Ernst & Young Inc. v. Essar Global Fund Ltd.

Citation: 2017 ONCA 1014
Court: Court of Appeal for Ontario
Judges: Blair, Pepall and van Rensburg JJ.A.
Date: December 21, 2017
Reported: 139 O.R. (3d) 1

Case Summary

Corporations — Oppression — Algoma's monitor in Companies' Creditors Arrangement Act ("CCAA") restructuring proceedings bringing oppression action under s. 241 of Canada Business Corporations Act ("CBCA") against Algoma's parent Essar — Monitor alleging that Essar had exercised de facto control over Algoma and had consistently preferred its own interests over those of Algoma and its stakeholders — Monitor having standing as complainant under oppression provisions of CBCA — Claim properly pleaded as oppression action rather than derivative action under s. 239 of CBCA — Algoma entirely dependent on access to port in order to function economically — Trial judge entitled to find that transaction directed by Essar which conveyed port to Essar-controlled Portco and resulted in Algoma losing control over port was oppressive to Algoma's stakeholders — Business judgment rule not providing defence to Essar — Trial judge not erring in granting remedy which removed Portco's control rights — Canada Business Corporations Act, R.S.C. 1985, c. C-44, ss. 239, 241 — Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.

Facts

Algoma was a steel manufacturer in Sault Ste. Marie, and its port facilities were integral to its operations. At a time when Algoma was facing a liquidity crisis, its board of directors placed responsibility for Algoma's recapitalization efforts in the hands of its parent Essar. Essar directed a transaction which conveyed the port facilities to Portco, which Essar indirectly owned. The port transaction resulted in Algoma losing control over the port facilities. Algoma was involved in restructuring proceedings under the Companies' Creditors Arrangement Act. As a result of the port transaction, Portco -- and therefore Essar -- effectively had a veto over any party acquiring Algoma in the CCAA proceedings. With the authorization of the supervising CCAA judge, Algoma's CCAA monitor brought an oppression action under s. 241 of the Canada Business Corporations Act against Essar and certain Essar-controlled companies. The trial judge found that the monitor had standing to bring the action. He found that the reasonable expectations of Algoma's trade creditors, employees, pensioners and retirees were that Algoma would not deal with a critical asset like the port in such a way as to lose long-term control over such a strategic asset to a related party on terms that permitted the related party to veto and control Algoma's ability to do significant transactions or restructure and which gave unwarranted value to the related party. He concluded that Essar's actions were oppressive. He granted a remedy which, among other things, removed Portco's control of the port facilities. The defendants appealed.

Held

The appeal should be dismissed.

The trial judge did not err in finding that the monitor had standing as a complainant under s. 238(d) of the CBCA. While a monitor generally plays a neutral role in CCAA proceedings, in exceptional circumstances it may be appropriate for a monitor to serve as a complainant. This was one such case. There was a prima facie case that merited an oppression action. The monitor commenced the action as an adjunct to its role in facilitating a restructuring. The monitor could efficiently advance an oppression claim on behalf of a conglomeration of stakeholders -- Algoma's pensioners, retirees, employees and trade creditors -- who were not organized as a group and who were all similarly affected by the alleged oppressive conduct. The remedy granted by the trial judge removed an insurmountable barrier to a successful restructuring.

The trial judge did not err in finding that the action was properly brought as an oppression action under s. 241 of the CBCA rather than as a derivative action under s. 239 of the CBCA. The derivative action and the oppression remedy are not mutually exclusive, and there may be circumstances giving rise to overlapping derivative actions and oppression remedies where harm is done both to the corporation and to stakeholders in their separate stakeholder capacities. This case fell into that overlapping category.

The trial judge correctly identified the two prongs of the oppression remedy inquiry: (i) does the evidence support the reasonable expectation asserted by a claimant; and (ii) does the evidence establish that the reasonable expectation was violated by conduct falling within the term "oppression"? On the evidence, he was entitled to find that the port transaction, and in particular the transfer of control and the loss of Algoma's ability to restructure absent Essar's consent, violated the reasonable expectations of Algoma's stakeholders.

In light of the fact that Algoma's board of directors was not independent and did not actually exercise business judgment, the business judgment rule did not provide a defence to Essar.

The remedy granted by the trial judge was appropriate.

APPEAL FROM THE JUDGMENT OF NEWBOULD J.

(2017), 137 O.R. (3d) 438, [2017] O.J. No. 1377, 2017 ONSC 1366 (S.C.J.) for the plaintiff in an action for an oppression remedy; and from the costs order, [2017] O.J. No. 4248, 2017 ONSC 4017, 50 C.B.R. (6th) 148 (S.C.J.).

Counsel

Patricia D.S. Jackson, Andrew D. Gray, Jeremy Opolsky, Alexandra Shelley and Davida Shiff, for appellants Essar Global Fund Limited, New Trinity Coal, Inc., Essar Ports Algoma Holding Inc., Essar Ports Canada Holding Inc., Algoma Port Holding Company Inc., Port of Algoma Inc., and Essar Steel Limited.

Clifton P. Prophet, Nicholas Kluge and Delna Contractor, for respondent Ernst & Young Inc. in its capacity as monitor of Essar Steel Algoma Inc. et al.

Eliot N. Kolers and Patrick Corney, for respondent Essar Steel Algoma Inc.

Peter H. Griffin, Monique Jilesen and Kim Nusbaum, for appellants GIP Primus, L.P. and Brightwood Loan Services LLC.

JUDGMENT

The judgment of the court was delivered by PEPALL J.A.

A. FACTS

(1) Algoma's Operations

The City of Sault Ste. Marie sits on the shore of St. Mary's River, a waterway that links Lake Superior to Lake Huron at the heart of the Great Lakes, close to the Canada/U.S. border. The steel production operations that are owned by Algoma have been the primary employer and economic engine of the city since construction of the steel mill in 1901. Not surprisingly, the city's port, which is situated next to Algoma's buildings and facilities, is integral to the steel operations. Indeed, Algoma is the port's primary customer and its employees have traditionally run the port operations. Raw materials used to produce steel are shipped to the port and the steel that is produced is shipped to market from the port. The relationship is one of mutual dependence.

Unfortunately, Algoma was in and out of CCAA protection proceedings both in 1991 and in 2001. In late 2013, Algoma faced another liquidity crisis and restructured under the CBCA in 2014. The recent CCAA filing occurred on November 9, 2015.

(2) The Essar Group

Essar Global is a Cayman Islands limited liability company and the ultimate parent of the respondent Algoma, which it acquired through its subsidiaries in 2007. Essar Global is also the parent of the appellants Portco, Essar Power Canada Ltd., New Trinity Coal Inc., Essar Ports Algoma Holding Inc., Algoma Port Holding Company Inc. and Essar Steel Limited. Its investments are managed by Essar Capital Limited ("Essar Capital"), which is based in London, England. These companies are part of the Essar Group, a multinational conglomerate that was founded in India by two brothers, Sashi and Ravi Ruia. Members of the Ruia family are the beneficial owners of the Essar Group.

(3) Algoma's Recapitalization

In late 2013, Algoma was facing a liquidity crisis. Algoma anticipated being unable to meet a coupon payment due to unsecured bondholders in June 2014, and its US$346 million term loan was to mature in September 2014. Although Essar Global had been injecting substantial funds into Algoma, it was hesitant to advance further cash to Algoma. Algoma decided to consider mechanisms to restructure and reduce its debt and therefore embarked on a recapitalization project.

At the time of the discussions relating to the recapitalization, Algoma's board of directors consisted of five appointees affiliated with the Ruia family or the Essar Group, and three independent directors. In early January 2014, the board of directors placed responsibility for Algoma's recapitalization efforts in the hands of Essar Global and Essar Capital employees. Algoma personnel had no day-to-day control over the recapitalization project.

Although the three independent directors had begun expressing concerns about their roles on the board as early as the fall of 2013, in the face of Algoma's serious financial challenges, their concerns became more acute. Specifically, they were concerned that their requests for timely, full disclosure of information and full participation in the strategic decisions of the board had not been properly taken into account by the other board members. On January 19, 2014, the three sent a memo to the board proposing the establishment of an independent committee to work with outside financial advisors to evaluate options and alternatives for Algoma's recapitalization. The board held a meeting on February 11, 2014, and rejected this proposal by a vote of four to three, the three being the independent directors. In response, one of the three independent directors resigned. The other two initially remained on the board.

On February 17, 2014, one of the remaining independent directors, Thomas Dodds, wrote to Prashant Ruia seeking a meeting. Prashant Ruia was then the vice-chair of Algoma's board, the son of one of the founders of Essar Group, and a director of Essar Capital. Mr. Dodds wrote:

If your expectation of [the Algoma] Board is to simply be a formality and our role as independent directors is to essentially "rubberstamp" shareholder and management decisions, we are not prepared to continue serving as directors.

As you know, Directors and particularly independent directors have a legal, fiduciary responsibility to all the stakeholders of the Company starting with the Company first, followed by the shareholders, employees, community and others. This Director responsibility may on occasion conflict with the objectives of the shareholder who may, understandably, be more interested in matters of import to themselves. Most of the time there will be no conflict between the responsibilities of the Directors, objectives of the shareholder and that of the Company stakeholders as broadly defined. However, there are other occasions when they do.

What we as independent directors have experienced in the last few Board meetings is a complete disregard for any discussion or wholesome debate on alternatives to re-financing or contingency planning at [Algoma].

In addition when we ask questions, or propose alternatives, we are asked to wait a while for additional information and told that everything will work out.

We cannot discharge our responsibilities under such an environment.

The two remaining independent directors resigned on February 21 and May 5, 2014, respectively. In his resignation letter, Mr. Dodds explained his rationale, stating:

I lacked confidence that I was receiving information and engaged in decision-making in the same manner as those Board members who are directly affiliated with the company or its parent.

The trial judge found, at para. 15 of his reasons, that the four directors who voted against the independent committee were "Essar-affiliated directors", that it was clear that the Ruia family did not want an independent committee, and that the Essar-affiliated directors voted accordingly.

The trial judge also found that the recapitalization and the port transaction were run by Joe Seifert, chief investment officer of Essar Capital. The trial judge rejected the contention that Mr. Seifert was merely an advisor to the board that independently made all of the critical decisions. Rather, Essar Global and Essar Capital, led by Mr. Seifert, directed and made decisions relating to the recapitalization and the port transaction. As the trial judge noted, at para. 49, the evidence was "overwhelming" that Essar Global and Essar Capital were "calling the shots".

(4) Restructuring Support Agreement

Essar Global engaged Barclays Capital, an investment bank, to pursue alternative financing structures for Algoma on behalf of Essar Global. Barclays introduced GIP to Mr. Seifert of Essar Capital. In May 2014, representatives of Essar Global, GIP, and Barclays met to discuss Algoma's infrastructure assets and potential asset disposition transactions. They discussed the possibility of a transaction in which Algoma might sell its port assets to a new corporate entity to generate cash proceeds, but not for the purpose of recapitalizing Algoma. Rather, the proceeds would flow upstream to Essar Global. In light of Algoma's prior insolvencies, GIP thought it important that a separate corporate entity distinct from Algoma be established to hold the port assets. By the end of June 2014, Algoma had an exclusivity agreement with GIP regarding GIP's loan to finance the port transaction.

Soon after entering into the exclusivity agreement with GIP, on July 24, 2014, Algoma entered into a restructuring support agreement (the "RSA") with Essar Global and an ad hoc committee of Algoma's unsecured noteholders. The RSA set out the principal terms of a restructuring. It provided for a reduction of Algoma's debt through the exchange of the unsecured notes in return for the payment of a percentage of their original principal amount and the issuance of new notes. The note restructuring would be implemented through a court-approved CBCA plan of arrangement. As a condition of the RSA and pursuant to an equity commitment letter dated July 23, 2014, Essar Global agreed to acquire equity in Algoma for cash in the minimum amount of US$250 million and subject to a maximum of US$300 million. The trial judge found that Essar Global never intended to honour this obligation.

The equity commitment letter provided a remedy in the event of a breach. The plan of arrangement contained a release of any claim arising out of the equity commitment letter in favour of Essar Global, the noteholders and the other corporations participating in the arrangement.

It was a condition of the proposed plan of arrangement that Essar Global would comply with its RSA obligation to provide the aforementioned cash equity infusion. However, as early as March 28, 2014, representatives of the Ruia family had made it clear that they did not have US$250 million for equity. Efforts were made to reduce Essar Global's contribution. In late July 2014, one of the Ruia representatives wrote that ideally the equity contribution would be kept to US$150 to US$160 million.

Nonetheless, an application for approval of the plan of arrangement was made to the court. The recapitalization contemplated by the RSA was approved as an arrangement under s. 192 of the CBCA on September 15, 2014.

Beginning in October 2014, roadshow presentations were made to market the securities being offered through the recapitalization. However, the transaction marketed did not accord with the transaction contemplated by the RSA. First, the roadshow presentation described an Essar Global cash equity contribution in Algoma of less than US$100 million, not the US$250 to US$300 million described in the RSA. Second, the presentation provided for the cash to be generated from the sale of the port by Algoma. The RSA did not allow for such a sale absent the noteholders' consent. No such consent had been obtained. In addition, the proceeds of any sale were to be used to reduce Algoma's debt.

The roadshow was unsuccessful and investors failed to subscribe for the securities marketed. The lead bookrunner attributed this failure to the perception among investors that the transaction described in the roadshow presentation contemplated an insufficient contribution of equity into Algoma by Essar Global.

And so it was that Algoma was left without the cash to repay or refinance its debt.

Ultimately, the RSA was amended on November 6, 2014, such that Essar Global contributed US$150 million rather than the cash contribution of between US$250 and US$300 million originally contemplated by the equity commitment letter. The amended RSA went on to provide that upon fulfillment of this revised contribution, Essar Global was deemed to have satisfied all of its obligations under the equity commitment letter. The releases contained in the original filing were repeated in the amended plan of arrangement.

As subsequently discussed, in light of the amended RSA, an amended plan of arrangement was approved on November 10, 2014.

(5) Port Transaction

The port transaction closed on November 14, 2014. In summary, Algoma sold to Portco the port assets consisting of the port buildings, the plant and machinery, but not the land. Algoma leased the realty to Portco for a term of 50 years. Portco agreed to provide port cargo handling services in return for a monthly payment from Algoma to Portco. Algoma agreed to provide to Portco the services necessary to operate the port in return for a monthly payment from Portco that would be less than the monthly payment paid by Algoma to Portco for cargo handling services.

Turning to the details of the port transaction, Algoma and Portco entered into a master sale and purchase agreement ("MSPA"). Under the MSPA:

(i) Algoma conveyed to Portco all of the fixed assets owned and used by Algoma in relation to the Port, and agreed to lease the realty to Portco;

(ii) Portco agreed to pay Algoma US$171.5 million to be satisfied by:

• a cash payment by Portco of US$151.66 million; and
• the issuance of an unsecured promissory note in the amount of US$19.84 million payable in full on November 13, 2015.

To fund these obligations, Portco obtained a US$150 million term loan from GIP. GIP Primus, L.P. lent US$125 million, while Brightwood Loan Services LLC lent US$25 million. This term loan was secured by all of Portco's current and future real and personal property and supported by two guarantees in favour of GIP: one from Essar Global, and another from Algoma Port Holding Company Inc., Portco's direct parent.

Pursuant to the MSPA, Algoma and Portco executed five additional documents: a promissory note, a lease, a shared services agreement, an assignment of material contracts agreement and a cargo handling agreement.

(i) Promissory Note

The promissory note was for US$19.84 million payable by Portco to Algoma. Portco immediately assigned its obligations under the promissory note to Essar Global. Essar Global therefore became the obligor under the note and Algoma released Portco from its obligation. As of the date of the trial, the promissory note remained unpaid. At para. 27 of a subsequent decision released on June 26, 2017, the trial judge granted a declaration that any amounts owing to Algoma under the promissory note given by Portco to Algoma have been set off against amounts owing by Algoma to Portco under the cargo handling agreement: Essar Steel Algoma Inc. (Re), [2017] O.J. No. 4258, 2017 ONSC 3930, 53 C.B.R. (6th) 321 (S.C.J.). The decision allows for set-off against Portco, but preserves GIP's right to repayment.

(ii) Lease

Under the lease, Portco leased from Algoma the port lands, roads and outdoor storage space for a 50-year term. Portco prepaid Algoma the rent for the entire 50-year period. The present value of this leasehold interest was stated to be US$154.8 million. Algoma maintained responsibility for all maintenance, repairs, insurance and property taxes.

(iii) Shared Services Agreement

Under the shared services agreement, Algoma was to be responsible for providing all the services necessary for Portco to fulfill its obligations under the cargo handling agreement. These services were to be provided by Algoma employees, not Portco employees. Portco agreed to pay Algoma US$11 million annually subject to escalation at the rate of 3 per cent per annum beginning in 2016.

(iv) Assignment of Material Contracts

Under the assignment of material contracts agreement, Algoma provided a covenant in favour of GIP, which precluded Algoma from selling or assigning any material contract relating to the port, including the cargo handling agreement except by way of security granted to its other third party lender.

(v) Cargo Handling Agreement

Under the cargo handling agreement, Portco agreed to provide Algoma with cargo handling services for an initial 20-year term with automatic renewal for successive three-year periods unless either party gave written notice of termination to the other. Algoma agreed to pay Portco based on tonnage with a minimum monthly assured volume of US$3 million. In other words, Algoma was obliged to pay a minimum of US$36 million annually to Portco for 20 years subject to an escalation in price of 1 per cent per annum commencing in 2016. Therefore, while Algoma was entitled to US$11 million annually under the shared services agreement, it had to pay Portco at least US$36 million annually under the cargo handling agreement, such that Portco would receive an annual revenue stream from Algoma of US$25 million. This amount was intended to service GIP's term loan at US$25 million a year. However, GIP's loan had a term of eight years, and therefore Portco would have the full benefit of the US$25 million for at least 12 years of the initial 20-year term of the cargo handling agreement, and potentially for 42 years if the agreement was not terminated.

Section 15.2 of the cargo handling agreement also contained a change of control clause that stated that the "Agreement may not be assigned by either Party without the prior written consent of the other Party." This provision became particularly contentious because it effectively gave Portco -- and therefore Portco's parent, Essar Global -- a veto over any party acquiring Algoma in the CCAA proceedings.

Although inclusion of the change of control provision in the cargo handling agreement was driven by GIP, the trial judge found that it was effectively for the benefit of Essar Global, as it gave Portco a veto. Furthermore, the trial judge noted, at para. 117, that Essar Global had in fact relied on s. 15.2 to its benefit, by holding out its change of control rights to dissuade competing bidders for Algoma in the restructuring process while Essar Global continued to express its own interest as a prospective bidder.

In discussing the financial ramifications of the shared services agreement and the cargo handling agreement, the trial judge observed, at para. 26 of his reasons:

When the costs of operating the Port (shared services) are netted from the cargo handling charges, the result is that Algoma will pay approximately $25 million per year to Portco, which is the amount required by Portco to service the Term Loan each year. That amount of $25 million for 20 years comes to $500 million, far more than the amount needed to repay the $150 million GIP loan.

Duff & Phelps assessed the fair value of the Portco transaction as ranging between US$150.9 million and US$174.2 million with a midpoint of US$161.7 million. However, this assessment failed to take into account the change of control provision in the cargo handling agreement. Deloitte LLP reviewed Duff & Phelps' assessment and concluded it was reasonable.

(6) Final Recapitalization

Ultimately, the recapitalization of Algoma consisted of the following transactions:

(a) Algoma issued US$375 million in senior secured notes pursuant to an offering memorandum;

(b) Algoma entered into a new US$50 million senior secured asset-based revolving credit facility and a new US$375 million term loan;

(c) Algoma's unsecured noteholders were paid a portion of their principal and were issued new junior secured notes;

(d) Algoma completed the port transaction;

(e) Essar Global contributed US$150 million in cash in exchange for common equity, and also contributed US$150 million in debt forgiveness; and

(f) All other Algoma lenders were repaid in full.

In addition, GIP entered into a secured term loan for US$150 million with Portco, secured by a GSA over all of Portco's assets. It also received guarantees -- one from Essar Global and one from Algoma Port Holding Company Inc. -- guaranteeing Portco's liabilities. In November 2014, the transactions in furtherance of Algoma's recapitalization, including the port transaction, were approved unanimously by Algoma's board of directors after receiving advice and on the recommendation of Algoma's management. By this time, the board consisted of four directors: Mr. Kishore Mirchandani, who became a director on June 23, 2014; Mr. Naresh Kothari, who became a director on August 24, 2014; the board's chair, Mr. Jatinder Mehra of Essar Global; and Algoma's CEO, Mr. Kalyan Ghosh. Mr. Ghosh and Mr. Rajat Marwah, Algoma's CFO, both testified that they supported the port transaction not because it was ideal, but because there was no other option given Essar Global's failure to capitalize Algoma as it had committed to do.

As mentioned, the approved plan of arrangement that included the original RSA had to be amended in light of the revised equity contribution. A CBCA plan of arrangement incorporating the recapitalization and authorizing the amendment of the September 2014 approval order was granted by Morawetz J. on November 10, 2014.

Based on the materials before this court, it would appear that the port transaction was not mentioned or brought to Morawetz J.'s attention. In this regard, the trial judge found that there was no reference to the port transaction in the affidavits filed in support of the amendment to the plan of arrangement. The port transaction is not mentioned in that order or in any endorsement.

The outcome of the port transaction was that all port assets were transferred from Algoma to Portco, the port lands were leased to Portco for 50 years, and Portco obtained change of control rights. Portco paid Algoma US$151,660,501.50 in cash, provided the US$19,840,000 promissory note and was obliged to pay Algoma US$11 million per annum under the shared services agreement. In turn, Algoma was obliged to pay Portco US$36 million per annum for an initial term of 20 years under the cargo handling agreement, subject to renewal, netting Portco US$25 million per annum as against the shared services agreement payments. Meanwhile, under the revised RSA, Essar Global contributed cash of US$150 million to Algoma rather than the original cash commitment of US$250 to US$300 million.

(7) Insolvency Protection Proceedings

On November 9, 2015, Newbould J. granted an order placing Algoma, Essar Tech Algoma Inc., Algoma Holdings B.V., Essar Steel Algoma (Alberta) ULC, Cannelton Iron Ore Company, and Essar Steel Algoma Inc. USA (the "CCAA applicants") under CCAA protection. As mentioned, he appointed Ernst & Young Inc. as the monitor. The order contained various paragraphs addressing the rights and obligations of the monitor, including a direction to perform such duties as were required by the court. On November 20, 2015, Morawetz J. granted an amended and restated initial order that, among other things, directed the monitor to review and report to the court on any related party transactions (expressly including the port transaction).

During the CCAA proceedings, on February 10, 2016, a sales and investment solicitation process ("SISP") for Algoma's business and property was approved by the court. Essar North America, a subsidiary of Essar Global, submitted a bid but was disqualified in April 2016 under the terms of the SISP because it failed to provide sufficient evidence of financial ability to purchase. In May and July of 2016, Essar Global persisted in its efforts to be the purchaser of the CCAA applicants. On May 10, 2016, counsel to Portco, who was also counsel to Essar Global, wrote to counsel for Algoma to highlight matters of particular concern in connection with the CCAA process. The letter stated that any prospective bidder was to be told of the consent or veto right:

Portco and [Algoma] are party to a Cargo Handling Agreement pursuant to which [Algoma] has committed to long-term use of the port. Portco, has, of course, a keen interest in any successor to [Algoma] as counterparty to that agreement and would like it to be clear to prospective bidders that, pursuant to the terms of the Cargo Handling Agreement, Portco has a consent right in the event of any assignment by [Algoma] of the agreement or a change of control of [Algoma].

Again please confirm that this has been made clear to prospective bidders.

On June 20, 2016, the monitor filed its thirteenth report, which described the Portco transaction and indicated that there may be grounds for further review of that transaction. The monitor noted that the renegotiated equity commitment resulted in Essar Global contributing the sum of US$150 million in equity rather than US$250 to US$300 million, and that the Portco transaction transferred control of one of Algoma's most critical assets, the Port, to Essar Global. The Monitor stated that it remained "particularly concerned about the effect on the completion of a restructuring transaction of the restrictions on assignment in the Portco Transaction documents".

On September 26, 2016, Deutsche Bank AG, who led the debtor-in-possession ("DIP") lenders of Algoma and also represented the interests of potential bidders in the CCAA process, applied for an order empowering the monitor to commence certain proceedings and make certain investigations. On September 26, 2016, Newbould J. granted an order authorizing the monitor to commence and continue proceedings under s. 241 of the CBCA in relation to related party transactions, including but not limited to the port transaction.

The action proceeded on an accelerated timetable due to the progress of the CCAA restructuring. On October 20, 2016, the monitor commenced proceedings claiming oppression pursuant to s. 241 of the CBCA against Essar Global and others in the Essar Group including Portco. It pleaded that by reason of its role as a court officer directed to commence the oppression proceedings and to oversee the interests of all stakeholders of Algoma, it was a complainant within the meaning of ss. 238 and 241 of the CBCA.

It alleged that since June 2007, the Essar Group had exercised de facto control over Algoma and had engaged in a course of conduct that consistently preferred the interests of the Essar Group and, in particular, Essar Global, to those of Algoma and its stakeholders. This included the transfer to the Essar Group of long-term control over, and a valuable equity interest in, Algoma's port facilities, an irreplaceable and core strategic asset of Algoma. The value of control over the port to Algoma and its stakeholders was immeasurable, since Algoma's business could not function without access to the port.

The monitor pointed out that the Essar Group obtained its control and equity interest in the port through a cash contribution of less than US$4.7 million. It pleaded that the US$150 million raised as part of the port transaction came from third party lenders, namely, GIP, and was money raised against the security and value of the port facilities, an asset of Algoma, as well as a promissory note that remained unpaid, and a guarantee from Essar Global. The monitor also stressed that the control obtained by the Essar Group was not only over the port facilities, but extended to any sale of the Algoma business such that Essar Global had an indirect veto on transactions involving Algoma's enterprise. Essar Global also obtained a right to substantial payments under the cargo handling agreement.

The oppression occasioned was exacerbated by the fact that the borrowed moneys raised through the transaction were a substitution for moneys Essar Global had promised to contribute as equity in Algoma.

The monitor also argued that s. 15.2 of the cargo handling agreement itself constituted oppression, because it was for the long-term benefit of Essar Global and not in the interests of Algoma's non-shareholder stakeholders. The monitor took the position that the provision gave Portco and Essar Global a veto over any party acquiring Algoma in the CCAA process, thus negatively affecting the sales process. The monitor also argued that the change of control provision was not necessary for the protection of GIP because it had its own change of control rights under its credit agreement.

In addition, the monitor pleaded that the oppression and prejudice to creditors was continuing as Essar Global and other related companies had insisted that bidders for Algoma's business under the SISP, which was approved by the court on February 11, 2016, be advised of Portco's consent rights under the change of control clause in the cargo handling agreement.

Essar Global and the remaining defendants filed their defence rejecting the monitor's allegations, describing the action as "an improper and ill-conceived leverage tactic". They asserted that the litigation was an attempt to attack the port transaction for the benefit of other bidders under the sales process, including the DIP lenders. They pleaded that the monitor had no standing, the claim was improperly pleaded, an oppression remedy seeking to unwind or claim damages in respect of the port transaction was unavailable at law, and in any event there was no oppression, prejudice or unfairness.

Portco's lenders, GIP, were granted intervenor status as parties on December 22, 2016. They noted that they were bona fide, arm's-length and independent commercial parties and no cause of action or wrongful conduct was asserted by the monitor against them. Nonetheless, the monitor was seeking remedies that eviscerated the security held by them. They asserted that the monitor did not have standing and could not establish any oppressive conduct in any event. Moreover, the structure of the port transaction was transparent to all of Algoma's stakeholders. Lastly, even if the court granted a remedy to the monitor, it had no jurisdiction to prejudice the interests of GIP. The monitor subsequently amended its statement of claim to modify the language on the relief claimed relating to the indebtedness and security interests in favour of GIP.

Various procedural motions were brought. Others who are not before this court intervened: Deutsche Bank AG; the ad hoc committee of Algoma's noteholders; Algoma retirees; and two locals from the union United Steelworkers, Locals 2724 and 2251. The Essar Group and GIP brought motions to strike on the basis that the monitor lacked standing and later also sought an order for particulars. On December 1, 2016, Newbould J. ordered that the standing motions be dealt with at the trial scheduled for January 30, 2017. On January 5, 2017, he urged the monitor to give as many particulars as it could regarding the relief it might seek.

On January 30, 2017, Essar Capital served a motion for an order re-opening the SISP and to make information available to Essar Global to allow it to consider submitting a bid. Newbould J. dismissed the request. At para. 114 of his reasons, the trial judge found that Essar Global was still interested in purchasing the assets of Algoma.

The action proceeded to a five-day trial before Newbould J. commencing on January 31, 2017.

B. TRIAL JUDGMENT

The trial judge organized his reasons for decision under six principal headings: the monitor's standing; who directed the recapitalization and the port transaction; reasonable expectations and were they violated; the business judgment rule; and the appropriate remedy. I will summarize his conclusions on each issue.

(1) Monitor's Standing

Both Essar Global and GIP challenged the monitor's standing as a complainant under the oppression provisions of the CBCA. They also argued that only persons directly damaged by the oppressive conduct could bring the action and that this action was in substance a derivative claim by Algoma. The trial judge rejected these arguments.

He found that the stakeholders harmed were Algoma's trade creditors, pensioners, retirees and employees. At para. 32, he noted that Algoma owed CDN$911.9 million as of the date of the port transaction to a group of creditors including trade creditors, pensioners, retirees and the City of St. Sault Marie.

The trial judge acknowledged, at para. 34, that normally a monitor, who is a court officer, is to be neutral and not take sides. However, there are exceptions. Under s. 23(1)(k) of the CCAA, a monitor must carry out any function in relation to the debtor that the court may direct. At para. 35, the trial judge also pointed to the CCAA proceedings of Nortel Networks Corp. as a precedent: Nortel Networks Corp. (Re) (October 3, 2012), Toronto, 09-CL-7950 (Ont. S.C.J. (Commercial List)). In those proceedings, a monitor was authorized to act as a litigant after all of Nortel's directors and senior executives had resigned.

Moreover, the trial judge observed that determining whether someone is a complainant under s. 238 of the CBCA is a discretionary decision. In Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp. (2003), 68 O.R. (3d) 544, [2003] O.J. No. 5242 (C.A.), this court confirmed that a trustee in bankruptcy acting on behalf of the creditors of a bankrupt estate could be a complainant within the meaning of s. 238. In so doing, the court noted the need for flexibility to ensure that the remedial purpose of the oppression provisions is achieved. The trial judge saw no reason why the principle of collective action -- which posits that it is more efficient for creditors to pursue their claims in a bankruptcy collectively with a trustee acting as their representative rather than individually -- should not be followed in the present CCAA proceeding. At para. 37, he concluded that the monitor had taken the action as an adjunct to its role in facilitating a restructuring and was therefore a proper complainant.

To respond to Essar Global and GIP's arguments that the claim was properly a derivative action and that no person had been personally harmed beyond Algoma, at para. 39 the trial judge relied on Rea v. Wildeboer (2015), 126 O.R. (3d) 178, 2015 ONCA 373, at para. 27. There, Blair J.A. commented that the derivative action and the oppression remedy are not mutually exclusive. Although on the facts of Wildeboer, Blair J.A. had struck out a statement of claim pleading the oppression remedy, the trial judge distinguished Wildeboer on the basis that the relief sought was for the benefit of the corporation and there was no allegation that individualized personal interests were affected by the alleged wrongful conduct.

(2) Essar Global Directed the Recapitalization and the Portco Transaction

The trial judge observed that in some respects, it did not matter who made the decisions regarding the recapitalization and the port transaction -- if the conduct was oppressive, relief could be granted. Nonetheless, he found, at para. 49, that the evidence was "overwhelming" that Essar Global and Essar Capital were "calling the shots".

At para. 52, he accepted the evidence of Mr. Ghosh and Mr. Marwah that they did not negotiate the economic terms of the refinancing or the port transaction. Nor was either involved in the renegotiation of the RSA.

The trial judge relied on other evidence, including Algoma's annual business plan dated February 3, 2014, to support his factual findings. He also considered evidence of the witnesses. He found, at paras. 56-57, that some of the witnesses had been evasive, including Rewant Ruia, the Ruia family's lead in the Essar Group's North American operations; Mr. Seifert; and Rajiv Saxena, the executive director of Essar Steel India Ltd.

After reviewing the evidence, the trial judge noted, at para. 58, that he was satisfied that Mr. Seifert, who represented the Essar Group's interests, had primary responsibility for pursuing the recapitalization negotiations and Algoma's refinancing via the port transaction. He concluded, at para. 60:

I am satisfied that representatives of Essar Global including Essar Capital carried out the Recapitalization and Portco Transaction negotiations and made the critical decisions. Algoma management were handed the economic terms of the Recapitalization and Port Transaction and implemented them from an operational perspective. Algoma management did not negotiate the terms. Their role was to support the negotiations with regard to non-economic, primarily operational, issues.

(3) Reasonable Expectations and Their Violation

The trial judge identified the two-step process to determine whether a violation of reasonable expectations has occurred under s. 241 of the CBCA, which is described at para. 68 of BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, 2008 SCC 69: (i) does the evidence support the reasonable expectation asserted by the complainant; and (ii) does the evidence establish that the reasonable expectation was violated by conduct that is oppressive, unfairly prejudicial or unfairly disregards a relevant interest?

He described the reasonable expectations asserted by the monitor as relating to the loss by Algoma of a critical asset and the change of control clause in the cargo handling agreement. He stated, at para. 64:

The monitor contends that the reasonable expectations of the creditors of Algoma, including the trade creditors, employees, pensioners and retirees, were that Algoma would not deal with its core assets like the Port in such a way as it would lose long-term control and value over those assets to a related party on terms that permitted the related party to veto or thwart Algoma's ability to do significant transactions or restructure, as was done in this case.

At para. 67, the trial judge did not accept that the expectations of creditors such as the employees, pensioners, and retirees were governed only by their agreements with Algoma. Furthermore, the evidence, including the inferences drawn from the circumstances that existed at Algoma in 2014, supported the expectations relied upon by the monitor. He noted, at para. 73, that stakeholders have a reasonable expectation of fair treatment and this was particularly so in Sault Ste. Marie, where Algoma is of critical importance to the local economy and relied upon greatly by trade creditors and employees.

He concluded, at para. 75, that

the reasonable expectations of the trade creditors, the employees, pensioners and retirees of Algoma were that Algoma would not deal with a critical asset like the Port in such a way as to lose long-term control over such a strategic asset to a related party on terms that permitted the related party to veto and control Algoma's ability to do significant transactions or restructure and which gave unwarranted value to the third party.

The trial judge held that the reasonable expectations of the trade creditors, employees, pensioners and retirees were violated in two principal ways: first, the port transaction itself; and second, the change of control veto provided to Portco, and thus Essar Global, in the port transaction.

The port transaction was caused by Essar Global's breach of both the RSA and the equity commitment letter. Because the lease of the land from Algoma to Portco was for 50 years and Essar Global was in a position to terminate the cargo handling agreement after 20 years, Algoma would be at Essar Global's mercy for the duration of these agreements. The trial judge found, at para. 78, that the transfer of the port assets to Portco was driven by GIP's desire for a "bankruptcy remote" special purpose vehicle. GIP was aware of Algoma's previous insolvencies and would only lend to a new entity that held the port assets and that was separate from Algoma.

The port transaction and the GIP secured loan to Portco would not have been necessary had Essar Global lived up to its obligations under the RSA and the equity commitment letter under which Essar Global had pledged a cash investment of US$250 to US$300 million. The trial judge found, at para. 82, that Essar Global had no intention of living up to its promises and had acted in bad faith in this regard. The content of the roadshow presentations reflected the discordance with the RSA. The alternative transaction in the roadshow presentations contemplated cash being contributed to the recapitalization through the sale of the port. That these presentations failed was partially attributable, as the trial judge found at para. 82, to Essar Global's insufficient contribution of cash equity into Algoma.

The trial judge concluded that Essar Global's decision not to fund Algoma according to the terms of the equity commitment letter made it necessary to carry out the port transaction. GIP's loan of US$150 million reduced the amount of cash equity Essar Global promised to advance to Algoma. Essar Global's failure to inject cash equity into Algoma as agreed was the root cause of the port transaction and the transfer of control. This was, as the trial judge concluded at para. 89, an exercise in bad faith. Had an independent committee of Algoma's board of directors been struck, Essar may have been held to its bargain rather than looking to third party financing from GIP under the port transaction structure. The board's failure to examine alternatives to effect Algoma's recapitalization indicated a lack of regard for the interests of Algoma's stakeholders.

Additionally, the long-term value given to Essar Global by the port transaction was itself oppressive (although in stating this, the trial judge noted that the monitor did not pursue its claim that the port assets were transferred to Portco at an undervalue).

As for the release in the amended RSA, the trial judge observed that it was a release of any claim arising out of the equity commitment letter. The trial judge found, at para. 100, that the monitor was not making a claim under that letter, nor was it asking that Essar Global provide the equity it had promised in that commitment. Rather, Essar Global's failure to live up to its commitment was part of the factual circumstances to be taken into account in considering whether Algoma's stakeholders were treated fairly under the port transaction.

The trial judge also observed that when the court approved the amended plan of arrangement under the amended RSA, it did not have knowledge of the port transaction. There was no reference to the port transaction in the affidavits filed in support of the amendment to the plan of arrangement; there was no finding relating to the release of Essar Global; the trade creditors, the employees, pensioners and retirees were not parties to the motion approving the amended RSA; and the order was obtained without opposition.

Ultimately, he concluded that the port transaction was itself unfairly prejudicial to, and unfairly disregarded, the interests of Algoma's trade creditors, employees, pensioners and retirees.

(4) Change of Control Provision

The trial judge determined, at para. 104, that the change of control provision gave effective control to Portco (i.e., Essar Global) over who may acquire the Algoma business. Any buyer of Algoma or its business would need to be assigned the cargo handling agreement so that it could operate the steel mill. Therefore, the veto under this clause was effectively a veto over any change of control of the Algoma business.

Although the evidence indicated that the change of control provision was included for GIP's protection, the trial judge found that this end could have been achieved in other ways. For example, as the trial judge pointed out, at para. 110, the parties could have included a provision in the assignment of material contracts agreement that prevented a change of control of Algoma without GIP's explicit consent. Such an alternative might have been considered had there been a committee of independent directors with advisors independent of Essar Global. But, as the trial judge concluded, at para. 111, the reality was that there was no pushback on the change of control provision that was implemented, and which gave Portco/Essar Global a veto.

The trial judge concluded, at para. 113, that the change of control provision was of considerable value to Essar Global. Furthermore, as mentioned, the trial judge stated, at para. 117, that Essar Global had in fact relied on s. 15.2 to its benefit by holding out its change of control rights to dissuade competing bidders for Algoma in the restructuring process while Essar Global continued to express its own interest as a prospective bidder.

The May 10, 2016 letter from Portco's counsel, which sought confirmation from Algoma's counsel that prospective bidders would be advised of Portco's rights, exemplified this. In the letter, Essar Global effectively held out its consent to any change of control right to dissuade competing bidders for Algoma in the restructuring process while it continued to express its own interest as a prospective bidder. The trial judge observed, at para. 115, that "it is clear that the dictate of Portco through its solicitors that prospective purchasers should be made aware of the change of control provision was successful".

The trial judge also observed that the evidence established that Portco's right to refuse assignment of the cargo handling agreement was a material impediment to restructuring Algoma as Algoma could not survive without access to the port. He concluded that the change of control provision in favour of Portco in the cargo handling agreement was unfairly prejudicial to, and unfairly disregarded, the interests of Algoma's trade creditors, employees, pensioners and retirees.

(5) The Business Judgment Rule

The trial judge also determined that the business judgment rule, which accords deference to a business decision of a board of directors so long as the decision lies within a range of reasonable alternatives, did not provide a defence to Essar Global. The board had not followed advice that it insist Essar Global comply with its commitments under the RSA and the equity commitment letter. As the trial judge stated, at para. 123, the result of this was the port transaction, which was

an exercise in self-dealing in that Algoma's critical Port asset was transferred out of Algoma to a wholly owned subsidiary of Essar Global with a change of control provision that benefited Essar Global at a time that a future insolvency was a possibility.

Moreover, there was no evidence that the board even considered whether protection to GIP could be provided in the absence of the change of control provision in favour of Portco and hence Essar Global. This failure was unreasonable.

(6) Remedy

The trial judge stated, at para. 136, that if there were no less obtrusive way to remedy the oppression, he would have ordered that Portco's shares be transferred to Algoma. However, mindful that a remedy for oppression should be approached with a scalpel, he instead relied on s. 241(3) of the CBCA to order a variation of the port transaction. He accordingly deleted s. 15.2 of the cargo handling agreement and inserted a provision in the assignment of material contracts agreement, which provided that, if GIP becomes the equity owner of Portco, its consent would be required for a change of control of Algoma. He rejected the suggestion that either GIP or Essar Global were taken by surprise by this relief.

He also addressed the imbalance created by the 50-year term of the lease between Algoma and Portco as against the 20-year term of the cargo handling agreement (with automatic renewal for successive three-year periods, barring either party's termination). As the port was critical to Algoma's operation and survival, Algoma's ability under the cargo handling agreement to refuse an extension after 20 years was illusory and, in reality, the renewal provision was one-sided in favour of Essar Global.

He concluded, at para. 144, that the payments under the cargo handling agreement were an unreasonable benefit in favour of Essar Global. If the agreement lasted only the initial 20-year term, Portco/Essar Global would receive US$300 million after GIP's loan was paid off. If the agreement was not terminated before the end of its 50-year life, Portco/Essar Global would receive an additional US$750 million for the last 30 years.

Accordingly, the trial judge ordered that the lease, the cargo handling agreement and the shared services agreement be amended to provide Algoma with the option to terminate any of these three agreements once GIP's loan matured and was paid. If Portco elected not to renew after 20 years, or any of the three-year extensions, those three agreements would terminate, and Algoma would then owe Portco US$4.2 million plus interest.

The trial judge decided, at para. 147, that the appropriate place for Portco to assert its claims for a declaration that the US$19.8 million promissory note had been paid as a result of set-off and for amounts owing under the cargo handling agreement was in the ongoing CCAA proceedings.

(7) Costs

Lastly, following the release of the judgment, Essar Global agreed to pay costs of CDN$1.17 million to the monitor. The trial judge then ordered Essar Global to pay Algoma CDN$1.5 million in costs and ordered that no costs be payable by the monitor or by or to GIP.

C. ISSUES

There are eight issues to be addressed:

(1) Did the monitor lack standing to be a complainant under s. 238 of the CBCA?

(2) Could the claim of the monitor only be brought as a derivative action under s. 239 of the CBCA rather than an oppression action under s. 241 of the CBCA?

(3) Did the trial judge err in his analysis of reasonable expectations?

(4) Did the trial judge err in his analysis of wrongful conduct and harm?

(5) Did the trial judge err in tailoring a remedy?

(6) Was there procedural unfairness?

(7) Should the fresh evidence be admitted?

(8) Should leave to appeal costs be granted to GIP and the costs award varied?

D. ANALYSIS

(1) Standing of the Monitor

Essar Global submits that the monitor is not a proper complainant given the conflict between it and the stakeholders it represents. The trial judge failed to consider whether the monitor could avoid conflicts.

GIP supports the position of Essar Global. It states that the trial judge erred in assuming that the court's broad jurisdiction under the CCAA could be combined with the equally broad jurisdiction under the CBCA to create a super remedy that would interfere with the contractual rights of non-offending third parties. A trustee in bankruptcy is a representative of the creditors of the bankrupt. A monitor owes duties to all stakeholders, not just creditors. Its duty to Essar Global as sole shareholder of Algoma cannot be reconciled with the monitor's oppression claim against it. Also, Algoma can be directed to make the cargo handling agreement payments to GIP directly and therefore the monitor owed a fiduciary duty to GIP.

In addressing this issue, I will first discuss the evolution of the role of a monitor. I will then discuss who can be a complainant under the CBCA oppression provisions. Lastly, I will consider whether in the particular circumstances of this case, the trial judge was correct in concluding that the monitor could have standing to bring an oppression action.

(a) The Purpose of CCAA Restructurings

As has been repeatedly described, the CCAA was originally enacted in 1933 to respond to the ravages of the Great Depression and to allow large corporations with outstanding bonds and debentures to restructure their debt in a court-supervised process through plans of arrangement or compromise negotiated with their creditors.

As outlined by Deschamps J. in Century Services Inc. v. Canada (Attorney General), [2010] 3 S.C.R. 379, [2010] S.C.J. No. 60, 2010 SCC 60, the CCAA fell into disuse after amendments in 1953 that limited its application to companies issuing bonds. Courts breathed new life into the statute in the early 1980s in response to an economic recession, and the CCAA became the primary vehicle through which major restructurings were attempted. Amendments to the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"), introduced in 1992, allowed insolvent debtors to make proposals to creditors under that statute, and were expected to supplant the CCAA. However, the CCAA continues to be employed as the vehicle of choice to restructure large corporations, particularly where flexibility is needed in the restructuring process.

The corporate restructuring process at the heart of the CCAA "provide[s] a constructive solution for all stakeholders when a company has become insolvent": Sun Indalex Finance, LLC v. United Steelworkers, [2013] 1 S.C.R. 271, [2013] S.C.J. No. 6, 2013 SCC 6, at para. 205. There are a number of justifications for why such a process is desirable. The traditional justification for CCAA-enabled restructurings, as explained by Duff C.J. shortly after the statute's enactment, was to rescue financially distressed corporations without forcing them to first declare bankruptcy: Reference re: Constitutional Creditor Arrangement Act (Canada), [1934] S.C.R. 659, [1934] S.C.J. No. 46, at p. 661 S.C.R.

The restructuring process can also allow creditors to obtain a higher recovery than may otherwise be available to them through bankruptcy or other liquidation proceedings, by preserving the corporate entity or the value of its business as a going concern. Additionally, restructuring proceedings can provide an opportunity to evaluate the root of a corporation's financial difficulties, and develop strategies to achieve a turnaround, whether the best option be a full restructuring, or a liquidation of the corporation within the restructuring regime.

The benefits of the restructuring process are not limited to creditors. Even early commentary lauded restructurings as promoting the public interest by salvaging corporations that supply goods or services important to the economy, and that employ large numbers of people. This view remains applicable today, with restructurings "justified in terms of rehabilitating companies that are key elements in a complex web of interdependent economic relationships in order to avoid the negative consequences of liquidation".

To summarize, by enabling the restructuring process, the CCAA can achieve multiple objectives. It permits corporations to rehabilitate and maintain viability despite liquidity issues. It allows for the development of business strategies to preserve going-concern value. It seeks to maximize creditor recovery. It can serve to preserve employment and trade relationships, protecting non-creditor shareholders and the communities within which the corporation operates. The flexibility inherent in the restructuring process permits a broad balancing of these objectives and the multiple stakeholder interests engaged when a corporation faces insolvency.

It is against this background that the role of a monitor must be considered.

(b) The Role of the Monitor

Originally, the CCAA was a very slim statute and made no mention of a monitor. Born of the court's inherent jurisdiction, the term "monitor" was first used in Northland Properties Ltd. (Re), [1988] B.C.J. No. 1210, 29 B.C.L.R. (2d) 257 (S.C.). In that case, an interim receiver was appointed whose role was described, at p. 277 B.C.L.R., as that of a monitor or watchdog. As a watchdog, the monitor could "observe the conduct of management and the operation of the business while a plan was being formulated". The monitor was thus a court-appointed officer.

The 1997 amendments to the CCAA gave legislative recognition to the role of the monitor and made the appointment mandatory. The 2007 amendments to the CCAA expanded the description of the monitor's role and responsibilities. In essence, its minimum powers are set out in the Act and they may be augmented through the exercise of discretion by the court, typically the CCAA supervising judge. This framework is reflected in s. 23 of the CCAA, which enumerates certain duties and functions of a monitor. Paragraph 23(1)(k) directs that a monitor shall carry out "any other functions in relation to the company that the court may direct". Its express duties under s. 23(1)(c) include making, or causing to be made, any appraisal or investigation that the monitor "considers necessary to determine with reasonable accuracy the state of the company's business and financial affairs and the cause of its financial difficulties or insolvency". It is then to file a report on its findings.

Not surprisingly, as with the CCAA itself, the role of the monitor has evolved over time. As stated by David Mann and Neil Narfason in their article entitled "The Changing Role of the Monitor" (2008), 24 Bank. & Fin. L. Rev. 131, at p. 132:

Born out of invention, the role has developed from one of passive observer to one of active participant. The monitor has enhanced communication, mediated disputes, provided input into plans of reorganization, and provided expert advice in complex affairs. As the business community has become more sophisticated and global, so too has the monitor -- taking on larger mandates, often times involving complex, cross-border restructurings.

Examples of the use of expanded powers for a monitor are found in Philip's Manufacturing Ltd. (Re), [1992] B.C.J. No. 1163, 67 B.C.L.R. (2d) 385 (C.A.), where the British Columbia Court of Appeal ordered a monitor to report on the causes of financial problems of the company and report on improper payments made to management, shareholders and directors, and in Woodward's Ltd. (Re), [1993] B.C.J. No. 79, 77 B.C.L.R. (2d) 332 (S.C.), where Tysoe J. (as he then was) held that a monitor was to review all transactions and conveyances for fraud, preferences, or other reviewable features and act in a similar manner to a trustee in bankruptcy.

Under s. 11.7(1) of the CCAA, a monitor must be a licensed trustee in bankruptcy and, as such, under s. 13 of the BIA, is subject to the supervision of the Office of the Superintendent of Bankruptcy. The monitor is to be the eyes and the ears of the court and sometimes, as is the case here, the nose. The monitor is to be independent and impartial, must treat all parties reasonably and fairly, and is to conduct itself in a manner consistent with the objectives of the CCAA and its restructuring purpose. In the course of a CCAA proceeding, a monitor frequently takes positions; indeed, it is required by statute to do so. See, for example, s. 23 of the CCAA that describes certain duties of a monitor.

Of necessity, the positions taken will favour certain stakeholders over others depending on the context. Again, as stated by Messrs. Kent and Rostom:

Quite fairly, monitors state that creditors and the Court currently expect them to express opinions and make recommendations. . . . [T]he expanded role of the monitor forces the monitor more and more into the fray. Monitors have become less the detached observer and expert witness contemplated by the Court decisions, and more of an active participant or party in the proceedings.

(c) A Monitor as Complainant in an Oppression Action

Turning to the issue of a monitor and an oppression action, there is some difference in academic opinion on the suitability of the oppression remedy in insolvency proceedings. Professor Stephanie Ben-Ishai has argued that the remedy should be unavailable for use once the debtor has entered a court-supervised reorganization under the BIA or the CCAA. Professor Janis Sarra has countered that the oppression remedy continues to be an important corporate law remedy that should be available in such proceedings. I do not understand the appellants to be taking the former position; rather, they simply argue that the monitor has no standing.

Section 238 of the CBCA defines a complainant as

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or any of its affiliates,

(c) the Director, or

(d) any other person who, in the discretion of a court, is a proper person to make an application under this Part.

For the purposes of this analysis, s. 238(d) is the relevant subsection.

Section 241 of the CBCA describes the oppression remedy:

241(1) A complainant may apply to a court for an order under this section.

(2) If, on an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates

(a) any act or omission of the corporation or any of its affiliates effects a result,

(b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or

(c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of.

The question here is whether the trial judge erred in concluding that the monitor had standing to be a complainant. There are two elements to this analysis: can a monitor be a complainant under the CBCA; and should the monitor have been a complainant in this case? I would answer both questions affirmatively.

As is clear from s. 238(d) of the CBCA, a court exercises its discretion in determining who may be a complainant, and this discretion is broad. There has been much jurisprudence on who qualifies as a complainant. In Olympia & York, a trustee in bankruptcy, acting on behalf of the creditors of the bankrupt estate, was entitled to be a complainant in an oppression action involving an oppressive agreement between the debtor and a non-arm's-length party. As this court said in that case, at para. 45:

. . . the trustee is neither automatically barred from being a complainant nor automatically entitled to that status. It is for the judge at first instance to determine in the exercise of his or her discretion whether in the circumstances of the particular case, the trustee is a proper person to be a complainant.

Admittedly, a monitor differs from a trustee in bankruptcy in that the latter represents the interests of the creditors whereas the monitor has a broader mandate. However, like a trustee in bankruptcy, a monitor is neither automatically barred from being a complainant nor automatically entitled to that status.

Section 241 speaks of a proper person, not the proper person, therefore allowing for discretion to be exercised in the face of more than one proper person. The appellants did not direct us to any authority saying that a monitor could not be a complainant. Paragraph 23(1)(k) of the CCAA expressly provides that a monitor shall carry out any functions in relation to the company that the court may direct. Moreover, s. 23(1)(c) directs a monitor to conduct any investigation that the monitor considers necessary to determine the state of the company's business and financial affairs. It does not strain credulity that this responsibility will frequently place a monitor at odds with the shareholders or other stakeholders.

Additionally, there is nothing in the CCAA itself to suggest that a monitor cannot be authorized to act as a complainant. Indeed, the broad language of s. 11 of the CCAA, which permits a supervising court to "make any order that it considers appropriate in the circumstances", is permissive of such orders. As this court and the Supreme Court have made clear, the broad language of s. 11 "should not be read as being restricted by the availability of more specific orders": U.S. Steel Canada Inc. (Re), [2016] O.J. No. 4688, 2016 ONCA 662, 39 C.B.R. (6th) 173, at para. 79, citing Century Services, at para. 70. Courts can, and sometimes should, make "creative orders" in the context of CCAA proceedings: U.S. Steel, at paras. 80, 86-87.

Generally speaking, the monitor plays a neutral role in a CCAA proceeding. To the extent it takes positions, typically those positions should be in support of a restructuring purpose. As stated by this court in Ivaco Inc. (Re) (2006), 83 O.R. (3d) 108, [2006] O.J. No. 4152 (C.A.), at paras. 49-53, a monitor is not necessarily a fiduciary; it only becomes one if the court specifically assigns it a responsibility to which fiduciary duties attach.

However, in exceptional circumstances, it may be appropriate for a monitor to serve as a complainant. In my view, this is one such case.

Here, in para. 37(c) of the amended and restated initial CCAA order dated November 20, 2015, the monitor was directed to investigate whether there were potential related party transactions that should be reviewed. It then reported back to the supervising CCAA judge that there were, and on that basis the CCAA judge authorized the monitor to commence proceedings under s. 241 of the CBCA. The monitor proceeded with the oppression action in the interests of the restructuring consistent with the objectives of the CCAA. The trial judge ultimately found that aspects of the port transaction, such as the change of control clause in the cargo handling agreement that gave Essar Global control over who can be a buyer of the Algoma business, were oppressive and also harmful to the restructuring process. The monitor took the action as an "adjunct to its role in facilitating a restructuring".

Moreover, it cannot be said that the monitor was a fiduciary. Indeed, the appellants did not say this in their pleadings, opening submissions, or closing submissions before the trial judge. The remedy granted by the trial judge was directed at the oppression and removed an insurmountable barrier to a successful restructuring. In addition, it was brought in the face of Essar Global demonstrating a continuous desire to acquire Algoma and, as evident from the letter sent by its counsel, a desire to discourage others from doing so.

It will be a rare occasion that a monitor will be authorized to be a complainant. Factors a CCAA supervising judge should consider when exercising discretion as to whether a monitor should be authorized to be a complainant include whether

(i) there is a prima facie case that merits an oppression action or application;

(ii) the proposed action or application itself has a restructuring purpose, that is to say, materially advances or removes an impediment to a restructuring; and

(iii) any other stakeholder is better placed to be a complainant.

These factors are not exhaustive, and none of them is necessarily dispositive; they are simply factors to consider.

In the circumstances that presented themselves here, the CCAA supervising judge was justified in providing authorization. A prima facie case had been established; the monitor had reviewed and reported to the court on related party transactions; the oppression action served to remove an insurmountable obstacle to the restructuring; and the monitor could efficiently advance an oppression claim, representing a conglomeration of stakeholders, namely, the pensioners, retirees, employees and trade creditors, who were not organized as a group and who were all similarly affected by the alleged oppressive conduct.

Quite apart from meeting the aforementioned criteria, I would also observe that as the presiding judge in the CCAA proceeding and the trial judge, Newbould J. had insight into the dynamics of the restructuring and was well positioned to supervise all parties including the monitor to ensure that no unfairness or unwarranted impartiality occurred.

Lastly, I do accept the appellants' position that the Nortel proceedings relied upon by the trial judge in support of his conclusion were quite different from this case. In Nortel, the monitor's powers were expanded by an order authorizing the monitor to exercise any powers properly exercisable by a board of directors of Nortel or its subsidiaries. But this expansion was a response to the resignations of the boards of Nortel and its subsidiaries, not, as here, a response to the results of investigations the monitor had been directed to pursue. That said, the case does illustrate the need to avoid rigid definition of a monitor's role and responsibilities.

In conclusion, I would not give effect to the appellants' submission that the trial judge erred in granting the monitor standing to pursue an action for oppression.

(2) Derivative or Oppression Action

In addition to attacking the standing of the monitor to bring the action, the appellants also submit that the monitor was precluded from bringing the action in the form of an oppression remedy proceeding pursuant to s. 241 of the CBCA. In their view, the action could only have been brought as a derivative action pursuant to s. 239 of that Act. They say the claim asserted is a corporate claim belonging to Algoma, if anyone, and the stakeholders, on whose behalf the monitor asserts the claim, were not harmed directly or personally but only derivatively through harm done to Algoma. I disagree.

In support of their submission, the appellants rely heavily on the decision of this court in Wildeboer. This case is not Wildeboer, however.

In Wildeboer, "insiders" who controlled the corporation had misappropriated many millions of dollars from the corporation. The sole claim advanced by the complainant minority shareholder by way of oppression remedy was for the return of the misappropriated funds to the corporation. There was no claim asserted by the complainant, of any kind, for a personal remedy qua shareholder. As the court noted, at para. 45, "[t]he substantive remedy claimed is the disgorgement of all the ill-gotten gains back to Martinrea [the corporation in question]".

The Wildeboer decision must be read in that context. It does not stand for the proposition that in all cases where there has been a wrong done to the corporation, the action must be brought as a derivative action. Consistent with a number of other authorities, this court expressly reaffirmed the principles that the derivative action and the oppression remedy are not mutually exclusive and that there may be circumstances giving rise to overlapping derivative actions and oppression remedies where harm is done both to the corporation and to stakeholders in their separate stakeholder capacities. This is clear from para. 26:

I accept that the derivative action and the oppression remedy are not mutually exclusive. Cases like Malata [Malata Group (HK) Ltd. v. Jung, 2008 ONCA 111, 89 O.R. (3d) 36] and Jabalee [Jabalee v. Abalmark Inc., [1996] O.J. No. 2609 (C.A.)] make it clear that there are circumstances where the factual underpinning will give rise to both types of redress and in which a complainant will nonetheless be entitled to proceed by way of oppression. Other examples include: Ontario (Securities Commission) v. McLaughlin, [1987] O.J. No. 1247 (Ont. H.C.); Deluce Holdings Inc. v. Air Canada (1992), 12 O.R. (3d) 131, [1992] O.J. No. 2382 (Gen. Div. [Commercial List]); C.I. Covington Fund Inc. v. White, [2000] O.J. No. 4589, [2000] O.T.C. 865 (S.C.J.), affd, [2001] O.J. No. 3918, 152 O.A.C. 39 (Div. Ct.); Waxman v. Waxman, [2004] O.J. No. 1765, 186 O.A.C. 201 (C.A.), at para. 526, leave to appeal refused [2004] S.C.C.A. No. 291.

Or, as Armstrong J.A. put it in Malata (Group (HK) Ltd. v. Jung (2008), 2008 ONCA 111, 89 O.R. (3d) 36, [2008] O.J. No. 519 (C.A.)), at para. 26:

[T]here is not a bright-line distinction between the claims that may be advanced under the derivative action section of the Act and those that may be advanced under the oppression remedy provisions.

In short, there will be circumstances in which a stakeholder suffers harm in the stakeholder's capacity as stakeholder, from the same wrongful conduct that causes harm to the corporation. In my opinion -- unlike in Wildeboer, where the harm alleged was solely harm to the corporation -- this case falls into the overlapping category.

For the purposes of this analysis, it is the nature of the claim put forward by the claimants, on whose behalf the monitor was pursuing the oppression remedy, that must be examined. As the trial judge noted, at para. 31, the monitor initially cast quite widely the net of stakeholders affected by the port transaction and on whose behalf it was claiming a remedy. By the time of the hearing, however, the net's reach had been narrowed to Algoma's trade creditors, employees, pensioners and retirees.

In oppression remedy parlance, the nub of the exercise lies in determining whether the claimant has identified a "reasonable expectation" and shown that it has been violated by wrongful conduct that is "oppressive" (in the broad sense contemplated by the Act) of the interests of the claimant: see BCE. The monitor asserted at the hearing, and the trial judge found, at para. 75:

[T]hat the reasonable expectations of the trade creditors, the employees, pensioners and retirees of Algoma were that Algoma would not deal with a critical asset like the Port in such a way as to lose long-term control over such a strategic asset to a related party on terms that permitted the related party to veto and control Algoma's ability to do significant transactions or restructure and which gave unwarranted value to the third party.

It was alleged, and the trial judge found, that these reasonable expectations had been violated both by aspects of the port transaction itself, and by the change of control veto provided to Portco, and thus Essar Global, in the port transaction.

The appellants argue that the reasonable expectations asserted relate only to harm done to Algoma. The trial judge disagreed, as do I. As he concluded, at para. 37:

Aspects of the Port Transaction, such as the change of control clause in the Cargo Handling Agreement that gives the parent control over who can be a buyer of the Algoma business, are harmful to a restructuring process and negatively impact creditors.

(Emphasis added)

On this basis, at para. 40, the trial judge distinguished Wildeboer because the monitor was asserting "that the personal interests of the creditors ha[d] been affected".

The appellants place considerable emphasis on certain language contained in Wildeboer to the effect that, in circumstances where there may be overlapping derivative and oppression claims, the wrong must both harm the corporation and must also affect the claimant's "individualized personal interests". They interpret these comments as mandating not only that each claimant must suffer an identifiable individual harm but also that this harm must be different from other individualized personal harms suffered by others in their same class.

For example, the appellants rely on certain aspects of the following comments by this court, at paras. 29, 32-33 of Wildeboer:

On my reading of the authorities, in the cases where an oppression claim has been permitted to proceed even though the wrongs asserted were wrongs to the corporation, those same wrongful acts have, for the most part, also directly affected the complainant in a manner that was different from the indirect effect of the conduct on similarly placed complainants[.]

The appellants are not asserting that their personal interests as shareholders have been adversely affected in any way other than the type of harm that has been suffered by all shareholders as a collectivity. Mr. Rea -- the only director plaintiff -- does not plead that the Improper Transactions have impacted his interest qua director.

Since the creation of the oppression remedy, courts have taken a broad and flexible approach to its application, in keeping with the broad and flexible form of relief it is intended to provide. However, the appellants' open-ended approach to the oppression remedy in circumstances where the facts support a derivative action on behalf of the corporation misses a significant point: the impugned conduct must harm the complainant personally, not just the body corporate, i.e., the collectivity of shareholders as a whole.

While pertinent to the Wildeboer context, some of the foregoing language, when read in isolation and out of context, may be misconceived when it comes to a more general application. However, I do not read Wildeboer as precluding an oppression remedy in respect of individuals forming a homogenous group of stakeholders -- for example, trade creditors, employees, retirees or pensioners -- simply because each of them, separately, may have suffered the same type of individualized harm.

Instead, I read the reference, at para. 29, to the complainant being directly affected "in a manner that was different from the indirect effect of the conduct on similarly placed complainants" to be another way of capturing the notion expressed in paras. 32-33 that the individualized harm is to be distinct from conduct harming only "the body corporate, i.e., the collectivity of shareholders as a whole".

Were the appellants correct in their submissions, as counsel for the monitor points out, this court would not have upheld an oppression remedy on behalf of all shareholders of a company that had suffered harm as a result of a non-market executive compensation contract: see UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc., [2002] O.J. No. 2412, 214 D.L.R. (4th) 496 (S.C.J.) (Commercial List), at para. 153, affd , [2004] O.J. No. 636, 42 B.L.R. (3d) 34 (C.A.). Nor would it have upheld an oppression remedy claim on behalf of a class of shareholders who were harmed as a result of the existence of a transfer pricing regime that was disadvantageous to the company, as it did in Ford Motor Co. of Canada v. Ontario Municipal Employees Retirement Board (2006), 79 O.R. (3d) 81, [2006] O.J. No. 27 (C.A.). Wildeboer contains no suggestion that these authorities are no longer good law; nor would it have done.

The same may be said, in my view, about a group of creditors who have suffered similar harm from a corporate wrong that affects both their interests as creditors and the interests of the corporation. While the oppression remedy is not available as redress for a simple contractual breach (such as the failure to pay a debt), it has long been held to be available, in appropriate circumstances, to creditors whose interests have been "compromised by unlawful and internal corporate manoeuvres against which the creditor cannot effectively protect itself": J.S.M. Corp. (Ontario) Ltd. v. Brick Furniture Warehouse Ltd., [2008] O.J. No. 958, 2008 ONCA 183, 41 B.L.R. (4th) 51, at para. 66. See, also, Fedel v. Tan (2010), 101 O.R. (3d) 481, [2010] O.J. No. 2839, 2010 ONCA 473, at para. 56.

The question is whether the impugned conduct is "oppressive" (in the broad sense contemplated by the CBCA) and, if so, whether the stakeholder has suffered harm in its capacity as a stakeholder as a result of that conduct.

Moreover, the circumstances that presented themselves emphasize the need for flexibility in the availability of the oppression remedy. The court and the monitor were faced with prima facie evidence of oppression including bad faith and self-dealing. There was prima facie evidence of personal harm to the pensioners, employees, retirees and trade creditors. While leave of the court is required for a derivative action, in substance, in the context of a CCAA proceeding, court supervision is present, thereby neutralizing the need for the derivative action procedural safeguard of leave.

I would also note that GIP argues that the decision not to bring this action by way of derivative action may have been a strategic decision made because Algoma was contractually prohibited from seeking to set aside or vary the contracts arising from the port transaction, including the cargo handling agreement and the lease. If anything, this argument supports the conclusion that it was appropriate for this action to be brought as an oppression claim.

In conclusion, at law, the monitor was at liberty to bring an action for oppression. I will now turn to the issue of reasonable expectations.

(3) Reasonable Expectations

Essar Global and GIP submit that the trial judge erred in his analysis of reasonable expectations. They argue that there was no evidence of any subjectively held expectations, that the trial judge did not consider whether the expectations were objectively reasonable, and that he failed to consider factors identified in BCE.

The monitor and Algoma respond by saying that the existence of reasonable expectations is a question of fact that can be proved by direct evidence or by the drawing of reasonable inferences. In this case, the trial judge properly considered the evidence that was before him to conclude that the pensioners, employees, retirees and trade creditors held expectations that had been violated and that those expectations were objectively reasonable.

In his analysis, the trial judge correctly identified the two prongs of the oppression inquiry identified by the Supreme Court, at para. 68 of BCE: (i) does the evidence support the reasonable expectation asserted by a claimant; and (ii) does the evidence establish that the reasonable expectation was violated by conduct falling within the terms "oppression", "unfair prejudice", or "unfair disregard" of a relevant interest?

In identifying these two prongs, at paras. 58-59, the Supreme Court made two preliminary observations:

First, oppression is an equitable remedy. It seeks to ensure fairness -- what is "just and equitable". It gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair. . . . It follows that courts considering claims for oppression should look at business realities, not merely narrow legalities.

Second, like many equitable remedies, oppression is fact-specific. What is just and equitable is judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play. Conduct that may be oppressive in one situation may not be in another.

As also stated in BCE, at para. 71:

Actual unlawfulness is not required to invoke s. 241; the provision applies "where the impugned conduct is wrongful, even if it is not actually unlawful." The remedy is focused on concepts of fairness and equity rather than on legal rights. In determining whether there is a reasonable expectation or interest to be considered, the court looks beyond legality to what is fair, given all the interests at play.

Evidence of an expectation "may take many forms depending on the facts of the case": BCE, at para. 70. The "actual expectation of a particular stakeholder is not conclusive": BCE, at para. 62. Furthermore, a stakeholder's reasonable expectation of fair treatment "may be readily inferred", because fundamentally all stakeholders are entitled to expect fair treatment: BCE, at paras. 64, 70. Once the expectation at issue is identified, the focus of the inquiry is on whether it has been established that the particular expectation was reasonably held: BCE, at para. 70.

The monitor particularized the reasonable expectations in issue. It stated that the stakeholders had reasonable expectations that the Essar Group would not cause Algoma to engage in transactions for their benefit to the detriment of Algoma and its stakeholders, cause Algoma to transfer long-term control over an irreplaceable and core strategic asset of Algoma (i.e., the port) to the Essar Group, and, among other things, provide the Essar Group with a veto. The source and content of the expectations were stated by the monitor to include commercial practice, the nature of Algoma and past practice. These particulars would all feed an expectation of fair treatment.

Based on the reasonable expectations particularized by the monitor, as already noted, the trial judge found, at para. 75 that:

[T]he reasonable expectations of the trade creditors, the employees, pensioners and retirees of Algoma were that Algoma would not deal with a critical asset like the Port in such a way as to lose long-term control over such a strategic asset to a related party on terms that permitted the related party to veto and control Algoma's ability to do significant transactions or restructure and which gave unwarranted value to the third party.

There was evidence of subjective expectations before the trial judge. For example, at para. 65 of his reasons, the trial judge considered the evidence of subjective expectations of two trade creditors explaining that they were unaware of the port transaction and would not have expected an outcome in which Algoma no longer had full control over the port facility.

The trial judge also drew reasonable inferences from the evidence and circumstances that existed at Algoma in 2014 in support of the expectations relied upon by the monitor, as he was entitled to do: see Ford Motor, at para. 65. In that regard, he noted that Algoma had gone through a number of insolvencies and restructurings since the early 1990s. Given the cyclical nature of the steel business, it was reasonable for the stakeholders to expect a restructuring in the future. The reasonableness of this restructuring-related expectation was confirmed by GIP's insistence on a "bankruptcy remote" structure for its loan "given the fluctuating prices of steel and Algoma's history of insolvencies", as GIP said in its factum.

Based on the evidence of subjective expectations and the reasonable inferences the trial judge drew from the record, it cannot be said that there was no evidence supporting the trial judge's conclusion that a future restructuring was not reasonably foreseeable.

The trial judge also concluded that it was objectively reasonable for the stakeholders to expect, as he noted, at para. 73, that Algoma would not lose its ability to restructure absent the consent of Essar Global -- particularly in Sault Ste. Marie, where Algoma is the major industry on which trade creditors and employees rely. Put differently, it would not be reasonable to expect that the shareholder would have the right to veto any restructuring in a CCAA proceeding in which it was not an applicant and have the right to prefer its own interests over those of others such as the retirees, pensioners, trade creditors and employees. Contrary to the assertions of the appellants, the trial judge expressly considered those issues.

Similarly, Essar Global submits that the foreseeability of another insolvency was contradicted by Mr. Marwah's affidavit evidence on the application for approval of the plan of arrangement, where he deposed that he believed that Algoma would be solvent. I would not give effect to this argument, as the trial judge's conclusion on the foreseeability of the insolvency is a factual finding, based on his review of the record as a whole. Essar Global has not demonstrated that this finding is subject to any palpable and overriding error.

The appellants' complaint that the trial judge failed to consider any of the factors identified in BCE is also misplaced. In that decision, the Supreme Court stated, at para. 62:

As denoted by "reasonable", the concept of reasonable expectations is objective and contextual. . . . In the context of whether it would be "just and equitable" to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.

Essar Global's argument that the trial judge did not turn his mind to the BCE factors ignores the trial judge's explicit reasons on this point. At para. 68 of his decision, the trial judge referred to the factors identified by the Supreme Court as "useful" in determining whether an expectation was reasonable. These factors include (i) general commercial practice; (ii) the nature of the corporation; (iii) the relationship between the parties; (iv) past practice; (v) steps the claimant could have taken to protect itself; (vi) representations and agreements; and (vii) the fair resolution of conflicting interests between corporate stakeholders.

The trial judge correctly noted that, due to the fact-specific nature of the inquiry into reasonable expectations, not all listed factors must be satisfied in any particular case. I agree with his conclusion. The BCE factors are "not hard and fast rules", but are merely intended to "guide the court in its contextual analysis".

Nonetheless, the trial judge did consider a number of the BCE factors based on the facts before him. For instance, at para. 68, he concluded that Algoma's prior sale of a non-critical asset, relating to factor (iv), past practice, was not helpful in determining reasonable expectations. This was because the sale of a non-critical asset differs from the sale of a critical asset, as in the port transaction. Also under the rubric of past practices, he considered Algoma's prior insolvencies and restructuring proceedings. He concluded that while it was reasonable for stakeholders to expect that significant corporate changes might be necessary for Algoma in the future, it was not reasonable for them to expect that Algoma would lose its ability to restructure without the prior agreement of its parent, Essar Global.

As the trial judge's reasons reveal, he specifically considered the BCE factors and made findings on the objective reasonableness of the expectations at issue. I endorse the comments of the monitor found at para. 80 of its factum:

In this case, Justice Newbould found that the employees, retirees, and trade creditors all had a reasonable expectation that Essar Group would not engineer a transaction that deprived Algoma of a key strategic asset, rendering it incapable of restructuring or engaging in significant transactions without the approval of Essar Global, for minimal cash consideration in circumstances where there had been no consideration of alternative transactions. This was entirely supported by the entirety of the record adduced at trial.

This was essentially a factual exercise. There was conflicting evidence before the trial judge. However, it was for the trial judge to weigh the evidence and make factual findings. That is what he did. Based on the record before him, those factual findings were available to him. He considered both subjective expectations and whether the expectations were objectively reasonable. I see no reason to interfere.

I therefore reject the appellants' submissions on reasonable expectations.

(4) Wrongful Conduct and Harm

Essar Global also takes issue with the trial judge's conclusion that Essar Global's conduct was wrongful and harmful.

First, Essar Global submits that the trial judge inappropriately relied on the equity commitment letter. It argues that the court approved the amended plan of arrangement that released Essar Global from any claim relating to the equity commitment letter, and that reliance on a released obligation in connection with the wrongful conduct requirement of oppression was an impermissible collateral attack on the approval order.

I disagree. I can state no more clearly than the trial judge did, at para. 100 of his reasons:

The Monitor is not making a claim under the Equity Commitment Letter or asking that Essar Global provide the equity it agreed to provide in that commitment. Nor is the Monitor asking that the release be set aside. The [Monitor] contends, and I agree, that the failure of Essar Global to fund as agreed in the RSA and Equity Commitment Letter is a part of the factual circumstances to be taken into account in considering whether the affected stakeholders who were not party to the agreements were treated fairly by the Port Transaction.

An amended plan of arrangement became necessary when Essar Global did not provide the promised equity contribution, the roadshow presentations were unsuccessful and the port transaction was the only available means to generate sufficient cash for Algoma.

I also note that the trial judge recognized that the trade creditors, the employees, pensioners and retirees were not parties to nor did they play any role in the amended plan of arrangement proceedings. Although the release was in both the original RSA and the amended RSA, it would appear that there was no express reference to the port transaction being part of the plan of arrangement, nor was there any mention of it in any endorsement or the order approving the amended plan of arrangement.

In addition, the trial judge did not make his finding of wrongful conduct based on Essar Global's breach of the equity commitment letter. Rather, he found that the totality of Essar Global's conduct regarding the recapitalization and port transaction satisfied the wrongful conduct requirement.

Taken in context, the trial judge made no error in his treatment of the release in favour of Essar Global.

Second, Essar Global submits that the trial judge made factual errors relating to Essar Global's cash contributions. In particular, it submits that he erred in concluding that the cash Essar Global did advance in the recapitalization, namely, US$150 million rather than the US$250 to US$300 million that was originally promised, was generated by the port transaction when it was not. They also complain that he erred in granting an oppression remedy when the equity commitment letter provided for a limited remedy in the event of a breach.

The reasons of the trial judge on Essar Global's cash contribution are admittedly somewhat confusing. In para. 20 of his reasons, he states that Essar Global's revised cash contribution under the amended RSA was "to be funded largely not by Essar Global but by a loan from third party lenders to Portco of $150 million". Reading that paragraph in isolation might lend credence to the appellants' submission. That said, having regard to the record before him and reading the reasons as a whole, I am not persuaded that the trial judge misunderstood Essar Global's contribution to the recapitalization.

The relevant contributions made to Algoma in November 2014 consisted of

• US$150 million in cash from Essar Global under the amended RSA;
• US$150 million in debt reduction in the form of loan forgiveness for certain loans owed by Algoma to members of the Essar Group under the amended RSA; and
• US$150 million in cash generated from the port transaction.

Essar Global only provided Algoma with US$150 million in cash equity, not the US$250 to 300 million in cash equity it had originally promised. The debt forgiveness would not assist Algoma in addressing its impending liquidity issues in the same way a cash injection would. Additionally, as the trial judge noted, at para. 88, the US$150 million in debt reduction related to loans at the bottom of Algoma's capital structure, and therefore this reduction was of "questionable value" to Algoma at the time.

Algoma, the monitor and Essar Global all provided the trial judge with written submissions describing the cash equity contribution as consisting of US$150 million in cash from Essar Global and US$150 million in cash from the port transaction. The contributions were also repeatedly referenced in the record. For example, the affidavit of Mr. Seifert -- which the trial judge considered in great detail -- clearly sets out Essar Global's cash contribution to Algoma and the US$150 million in cash paid by Portco to Algoma under the port transaction as separate transactions. Similarly, these contributions are described as separate transactions in the affidavits of Messrs. Marwah and Ghosh.

The trial judge's reasons establish that he understood that there were two separate cash payments made to Algoma -- one made by Essar Global in satisfaction of its commitments under the amended RSA and one made by Portco under the port transaction. He also understood that these cash payments were made in addition to Essar Global's forgiveness of US$150 million debt owed to it by Algoma.

Specifically, at para. 85, the trial judge noted that in October 2014, after the original RSA had been executed, Essar Global contemplated reducing the amount of its cash contribution promised under the RSA and the equity commitment letter. The roadshow presentation prepared regarding Algoma's capitalization showed that Essar Global proposed to contribute less than US$100 million of cash rather than the US$250 --$300 million required. He obviously understood that there was to be a cash component to Essar Global's contribution separate and apart from the proceeds of the port transaction.

In addition, at para. 88, the trial judge noted that the port transaction "reduced the amount of cash equity previously promised by Essar Global to be advanced to Algoma" (emphasis added). This shows that the trial judge understood that the proceeds from the port transaction were not replacing Essar Global's promised cash contribution. The trial judge recognized that the cash equity contribution of US$150 million and the debt reduction of US$150 million were insufficient to successfully refinance Algoma, and using the port transaction proceeds was the only way to generate the additional US$150 million in cash necessary. The trial judge highlighted at para. 96 that Algoma's CEO, Mr. Ghosh, had indicated that "he had to agree to the Port Transaction" as it was the "only way" to refinance Algoma, since Essar Global's contribution was only "bringing in $150 million".

Even if the appellants were correct in this regard, which I do not accept, on their analysis, they themselves admit that Essar Global's contribution was short by US$50 million.

No matter the correct figure, Essar Global's conduct created a situation where Algoma had no choice but to accept the port transaction. There was no palpable and overriding error in the trial judge's understanding of the recapitalization requirements.

In any event, the reduction in Essar Global's cash contribution was only one aspect of Essar Global's overall conduct considered by the trial judge. He did not conclude that the cash equity reduction was itself the oppressive act. Accordingly, again, any factual error regarding Essar Global's actual cash contribution was not a palpable and overriding error.

As mentioned, Essar Global also asserts that the remedy for breach contained in the equity commitment letter precluded any oppression remedy. No one was suing for breach of the equity commitment letter. Rather, it formed part of the context that included a failure to explore alternatives, the port transaction itself, control rights that were proffered as a disincentive to other bidders and that erased any possibility of a successful restructuring, all in disregard of the expectations of the pensioners, employees, retirees and trade creditors.

Third, although not identified as a ground of appeal nor advanced as such in their factum, in oral argument, the appellants submitted that the alleged breach of the equity commitment letter did not cause Algoma to enter the port transaction.

Essar Global contends that the trial judge made factual errors in finding a causal connection between Essar Global's equity commitment and the port transaction. It argues that the port transaction was a key component of the recapitalization before the execution of the equity commitment letter.

At trial, the trial judge rejected Essar Global's argument, finding, at para. 87, that the port transaction was contemplated as a possible transaction when first introduced in May 2014, but that the transaction was not a certainty. He accurately noted that the first plan of arrangement that was approved by the court required Essar Global to comply with its cash funding commitment of US$250 to US$300 million pursuant to the equity commitment letter and that the port transaction was not a part of that plan. He found that the port transaction had to be carried out because of Essar Global's decision not to fund Algoma according to the terms of the equity commitment letter.

The causal connection between Essar Global's equity commitment and the port transaction is a factual matter and the trial judge's factual finding was supported by the evidence.

Furthermore, the port transaction that was floated in May 2014 was an entirely different transaction, in which the proceeds of sale would flow upstream to Essar Global and would not be used to recapitalize Algoma. Moreover, the RSA prohibited a related party transaction without noteholder consent, and the proceeds of any sale in excess of US$2 million had to be used to reduce Algoma's debt.

I am not persuaded that the trial judge made any palpable and overriding error in his finding.

Fourth, Essar Global submits that the trial judge erred in disregarding the business judgment rule, which should have applied to prevent judicial second-guessing of the board's decisions.

The trial judge correctly described [at para. 119] the business judgment rule, relying on para. 40 of BCE:

In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Courts should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule. The "business judgment rule" accords deference to a business decision, so long as it lies within a range of reasonable alternatives . . . It reflects the reality that directors, who are mandated under s. 102(1) of the CBCA to manage the corporation's business and affairs, are often better suited to determine what is in the best interests of the corporation. This applies to decisions on stakeholders' interests, as much as other directorial decisions.

Two additional points should be made with respect to the business judgment rule. First, the rule shields business decisions from court intervention only where they are made prudently and in good faith: [CW Shareholdings Inc. v. WIC Western International Communications Ltd. (1998), 39 O.R. (3d) 755, [1998] O.J. No. 1886, 160 D.L.R. (4th) 131 (Gen. Div. (Commercial List))], at pp. 150-51 D.L.R.

Second, the rule's protection is available only to the extent that the board of directors' actions actually evidence their business judgment: UPM-Kymmene, at para. 153.

In deciding that the rule afforded no defence to Essar Global, the trial judge, at para. 123, relied on the fact that the board did not follow "advice to go after Essar Global on its cash equity commitment". The trial judge went on to note that had Algoma's board formed an independent committee in February 2014, events may have evolved differently, and the board may have accepted the advice to hold Essar Global to its commitment.

Essar Global takes issue with this conclusion by asserting that the trial judge should not have characterized Algoma's board as lacking independence because of its decision not to strike an independent committee. Essar Global points out that there was no evidence that Mr. Ghosh -- who cast the deciding vote in that decision -- was not free to vote as he chose.

Essar Global's argument ignores the trial judge's key finding that the four directors who voted against the independent committee in February 2014, including Mr. Ghosh, were not independent. The trial judge noted, at para. 15, that he could "not overlook" that Mr. Ghosh had been with Essar Steel India, adding that Algoma's CFO, Mr. Marwah, had described these four directors as "Essar-affiliated directors". On this basis, it was open for the trial judge to find that the Essar-affiliated directors were not free from the influence of Essar Global and the Ruia family, particularly when considered alongside his extensive comments, at paras. 43-60, finding that the critical decisions regarding Algoma's recapitalization and the port transaction were made not by Algoma's board, but by Essar Global and Essar Capital as led by Mr. Seifert.

Specifically, the trial judge made findings of fact, at paras. 51-53, regarding the limited role played by Algoma's board and management. He accepted the evidence of Messrs. Ghosh and Marwah that they did not negotiate the economic terms of the debt refinancing or the port transaction. He also accepted the evidence of Mr. Ghosh that the transaction was approved because there was no realistic alternative to generate sufficient cash to complete the recapitalization. He rejected the contradictory evidence of Mr. Seifert because the evidence of Messrs. Ghosh and Marwah was consistent with the documentary evidence. In my view, the trial judge was entitled to weigh the evidence as he did and make these findings of fact that were not infected by any palpable and overriding error.

Essar Global maintained before the trial judge, as they do before this court, that the Algoma board's decisions were nonetheless shielded from court intervention because the board had the benefit of sophisticated advisors throughout the recapitalization process. And yet, the only evidence tendered of any such advice was advice that the board elected not to follow.

At para. 122, the trial judge described this advice, which was provided at least in part by Ray Schrock, described by the appellants as Algoma's lawyer. Mr. Schrock told the board that unsecured noteholders would not react well to the port transaction and were likely to seek a higher infusion of cash from Essar Global, as promised in the equity commitment letter. Mr. Schrock said that the board should insist that Algoma press Essar Global to fulfill its equity commitments. There was no evidence that steps were taken in this regard and the trial judge found that this advice was not followed.

Additionally, the circumstances surrounding the resignation of the independent directors from Algoma's board lend support to the trial judge's conclusion that reliance on the business judgment rule was unavailable. Mr. Dodds' letter stated that his decision to resign was driven by his conclusion that as an independent director, he lacked confidence that he was "receiving information and engaged in decision-making in the same manner as those board members who are directly affiliated with the company and/or its parent". It was open to the trial judge to reach the conclusions he did. In these circumstances, the business judgment rule was of little assistance.

Essar Global also submits that the trial judge should not have gone on to censure the activities of the board in November 2014 (when the board approved the transactions) by relying on the board's February 2014 decision regarding the independent committee.

The trial judge did not censure the decisions of the Algoma board solely based on the February 2014 meeting. The February meeting, and the events surrounding it, are part of a larger context that included the November 2014 meeting, all of which the trial judge considered, and all of which demonstrated that the board's decisions regarding the recapitalization were not made prudently or in good faith, as found by the trial judge, and thereby failed to attract the application of the business judgment rule.

Specifically, the trial judge found, at para. 123, that, if the board had acquiesced to forming an independent committee, or listened to the truly independent directors before they resigned in frustration, subsequent steps taken in pursuit of the recapitalization transaction "may have been taken differently". He then went on to say that

What happened in the Port Transaction was an exercise in self-dealing in that Algoma's critical Port asset was transferred out of Algoma to a wholly owned subsidiary of Essar Global with a change of control provision that benefited Essar Global at a time that a future insolvency was a possibility.

Additionally, the trial judge found that the board had accepted the inclusion of the contentious change of control provision in the cargo handling agreement without considering alternatives. If the provision was truly for the benefit of GIP, it could have been accomplished in another way, without providing Essar Global with an effective veto over a change of control of Algoma.

All this evidence speaks to the board's lack of business judgment and good faith, the failure to consider reasonable alternatives, and the Algoma board's limited role in directing the recapitalization. There is no palpable and overriding error in the trial judge's conclusion that the board was precluded from relying on the business judgment rule. His decision was amply supported by the record.

Essar Global makes an additional point relating to the business judgment rule: that, in any event, no independent committee was required under corporate law.

It is a contrivance for Essar Global to impugn the trial judge's conclusion regarding the business judgment rule on the basis that an independent committee was not required. Although it is true that an independent committee was not legally or technically required, the board's decision not to strike one, in the circumstances surrounding the November 2014 restructuring transactions, speaks volumes. The decision not to strike an independent committee must be considered alongside the evidence I have already reviewed: the board's lack of independence, the board's failure to follow its advisors' advice, the board's failure to consider alternatives, and the board's acquiescence to recapitalization transactions that primarily benefited the interests of Essar Global over those of Algoma. Again, the totality of the evidence supports the board's lack of good faith, and renders the business judgment rule inapplicable.

There is one final argument Essar Global raises in invoking the business judgment rule. It claims that it was procedurally offensive for the trial judge to criticize the directors for not following Mr. Schrock's advice because evidence of the advice was not before him. It adds that, had the directors relied on legal advice from Mr. Schrock in the legal proceedings, privilege had not been waived.

Here, the minutes of the board meeting held in November 2014 describe Mr. Schrock as "informing the Board [that] the [unsecured noteholders] would not react well to the proposed changes and that they were likely to push [Essar Global] for a higher infusion of cash/equity into [Algoma] as set forth in the Commitment [L]etter". Mr. Schrock also commented that the proposed Port Transaction "was likely to cause concern by the [unsecured noteholders]". Accordingly, Mr. Schrock advised the board to "insist that [Algoma] should press all parties to fully satisfy their . . . obligations regarding the equity contributions".

To the extent that Mr. Schrock's comments amounted to legal advice, I would first note that his advice was only one piece of the evidentiary puzzle in the broader factual context. Even if Mr. Schrock's advice, and the board's failure to implement it, are disregarded, the record still amply supports the trial judge's conclusions on this issue.

I would also add that Essar Global's claim that the evidence of Mr. Schrock's advice was not before the trial judge is incorrect. The board minutes were included in the record as an exhibit to an affidavit tendered by Essar Global. Finally, as for Essar Global's argument that privilege had not been waived, any privilege that may have attached to Mr. Schrock's advice belonged to Algoma and not Essar Global.

Fifth, Essar Global submits that the involvement of Algoma's management and board in the port transaction sanitizes that transaction, because the trial judge concluded that Messrs. Ghosh and Marwah acted in good faith thinking they were doing the best for Algoma in the circumstances. Essar Global also claims that the trial judge erred by holding otherwise because the monitor failed to attack the board's process in its pleading. I do not accept these arguments.

Despite Essar Global's argument, this court has established that good faith corporate conduct does not preclude a finding of oppression: Brant Investments Ltd. v. KeepRite Inc. (1991), 3 O.R. (3d) 289, [1991] O.J. No. 683 (C.A.).

Moreover, Essar Global's argument on this point ignores the trial judge's findings that Algoma's board and management played a limited role in the port transaction. It also ignores evidence that indicates that Messrs. Ghosh and Marwah's support was only given because there was no alternative to address Algoma's financial straits. This factual background demonstrates why it was open for the trial judge to conclude that the port transaction was oppressive, despite the good faith of Messrs. Ghosh and Marwah.

On the pleadings issue, I note that the monitor pleaded that the port transaction was the result of Essar Global's "de facto control" of Algoma. In response, Essar Global pleaded that the port transaction was in the best interests of Algoma, based on the approval of the transaction by Algoma's board and senior management, who were acting on an informed basis and with the benefit of financial advice. Given the way in which Essar Global framed its defence in its pleadings, it cannot now say that issues related to the board's process were not properly before the trial judge.

Turning to the appellants' last argument relating to wrongful conduct and harm, they submitted that the trial judge identified two potential harms caused by Essar Global, neither of which is actionable in the oppression action: the undervalue of the port transaction to Algoma and the impairment of Algoma's ongoing restructuring.

In my view, it is inaccurate to characterize the trial judge's findings and analysis as concluding that harm flowed to stakeholders because the port transaction did not provide sufficient value to Algoma.

Specifically, he did not find that the US$171.5 million in consideration paid by Portco to Algoma constituted undervalue. Indeed, his remedy that GIP be repaid in full suggests the contrary. Rather, he found that Essar Global received an unreasonable benefit from the port transaction.

Moreover, it was an exercise in self-dealing. As the trial judge stated, at para. 144:

For the balance of the first 20 years under the Cargo Handling Agreement after the GIP loan matures, if that agreement survives only to that date, Algoma will pay a further 12 years at $25 million, or $300 million, to Portco which will benefit Essar Global after the balance of the GIP loan is paid off. If the Cargo Handling Agreement is not terminated before the end of its life of 50 years, that will be another 30 years at $25 million, or $750 million, paid to Portco/Essar Global. Taken with the small amount paid by Essar Global, the $4.2 million in cash (and the $19.8 million note that it has refused to pay), it means that Essar Global will obtain an extremely large amount of cash from Algoma for little money. I realize that if Algoma became solvent and able to pay its debts, it would be able to pay a dividend [to] Essar Global (or the appropriate subsidiary) so long as Essar Global remained its shareholder. Whether and when Algoma could become solvent with its pension deficits that have existed for some time and be in a position to pay dividends to its shareholder is a significant unknown. But the payments under the Cargo Handling Agreement do not require any solvency test and are in the financial circumstances Algoma finds itself in, a clear contractual benefit for little money. It is an unreasonable benefit that was prejudicial to, and unfairly disregarded, the interests of the creditors on whose behalf this action has been brought by the Monitor.

The trial judge also concluded that the mismatched terms of the cargo handling agreement (20 years renewable) and the 50-year lease offered Essar Global an additional benefit. In that regard, he was not bound to accept the evidence of the appellants' expert. He reasoned, at para. 142, that the port was critical to Algoma's functioning, and therefore that Algoma would not be in a position to terminate the cargo handling agreement for the duration of the lease:

The other concerns are with respect to the obligations in the Cargo Handling Agreement. I have a concern with the imbalance in the term of the lease to Portco for 50 years against the term of the Cargo Handling Agreement for 20 years with automatic renewal for successive three year periods unless either party gives written notice of termination to the other party. If Essar Global thought that it wanted an increased payment after 20 years, it could refuse to continue the Cargo Handling Agreement and put Algoma at its complete mercy. If the market did not support an increased payment, or indicated that the payments from Algoma to Portco should be less in the future, Algoma would still be at the mercy of Essar Global. As the Port facilities are critical to the operation and survival of Algoma, it would be foolhardy indeed for Algoma to refuse to extend the Cargo Handling Agreement. The language in the Cargo Handling Agreement that Algoma can refuse to extend it after 20 years is illusory and not realistic. In reality, it is a provision that is one-sided in favour of Essar Global.

The change of control provision or veto was also an exercise in "self-dealing". The consent provision unnecessarily tied Algoma's strategic options to Essar Global. The trial judge properly found that the insertion of control rights in the cargo handling agreement served no practical purpose to GIP and the same rights could have been provided for in the assignment of material contracts.

As the trial judge concluded, at para. 138:

In my view, and I so order, the appropriate relief for the oppression involving the change of control clause in the Cargo Handling Agreement is to delete section 15.2 from that agreement and to insert a provision in the Assignment of Material Contracts agreement that if GIP becomes the equity owner of Portco, Algoma or its parent cannot agree to or undertake a change of control of Algoma without the consent of GIP.

There was evidence from Messrs. Ghosh and Marwah that supported the trial judge's conclusion that harm had flowed from the presence of the change of control provision and the ensuing letter from counsel. They were not cross-examined and no competing evidence was tendered by the appellants. It was also open to the trial judge to interpret the letter sent by Portco's counsel to Algoma's counsel as a veto threat to potential bidders while Essar Global continued to be interested in being a bidder. I would not give effect to this argument.

On the issue of the impairment of Algoma's ongoing restructuring, the appellants argue that no harm could have flowed from this, as the restructuring was not, in fact, impaired. Specifically, they argue that the only evidence of impairment consisted of statements in the affidavits of Messrs. Ghosh and Marwah that potential bidders for Algoma were concerned about the change of control clause. I would reject this argument as well. Again, I note that the appellants chose not to cross-examine on these affidavits, nor did they object to their admission into evidence. They cannot now, after the fact, impugn the trial judge's reliance on these statements.

Additionally, the appellants argue that it was premature for the trial judge to conclude that the control clause impaired the restructuring, because Portco/Essar Global was never asked to consent to a new transaction or to new owners. However, at para. 117, the trial judge noted that the change of control rights had to be considered alongside Essar Global's holding itself out as a prospective buyer in any bidding process for Algoma. That Essar Global has never been asked to consent to a new transaction was immaterial, as it remained in Essar Global's "interest to dissuade other buyers in order for it to achieve the lowest possible purchase price". In coming to this conclusion, the trial judge pointed to the letter from counsel for Portco/Essar Global on May 12, 2016, which "sp[oke] volumes" by "clearly invit[ing] any bidder to understand that Essar Global has control rights".

I see no error in the trial judge's conclusion.

(5) The Remedy

Turning then to the issue of the remedy. Essar Global submits that the trial judge erred in striking out the control clause in the cargo handling agreement and in granting Algoma the option of terminating the port agreements upon repayment of the GIP loan. They argue that he was only permitted to rectify the harm that was suffered. Deleting the provision was an overly broad remedy that was unconnected to the reasonable expectations of the stakeholders, and instead, he should have considered a nominal damages award.

GIP supports the submissions of Essar Global. It argues that the remedy awarded was not sought by any party, no evidence had been called in respect of that remedy and no submissions were made. The practical effect of granting Algoma a termination right is that GIP does not have the security for which it bargained and it was prejudiced, despite its lack of involvement in the oppression found against Essar Global. GIP also argues that the monitor and Algoma are seeking to set-off amounts owed by Essar Capital to Algoma against amounts owed to GIP, which results in additional prejudice.

I would not give effect to these submissions. First, trial judges have a broad latitude to fashion oppression remedies based on the facts before them. Once a claim in oppression has been made out, a court may "grant any remedy it thinks fit": Pente Investment Management Ltd. v. Schneider Corp. (1998), 42 O.R. (3d) 177, [1998] O.J. No. 4142 (C.A.), at para. 4. The focus is on equitable relief, and deference is owed to the remedy granted: Fedel, at para. 100.

Second, the trial judge properly identified the need to avoid an overly broad remedy, stating, at para. 136, that there were "less obtrusive ways" of remedying the oppression than ordering shares of Portco be transferred to Algoma (the remedy the monitor had originally requested). Varying the transaction as he did was one such way. The trial judge's remedy removes Portco's control rights (the main obstacle to a successful restructuring) and, after GIP is paid, restores the port to the ownership of Algoma. If GIP becomes the equity owner of Portco, its consent will be required to any change of control. Unlike a damages award, the remedy was responsive to the oppressive conduct. It served to vindicate the expectations of the stakeholders that Algoma would retain long-term control of the port and that Essar Global would not have a veto over its restructuring efforts.

Third, the remedy granted preserves the security GIP had bargained for and therefore GIP has not suffered any prejudice as a result of the remedy. The trial judge's remedy, as described at para. 145, ensures that GIP is to be paid in full. Until "payment in cash of all amounts owing to GIP" is made, the port remains in Portco's hands and the contractual remedies held by GIP to enforce its security remain in place. Moreover, Essar Global guaranteed Portco's liabilities to GIP under GIP's loan in the port transaction, which further demonstrates GIP's lack of prejudice. As GIP's own affiant indicated, this guarantee provides GIP with "an extra layer of protection in the event the debtor is unable to repay the loan".

Finally, regarding the issue of set-off, I note that the arguments made by GIP in support of this ground were made prior to Newbould J.'s subsequent ruling dealing with this issue. In that decision, he held that Algoma had set-off amounts owed under the promissory note against Essar Global, but he preserved GIP's right to repayment. This decision is a full answer to GIP's arguments on this point, and ensures that GIP will not suffer any prejudice as a result of the remedy granted in response to Essar Global's oppressive conduct.

(6) Was There Procedural Unfairness?

Essar Global submits that the trial judge erred in basing his decision and relief on bases that were not pleaded. GIP supports the position of Essar Global, with particular focus on the remedy that was ultimately imposed.

As mentioned, the trial judge was the supervising CCAA judge and deeply acquainted with the facts of the restructuring. Of necessity, and on agreement of all parties to the oppression action, the timelines for pleadings, productions and examinations were truncated. Additionally, no party objected at trial that the process had been procedurally unfair. Given the context and the complexity of the dispute, the pleadings were not as clear as they might have been in a less abbreviated schedule. That said, on a review of the record, I am not persuaded that there was any procedural unfairness with respect to the claims or that the appellants did not know the case they had to meet.

The focus of at least GIP's complaint lies in the remedy. The appellants are correct that the precise remedy awarded by the trial judge was not pleaded. A trial judge must fashion a remedy that best responds to the oppressive conduct and that is not overly broad. While it is desirable for a party seeking oppression relief to provide particulars of the remedy, a trial judge is not bound by those particulars. Because the discretionary powers under the oppression remedy must be exercised to rectify the oppressive conduct complained of (see Naneff v. Con-Crete Holdings Ltd. (1995), 23 O.R. (3d) 481, [1995] O.J. No. 1377 (C.A.), at para. 27), it follows that the remedy will, by necessity, be linked to the oppressive conduct that was pleaded. Therefore, a party against whom a specifically tailored oppression remedy is ordered cannot fairly complain that the remedy caught them by surprise. This conclusion is consistent with Fedel, where this court upheld oppression remedies imposed by the trial judge where the relief granted had not been specifically pleaded or sought in argument.

Moreover, absent error, a trial judge's decision on remedy is entitled to deference. As I have discussed, there is an absence of error. Furthermore, in this case, there is no prejudice to GIP. Its position is preserved by the remedy granted by the trial judge. At the same time, the remedy is responsive to Essar Global's oppressive conduct.

That said, the trial judge did consider whether Essar Global and GIP could fairly argue that they were taken by surprise by his remedy. At para. 141, he rejected this position, holding that the issue of the change of control clause was pleaded by the monitor, and affidavit material filed by both Essar Global and GIP provided evidence on the provision's significance. At para. 146, he concluded that issues relating to the relief he ordered were "fully canvassed in the evidence and argument", and that the remedy he ordered in fact was less intrusive than the remedy originally pled by the monitor. And although he did not think an amendment was necessary, he nonetheless ordered that the monitor would be granted leave to amend its claim to support the relief he granted.

I would not give effect to this ground of appeal.

(7) Fresh Evidence

Essar Global seeks to introduce fresh evidence on appeal that addresses the independence of Algoma's board of directors. It takes the position that the trial judge's rejection of the independence of two directors, Messrs. Kothari and Mirchandani, played a significant role in his decision. It adds that the lack of independent directors was not pleaded by the monitor and so Essar Global had no reason to adduce this evidence earlier.

Messrs. Mirchandani and Kothari joined Algoma's board in June and August 2014, respectively, after the three independent directors resigned. They were therefore on the board when the port transaction was approved in November 2014.

Whether "a proper case" exists to allow fresh evidence is determined by applying the test outlined in R. v. Palmer, [1980] 1 S.C.R. 759, [1979] S.C.J. No. 126, or the slightly modified test from Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 208, [1994] O.J. No. 276 (C.A.).

As this court has noted, the two tests are quite similar: see Chiang (Trustee of) v. Chiang (2009), 93 O.R. (3d) 483, [2009] O.J. No. 41, 2009 ONCA 3, at para. 77. Under the Palmer test, the party seeking to admit fresh evidence must demonstrate that the evidence could not, by due diligence, have been adduced at trial; that the evidence is relevant in that it bears on a decisive issue in the trial; that the evidence is credible; and that the evidence, if believed, could be expected to affect the result.

Under the Sengmueller test, the moving party must demonstrate that the evidence could not have been obtained by the exercise of reasonable diligence prior to trial; that the evidence is credible; and that the evidence, if admitted, would likely be conclusive of an issue on appeal.

Essar Global has failed to meet either the Palmer or the Sengmueller test for two main reasons.

In both its original and its amended statement of claim, the monitor alleged that representatives of Essar Global were members of Algoma's board and exercised de facto control over Algoma, such that they made decisions for the benefit of Essar Global while unfairly disregarding the interests of Algoma's stakeholders. Essar Global cannot claim to have been caught by surprise by the issue of the board's independence being in play. The fresh evidence could have been obtained with reasonable diligence prior to trial.

In any event, the evidence would not have affected the result at trial, and is not conclusive of any issue on appeal. The fresh evidence Essar Global asks to proffer consists of the affidavit of Mr. Mirchandani, which states that he and Mr. Kothari were determined to be independent board members as a result of a conflict of interest policy and by virtue of the questionnaires they each completed.

However, there was evidence before the trial judge essentially to this effect, including Algoma's October 2014 offering memorandum, which stated that the board included two independent directors. Indeed, the trial judge commented on this evidence in footnote 7 of his reasons, and rejected it in concluding that Messrs. Mirchandani and Kothari were not truly independent of Essar Global.

Additionally, and as I have already discussed elsewhere in these reasons, the remainder of the record strongly supported the board's lack of independence. Even if the trial judge had Mr. Mirchandani's affidavit before him, it would not have made a difference.

I would therefore dismiss the motion for fresh evidence.

(8) Costs

GIP claimed costs of CDN$750,156.18 against the monitor payable on a partial indemnity scale. It claimed it was entirely successful because it successfully resisted relief sought by the monitor that would have prejudiced GIP. The trial judge exercised his discretion and observed that success between the monitor and GIP was divided. He also relied on GIP's appeal as a basis to conclude success was divided. He therefore did not order any costs in favour of or against GIP.

GIP seeks leave to appeal the trial judge's costs award. Before this court, GIP in essence renews the arguments made before the trial judge. The awarding of costs is highly discretionary and leave is granted sparingly. I see no error in principle in the trial judge's exercise of discretion nor was the award plainly wrong: Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 2004 SCC 9, at para. 27.

At trial, GIP was unsuccessful in challenging both the monitor's claim of standing and its claim that the port transaction was oppressive. It also seems incongruous for GIP to suggest that it was entirely successful in defeating the monitor's claims, while it appeals the trial decision.

I see no basis on which to interfere with the costs award of the trial judge and would refuse leave to appeal costs.

E. DISPOSITION

For these reasons, I would dismiss the appeal, the motion for fresh evidence and the motion for leave to appeal costs.

As agreed, I would order that the monitor and Algoma are entitled to costs of the appeal fixed in the amounts of CDN$100,000 and CDN$60,000, respectively, inclusive of disbursements and applicable taxes on a partial indemnity scale. At the oral hearing, the parties had not agreed on whether the award should be payable on a joint and several basis and requested more time to consider the matter. On September 15, 2017, counsel wrote advising that they had still not agreed on this issue. GIP requested the opportunity to make additional costs submissions on this issue at the appropriate time. Under the circumstances, I would permit GIP to make brief written submissions on this issue by January 10, 2018. Essar Global shall have until January 17, 2018 to file its submissions. The monitor and Algoma shall have until January 24, 2018 to respond.

Appeal dismissed.

Notes

1 Algoma was named in the proceeding below as a defendant, but supports the position taken by the respondent Ernst & Young Inc. It is therefore a respondent on this appeal.

2 In early 2015, Essar Consulting obtained two additional valuations of the port assets, one in February from Royal Bank of Canada and one in April from ICICI Securities. The RBC valuation, which was an exhibit to the affidavit of Joseph Seifert, was between US$165 and US$200 million. The ICICI valuation, which was an exhibit to the affidavit of Anshumali Dwivedi, was US$349 million.

3 Although Deutsche Bank intervened in the proceedings below, it was not involved in this appeal.

4 Before this court, no submissions on urgency were advanced.

5 Stephanie Ben-Ishai and Catherine Nowak, "The Threat of the Oppression Remedy to Reorganizing Insolvent Corporations" in Janis P. Sarra, ed., Annual Review of Insolvency Law, 2008 (Toronto: Carswell, 2009), at pp. 430-31 and 436.

6 Janis P. Sarra, "Creating Appropriate Incentives, A Place for the Oppression Remedy in Insolvency Proceedings" in Janis P. Sarra, ed., Annual Review of Insolvency Law, 2009 (Toronto: Carswell, 2010), at p. 99.

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