Court File and Parties

Court File No.: CV-14-10695-00CL
Date: 2025-04-29
Court: Superior Court of Justice – Ontario (Commercial List)
Before: Glenn Hainey Penny
Heard: March 19, 2025

Counsel:

• Christopher Besant for Cushman & Wakefield (Moving Party)
• Richard Swan, Raj Sahni, and Thomas Gray for Court Appointed Monitor
• Andrew Hatnay for the Non-Union Active Employees et al.
• David Bish for TELUS Health (pension plans administrator)
• Tracey Henry for United Steelworkers Local 1005 et al.
• Lily Harmer for USW Local 8782 WELHT

Endorsement

Overview

[1] In these proceedings under the Companies’ Creditors Arrangement Act, Ernst & Young Inc. was appointed by the court as Monitor of Stelco and as interim Land Restructuring Officer (“LRO”). Part of Stelco’s approved plan of compromise involved the transfer of much of Stelco’s land to a special purpose land vehicle created for the benefit of Stelco’s main stakeholders (made up of various pension and other benefit plans and trusts established for the benefit of Stelco’s existing and former employees) (the “Stakeholders”).

[2] Cushman & Wakefield ULC was retained as a real estate broker to market and sell certain of the lands which Stelco transferred to the land vehicle.

[3] C&W brings this motion for a declaration that it is entitled to be paid commission on a purchase by Stelco of the Stakeholders’ limited partnership units (and other equity) of an entity called the Legacy Lands LP, which was a major element of the land vehicle.

[4] E&Y (as both Monitor and LRO) and the Stakeholders oppose C&W’s motion, arguing that C&W has already been paid in full for all commissions earned and that no commission attaches to Stelco’s purchase of the Stakeholders’ limited partnership units.

[5] The parties agreed that the motion would proceed in two stages: first, a determination of whether C&W is entitled to payment of a commission regarding the limited partnership purchase at all; and, if yes, second, a determination of the amount of the commission payable.

[6] There are two basic issues arising from the first stage of this motion:

(1) as a matter of contract, did Stelco’s purchase of the Stakeholders’ limited partnership units of the Legacy Lands LP trigger the right to a commission? and, if not,

(2) do the principles of unjust enrichment or quantum meruit apply so as to entitle C&W to payment of a commission?

[7] While the core issues can be stated simply, they arise in the context of a lengthy and complex series of events which comprise an essential part the factual matrix in which this dispute must be considered.

Background

[8] These CCAA proceedings were commenced by what was then U.S. Steel Canada Inc. on September 16, 2014. After several motions, significant negotiations, and the filing of various plan materials, the Court sanctioned and approved a plan of compromise on June 9, 2017. The Plan was implemented on June 30, 2017. As part of the closing of the Plan, U.S. Steel filed articles of reorganization and was renamed Stelco.

[9] At the time of the CCAA Plan implementation, the Stakeholders in these proceedings were the various employees, retirees, and pensioners of Stelco (whose plans were in serious deficit). Under the Plan, a series of special purpose entities, Legacy Lands LP, Legacy Lands GP Inc., Legacy Lands Lake Erie Inc. (the “Lake Erie Nominee”) [1] and Legacy Lands Hamilton Inc. (collectively, the “Land Vehicle”) were established to hold significant portions of what had formerly been Stelco’s real property and other assets for the benefit of the Stakeholders. The Court issued an order appointing the Monitor as LRO of the Land Vehicle to provide temporary governance and administration.

[10] This motion concerns the Lake Erie Nominee and the Legacy Lands LP specifically. The limited partners of the Legacy Lands LP are the Stakeholders: three Employee Life and Health Trusts (the Non-USW ELHT, the USW Local 1005 ELHT, the USW Local 8782 ELHT), the main registered Stelco pension plans (as administered by TELUS Health (Canada) Ltd., the administrator to the Stelco Plans) and the Pension Deficit Funding Trust.

[11] Following Plan approval, steel prices improved worldwide and Stelco’s fortunes with them. Stelco initially expressed an interest in leasing more of its former land back from the Land Vehicle. Then, Stelco’s approach shifted to buying all of the leased land back. This was attractive to the Stakeholders as it would monetize the Stakeholders’ interests arising out of the Plan more rapidly.

[12] In June 2018, the Court issued an Order confirming the authority of the LRO to execute documents for the Land Vehicle to sell the Land Vehicle’s premises that were being leased by the Land Vehicle to Stelco at the Lake Erie and Hamilton works, as well as an additional 480 acres of non-leased land in Hamilton. The Land Vehicle and Stelco executed an agreement of purchase and sale to sell these lands to Stelco. This transaction was the product of extensive negotiations involving the LRO, the Land Vehicle, Stelco, the Stakeholders, the Province of Ontario, and the Financial Regulatory Services Authority of Ontario. No real estate broker assisted with that transaction.

[13] For Planning Act reasons, Stelco repurchased more land than it needed. As a result, the purchase transaction contemplated that Stelco would later sever and reconvey a portion of those lands not needed for Stelco’s purposes (the “Reconveyance Lands”) back to the Land Vehicle. A reconveyance agreement was entered into between the Land Vehicle and Stelco to this effect. As the Reconveyance Lands abutted existing Stelco land in some cases, the reconveyance agreement required Stelco to obtain severance approvals prior to completing the reconveyances. Some of the Reconveyance Lands consisted not only of a portion of the DGAP Lands transaction (discussed below) but included some or all of what came to be called the Southern and Northern Sites, which is the land in issue in this motion.

[14] Following the closing of Stelco’s land purchase transaction, the LRO, in consultation with the Stakeholders, worked toward monetizing the remaining lands owned by the Land Vehicle. After meeting with various real estate brokerage firms and reviewing their proposals, the LRO, in consultation with the Stakeholders, retained C&W to market and sell the remaining lands for the ultimate benefit of the Stakeholders. The first Master Services Agreement (“MSA”) was for a one year term and expired in August 2019. The parties seem to agree, however, that the relevant contractual documents governing C&W’s rights and obligations for the purpose of this motion are the June 2021 Amended Master Services Agreement (“AMSA”) and various OREA Form 520 commercial Listing Agreements from June 2021 for each parcel of land being offered for sale through C&W.

[15] Further complications developed. In March 2021, the Court approved a sale of 4,100 acres of the Land Vehicle’s property to a real estate developer, DGAP Investments Ltd. (the DGAP Lands transaction). This transaction represented the majority of the Land Vehicle’s assets and had been facilitated by C&W under the AMSA. Some of the lands to be purchased by DGAP in this transaction included Reconveyance Lands which were to be transferred by Stelco back to the Land Vehicle. It was a requirement of the DGAP Lands transaction that the Reconveyance Lands be reconveyed by Stelco prior to closing.

[16] However, the DGAP Lands transaction did not close as planned. Among other things, these CCAA proceedings became the forum for long-running, highly contentious litigation between Stelco and DGAP over the DGAP Lands transaction and other issues. The disputes involved both DGAP’s purchase of the 4,100 acres adjacent to Stelco’s Lake Erie operations, and, subsequently, a proposed securities purchase agreement (“SPA”), by which Stelco proposed to acquire the Stakeholders’ limited partnership units and other equity associated with the Legacy Lands LP.

[17] The SPA transaction was attractive to the Stakeholders because, like the earlier transaction with Stelco, it would have the effect of speeding up the Stakeholders’ monetization of the benefits of the original Plan and, it was hoped, bringing the outstanding disputes between Stelco and DGAP, and the CCAA proceedings themselves, to end.

[18] The SPA transaction was originally approved by the Court in May 2023.

[19] DGAP’s proposed development of the DGAP Lands included light industrial, commercial and residential development. Stelco viewed this proposed development as an “existential threat” to Stelco’s ongoing viability as a steel producer at the Lake Erie works. As a result, Stelco vehemently opposed the proposed DGAP Lands transaction on various grounds, resulting in contested proceedings before Justice McEwen and before me, both of which decisions Stelco unsuccessfully appealed to the Court of Appeal for Ontario.

[20] Similarly, DGAP vehemently opposed Stelco’s proposed purchase of the Stakeholders’ limited partnership units in the Legacy Lands LP, resulting in a contested proceeding before Justice McEwen, which DGAP unsuccessfully appealed to the Court of Appeal for Ontario.

[21] After much litigation and delay, the disputes between Stelco and DGAP and the Stakeholders were ultimately resolved in mid-2024. All parties agreed that:

(a) DGAP (unopposed by Stelco) would close the previously approved sale agreement with the Lake Erie Nominee, on behalf of the Land Vehicle, by which DGAP would purchase 4,100 acres of land held by the Land Vehicle; and

(b) Stelco (unopposed by DGAP) would enter into an amended version of the previously approved SPA by which it would purchase all of the Stakeholders’ limited partnership units and other equity in the Land Vehicle (the “Amended SPA”).

[22] On June 17, 2024, the Court issued the DGAP approval and vesting order approving the DGAP Lands transaction and vesting in the purchaser all of the Land Vehicle’s right, title and interest in and to the property free and clear of any claims and encumbrances.

[23] The Court also issued the Amended SPA order authorizing the Monitor as LRO to execute the Amended SPA between Stelco and each of the vendors set out in Schedule “A” to the Amended SPA (these are the Stakeholders).

[24] These transactions subsequently closed. The Monitor has since completed a distribution to the Stakeholders authorized by this Court on July 31, 2024. The Monitor was also authorized to retain a reserve, to be held by the Monitor to the credit of the claims asserted by C&W in this motion for payment of a commission in respect of the Amended SPA transaction.

[25] C&W was the real estate broker on the DGAP Lands transaction. C&W had also been involved in the sale of various other parcels of Land Vehicle lands in accordance with the AMSA and the Listing Agreements entered into for those lands. Prior to the closing of the DGAP Lands transaction, the commissions paid to C&W on the other sales totalled about $450,000.

[26] After the DGAP Lands transaction finally closed, the Monitor, with the consent of the Stakeholders, paid C&W about $2.1 million in commission in respect of the DGAP Lands sale, which brought the total commissions paid to C&W to approximately $2.6 million.

[27] The contested C&W commission claim which is the subject of this motion is, according to the Monitor, the last issue of any controversy needing be resolved in this long standing CCAA proceeding.

Analysis

The Issue for Determination

[28] In this motion, the sole issue for determination is whether C&W is entitled to payment of a commission in respect of the Amended SPA transaction.

[29] C&W advances two alternative theories in support of its claimed entitlement:

1. a contract entitlement which turns on the interpretation of the real estate brokerage contracts C&W entered into with the Lake Erie Nominee; and

2. an entitlement based on the equitable principles of unjust enrichment and/or quantum meruit.

Contract

[30] It is well settled that, when interpreting a contract, the court must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances reasonably known to the parties at the time of formation of the contract. In doing so, courts should avoid any interpretation that would result in a commercial absurdity; the provisions should be considered with the rest of the contract as a whole in light of its purposes and commercial context: Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 at para 47; 2484234 Ontario Inc v Hanley Park Developments Inc, 2020 ONCA 273 at para 64.

[31] C&W’s main argument for a contractual entitlement to a commission resulting from the Amended SPA transaction turns on two brokerage/realty services contracts between C&W, as the real estate broker, and the Lake Erie Nominee, as the client:

(a) the June 2021 AMSA; and

(b) the June 2021 Listing Agreements,

(collectively the “C&W Agreements”).

Since C&W’s motion is about whether the Amended SPA transaction triggered a commission payment obligation, I will consider the terms of the Amended SPA as well.

The AMSA

[32] The only parties to the C&W Agreements are C&W and the Lake Erie Nominee.

[33] The LRO held the sole share of the Lake Erie Nominee (and the sole share of the Legacy Lands LP general partner). None of the LRO, the Stakeholders or the Legacy Lands LP general partner were parties to the C&W Agreements.

[34] Article 2 of the AMSA appoints C&W as the client’s (Lake Erie Nominee) real estate broker with the “exclusive” right to represent the client. The real estate lands subject to the agreement are listed in Schedule “1” to Exhibit “A” of the AMSA. The lands listed in Schedule “1” are referred to in the material as the Southern Sites. It is common ground that title to the Southern Sites was in the name of the Lake Erie Nominee. Prior to the commencement of any work by C&W, the parties agreed they would mutually execute a “Request for Services” in the form specified in Exhibit “A”. It is common ground that a Request for Services was executed in 2021.

[35] Exhibit “B” to the AMSA sets out the real estate brokerage services to be performed by C&W. These services include establishing appropriate listing prices for the Southern Sites, marketing and exposing the Sites to the public, arranging tours of the Sites, assisting in negotiations with prospective purchasers and the financial analysis of any offers to purchase.

[36] There are three categories of services listed in Exhibit “B”. The part (a) listed services appear to be informational, reporting and process-oriented in nature. Part (b) services are said to be “leasehold and fee simple acquisition services”. It is not clear that any such services were ever performed because the Land Vehicle was (apart from the reconveyance agreement, which pre-existed the C&W Agreements) never engaged in acquiring any land; its only objective was to sell the Schedule “1” properties. The part (c) services list the “leasehold and fee simple disposition services” that C&W will provide.

[37] Article 3 of the AMSA purports to set out the terms of compensation. Article 3.2 provides that in consideration of C&W’s performance of the services, the Lake Erie Nominee “shall make or cause to be made the payments to or for the benefit of C&W” described in Exhibit “C”. Oddly, Exhibit “C” merely repeats the essence of Article 3.2 but goes on to indicate that the Lake Erie Nominee “shall pay to C&W a commission set out in Exhibit “A””.

[38] Exhibit “A” is the Request for Services. The Request for Services is a brief, but important, component of the AMSA. It stipulates the term of the assignment: commencing July 1, 2021 and expiring June 30, 2022 “subject to automatic renewals” for up to five years. The Listing Price/Rate is stipulated to be: “Based on proposed pricing set out in Schedule “1” attached hereto”. The same clause also requires that: “Each project shall have a separate MLS Agreement.”

[39] Under the heading “Compensation due C&W”, the Request for Services provides:

…the commission payable with respect to the sites set out in Schedule “1” attached hereto shall be 5% of total sale price of the sites with a minimum of $15,000 per closing.

The “Timing of Payment” is defined in Exhibit “A” as being “Upon Successful closing”.

[40] Article 9.2 of the AMSA provides that the term “shall be automatically renewed for a period of up to five (5) successive years unless either party gives the other party written notice of non-renewal of the Term at least thirty (30) days prior to the expiry of the then current term”. If the Lake Erie Nominee “consummates a transaction with a prospect within six months after the expiration or termination” of the AMSA, C&W “shall be entitled to receive the compensation provided for hereunder”. The right to payment of a commission with respect to any transaction consummated prior to the expiration or termination of the AMSA “shall survive the expiration or termination of” the AMSA.

[41] C&W maintains that after the AMSA and the Request for Services was executed, C&W and the LRO agreed in a series of emails from March 29 to April 1, 2022 to add four additional parcels (comprising what is described in the material as “the Northern Sites” (Sites #22-25), to C&W’s brokerage and realty services mandate set out in the AMSA, with a commission rate for those Sites of 4.5%. No formal amendment or additional Listing Agreements were ever executed regarding the Northern Sites.

The Listing Agreements

[42] C&W and the Lake Erie Nominee entered into Standard Form Ontario Real Estate Association Listing Agreements for each of the Southern Sites. Each Listing Agreement described each property using the descriptions provided in Schedule “1” to the AMSA.

[43] According to the Monitor’s 59th Report (which I accept as accurate, as will be discussed in more detail below) the Listing Agreements are dated June 30, 2021 and contain a listing period that expired on December 15, 2021. It is not in dispute that the parties never executed Listing Agreements for the Northern Sites.

[44] Paragraph 1 of the Listing Agreements provides that a purchase shall be deemed to include “an agreement to sell or transfer shares or assets.”

[45] Under paragraph 2 of the Listing Agreements, the Lake Erie Nominee’s obligation to pay a commission only arises in respect of “any valid offer to purchase the Property from any source whatsoever obtained during the Listing Period”. Paragraph 2 of the Listing Agreement also provides that a commission will be paid on the sale price of a property “if an agreement to purchase is agreed to or accepted by the Seller …within 90 days after the expiry of the Listing Period (Holdover Period) as long as such agreement is with anyone who was introduced to the Property from any source whatsoever during the Listing Period or shown the Property during the Listing Period.”

[46] Unlike the AMSA, which contains an automatic renewal provision, the Listing Agreements expressly provide (as required by the Real Estate and Business Brokers Act, 2002) that they cannot have a term longer than six months unless expressly agreed by the parties and initialed by the client, in this case the Lake Erie Nominee. None of the Listing Agreements were initialed by the Lake Erie Nominee to indicate consent to a listing period longer than six months. As a result, any entitlement C&W had to be paid a commission under the Listing Agreements for the Southern Sites expired on December 15, 2021 (or 90 days thereafter if the holdover conditions were met). As noted above, there were no Listing Agreements entered for the Northern Sites.

The SPA and Amended SPA

[47] In January 2023 (after Stelco had unsuccessfully sought to derail the DGAP Lands transaction before this Court and the Court of Appeal), Stelco made an unsolicited offer to acquire all of the Land Vehicle’s lands. E&Y advised Stelco that this offer to purchase was unacceptable because it included lands which the Land Vehicle was already contractually obliged to sell to DGAP. As a result, in February 2023, Stelco made an offer to acquire all of the Stakeholders’ limited partnership units in the Legacy Lands LP and the shares of the Legacy Lands LP general partner and of the Lake Erie Nominee. One condition of closing, among others, was that the court approve the SPA transaction. That approval was originally granted, over DGAP’s objection, by order of this Court in May 2023. DGAP’s appeal was later dismissed but other litigation between Stelco and DGAP was ongoing. The transaction under the original SPA never closed due to this ongoing litigation.

[48] In the end, however, the parties were able to negotiate a resolution which involved agreement to the terms of an Amended SPA, which was ultimately approved by the Court in June 2024. This transaction closed shortly thereafter. Agreement on the Amended SPA also enabled the DGAP Lands transaction to close. The closing of the DGAP Lands transaction benefited the Stakeholders, DGAP, Stelco and the Monitor/LRO. It also benefitted C&W because, following the closing of the DGAP Lands transaction, C&W became entitled to, and was eventually paid, a $2.1 million commission.

[49] The Stakeholders (as owners of the limited partnership units in the Legacy Lands LP) are all Vendors under the Amended SPA. The Lake Erie Nominee is not a Vendor under the Amended SPA; nor is the general partner of the Legacy Lands LP. E&Y, in its capacity as LRO (holding the sole share of the Lake Erie Nominee and the sole share of the general partner of the Legacy Lands LP), is a Vendor. The share of the Lake Erie Nominee and the share of the Legacy Lands LP general partner held by the LRO are listed among the securities being acquired by Stelco in the Amended SPA. The redacted record does not disclose what, if any, value was ascribed to those two shares.

The remainder of the decision continues with detailed analysis of the parties' positions, the court's findings on contract interpretation, the expiry and effect of the Listing Agreements, the absence of Listing Agreements for the Northern Sites, the inapplicability of the MSA holdover provision, and the rejection of the unjust enrichment claim. The court ultimately dismisses C&W's motion for a declaration of entitlement to commission and grants a limited sealing order regarding the pricing of the Amended SPA transaction. Costs are reserved for further written submissions if the parties cannot agree.

Footnotes

[1] The focus is on the Lake Erie Nominee in particular because this is the entity which entered into the relevant brokerage agreements with C&W which govern C&W’s claim to a commission on the equity transaction.

[2] Apart from the Listing Agreements expiring and not being renewed, E&Y’s argument does not allege or depend upon any failure on the part of C&W to perform required services under the AMSA.

[3] It is the Lake Erie Nominee which holds the reserve in respect of the C&W claim.