(Manitoba - Civil Procedure) Stay of Civil Proceedings with Pending Criminal Charges By David I. Marr & Gregory L. Juliano May 29, 2001 - Canadian Litigation Counsellor newsletter It is not uncommon that criminal and civil proceedings may be initiated regarding the same set of facts. In such circumstances, plaintiffs or defendants sometimes apply for a stay of the civil case in order to prevent both matters from proceeding simultaneously. It is most often the accused which applies for the stay, in order to allow him/her the opportunity to first deal with the criminal charges. However, the recent Manitoba Queen's Bench case of Pats v. The Personal Insurance Company of Canada examined the criteria for granting a stay in the unusual situation where the accused wanted both matters to move forward. It is not uncommon that criminal and civil proceedings may be initiated regarding the same set of facts. For example, a plaintiff may try to recover money from the accused (defendant) who caused damage as a result of criminal wrongdoing. However, in some insurance cases, the accused may be the plaintiff in the civil action. In such circumstances, the insurance company will have denied coverage, as a result of suspicions that the insured has made a fraudulent claim, and be sued by their insured for indemnity under the policy. This was exactly the case in the Manitoba Queen's Bench case of Pats v. The Personal Insurance Company of Canada, [2001] M.J. No.29. The recent decision of Justice Hanssen in this matter examined the criteria for granting a stay of the civil case, pending the outcome of the criminal charges. In Pats, the plaintiffs in the civil case had sued their insurer for failing to make payment under a insurance policy after their home was damaged by fire. However, the plaintiffs were are accused of arson relating to, not only the fire which was the subject of the civil claim, but an early fire at the Pat's restaurant business and an earlier attempted arson relating to the home. In defending the civil claim, the insurance company would bear a heavy onus to prove that the plaintiffs were not entitled to indemnity due to their criminal actions. A criminal conviction, while not conclusive, would be prima facie evidence that the plaintiffs committed the crime of arson. Such a conviction would go a long way in helping the insurer to meet this burden of proof during this civil case. If faced with this situation, the plaintiffs might even drop the civil case entirely, thereby saving all parties the costs of the entire civil trial. It was, therefore, clear to the insurer that there would be an advantage to obtaining a stay in the civil proceedings until the Courts disposed of the criminal charges. Weighing against the insurer's request was the fact that courts have shown a general reluctance to grant a stay of civil proceedings while criminal charges are pending. An example of this hesitation can be found in the 1961 Manitoba Court of Appeal case of Rowe v. Brandon Packers, in which Chief Justice Miller stated: "I am unable to subscribe to any principle which would indicate that the mere fact there are criminal proceedings pending at the same time as civil proceedings is a ground for either a stay or an adjournment of the civil proceedings." In the vast majority of reported cases, it was the accused who applied for a stay of the civil proceedings in order to deal with the criminal charges. Most often, the accused was the defendant in the civil action, and was being pursued by the plaintiff for damages caused by criminal wrongdoing. The classic test cited in the 1973 Ontario Court case of Stickney v. Trusz is that the applicant must demonstrate that his/her case is "extraordinary or exceptional." The simple fact that the accused may incriminate himself at Examinations for Discovery or while testifying at trial is not considered to be an exceptional circumstance. There are provisions in the Manitoba and Canada Evidence Acts which would protect the accused from his testimony being used against him at a criminal hearing. However, the court in Pats encountered difficulty, because there were very few decisions in which the party requesting a stay of the civil proceedings was not the accused. A rare example cited by Justice Hanssen was the 1995 Ontario Court of Appeal decision in Nash v. Ontario, which involved a complicated commercial matter. In this case, the Crown became concerned with the company, subsequently freezing its assets and appointing a receiver. Criminal charges were instituted against the directors of the company. The directors felt that the Crown had acted improperly, and brought a civil case for damages relating to the Crown's actions. The Crown applied for a stay of the civil proceedings pending the outcome of the criminal case. The unanimous Court felt that, although it was not the accused applying for the stay, the Crown should be held to the same stringent test. "This high threshold test should not be relaxed merely because it is the Crown that requests the stay. An applicant, whether it is the Crown or the accused, must meet the same burden of proving extraordinary or exceptional circumstances." Based on the facts of that case, the Court felt that a stay should be granted. Like in Pats, they cited the fact that "the allegations are such that the civil claims would have little merit if the Crown successfully convicts...the civil action is the reciprocal of the criminal prosecution." Justice Hanssen also reviewed the 2000 Ontario Superior Court of Justice case of Schreiber v. Attorney General of Canada. This case involved a situation very similar to Nash, and made many references to the earlier case. The facts arose out of the "Airbus scandal" and involved a large international dispute. Germany brought extradition proceedings against the plaintiff, who was arrested by Canadian officials at Germany's request. The plaintiff subsequently brought an action for damages against Canada and Germany for acting improperly in the arrest. In Schreiber, Justice Nordheimer clarified some questions arising out of the earlier cases. He distinguished the more common situation in which the accused applied for a stay, from the facts of this case, saying: "In each of those cases, the issue of the accused's right to a fair trial was essential to the determination. In this case, however, we have the opposite situation. Here the individual against whom certain offences are alleged is the plaintiff, and it is the Crown who is seeking the stay. Consequently, there is no issue here of any interference with the right to a fair trial." Yet, he went on to confirm that "the test is nonetheless the same whether the moving party is, the accused or the Crown", and that the applicant would still have to show "extraordinary or exceptional circumstances." In deciding to exercise his discretion to grant a stay, there were a number of factors considered by the Court which were also noted by Justice Hanssen to be present in Pats. For example, Justice Nordheimer cited the "considerable overlap between the issues", saying: "It is almost certain that the determination of the extradition proceedings will have a significant impact on this action. If the plaintiff is extradited for the tax evasion and other offences for which he was originally arrested, then the likelihood of this action proceeding seems remote. Conversely, if the plaintiff is not extradited for those offences, then the prosecution of this action may be greatly simplified." Similarly, in Pats, Justice Hanssen felt that "the outcome of the criminal proceedings will likely have a significant impact on the civil action." In Schreiber, Justice Nordheimer also discussed a critical issue which could bring the administration of justice into disrepute. He noted that there could be a very serious problem if inconsistent findings were made in the civil trial and the criminal trial, saying: "There is a serious prospect for inconsistent findings if both of these proceedings move forward concurrently. It is not sufficient to say in response to that concern that there are ways by which Judges of this Court could avoid such inconsistencies. The point is that the Court should not be put in that position in the first instance." This potential problem was also present in the Pats case. Justice Hansen noted a "serious prospect of inconsistent findings", and stated that "it is important to the efficiency and reputation of the judicial system that conflicting decisions be avoided." Justice Nordheimer also made some important comments regarding the time frame in which events should occur. He essentially closed the door on the argument that allowing the criminal proceedings to go forward would cause undue delay. He said: "Any stay granted would not be permanent or absolute. It would be subject to being lifted if there were significant change in the circumstances such that it then appeared that the action should be allowed to proceed. I assume that the extradition proceedings will move forward expeditiously and, therefore, any stay of this action would not be unduly lengthy. However, if that should turn out not to be the case, then that might also provide the basis for a motion to lift the stay." Similarly, in Pats, Justice Hanssen said that "there is no reason to believe that the criminal proceedings will not move forward expeditiously." The judge granted the insurer's request, and stayed the civil proceedings until further order of the court. In summary, a stay of civil proceedings is available when criminal charges are pending regarding the same set of facts. The applicant, whether or not he/she is the accused, must show that there is some "exceptional" circumstance which warrants a stay of the civil case. The recent Manitoba Queen's Bench case of Pats v. The Personal Insurance Company of Canada provides an important examination of the criteria required to obtain a stay, where the accused wishes both matters to move forward simultaneously.

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