2015 QCCA 1351, 2015 QCCA 1351

Bloom Lake, g.p.l. (Arrangement relatif à) 2015 QCCA 1351 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-025441-155 500-09-025469-156 (500-11-048114-157) DATE: AUGUST 18, 2015 PRESIDING: THE HONOURABLE NICHOLAS KASIRER, J.A. IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED: 500-09-025441-155 MICHAEL KEEFER, TERENCE WATT, DAMIEN LEBEL AND NEIL JOHNSON, as representatives of the salaried / non-union employees and retirees APPLICANTS – objecting parties v.

BLOOM LAKE GENERAL PARTNER LIMITED QUINTO MINING CORPORATION 8568391 CANADA LIMITED CLIFFS QUEBEC IRON MINING ULC WABUSH IRON CO. LIMITED WABUSH RESOURCES INC RESPONDENTS – petitioners and THE BLOOM LAKE IRON ORE MINE LIMITED PARTNERSHIP BLOOM LAKE RAILWAY COMPANY LIMITED WABUSH MINES ARNAUD RAILWAY COMPANY WABUSH LAKE RAILWAY COMPANY LIMITED IMPLEADED PARTIES – impleaded parties and FTI CONSULTING CANADA INC. IMPLEADED PARTY – monitor and HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR, as represented by THE SUPERINTENDENT OF PENSIONS THE ATTORNEY GENERAL OF CANADA SYNDICAT DES MÉTALLOS,

SECTION LOCALE 6254 SYNDICAT DES MÉTALLOS,

SECTION LOCALE 6285 IMPLEADED PARTIES – objecting parties

500-09-025469-156 SYNDICAT DES MÉTALLOS,

SECTION LOCALE 6254 SYNDICAT DES MÉTALLOS,

SECTION LOCALE 6285 APPLICANTS – objecting parties v. BLOOM LAKE GENERAL PARTNER LIMITED QUINTO MINING CORPORATION 8568391 CANADA LIMITED CLIFFS QUEBEC IRON MINING ULC WABUSH IRON CO. LIMITED WABUSH RESOURCES INC RESPONDENTS – petitioners and THE BLOOM LAKE IRON ORE MINE LIMITED PARTNERSHIP BLOOM LAKE RAILWAY COMPANY LIMITED WABUSH MINES ARNAUD RAILWAY COMPANY WABUSH LAKE RAILWAY COMPANY LIMITED IMPLEADED PARTIES – impleaded parties and FTI CONSULTING CANADA INC.

IMPLEADED PARTY – monitor and HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR, as represented by THE SUPERINTENDENT OF PENSIONS THE ATTORNEY GENERAL OF CANADA MICHAEL KEEFER, TERENCE WATT, DAMIEN LEBEL AND NEIL JOHNSON, as representatives of the salaried / non-union employees and retirees IMPLEADED PARTIES – objecting parties and QUEBEC NORTHSHORE AND LABRADOR RAILWAY COMPANY INC.

IRON ORE COMPANY OF CANADA IMPLEADED PARTY – impleaded parties JUDGMENT [ 1 ] Sitting as judge in chambers pursuant to sections 13 and 14 of the Companies’ Creditors Arrangement Act [1] (“CCAA”) and articles 29, 511 and 550 C.C.P., I am seized of two motions for leave to appeal from a judgment of the Superior Court, District of Montreal (the Honourable Stephen Hamilton), rendered on June 26, 2015.

The Superior Court dismissed contestations made on behalf of the petitioners, who are, respectively, representatives of non-union employees and retired employees (petitioners in court file C.A.M. 500-09-025441-155 and hereinafter designated the “Salaried Members”) and the Syndicat des Métallos, sections locales 6254 and 6285 (in court file C.A.M. 500-09-025469-156, hereinafter referred to together as the “Union”). In so doing, the Superior Court confirmed the respondent’s request to grant priority to an interim lender charge over claims made by the petitioners based on deemed trusts in pension legislation.

The Court also suspended certain payments due under pension plans as well as for post-retirement benefits. [ 2 ] The Union filed an amended motion prior to the hearing. Both motions for leave also ask for orders to suspend provisional execution of the judgment notwithstanding appeal. I Background

[ 3 ] The facts are usefully and completely recounted in the judgment a quo . [2] [ 4 ] On May 20, 2015, the CCAA Judge Hamilton, J. granted a motion for the issuance of an initial order to commence proceedings under the CCAA to respondents Wabush Iron Ore Co. Ltd., Wabush Resources Inc., Wabush Mines, Arnaud Railway Company and Wabush Railway Co. Ltd. (the “Wabush CCAA Parties”).

The CCAA proceedings as they concern the Wabush CCAA Parties were joined to CCAA proceedings started some four months earlier involving the “Bloom Lake CCAA Parties”. [3] [ 5 ] Prior to the filing of the motion, Wabush Mines operated an iron ore mine located near the Town of Wabush and Labrador City, in the province of Newfoundland and Labrador, with facilities at Pointe-Noire, Quebec. [ 6 ] The Wabush CCAA Parties are currently involved in a court-ordered sales process, originally commenced in the Bloom Lake CCAA proceedings, whereby they seek to sell assets with a view either to concluding a plan of compromise with their creditors (including the petitioners) or disposing of assets and distributing the proceeds to creditors (including the petitioners). [ 7 ] The Wabush CCAA Parties have two defined pension plans for their employees, one for salaried employees and the other for unionized employees paid an hourly wage.

Because some employees work in a provincially-regulated setting in Newfoundland and Labrador and others work in federally-regulated industries, the plans are subject to oversight by both the federal Office of Superintendent of Financial Institutions and the Newfoundland and Labrador Superintendent of Pensions. [ 8 ] Both plans are underfunded. The CCAA Judge set forth estimated amounts to be paid as winding-up deficiencies, monthly amortization payments and lump-sum “catch-up” amortization payments.

He noted as well that the Wabush CCAA Parties provide other post-employment benefits (“OPEB”), including health care and life insurance, to certain retired employees. Accumulated benefits’ obligations for the OPEBs, as well as monthly premiums required to fund those benefits, are to be paid by the Wabush CCAA Parties.

In addition, amounts are due pursuant to a supplemental retirement arrangement plan for certain salaried employees (see paras [4] to [13] of the judgment). [ 9 ] The Wabush CCAA Parties arranged for interim financing (a debtor-in-possession or “DIP” loan) from Cliffs Mining Company, a related company. The CCAA Judge was of the view that the Wabush CCAA Parties’ cash-flow was compromised and that the interim financing was necessary to continue operations during restructuring.

The Wabush initial order approved an interim financing term sheet pursuant to which the interim lender would provide US$10M of interim financing, on conditions, for the Wabush CCAA Parties short-term liquidity needs during the CCAA proceedings. These conditions included, as the CCAA Judge recorded in paragraph [16] of his reasons, a requirement that the interim lender have a charge in the principal amount of CDN $15M, with priority over all charges, against Wabush CCAA Parties’ property, subject to some exceptions.

There is a further condition that Wabush CCAA Parties may not make any special payments in relation to the pension plans or any payments in respect of the OPEBs.

The initial order granted the interim lender charge of $15M but did not give priority to that charge over existing secured creditors in order to allow the parties to make representations at a comeback hearing. [ 10 ] At that comeback hearing, the Wabush CCAA Parties sought, inter alia , priority for the interim lender charge ahead of deemed trusts created by pension legislation and a suspension of obligations to pay amortization payments in relation to the pension plans and payments for OPEBs. The Salaried Members and the Union contested these matters.

The CCAA Judge issued an order on June 9, 2015 granting priority to the interim lender charge, subject to the rights of, inter alia , the Salaried Members, the Union and the federal and provincial pension authorities to be determined at a later hearing. [ 11 ] That hearing on June 22, 2015 gave rise to the judgment a quo in which the CCAA Judge granted the Wabush CCAA Parties’ comeback motion and dismissed the contestations brought by the Salaried Members and the Union.

II The judgment of the Superior Court [ 12 ] The CCAA Judge made numerous findings and rendered different orders, not all of which concern the motions before me.

I will limit my comments to those aspects of the judgment relevant here. [ 13 ] After setting forth the context and the arguments of the parties, the CCAA Judge considered the conflict between the super- priority of the interim lender charge and the deemed trusts created by federal and provincial legislation. (His findings in respect of the provincial rules do not concern us directly at this stage). [ 14 ] As to the impact of CCAA proceedings on the deemed trust created by subsection 8(2) of the Pension Benefits Standards Act, 1985 , [4] the judge wrote “there is no general rule that deemed trusts in favour of anyone other than the Crown are ineffective in insolvency” (para. [72]).

He then considered the effect of subsection 8(2) PBSA on the provisions of the CCAA that deal with pension obligations, including subsections 6(6) and 36(7) CCAA that were added to the Act in 2009. Based on his

interpretation of the general rule in subsection 8(2) PBSA and the particular rules in the CCAA, the judge concluded, as an exercise of statutory

interpretation, that “Parliament’s intent is that federal pension claims are protected in […] restructurings only to the limited extent set out in the […] CCAA, notwithstanding the potentially broader language in the PBSA” (para. [78]). In the alternative, he wrote, “the Court could conclude that a liquidation under the CCAA does not fall within the term “liquidation” in Subsection 8(2) PBSA such that there has been no triggering event” (para. [79]). Either way, he observed, the deemed trust in subsection 8(2) PBSA did not prevent him from granting a priority to the interim lending charge if the conditions of

section 11.2 CCAA were met. [ 15 ] After considering the relevant factors under the CCAA to the facts of the case, the CCAA Judge decided that the proposed sale was in the interests of the Wabush CCAA Parties and their stakeholders as it should lead to a greater recovery. The sale required new financing and, without that financing, it is likely that the Wabush CCAA Parties would go bankrupt. The judge also expressed his view that the terms and conditions of the interim financing were reasonable, and that the security is limited to the amount of the new financing.

He then wrote that “[t]his is sufficient for the Court to conclude that the Interim Financing should be approved and the interim lender charge should be granted with priority over the deemed trust under the PBSA, if it is effective in the CCAA context” (para. [95]). He also found that the terms of the interim lending sheet, including the requirement that the interim lender be granted super priority, were not unusual and that he was not satisfied that the Superior Court had jurisdiction to order the lender to advance the funds on other

terms (para. [100]). [ 16 ] The CCAA Judge then gave reasons for his decision to grant the Wabush CCAA Parties’ request that their obligation to make special and OPEB payments be suspended. He held that forcing the Wabush CCAA Parties to make special payments would lead to a default under the interim financing arrangement and a likely bankruptcy (para. [112]). He came to the same conclusion in respect of the OPEBs (para. [122]). In so doing, he rejected the argument that the suspension of the OPEBs amounted to a resiliation of the insurance contract under which the benefits are provided, resiliation which would have required notice under

section 32 CCAA (paras [127] to [131]). [ 17 ] The CCAA Judge rejected all other grounds for contestation. He confirmed the priority of the interim lending charge over the deemed trusts as set out in the initial order; he ordered the suspension of payment by the Wabush CCAA Parties of monthly amortization payments, of the annual lump sum catch-up payments, and of other post-retirement benefits.

III The motions for leave [ 18 ] The two motions raise some similar issues but are different in scope. [ 19 ] The Salaried Members ask for leave to appeal in respect of conclusions relating to two aspects of the judgment. [ 20 ] First, the Salaried Members seek to reverse the CCAA Judge’s approval of what they characterize as the termination of OPEBs and of payment of supplemental pension benefits imposed by the Wabush CCAA Parties without proper notice as required by

section 32 CCAA .

In this regard, the Salaried Members object to the following paragraph in the judgment a quo : [146] ORDERS the suspension of payment by the Wabush CCAA Parties of other post-retirement benefits to former hourly and salaried employees of their Canadian subsidiaries hired before January 1, 2013, including without limitation payments for life insurance, health care and a supplemental retirement arrangement plan, nunc pro tunc to the Wabush Filing Date. [ 21 ] In argument, the Salaried Members also contended that the CCAA Judge’s finding that the Wabush CCAA Parties did not have the funds to meet the $182,000 monthly payments for the premiums to fund the OPEBs and the supplemental pension benefits was mistaken. [ 22 ] Second, the Salaried Members seek to reverse that portion of the CCAA Judge’s reasons bearing on the ineffectiveness of the federal statutory deemed trust in CCAA proceedings.

They say that to hold the deemed trust priority under the PBSA to be “of no force and effect in CCAA Proceedings on a wholesale basis” is wrong in law. Specifically they state that the deemed trust priority should continue to apply for the benefit of Salaried Members over the assets of the company in future priority distributions (after the DIP and CCAA-ordered priorities).

For this second argument, the Salaried Members target the following paragraphs of the CCAA Judge’s reasons as they pertain to the effectiveness of the PBSA deemed trust in CCAA proceedings: [78] For all of these reasons, the Court concludes that Parliament’s intent is that federal pension claims are protected in insolvency and restructurings only to the limited extent set out in the BIA and the CCAA , notwithstanding the potentially broader language in the PBSA. [79] In the alternative, the Court could conclude that a liquidation under the CCAA does not fall within the term “liquidation” in Section 8(2) PBSA such that there has been no triggering event. [ 23 ] It may be noted that the Salaried Members had initially contemplated objecting to the non-payment of other amounts owing by the Wabush CCAA Parties in respect of the pension plans.

But given limits to the Wabush CCAA Parties’ cash-flow and the significant amounts of these payments, the Salaried Members chose not to pursue the objections in these proceedings. [ 24 ] As noted, the Salaried Members also ask to suspend provisional execution notwithstanding appeal of this order. [ 25 ] The Union’s proposed appeal is somewhat broader. [ 26 ] In respect of the portion of the judgment regarding the deemed trust provided in the PBSA, the Union is of the view, like the Salaried Members, that the CCAA Judge erred in holding that the subsection 8(2) PBSA deemed trust is ineffective in CCAA proceedings.

Moreover, the Union disagrees with the CCAA Judge that the pension amortization payments constitute ordinary, unsecured claims under the CCAA rather than trust claims (paras [103] to [118] of the judgment). The Union also says the CCAA Judge was mistaken in deciding that the financing conditions in respect of the interim financial loan were reasonable insofar as those conditions precluded the payment of OPEBs (paras [119] to [133]). The judge should have set aside the unreasonable conditions in the interim lending sheet.

Had he done so, the judge would have found that the Wabush CCAA Parties had the necessary funds to make the payments owed under the plans. [ 27 ] The Union also seeks a stay of provisional execution of the judgment. [ 28 ] It bears mentioning that the Union’s motion was filed late.

In keeping with section 14(2) CCAA , the Union obtained permission from the CCAA Judge to bring the late appeal, subject to the determination by a judge in chambers of this Court as to whether the appeal is a serious one. [5] None of the parties objected to this way of proceeding and I find the Union’s amended motion to be correctly before me. IV Criteria for granting leave [ 29 ] The test for leave under the CCAA is well known.

Writing for the Court of Appeal for Saskatchewan in Re Stomp Pork Farm Ltd ., [6] Jackson, J.A. wrote: [15] In a series of cases emanating first from British Columbia and then from Quebec, Alberta and Ontario, there has developed a

consensus among the Courts of Appeal that leave to appeal an order or decision made under the CCAA should be granted only where there are serious and arguable grounds that are of real significance and interest to the parties and to the practice in general.

The test is often expressed as a four-part one: 1. whether the issue on appeal is of significance to the practice; 2. whether the issue raised is of significance to the action itself; 3. whether the appeal is prima facie meritorious or, on the other hand, whether it is frivolous; and, 4. whether the appeal will unduly hinder the progress of the action. [ 30 ] Judges sitting in chambers of this Court have consistently applied this four-part test to measure the seriousness of a proposed appeal.

As my colleague Hilton, J.A. observed in Statoil Canada Ltd. (Arrangement relative à) , [7] the above-mentioned four criteria are understood to be cumulative, with the result that if a petitioner fails to establish any one of them, the motion for leave will be dismissed. Hilton, J.A. alluded to the oft-repeated injunction that a petitioner seeking leave to appeal faces a heavy burden given the role of a CCAA judge, the discretionary character of the decisions he or she must make and the nature of the proceedings.

He recalled the longstanding cautionary note that motions for leave should only be granted “sparingly”. [8] [ 31 ] The grounds upon which a stay of provisional execution notwithstanding appeal may be granted by a judge in chambers are also well known. [9] Applying the principles developed pursuant to

article 550 C.C.P. to this case, I note that the petitioners must show that the judgment suffers from a plain weakness; that failing to grant the stay would result in serious harm (sometimes characterized as irreparable harm) to them; and that the balance of inconvenience favours granting a stay.

IV Analysis [ 32 ] Despite the importance of certain of the questions raised in the motions for leave to the practice and to this action, and notwithstanding the prima facie meritorious character of some arguments made by the petitioners, I am of the respectful view that both the Salaried Members and the Union have failed to meet the test for leave. In particular, they have not convinced me that an appeal would not unduly hinder the progress of the action. [ 33 ] I shall make brief comments on each of the four criteria in turn.

IV.1 Importance of the questions to the practice [ 34 ] Some questions raised in both motions, to varying degrees, have importance to the practice as that notion is understood in connection with applications for leave brought under sections 13 and 14 CCAA . [ 35 ] The issue of the effectiveness of the PBSA deemed trust in CCAA proceedings raised in both motions meets this first criterion. This issue is not, as the respondent argued, a settled matter.

In pointing to the CCAA Judge’s comment in paragraph [61] to the effect that “[t|hese are not new issues”, respondent has, it seems to me, quoted the judge out of context. It is of course true, as the CCAA Judge observed, that courts, including the Supreme Court, have been called upon to consider the effect of statutory deemed trusts in insolvency on numerous occasions. But as the CCAA Judge’s own reasons make plain, the

interpretation of the deemed trust protection in subsection 8(2) PBSA in light of amendments made to the CCAA in 2009, in particular subsections 6(6) and 36(7) , involve a different exercise of statutory

interpretation. In undertaking that work, the judge did have the benefit of principles set out in Century Services [10] relating to the conflict between the deemed trust for the GST and the CCRA, in Sparrow Electric [11] dealing with a deemed trust in favour of the Crown in respect of payroll deductions for taxation, as well as Indalex [12] in which a conflict between provincial deemed trust and federal insolvency law was in part at issue. But these settings were different from that of the case at bar.

Others have observed that difficulties arising out of the interaction between deemed trust rules for pensions and the CCAA persist, notwithstanding the jurisprudence of the Supreme Court on point. [13] Moreover, the narrow issue would be new to this Court and the practice would have a precise consideration of the interaction between the federal deemed trust in subsection 8(2) and the CCAA by an appellate court. [ 36 ] This is not to say that the CCAA Judge was the first to consider the problem.

He had the benefit of Aveos [14] , decided by Schrager, J., as he then was, as well as a scholarly paper on the topic which he cited with approval in paragraph [77]. And while the CCAA Judge and Schrager, J. agree on central aspects of that

interpretation exercise, they are not at ones on all points, including the importance of a Crown exception in this context (as the CCAA Judge himself noted at para. [72]). While I recognize the care with which the CCAA Judge examined the question of statutory

interpretation, as well as the alternative argument as to whether “any liquidation” within the meaning of subs. 8(2) PBSA includes CCAA proceedings – a point not given full analysis in Aveos – the matter of the effectiveness of the federal deemed trust in CCAA proceedings is not settled law and remains important to CCAA practice. [ 37 ] Is the issue raised by the Salaried Members of the proper scope of

section 32 CCAA , and the prior notice rule, also of sufficient importance to the practice? [ 38 ] As I will note below, I am of the respectful view that the merits of this argument are less strong. Nonetheless, the matter of the proper scope of

section 32 in light of the kind of insurance contract that provided benefits here, and in particular of competing notions of suspension and termination of OPEBs, is one of importance to the practice. [ 39 ] What about the Union’s argument that the judge erred in holding that the terms of the interim financing were reasonable? [ 40 ] This decision was one that called upon the CCAA Judge to make a determination of fact and exercise discretion afforded him under the Act, matters generally viewed as less consequential to the practice.

Moreover, it would seem to me that the ability of a lender to determine the basis of risk he or she is willing to tolerate in a restructuring is not a matter widely disputed. I have not been convinced that this point, viewed on its own, is important to the practice.

IV.2 Importance of the questions to the present action [ 41 ] The decision not to apply the PBSA deemed trust in CCAA proceedings has meaningful negative consequences for both the Salaried Members and the Union. The importance to the action in this regard seems beyond serious dispute. [ 42 ] I agree with the petitioners that the question relating to the suspension or termination of the OPEBs is also significant to the action.

The CCAA Judge recognized at para. [126] and again at para. [133] of his reasons that if the Wabush CCAA Parties fail to pay the premiums on the insurance policy, the policy will be cancelled thereby causing hardship to the Petitioners. I agree too with the position of counsel to the Union who argued that aspects of the pension claims may usefully be compared to alimentary claims, and that the hardship in suspending them gives the question sufficient importance to the action.

IV.3 The proposed appeals are prima facie meritorious and not frivolous [ 43 ] The arguments brought in service of the petitioners’ view that the deemed trust under the PBSA remains effective in CCAA proceedings are not frivolous. While the exercise of statutory

interpretation undertaken by the CCAA Judge – which, it should be noted, is not a discretionary exercise in and of itself – shows no prima facie weakness, that is not to say that it precludes an arguable case for the other side. [15] There are, in my view, grounds for framing a statutory

interpretation argument for the petitioners' position that have prima facie merit when one considers, for example, that the CCAA amendments are the product of a complicated evolution; that the CCAA and the PBSA have different policy objectives which may shape

interpretation; that the relevance of principles developed by the Supreme Court in other settings to the deemed trusts problem faced in this case is the matter of fair debate; that comparisons might be made with deemed trust regimes from the provinces or other statutes, and more. All of these factors suggest to me that, notwithstanding the strength of the judgment a quo , there are prima facie meritorious lines of argument that might be pressed on appeal.

The parties debated vigorously the scope of “any liquidation” in subs. 8(2) PBSA before me, for example, as they did the proper scope of amendments to the CCAA and the policy they reflect. On the question of the effectiveness of the PBSA deemed trust as raised by the Salaried Members and in the first three grounds of appeal in the Union’s amended motion, I am of the view that this criterion is satisfied. [ 44 ] The issue of the proper scope of

section 32 CCAA , and the prior notice rule, strikes me, from my disadvantaged position, to be less compelling, but I would not say it is wholly lacking in merit. [ 45 ] Counsel for the monitor argued, in support of the respondents’ position that leave should be refused, that this ground of appeal was frivolous. He contended that the CCAA Judge rightly held that

section 32 plainly did not apply to the resiliation of the Wabush CCA Parties’ insurance contract. Like the respondents, the monitor said the CCAA Judge rightly relied on Mine Jeffrey [16] decided by this Court in 2003, and that his analysis of the “tri-partite relationship” between the employer, the insurer and the beneficiary in paragraphs [129] et seq . is free from error. [ 46 ] The question as to the applicability of

section 32 here is not frivolous, even if Mine Jeffrey presents a formidable obstacle to a successful appeal. While not equal in strength, arguments raised by counsel for the Salaried Members as to type of contract to which the rule applies and, in particular, to the distinction between the termination of a contract and the suspension of a contract, are not without some merit.

While I recognize that the test of the relative merit of the arguments proposed can be construed in some circumstances as requiring more than “a limited prospect of success” [17] given the nature of CCAA proceedings, I would not dismiss the motions on this narrow issue on this basis alone. [ 47 ] The Union says the interim lender’s conditions should be set aside as unreasonable.

I am not convinced that this argument is prima facie meritorious. [ 48 ] Counsel for the Union argues strongly that the interim lender should not be allowed to dictate terms to the CCAA Judge or to the stakeholders as a whole by imposing conditions on financing that have the effect of exploiting the vulnerability of the employees and former employees.

He says that if the interim lender’s conditions were struck as unreasonable, the Wabush CCAA Parties would have access to those funds and that there would be no need to suspend the various payments due to the petitioners. [ 49 ] With respect, this argument strikes me as flawed in two respects. First, it requires an overturning of the CCAA Judge’s view – with all the advantages of perspective he has in so deciding – that as a matter of fact the conditions of the interim financing are reasonable.

Secondly, the Union has left unanswered the questions raised by the judge concerning the “harsh commercial realities of interim financing” at paragraph [115]. Why indeed should the interim lender advance funds be used to pay someone else’s debt, particularly one that is pre-filing and unsecured? Why should a condition of the financing be ignored, effectively forcing the lender to advance funds on disadvantageous terms to which it did not agree? It is not a matter of the CCAA Judge being callous or insensitive to hardship faced by vulnerable parties.

In my view, the comment of Deschamps, J. for the majority in Indalex , as adapted to the setting of federal deemed trusts, is apposite here: “The harsh reality is that lending is governed by the commercial imperatives of the lenders, not by the interests of the plan members or the policy considerations that lead provincial governments to legislate in favour of pension fund beneficiaries”. [18] IV.4 The appeal will not hinder the progress of the action [ 50 ] The petitioners argue that the Wabush CCAA Parties are undergoing a court-supervised sales process in accordance with timelines and procedures that are supervised by the CCAA Judge with the oversight of the monitor.

In the circumstances, they say, the proposed appeal, especially if it were placed on an accelerated roll, would not hinder the progress of the action. They contend, to differing degrees, that the CCAA Judge erred in his measure of the financial vulnerability of the Wabush CCAA Parties.

Mindful no doubt of the difficulty that this aspect of the analysis presents to their leave application, the Salaried Members “part company” (to use the expression of counsel) with the Union in framing their appeal more narrowly, in particular in respect of the recognition that the DIP loan enjoys a wider priority than does the Union, and in limiting their claim in respect of the payments that should escape suspension. [ 51 ] Given the findings of fact concerning the fragility of the Wabush CCAA Parties as observed by the CCAA Judge, I find the

positions of both petitioners on this point unconvincing. Even the “strategic” decision of the Salaried Members to contest the judgment on a narrower basis does not satisfy this criterion.

In my view, both proposed appeals would unduly hinder the action. [ 52 ] My conclusion is based largely on the findings of fact arrived at by the CCAA Judge regarding the vulnerability of the Wabush CCAA Parties at this stage of the restructuring. [ 53 ] In canvassing the circumstances in which the interim financing was put in place, the CCAA Judge observed that the cash-flow position of the Wabush CCAA Parties was compromised with the result that they needed the interim financing to continue even their limited operations during the CCAA process (para. [16]).

The CCAA Judge made the following specific findings, which I consider to be findings of fact: (1) that the sale and investor solicitation process in progress are in the interests of the Wabush CCAA Parties and their stakeholders because they will likely lead to a greater recovery; (2) that without new financing, the Wabush CCAA Parties could not complete the sale; (3) that without new financing allowing them to complete the sale, it is likely that the Wabush CCAA Parties will go bankrupt; (4) that the Wabush CCAA Parties and the monitor have not identified any other source of new financing; and (5) that the terms of the interim financing are reasonable (para. [94]). [ 54 ] When discussing the suspension of special payments, the CCAA Judge observed, at para. [112]: [112] The Wabush CCAA Parties do not have the funds available to make these payments.

The cash flow statements filed with the Court show that the Wabush CCAA Parties need the funds from the Interim Financing to meet their current obligations other than the special payments. The Interim Lender Term Sheet expressly requires the Wabush CCAA Parties not to make any special payments.

As a result, forcing the Wabush CCAA Parties to make the special payments would lead to a default under the Interim Financing and a likely bankruptcy. [Footnote omitted.] [ 55 ] In respect of the suspension of the OPEBs – including what the Salaried Members characterize as the modest premiums of $182,000 per month and the supplemental retirement arrangement plan amount – the CCAA Judge recalled at para. [122] that “[t]he Wabush CCAA Parties do not have any funding valuable to continue to pay any of the foregoing OPEBs, as the Interim Financing Sheet prohibits such payments”.

In para. [125], the CCAA Judge explained that it was not enough to say, as did the Salaried Members, that $182,000 and the supplemental amount could be found elsewhere if the interim lending sheet prevents them from making the payments: “Given the cash flow statement filed with the Court and the language of the Interim Lender Sheet, the Court accepts that the Wabush CCAA Parties do not have the funds”. [ 56 ] These findings of fact, while not immune from review, are deserving of deference on appeal.

It is not enough to say, without more, that the amount is a small one in the grand scheme of things, as do the Salaried Members, or that another interim lender could be found without difficulty as the action proceeds. The CCAA Judge decided specifically otherwise. A reviewable error would have to be shown on this point to overcome the strong impression that comes from reading the judgment that granting leave and suspending provisional execution would hinder the action. [ 57 ] In like circumstances, leave has been denied.

Recently in Bock inc. (arrangement relative à) , [19] my colleague Bich, J.A. declined to grant leave, notwithstanding the presence of a question she characterized as “interesting” for the purposes of an eventual appeal and one in respect of which, like ours, there was a paucity of appellate court consideration. “Granting leave to appeal”, she wrote at para. [12] of her reasons, “would most likely jeopardize the course of the action and cause irreparable harm to the debtor company and, consequently, all other stakeholders (creditors, employees, etc.)”.

Similarly, in Re: Consumer Packaging Inc ., [20] a bench of the Court of Appeal for Ontario declined to grant leave in circumstances where conditions set by the interim lender meant that the time and financial constraints that would have come with an appeal were prohibitive: “Leave to appeal should not be granted”, wrote the Court at para. [5], “where, as in the present case, granting leave would be prejudicial to restructuring the business for the benefit of stakeholders as a whole […]”. [21] [ 58 ] All told, the risk of default on the interim financing and of bankruptcy to the Wabush CCAA Parties is serious.

Granting leave would, in this setting, risk hindering the action. If leave were granted, the petitioners would likely obtain, at best, a Pyrrhic victory if they succeeded on appeal. *** [ 59 ] Given my conclusion that leave should be denied, the motions seeking a stay of the judgment pursuant to

article 550 C.C.P. are without further object and should be dismissed as well. In any event, the conditions necessary for a stay were not present. While the petitioners have, to be sure, shown that they have an arguable case, they have not pointed to something I would characterize as a weakness in the judgment a quo . They did satisfy the burden of showing that the failure to grant a stay would cause them harm.

However, the balance of inconvenience – considering the impact that lifting the stay would have on the Wabush CCAA Parties – would not have favoured granting a stay. [ 60 ] Counsel should be commended for their helpful presentation of the matter in dispute. [ 61 ] FOR THE AFOREMENTIONED REASONS : the undersigned: [ 62 ] DISMISSES the Salaried Members motion for leave to appeal and for a stay, with costs; [ 63 ] DISMISSES the Union’s amended motion for leave to appeal and for a stay, with costs.

NICHOLAS KASIRER, J.A. Mtre Andrew J. Hatnay Mtre Ari Nathan Kaplan Koskie Minsky LLP Mtre Geeta Narang Narang & associés Mtre Nicholas Scheib (absent) Scheib Legal For Michael Keeper, Terence Watt, Damien Lebel and Neil Johnson Mtre Bernard Boucher Blake Cassels & Graydon s.r.l. (Montreal) For Bloom Lake General Partner Mtre Steven Weisz Blake Cassels & Graydon s.r.l. (Toronto) For Bloom Lake General Partner Mtre Louis Dumont Dentons Canada LLP For Cliffs Quebec Iron Mining ULC Mtre Sylvain Rigaud Norton Rose Fulbright Canada LLP For FTI Consulting Canada Inc.

Mtre Douglas Mitchell (absent) Mtre Leslie-Anne Wood (absent) Irving Mitchell Kalichman For Her Majesty in right of Newfoundland and Labrador, as represented by the Superintendent of Pensions Mtre Pierre Lecavalier Department of Justice – Canada For the Attorney General of Canada Mtre Jean-François Beaudry Philion, Lebland, Beaudry, avocats, S.A. For the Syndicat des Métallos,

Section Locale 6254 and

Section Locale 6285 Mtre Gerald N. Apostolatos Langlois Kronström Desjardins For the Creditors Quebec North Shore and Labrador Railway Company Inc. and Iron Ore Company of Canada Date of hearing: August 5, 2015