



COURT OF APPEAL FOR ONTARIO

CITATION: Essar Steel Algoma Inc. (Re), 2016 ONCA 274

DATE: 20160415

DOCKET: M46326 (M46297)

Gillese J.A. (In Chambers)

IN THE
    MATTER OF THE
COMPANIES CREDITORS

ARRANGEMENT
    ACT
, R.S.C. 1985, c. C-36, AS AMENDED

AND IN
    THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT
    OF ESSAR STEEL ALGOMA INC.,

ESSAR
    TECH ALGOMA INC., ESSAR STEEL ALGOMA

(ALBERTA)
    ULC, CANNELTON IRON ORE COMPANY

AND
    ESSAR STEEL ALGOMA INC. USA

Applicants

Lou Brzezinski and Alexandra Teodorescu, for the moving
    party United Steelworkers Union Local 2251

Ashley John Taylor and Lee Nicholson, for the Applicants

David Rosenblat, for Deutsche Bank, the DIP Lenders and
    the Term Lenders

Clifton P. Prophet, for the Monitor, Ernst & Young
    Inc.

Massimo Starnino and Debra McKenna, for the United
    Steelworkers Union Local 2724

Heard: April 13, 2016

Gillese J.A.:

[1]

This is a motion brought by Local 2251 of the United Steelworkers Union
    for the stay of an order made in a CCAA proceeding.

[2]

Local 2251 is the exclusive bargaining agent for the hourly employees of
    Essar Steel Algoma Inc. (Algoma) in Sault Ste. Marie. It moves to stay the
    order of Newbould J. (the CCAA judge) dated March 14, 2016 (the Order), pending
    the disposition of its motion for leave to appeal that Order. The Order
    establishes a summary process with condensed timelines for the resolution of
    grievance related claims.

[3]

In Local 2251s amended Notice of Motion for Leave to Appeal, dated
    March 29, 2016, it contends that leave should be granted because its proposed
    appeal raises points of significance to the practice, including whether the
    suspension of grievances under the CCAA constitutes an alteration of the
    collective agreement, contrary to s. 33 of the CCAA.

[4]

For the reasons that follow, the motion for a stay is dismissed.

BACKGROUND IN BRIEF

The CCAA Proceeding

[5]

Algoma and certain related companies (the Applicants) came under the
    protection of the
Companies Creditors Arrangement Act
, R.S.C. 1985, c.
    C-36, as amended (CCAA) by court order made in November of 2015 (the Initial
    Order).

[6]

The Applicants are currently in the middle of a sale and investment
    solicitation process (SISP) which was approved by an order dated February 10,
    2016. The SISP is expected to be completed by August 31, 2016, which coincides
    with the expiry of the Applicants debtor-in-possession financing (DIP
    financing).

[7]

The majority of the Applicants employees are represented by Locals 2251
    and 2724 of the United Steel, Paper and Forestry, Rubber, Manufacturing,
    Energy, Allied Industrial and Services Workers International Union (USW).

[8]

Local 2251 is the exclusive bargaining agent for all hourly employees of
    Algoma in Sault Ste. Marie. It represents approximately 2235 members.

[9]

The relationship between Algoma and Local 2251 is governed by a
    collective agreement, dated August 1, 2013 (the Collective Agreement).
    Article 13 of the Collective Agreement establishes a three-step process for the
    resolution of grievances and provides for the final and binding settlement of
    grievances by arbitration in the third step. Most of the pre-filing grievances
    have gone through the first two steps and what remains is arbitration under the
    third step.

[10]

Currently,
    there are approximately 3,000 unresolved grievances of employees represented by
    Local 2251. The grievances date back as far as 2005.

[11]

Local
    2724 is the exclusive bargaining agent for all of Algomas salaried employees.

[12]

By
    order dated January 14, 2016, a general claims process was approved to
    determine claims against the Applicants and their directors and officers (the
    Claims Procedure Order). However, the USW and the Locals requested that an
    independent claims procedure be designed specifically to deal with grievances.
    The Applicants agreed to such an approach on the understanding that the parties
    would work together to develop a grievance claims procedure.

[13]

Algoma,
    the USW and Local 2724 negotiated such a procedure. Local 2251 did not
    participate because it viewed such a procedure as an amendment or alteration of
    the collective agreement, contrary to s. 33 of the CCAA.

The Order

[14]

The
    motion to obtain court approval of the grievance claims procedure was heard on
    March 11, 2016. The motion was granted and the Order made on March 14, 2016.

[15]

The
    Order provides for a streamlined grievance claim procedure. The goal is to have
    such claims determined by August 31, 2016, which coincides with the conclusion
    of the SISP and expiry of DIP financing.

[16]

The
    Order requires Local 2251 to prepare a list of grievances by April 11, 2016, to
    which the Applicants must respond by May 2, 2016. The list is to include the
    identity of the employee, a 250-word summary of the grievance, and the relief
    or remedy sought. All claims not included on the list are deemed withdrawn with
    prejudice, and are forever barred and extinguished.

[17]

The
    Order appointed the Honourable John Murray, as Chief Arbitrator, to oversee the
    implementation of the procedure. Chief Arbitrator Murray has the power to
    assign grievance claims to qualified labour arbitrators to assist the parties
    in resolving the claims. Once a grievance arbitrator has carriage of a
    grievance claim, he or she must attempt to come up with a consensual resolution
    but, if unsuccessful, the arbitrator will hear, adjudicate and determine the
    grievance claim. Except for a limited number of identified grievances, the
    result will be final but have no precedential binding effect.

Steps Taken since the Order Issued

[18]

Acting
    pursuant to the Order, Chief Arbitrator Murray named Michael Mitchell as Deputy
    Chief Arbitrator. The two men have already travelled to Sault Ste. Marie for
    both joint and separate meetings with representatives of Algoma, Local 2251 and
    Local 2724.

[19]

At
    the direction of Chief Arbitrator Murray, after the meetings, Algoma delivered
    to Local 2251 a summary of its information on the number of grievances
    associated with each article in the collective agreement.

[20]

Based
    on the spreadsheet of grievances provided by Algoma, Chief Arbitrator Murray
    noted that many grievances appear to raise common issues, the resolution of
    which could clear the path to speedy resolution of the underlying grievances.

[21]

The
    parties subsequently met with the Deputy Chief Arbitrator to discuss progress
    in identifying those common grievances that could potentially be resolved
    together. After one day with the Deputy Chief Arbitrator, Local 2251 requested
    an adjournment of the meeting. There is some dispute about what next occurred. On
    one version, Local 2251 agreed to the continuation of the meeting without it
    being present. On the other version, Deputy Chief Arbitrator refused to adjourn
    the meeting, Local 2251 walked out of the meeting and refused to re-attend. There
    is no question, however, that the meeting continued without Local 2251s
    participation.

[22]

In
    a report delivered to the parties on April 4, 2016, Deputy Chief Arbitrator
    Mitchell reiterated that the Chief Arbitrator and Deputy Chief Arbitrator have
    directed a modified approach to the grievance claims procedure that is less
    onerous than that which is provided for in the Order. Among other things, the
    modified approach does not require Local 2251 to provide a 250-word summary of each
    grievance in the list that it is to prepare.

[23]

A
    number of executive members of Local 2251 are working full-time to complete the
    list but, consequently, are unable to perform other day-to-day tasks critical
    to the operation of the union.

[24]

Algoma
    has agreed to allow Local 2251 to pull four workers from the shop floor to
    assist in drafting the list.

[25]

As
    of April 6, 2016, 36 of 48 grievances filed by Local 2724 and its members have
    been consensually resolved under the grievance claims procedure provided for in
    the Order. It is expected that the remaining grievances will be resolved well
    before August 31, 2016.

The Notice of Motion for Leave to Appeal

[26]

On
    March 29, 2016, Local 2251 served its notice of motion for leave to appeal the
    Order. An amended notice was filed on April 1, 2016.

THE TEST FOR GRANTING A STAY

[27]

To
    obtain a stay, it is trite law that the moving party must demonstrate that:

1.

there is a
    serious question to be determined on the appeal, should leave be granted;

2.

it will suffer
    irreparable harm if the stay is not granted; and

3.

the balance of
    convenience favours granting the stay.

See
RJR MacDonald Inc. v. Canada (Attorney General)
,
    [1994] 1 S.C.R. 311.

[28]

In
    applying this test, the overall focus must be on whether a stay is in the interests
    of justice:
Circuit World Corp. v. Lesperance
(1997), 33 O.R. (3d) 674
    (C.A.), at p. 677.

1.       Serious Question

[29]

The
    threshold to satisfy the first limb of the test is generally low, in that the
    court is required to make a preliminary assessment of the merits to determine
    that the appeal is neither frivolous nor vexatious:
RJR MacDonald,
at pp.
    337-338.

[30]

However,
    where  as in the present case  leave to appeal is required, the moving party
    must demonstrate that there is at least a reasonable prospect that leave will
    be granted:
Vandenberg v. Desjardine
, 2016 ONSC 1968, at para. 14.

[31]

Moreover,
    leave to appeal is to be granted only sparingly in CCAA proceedings and only
    where there are serious and arguable grounds:
Return on Innovation Capital
    Ltd. v. Gandi Innovations Limited
, 2012 ONCA 10,
90
    C.B.R. (5th) 141,
at para. 6. At para. 6 of
Innovation Capital
,
    this court states that in determining whether the grounds of the proposed
    appeal are sufficient and arguable, it considers whether:

1.   the
    point on the proposed appeal is of significance to the practice;

2.   the
    point is of significance to the action;

3.   the
    appeal is
prima facie
meritorious or frivolous; and

4.   the
    appeal would unduly hinder the progress of the action.

[32]

This
    stringent test for granting leave to appeal in CCAA proceedings is a result of
    the real time dynamic of CCAA matters and Parliaments clear intention to
    restrict appeal rights, having due regard to the nature and object of CCAA
    proceedings:
Newfoundland and Labrador v. AbitibiBowater Inc.
, 2010 QCCA
    965,
68 C.B.R. (5th) 57,
at para. 26, affd 2012 SCC
    67.


[33]

In
    my view, Local 2251 has not met its burden on this first part of the
RJR
    MacDonald
test. It appears unlikely that leave will be granted. The grounds
    set out in the amended Notice of Motion raise well-settled points of law. The
    federal paramountcy of CCAA proceedings has been the subject-matter of much
    appellate jurisprudence, including that of the Supreme Court of Canada. And, it
    is well-settled that grievances are caught by the stay made in CCAA
    proceedings, and that the CCAA judge has the power to establish a procedure for
    resolving matters which parties had previously agreed to have resolved by
    arbitration, including arbitrations pursuant to the terms of a collective
    agreement:
Canwest Global Communications Corp
., 2011 ONSC 2215,
75 C.B.R. (5th) 156,
at paras. 28-29.

[34]

Furthermore,
    it appears clear that an appeal would unduly hinder progress in this CCAA
    proceeding. On the findings of the CCAA judge, there is no question that the
    grievance claims procedure will assist the Applicants in their restructuring
    attempts, that some certainty regarding the potential impact of the
    unresolved grievances would greatly assist matters, and that a third party
    considering an offer to purchase would obviously want to understand the
    impact of the grievances on the business (para. 9). A stay at this point would delay
    the resolution of the grievances. So, too, would granting leave to appeal.

2.       Irreparable Harm

[35]

Local
    2251 submits that it will suffer irreparable harm unless a stay is granted,
    primarily because:

a.

it does not have
    the human resources or capability to process and summarise the outstanding
    grievances by the deadline, with the result that the unprocessed grievances
    will be barred and extinguished;

b.

the grievances
    cannot be addressed properly under the procedures provided for in the Order,
    given the compressed time period in which the grievances will be determined;

c.

it cannot carry
    out its duty of fair representation because of the constraints imposed by the
    Order; and

d.

it cannot fully
    or properly be involved in the SISP process because the Order requires that
    Local 2251 put its full efforts into the grievance process.

[36]

Much
    of Local 2251s assertion of irreparable harm rests on the workload created by
    the Order, its tight timelines and Local 2251s resulting inability to fulfill
    its other obligations, including involvement in the SISP process.

[37]

I
    find it difficult to accept this assertion because it appears that there were
    (and are) avenues available to Local 2251 to ameliorate the workload and strict
    deadlines which Local 2251 has failed to pursue. I offer three examples of
    this.

[38]

First,
    before making the Order, the CCAA judge pressed Local 2251 to identify its
    concerns with the procedure. While Local 2251 mentioned a concern about the
    deadlines imposed under the grievance list procedure, it does not appear that
    this matter was pursued in any detail before the CCAA judge nor has Local 2251 moved
    before that judge to amend or vary the Order to extend the deadlines.

[39]

Second,
    it appears that the Applicants have been working in good faith to assist Local
    2251 in preparing the list by the deadline. It has released four Local 2251
    members from their duties at Algoma to work full time on the grievance claims
    procedure. It has provided Local 2251 with a summary detailing the number of
    grievances associated with each article in the collective agreement. It has
    provided Local 2251 with a list of outstanding grievances and the description
    of each grievance that was provided by Local 2251 when the grievance was filed.
    And, it offered to consent to the deadline being extended to April 20, 2016.

[40]

Third,
    the Chief Arbitrator and Deputy Chief Arbitrator appear to be very cognizant of
    the difficult challenges the Order poses for Local 2251 and are willing to
    assist in the resolution of those challenges. Earlier in these reasons I give
    examples of assistance that the Chief Arbitrator and the Deputy Chief Arbitrator
    have already provided.

[41]

However,
    it appears that Local 2251 has not fully explored that route of assistance.  A
    recent example of this can be seen in Exhibit C to the affidavit of Alexandra
    Teodorescu sworn April 12, 2016. Exhibit C is an email sent by Chief
    Arbitrator Murray in which he says that he will treat an agreement by the
    parties to extend the April 11 deadline to April 15 (made in the context of an
    earlier adjournment of this motion), as a joint request by the parties. Chief
    Arbitrator Murray goes on to ask that, in future, such matters as extensions be
    the subject of a discussion with him in advance. He gives concrete reasons for
    this request, noting that the parties need to work diligently together and in
    good faith to achieve the important goals of the grievance claims procedure.

[42]

From
    this and the assistance already provided by the Chief Arbitrator, there is a
    demonstrated willingness on his part to work collaboratively to resolve the
    inevitable strains and workload problems that arise in a situation such as
    this.

[43]

I
    find it also difficult to accept the submission that irreparable harm will
    ensue if individual grievances are forever barred as a result of the grievance
    failing to be on the list.

[44]

In
    this regard, I note two things. First, the alleged harm appears speculative. Local
    2251 has lists. Algoma has lists. Steps have been taken to publish the list,
    which employees are urged to review to ensure that their grievances are listed.
    Second, if leave to appeal is granted and the appeal is allowed, anything that
    was done pursuant to the terms of the Order, including the possible barring of
    grievances, will be overturned.

[45]

Thus,
    I find it difficult to accept that irreparable harm will flow if the stay is
    not granted. Having said that, I wish to be clear. I fully accept that the Order
    has placed an onerous task on Local 2251, including the executive members who
    are working extremely hard to meet the deadlines. There is no question that the
    workload and resulting stress and strain is real and creates problems for the
    full and proper discharge of all of the union obligations. That said, I do not
    see such problems as amounting to irreparable harm, within the legal meaning of
    those words.

4.

Balance of
    Convenience

[46]

In
    considering the third part of the test, the court must determine which of the
    two parties will suffer the greater harm from granting or refusing the stay:
RJR
    MacDonald
, at p. 342.

[47]

Local
    2251 says that there is no evidence that the continued existence of the
    grievances has had, or will have, any impact on the SISP or that any bidder or
    person involved in the sales process has indicated that the grievances of Local
    2251 have impeded or affected any potential bid. In the face of the irreparable
    harm it says that it will suffer if the stay is not granted, its position is
    that the balance of convenience weighs in favour of granting the stay.

[48]

The
    Applicants submit that the CCAA judge was in the best position to consider and
    balance the interests of the various stakeholders with respect to the Order and
    his determination should not be disturbed.

[49]

I
    accept the Applicants submission on this matter.

[50]

The
    CCAA judge found that the Order would assist the Applicants in their
    restructuring attempts and that, in order to achieve a going concern solution,
    some certainty regarding the potential impact of the unresolved grievances
    would greatly assist (para. 9). He further found that it would be very
    detrimental to the attempted restructuring if the stay of the grievance claims
    and a process for their speedy resolution were not ordered (para. 35).

[51]

Based
    on the findings of the CCAA judge, I am of the view that granting the stay
    motion would lead to greater harm to the Applicants and other stakeholders in
    the CCAA proceeding, including Local 2251, as the stay would delay the
    determination of the grievance claims. The balance of convenience weighs
    heavily in favour of the Applicants.

CONCLUSION

[52]

In
    my view, granting a stay is not in the interests of justice. There can be little
    doubt that resolution of the outstanding grievances is important to the
    Applicants restructuring efforts. As the CCAA judge found, the Applicants must
    implement a plan of arrangement or a sale by August 31, 2016 (or September 30,
    2016, at the very latest). He also found that the Order would greatly assist in
    bringing certainty to the claims against the Applicants that may impact a
    restructuring transaction. Granting a stay pending leave to appeal, in these
    circumstances, will virtually ensure that the outstanding grievance claims will
    not be fully addressed by August 31, 2016.

DISPOSITION

[53]

Accordingly,
    the motion is dismissed.

Released: April 15, 2016 (E.E.G.)

E.E. Gillese J.A.


