Court of Appeal for Ontario

Date: 20240508 Docket: COA-24-OM-0023

Roberts, Trotter and George JJ.A.

BETWEEN

In the Matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, C. C-35, as Amended And in the Matter of a Proposed Plan of Compromise or Arrangement with Respect to U.S. Steel Canada Inc.

Counsel: Geoff R. Hall and James D. Gage, for the appellant, Stelco Inc. Crawford G. Smith, David Ionis, Katelyn B. Johnstone, Roger Jaipargas and Xue Yan, for the respondent, DGAP Investments Ltd.

Heard: in writing

Reasons for Decision

Introduction

[1] This motion for leave to appeal arises out of a proceeding under the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36 (“CCAA”). Stelco Inc., the moving party, seeks leave to appeal the December 12, 2023 order of the current CCAA supervisory judge (“the motion judge”). This leave motion represents the latest step in what Pepall J.A. has described on a previous motion as “bitter litigation between [the moving party] and DGAP [Investments Ltd.]” in the context of the CCAA proceeding.

[2] DGAP Investments Ltd. (“DGAP”) entered into an agreement to purchase land from LandCo, a land vehicle created during the course of the moving party’s reorganization under the CCAA. Some of the land DGAP agreed to purchase from LandCo (the “DGAP Parcel”) was still held by the moving party, although the moving party had agreed to reconvey the land to LandCo under a reconveyance agreement dated June 5, 2018 (the “Reconveyance Agreement”).

[3] The moving party failed to do so and was ordered by McEwen J., the former CCAA supervisory judge, to specifically perform its obligation to reconvey the land to LandCo. Until the land is reconveyed, DGAP and LandCo cannot close their transaction. The moving party failed to reconvey the land, and DGAP returned before the motion judge.

[4] The dispute regarding reconveyance appears to relate to the failure of the moving party and LandCo to reach an agreement under art. 4.1(m) of the Reconveyance Agreement, which is a precondition to reconveyance. Article 4.1(m) of the Reconveyance Agreement requires the parties to “enter into such shared facilities and/or reciprocal easement agreements required for the operation of the Planning Act Lands and the balance of the Property”.

[5] The motion judge allowed DGAP’s motion in part. He rejected the moving party’s proposed easements, as they fell outside art. 4.1(m). He also declined to impose DGAP’s proposed form of easement agreement, giving the parties one last opportunity to reach a negotiated agreement. However, the motion judge held that, absent an agreement by a stipulated date, the court “retains the authority to impose terms and conditions to bring about the reconveyance of the DGAP Parcel.”

Analysis

[6] It is well established that leave to appeal is granted sparingly in CCAA proceedings and only where there are serious and arguable grounds that are of real and significant interest to the parties. In addressing whether leave should be granted, the court will consider: (1) whether the proposed appeal is prima facie meritorious or frivolous; (2) whether the points on the proposed appeal are of significance to the practice; (3) whether the points on the proposed appeal are of significance to the action; and (4) whether the proposed appeal will unduly hinder the progress of the action: see e.g., Stelco Inc. (Re) (2005), 75 O.R. (3d) 5 (C.A.), at para. 24.

[7] Having weighed these factors in this case, we are not persuaded that leave to appeal should be granted.

[8] In considering whether leave should be granted, we apply the test referenced above to the moving party’s two proposed grounds of appeal:

1. Whether the motion judge erred in concluding that the Superior Court has the power, in the circumstances of this case, to create and impose the shared facilities and/or reciprocal easement agreements required by s. 4.1(m) of the Reconveyance Agreement notwithstanding the absence of the moving party’s consent.
2. Whether the motion judge erred in concluding that s. 4.1(m) of the Reconveyance Agreement precludes the moving party from negotiating terms in the shared facilities and/or reciprocal easement agreements required by s. 4.1(m) of the Reconveyance Agreement.

Whether the proposed appeal is prima facie meritorious

[9] The proposed appeal is not prima facie meritorious. The motion judge’s interpretation of the Reconveyance Agreement is entitled to deference, and the moving party has failed to point to any arguable errors of interpretation.

[10] As for the more contentious legal issue – the issue of a court imposing an agreement on a non-consenting party pursuant to s. 11 of the CCAA – the motion judge’s decision stands on the prior decision in these proceedings of McEwen J., the former CCAA supervisory judge, who ordered specific performance of the Reconveyance Agreement notwithstanding art. 4.1(m) and on this court’s decision refusing leave: see U.S. Steel Canada Inc. et al. v. The United Steel Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union et al., 2022 ONSC 6993, 5 C.B.R. (7th) 95, leave to appeal refused, 2023 ONCA 277.

[11] It also stands on the concession that both parties made before this court on a prior motion, namely that “the agreements contemplated by Article 4.1(m) of the Reconveyance Agreement could be determined by the Commercial List judge if the parties could not reach an agreement”: U.S. Steel Canada Inc. (Re), 2023 ONCA 569, at para. 30. The moving party now takes a different position which would thwart the reconveyance of the land.

Whether the points on the proposed appeal are of significance to the practice

[12] The first question, concerning the interpretation of the Reconveyance Agreement, is not of significance to the practice. The second question, whether a court can impose a contract on a non-consenting party, is of potential significance to the CCAA community. However, the significance of the issue is attenuated by the unique circumstances of this case, including the previous judicial determinations of the issue and, importantly, the moving party’s agreement that the court could do so on a previous motion.

Whether the points on the proposed appeal are of significance to the action

[13] The dispute in question is of significance to both parties, although we do not place great weight on this factor, given that this is usually the case. As this court noted in Nortel Networks Corporation (Re), 2016 ONCA 332, 130 O.R. (3d) 481, at para. 95, “[t]o perhaps state the obvious, typically parties tend to seek leave to appeal a decision that is of significance to an action.”

Whether the proposed appeal will unduly hinder the progress of the action

[14] Although there is not an ongoing restructuring, delay is still a factor that weighs against granting leave in this case. The motion judge described the delays to date, at para. 90, as follows:

[The moving party’s] obligation to reconvey the DGAP Parcel has been extant since 2018. Severance consents were obtained and became final in February 2022. [The moving party] was ordered to specifically perform its obligations to reconvey the DGAP Parcel in December 2022. This has still not been done; [the moving party] is effectively in continuing breach of McEwen J.’s order for specific performance. The time to conclude this transaction is nigh.

Disposition

[15] For these reasons, we dismiss the motion for leave to appeal. The responding party is entitled to its costs in the amount of $5,000, inclusive of all amounts.

“L.B. Roberts J.A.”

“Gary Trotter J.A.”

“J. George J.A.”