COURT FILE NO.: CV-23-00706851-00CL

DATE: 2023-10-30

SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

BETWEEN:

MAX AICHER (NORTH AMERICA) REALTY INC., MAX AICHER (NORTH AMERICA) BLOOM MILL REALTY INC, MAX AICHER (NORTH AMERICA) LIMITED and MAX AICHER (NORTH AMERICA) GROUP LIMITED (Plaintiffs)

and

STELCO INC. (Defendant)

BEFORE: Penny J.

COUNSEL: Lawrence E. Thacker, Jonathan Chen and Blerta Gjoci for the Plaintiffs

Geoff Hall and Saneea Tanvir for the Defendant

HEARD: October 16, 2023

ENDORSEMENT

Overview

[1] The plaintiffs (MANA) move for an interlocutory injunction pending the trial of this action. The substance of the relief sought is an order prohibiting the defendant Stelco from terminating an agreement under which it has provided water and wastewater treatment services to MANA for the last 13 years.

Issues

[2] The real battleground in this motion is whether: a) the order sought is prohibitory or mandatory and, thus, whether the merits-based test for an interlocutory injunction is serious issue to be tried or strong prima facie case; and b) the plaintiffs have satisfied the merits-based component of the test.

[3] This case is unusual in that the irreparable harm requirement is not in serious dispute. It is conceded that it will take nine months or more for MANA to construct its own water recycling facilities. Without the continued supply of water and wastewater treatment services from Stelco, MANA will have to shut down its operations; it may well go out of business.

[4] The balance of convenience requirement, however, is also contested ground. Both parties claim the balance of convenience favours their position on the motion.

Background

[5] Both parties are in the steel manufacturing business. Stelco owns significant steel manufacturing facilities in Hamilton, Ontario. These facilities are referred to as the “Hamilton Works” located on the north shore of Hamilton Harbour. In 2010, Stelco sold two of its Hamilton steel mill operations to MANA: the Bloom Mill and the Bar Mill. This dispute concerns the Bar Mill.

[6] The Bar Mill lands are surrounded by lands retained and used by Stelco in its own steel manufacturing enterprise. The Bar Mill does not have access to Hamilton Harbour or to its own industrial water supply. As a result, as part of the sale transaction in 2010, the parties entered into a complex set of interlocking agreements which contemplate that Stelco will provide industrial volumes of water (used to cool rolled steel) and related wastewater treatment services (which I will simply refer to collectively as “water services”) to MANA at the Bar Mill. The provision of these water services utilizes existing Stelco infrastructure (both water supply for cooling and wastewater treatment) which Stelco also uses for its own steel manufacturing operations. In essence, Stelco runs a 60 inch water pipe across the Bar Mill lands. A 24 inch pipe feeds water to the Bar Mill. Another BAR Mill pipe flows wastewater back into a larger Stelco pipe which takes wastewater to Stelco’s filtration facility.

[7] It is important context for the overall dispute that these agreements also contemplated that MANA would, at some point in time, develop its own water and wastewater treatment recycling facilities, such that it could operate independently of Stelco’s water services. I say “at some point in time” because, as will be outlined below, the time frame during which MANA was obliged to construct its own water and wastewater treatment facilities changed over time.

[8] Under the original November 12, 2010 Infrastructure Agreement, MANA was obliged, as soon as practicable, but in any event before the third anniversary of the agreement, to built and operate its own water supply and wastewater treatment system to recycle water used in the operation of the Bar Mill to replace the supply of these services by Stelco.

[9] The Vendor Services Agreement (VSA) of the same date likewise provided that Stelco would provide water services to the Bar Mill until the earlier of the completion of MANA’s recycling water system and the third anniversary of the agreement.

[10] The service fee payable to Stelco for the water services was to be at Stelco’s cost, “calculated on a one hundred percent cost recovery basis, including all fixed and variable costs (including applicable Taxes, depreciation, maintenance and repairs), but excluding profit.” The initial fees were to be based on an estimated baseline of 5,000 gallons per minute using a framework set out at Sch 12.1(3) of the VSA.

[11] Because the Stelco’s water services infrastructure crossed the Bar Mill lands, the parties also entered into a Reciprocal Easement and Operating Agreement (REOA) which granted Stelco, in common with MANA, in perpetuity an easement to maintain and remove existing industrial water supply lines serving the Hamilton Works located on the Bar Mill lands.

[12] MANA did not operate for several years due to a protracted labour dispute. By June 2013, it had not commenced any work on its own water recycling facilities. The parties entered into a lengthy and complex amending agreement on June 28, 2013. The Amending Agreement addressed many issues, including the supply of water services. Under the amended terms, Stelco was obliged to provide water services to MANA until the earliest of: a) the completion of MANA’s own water recycling facilities; b) 21 months after the date on which Stelco delivered a notice terminating the Bar Mill water services; or c) seven years after the original agreement (i.e., November 11, 2017). The Infrastructure Agreement was also amended to conform with this timeline.

[13] The new price for the water services was agreed be $0.19 per 1,000 gallons for water and $0.20 per 1,000 gallons for wastewater.

[14] On May 1, 2014, Stelco served notice of termination of the water services agreement in 21 months (i.e., on February 1, 2016). MANA had not commenced construction of its own water recycling facilities at that time. There were ongoing negotiations between the parties when, on September 16, 2014, Stelco obtained an initial order under the CCAA.

[15] During the course of the CCAA proceedings, February 1, 2016 came and went without termination of Stelco’s water services agreement. There were, however, ongoing discussions between MANA and Stelco’s court-appointed Chief Restructuring Officer (CRO). On March 3, 2016, the parties entered into a letter agreement amending the VSA yet again.

[16] It is common ground, supported by evidence of factual matrix and reflected in the Letter Agreement itself, that because of the uncertainty surrounding Stelco’s future and the future of the Hamilton Works, the CRO was in no position to enter into long term commitments on Stelco’s behalf for ongoing water services to MANA. Stelco was under the protection and constraints of the CCAA and subject to court supervision. As such, it was in a position to disclaim ongoing service contracts altogether, and might well have done so if, for example, it had been determined that maximizing recovery for stakeholders involved the liquidation of Stelco’s assets, including the Hamilton Works.

[17] The introduction to the March 3, 2016 Letter Agreement provides that, at the request of MANA, Stelco:

has continued to provide the Extended Bar Mill Services beyond February 1, 2016 while the Parties attempt to negotiate a formal extension of such services but has explicitly reserved its right to immediately terminate services if the Parties are unable to agree on the terms of such extension.

[18] The Letter Agreement goes on to say that because Stelco was operating under the protection of an initial order issued by the Superior Court under the CCAA, Stelco:

is unable to agree to a long-term extension of the Extended Bar Mill Services at this time. However, [Stelco] is willing to extend its provision of the Extended Bar Mill Services to [MANA] on the following terms and conditions effective February 1, 2016.

[19] Of particular importance to the present motion are terms and conditions 2 and 3 of the Letter Agreement, which provide:

2. Notwithstanding the Termination Notice, the Bar Mill Industrial Water Service Period will not terminate on February 1, 2016 and [Stelco] will continue to provide the Extended Bar Mill Services to [MANA] on a forward rolling basis.

3. Subject to paragraph 7 below, [Stelco] may terminate the Extended Bar Mill Services at any time, for any reason, or no reason, on sixty (60) days’ prior written notice to [MANA] at the conclusion of which the Bar Mill Industrial Water Service Period shall terminate.

[20] The new price for water services was agreed to be $0.25 per 1,000 gallons for both water and wastewater.

[21] As it turned out, Stelco was not liquidated, the Hamilton Works were not sold, and Stelco emerged from CCAA proceedings by virtue of further order of the court on June 30, 2017. Stelco continued to operate its own steel manufacturing operations at the Hamilton Works, including its industrial water and filtration operations. Stelco continued to provide water services from this system to MANA, and to bill MANA for those services, as well. MANA continued to pay Stelco’s invoices for these services rendered monthly. November 11, 2017, the 7-year deadline under the Amending Agreement, came and went without comment or any interruption of the water services. Indeed, there appears to have been no material discussion about the term or continuance of the water services provided by Stelco until May 2023, another over six years later.

[22] Throughout this period, MANA did not build its own water recycling facilities or seek to vary the Letter Agreement by fixing a new time frame for the construction of its water recycling facilities.[^1] Nor did Stelco give any indication that MANA was in alleged “breach” of its obligation to become independent of Stelco’s water services under the VSA and Amending Agreement after November 11, 2017, or under the Letter Agreement. Nor did Stelco suggest that it was unhappy with the provision of water services to MANA or that MANA had better get moving on constructing its own water recycling facilities because Stelco was intending to act on the 60 day notice of termination under the Letter Agreement. Things just carried on as they had more or less from the beginning, with Stelco providing the service, billing monthly at the new $0.25 per 1,000 gallon rate determined under the Letter Agreement and MANA paying each monthly invoice as it came due.

[23] Over the course of 13 years during which Stelco provided water services, there were numerous assessments and changes made to the volume calculations. These often arose as a result of malfunctioning or non-functioning meters. These issues were all resolved at the time between the parties at an operational level, usually on the basis of mutually agreed assumptions or revisions to the volumes being processed.

[24] Stelco’s affiant, Mr. Estrabillo, says Stelco became concerned in 2021 that the volumes being used to determine MANA’s usage were understating the amounts actually used. This lead to an ongoing discussion about the valuation of the water services which did not result in any resolution.

[25] Finally, at a meeting in May 2023, Stelco claimed that the water services being provided significantly exceeded the volumes being paid for by MANA. Stelco unilaterally changed the basis of its volume calculations for billing purposes using flowmeter data and certain adjustments or assumptions of its own. The May bill, delivered in June, increased MANA’s cost by some 300 to 400%. Although details of the methodology and analysis used to produce the new volume assumptions were requested by MANA, they were not forthcoming.

[26] MANA initially objected to the unilateral increase and the failure to provide the underlying analysis and methodology used to calculate the new volume assumptions.

[27] As a result, Stelco issued a July 18, 2023 Demand Letter requiring payment of the amount owed for water services, failing which the services would be terminated on August 1, 2023 (that is, a notice of two weeks). In the Demand Letter, Stelco claimed $11,222,643 in respect of the total water Stelco determined was supplied and used by MANA between 2016 and 2023 but was not paid for. This amount, according to Mr. Estrabillo, was based on an estimate prepared internally by Stelco extrapolating the average meter readings previously reported by MANA combined with the expected water utilization of water by the Bar Mill at full production during that same period.

[28] There were further meetings, but the parties were unable to agree on any payment adjustments. Then, MANA made its own efforts to reverse engineer Stelco’s calculations but was unable to do so. MANA also attached another meter to its pipeline. As a result of its findings from that meter, MANA now concedes there is some basis for an increased volume adjustment for some period of time, possibly amounting to around $2 million. As a result, it has agreed to pay, and has paid, the monthly charges based on Stelco’s new volumetric calculations and has stated its intention to continue to do so. MANA does not concede Stelco’s right to reach back to 2016, however, and to retroactively claim for six or more years of alleged underbilling. MANA has, therefore, refused to pay the demanded retroactive charge of $11.2 million.

[29] Having apparently realized that even the Letter Agreement required 60 days notice of termination, Stelco did not terminate the supply of water services on August 1, 2023 as it threatened to do in the Demand Letter. Instead, it issued a notice of termination to MANA on August 2 purporting to exercise its 60 day termination right as of October 2, 2023.

[30] Stelco’s attempt to explain the basis of the new charges and the $11.2 million arrears was not provided until September 13, 2023. Stelco described the general process but provided no details, referring, among other things, to the “assumed” base flow of water of 5,000 gallons per minute used in the 2010 agreements and “assumed” production rates of 100% utilization for “every day where two shifts were being employed (24hrs/day, 7 days/week)”. Stelco conceded, without explanation or providing details, that “we did have to make some other assumptions where the data was not reliable.” Stelco had still not, as of oral argument on October 16, 2023, produced detailed calculations or a detailed explanation showing how it arrived at a bill for unpaid arrears of $11.2 million.

[31] After receiving the Demand Letter from Stelco, MANA took steps to commence the design, manufacture and installation of its own self-sufficient water recycling system. In July/August MANA engaged three engineering companies to provide proposals for a design study. MANA’s initial estimate for the minimum time required to design, manufacture and install its own water recycling system was 12 months, depending on certain weather and other considerations.

[32] Following conclusion of oral argument, MANA advised the court, with the consent of Stelco’s counsel, that subsequent analysis by MANA’s engineers had determined that this time frame could be shortened to nine months.

Analysis

[33] To obtain a prohibitory injunction, the moving party must show a serious question to be tried, irreparable harm if the injunction is not granted and that the balance of convenience favours granting the injunction. Where the injunction sought is mandatory in nature, it is said that the merits-based test is elevated to a strong prima facie case.

[34] The three factors are not, however, watertight components operating independently of each other. The court takes a flexible approach in considering the three factors recognizing that in some cases the strength of one factor may compensate for the weakness of another. Ultimately, the fundamental question is whether an interlocutory injunction is just and convenient in all the circumstances of the case.

Merits Test

[35] Most of the argument at the hearing concerned the merits test -- both what it was and whether it was met.

Serious Issue or Strong Prima Facie Case?

[36] In general, a prohibitory injunction restrains someone from committing a specified act. An order requiring the parties to act in accordance with an agreement has been considered prohibitive and not mandatory. Where a party seeks to prevent the termination of a contract, the party is asking to preserve the status quo. Conversely, a mandatory injunction generally requires a party to act according to a new, never agreed-to right. The difference is not immaterial: serious issue for trial means not frivolous or doomed to fail; strong prima facie case means likely to succeed.

[37] MANA says it is only seeking continuation of a service it is already getting and which it has been receiving since 2013. It is therefore seeking to prohibit a termination of a right it already has and a service it is already receiving.

[38] Stelco says MANA is seeking to require Stelco to provide a service it has no obligation to provide after October 2, 2023 because it exercised a valid right of termination under the Letter Agreement. The injunction will force Stelco to do something it does not want, and has no legal obligation, to do. Accordingly, the injunction being sought is mandatory.

[39] Much legal and judicial ink has been spilled over this distinction. There are cases on both sides of the question and some which challenge the utility of the conceptual distinction at all. What is clear from reading these cases is that the determination is highly fact specific and requires a careful, contextual analysis of the surrounding circumstances.

[40] Here, the core relief sought by MANA in the statement of claim is:

(a) damages in an amount to be particularized before trial for breach of contract, breach of the duties of good faith and honest performance of contractual obligations, and negligent misrepresentation;

(b) a declaration that failing to supply the plaintiffs with a continuous and uninterrupted supply of water required to meet its production requirements at the Bar Mill and Bloom Mill is a breach of the Vendor Services Agreement made as of November 12, 2010 and the amendments thereto;

(c) a declaration that the defendant is estopped from strictly relying on the termination provision until the plaintiff has installed its own re-circulating water supply and filtration system; and

(d) a declaration that the termination notice issued by the defendant is invalid and of no force or effect, and that the defendant is required to perform fully all of its obligations under the VSA until the dispute is resolved.

[41] Stelco argues that the termination right under the Letter Agreement is broad and unconditional. Stelco may terminate “at any time, for any reason, or no reason” on 60 days notice. Stelco argues that granting MANA relief in these circumstances would be to rewrite the contract to save MANA from a bad bargain. This, the court cannot do. MANA has known from the outset that Stelco expected MANA to construct its own water recycling facilities. After February 16, 2016, and certainly after November 11, 2017, MANA was knowingly utilizing Stelco’s water services on no more than a 60 day renewing cycle. MANA did nothing to further its contemplated independence from the Stelco water services. Now it must suffer the consequences of its own inaction and complacency.

[42] The central argument advanced by MANA is that Stelco’s use of the 60 day termination clause in the Letter Agreement in the circumstances of the July 18 demand is not in accordance with good faith performance of that agreement or the VSA. Rather, it is an attempt to extort exorbitant rents by abusing its effective monopoly position. This, MANA says, was never the intention of the Letter Agreement nor can it reasonably be read that way. According to MANA, Stelco failed to act in good faith when it sought to use the 60 day termination clause as a tool and threat to unilaterally extract higher fees for its provision of water services.

[43] In this case, I find that the injunction is properly characterized as prohibitory in nature; the appropriate test is therefore whether there is a serious issue for trial. I come to this conclusion on the basis of the following findings:

• Stelco has provided water services to MANA without material complaint for ten years.

• Stelco’s Demand Letter specifically states that it will continue to provide water services if MANA pays the increased monthly amounts and the alleged arrears. MANA has paid and promises to continue to pay the increased monthly amounts pending trial. It refuses, however, to pay the arrears on both factual and legal grounds. The point is that Stelco is both capable of providing, and willing to provide, ongoing water services to MANA.

• The central issue in the action commenced by MANA is whether the Letter Agreement, in the context of the particular circumstances of this case, permits Stelco to threated to terminate, and to terminate, its supply of water services on 60 days notice.

• Stelco operates, and proposes to continue to operate, the water services for its own needs and purposes in any event. Thus, the request that Stelco continue to provide water services to MANA is a request that Stelco continue to do something that it is not only doing already but will continue to do even if it terminates water services to MANA. The volumes will be somewhat different but the infrastructure and Stelco’s operations will be essentially the same.

[44] As I will discuss in the next section, however, even if I had come to the conclusion that the injunction being sought was mandatory in nature, it would not change the outcome.

Application of the Merits Test

[45] MANA has not only, in my view, established a serious issue for trial. It has met the higher test of strong prima facie case as well. I reach this conclusion for the following reasons.

[46] The Letter Agreement was drafted in the context of uncertainty surrounding Stelco’s CCAA proceedings and what would become of Stelco and its operations and assets. It was entirely possible, according to the CRO at the time, that the best option for stakeholders would be to terminate Stelco’s operations, liquidate its assets and possibly redevelop Stelco’s Hamilton Works lands for some other purpose entirely. In those circumstances, it would not have been possible for Stelco to continue to provide MANA with water services. This is entirely consistent with, and supports, the language of the Letter Agreement itself.

[47] Stelco did not cease operations, however. Its assets were not all liquidated. Stelco’s Hamilton Works were not sold. Stelco was not required to repurpose its lands and equipment there. Stelco came out of the CCAA proceedings still operating as a steel manufacturer and still carrying on steel manufacturing operations at the Hamilton Works. The water supply and filtration infrastructure remained in place and continued to be utilized by Stelco in its own operations. Likewise, Stelco continued to provide MANA’s 24 inch pipe with water from Stelco’s 60 inch pipe, and to receive MANA’s used water into Stelco’s existing filtration system. It continued to bill for these services and continued to be paid.

[48] Stelco has provided water services for over six years since then. At no time has it suggested it was unwilling to do so or suggested that MANA had better get cracking on its own water recycling facilities. Stelco has been content to carry on using its own water and filtration system and allowing MANA to use it as well. Stelco has billed for those services and MANA has paid. It may well be, as Stelco maintains, that the circumstances whereby Stelco continued to provide water services to MANA without concern or caution since 2016 does not amount to an enforceable estoppel by representation. But these facts are nevertheless relevant, in the overall context, to the question of how the Letter Agreement and VSA should be interpreted, given what has happened, and whether Stelco’s conduct in demanding unilateral price increases in exchange for continued supply of water services was, in all of the circumstances, good faith performance of the Letter Agreement and VSA.

[49] The VSA provides that, in exchange for providing MANA with water services, Stelco is entitled to be paid its fully loaded fixed and variable costs of providing the service. The agreement contains a specific mechanism for how price changes are to be determined in the event of a dispute. Section 12.6 of the VSA provides for a review of service fee calculations:

Promptly following a written request therefor by MANA, USS Canada shall provide to MANA a full accounting of the calculation of any Service Fee for any period covered by this Agreement. Any disagreement regarding the calculation of any Service Fee shall be subject to the provisions of Sections 15.1 and 15.2.

[50] Section 15 contains the generic dispute resolution procedures under the agreement:

Section 15.2 Dispute Resolution

(1) Each Party shall designate one of its senior management employees knowledgeable with respect to the matter at issue as its designate to attempt to resolve in the first instance any dispute between the Parties that may arise under this Agreement

(2) If a dispute arises between the Parties under this Agreement, either Party may give written Notice of the dispute to the other Party and request that the dispute be resolved by the designates of the Parties. If either Party gives written Notice of a dispute to the other Party, the designates of the Parties shall work cooperatively together to attempt to amicably resolve the dispute.

(3) Nothing in Section 15.2(2) shall be construed as limiting the other rights and remedies that either Party may have under this Agreement and the other Concurrent Agreements or at law or in equity and, if the Parties are unable to resolve the dispute pursuant to Section 15.2(2), they may pursue their other rights and remedies under the Purchase Agreement, this Agreement, the other Concurrent Agreements or at law or in equity.

[51] Thus, if the parties do not agree on a price recalculation, designated senior management are required to try to resolve the dispute amicably. If that does not resolve the problem, the parties are then free to pursue their rights in law and equity before the courts. The evidence is clear that, historically, the parties negotiated and came to an accommodation of price changes at the operation level. There is no evidence that the dispute resolution provisions were even invoked, much less necessary, to achieve these accommodations.

[52] In all of the circumstances, I find that there is a strong prima facie case that Stelco’s conduct did not meet the requirement of working “cooperatively together to attempt to amicably resolve the dispute”. The demand was a unilateral demand for an exorbitant price increase. Stelco has, contrary to section 12.6 of the VSA, refused to provide the detailed calculations on which its new claimed charges are based. Further, no theoretical or other justification has been advanced for how or why Stelco is entitled to reach back over six years to claim alleged historical underpayments for the water services. There has been no serious effort to resolve the matter.

[53] Stelco’s purpose in delivering the Demand Letter is plain on its face; there is no need for speculation about motive.

[54] On July 18, Stelco explicitly demanded payment of $11.2 million in arrears going back six years and a 300 to 400% increase in ongoing monthly charges as a precondition for continued provision of water services, failing which the services would be terminated on August 1, 2023 (a notice of two weeks). This demand was, among other things, obviously in contravention of the terms of the Letter Agreement as written, which require at least 60 days notice. Moreover, Stelco made this exorbitant demand knowing that MANA could not possibly construct its own water recycling facilities in that time and that, without Stelco’s water services, MANA could not continue to operate as a steel rolling mill.

[55] The termination clause in the Letter Agreement provides Stelco with the right, but not the obligation, to terminate the water services contract on 60 days’ notice. The termination provision confers on Stelco a discretion whether to terminate or not. For the last six years Stelco not exercised that discretion.

[56] The duty to exercise a contractual discretion in good faith applies to every contract. The content of that duty is governed by certain principles including:

(a) parties must employ their discretion in a manner consistent with the purpose for which it was granted in the contract. Where its exercise falls outside the range of choices connected to its underlying purpose, it is contrary to good faith;

(b) what is unreasonable is highly context-specific and ultimately depends upon the intention of the parties as disclosed by their contract;

(c) even an unfettered or absolute discretion in a contract is constrained by the parties’ shared interests and expectations;

(d) exercise of discretion must be interpreted within the contract’s contextual scope and considerations of business efficacy;

(e) while the duty of good faith does not impose a fiduciary duty, it does require contracting parties to conduct themselves in a manner that demonstrates “loyalty” to the bargain: Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 at paras 62-107.

[57] I find on the available evidence filed on this motion that that there is a strong prima facie case that the termination right contained in the Letter Agreement was not intended to operate as a basis for making unilateral, extortionate demands for price increases: Enwave Geo Communities, LP v Kings Towns North, Inc, 2021 ONSC 3978 at para 25. The matter of price increases has its own provisions in the VSA -- sections 12 and 15 provide for negotiation and, if necessary, resort to the court for the purpose of establishing Stelco’s fully loaded fixed and variable costs of providing the service. Rather, the termination right, on a proper contextual reading of the contract, was intended to cover situations such as where Stelco was no longer operating the water and filtration infrastructure or could no longer accommodate the provision of water services to MANA. The termination clause in the Letter Agreement was certainly not intended to provide Stelco with the ability to use its monopoly position to extort unilateral, exorbitant price increases from MANA.

[58] There is a strong prima facie case that Stelco, knowing it had a (temporary) monopoly over the provision of critical services, deliberately chose to abuse that monopoly position to extract an enormous, as yet unproved and unjustified, price increase.

[59] Thus, there is a strong prima facie case that the use of the termination provision to enforce a unilateral demand for an exorbitant, as yet unproven and unjustified, price increase was a failure of good faith performance of the contract.

Irreparable Harm

[60] As noted earlier there is clear, unchallenged evidence that provision of the water services is critical to MANA operations at the Bar Mill. If the services are cut off before MANA has built its own water recycling facilities, it will have to shut down, terminate employees and cease doing business. MANA’s US operation is dependent on milled steel from the Bar Mill. It too will have to shut down. Customer contracts in the pipeline will not be filled. Those reliant on MANA steel production will be negatively affected. And, in the competitive steel industry, MANA’s customers will go elsewhere and will likely not return. There is a material risk that MANA will go out of business. Significant loss of employment and material risk of the plaintiff going out of business are well recognized factors in the irreparable harm analysis.

[61] On the evidence, I have no hesitation in concluding that the requirement for irreparable harm has been met.

Balance of Convenience

[62] MANA may go out of business if the injunction is not granted.

[63] By contrast, if the injunction is granted, Stelco will continue to operate its water supply and filtration system as it has for the last ten years. Indeed, in making demand for unilateral price increases, it has specifically expressed a willingness to do so. Stelco will be paid at the new monthly rate pending final determination of its true costs. It will, in essence, suffer no harm at all.

[64] To make up for this glaring imbalance, Stelco now relies on several “spills” which took place on MANA’s lands over the last year or two which, Stelco now says, might imperil the status of Stelco’s environmental permits or expose it to environmental liabilities.

[65] Stelco is grasping at straws. The evidence does not support the allegation that there is any material risk to Stelco from continued provision of water services. First, Stelco made its July 18 demand, which included the promise of continued provision of water services, with full knowledge of these alleged “incidents”. In any event, the evidence suggests the incidents were addressed immediately by MANA operational staff and that corrective measures, if necessary, were taken. When the events occurred, Stelco never suggest that they had any effect on Stelco’s willingness to continue the uninterrupted supply of water services to MANA, or that MANA was in breach of any provision of the VSA or Letter Agreement. There is little evidence that Stelco expressed any continuing concerns or did significant follow up after the incidents. Further, there is no evidence that would take the alleged potential for harm beyond the realm of the speculative. Stelco has produced no letters, notes, internal reports, external reports, correspondence from government agencies or the like to substantiate the allegations of harm. Nor has it put forward sufficient evidence that these incidents were a real factor in its decision to issue the notice of termination on August 2. Finally, I agree with MANA that if these were material concerns, section 15 of the VSA required Stelco to involve senior management in an attempt to resolve the dispute with senior management at MANA. Stelco never did so.

[66] For these reasons, I find that the balance of convenience favours granting the injunction.

Conclusion

[67] An order shall issue prohibiting Stelco from terminating water services to MANA at the Bar Mill.

[68] It shall be a term of this order that MANA make timely payment of Stelco’s monthly invoices at the rate used for the May to August invoices. The applicable rate may be changed by written agreement of the parties or further order of court.

[69] This order shall last until trial or the expiry of nine months from November 1, 2023, whichever is sooner. The nine-month period is based upon MANA’s representation that it can install and operate its own water recycling system within that time.

[70] “Best effort” means leaving no stone unturned. MANA shall use its best effort to complete its water recycling facilities within the allotted nine months. MANA shall have no expectation of further extensions. Any request for an extension must be considered extraordinary relief in the circumstances and would have to be justified by the most compelling evidence possible.

Costs

[71] The parties agreed that all inclusive partial indemnity costs of $75,000 should be payable by the losing party. Stelco shall, therefore, pay MANA $75,000 (inclusive of fees, disbursements and all applicable taxes) on account of costs of the motion.

Penny J.

Date: October 30, 2023

[^1]: However, in 2016, MANA’s engineering department began to develop preliminary design plans for the water recycling system, and MANA applied for a Permit to Take Water in May 2017, which was obtained on June 7, 2018 from the Ministry of Environment. MANA retained a hydrogeologist to conduct aquifer testing to obtain that permit. The Take Water Permit expires on December 31, 2027.