In Phostech v Valence 2011 FCA 107 Pelletier JA granted a stay pending appeal of the judgment of Gauthier J in 2011 FC 174. It is interesting to contrast this decision with that of the EWCA in Virgin Atlantic v Premium Aircraft  EWCA Civ 1513 Jacob LJ: Patten LJ, Kitchin J granting a partial stay (a “carve-out”) pending a decision on an application for leave to appeal to the UK Supreme Court.
The major difference is that the FCA in Phostech applied the Cyanamid threshold of “a serious issue to be tried” on the merits portion of the test, while the EWCA did not, saying:
22 It should be noted the question is not the same when one is considering what to do on an application for an interim injunction pending trial. In that case the patentee has yet to establish his right, whereas after successful trial he has prima facie done just that.
Surely this is a compelling argument. The reason given by Lord Denning in American Cynamid for lowering the old threshold of “a prima facie case” to “a serious question to be tried” was that “[i]t is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial"  AC 396, 407. It follows directly that once the matter has been decided at trial, it is legitimate to consider the merits. Indeed, this was the position taken by the Supreme Court in Laboratoire Pentagone Ltée v. Parke, Davis & Co.  SCR 269, a patent case in the Supreme Court refused a stay of execution pending appeal:
The burden upon the appellant is much greater than it would be if the injunction were interlocutory. In such a case the Court must consider the balance of convenience as between the parties, because the matter has not yet come to trial. In the present case we are being asked to suspend the operation of a judgment of the Court of Appeal, delivered after full consideration of the merits.
This argument is particularly compelling where the appeal turns on a point on which the trial judge is owed deference. But even on a point of claim construction, the point argued in Phostech , the considered opinion a trial judge after a full trial on the merits, must surely count for something. In Laboratoire Pentagone  SCR 307 the SCC ultimately reversed the Quebec Court of Appeal on a point of law; this implies that the Court did not view the the nature of the point on appeal as being relevant to the test for a stay.
The route from Laboratoire Pentagone to Phostech lay through Metropolitan Stores  1SCR 110 and RJR-MacDonald Inc  1 SCR 311. In Apotex Inc v Wellcome Foundation Ltd / zidovudine (1998) 82 C.P.R. (3d) 429 (FCA), Robertson J, in the course of reversing Wetston J and granting a stay, stated that: “It appears to me that the line of cases beginning with Laboratoire Pentagone Ltée v. Parke, Davis & Co. , and on which the Motions Judge based his decision not to grant the requested stays, has been largely overtaken by the Supreme Court's decisions in RJR-MacDonald Inc. v. Canada (Attorney General) and Re: Metropolitan Stores (MTS) Ltd. v. Manitoba Food & Commercial Workers, Local 832. For this reason the Motions Judge must be deemed to have erred in principle.”
With respect, this is not an accurate reading of the Supreme Court decisions. Metropolitan Stores emphasized throughout that the question was the test for granting a stay in constitutional cases. The heading to the substantive discussion was “The Principles Which Govern the Exercise of the Discretionary Power to Order a Stay of Proceedings Pending the Constitutional Challenge of a Legislative Provision,” and this point was repeated throughout. Discussing Cynamid, Beetz J said “ In my view, however, the American Cyanamid 'serious question' formulation is sufficient in a constitutional case where, as indicated below in these reasons, the public interest is taken into consideration in the balance of convenience. But I refrain from expressing any view with respect to the sufficiency or adequacy of this formulation in any other type of case” (emphasis added). He did also say that “A stay of proceedings and an interlocutory injunction are remedies of the same nature.” This is entirely true. That does not mean that the weight given to a consideration of the merits must be the same in either case. In RJR-MacDonald, the Court expressly left the point open:
According to the respondent, such statements suggest that once a decision has been rendered on the merits at trial, either the burden upon an applicant for interlocutory relief increases, or the applicant can no longer obtain such relief. While it might be possible to distinguish the above authorities on the basis that in the present case the trial judge agreed with the applicant's position, it is not necessary to do so. Whether or not these statements reflect the state of the law in private applications for interlocutory relief, which may well be open to question, they have no application in Charter cases.
Thus the FCA’s decision in the zidovudine case that the “serious question” test applies even in a stay application, must rest on its own merits and not on SCC authority. In my view, the EWCA has better position as a matter of principle. Even at the interlocutory stage the Cyanamid position that the merits are to be ignored has been subject to strong criticism, and is often honored in the breach: see Sharpe, Injunctions and Specific Performance, ¶2.130 - 2.380, esp at 2.230 arguing that an assessment of the merits should be relevant, and concluding at 2.370 after a review of the cases that the court’s preliminary assessment of the merit does play an important role. The correct principle, as I have argued in my article on “Interlocutory Injunctions and Irreparable Harm in the Federal Courts,” (2009) 88 Can Bar Rev 517 (2009), was articulated by Hoffmann J in Hoffmann J. in Films Rover International Ltd v. Cannon Film Sales Ltd.  3 All E.R. 772 at 780 (Ch.):
The principal dilemma about the grant of interlocutory injunctions. . . is that there is by definition a risk that the court may make the ‘wrong’ decision. . . . A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong.’
This is also the position independently advocated by Sharpe; see esp at ¶ 2.90. If this approach is adopted, the merits are relevant, though the weight will vary depending on the confidence that can be placed on such an assessment. On this view it was right in American Cynamid to downplay the importance of the merits because it was an interlocutory motion in a complex patent case and it was not reasonable to make a sufficient assessment of the merits in a brief proceeding (see Sharpe ¶ 2.210). Conversely though, after a full trial, the view of the trial judge must be given some weight, though that weight may depend on the nature of the issue. (Note that claims construction is considered a matter of law in Canada, and thus reviewable on a correctness standard, but it is arguably better characterized as a matter of mixed fact and law: 2009 FCA 212 ; cf Novartis AG v. Dexcel-Pharma Ltd  EWHC 1266 (Pat)  and Trading Technologies International, Inc. v. eSpeed, Inc., 595 F.3d 1340 (Fed. Cir. Feb. 25, 2010))
This is not to say that the FCA zidovudine decision was wrong on its facts. It is clear that even after a decision on the merits a stay should not automatically be refused. As Jacob LJ said in Virgin Airlines  “The question, however, remains one of a balance of convenience.” (Or, as Hoffmann J would have it, the balance of risk.) In the zidovudine decision an important factor, and one emphasized by Marceau JA, is that “[t]here being no undertaking as to damages offered by the respondents, there will be no way then for the appellants to recover their losses. No cause of action could support a claim against the respondents or any other potential defendant.” In contrast, in Virgin Airlines the applicant was required to give a very substantial undertaking in damages in order to obtain its carve-out – an undertaking which was ultimately enforced to the tune of £3.6 million:  EWCA Civ 163. It is well recognized that the undertaking is crucial to balancing the risk to the parties. There were also numerous other factors in zidovudine indicating that the balance of convenience favoured the stay. It is not my purpose here to repeat all these points in detail; the point is that the FCA in the zidovudine decision did ultimately apply a balance of convenience test, which is consistent with the Virgin Airlines approach, and it came to the conclusion, based on ample reasons, that the balance favoured the stay. Similarly, in Phostech I do not dispute the FCA's conclusion that the balance of convenience favoured the stay, and the stay may well have minimized the risk of injustice, even when due weight it given to the Gauthier J's decision on the merits. (It is difficult to form an opinion on this given the brevity of the reasons.)
The difficulty in the zidovudine decision was that the motions judge had denied the stay, and that decision was owed deference. It may be that Robertson J held that the Pentagone decision had been “overtaken” by RJR-MacDonald, in order to find an error of principle which justified substituting his own view for that of the trial judge. If that is the case, I must say that I prefer the opinion of Marceau J holding straightforwardly that the motions judge had exercised his discretion unjudicially. In any event, whatever the reason for either decision, it is time to address these questions afresh on a principled basis, rather than continuing to torture the 35 year old Cyanamid decision in conditions it was never meant to endure.
Note that in Virgin Airlines the EWCA also extended the carve-out to the permanent injunction, on related but distinct principles. I will discuss this in a subsequent post.