Enforcement of a Costs Order Stayed Pending Appeal

The Dispute

A trade contractor had been drawn into the litigation that followed a commercial construction project. It had committed months of preparation to a long trial, and then lost the trial date when another party asked for the trial to be put off. The court that agreed to move the trial ordered that party to pay for the preparation that had gone to waste, and to pay it straight away. Before any money changed hands, that party appealed the order and asked the court to put it on hold.

The Parties’ Positions

The defendant, retained to provide materials and work on the project, applied to stay enforcement of the costs order pending its appeal. It relied on the reasons for that order, in which the Associate Judge had explained that the purpose of the orders was to get the attention of the defendant that dealing with the case in the required manner was imperative. On that passage the defendant contended that the order appeared to have been made for punitive reasons, or for reasons that would not properly inform an award for costs thrown away, and that the appeal accordingly carried some prospect of success. It also relied on sums already paid into court under earlier orders as security for costs, which it said left no risk of the trade contractor going unpaid.

The trade contractor was the only party to oppose the stay application. It submitted that the costs order rested on findings of fact and was discretionary in character, so that the standard of review on appeal was highly deferential. Even on the low threshold governing the first branch of the test, it submitted, there was little to no prospect that the appeal would succeed. On irreparable harm it submitted that the defendant had identified nothing beyond the trade contractor’s lack of any property ownership in British Columbia, and that the prospect of the money proving unrecoverable was therefore speculative. Both sides worked from the three-part test that governs an interim injunction, drawn from RJR-MacDonald Inc. v. Canada (Attorney General).

The Court’s Decision

The court found merit in the trade contractor’s argument on the limited prospect of success, but could not conclude that there was no prospect of success. It treated irreparable harm as neutral, since the evidence of the trade contractor’s inability to repay was limited and there was equally no evidence of its ability to repay. On the balance of convenience the court accepted that the money already in court left no risk of the trade contractor going unpaid, and weighed against that the delay in payment and the delay in the trade contractor’s ability to apply to strike the third party notice. It was not satisfied that a delay of roughly three months affected the balance, and stayed the costs order as it applied to the trade contractor until the earlier of the appeal being determined and a fixed date three months out. The defendant was left at liberty to apply for a further extension of the stay.

Key Lessons for Trade Contractors and Suppliers

• Security for costs held in court cuts in both directions in a construction dispute. Funds paid in under an earlier order remove the risk that a later costs award goes unpaid, and that absence of risk is what a paying party relies on when it asks for time.
• An order for costs payable forthwith does not enforce itself. An appeal and a stay application can suspend it for months, so a party counting on the payment date to open a strike application should plan for that date to move.
• A responding party’s own financial position becomes evidence on a stay application. Where the paying party says it may not be repaid, an absence of evidence of assets, bank accounts or continued operation tells against the responding party, and the factor was treated here as neutral.
• A discretionary order attracts a deferential standard of review, and that character alone does not answer a stay application. The first branch asks only whether the appeal is neither frivolous nor vexatious, and a deferential standard did not carry the trade contractor past it, since the court declined to conclude that there was no prospect of success.

The stay granted on this application turned on the material before the court on that day, including the security already held in court. A similar application may resolve differently.

ATAC LAW acts for owners, contractors, subcontractors and suppliers in civil and commercial litigation, including the appeals and enforcement steps that follow an interlocutory order.

This matter was conducted by Dan H. Griffith, a partner at ATAC LAW, who acted for the trade contractor, the third party responding to the stay application.