Date: 20110225
Docket: T-1162-09
Citation: 2011
FC 226
Ottawa, Ontario, February 25, 2011
PRESENT: The Honourable Mr. Justice Near
BETWEEN:
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THE ATTORNEY GENERAL OF CANADA
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Applicant
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and
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UNITED STATES STEEL CORPORATION AND
U.S. STEEL CANADA INC.
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Respondents
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and
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LAKESIDE STEEL INC. AND LAKESIDE STEEL
CORP.
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Interveners
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and
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THE UNITED STEEL WORKERS AND LOCAL 1005
AND LOCAL 8782 AND
JOHN PITTMAN AND GORD ROLLO
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Interveners
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REASONS FOR ORDER AND ORDER
[1]
This is a
motion brought by the Respondents, United States Steel Corporation and U.S. Steel Canada
Inc. (US Steel) appealing the Order of Prothonotary Martha Milczynski, issued
November 15, 2010, (the Order) allowing the Applicant (the AGC) to amend
the relief sought in the Notice of Application filed on July 17, 2009 (the
Application). US Steel seeks an order setting aside the Order of Prothonotary
Milczynski.
I. Background
A. Factual
Background
[2]
On July
17, 2009 the AGC commenced an application on behalf of the Minister of Industry
(the Minister) pursuant to section 40 of the Investment Canada Act, RSC
1985 c 28 (the ICA).
[3]
The AGC
alleges that US Steel has failed to comply with two written undertakings (the Undertakings)
made to the Minister in connection with US Steel’s acquisition of certain
assets of Stelco Inc. (the Canadian Business). The undertakings relate to the
annual level of steel production in US Steel’s Canadian Business (the
Production Undertaking) and aggregate employment levels at the Canadian
Business (the Employment Undertaking).
[4]
The
Undertakings, given to the Minister in October 2007 provided that:
The Investor will increase the
annual level of production at the facilities of the Canadian Business by at least
10% over the Term (excluding periods of interruption in production due to
capital investment projects) relative to the average of the last three
completed calendar years.
Over the Term, the Investor will maintain
an average aggregate employment level at the Canadian Business of not less than
3,105 employees on a full time equivalent basis if the bar mill continues to be
operated or 2,790 employees on a full time equivalent basis if the bar mill is
sold or closed.
[5]
The term
of the Production and Employment Undertakings was from November 1, 2007 to
October 31, 2010 (the Term).
[6]
Following
US Steel’s submission of a progress report to Industry Canada in March 2009 indicating that production
had declined and lay-offs were occurring, on May 5, 2009 the Minister sent a
demand to US Steel pursuant to section 39 of the ICA. Such a demand may require the investor
to: cease the contravention, remedy the default, show cause why there is no
contravention, or, in the case of undertakings, justify any non-compliance therewith.
In the Demand the Minister required US Steel to provide a written commitment
that, “it will increase production at Canadian facilities in 2009 and 2010 to
achieve increased production over the term…” and “it will…comply with the
undertaking to maintain average aggregate employment at the Canadian Business
over the term…”
[7]
Dissatisfied
with US Steel’s response to the Demand, the AGC filed the Application in the
Federal Court on July 17, 2009. The AGC sought an order directing US Steel to
comply with the relevant undertakings:
a. By increasing steel
production at the Canadian Business, as defined in this Application, such that:
i. In the period from
November 1, 2007 to October 31, 2009, steel production at the Canadian Business
is greater than or equal to a total of 8,690,000 tons (2 x 4,345,000); and
ii. In the period
from November 1, 2009 to October 31, 2010, steel production at the Canadian
Business is greater than or equal to 4,345,000 net tons; and
b. By taking all such
steps as are necessary to ensure that over the Term of the undertakings, as
defined in this Application, the Respondents maintain an average level of
employment at the Canadian Business of 3,105 employees on a full time
equivalent.
[8]
Due to
several interlocutory motions, including a constitutional challenge, the
lifespan of the litigation of the Application has now surpassed the Term of the
Undertakings, which expired October 31, 2010. In order to account for the
passage of time since the Application was commenced, the ACG decided to amend
the relief sought in the Application, filing an amendment motion on October 15,
2010. This motion to amend is the subject of the present appeal.
[9]
As
amended, paragraph 3 of the Application now requests the Court to issue an
order directing US Steel to:
a. produce X million tons of
steel at the Canadian Business, as defined in this Application, at a rate of
4,345,000 million tons per year following the issuance of the Court’s order in
this matter where:
X=Y-Z
Y=13,035,000 million tons
Z=total tons of steel produced by the
Canadian Business in those months during the Term, as defined in the
Application, where steel production equalled or exceeded 362,083 tons; and
b. maintain an average
employment level of 3,105 employees on a full time equivalent basis over X
months following the issuance of the Court’s order in this matter, where:
X=Y-Z
Y=36 months
Z=the number of months during the Term in
which the Canadian Business’ average employment level equalled or exceeded
3,105 employees on a full time equivalent basis.
B. The
Order
[10]
Prothonotary
Milczynski granted the AGC’s motion. The Prothonotary recognized that the
proposed amendments created new obligations on the part of US Steel. The
Prothonotary described how the proposed amendments would have the effect of
lengthening the term until the Undertakings are fulfilled and in respect of the
Production Undertaking, adding a new term that would require US Steel to
have produced a monthly minimum target output. Similarly with the Employment
Undertaking, US Steel would only be given credit for meeting the undertaking
where a monthly minimum average employment target was met. However, the
proposed amendment related exclusively to the relief sought, and the
Prothonotary found that if the Application proceeded to the remedy stage, US
Steel could make any arguments regarding the appropriateness of the relief
sought at that time.
[11]
US Steel
identified several issues with respect to whether or not the section 39 Demand
covered the entire Term. The Prothonotary found that the original Notice of
Application referred to the entire Term and sought remedial action covering the
entire Term to ensure that the Production and Employment Undertakings were
satisfied in their entirety. Whether the Demand was premature and valid only
for year one of the Term were already issues in dispute under the original
Application and did not arise solely by virtue of the proposed amendments. The
Prothonotary concluded that these matters were best left to the judge hearing
the application and that US Steel was not foreclosed from raising any argument
regarding alleged defects of the Demand at that time.
[12]
The
Prothonotary referred to rule 75 of the Federal Courts Rules and the
test laid out in Canderel Ltd. v Canada, [1994] 1 FC 3, [1993] FCJ No
777 (QL) (CA), and Varco Canada Limited v Pason Systems Corp., 2009
FC 555, [2009] FCJ No 687 (QL). She decided that, in accordance with the test
laid out by the Federal Court, the proposed amendments, had they been included
in the original notice, would survive a motion to strike. Furthermore, while
the Prothonotary noted that the relief requested might be ambitious, it was not
plain and obvious or a certainty that it would be impossible for the Court to
grant. The Prothonotary was also not satisfied that any prejudice visited upon
US Steel could not be compensated by an award of costs.
II. Issues
[13]
The issues
raised in this appeal are:
(a) What
is the applicable standard of review of the Prothonotary’s decision?
(b) Is there any basis
upon which this Court can set aside the Prothonotary’s decision?
III. Argument and Analysis
A. Standard of
Review
[14]
As set out
in Canada v Aqua-Gem Investments Ltd., [1993] 2 FC 425 (CA), [1993] FCJ
No 103 and restated in Merck & Co. v. Apotex Inc., 2003 FCA
488, [2004] 2 F.C.R. 459, at
para 19, discretionary orders of Prothonotaries ought not
to be disturbed on appeal to a judge unless:
a) the questions raised in the motion are
vital to the final issue of the case, or
b) the orders are clearly wrong in the
sense that the exercise of discretion by the prothonotary was based upon a
wrong principle or upon a misapprehension of the facts.
[15]
If the
question is determined to be vital to the final issue, under the first branch
of the test, a de novo review is conducted and no deference is shown to the
prothonotary. However, the second branch requires the Court to determine that
the order was clearly wrong before disturbing it. This is a deferential
standard.
[16]
The first
question then, is whether, as US Steel submits, the Order is vital to the final
issue of the case.
[17]
US Steel submits that allowing
the AGC to seek the relief contained in the amended notice of motion is an
issue vital to the outcome of the entire Application because it changes the
definition of compliance from one that was negotiated between the Investor and
the Minister to one that is unilaterally imposed by the Minister. Moreover,
the amendment attempts to impose upon US Steel the duty to answer for conduct
that was never the subject of the requisite statutory Demand, that being the
conduct in years two and three of the Term.
[18]
The AGC
submits that the amendment does not re-define or fundamentally alter the course
of this proceeding because: the length of the Term for which the Demand was
valid was already at issue; the amendment only relates to the relief sought in
the Application; given the delays in this proceeding the amendment of necessity
contemplates a remedial Court order which would take place after the end of the
Term; and under section 40 of the ICA the Court retains the power to make any
order as it considers the circumstances to require.
[19]
The test
to determine if a question is “vital” is stringent. As Justice Robert Décary
explained in Merck, above, at paras 22 and 23,
The use of the word "vital"
is significant. It gives effect to the intention of Parliament […]
[…] that the office of prothonotary is
intended to promote "the efficient performance of the work of the
Court".
[…]
One should not, therefore, come too
hastily to the conclusion that a question, however important it might be, is a
vital one. Yet one should remain alert that a vital question not be reviewed de
novo merely because of a natural propensity to defer to prothonotaries in
procedural matters.
[20]
Specifically
regarding amendments, decisions of this Court support the conclusion that
amendments that advance additional claims, or causes of action or defences are
likely to be “vital” (Bristol-Myers Squibb Co. v Apotex Inc, 2008 FC
1196, 173 ACWS (3d) 249 at para 6; Merck, above, at para 25).
[21]
In the
present matter I am not convinced by US Steel’s arguments that the amendment is
“vital”. It does not advance additional causes of action or defences. The
issues US Steel identifies as problematic in regards to the amendment, were, as
found by Prothonotary Milczynski, already at play in the original notice of
application and ought to be determined by the Applications Judge. Furthermore,
the amendment does not change the character of the Application: it does not
impose a new performance standard on US Steel, or determine whether the
Minister was justified in sending the Demand, or affect in any way the
determination of whether or not US Steel complied with the Demand; rather the
amendment only changes the formulation by which the AGC seeks relief to be
calculated. In essence, the AGC still seeks an order directing US Steel to
comply with the Undertakings. The reality that time has passed, making the
relief sought in the original notice of no practical effect is unequivocal.
Perhaps, as noted by Prothonotary Milczynski, the AGC ought to have accounted
for this unsurprising outcome at the outset, but, in any case, the fact remains
that the appropriateness of the methodology suggested by the AGC in the
amendment will be up for debate during the hearing. As such, I cannot find
that the amendment is a vital one. Accordingly, the decision of the
Prothonotary can only be overturned if it is shown to be clearly wrong.
B. The
Amendment Order Is Not Clearly Wrong: It Is Not Based On a Wrong Principle of
Law, Or Upon a Misapprehension of the Facts
[22]
As stated
by Prothonotary Milczynski, whether leave should be granted for the amendments
to be made is governed by Rule 75 of the Federal Courts Rules, and
well-settled jurisprudence. Rule 75 provides:
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Amendments
with leave
75.
(1) Subject to subsection (2) and rule 76, the Court may, on motion, at any
time, allow a party to amend a document, on such terms as will protect the
rights of all parties.
Limitation
(2)
No amendment shall be allowed under subsection (1)
during
or after a hearing unless
(a)
the purpose is to make the document accord with the issues at the hearing;
(b)
a new hearing is ordered; or
(c)
the other parties are given an opportunity for any preparation necessary to
meet any new or amended allegations.
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Modifications
avec autorisation
75.
(1) Sous réserve du paragraphe (2) et de la règle 76, la Cour peut à tout
moment, sur requête, autoriser une partie à modifier un document, aux
conditions qui permettent de protéger les droits de toutes les parties.
Conditions
(2)
L’autorisation visée au paragraphe (1) ne peut être accordée pendant ou après
une audience que si, selon le cas :
a)
l’objet de la modification est de faire concorder le document avec les
questions en litige à l’audience;
b)
une nouvelle audience est ordonnée;
c)
les autres parties se voient accorder l’occasion de prendre les mesures
préparatoires nécessaires pour donner suite aux prétentions nouvelles ou
révisées.
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[23]
The test
for when an amendment to a pleading should be permitted is set out in the
Federal Court of Appeal decision, Canderel, above, at para 9:
With respect to amendments,
[…], that while it is impossible to enumerate all the factors that a judge must
take into consideration in determining whether it is just, in a given case, to
authorize an amendment, the general rule is that an amendment should be allowed
at any stage of an action for the purpose of determining the real questions in
controversy between the parties, provided, notably, that the allowance would
not result in an injustice to the other party not capable of being compensated
by an award of costs and that it would serve the interests of justice.
[24]
Prothonotary
Milczynski also cited the “plain and obvious” test from Varco Canada Limited
v Parson Systems Corp., above, at para 26:
The test to amend a pleading
must be applied consistently with the test to strike a pleading. Amendments
will be denied, and pleadings will be struck only when it is plain and obvious
that the claim discloses no reasonable cause of action. In Enoch Band of
Stony Plain Indians v. Canada, [1993] F.C.J. No. 1254, the Federal Court of
Appeal made in very clear that the Court should only "deny amendments in
plain and obvious cases" where the matter is "beyond doubt".
[25]
There is
no disagreement between the parties as to the applicable tests, however, US
Steel, in its written submissions offers the “not reasonably realizable” test
from Mushkegowuk Council v Canada (Attorney General), 2008 FC 1041, 170
ACWS (3d) 224 quoting para 12 in which the Court appears to hold that a motion
to amend should be denied where the relief it provides for is not reasonably
realizable or cannot reasonably be awarded:
Amendments are always within the
discretion of the Court as the party pleading is expected to define the issues
and specify the relief requested in the first instance. Occasionally facts are
discovered or the characterization of the lis between the parties
changes such that an amendment is in the interests of justice. I would be hard
pressed to be convinced that permitting an amendment to raise a claim for
relief that cannot reasonably be awarded by the Court is ever in the interest
of justice.
(Emphasis added)
[26]
In that
case, like in the present matter, the prothonotary considered whether the
relief sought in the proposed amendment was something that the court could
award if the applicants were successful. On the facts of that the case the
prothonotary found that the alternative relief was not available because it
would have the court making specific policy decisions regarding the disposal of
nuclear fuel waste. On appeal, Justice Russel Zinn found that the availability
of the proposed amendment was not an improper consideration when deciding
whether or not to exercise discretion to permit an amendment. In the present
matter Prothonotary Milczynski considered whether the relief sought would be
available, and concluded that while it may be ambitious, based on section 40 of
the ICA which allows the Court to make any order or orders as, in its opinion,
the circumstances require, it was not plain and obvious that the relief sought
through the amendment would be impossible for the Court to grant.
[27]
Nevertheless,
US Steel submits that Prothonotary Milczynski committed three reviewable errors:
1) Prothonotary
Milczynski failed to recognize that there was no jurisdiction in the Court to
grant the amendment because it is premised on an alleged breach for which no
section 39 demand has been made and no opportunity to respond has been given. Therefore
it was plain and obvious that the relief sought would fail;
2) Prothonotary
Milczynski correctly recognized that the amendment created “new obligations”
and sought to define non-compliance in a manner “that may not have been
contemplated by the parties at the time that Undertakings were given.”
However, the Prothonotary failed to recognize that the imposition of such new
obligations was not authorized by the ICA;
and
3) Prothonotary
Milczynski failed to recognize that the amendment was not in the interests of
justice having regard to the legislative intent as expressed in the ICA.
[28]
I prefer
the AGC’s analysis which neatly summarizes the above issues into two core
arguments which deal with the bulk of US Steel’s allegations:
1) The Court has no jurisdiction
to grant the amendment because it is premised on an alleged breach for which
there has been no section 39 demand; and
2) That the amendment
wrongly results in the imposition of a new metric for the determination of
whether US Steel abided by the Output and Employment undertakings.
(1)
No
Jurisdiction Argument Unfounded
[29]
US Steel submits that the
Prothonotary had no jurisdiction to grant the amendment because it was premised
on an alleged breach for which no section 39 demand had been made and no opportunity
to respond had been given. Pursuant to the ICA, each section 40 application must be preceded
by a section 39 demand. Therefore, it was plain and obvious that the relief
sought would fail.
[30]
Despite US
Steel’s arguments regarding the structure of the ICA, and its belief that a section 39 demand can only relate to
non-compliance which has already occurred, this narrow grammatical
interpretation of the statute does not convince me that it is plainly obvious
that the Court would not be able to grant the relief sought by the AGC.
[31]
The AGC
sent the section 39 Demand with only 15 months left in the Term. As I read the
Demand, it seems clear, or at least arguable, that the Minister intended to
require US Steel to meet the Undertakings for the entire Term. US Steel
contends that the AGC has conceded that no demand has been issued for years two
and three of the Term. I find no such concession in the AGC’s submissions. As
the Prothonotary stated, the validity of the Demand and the time period it
covered remains an issue to be examined as part of the hearing on the merits of
the Application. US Steel’s reasoning is specious - surely, Parliament
could not have intended for the Minister to be required to repeatedly issue
demands on non-compliant investors or wait until the end of the Term to issue a
demand. The AGC’s position on this point is much more lucid. As the AGC
submits, US Steel’s argument results in an untenable paradox in which the
Minister must wait until the end of the term to issue a demand, but
undertakings can only be enforced during the term, for US Steel also presents
as a problem the fact that the new relief requires the undertakings to be
fulfilled after the expiry of the Term.
[32]
The Demand
was indeed issued prior to the expiration of the Term, but whether or not the
Undertakings were fulfilled or the Demand was complied with subsequent to the
date it was issued is a knowable fact, that the Applications Judge will be able
to determine when determining firstly whether the Minister was justified in
sending the Demand, and secondly, whether the investor failed to comply with
the demand. The Court’s determination of appropriate remedial measures will
only be an issue after the merits of the Application are determined.
(2) The
Proposed Amendment Does Not Impose New Undertakings
[33]
US Steel argues that the
amendment seeks to have the Court order the performance of entirely new
commitments, and to extend those obligations beyond the Term of the
undertakings.
[34]
It is true
that the amendment seeks relief on the basis of a monthly measurement of
compliance with the Production and Employment Undertakings whereas the
Undertakings themselves were designed to be measured based on yearly
performance targets. The Prothonotary recognized as much in her reasons.
[35]
However,
having reviewed US Steel’s submissions, I am in complete agreement with the AGC
in that it appears as though US Steel has conflated liability with remedy. The
amendment deals solely with the remedy sought by the AGC, and has no effect on
how the Court will determine whether the Minister was justified in making the
Demand or whether US Steel complied with it, which is the heart of the
Application. As noted by the Prothonotary at para 9:
It also appears from this motion that the
parties may not share a common understanding of what the Production and
Employment Undertakings mean and what actually was required of US Steel over
the Term to satisfy them. This matter too must be left for the hearing of the
application on its merits.
[36]
While
there might already be disagreement between the parties regarding how the
Undertakings were to be measured and what they entailed, the amendment
certainly does not amount to a retrospective rewriting of them.
[37]
When it
comes time to discuss remedies, as the Prothonotary noted and the AGC submits,
US Steel will be able to make arguments to the Applications Judge regarding the
appropriateness of the AGC’s proposed remedy and any other remedies that
the Court might be tempted to order. Prothonotary Milczynski characterized
the amendment as ambitious, but noted that it was not impossible. I concur
with this sentiment, and note again that under the ICA, remedial orders are left to the
discretion of the Court.
[38]
There is
no merit in US Steel’s argument that the AGC, in issuing the motion to amend,
is circumventing the legislation.
[39]
The
Prothonotary’s Amendment Order was not clearly wrong; it was not based on a
misapprehension of the facts or a wrong principle of law. This appeal is
accordingly dismissed.
IV. Conclusion
[40]
In
consideration of the above conclusions, this appeal is dismissed and costs are
awarded to the Applicant, the AGC.
ORDER
THIS COURT ORDERS that:
1.
This appeal
is dismissed.
2.
Costs are
awarded to the Applicant, the Attorney General of Canada.
“ D.
G. Near ”
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