Court File and Parties

COURT FILE NO.: CV-16-00011348-00CL DATE: 20160429 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

BETWEEN:

INTERNATIONAL STEEL SERVICES INC. and ISSI MADAGASCAR S.A.R.L. Applicants – and – DYNATEC MADAGASCAR S.A. Respondent

COUNSEL: David C. Moore, Diana Soos and Nicholas Reinkeluers, for the Applicants John B. Laskin and Myriam Seers, for the Respondent

HEARD: April 25, 2016

Newbould J.

Endorsement

[1] The applicants (“ISSI”) apply for an interim injunction restraining the respondent (“Dynatec”) from interfering with its contractual rights under a Sulphuric Acid Plant Operation and Maintenance Agreement dated September 20, 2010 (the “Agreement”) pending the arbitral determination of certain disputes between the parties regarding the continuing existence of the Agreement. ISSI contends that the Agreement was extended by agreement to September 27, 2018. Dynatec contends that the Agreement was not extended to that date but terminates by its terms on May 1, 2016.

[2] The Agreement provides for the dispute to be arbitrated. After ISSI gave notice that it was invoking the arbitration provision in the Agreement, Dynatec gave a 90 day notice under the Agreement terminating the Agreement effective July 18, 2016 without prejudice to its position that the Agreement expires on May 1, 2016.

[3] Dynatec has been taking steps to take over the acid plants on May 1, 2016. The arbitration has not yet been set up, as I will describe, resulting in this application by ISSI. In light of the urgency, this decision must be rendered quickly. I have read all of the affidavit evidence but time does not permit a reference to the evidence in any great detail.

Factual background

[4] ISSI and Dynatec are parties to the Agreement made as of September 20, 2010, pursuant to which ISSI is responsible for the operation and maintenance of a sulphuric acid generating facility comprised of two sulphuric acid plants together with a 40,000 ton acid storage facility and other related works (the “Acid Plant”). The Acid Plant is a key component of the processing facilities necessary to produce finished nickel and cobalt derived from a large mining and infrastructure project owned by Dynatec in Madagascar known as the Ambatovy Project.

[5] The Agreement provided for an initial term during which ISSI would have 5 years to operate the Acid Plant functioning at full capacity, during which time ISSI would have an opportunity to earn certain bonuses and other payments under the Agreement. In return for the right to earn these bonus payments, ISSI agreed in the Agreement to be paid a lower based annual contract fee from Dynatec.

[6] When the Agreement was signed, the Acid Plant had not yet been commissioned, and it was uncertain when it would reach full capacity. In these circumstances, although the “Initial Expiry Date” provided for in the Agreement was initially agreed to be September 27, 2015, the Agreement specifically contemplated that the Initial Expiry Date could be amended by agreement of the parties.

[7] In May 2011, the Acid Plant had not yet been commissioned. The parties agreed by way of a signed amendment to the Agreement at that time to extend the Initial Expiry Date to May 1, 2016, five years from the time ISSI Madagascar employees began work at the Ambatovy plant. It was not until almost two years later that the two sulphuric acid plants comprising the Acid Plant achieved full operating capacity on or about April 6, 2013.

[8] Between November 2013 and January 2014 there were meetings and an exchange of emails between representatives of ISSI and Dynatec regarding an extension of the Agreement. ISSI takes the position that this resulted in an extension of the Agreement to September 27, 2018, subject to two conditions which were satisfied by April 2014 and that the exchange of emails satisfied the requirement to be in writing. Dynatec takes the position that there was no binding agreement to extend the Agreement to September 27, 2016.

[9] By email and letter dated October 2, 2015 Dynatec advised ISSI that the Ambatovy Project was in crisis because of a continuing reduction in the market price of nickel and invited ISSI to attend a meeting to agree on terms that would be commercially viable to both parties and the foundation for a long-term relationship between the two companies. The letter stated, in part:

On behalf of Dynatec Madagascar S.A. and Ambatovy Madagascar (collectively “Ambatovy”) we would like to thank you for the support your Company has consistently provided to Ambatovy. Over the years, our companies have built long standing working relationships and Ambatovy relies on your attention to quality and customer service.

The global commodity industries are undergoing a dramatic slowdown as demand and prices decline. At the same time, our industry has experienced cost increases across a broad range of spend categories. Together, these trends have significantly eroded Ambatovy’s margins and prompted a deliberate and critical review of spending across all parts of the organization.

Ambatovy would like to invite you to a meeting in which we can agree on terms that are commercially viable to both parties, and that can be the foundation for a long-term relationship between our two companies.

[10] On October 28, 2015, ISSI representatives met in Madagascar with Dynatec representatives and presented a cost cutting proposal for the operation and management of the Acid Plant. The minutes of the meeting drafted by Dynatec indicate that Dynatec was considering a further 5 year term in return for agreement on cost cutting measures. The minutes stated:

The discussion is to transmit the message of Ambatovy to ISSI of the important necessity of costs reduction program to be implemented to all Suppliers/Contractors due to continue declining of nickel price in the market in order to survive in this crisis and the Ambatovy plans to extend the Contract to 5 years term.

[11] ISSI says that their cost cutting proposal was well received at the October 28, 2015 meeting. However on November 23, 2015 in a telephone call, representatives of Dynatec advised ISSI that senior management had rejected ISSI’s cost cutting proposal and that Dynatec was going to take over the operation and maintenance of the Acid Plant on May 1, 2016. On the same day Mr. Sander of ISSI emailed Dynatec with a number of attached documents asserting that there had been an agreement reached to extend the Agreement to September 27, 2018.

[12] On the following day on November 24, 2015, Dynatec wrote to ISSI confirming that Dynatec was going to take over the Acid Plant on May 1, 2016, without any mention of the information regarding an extension of the Agreement to September 27, 2018 sent the day before by ISSI. It stated in part:

Thank you, and your team, for your time last evening to talk through our intent to take over the operation of the Sulphuric acid plants in 2016. I appreciate this would’ve been a difficult discussion for ISSI, however, the operation of the acid plants are essential core business activities and as such should be brought “in house”, aligning with Ambatovy’s vision for the business.

[13] Meetings took place in January, 2016 in Madagascar but no resolution of the dispute was achieved.

[14] Paragraph 24 of the Agreement states that any disputes between the parties are to be finally settled by way arbitration by a single arbitrator conducted in accordance with the rules of the International Chamber of Commerce:

24.2.1: In the event of a dispute between the CLIENT [Dynatec] and the OPERATOR [ISSI] (other than a matter to be resolved pursuant to Clause 24.4) concerning the interpretation of any provision of this Agreement or the performance of any of the terms of this Agreement, such matter or matters in dispute shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one arbitrator, appointed by the Chairman of the International Chamber of commerce, or his or her designee. The language of the arbitration shall be English and the place of the arbitration shall be Toronto, Ontario, Canada.

[15] Under clause 24.5.1 of the Agreement, it was agreed that performance of the Agreement shall continue during the arbitration proceedings:

24.5.1: Performance of this Agreement shall continue during arbitration proceedings or any other dispute resolution mechanism pursuant to clause 24. No payment due or payable by the CLIENT or the OPERATOR shall be withheld on account of a pending reference to arbitration or other dispute resolution mechanism except to the extent that such payment is the subject of such dispute.

[16] In clause 27.1 of the Agreement, it was agreed that the laws of Ontario apply to any such arbitration.

[17] On February 3, 2016 ISSI gave notice to Dynatec that it was thereby invoking the arbitration provisions in the Agreement. Dynatec continued to take the position that it intends to take over the Acid Plant on May 1, 2016 and it has taken steps with the ISSI employees that ISSI says is in breach of the Agreement. Some details of its complaint regarding the actions of Dynatec with its employees are contained in paras. 50 to 61 of the notice of arbitration and in supplementary affidavits of Mr. Sander sworn on April 25, 2016.

[18] On March 24, 2016, ISSI submitted to the ICC a request for arbitration detailing the facts relating to the termination dispute and requesting that the ICC appoint a single arbitrator pursuant to Clause 24.2.1 of the Agreement.

[19] On April 14, 2016 this application was commenced. In response, Dynatec gave notice to ISSI on April 19, 2016 that it was terminating the agreement under a 90 termination clause without prejudice to its position that the agreement expired on April 30, 2016. The notice stated in part:

However, given the position that has been asserted by ISSI in its application for an injunction and in its Request for Arbitration, we hereby give notice to ISSI pursuant to section 16.1.1.4 that [Dynatec] terminates the Agreement effective on the date that is 90 days from the date of this letter (July 18, 2016). This termination notice is without prejudice to [Dynatec]’s position that the Agreement expires on May 1, 2016 and that, consequently, no termination notice is required; it is being issued to limit the harm which would be caused to [Dynatec] should ISSI’s position regarding extension be accepted and is in no manner an acceptance or acknowledgment that the Agreement has been extended beyond May 1, 2016.

[20] The clause in the Agreement relied on by Dynatec is clause 16.1.1.4 which provides that Dynatec may terminate the Agreement without cause, in its sole discretion at any time, upon giving not less than ninety days written notice to ISSI.

Delay of Dynatec

[21] It is apparent that since the dispute surfaced, Dynatec has dragged its heels in having this matter arbitrated and that its plan has been to take over the acid plants before the disputed issues can be resolved.

[22] When Dynatec advised ISSI on November 23, 2015 that it was going to take over the operation and maintenance of the Acid plant on May 1, 2016, ISSI that day sent details of what it said was the agreement to extend the Agreement to September 27, 2018. On the following day Dynatec emailed ISSI and without referring to the email of the previous day from ISSI, outlined the steps it intended to take leading to the May 1, 2016 take-over the of the Acid plant.

[23] Meetings between the parties took place in Madagascar in January, 2016 and from the correspondence, it looks like a resolution of the dispute was discussed but not agreed to by persons in authority at Dynatec. On February 3, 2016 ISSI gave notice to Dynatec that it was thereby invoking the arbitration provisions in the Agreement.

[24] On February 4, 2016 Mr. Sander of ISSI emailed the ICC emergency arbitration rules to Dynatec and asked that ISSI and Dynatec make a joint request for implementation of these rules.

[25] Dynatec did not respond until on March 4, 2016 when it sent a letter to ISSI that stated that there were no grounds for any arbitration proceedings. The letter stated:

As discussed on several occasions, the Sulphuric Acid Plant Operation and Maintenance Agreement (the “Contract”) naturally expires on 30 April 2016, as provided for under the Contract amendment No. 1 dated 21 July 2011, this being the only contract term extension signed by both parties.

In relation to your proposal relating to arbitration, as indicated above, there has been no formal contract term extension executed by the parties and it is clear that the Contract expires on 30 April 2016. [Dynatec] has not breached and has acted in full compliance with the Contract, and as long as ISSI continues to perform its obligations under the Contract, there is no ground for arbitration proceedings or any other form of dispute resolution proceedings. Ambatovy is therefore not willing to incur any additional expenses.

[26] In the absence of any resolution of the issues, on March 24, 2016, ISSI submitted to the ICC a request for arbitration detailing the facts relating to the termination dispute and requested the ICC to appoint a single arbitrator pursuant to clause 24.2.1 of the Agreement. In its request for arbitration ISSI sought, inter alia, interim relief to maintain the status quo in accordance with clause 24.5.1 of the Agreement:

67. Accordingly, ISSI seeks the following relief:

(a) An interim and interlocutory injunction, or such other protective order as the arbitrator deems appropriate, pending the adjudication of the merit of the Issues herein, including an Order:

(i) restraining Dynatec and all of its officers, directors, employees and representatives, and any other person having knowledge of this order, from breaching, directly or indirectly, Clause 16.5.6 of the Agreement; and

(ii) directing the Parties to maintain the status quo with respect to the operation and maintenance of the Acid Plant, including but not limited to the performance of all duties and payment of all obligations relating thereto, in accordance with clause 24.5.1 of the Agreement, which provides as follows:…

in accordance with the principles applicable to the granting of such relief under Ontario law.

[27] On April 8, 2016 the ICC sent a notice to Mr. Moore and to Dynatec advising that Dynatec had to deliver its response to the request for arbitration by May 6, 2016. The notice also stated that if the parties wished to jointly nominate an arbitrator they should do so by May 6, 2016, failing which the ICC would appoint the arbitrator. On that day, Mr. Moore advised Mr. Blamires of Dynatec that ISSI would be satisfied with the Honourable Ian Binnie, the Honourable Dennis O’Connor or the Honourable Warren Winkler as arbitrator. No response was received by ISSI.

[28] On April 14, 2016 this application was commenced. In response, Dynatec gave its notice to ISSI on April 19, 2016 that it was terminating the agreement under the 90 termination clause without prejudice to its position that the agreement expires on May 1, 2016.

[29] This injunction application was scheduled to be heard on Friday, April 22, 2016. However on that day in chambers an order was made adjourning the application to Monday, April 25, 2016 to permit further affidavits and potential cross-examinations. It was also ordered that there be no further adjournments. At that conference, I enquired of Mr. Terry about the selection of an arbitrator. He said that Dynatec was not required to respond to the ICC until May 6, 2016 and that the response of Dynatec would be provided to the ICC on that day. I expressed some concern about that and queried why Dynatec was not proceeding quickly to agree on an arbitrator who could deal with the issues. On Monday of this week at the argument of this application, I was informed that the parties had agreed on Mr. O’Connor being the arbitrator. When Mr. O’Connor is available to deal with this matter was unknown.

[30] Since November 2015 Dynatec has continuously stated that it intends to take-over the Acid Plant on May 1, 2015 and it has been taking steps to that end, including taking steps with respect to ISIS's employees and the deactivation of the ISSI employee badges. ISSI has throughout this dispute taken the position with Dynatec that Dynatec has no right to take these steps during this dispute as clause 24.5.1 of the Agreement provides that performance of the Agreement shall continue during arbitration proceedings. At the conference on April 22, 2015 Mr. Terry acknowledged that Dynatec was taking steps towards the change-over and would be doing so over the week-end. In the circumstances I made an order that no steps of any kind are to be taken regarding the change-over pending the determination of the Applicants’ motion.

[31] Dynatec submitted in its factum that ISSI had delayed until the last minute in bringing this application, which it said should be considered in assessing whether ISSI was at risk of irreparable harm. This is somewhat paradoxical in view of failure of Dynatec to properly respond to the arbitration notice and in trying to delay the appointment of an arbitrator. This issue of interim relief should have been dealt with before an arbitrator under the ICC emergency arbitration rules as requested by ISSI on February 4, 2016. Dynatec's refusal to take any steps to respond to ISIS's notices and requests is a factor that I take into account in considering the equities involved in the granting of an injunction.

Test to be applied

[32] Article 28(2) of the ICC Rules provides for an application to a court before the file is given to the arbitrator for interim or conservatory measures.

28(2) Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an arbitral tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the arbitral tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the arbitral tribunal thereof.

[33] The Ontario International Commercial Arbitration Act also provides this Court with the jurisdiction to grant the interim relief:

9. It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

[34] In their facta, both parties referred to the RJR test as being applicable, with the caveat by Dynatec that what is being sought by ISSI is a mandatory injunction with a higher test of a strong prima facie case needed to be established by ISSI rather than the lesser test of a serious issue to be tried. Both parties referred to case law in which an injunction request pending an arbitration was determined on the RJR principles.

[35] During argument, I raised a question as to whether there was any case law in Canada discussing whether some other test might be applicable for interim injunction requests pending an arbitration. I was told that no such discussion could be found and that the parties and the courts had just assumed that the RJR test applied. Following the argument, counsel for ISSI submitted a supplementary brief that indicated that in some U.S. districts, the courts had applied a different test that did not require any showing of irreparable harm, although the decisions in different districts were not uniform. Counsel for Dynatec responded that the settled law in Canada was RJR and that it would be wrong to apply U.S. case law, particularly as U.S. case law is divided. I accept the position of Dynatec and will not apply any U.S. case law.

[36] Both the ICC rules and the Ontario International Commercial Arbitration Act refer to an application to the courts for an interim measure. That suggests that the relief is to be granted pending the ability of the arbitrator to decide matters.

[37] There is support for this in the decision of Justice Gillese in 1711811 Ontario Ltd. v. Buckley Insurance Brokers Ltd., 2014 ONCA 125. In that case Gillese J.A. described in a preliminary way the difference between motions for interim and interlocutory injunctions. She stated that on a motion for an interim injunction, argument is generally quite limited and if an order is made it is typically for a brief specified period of time, quoting Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf (Toronto: Canada Law Book) at para. 2.15. She stated further that an interlocutory injunction, like an interim injunction, is an order restraining the defendant for a limited time such as until trial or other disposition of the action, again quoting Sharpe, and it typically follows much more thorough argument than for an interim injunction and is generally for a longer duration than an interim injunction.

[38] The word “interim” in the Ontario International Commercial Arbitration Act must have some meaning, particularly when it is used in the phrase “an interim measure of protection”. In my view, while RJR is instructive on such a motion, it must be recognized that the interim measure of protection is not necessarily a typical measure intended to last until the trial or other final disposition of the action. What is contemplated by the Ontario International Commercial Arbitration Act in my view is an interim measure pending the ability of the arbitration process to deal with the issues. [1]

[39] In this case, the hearing of the application was conducted on a number of affidavits that were filed in the last few days, even just hours, before the hearing and without any cross-examination. The hearing lasted three hours. It had all the hallmarks of an interim application.

[40] Dynatec contends that what is sought is a mandatory injunction and therefore the test to be applied is whether the applicant has established a strong prima facie case. It relies on the statement of Gillese J.A. in Buckley that a mandatory injunction is one that requires the defendant to take acts positively:

A mandatory injunction is one that requires the defendant to act positively. It may require the defendant to take certain steps to repair the situation consistent with the plaintiff’s rights, or it may require the defendant to carry out an unperformed duty to act in the future. Mandatory injunctions are rarely ordered and must be contrasted with the usual type of injunctive relief, which prohibits certain specific acts. Because of their very nature, mandatory injunctions are often permanent.

[41] Under the Agreement, ISSI is to operate the Acid Plant to produce sulphuric acid. The sulphuric acid is required in the production of finished nickel and cobalt derived from the overall mining and infrastructure known as the Ambatovy Project owned by Dynatec. The Agreement provides that Dynatec is to provide ISSI with all materials and supplies and consumables necessary for the operation and maintenance of the Acid Plant.

[42] ISSI relies on authority that the injunction sought is prohibitive rather than mandatory if it requires the parties to act in accordance with an agreement. TDL Group Ltd. v. 1060284 Ontario Ltd., [2001] O.J. No. 3614 (Div. Ct.) is authority for the proposition that an order that establishes a new right never agreed to is mandatory while an order requiring the parties to act in accordance with an agreement is prohibitive and not mandatory. This proposition has been applied in a number of cases, including cases such as 674834 Ontario Ltd. (c.o.b. Coffee Delight) v. Culligan, [2007] O.J. No. 979 (per Pattillo J.) and Best Theratronics Ltd. v. Canadian Nuclear Laboratories Ltd., 2015 ONSC 7993 (per Smith J.) in which a franchisor or other contracting party has been required to supply goods to the plaintiff or take other steps under an existing contract that is in dispute.

[43] In 1323257 Ontario Ltd. (c.o.b. Hyundai of Thornhill) v. Hyundai Auto Canada Corp. (2009), 55 B.L.R. (4th) 265, D.M Brown J. (as he then was) adopted TDL Group as follows:

30 I propose to follow the directions given by the Divisional Court in TDL Group Ltd. v. 1060284 Ontario Ltd., [2001] O.J. No. 3614 where Lane, J. wrote:

• It is clear that the categories of positive and negative covenants and orders are not clear cut. In our view, the essence of the order in its factual matrix is what is to be looked at in making this determination. (para. 4)

He continued, at para. 9, by observing:

• An order preventing the denial of a right previously agreed to is very different from an order establishing a new right never agreed to and requiring a party to act accordingly.

TDL has been followed by several recent decisions of this court: Erinwood Ford Sales Ltd. v. Ford Motor Co. of Canada, [2005] O.J. No. 1970; 674834 Ontario Limited v. Culligan of Canada, [2007] O.J. No. 979; Struik v. Dixie Lee Food Systems Ltd., [2006] O.J. No. 3269.

31 In some cases involving the termination of dealerships or franchises courts have examined whether the injunctive relief sought would be prohibitive or mandatory by inquiring whether the dealership agreement in issue contained renewal rights. Where it did not, some courts have regarded a request for an injunction restraining termination as mandatory in nature, requiring, as it would, the franchisor to continue to supply the franchisee: Parker, supra.; Esmail v. Petro-Canada (1995), 86 O.A.C. 385 (Div. Ct.). Where it did, courts have tended to view requests for interlocutory injunctions restraining termination of the agreement prior to trial as ones for prohibitive relief, with the plaintiff seeking to prevent the denial of a right previously agreed upon: TDL, supra. Although the granting of an injunction in the latter case would require the parties to continue their relationship until trial, as Lane J. pointed out in TDL:

• That one effect of this is to require both parties to act in accordance with their contract while the dispute is being tried does not change the essence of the matter. (para. 9)

32 As Spies J. noted in Erinwood Ford at para. 60: "Where a party seeks to prevent early termination of a dealer agreement, the party does not ask the court to create a new right, but rather to preserve the status quo and leave the issue of whether or not the termination is proper for trial."

33 In my view, that describes precisely the circumstances of the present motion. The 1999 Agreement, as continued under the Minutes, provided for its annual automatic renewal absent termination for cause or proper notice of non-renewal. In this action Thornhill puts in issue the validity of its recent termination. Thornhill seeks to set aside the Minutes at trial. If the trial judge grants such relief, the validity of the 2006 Notice of Non-Renewal will be determined at arbitration. If the trial judge does not set aside the Minutes, the court will then consider the validity of the September 2008 Notice of Termination. In either case the essence of the injunctive relief sought is to preserve until trial the status quo of the dealer relationship between Thornhill and HAC.

34 I therefore conclude that the applicable standard for examining the strength of Thornhill's case is whether it gives rise to a serious question to be tried - i.e. whether the claim is neither frivolous or vexatious. A prolonged examination of the merits is neither necessary nor desirable: RJR-McDonald Inc. v. Canada, [1994] 1 S.C.R. 311, at paras. 49-50.

[44] This case is apt to our situation. ISSI contends that it has an agreement in place to extend the Agreement to September 27, 2016. It seeks to enforce that agreement and not to establish some right it does not have. It also seeks to enforce clause 6.1.1 of the Agreement that states that Dynatec shall provide access to the site to ISSI as required for the performance by ISSI of its services under the Agreement and clause 24.5.1 of the Agreement that provides that performance of the Agreement shall continue during arbitration proceedings.

[45] There is further support for the view that what ISSI seeks is not a mandatory injunction. It is stated in Sharpe, supra, at ¶2.460 that a mandatory order is usually restorative in effect. The plaintiff is asking the court to order the defendant to take the necessary positive action to put the situation back to what it should be. Usually that can be achieved at trial. A negative order will stop the defendant from taking further action pending trial. Here, ISSI is in substance not asking the court to order Dynatec to take positive action to put the situation back to what it should be but rather is asking the court to order Dynatec to stop taking steps that interfere with the rights of ISSI under the Agreement.

[46] Thus while there are some requirements of Dynatec to provide certain things to ISSI while ISSI is operating under the agreement, the essential matter at hand is a claim by ISSI that Dynatec should be stopped from interfering with ISIS's rights to perform under the Agreement. In the circumstances, the claim by ISSI for interim relief is for a prohibitive injunction rather than a mandatory injunction.

[47] Dynatec argues that an injunction would practically speaking make proceeding to the arbitration pointless as it would render the issue of whether the Agreement expired on May 1, 2016 moot. I do not see that. If an injunction is ordered and at some point terminated on the basis that there was no agreement to extend the Agreement beyond May 1, 2016 or that the Agreement was lawfully terminated by the 90 day notice given on April 19, 2016, Dynatec will have a determination that the Agreement was not extended or that it was lawfully terminated and it will have a claim for damages under the undertaking as to damages given by ISSI. The trial or arbitration would not be pointless at all from Dynatec’s point of view.

Serious issue to be tried

[48] The threshold to be met is a low one with the judge to make a preliminary assessment of the merits of the case and decide whether the application is neither frivolous nor vexatious. See RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at paras 49-50.

[49] Whether the Agreement continues is a matter for the arbitrator. Having said that, there is no doubt that there is a serious issue to be tried as to whether there was an agreement made between ISSI and Dynatec to extend the Agreement to September 27, 2016. There was an exchange of emails containing the terms and evidence that the conditions for the extension had been satisfied. There are also serious questions as to whether the provision in clause 24.5.1 of the Agreement that provides that performance of the Agreement shall continue during arbitration proceedings is enforceable and whether the purported termination of the Agreement by Dynatec after and as a result of ISSI commencing arbitration and bringing this application was a good faith and valid exercise of its rights under clause 16.1.1.4 of the Agreement.

Irreparable harm

[50] "Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. See RJR at para. 59.

[51] There are cases in the Federal Court that have said that evidence of irreparable harm must be clear and not speculative and that it is not enough that irreparable harm may arguably result. However it is pointed out in Sharpe, supra, at ¶2.418 that most other courts have adopted a more flexible approach. Reference is made to a statement of McLachlin J.A. (as she then was) in British Columbia (Attorney General) v. Wale (1986), 9 B.C.L.R. (2d) 333 in which she stated:

It is important to note that clear proof of irreparable harm is not required. Doubt as to the adequacy of damages as a remedy may support an injunction.

[52] Reference is also made in Sharpe to the decision of the Saskatchewan Court of Appeal in Potash Corp. of Saskatchewan Inc. v. Mosaic Potash Esterhazy Limited Partnership, 2011 SKCA 120 in which the Court took a similar view and cautioned against requiring the plaintiff to prove to a high level of certainty that irreparable harm will result. In that case R.G. Richards J.A. stated:

59 …it seems wrong to demand that a plaintiff seeking an injunction must prove to a high degree of certainty that he or she will suffer irreparable harm if the injunction is not granted. In many situations, this approach would self-evidently frustrate the balancing exercise which a court should be undertaking in deciding if interlocutory relief is warranted. …

61 Therefore, in the end, it is sufficient that, as a general rule, a plaintiff seeking interlocutory injunctive relief be required to establish a meaningful risk of irreparable harm or, to put it another way, a meaningful doubt as to the adequacy of damages if the injunction is not granted. This is a relatively low standard which will serve to fairly easily move the analysis into the balance of convenience stage of the decision-making. It is there that all of the relevant considerations can be weighed and considered with as much subtlety as the circumstances require. ...

[53] In this case, ISSI claims for a number of reasons that it will suffer irreparable harm.

[54] The first is its contention that it will suffer a loss of its business reputation if Dynatec is permitted to take over the operation of the Acid Plant on May 1, 2016. Loss of business reputation is a recognized category of irreparable harm. See RJR at para. 59.

[55] In his affidavit on behalf of ISSI, Mr. Sander has sworn that ISSI has developed a recognized international reputation for reliable development, operation and maintenance of acid plants throughout the world. ISSI’s reputation is dependent upon its ability to engage, train and oversee qualified personnel to operate and maintain acid plants on behalf of ISSI. Conversely, ISSI’s ability to engage such personnel to travel to and establish themselves in different parts of the world is dependent upon ISSI’s reputation and ability to provide stable employment, including certainty of tenure, for such employees. If Dynatec takes over the operation of the Acid Plant on May 1, 2016 as it intends, there will be irreparable harm to ISSI in terms of its status and reputation within its industry and to ISSI’s relations with the employees whom it engaged to operate the Acid Plants.

[56] Mr. Sander swore that if Dynatec unilaterally takes over the Acid Plant on May 1, 2016, it will have consequences as follows:

(a) ISSI Madagascar employees (approximately 50 expatriate Indian employees are currently in Madagascar) are indispensable to the maintenance and operation of the Acid Plant;

(b) If Dynatec is permitted to take over the operation of the Acid Plant on May 1, 2016, the employment of all of ISSI Madagascar’s employees will be terminated;

(c) Under Madagascar Law all terminated employee must be immediately reported to the Ministry of Interior, which will result in their work permits being automatically revoked and putting the employee at serious risk of violation of immigration laws;

(d) As a result, said employees would be immediately required to leave Madagascar, and to incur significant transportation costs as a result;

(e) If this occurred there could be significant difficulty in arranging for the return of these employees to Madagascar in the event ISSI is successful in the arbitration proceeding, as they would require a new Transformable Visa issued by the government of India, which in the experience of ISSI could take up to three months to be approved and obtained;

(f) If Dynatec takes over the operation and maintenance of the Acid Plant on April 30, 2016 all employees of ISSI Madagascar must return to India. When and whether all former employees will be able to obtain alternative employment is problematic and represents a potentially devastating hardship for such individuals and their families. This would adversely affect the reputation of ISSI and its ability to engage such former employees to travel to other parts of the world to perform services on behalf of ISSI’s projects and clients;

[57] Mr. Sander attached a letter from its employees at the Acid Plant that makes clear they are confused and concerned about the steps taken by Dynatec, including telling them from January, 2016 that the ISSI contract would be terminated and telling them that their badges would be cancelled.

[58] This concern is not, as contended by Dynatec, a concern only for the welfare of ISIS's employees and therefore irrelevant as to whether ISSI will suffer irreparable harm. It is also a concern for ISIS's business reputation. The evidence at this stage cannot be said to lack any substance. Dynatec argues that concerns of the employees is ISIS's fault as ISSI has failed to communicate with its employees about the transition process and Dynatec has been unable to offer them employment because of ISIS's position that the Agreement was extended. This is simply argument that the trouble was caused by ISSI not agreeing with Dynatec's actions. What Dynatec did was obviously part of its strategy to push ahead and ignore the arbitration. At this stage it is no answer to the concerns of ISSI.

[59] ISSI also contends that it would not be possible to determine with any accuracy what its monetary damages would be because apart from set amounts to be paid to ISSI, clause 13.1.1 of the Agreement provides that ISSI is entitled each year to a bonus based on its performance to be based on various criteria set out in a schedule to the Agreement. That is not an insubstantial point.

[60] In my view, ISSI has established a meaningful risk of irreparable harm and a meaningful doubt as to the adequacy of damages if the injunction is not granted.

Balance of convenience

[61] This step requires a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits. The factors which must be considered in assessing the balance of inconvenience are numerous and will vary in each individual case and it would be unwise to attempt to list them. See RJR at paras. 62 and 63 and Sharpe, supra, at ¶2.530.

[62] In this case there is a serious issue that ISSI may suffer irreparable harm if the injunction is not granted. ISSI will be out of the Acid Plant and will likely face difficulty if after the arbitration and an award declaring the Agreement to be still in force it attempts to start up again and hire employees to work for it.

[63] Dynatec argues that granting the injunction would deprive Dynatec of the right to manage, operate and maintain its acid plants as it sees fit. It would effectively deprive Dynatec of its property rights in the acid plants and associated assets in favour of granting possession and control of those assets to ISSI, which has no property rights in those assets. I have difficulty with this argument. There is a contract that may be in place, depending on the outcome of the arbitration, which permits access to the premises by ISSI for the purpose of carrying out the Agreement. Having to carry out that contract which it chose to make in the first place can hardly be said to be harm in this case to Dynatec.

[64] Dynatec also says that it would be harmful because it would have to accept and pay for a service it does not want and it would be required to abort the substantial transition process it has undertaken since February 2016, including the hiring and training of staff and the completion of multiple plans, evaluations and assessments. This process would need to be aborted, and new staff reassigned or terminated, if the injunction were granted.

[65] However, this “harm” if real was a harm Dynatec imposed on itself by the hardball tactics it employed. When Dynatec did not accept the cost cutting measures it requested ISSI to make, it asserted to ISSI and publicly that the Agreement expired on May 1, 2016, ignoring the position of ISSI that the contract had been extended to September 27, 2018 and ignoring the arbitration obligations in the Agreement. It proceeded with its plans in the face of the arbitration and did what it could to delay any arbitration. It does not lie in its mouth to now complain that its tactical position will be of nought.

[66] Moreover, I do not in this case see it as any answer by Dynatec that it does not want to continue with ISSI running its Acid Plant. Any defendant in a case in which it had a contract with a plaintiff and wanted the contract terminated would be a defendant that did not want to continue its relationship with the plaintiff. The issue is whether there are grounds to enjoin the defendant from interfering with the contractual rights of the plaintiff. Some cases have enjoined such conduct. Others have not. But it should not ride on whether the defendant asserts it does not want to deal with the plaintiff.

[67] “Clean hands” and “one who seeks equity” maxims apply not only to the party seeking an injunction but also to the party opposing it. See Catalyst Capital Group Inc. v. Moyse (2014), 2014 ONSC 6442, 122 O.R. (3d) 741 at para. 2; leave to appeal refused 2015 ONSC 2384 (Div. Ct.). The actions of Dynatec do not at all attract equity but rather speak against it. Their actions are a factor against Dynatec on this application.

[68] In Sharpe, supra, at ¶1.590 in discussing mandatory injunctions, it is said that it is appropriate to consider the defendant’s blameworthiness for the existence of the state of affairs which altered the situation and that a defendant who has acted in reliance of a bona fide but mistaken belief that activity would not invade the plaintiff’s rights will not be treated the same as the defendant who has acted in a high-handed or deliberate fashion. If this is a factor in a mandatory injunction situation, it surely is a factor in this case. Dynatec has acted deliberately and high-handily in ignoring the arbitration obligations in the Agreement and attempting to bulldoze its way to removing ISSI.

[69] Dynatec also says that it has serious concerns about ISSI’s ability to operate the plants safely and effectively. It says there has been an increasing trend of incidents of increasing severity while the acid plants’ operation and maintenance have been under ISSI’s responsibility. The concerns of Dynatec appear to have been raised with ISSI for the most part after ISSI commenced arbitration proceedings and this court application.

[70] One difficulty with this contention is that it has arisen in this case in the last few days in a flurry of affidavits going back and forth. Each allegation of Dynatec has been met with denials and particulars of why the concerns are not valid. On one view of it, Dynatec is trying to manufacture a mountain out of a molehill in order to convince a court not to grant an injunction. That is the position of ISSI and it refers to the letter from Dynatec to ISSI of October 2, 2015 that stated that over the years, the two companies had built long standing working relationships and that Ambatovy relied on ISIS's attention to quality and customer service. However, I am not in any position on this record to say who is right or wrong. I certainly cannot say that Dynatec has established the basis for its alleged concern.

[71] In my view, the balance of convenience in this case favours ISSI.

Conclusion

[72] ISSI is entitled to an interim protective order restraining Dynatec, its officers, directors agents, servants or employees and all other persons with knowledge of the order from in any way prohibiting, hindering, restricting or in any way interfering with ISSI’s contractual rights under the Agreement including (i) restraining Dynatec from interfering in any way with the employees of ISSI or their status as badge holders, (ii) restraining Dynatec from taking over the Acid Plant or interfering in any way with ISIS's rights to access the premises and its rights under the Agreement to operate the Acid Plant, (iii) restraining Dynatec from not complying with its obligations under the Agreement. This order will be in effect until and unless an order is made in the arbitration to the contrary.

[73] ISSI is entitled to its costs. If costs cannot be agreed, ISSI may file brief written submissions along with a proper cost outline within 10 days and Dynatec shall have a further 10 days to file brief written submissions in reply.

Newbould J.

Released: April 29, 2016

Reasons for Judgment (Additional Note)

COURT FILE NO.: CV-16-00011348-00CL DATE: 20160429 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

BETWEEN:

INTERNATIONAL STEEL SERVICES INC. and ISSI MADAGASCAR S.A.R.L. Applicants – and – DYNATEC MADAGASCAR S.A. Respondent

REASONS FOR JUDGMENT Newbould J. Released: April 29, 2016

[1] It is generally accepted in Ontario that whether an injunction is termed interim or interlocutory, as the effect is the same, the injunction should only be granted in accordance with well settled principles and that essentially the same standard applies, although some consideration may be given to the relatively short time that often has transpired prior to the hearing. See Kanda Tsushin Kogyo Co. et al. v. Coveley et al. (1997), 96 O.A.C. 324 (Div.Ct.)