Executive Summary: Key Legal and Evidentiary Issues

• Dispute over interpretation and application of complex earn-out provisions in a Share Purchase Agreement, including deadlines, EBITDA deductions, and disclosure obligations.
• Controversy as to whether the purchaser’s sixth earn-out computation, showing a minimum amount of €855,155, constitutes an admission of liability to at least that sum.
• Allegations that the purchaser engaged in delay tactics, including slow document production, changing positions and late affidavits, against the backdrop of financial distress and lender forbearance agreements.
• Evidentiary reliance on the purchaser’s public financial statements to assess risk of non-payment and justify protective relief pending resolution of the appeal.
• Procedural and appellate issues concerning the test for lifting an automatic stay of a money order under Rule 63.01(5), including financial hardship, risk of non-recovery, and the merits of the appeal.
• Use of security into court to balance the vendors’ need to enforce an admitted minimum earn-out against the purchaser’s right to protect its appellate position.

Factual background and transaction structure
The case arises from the sale of a video game company, Vedatis SAS, by individual sellers Damien Thivolle and Vlad-Matei Mladin, together with their professional corporation, The Innkeepers S.R.L. (collectively, the Vendors), to Enthusiast Gaming Holdings Inc. (the Purchaser). The sale closed in May 2021 under a Share Purchase Agreement (SPA) that contained a significant earn-out component, payable after a four-year earn-out period. The SPA created a mechanism under which the earn-out payment (the Earn-Out Payment) would be calculated by reference to the company’s financial performance, specifically using EBITDA, and permitted the Purchaser to elect to pay up to half of the Earn-Out Payment in shares instead of cash. Under the SPA, the Purchaser was obliged to prepare and deliver an Earn-Out Computation Statement within 30 days of the end of the earn-out period. If the Vendors did not serve a notice of objection within 30 days, they were deemed to accept the computation. If they did object, the parties were to engage in good-faith settlement discussions for 15 days; if unresolved, the dispute would be referred to an “Earn-Out Expert” for an independent computation based on the SPA’s terms. The Vendors say the earn-out period expired on May 1, 2025, and that the Purchaser breached the SPA by failing to deliver a timely computation. The Purchaser counters that its contractual deadline for the computation was July 30, 2025, and in fact delivered its Earn-Out Computation Statement on that date, still within what it considered to be the required time.

Earn-out computation dispute and court proceedings
The central commercial dispute concerns both the content and timing of the Purchaser’s earn-out calculations. In its computation, the Purchaser made several deductions to EBITDA that materially reduced the Earn-Out Payment and that it said were contemplated by the SPA. The Vendors disputed the legitimacy of those deductions, framing a set of “Legal Issues” that required interpretation of the SPA’s earn-out clauses and its EBITDA adjustments. At the same time, they also challenged the actual numbers and methodology in the Purchaser’s Earn-Out Computation Statement (the “Computation Issues”), and sought disclosure of documents they claimed they were contractually entitled to receive under the SPA in order to understand and test the calculation. The Vendors commenced an application on June 17, 2025, seeking declarations and orders to enforce the SPA’s computation process, including an injunction to compel delivery of the Earn-Out Computation Statement and supporting documentation, or alternatively an order for payment of a specified earn-out amount. At a July 2, 2025 appearance, Black J. set an August 11, 2025 hearing date on the application and ordered a timetable for materials and cross-examinations. When the matter reached that hearing date, Black J. directed that the dispute move forward on two parallel tracks. The interpretive Legal Issues would be determined by the court through the application, while the Computation Issues would be handled in accordance with the SPA’s agreed process, including referral to an Earn-Out Expert if required. He set a 15-day period for steps relating to computation and potential resolution, and indicated that any unresolved interpretive issues would go before the court in a half-day hearing scheduled for November 3, 2025. He further ordered that if the parties took competing positions on interpretive issues, the Earn-Out Expert could be asked to express views on the computation “including for competing scenarios” aligned with those differing interpretations.

Adjournment motion and protective payment order
Following these directions, the Purchaser continued to adjust its calculations, ultimately delivering a sixth iteration of its Earn-Out Computation Statement on September 26, 2025, which reflected an Earn-Out Payment of €855,155—an amount significantly below what the Vendors claimed was owing. The Vendors demanded extensive disclosure in order to analyze this computation, prompting a motion before Black J. on October 17, 2025, to compel production. While some materials had been provided by then, Black J. described the Vendors’ demands as “somewhat scattergun”, ordered disclosure of certain outstanding documents, and declined other requests. He expressed concern about the tight timeline heading into the scheduled November 3 hearing, describing the situation as largely of the parties’ making, but stated he would be reluctant to adjourn the November date absent a compelling reason. Leading up to November 3, the Vendors served their application record and factum on October 27, 2025; the Purchaser served responding affidavits late on October 30, 2025, and the Vendors rapidly prepared a further responding affidavit. The Vendors proposed cross-examinations over the weekend, which Purchaser’s counsel declined. The Purchaser then filed its factum only on November 2, 2025, the day before the scheduled hearing. Against this procedural backdrop, the parties attended before Myers J. on November 3, 2025, when the Purchaser sought an adjournment of the application. Critical context was that Enthusiast Gaming was operating under two forbearance agreements with its secured bank lender and Beedie Investments Ltd., expiring at the end of 2025 and March 31, 2026 (or earlier if defaults occurred). Myers J. found the situation to be complex both factually and legally, but he was also concerned that “it is in the [Purchaser’s] interest to delay” and that its ability to pay any eventual judgment was in increasing jeopardy. He noted the Purchaser had changed positions on several issues, had delayed document production, and had introduced new issues in a late October 30 affidavit, then refused to accommodate weekend cross-examinations. In this context, he accepted that a bare adjournment would prejudice the Vendors by increasing the risk that secured lenders might realize on the Purchaser’s assets, leaving the Vendors with an effectively hollow judgment. Myers J. therefore granted the adjournment but imposed a protective condition: he ordered the Purchaser to pay the Vendors €855,155, in the equivalent Canadian dollar amount calculated in accordance with the Courts of Justice Act, on or before a November 10, 2025 case management conference. If payment was not received by then, the Vendors would be entitled to move to strike the Purchaser’s evidence and proceed with an unopposed hearing on the application.

Motion to lift the automatic stay
The Purchaser appealed Myers J.’s November 3, 2025 endorsement to the Court of Appeal. Under Rule 63.01(1) of the Rules of Civil Procedure, that appeal triggered an automatic stay of the money portion of the order, meaning the obligation to pay the €855,155 in Canadian dollars could not be enforced while the appeal was pending. The Vendors brought a motion in the Court of Appeal under Rule 63.01(5) to lift that stay. Their position was that given the Purchaser’s precarious finances, further delay could deprive them of any meaningful recovery, especially in light of the forbearance agreements and the risk that secured creditors might move to enforce their security. Justice Paciocco, sitting as a single judge of the Court of Appeal, applied the familiar three-part framework used when deciding whether to lift an automatic stay of a money judgment: the degree of financial hardship to the respondent if the stay remains; the respondent’s ability to repay or provide security if the appeal succeeds; and the merits of the appeal. On financial hardship, the court relied heavily on Myers J.’s factual finding that the Purchaser’s ability to pay a judgment was “increasingly in jeopardy” and on public financial statements suggesting the Purchaser had negative cash flow and insufficient cash to fund its planned operations over the next year. These factors convinced the court there was a serious risk of non-payment, amounting to a form of financial hardship for the Vendors if the stay remained. On the ability to repay or provide security, there was no evidence that the Vendors lacked financial capacity to return funds if the appeal later succeeded. The Vendors even invited the court to craft terms that would both enforce the protective order and secure the Purchaser against loss. This opened the door to a solution where payment would be made now, but mirrored by security to safeguard the Purchaser’s appellate rights.

Court of Appeal’s analysis and final orders
When addressing the merits of the appeal, the Court of Appeal emphasized that it is not necessary to find an appeal frivolous in order to lift a stay. Justice Paciocco noted that many of the Purchaser’s grounds of appeal attacked the factual findings made by Myers J., including the conclusion that the Purchaser had effectively conceded a minimum earn-out liability of €855,155 via its sixth computation spreadsheet. At this preliminary stage, he was not persuaded that those challenges had strong merit, particularly in light of the Purchaser’s own public financial statements, which stated that the earn-out liability was probably valued at approximately C$2.4 million, expected to be paid in cash by late August 2025 and “under negotiation.” While acknowledging that the appeal raised arguments about the court allegedly rewriting the SPA—especially by compelling immediate payment in cash despite the SPA’s dispute-resolution mechanism and the Purchaser’s option to discharge up to half the earn-out in shares—Justice Paciocco held that any eventual appellate success could be adequately protected by properly tailored payment and security orders. He accepted there might be some arguable merit in the contention that payment should have been limited to half of the conceded amount, given the share-payment option, but again concluded that risk could be effectively addressed through security into court rather than by maintaining the stay. Balancing the risks, the Court of Appeal stressed that the purpose of a stay is to preserve the status quo, not to enable the very outcome Myers J. was seeking to prevent. Given the findings about the Purchaser’s financial instability and the real possibility that delay would make the Vendors’ judgment effectively uncollectible, leaving the stay in place could have rendered the appeal moot in practical terms. At the same time, there was no real evidence the Purchaser would be prejudiced in its ability to recover funds if secured appropriately. Justice Paciocco therefore exercised the exceptional discretionary power under Rule 63.01(5) to lift the automatic stay, but only on conditions. The Vendors are required to deposit with the Accountant of the Superior Court of Justice the Canadian-dollar equivalent of €855,155 as security by a specified date. If they do so, the stay is lifted, and the Purchaser must pay the same Canadian-dollar equivalent of €855,155 directly to the Vendors, thereby satisfying the payment condition imposed by Myers J. in his November 3 endorsement. In addition, the Court of Appeal ordered the Purchaser to pay the Vendors C$5,000 in costs for the motion. As a result, in this appellate decision the successful party is the Vendors, who secure enforceability of the minimum admitted earn-out amount—set at the Canadian-dollar equivalent of €855,155—together with C$5,000 in motion costs, although the precise Canadian-dollar conversion of the €855,155 is left to be determined under the Courts of Justice Act and therefore cannot be stated as a fixed figure in the reasons.