COURT OF APPEAL FOR ONTARIO

CITATION: Essar Steel Algoma Inc. (Re) 2016 ONCA 138

DATE: 20160219

DOCKET: M46093 & M46104

Brown J.A. (In Chambers)

In the Matter of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended

And in the Matter of a Plan of Compromise or Arrangement of Essar Steel Algoma Inc., Essar Tech Algoma Inc., Algoma Holdings B.V., Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore Company, and Essar Steel Algoma Inc. USA

Markus Koehnen and Jeffrey Levine, for the moving parties/responding parties by way of cross-motion, The Cleveland-Cliffs Iron Company, Cliffs Mining Company and Northshore Mining Company

Eliot Kolers and Maria Konyukhova, for the responding parties/moving parties by way of cross-motion, Essar Steel Algoma Inc., Essar Tech Algoma Inc., Algoma Holdings B.V., Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore Company and Essar Steel Algoma Inc. USA

Nicholas Kluge and Delna Contractor, for the Monitor, Ernst & Young Inc.

Heard: February 16, 2016

ENDORSEMENT

I. THE MOTIONS

[1] Essar Steel Algoma Inc., and certain related companies (collectively, "Essar"), are under the protection of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended ("CCAA"). The Cleveland-Cliffs Iron Company, Cliffs Mining Company, and Northshore Mining Company (collectively, "Cliffs"), move for directions as to whether they require leave to appeal from the order of the CCAA judge, Newbould J., dated January 25, 2016 (the "Order"). Whether leave to appeal is required or not, Cliffs seeks a stay of the contract dispute motion Essar has brought against Cliffs before the CCAA judge pending Cliffs' exercise of its appeal rights in respect of the Order.

[2] Essar brings a cross-motion for an order expediting the hearing of Cliffs' motion for leave to appeal, or its appeal.

[3] At the hearing of the motions, I released an endorsement (the "Endorsement") in which I concluded that Cliffs required leave to appeal the Order and its leave to appeal motion should be expedited. I also granted a stay of Essar's contract dispute motion pending the determination of Cliffs' leave to appeal motion. These are my reasons for so ordering.

II. Background

[4] Essar manufactures steel in Sault Ste. Marie, Ontario. Iron ore pellets are a key input in its manufacturing process. In 2002, Essar's predecessor entered into a long-term iron ore pellet supply contract with Cliffs (the "Contract"). The Contract obliged Essar to purchase iron ore pellets exclusively from Cliffs until 2016 and to purchase a portion of its pellets from Cliffs from 2017 until 2024.

[5] In recent years the business relationship between Essar and Cliffs has been a rocky one, with disputes arising over the quantities of iron ore pellets Essar was obliged to order and take up under the Contract.

[6] In January 2015, Cliffs filed a complaint in the United States District Court for the Northern District of Ohio (Eastern District) (the "Ohio Court") alleging that Essar had breached the Contract by failing to take timely delivery of iron ore pellets in the requisite amounts. In late July 2015, Cliffs brought a motion for partial summary judgment. The motion was decided on October 7, 2015. The Ohio Court dismissed Cliffs' motion for summary judgment for breach of contract relating to Essar's 2014 quantity nomination, but granted its motion to dismiss Essar's counterclaim with respect to moisture content. A trial of all the issues in the Ohio litigation was scheduled to commence on December 7, 2015.

[7] On October 5, 2015, Cliffs terminated the Contract alleging multiple material breaches by Essar.

[8] On November 9, 2015, Essar sought and obtained an initial order under the CCAA. On November 10, 2015, Essar's foreign representative sought and obtained orders under Chapter 15 of the U.S. Bankruptcy Code, 11 U.S.C (2010) recognizing and enforcing in the United States the orders granted in the CCAA proceeding, which was recognized as the foreign main proceeding.

[9] On November 11, 2015, Essar filed with the Ohio Court a notice that the Ohio litigation was automatically stayed in respect of Essar. On December 3, 2015, the Ohio Court dismissed Cliffs' action without prejudice. As a result, the scheduled trial of Cliffs' action did not proceed. Cliffs has moved to vacate that dismissal, but no decision has been rendered on its motion.

[10] In mid-November, Essar served a motion under s. 11.4 of the CCAA seeking an order declaring Cliffs a critical supplier; the motion did not proceed because Essar was able to find short-term alternate suppliers.

III. PROCEEDINGS UNDER APPEAL

[11] On December 8, 2015, Essar moved in the CCAA proceeding for a declaration that Cliffs' purported termination of the Contract was not effective and Cliffs must supply Essar with iron ore pellets at the Contract price (the "Contract Dispute Motion"). Essar also sought orders directing Cliffs to comply with the Contract and to pay damages resulting from the purported termination of the Contract.

[12] On December 23, 2015, Cliffs served a motion seeking an order dismissing Essar's Contract Dispute Motion on the ground 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.

[13] Cliffs' motion was heard on January 14, 2015 by Newbould J., the judge conducting the CCAA proceedings in respect of Essar. The CCAA judge dismissed Cliffs' motion in an Order and Endorsement dated January 25, 2016. He held that the Ontario court has jurisdiction over Essar's Contract Dispute Motion and Cliffs had not demonstrated that a clearly more appropriate forum than Ontario existed in which to adjudicate the dispute.

IV. ISSUES

[14] Cliffs moves in this court for directions and for a stay of the Order pending Cliff's exercise of its appeal rights. Cliffs argues that it is not required to obtain leave to appeal the Order. Alternatively, Cliffs submits that in the event "leave is granted from a portion of the decision of" the CCAA judge, that appeal should be consolidated "with the other aspects of the appeal which Cliffs has as of right."

[15] Essar has brought a cross-motion seeking an order expediting the hearing of Cliffs' leave to appeal motion, if required, or the hearing of the appeal.

V. Whether Cliffs Requires Leave to Appeal the Order

[16] Section 13 of the CCAA requires that "any person dissatisfied with an order or a decision made under this Act" obtain leave to appeal. The sole issue on Cliffs' motion for directions is whether the Order of the CCAA judge was "made under" the CCAA.

[17] The Order resulted from a motion brought in the Essar CCAA proceeding, before the judge seized with hearing all matters in the Essar CCAA proceeding, with the judge explaining, in his reasons, how he was exercising his powers as a CCAA judge. The Order bears a style of cause stating that it was made "In the Matter of the Companies' Creditors Arrangement Act" in respect of a "Plan of Compromise or Arrangement of Essar Steel Algoma Inc." and other companies.

A. Positions of the Parties

[18] Nevertheless, Cliffs submits that the Order was not "made under" the CCAA, for two reasons. First, the fact that an order is made "in" a CCAA proceeding does not necessarily mean that it was "made under" the CCAA. Second, an order is not "made under" the CCAA if it is one that "could have properly been made in a normal civil action without any regard to the CCAA or the CCAA proceeding." According to Cliffs, to constitute an order "made under" the CCAA, the order must rely upon or be grounded in a specific section of the CCAA. In support of its submissions, Cliffs relies on decisions made by Tysoe J.A. in Sandvik Mining & Construction Canada Inc. v. Redcorp Ventures Ltd., 2011 BCCA 333, 94 C.B.R. (5th) 53, and O'Brien J.A. in Monarch Land Ltd. v. Sanderson of Fish Creek (Calgary) Developments Ltd., 2014 ABCA 143, 575 A.R. 46.

[19] Essar submits that CCAA proceedings have a wide scope. Consequently, if CCAA considerations inform the decision and exercise of discretion of the judge, the decision can fairly be said to be "made under" the CCAA. Such considerations informed the making of the Order, so leave to appeal is required.

B. Analysis

The Purpose of s. 13 of the CCAA

[20] The analysis must start with an examination of the legislative purpose underlying the leave requirement contained in s. 13 of the CCAA. In Hurricane Hydrocarbons Ltd. v. Komarnicki, 2007 ABCA 361, 425 A.R. 182, the Alberta Court of Appeal observed that the requirement for leave to appeal furthers the objects and purpose of the CCAA. At paras. 14 and 15, the court stated:

To further the goal of enabling a company to deal with creditors in order to continue to carry on business, the CCAA proceedings seek to resolve matters and obtain finality without undue delay...The requirement for leave to appeal similarly reinforces the finality of orders made under a CCAA proceeding and prevents continuing litigation where there are no serious and arguable grounds of significance to the parties. As noted by numerous courts, delay and uncertainty caused by appeals is a matter of concern in a CCAA proceeding: Luscar Ltd. v. Smoky River Coal Ltd., 1999 ABCA 62, [1999] A.J. No. 185 at para. 22, citing Re Pacific National Holding Corp. (1992), 1992 427 (BC CA), 15 C.B.R. (3d) 265 (B.C.C.A.).

The scope of CCAA proceedings has been interpreted expansively by the courts and may even include non-judicial proceedings because the objective is to include proceedings that may work against the interests of creditors and render impossible the achievement of effective arrangements: Luscar Ltd. v. Smoky River Coal Ltd., 1999 ABCA 179, 237 A.R. 326 at para. 31.

[21] More recently, in Re AbitibiBowater Inc., 2010 QCCA 965, 68 C.B.R. (5th) 57, at para. 26, Chamberland J.A. described the purpose of the leave to appeal requirement in s. 13 of the CCAA:

This requirement stems from a clear intention of Parliament to restrict appeal rights having regard to the nature and object of CCAA proceedings; an appeal court should be cautious about intervening in the CCAA process. This is not to say that leave will never be granted but it should be so only "sparingly" (In Re Pacific National Lease Holding Corp. (1992), 1992 427 (BC CA), 15 C.B.R. (3d) 265 (B.C.C.A. [In Chambers]), at 272).

[22] That legislative purpose for the leave requirement supports an expansive interpretation of the term "made under" the Act in s. 13: Re Smoky River Coal Ltd., 1999 ABCA 62, 237 A.R. 83, at para. 20. Such an expansive interpretation was adopted by Paperny J.A. in Re Concrete Equities Inc., 2012 ABCA 91, [2012] A.W.L.D. 2836, at para. 16, where she held that when "CCAA considerations informed the decision of and the exercise of discretion by the chambers judge ... it can be fairly said that the order was made 'under' the CCAA in accordance with section 13 of the Act."

The Decisions in Sandvik Mining and Monarch Lands

[23] Cliffs submits that the interpretation given to "made under" the Act in Concrete Equities should be limited to the facts of that case, where there was no dispute that the notices of disallowance dealt with by the chambers judge resulted from a claims process ordered under the CCAA. Cliffs argues that the Sandvik Mining and Monarch Lands decisions employed different interpretations of "made under" the Act which are more appropriate for the present case.

[24] I agree that both the Sandvik Mining and Monarch Lands decisions offer guidance on the meaning of "made under" the CCAA, but I do not accept Cliffs' submission that the principles emerging from those cases would lead to the conclusion that Cliffs is not required to seek leave to appeal from the Order. Both cases involved exceptional fact situations that lay beyond the boundaries of the usual CCAA proceeding.

[25] Dealing first with the Sandvik Mining decision, Tysoe J.A. concluded that the decision of the judge below regarding the ownership of some equipment was not an order "made under" the CCAA, notwithstanding that the order resulted from an application styled as brought in a CCAA proceeding involving Redcorp and related companies. Tysoe J.A. wrote, at para. 9: "it does not follow from the fact that the order was made in the CCAAproceeding that it was necessarily an order made under the CCAA." He continued by observing the judge below "did not rely on any provision of the CCAA, and the determination of the issue in question was not incidental to any order made under the CCAA." Tysoe J.A. went on to state, at para. 11:

It was a decision made under general law and the Sale of Goods Act, and while the decision may have been made within the CCAAproceeding as a matter of convenience, it was a decision that was made independently of the provisions of the CCAA and the BIA and of any order previously made under the CCAA.

[26] Those statements must be understood in the specific factual context in which they were made. In Sandvik Mining, the debtor companies had secured an initial order under the CCAA in March 2009. Two months later, a judge lifted the stay of proceedings against certain creditors, appointed an interim receiver over some of the debtors' assets, and discharged the monitor from most of its duties. A month after that, the debtors were assigned into bankruptcy. Almost two years later, the receiver brought its application seeking a declaration regarding the ownership of the equipment and styled the application as one brought in the CCAA proceeding. It was against that background that Tysoe J.A. stated, at para. 8:

In my opinion, the order or decision of [the judge below] was not made under the CCAA. The efforts to reorganize Redcorp had come to an end, and there was no ongoing attempt to have Redcorp file a plan of arrangement. [The receiver] simply filed its application in the CCAA proceeding as a matter of convenience. The fact that [the receiver] was appointed in the CCAAproceeding did not require the application to be filed in that proceeding. [The receiver] could have, and more properly should have, commenced a separate proceeding. [The receiver] was not appointed as interim receiver or receiver pursuant to the CCAA, but rather pursuant to the BIA and the Law and Equity Act, R.S.B.C. 1996, c. 253 (while the order lifting the stay undoubtedly had to be made within the CCAA proceeding, there is a question in my mind about the appropriateness of appointing receivers within CCAAproceedings after the reorganization attempt has failed).

[27] Sandvik Mining, therefore, involved a case where the CCAA proceedings had run their course and failed, but the CCAA court file had not yet been closed. The receiver, "as a matter of convenience", took advantage of that state of affairs to bring its application in the CCAA court file. The message from the Sandvik Mining decision is that where the CCAA proceedings have come to an end for all intents and purposes, an order made several years later in a dormant CCAA court file may well not be an order "made under" the CCAA.

[28] Cliffs also relies on the decision in Monarch Land, which considered whether an order resulting from a trial of issues was "made under" the CCAA, and therefore required leave to appeal. Again, the context of that case explains its result.

[29] Sanderson was one of a group of companies that obtained an initial order under the CCAA. In those proceedings, a trial of issues was directed. Prior to the trial, the list of issues was expanded. As a result, the trial judge considered two issues: (i) an accounting for sale proceeds as between two of the secured creditors of the debtors; and (ii) the ownership of parking stalls pursuant to an agreement between the debtor and a secured creditor.

[30] In respect of the first part of the trial order – dealing with the accounting between two secured creditors – O'Brien J.A. stated, at para. 11:

It is common ground that the accounting issue arises out of a Postponement and Priority Agreement, a separate and distinct agreement between CMI and Monarch. Monarch concedes that this determination, including the limitations issue, "could properly have been made in a normal civil action between Monarch and CMI without any regard to the CCAA", and accordingly that no leave is required with respect to that part of the judgment.

[31] However, O'Brien J.A. concluded that the part of the trial order disposing of the second issue concerning the ownership of the parking stalls was "made under" the CCAA. Distinguishing the case from Sandvik Mining, he wrote, at paras. 7 and 8:

Here the order of Horner J., the supervising judge in the CCAA proceedings, granted "a trial of an issue ... to determine whether the Purchase and Sale Agreement of December 1, 2010, between [Sanderson] and [Monarch] included parking stalls for the development of phase 3 of the Sanderson project". She lifted the stay in the CCAA proceedings specifically for that purpose. It is common ground that the subject Purchase and Sale Agreement was approved by an order made in the CCAA proceedings...

In my view, it cannot be said, as it was in Sandvik, that "the determination of the issue in question was not incidental to any order made in the CCAA". To the contrary, the issue Horner J directed to trial required the interpretation of an agreement that the court had expressly approved in the CCAA proceedings, and involved the need to interpret the order approving the sale. Both interpretations had a potential impact upon other Sanderson's other creditors in addition to CMI and Monarch.

[32] Accordingly, Sandvik Mining and Monarch Land involved circumstances which lay beyond the boundaries of the usual CCAA proceeding: in Sandvik Mining, the CCAA proceeding had run its course long before the order was made, and in Monarch Land an issue between two secured creditors was tacked on, as a matter of procedural convenience, to a trial of an issue in the CCAA proceeding. Consequently, I do not think that Sandvik Mining's distinction between an order "made in" a CCAA proceeding and one "made under" the CCAA or Monarch Land's reference to orders that "could properly have been made in a normal civil action" offers general guidance for considering whether leave to appeal is required under s. 13 of the CCAA.

A Purpose-Focused Approach to s. 13 of the CCAA

[33] The inquiry, instead, should be purpose-focused. 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: Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, at para. 59. 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.

[34] To aid that purpose-focused inquiry, the case law has identified some indicia about when an order is "made under" the CCAA. In Sandvik Mining, Tysoe J.A. stated a court should ask whether the order was "necessarily incidental to the proceedings under the CCAA" or "incidental to any order made under the CCAA": at paras. 9 and 10. In Monarch Land, O'Brien J.A. looked at 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: at paras. 8 and 15. As mentioned, in Concrete Equities, Paperny J.A. stated that s. 13 of the CCAA would apply 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": at paras. 16 and 17. Finally, additional indicia were identified by this court in Re Hemosol Corp., 2007 ONCA 124, at para. 3:

In our view, the proceeding before the motion judge and the decision under appeal were conducted and rendered under the CCAA within the meaning of s. 13 and therefore leave to appeal is required. The notice of motion and the reasons of the motion judge explicitly state that the matter is a CCAA proceeding. Directions were sought, amongst other things, to determine rights and requirements of voting in relation to the proposed plan of arrangement. There was no independent originating process to justify any other conclusion. The order determined rights arising under an agreement that arose out of and that was related entirely to the CCAA proceeding.

Application of the Purpose-Focused Approach

[35] Applying those principles to the present case, I conclude that the Order was "made under" the CCAA. It was made by the judge supervising an active CCAA proceeding in furtherance of the purposes of the CCAA. The evidence before the CCAA judge 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. In its Sixth Report dated January 11, 2016, the Monitor stated that Essar is preparing a business plan that will form part of the information made available to potential purchasers or investors in its Sale and Investment Solicitation Process ("SISP") recently approved under the CCAA. The Monitor reported: "A key component of the Business Plan is Algoma's raw material supply strategy, and in particular its strategy for the supply of iron ore pellets... In canvassing the iron ore pellet market and finalizing its supply strategy, Algoma needs certainty concerning the status of the Cliffs Contract." Based on that and other evidence, the CCAA judge concluded, at para. 31, that the "claim of Essar Algoma against Cliffs is an asset of the applicants to be dealt with in this Court." See also, Re Montréal, Maine & Atlantic Canada Co., 2013 QCCS 5194 (Que. S.C.), at paras. 17 and 19.

[36] Cliffs advances two additional reasons about why the Order was not "made under" the CCAA. I do not accept either.

[37] First, Cliffs submits that the CCAA judge did not, on the face of his reasons, rely on a specific section of the CCAA to assume jurisdiction. In Sandvik Mining, Tysoe J.A. commented that the judge below had not relied on any provision of the CCAA. However, it does not follow, as Cliffs submits, that an order is not "made under" the CCAA unless the judge expressly relies on a section of the Act in granting the order. In Century Services, the Supreme Court of Canada recognized that a judge supervising a CCAA proceeding will draw on both statutory authority under the CCAA and the court's residual authority under its inherent and equitable jurisdiction in order to decide specific issues that arise during the CCAA proceeding. Deschamps J. stated, at para. 65:

I agree with Justice Georgina R. Jackson and Professor Janis Sarra that the most appropriate approach is a hierarchical one in which courts rely first on an interpretation of the provisions of the CCAA text before turning to inherent or equitable jurisdiction to anchor measures taken in a CCAA proceeding...

[38] In any event, the CCAA judge expressly relied on s. 11 of the CCAA in his decision on jurisdiction. He stated, at para. 28:

The CCAA provides in section 11 that a court has jurisdiction to make any order "that it considers appropriate in the circumstances". A CCAA court clearly has the power as per Century Services to make the procedural orders of the kind sought by Essar Algoma in this case. See also Smokey River Coal Ltd., Re, (1999), 1999 ABCA 179, 12 C.B.R. (4th) 94 (Alta. C. A.) at paras. 60 and 67 per Hunt J.A. in which he held that a judge has the discretion under the CCAA to permit issues to be decided in another forum (in that case arbitration) but is under no obligation to do so. [Footnotes omitted.]

[39] Whether or not the CCAA judge was correct at law in reaching that conclusion is a matter for consideration by the leave to appeal panel, but is not relevant to the inquiry into the proper route Cliffs must follow to appeal the Order. The CCAA judge purported to rely on s. 11 of the CCAA in making the Order, so the Order was "made under" the CCAA.

[40] Second, Cliffs argues that because the contractual claim Essar seeks to assert against Cliffs could properly have been made in a normal civil action without regard to the CCAA, the Order was not "made under" the CCAA. I do not accept this submission. To decide the appeal route Cliffs must follow, the issue is not what claims Essar could have asserted in some hypothetical proceeding; the issue is how to characterize the Order – was it "made under" the CCAA? The purpose-focused inquiry under s. 13 of the CCAA must look at the order actually made, not at some order that could have been made in a hypothetical proceeding.

Conclusion

[41] For these reasons, I concluded that the Order was "made under" the CCAA, and Cliffs therefore required leave to appeal under s. 13 of the CCAA.

VI. Order Expediting Leave to Appeal

[42] Cliffs' motion for leave to appeal will be heard by a panel of this court on an expedited basis. In the Endorsement, I gave directions that the parties serve and file the completed leave materials no later than Wednesday, February 24, 2016, so that the materials could be placed before the panel on February 25, 2016.

VII. Stay Pending Appeal

[43] Cliffs seeks a stay of Essar's Contract Dispute Motion before the CCAA judge pending its leave to appeal motion. Essar opposes the request for a stay.

[44] As set out in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, 111 D.L.R. (4th) 385, at p. 334, the three-part test for obtaining a stay pending appeal requires the moving party to demonstrate (a) there is a serious question to be determined on the appeal, (b) the moving party will suffer irreparable harm if the stay is not granted, and (c) the balance of convenience favours granting the stay: Yaiguaje v. Chevron Corp., 2014 ONCA 40, 315 O.A.C. 109, at para. 3.

A. Serious Question

[45] Cliffs has demonstrated that its leave to appeal motion raises a serious question to be determined. Essar conceded as much in its factum when it stated that this was, at best, a "neutral factor." And, at the hearing, Essar advised it was not contesting that the serious question factor had been satisfied. In my view, that was a proper concession to make given the low threshold to meet on this factor. Cliffs' stay motion turns on the other two factors.

B. Irreparable harm

Positions of the parties

[46] Cliffs submits if a stay is not issued, it would effectively be deprived of the right to seek leave to appeal because Essar's Contract Dispute Motion would proceed before the CCAA judge in the face of Cliffs' jurisdictional challenge.

[47] The parties provided an update on what has transpired in that proceeding since the Order was made. Last week, the parties participated in two conference calls with the CCAA judge to discuss the procedure by which Essar's Contract Dispute Motion would be adjudicated in the CCAA proceeding. Counsel advised that a further videoconference call was scheduled to take place on Wednesday, February 17, 2016 before the CCAA judge at which time they expected the judge would render a decision on the adjudication procedure. Cliffs stated it was not participating voluntarily in those scheduling calls, even though it had been permitted to file its procedural proposals with the CCAA judge on a without prejudice basis.

[48] Cliffs submits that although Essar has undertaken not to treat Cliffs' participation in the scheduling and organization of the Contract Dispute Motion as an attornment to the jurisdiction of the Ontario court, conflicting decisions from this court create the risk that such an undertaking might not be given effect, posing a serious risk to Cliffs' ability to challenge the Ontario court's jurisdiction.

[49] In response, Essar argues that a stay is not necessary in light of its agreement to expedite the hearing of Cliffs' motion for leave to appeal and the undertakings it has given on the stay motion.

[50] Essar filed an affidavit from its Chief Financial Officer, Rajat Marwah. He deposed that Essar wants the parties to ready themselves for an adjudication of the Contract Dispute Motion. To that end, Essar has proposed to Cliffs that it deliver its responding affidavit evidence on the dispute on "an informal, without-prejudice basis outside the formal bounds of these court proceedings." Essar, in turn, would complete certain documentary disclosure. Mr. Marwah provided the court with three undertakings in order to permit Cliffs to exercise its appeal rights while enabling preparation to continue on the Contract Dispute Motion:

(i) Cliffs would not be required to file in the CCAA court any affidavit or other material delivered in preparation for the contract dispute hearing;

(ii) Essar undertakes not to argue that the delivery of such materials by Cliffs or the taking of any steps toward a hearing of Essar's motion would amount to an act of attornment to the jurisdiction of the Ontario court; and

(iii) Essar would not invoke the jurisdiction of the Ontario court until Cliffs' appeal or motion for leave to appeal has been decided.

Analysis

[51] Over the past decade, judges of this court sitting in Chambers on stay motions have expressed different views about whether a party risks attorning to the jurisdiction of the Ontario court by performing court-ordered procedural steps in the face of the party's on-going challenge to the court's jurisdiction. Some decisions have viewed such participation as risking attornment, thereby creating some risk of irreparable harm: M.J. Jones Inc. v. Kingsway General Insurance Co. (2004), 2004 6211 (ON CA), 72 O.R. (3d) 68, 242 D.L.R. (4th) 139 (C.A.), at paras. 27-31; Stuart Budd & Sons Ltd. v. IFS Vehicle Distributors ULC, 2014 ONCA 546, 122 O.R. (3d) 472, at paras. 29-36. On the other hand, in Van Damme v. Gelber, 2013 ONCA 388, 115 O.R. (3d) 470, at paras. 21-23, the court minimized any such risk from court-ordered participation, and in Yaiguaje v. Chevron Corp., at para. 11, MacPherson J.A. regarded any risk as a weak factor in the irreparable harm analysis.

[52] I need not express a view on the effect of court-ordered participation in a proceeding on a party's ability to continue to advance a jurisdictional challenge because decisions of this court uniformly have held that where the responding party provides the court with undertakings of the kind given by Essar in this case, the undertakings significantly reduce or remove the risk of irreparable harm.

[53] In BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, 2011 ONCA 620, 283 O.A.C. 321, at para. 14, Laskin J.A. described the undertakings given by BTR:

BTR wants to proceed with the Ontario action. It is content to have LBIE deliver a statement of defence without filing it with the court. It undertakes not to argue that delivery of the statement of defence or participation in examinations for discovery constitute acts of attornment. BTR also undertakes not to invoke the jurisdiction of the Ontario court, by, for example, a motion for summary judgment, while LBIE's leave motion is outstanding. [Emphasis added.]

[54] Laskin J.A. did not consider the delivery of a statement of defence or participation in discoveries outside of the "formal bounds" of the court proceedings as amounting to attornment: at para. 31. Similar undertakings given in Yaiguaje v. Chevron Corp., led MacPherson J.A., at paras. 11 and 16, to follow the decision in BTR Global and conclude that the moving parties had made a very weak showing that they would suffer irreparable harm.

[55] In light of the undertakings given by Essar to the court in the present case, I conclude that Cliffs have not demonstrated that they would suffer irreparable harm if a stay pending appeal is not granted.

C. Balance of convenience

[56] Both parties point to some "big picture" factors as tipping the balance of convenience in their favour. Cliffs contends that Essar will not suffer any prejudice should a stay not issue because to date it has found sufficient quantities of replacement iron ore pellets. As well, Essar did not pursue its critical supplier motion in the CCAA proceeding.

[57] On its part, Essar stresses the need for an expedited determination of the contract dispute in light of the end of April deadline for bids under the SISP process. Essar also advises that the Chapter 15 court in Delaware has deferred Cliffs' motion to lift the CCAA stay until the jurisdiction issue is resolved.

[58] Although these factors are relevant to the determination of which party will suffer the greater harm from the granting or refusal of a stay, in my view the most significant factor is much narrower in scope. While the parties did not file on this stay motion the procedural proposals they have presented to the CCAA judge, Essar advises that neither proposal contemplates Cliffs delivering any materials over the next two weeks. Instead, during that time Essar will be required to deliver certain productions.

[59] In those circumstances, the balance of convenience favours granting a stay. I have ordered Cliffs' leave to appeal motion to be expedited. As a result, within the next two weeks the leave motion will be placed before a panel of this court for determination. If leave is not granted, the Contract Dispute Motion can proceed on the merits with little delay in preparation having occurred. If leave to appeal is granted, then the leave panel will consider whether or not to continue the stay.

D. Conclusion

[60] In BTR Global, Laskin J.A. stated, at para. 16, that the three components of the stay test "are interrelated in the sense that the overriding question is whether the moving party has shown that it is in the interests of justice to grant a stay." In my view, the most significant factor affecting the interests of justice is the balance of convenience. It favours granting a stay. I therefore granted a stay in the terms set out in para. 3 of the Endorsement:

As to that part of Cliffs' motion which seeks a stay of Essar's contract motion before the CCAA judge pending its exercise of appeal rights in respect of the Order, I grant a stay of Essar's contract motion until such time as the panel of this court disposes of Cliffs' motion for leave to appeal. If the panel grants leave to appeal, the panel may consider whether or not to continue the stay based upon the stay motion materials already filed with the court.

[61] Having granted a stay, I went on to state in para. 4 of the Endorsement:

Of course, nothing in this endorsement prevents Cliffs from voluntarily taking steps to prepare for an adjudication of the contract dispute with Essar, without prejudice to its argument that the Superior Court of Justice of Ontario lacks the jurisdiction to adjudicate that dispute. As part of such voluntary steps, it is always open to Cliffs to request, on a voluntary, without prejudice basis, the informal assistance of the CCAA judge on any hearing planning or preparation issues, and it is always open to the CCAA judge to provide any such requested informal assistance on a without prejudice basis.

VIII. Disposition

[62] For the reasons set out above, I ordered (i) Cliffs to seek leave to appeal the Order under s. 13 of the CCAA, (ii) the hearing of the leave to appeal motion be expedited, and (iii) the issuance of a stay pending the disposition of the leave to appeal motion in the terms set out in para. 3 of the Endorsement.

"David Brown J.A."