Date: 20110621
Docket: T-1162-09
Citation: 2011
FC 742
Ottawa, Ontario, June 21, 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]
The Respondents,
US Steel, seek an order under Rule 312 of the Federal Court Rules (SOR/98-106)
for leave to file the following affidavit (collectively, the “Glass Response
Affidavits”):
(a) The affidavit of
Robert W. Crandall sworn March 25, 2011;
(b) The affidavit of
John H. Goodish sworn March 24, 2011;
(c) The affidavit of
Larry T. Brockway sworn March 25, 2011;
(d) The affidavit of
Michael A. McQuade sworn March 24, 2011; and
(e) The affidavit of C.
James Bond sworn March 25, 2011.
I. Background
[2]
On July
17, 2009 the Attorney General of Canada (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 (ICA). 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 background of this
application is well-known to the Court.
[3]
The pertinent
facts related to this particular motion are as follows.
[4]
US Steel
shut down steel production in Canada in spring 2009. In May 2009
the Minister issued a demand, asking US Steel to comply with its undertakings,
or justify its non-compliance. US Steel responded first arguing that the
Minister’s demand was premature, as the requirements were to be fulfilled over
the term, which only ended October 31, 2010. Secondly, US Steel took the
position that if it were unable to satisfy the undertakings over the term, it
should not be held accountable due to the force majeure provision in the
Minister’s guidelines. US Steel referred to the global recession, asserting
that it, as well as many of its customers had been significantly and severely affected.
[5]
The
referred to guideline is found in the ICA Administrative Procedures Guidelines and
reads:
Monitoring of Investments
The following policies apply
to the monitoring of investments that have been reviewed and implemented:
-
an
evaluation of performance will ordinarily be made 18 months after the
implementation of the investment;
-
investment
performance will be judged in the context of the overall results;
-
if the
evaluation discloses implementation substantially consistent with the original
expectations and subsequent economic circumstances, and there are no major
commitments yet to be fulfilled, no further monitoring will ordinarily take
place;
-
if the
evaluation discloses otherwise, the Government and the investor will together
determine an appropriate time for future follow-up;
-
plans
and undertakings are based to some extent on projected circumstances and the
monitoring of an investor’s performance will recognize this factor. Where
inability to fulfill a commitment is clearly the result of factors beyond the
control of the investor, the investor will not be held accountable.
[Emphasis added]
[6]
In support
of its application, the AGC filed the affidavit of Richard Lajeunesse,
Investment Review Manager at Industry Canada
(the Lajeunesse Affidavit) in August 2009. US Steel submits that the issue
of economic conditions affecting the Canadian Business were not addressed in
the AGC’s initial filing pursuant to Rule 306.
[7]
In
response, on August 13, 2010, US Steel served upon the AGC and subsequently filed
the following affidavits (collectively, the Response Affidavits):
(a)
The
affidavit of Robert W. Crandall, sworn July 29, 2010, containing the expert
report of Robert Crandall (the Crandall Report);
(b)
The
affidavit of Courtney Pratt, sworn July 29, 2010;
(c)
The affidavit
of John H. Goodish, sworn July 30, 2010;
(d)
The
affidavit of James D. Garraux, sworn July 30, 2010;
(e)
The
affidavit of Alex F. Morrison, sworn July 30, 2010 containing the expert report
of Ernst & Young LLP (the E & Y Report);
(f)
The
affidavit of Edward M. Iacobucci, sworn July 29, 2010 and
(g)
The
affidavit of C. James Bond, sworn July 30, 2010.
[8]
Evidence
regarding US Steel’s justification for non-compliance with the undertakings was
addressed in the Goodish, Morrison and Crandall affidavits.
[9]
The AGC
submits that although US Steel sought to justify its non-compliance based on
the “the dire circumstances faced by the entire industry worldwide” and argued
that these were precisely the types of factors expressly contemplated by the
exculpatory provision of the Guidelines, US Steel provided little detail in its
evidence regarding the alleged costs associated with producing the undertaking
level of steel production.
[10]
In reply
to the Response Affidavits, the AGC filed the Affidavit of Susan Glass, sworn
February 15, 2011, containing the expert report of KPMG LLP (the Glass
Report). US Steel consented to the filing of the Glass Report at a case
conference on February 14, 2011.
[11]
At a case
conference on April 5, 2011, the AGC indicated that he would not consent to US Steel’s filing of affidavits in response
to the Glass Report.
[12]
In
response, the Prothonotary first directed both parties to make motions pursuant
to Rule 312 of the Federal Court
Rules for the admission of their respective affidavits. However, following
the AGC’s submission, by way of letter dated April 6, 2011, that he should not
be called upon to make a Rule 312 motion given that US Steel had already
consented to the admission of the Glass Report, the Prothonotary reversed her
earlier decision. At a case conference on April 8, 2011, the Prothonotary
directed that only US Steel was required to make a Rule 312 motion for the
admission of the Glass Response Affidavits.
[13]
US Steel now submits that in
attacking the Crandall Affidavit, the Glass Report raises a series of new
issues that they could not have anticipated when filing the Response
Affidavits. US Steel seeks leave to
file five sur-reply affidavits.
[14]
The AGC
takes the position that the sur-reply affidavits relate to US Steel’s force
majeure defence and seek to bolster deficiencies in evidence already led.
As such, granting US Steel leave to file the sur-reply affidavits would allow
US Steel to split its case.
II. Issue
[15]
The sole
issue before the Court is whether US Steel ought to be granted leave to file
additional affidavits pursuant to Rule 312.
III. Argument and Analysis
[16]
Rule 312
allows a party to file supplementary affidavits with leave of the Court.
However, case law is clear. A party must always put its best case forward at
the first opportunity. A party will be granted leave pursuant to Rule 312 where
the evidence to be adduced will serve the interests of justice, assist the
Court, not cause substantial or serious prejudice to the other side, and was
not available prior to the cross-examination of the opponent’s affidavits (Atlantic
Engraving Ltd v Lapointe Rosenstein, 2002 FCA 503, 299 NR 244 at paras 8
and 9). Additionally, the party seeking to introduce new evidence must show
that its introduction will not unduly delay the proceeding (Janssen-Ortho
Inc v Apotex Inc, 2010 FC 81 at para 33).
[17]
Sur-reply
evidence cannot merely contradict the conclusion of the reply evidence.
Rather, it must contradict, qualify or directly impeach specific analysis or
argument made in the reply affidavit. The party seeking to introduce the
affidavits must identify with clarity and precision the exact statements, or
paragraphs of the reply to which it responds (Eli Lilly Canada Inc v Apotex
Inc, 2006 FC 953, 298 FTR 70 at para 10).
[18]
The AGC
submits that US Steel has split its case. The AGC points out that US Steel’s
proposed sur-reply addresses precisely the same issues that US Steel raised in
its August 2010 evidence, and seeks to substantially supplement the evidence
provided at that time. The AGC cites Justice Denis Pelletier in Halford v
Seed Hawk Inc, 2003 FCT 141, 24 CPR (4th) 220 at paras 14 and 15, in which he stated:
[14] […] evidence which simply
confirms or repeats evidence given in chief is not to be allowed as reply
evidence. It must add something new. But since the plaintiff is not allowed to
split its case, that something new must be evidence which was not part of its
case in chief. That can only leave evidence relating to matters arising in
defence which were not raised in the plaintiff's case in chief. But even this
is subject to a limitation […]
[15] […]
3 - Evidence which is simply a rebuttal
of evidence led as part of the defence case and which could have been led in chief
is not be be admitted.
[19]
The AGC
submits that this motion ought to be dismissed because none of the evidence in
US Steel’s proposed sur-reply is based on new facts which arose after August
2010. All of the evidence was available to US Steel in August 2010 and could
have been adduced as part of the August 2010 evidence. The AGC is of the view
that US Steel has filed no evidence on this motion other than the bare
assertion that the Glass Report raises a series of new issues. The AGC
strongly disagrees and characterizes the within application as an abuse of the
Court’s process which will unnecessarily delay the resolution of the underlying
application.
[20]
For its
part, US Steel claims that although the evidence might have been available when
the initial affidavits were filed, its relevance could not have been
anticipated. For this proposition, US Steel relies on Justice Luc Martineau’s
decision in Callaghan v Canada (Chief Electoral Officer), 2008 FC 1080,
172 ACWS (3d) 262 at para 24.
[21]
US Steel lists 11 allegedly new
issues raised by the Glass Report. However, US Steel does not explain why
these issues could not have been anticipated when US Steel knew if it wished to
rely on the guidelines to argue that it was unable to fulfill its undertakings,
the onus would be on US Steel to lead evidence which
proves this inability. US Steel merely argues that the
issues raised in the Glass Report are either new, or more troublingly, analyzed
from a cardinally different perspective which requires the introduction of
additional evidence. Nor does US Steel explain why this information could not
be reasonably dealt with on cross-examination. For instance, in Axia Inc v
Northstar Tool Corp, 2005 FC 526, 138 ACWS (3d) 926 the Court refused leave
to introduce a supplemental affidavit where the party could have, but had not,
cross-examined the other party. Without the cross-examination, the Court was
not convinced the evidence sought to be adduced was not available at an earlier
date (see para 5).
[22]
US Steel does list in the
written submissions precisely which statements the Glass Response Affidavits
purport to respond to.
[23]
Additionally,
US Steel asserts that the Glass Response Affidavits will assist the Court. US Steel
lists the important issues addressed by the sur-reply affidavits that it claims
are essential for the adjudication of the case:
1)
The
reasonableness of US Steel’s management’s responses to the unprecedented world
economic crisis;
2)
The
magnitude of the losses US Steel would have suffered had it maintained
production and employment at the requisite level throughout the period in which
the undertakings were in force; and
3)
The impact
of such losses upon US Steel.
[24]
US Steel argues that without
this evidence, the Court will have an incomplete picture. US Steel does not explain how this
evidence was either not available, or not previously known to be relevant. It appears
as though this kind of evidence is necessary in order to mount a force
majeure defence.
[25]
US Steel submits that allowing
the sur-reply will not prejudice the AGC since the evidence does not expand the
scope of the application, but only responds in a targeted fashion.
Additionally, US Steel takes the position that filing the sur-reply evidence
will not delay the proceedings.
[26]
The AGC
sharply disagrees and argues that the motion would cause serious prejudice to
the public interest in further lengthening the journey of this application to
its hearing date, resulting in unnecessary delay and expense. Furthermore, the
AGC submits that the repetition of previous allegations cannot possibly be of
assistance to the Court.
[27]
In terms
of the law on 312 motions, Justice Martineau neatly described the full
discretion afforded to the judge hearing the motion, at para 26 of Callaghan,
above:
[26] To sum up, the Court
possesses vast discretion to allow a party to file additional material. Such discretion
is incompatible with a mechanical application of any set test or formula,
whether threefold or fourfold. The factors mentioned above are not exhaustive
and the jurisprudence does not prescribe how they are to be weighed by the
judge or the prothonotary. Further, because each decision is discretionary and
will be fact-specific, there may be other factors in any given case.
[28]
US Steel submits in closing,
that it would be fundamentally unfair to permit the AGC to raise a series of
questions concerning the US Steel’s evidence, while prohibiting US Steel from
answering those questions. I am cognizant of such an argument, but would
remind US Steel that they consented to the introduction of the Glass Report.
IV. Conclusion
[29]
In my view,
it is important to recognize that this is a case of first impression and that
the relevant provisions of the ICA
have not been considered by the Court. I agree that the proper interpretation
of the relevant provisions of the ICA
is a matter of public importance and as such conclude that it would be in the
interests of justice to allow the filing of the Glass Response Affidavits.
[30]
I also
find that the Glass Response Affidavits would be of assistance to the Court in
understanding the complexities of this particular case. I do not agree that
the material set out in the Glass Response Affidavits merely repeat previous
allegations, though I should add that there is considerable overlap.
[31]
Further, I
find that the AGC will not be unduly prejudiced. Cross examinations have not
yet taken place and the AGC will be able to consider the evidence in the Glass
Response Affidavits prior to cross-examination. The AGC may seek to file
further evidence in order to rebut some of the material contained in the Glass
Response Affidavits, but I do not find that this possibility would cause
serious prejudice or undue delay.
[32]
Finally,
US Steel has conceded that all of the information contained in the Glass
Response Affidavits was available prior to the filing of US Steel evidence in
August 2010. I am concerned that this material was available to US Steel at
that time but was not included in the US Steel filing in August 2010. Further,
the only evidence tendered by US Steel that the Glass Response Affidavits
constitutes new evidence not contained in the US Steel filing in August 2010 is
an affidavit from an articling student for counsel to US Steel. Such evidence
has little tangible value. In addition, I find it difficult to accept that US
Steel would not have anticipated some questioning of the basis for their claim
that an unprecedented economic downturn prevented them from fulfilling their
written undertakings, and as such, been more forthcoming in their filing of
August 2010 as to the evidence supporting their conclusions. Thus, it is
difficult for me to conclude that the relevance of the material “could not have
been anticipated at that time,” as set out in Callaghan, above, at para
24.
[33]
However,
despite these misgivings, after reviewing the Glass Response Affidavits and the
August 2010 US Steel Affidavits I have somewhat reluctantly come to the
conclusion that the Glass Response Affidavits do address issues that could not
have been in their entirety anticipated by the August 2010 US Steel Affidavits
and that they are sufficiently targeted so as to “address, impeach or qualify
the specific analysis or argument” made in the Glass Affidavit and do not
merely disagree with its conclusion (Eli Lilly Canada Inc, above at para
24).
[10] Good practice would dictate
that a party, whose right to file additional evidence by way of sur-reply is
defined solely by the criteria that it be "proper sur-reply", would
identify with clarity and precision the exact statements or paragraphs of the
reply to which it purports to sur-reply. […]
[…]
[24] […]
- Evidence should address directly what
is in fact said in the reply evidence.
- For evidence to be responsive, it must
contradict, qualify or impeach what is stated in the reply evidence.
- It is not enough that the sur-reply be
on the same subject-matter, related or relevant to the reply evidence.
- It is not a proper sur-reply to attack
the conclusion reached by one expert in his reply affidavit on the basis of an
argument different from that which forms the basis of the reply affidavit. In
other words, the sur-reply must address, impeach or qualify the specific
analysis or argument made in the reply affidavit, not merely its conclusion.
It is fair to say that I have
exercised the discretion provided to me in Rule 312 in a flexible manner. In
so doing, I agree with the approach taken by Justice Martineau who said in Callaghan,
above, at para 27:
[…] the Court
must always have in mind the general principle mentioned at rule 3 of the Rules
that "[t]hese Rules shall be interpreted and applied so as to secure the
just, most expeditious and least expensive determination of every proceeding on
its merits".
ORDER
THIS COURT ORDERS that:
1. Leave
is granted to US Steel to serve and file, within 10 days of the present order
the Glass Response Affidavits.
2. Leave
is granted to the AGC to serve and file any responding affidavits as it may
deem appropriate within 30 days from the filing of the Glass Response
Affidavits.
3. This motion is granted with no costs.
“ D.
G. Near ”
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