Ernst & Young Inc. in its Capacity as Monitor of
all of the Following: Essar Steel Algoma Inc. et al. v.
Essar Global Fund Limited et al.
[Indexed as: Ernst & Young Inc. v. Essar Global Fund Ltd.]
2017 ONSC 1366
Superior Court of Justice, Newbould J.
March 6, 2017
Corporations — Oppression — Monitor under Companies’ Creditors
Arrangement Act having standing as complainant to bring oppression
action under Canada Business Corporations Act — Algoma entirely
dependent on access to port in order to function economically — Transaction directed by parent company which conveyed Algoma’s port facilities to related company and resulted in Algoma losing control over port
facilities being oppressive to Algoma’s creditors — Canada Business
Corporations Act, R.S.C. 1985, c. C.44 — Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36.
Algoma, a steel manufacturer, had sought protection under the Companies’
Creditors Arrangement Act (“CCAA”). Algoma was entirely dependent on its port
facilities to receive raw materials and to ship its products to market. Algoma’s
parent company, Essar, directed a transaction which conveyed the port facilities
to a related company and resulted in Algoma losing control over the port facilities. The CCAA monitor brought oppression proceedings under s. 241 of the
Canada Business Corporations Act in respect of the port transaction and other
transactions. The court dealt with the port transaction first.
Held, the action in respect of the port transaction was allowed.
The monitor was a proper complainant under the Canada Business Corporations Act. There were very large amounts owing to trade creditors, pensioners
and retirees. Aspects of the port transaction, such as a change of control clause
that gave Essar control over who could be a buyer of the Algoma business, were
harmful to a restructuring process and negatively impacted creditors. The monitor had brought this action as an adjunct to its role in facilitating a restructuring.
The reasonable expectations of the trade creditors, employees, pensioners and
retirees of Algoma were that Algoma would not deal with a critical asset like the
port in such a way as to lose long-term control over such a strategic asset to a
related party on terms that permitted the related party to veto and control
Algoma’s ability to do significant transactions or restructure and which gave
unwarranted value to the third party. The port transaction violated those
reasonable expectations and was oppressive to the creditors, employees, pensioners and retirees.
Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp.
(2003), 68 O.R. (3d) 544,  O.J. No. 5242, 180 O.A.C. 158, 42 B.L.R. (3d) 14,
46 C.B.R. (4th) 313, 127 A.C.W.S. (3d) 830 (C.A.); Rea v. Wildeboer (2015),
126 O.R. (3d) 178,  O.J. No. 2651, 2015 ONCA 373, 335 O.A.C. 161,
384 D.L.R. (4th) 747, 37 B.L.R. (5th) 101, 253 A.C. W.S. (3d) 87, consd
Other cases referred to
820099 Ontario Inc. v. Harold E. Ballard Ltd.,  O.J. No. 266, 3 B.L.R. (2d)
113 at 123, 25 A.C.W.S. (3d) 853 (Gen. Div.); BCE Inc. v. 1976 Debentureholders,