



COURT OF APPEAL FOR ONTARIO

CITATION: SFC litigation Trust v. Chan, 2018 ONCA 710

DATE: 20180830

DOCKET: M49537 (C65247)

Brown J.A. (Motions Judge)

BETWEEN

Cosimo Borrelli, in his capacity as trustee of
    the SFC Litigation Trust

Moving Party (Respondent)

and

Allen Tak Yuen Chan

Responding Party (Appellant)

Jonathan Bell and William Bortolin, for the moving
    party/respondent

Robert Rueter and Malik Martin, for the responding
    party/appellant

Heard: August 23, 2018

REASONS FOR DECISION

BROWN J.A.:

I.

MOTION TO LIFT THE STAY OF JUDGMENT PENDING APPEAL

[1]

After a 41-day trial, the moving party, Cosimo Borrelli, in his capacity
    as the trustee of the SFC Litigation Trust (the Litigation Trust), obtained a
    judgment against the responding party, Allen Tak Yuen Chan, in the amount of
    $2.904 billion as damages for fraud and breach of fiduciary duty and an
    additional $5 million in punitive damages (the Judgment). Mr. Chan had been
    the Chairman of the Board and Chief Executive Officer of Sino-Forest
    Corporation (Sino-Forest). The extensive March 14, 2018 reasons of Penny J.
    granting the Judgment are reported at 2018 ONSC 1429.

[2]

Mr. Chan resides in Hong Kong. The Litigation Trust has identified
    assets of his in Hong Kong; it has not located any assets of Mr. Chan in
    Ontario.

[3]

On March 28, 2018 the Litigation Trust commenced an action in Hong Kong
    for the recognition and enforcement of the Judgment (the HK Enforcement
    Proceeding).

[4]

Mr. Chan appealed the Judgment to this court by notice of appeal filed
    April 17, 2018. The delivery of the notice of appeal automatically stayed the
    Judgment: r. 63.01(1) of the
Rules of Civil Procedure
.

[5]

Upon the filing of the appeal, the parties agreed to a consent order of
    the Hong Kong court that stayed the HK Enforcement Proceeding. Para. 2 of that
    consent order provided that [u]pon the release of the outcome of the appeal
    against the Canadian Decision or abandonment of the appeal by [Mr. Chan], or
    upon a lifting of the stay that would allow these proceedings to continue
    (regardless of the status of the appeal), parties are at liberty to give a
    21-day written notice to the other side to re-activate these proceedings.

[6]

The Litigation Trust now moves under to r. 63.01(5) for an order
    partially lifting the stay of the Judgment to permit it to continue the HK
    Enforcement Proceeding for the limited purpose of obtaining a domestic Hong
    Kong judgment against Chan on substantially the same terms as the [Judgment].
    Mr. Chan opposes the motion.

II.

GOVERNING PRINCIPLES

[7]

The automatic stay of
an order requiring
    the payment of money (other than support payments)
created by
r. 63.01(1) safeguards the appeal process by
    preserving the appellants access to the money to fund the appeal and continued
    possession of it in the event that the appeal is successful:
Antunes
    v. Limen Structures Ltd.
, 2016 ONCA 61, 85 C.P.C. (7th) 269 at para. 11;
Hall-Chem
    Inc. v. Vulcan Packaging Inc.
(1994)
,
72 O.A.C. 303

(C.A.) at para. 5
.

[8]

Rule 63.01(5) permits a judge of the court to which an appeal is taken
    to order on such terms as are just that the stay arising from r. 63.01(1) does
    not apply. In
Ryan v. Laidlaw Transportation Ltd.
(1994), 19 O.R. (3d)
    547 (C.A.), Austin J.A. described, at pp. 711-712, the perspective a judge
    should bring to a motion to lift a stay pending appeal. He quoted with approval
    the following comments made by Carthy J.A. in
Mortimer v. Cameron,
[1993]
    O.J. No. 4169 (C.A.), at para. 2:

As an initial observation I express the view that motions under
    this rule should be restricted to cases of demonstrable and unusual hardship to
    the respondent, and where a reasonable measure of protection can be afforded to
    the appellants. The reason for the first standard is that the rule provides for
    a stay of money judgments and should be applied in all but unusual
    circumstances. The reason for the second standard is to protect appellants
    against payments which they may not eventually be obligated to make, thus
    putting them to the uncertainties of recovery. In most cases the merits of the
    appeal will have a bearing on these factors.

[9]

Rule 63.01(5) authorizes the lifting of the stay pending appeal on such
    terms as are just. Accordingly, a court should consider the general
    circumstances of the case:
Hall-Chem Inc.
, at para. 6;
Antunes
,
    at para. 13. The court must be flexible and treat each case on its facts:
Stein
    v. Sandwich West (Township)
(1994), 16 O.R. (3d) 321 (C.A.), at p. 323. A
    court must be satisfied that, taking all circumstances into account, it would
    be in the interests of justice to lift the stay.

[10]

Recent
    jurisprudence indicates that a court should have regard to three principal
    factors: (i) the financial hardship to the respondent if the stay is not
    lifted; (ii) the ability of the respondent to repay or provide security for the
    amount paid; and (iii) the merits of the appeal:
SA Horeca Financial
    Services v. Light,
2014 ONCA 811, 123 O.R. (3d) 542 at para. 13;
Antunes
at para. 14.

[11]

While
    the first factor goes to the respondents need, the latter two reduce the risk
    that a successful appellant will be forced to bear the loss, rendering the
    appeal moot. The court may impose this risk on an appellant in an appropriate
    case, but there is no reason to do so absent evidence of significant prejudice
    to the respondent from the stay:
Stein
at p. 323;
Ryan
at pp.
    711-712. Whether the hardship faced by the respondent outweighs any risk to the
    appellant must be determined within the context of the case, including: the
    grounds of appeal, the parties' positions at trial, the trial judges reasons
    and the probable delay before the appeal can be heard:
Antunes
at
    para. 13;
SA Horeca Financial Services
at para. 17.

[12]

The stay has been lifted where a plaintiff is suffering financial
    hardship, particularly in personal injury and family law cases, or has a
    well-founded fear that the appellant is dissipating or divesting assets to
    avoid payment:
Stein
;
Antunes; Peper v. Peper
(1990),

1
    O.R. (3d) 145 (C.A.);
Babbitt v. Paladin Inc.
(1993)
,
20
    C.P.C. (3d) 399 (Ont. C.A.). However, even where such factors are present, the
    plaintiff must satisfy the court that the prejudice of maintaining the stay
    outweighs the risk of subjecting the appellant to the uncertainties of recovery
    if the appeal is successful:
Antunes,
at para. 11;
Ryan,
at
    pp. 711-712;
Stein,
at p. 323.

III.

APPLICATION OF THE governing PRINCIPLES

[13]

The
    Litigation Trust was created as part of Sino-Forests Plan of Compromise and
    Reorganization (the Plan) under the
Companies Creditors Arrangement Act
,
    R.S.C. 1985, c. C-36. Under the Plan, most of Sino-Forests litigation claims
    were transferred to the Litigation Trust, of which Mr. Borrelli was appointed
    trustee.

[14]

On
    this motion, the Litigation Trust concedes that it will not suffer financial
    hardship if the stay is not lifted. Instead, it contends that the stay will
    cause it harm by delaying its efforts to move ahead with the HK Enforcement
    Proceeding.

[15]

The
    Litigation Trust does not point to the scheduling of this appeal as a source of
    delay. Mr. Chan perfected his appeal in mid-July. The Litigation Trust will
    file its responding materials by mid-September. A two-day hearing for the
    appeal has been scheduled for January 14 and 15, 2019. In the result, the
    appeal will be heard within 10 months of the granting of the Judgment.

[16]

Instead,
    the Litigation Trust contends that it will suffer hardship as a result of the
    time it will take to complete the steps required to enforce the Judgment in
    Hong Kong. Mr. Chan has indicated that he will oppose the HK Enforcement
    Proceeding, although he has not disclosed the basis on which he will do so.
    Given his position, the Litigation Trust estimates that it may take up to nine
    months to secure a Hong Kong judgment once it can proceed with the HK Enforcement
    Proceeding. The Litigation Trust seeks to lift the automatic stay so that it
    can start those steps now. If the stay is lifted to permit it to do so, the
    Litigation Trust states that it would be in a position to execute on Mr. Chans
    Hong Kong assets immediately upon the dismissal of his appeal, which it views
    as the inevitable result.

[17]

The
    Litigation Trust submits that lifting the stay to enable it to secure  but not
    enforce  a judgment in Hong Kong would put it in the same enforcement position
    as a plaintiff who had secured an Ontario judgment against a defendant resident
    or with assets in Ontario: it could act at once to enforce the judgment upon the
    dismissal of the appeal.

[18]

I
    am not persuaded, in the specific circumstances of this case, that the
    enforcement delay the Litigation Trust may face amounts to the degree of
    hardship necessary to justify lifting the automatic stay. Several factors lead
    me to this conclusion.

[19]

First,
    the nature of the hardship described by the Litigation Trust  the time it will
    take to enforce an Ontario judgment in a foreign jurisdiction  strikes me
    simply as part of the ordinary cost of conducting the type of business in which
    the Litigation Trust is engaged.

[20]

As
    described by the trial judge, the Litigation Trust is in the business of
    pursuing most of the litigation claims possessed by Sino-Forest at the time of
    the Plans sanction: at para. 73. Pursuing a litigation claim invariably takes some
    period of time. Some defendants reside in the jurisdiction of the domestic
    court; others do not. That simply is a fact of life faced by plaintiffs
    pursuing commercial litigation in a highly inter-connected business and
    investment world. As well, most jurisdictions provide for rights of appeal from
    the decision in first instance. The risk that enforcement of a judgment may be
    postponed because the judgment debtor exercises his right of appeal is an
    ordinary risk of the kind of business carried on by the Litigation Trust.

[21]

Nor
    is this a case where the domestic court cannot move the appeal along with some
    dispatch. Back in 1994, it took this court 18 to 24 months to hear a civil
    appeal once perfected:
Hall-Chem
, at para. 16. In the present case,
    the appeal will be heard six months following perfection.

[22]

Second,
    the ordinary time it takes to secure recognition of a foreign judgment in Hong
    Kong poses no financial risk to the Litigation Trust. The world-wide
Mareva
injunction against Mr. Chan issued by the Ontario Superior Court of Justice has
    been recognized by the Hong Kong courts. The Litigation Trust acknowledges that
    the
Mareva
order is adequate to prevent Mr. Chan from dissipating his
    known remaining assets in Hong Kong.

[23]

Third,
    although the Litigation Trust submits that it is not asking me to assess the
    merits of Mr. Chans appeal, its argument contains a strong the appeal is
    doomed, so lets get on with enforcement of the Judgment flavour. By contrast,
    Mr. Chan submits that it is important to consider the merits of his appeal on
    this motion. He contends his appeal raises important legal issues regarding the
    Litigation Trusts right to pursue the claims asserted in this action, as well
    as important issues of evidence and trial practice.

[24]

A
    motion to lift an automatic stay of judgment in a civil appeal engages  albeit
    it in a different context  the tension between enforceability and
    reviewability interests at play on applications for bail pending appeal. As the
    Supreme Court of Canada observed in
R. v. Oland
, 2017 SCC 17, [2017] 1
    S.C.R. 250, the reviewability analysis on an application for bail pending
    appeal requires a court to examine the grounds identified in the notice of
    appeal with an eye to their general legal plausibility and their foundation in
    the record: at para. 44. To do so, the court must possess an adequate record.
    The following comments made by Moldaver J. in
Oland
, at para. 45,
    apply with equal force to the quality of the record a moving party must place
    before the court on a lift stay motion where the merits of the appeal are
    engaged, either expressly or by implication, in the moving partys submissions:

In the end, appellate judges can be counted on to form their
    own preliminary assessment of the strength of an appeal based upon their
    knowledge and experience. This assessment, it should be emphasized, is not a
    matter of guesswork. It will generally be based on material that counsel have
    provided, including aspects of the record that are pertinent to the grounds of
    appeal raised, along with relevant authorities.

[25]

In
    the present motion, the slim record does not permit an assessment of the merits
    of the appeal. All it allows me to say is that the reasons for judgment of the
    trial judge are long (180 pages) and canvass a number of complex legal and
    factual issues. However, the motion record does not enable me to assess those
    lengthy reasons in light of the record that was before the trial judge.
    Consequently, as a practical matter the merits of the appeal cannot form part
    of the assessment in the present case as to whether the stay should be lifted
    under r. 63.01(5).

[26]

Fourth,
    I see merit in Mr. Chans submission that, on balance, it would be unfair for
    this court to lift the stay to permit additional proceedings to move forward in
    Hong Kong, thereby requiring Mr. Chan to expend resources on both the appeal
    and the HK Enforcement Proceeding. As mentioned, the appeal will be heard in
    six months and during that time the Litigation Trust enjoys the protection
    afforded by the
Mareva
order against Mr. Chan.

[27]

Finally,
    although the Litigation Trust, as plaintiff, does face the task of seeking
    recognition and enforcement of an Ontario judgment in Hong Kong should this
    court dismiss Mr. Chans appeal, the need to do so resulted from the Litigation
    Trusts decision to sue a Hong Kong resident in an Ontario court. As I
    understand the situation, the Litigation Trust is based in Hong Kong and Mr.
    Chan resides in Hong Kong. Had Mr. Chan been sued in Hong Kong, the inevitable
    additional time required to enforce a foreign judgment would not arise.

[28]

I
    do not place much weight on this factor. There may have been quite sound
    reasons for the Litigation Trust to sue Mr. Chan in Ontario. However, the
    motion materials do not assist me in understanding why suit was brought in
    Ontario instead of Hong Kong. I simply observe that what the Litigation Trust
    describes as the hardship associated with this appeal flows from its choice of
    forum.

[29]

Taking
    all these factors into account, I conclude that it would not be in the
    interests of justice to lift the stay of the Judgment to allow the Litigation
    Trust to continue the HK Enforcement Proceeding to the point of obtaining an
    order recognizing and enforcing the Judgment against Mr. Chan.

IV.

DISPOSITION

[30]

For
    these reasons, I dismiss the Litigation Trusts motion.

[31]

Mr.
    Chan seeks partial indemnity costs of the motion in the amount of $9,000. The
    Litigation Trust submits the costs should be left to the panel hearing the
    appeal and, in any event, should not exceed $5,000.

[32]

I
    will not defer the costs of this motion to the panel. The main reason for not
    doing so lies in the protection the continuing
Mareva
order provides
    to the Litigation Trust against the risk of Mr. Chan dissipating his assets
    pending the hearing of the appeal. The existence of that order lessened the
    need to bring this motion to lift the stay.

[33]

I
    award Mr. Chan costs of this motion fixed at $5,000, inclusive of disbursements
    and all applicable taxes, payable by September 10, 2018.

David Brown J.A.


