WestlawNext Canada insight Blog

Houlden & Morawetz Insolvency Newsletter | CCAA proceedings

Timelines for resolution of labour grievances during CCAA proceedings.

Re Essar Steel Algoma Inc.
2016 ONCA 274, 2016 CarswellOnt 5758 (Ont. C.A.)

Local 2251 of the United Steelworkers Union brought a motion for the stay of an order in the Companies’ Creditors Arrangement Act (”CCAA”) proceedings of Essar Steel Algoma Inc. (”Algoma”).

Local 2251 is the exclusive bargaining agent for the hourly employees of Algoma. Local 2251 moved 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 established a summary process with condensed timelines for the resolution of grievance related claims.

Local 2251 contended that leave should be granted because its proposed appeal raised points of significance to the practice, including whether the suspension of grievances under the CCAA constituted an alteration of the collective agreement, contrary to s. 33 of the CCAA.

Algoma and certain related companies (the “Applicants”) came under CCAA protection by an order made in November 2015 (the “Initial Order”).

At the time of this motion, the Applicants were 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”).

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 established a three-step process for the resolution of grievances and provided for the final and binding settlement of grievances by arbitration in the third step. Gillese J.A. noted that most of pre-filing grievances had gone through the first two steps and what remained was arbitration under the third step.

There were approximately 3,000 unresolved grievances of employees represented by Local 2251.

Local 2724 was the bargaining agent for all of Algoma’s salaried employees.

By order dated January 14, 2016, a general claims process was approved to determine claims against the g claims procedure was granted and the Order was made on March 14, 2016. The Order provided for a streamlined grievance claim procedure. The goal was to have such claims determined by August 31, 2016, which coincides with the conclusion of the SISP and the expiry of the DIP Financing. 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.

On March 29, 2016, Local 2251 served its notice of motion for leave to appeal the Order.

Justice Gillese stated that 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), [1994] 1 S.C.R. 311, 1994 CarswellQue 120F, 1994 CarswellQue 120, 54 C.P.R. (3d) 114, (sub nom. RJR-MacDonald Inc. c. Canada (Procureur général)) 164 N.R. 1, (sub nom. RJR-MacDonald Inc. c. Canada (Procureur général)) 60 Q.A.C. 241, 111 D.L.R. (4th) 385 (S.C.C.).

With respect to the first part of the test, Gillese J.A. noted that the threshold 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, supra. 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), 2016 CarswellOnt 4244, 2016 ONSC 1968 (Ont. S.C.J.).

Justice Gillese noted that 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 Ltd. (2012), 2012 ONCA 10, 2012 CarswellOnt 103, 90 C.B.R. (5th) 141 (Ont. C.A.). In determining whether the grounds of the proposed appeal are sufficient and arguable, the court 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.

Justice Gillese also noted that this stringent test for granting leave to appeal in CCAA proceedings is as a result of the real time dynamic of CCAA matters and Parliament’s clear intention to restrict appeal rights, having due regard to the nature and object of CCAA proceedings: AbitibiBowater Inc., Re (2010), 68 C.B.R. (5th) 57, 52 C.E.L.R. (3d) 1, 2010 CarswellQue 4782, 2010 QCCA 965 (C.A. Que.), affirmed (2012), 352 D.L.R. (4th) 399, 71 C.E.L.R. (3d) 1, (sub nom. Newfoundland and Labrador v. AbitibiBowater Inc.) 438 N.R. 134, (sub nom. Newfoundland and Labrador v. AbitibiBowater Inc.) [2012] 3 S.C.R. 443, 2012 SCC 67, 2012 CarswellQue 12490, 2012 CarswellQue 12491, 95 C.B.R. (5th) 200 (S.C.C.).

Justice Gillese was of the view that Local 2251 had not met its burden on this first part of the RJR-MacDonald test as it appeared unlikely that leave would be granted. The grounds set out in the amended Notice of Motion raised well-settled points of law. The federal paramountcy of CCAA proceedings has been the subject matter of much appellate jurisdiction, 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., Re (2011), 2011 ONSC 2215, 2011 CarswellOnt 2392, 75 C.B.R. (5th) 156 (Ont. S.C.J. [Commercial List]).

In addition, Gillese J.A. was of the view that it appeared clear that an appeal would unduly hinder progress in this CCAA proceeding. The CCAA judge had previously noted that there was “no question” that the grievance claims procedure would 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.

Justice Gillese concluded that a stay at this point would delay the resolution of the grievances and so, too, would granting leave to appeal.

Justice Gillese then addressed the issue of irreparable harm. She noted that much of Local 2251’s assertion of irreparable harm rested on the workload created by the Order, its tight timelines and Local 2251’s resulting inability to fulfill its other obligations, including involvement in the SISP process.

Justice Gillese stated that she found it difficult to accept this assertion because it appeared that there were avenues available to Local 2251 to ameliorate the workload and strict deadlines which Local 2251 had failed to pursue.

Justice Gillese also found it difficult to accept the submission that irreparable harm would ensue if individual grievances were forever barred as a result of the grievance failing to be on the list provided to the Chief Arbitrator.

On this issue, Gillese J.A. found it difficult to accept that irreparable harm would flow if the stay was not granted.

Justice Gillese then addressed the issue of the balance of convenience. 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, supra.

Local 2251 submitted that there was no evidence that the continued existence of the grievances had had, or would have, any impact on the SISP. The Applicants submitted 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.

Justice Gillese accepted the Applicants’ submission on this matter.

The CCAA judge had 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.

Justice Gillese stated that, based on the findings of the CCAA judge, she was of the view that granting the stay motion would lead to greater harm to the Applicants and other stakeholders in the CCAA proceedings, including Local 2251, as the stay would delay the determination of the grievance claims. The balance of convenience weighed heavily in favour of the Applicants.

In the result, Gillese J.A. concluded that granting a stay was not in the interests of justice. There was little doubt that resolution of the outstanding grievances was important to the Applicants’ restructuring efforts. As the CCAA judge had found, the Applicants must implement a plan of arrangement or a sale by September 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, would virtually ensure that the outstanding grievance claims would not be fully addressed by August 31, 2016.

Accordingly, the motion was dismissed.

See Houlden & Morawetz, Bankruptcy and Insolvency Law of Canada:

N§130 — Appeals — Leave to Appeal

N§132 — Stay of CCAA Order Pending Appeal

N§179 — Collective Agreement Remains in Force
View the Complete Sample Newsletter
© Copyright WestlawNext Canada, Thomson Reuters Canada Limited. All rights reserved.