This is an interesting motion decision out of the Ontario Court of Appeal. The case arose out of a commercial real estate deal that didn’t close. The buyer successfully sued for specific performance and obtained a vesting order to enforce it. If the buyer paid the purchase price balance into court, the property would vest in the buyer. The vendor appealed the specific performance order and moved in the Court of Appeal to stay the vesting order. Paciocco J. A. applied the RJR-MacDonald Inc. test but stayed the vesting order due to the “overarching consideration” of the interests of justice.

In considering the irreparable harm branch of the RJR-MacDonald Inc. test, the judge looked at the following:

  • the buyer registered a CPL on the property
  • after the CPL:
    • the vendor transferred the property to a corporation controlled by the same principal
    • mortgages were registered on the property
  • the vendor argued that if the vesting order was triggered
    • the post-CPL mortgagees would lose their security
    • the mortgagees would enforce the debts
    • the vendor would go bankrupt

The judge found that the vendor was the “author of its own misfortune.”

At paragraph 39: “When the litigation began, it was not exposed to the risks these mortgages may present. Knowing that it could lose the commercial land in litigation, it made a conscious choice to encumber that land, thereby courting the risk of defaulting on its financial obligations if that commercial land was lost in the pending litigation. It does not lie in the mouth of a litigant who did not face the risk of irreparable harm from the enforcement of a pending claim, to voluntarily assume such risk after the litigation is pending, and then rely upon that risk to impede the enforcement of that claim after it succeeds.”

Also, the risk to post-CPL mortgagees was not irreparable harm because they “chose to run the risk that [the vendor] could lose the land in this litigation.”

It appears that if you caused a mortgage to be registered on your property after the plaintiff registered a CPL, a default of such mortgage due to the plaintiff’s enforcement of a trial judgment against the property does not qualify as irreparable harm for the purposes of stay pending your appeal of the trial judgment.

What, to me, is a potential general principle in this decision? If the moving party created a risk of irreparable harm, it cannot be rely on this harm in its motion for interlocutory relief against the responding party that triggered the risk.

The judge still stayed the vesting order because he found that if the specific perfomance order was enforced before the appeal was determined, the vendor (or its affilliated parties) would likely lose the land although it might still be successful on appeal. There was no evidence that the delay would prejudice the buyer.

As a side note, the judge considered risk of irreparable harm under the RJR-MacDonald Inc. test, not certainty of irreparable harm. This appears to contradict a Superior Court decision that proposed that “It is not enough to show that the moving party “is likely” to suffer irreparable harm; one must establish that he or she “would suffer” irreparable harm.” In this case, you couldn’t even say if the appellant vendor was likely to suffer irreparable harm because these odds were the same as the odds of its appeal, which were presumably unknown.