In Essar Steel Algoma Inc. (Re), Justice David Brown of the Ontario Court of Appeal held that the ambit of orders “made under” the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”), and thus requiring leave to be appealed, is broad. Though concluding that the appellant in this case required leave to appeal, he nonetheless ordered the leave motion be expedited. He further stayed a particular Superior Court order pending the hearing of the leave motion even though irreparable harm was not established.

Background

The appellant (“Cliffs”) and the respondent (“Essar”) became parties to a supply contract relating to Essar’s steel manufacturing business in Sault Ste. Marie. After their relationship soured, Cliffs commenced a complaint in Ohio and terminated its contract with Essar. Thereafter, Essar sought and obtained an order under the CCAA.

Essar moved in the CCAA proceeding for a declaration that Cliffs’s purported termination of the contract was not effective and Cliffs must continue to supply Essar. Cliffs then brought a motion that the Ontario court lacks jurisdiction to grant the relief sought or, alternatively, Ontario is not the convenient forum in which to adjudicate the dispute. Justice Newbould of the Superior Court dismissed this jurisdictional motion.

Orders “Made Under” the CCAA

Before the Court of Appeal, Cliffs argued that Justice Newbould’s Order was not “made under” the CCAA and, as such, it did not require leave to be appealed. Justice Brown disagreed and, in doing so, he comprehensively considered the rationale behind the leave requirement in the CCAA.

First, Justice Brown held that s. 13 of the CCAA (which prescribes a leave to appeal requirement) recognizes that the CCAA seeks to resolve matters and obtain finality without undue delay. Accordingly, appeal rights are to be restricted and the ambit of orders “made under” the CCAA for the purpose of s. 13 is broad.

Second, he held that two cases that Cliffs relied upon to support its position were clearly distinguishable as:

  • Sandvik Mining & Construction Canada Inc. v. Redcorp Ventures Ltd., a 2011 British Columbia Court of Appeal decision, was a case where the CCAA proceedings had been dormant for several years after they had failed – it was in these peculiar circumstances that the receiver’s obtaining an order in that proceeding “as a matter of convenience” resulted in an order not “made under” the CCAA; and
  • Monarch Land Ltd. v. Sanderson of Fish Creek (Calgary) Developments Ltd., a 2014 Alberta Court of Appeal decision, was a case that involved a second non-CCAA issue being tacked on to a trial of issues in a CCAA proceeding, purely as a matter of procedural convenience.

Third, he held that the inquiry should be “purposed-focused”:

[33] […] When asked to determine whether an order requires leave to appeal under s. 13 of the CCAA, an appellate court should ascertain whether the order was made in a CCAA proceeding in which the judge was exercising his or her discretion in furtherance of the purposes of the CCAA by supervising an attempt to reorganize the financial affairs of the debtor company, either by way of plan of arrangement or compromise, sale, or liquidation: […] If the order resulted from such an exercise of judicial decision-making, then it is an order “made under” the CCAA for purposes of s. 13.

He noted that indicia about when an order is “made under” the CCAA include (para. 34):

  • “whether the order was ‘necessarily incidental to the proceedings under the CCAA’ or ‘incidental to any order made under the CCAA’”;
  • “whether the order required the interpretation of a previous order made in the CCAA proceeding or involved an issue that impacted on the restructuring organization of the insolvent companies”;
  • “if ‘CCAA considerations informed the decision of and the exercise of discretion by the chambers judge’ or ‘if a claim is being prosecuted by virtue of or as a result of the CCAA’”; and
  • whether “the notice of motion and the reasons of the motion judge explicitly state that the matter is a CCAA proceeding”;
  • whether “directions were sought, amongst other things, to determine rights and requirements of voting in relation to the proposed plan of arrangement”;
  • whether there is an independent originating process; and
  • whether “the order determined rights arising under an agreement that arose out of and that was related entirely to the CCAA proceeding”.

Applying the principles to this case, Justice Brown concluded that the Order was “made under” the CCAA for reasons including:

  • “it was made by the judge supervising an active CCAA proceeding in furtherance of the purposes of the CCAA” (para. 35);
  • the evidence “disclosed that what, if any, rights Essar possesses under the Contract, which Cliffs purported to terminate on October 5, 2015, is an issue in the CCAA proceeding” (para. 35);
  • Cliffs’s submission that Justice Newbould did not rely on a specific section of the CCAA was incorrect but, in any event, could not have been determinative; and
  • the fact that Essar could have brought the relevant claim in a normal civil proceeding without regard to the CCAA is irrelevant – the question remains whether the Order was “made under” the CCAA.

Expediting Leave Motion

Given the urgency of the matter, Justice Brown ordered that the leave motion be expedited.

Granting a Stay

The RJR-Macdonald test for granting a stay pending appeal is very well known. An appellant must establish that:

  1. the appeal raises a serious issue to be tried;
  2. the appellant will suffer irreparable harm if the stay is not granted; and
  3. the balance of convenience favours granting a stay.

There was no question that the appeal raised a serious issue to be tried – indeed, Essar conceded as much.

Cliffs argued that its participating in further steps in the Superior Court pending its appeal would result in it having attorned to the jurisdiction of the Ontario courts. Whether this would in fact amount to attornment and thus give rise to irreparable harm is an issue that has divided the Court of Appeal over the past decade. However, Essar had made various undertakings that reduced if not removed this risk, so Justice Brown concluded that irreparable harm had not been established.

Having said that, the balance of convenience favoured granting the stay as Cliffs was not required to do anything in the Superior Court during the short period of time prior to the hearing of the expedited leave motion. As such, there was no disadvantage to a stay pending the hearing of the leave motion. Justice Brown did note that if leave were granted, the panel hearing the leave motion would need to consider whether to continue the stay.

Even though irreparable harm had not been established, Justice Brown held that the overall consideration in deciding whether to grant a stay relates to the interests of justice. Given the unique facts of this case, he held a two week stay pending the hearing of the leave motion was warranted.