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Interim Order Prevents One Party from Accessing Contractual Damage Compensation until Appeal is Decided

Veolia Water Technologies Inc. v K+S Potash Canada General Partnership , 2018 SKCA 61

In an application brought by Veolia Water Technologies Inc. (“Veolia”), Justice Ottenbreit granted an interim order preventing K+S Potash Canada General Partnership (“K+S”) from accessing compensation for damages in the form of letters of credit (“LOCs”) until an appeal by Veolia is heard and decided.

The appeal—which has not yet been heard—is based on the following:

K+S had originally brought an application against Veolia seeking damages in excess of $180,000,000 after a contractual dispute arose.

Veolia provided two LOCs; one for if they defaulted on certain contractual obligations, and the second to cover damages in the event steel framing supporting a crystallizer (designed and supplied by Veolia) collapsed. Access for the second LOC was dependant on the damage being attributable to Veolia and recoverable under the contract.

K+S had taken steps to draw from the first LOC. They also gave notice of their intention to take similar steps for the second.

Veolia’s position was that K+S had no right to access the LOCs. They argued that no default had occurred, or, that a court or arbitrator must first determine which party was liable before K+S had a right to access the LOCs. The Chambers judge dismissed this application, and Veolia appealed.

This interim order finds itself between the original application and the appeal.

Section 20(1) of The Court of Appeal Act, 2000, SS 2000, c C-42.1 outlines when a judge may hear an application for an interim order:

A single judge sitting in chambers may hear and dispose of an application or motion that is incidental to an appeal or matter pending in the court and that does not involve the decision of the appeal on the merits.

Deciding against K+S’ argument, Justice Ottenbreit determined he had jurisdiction to make the interim order.

Justice Ottenbreit referred to the Saskatchewan cases,Beare v Kirby Enterprises Inc., 2013 SKCA 44, 414 Sask R 66; and Carman Loraas v Bruce Loraas (15 May 2018) to affirm his power to determine this matter. Although the courts in both cases dismissed the application, they supported a single judge’s authority to decide whether to grant an injunctive relief.

Justice Ottenbreit also cited Morin v Matheson, 2017 SKCA 80 (“ Morin”) as support for a single judge’s authority to grant an interim order. In Morin, the court said that granting this type of relief preserves the status quo and prevents the frustration of an appeal; both desired by the courts.

Deciding whether to exercise this power is fact-specific. In this case, the power was exercised because the interim order was incidental to the appeal—in essence, it did not seek the same thing sought in the appeal.

The appeal itself is centered on Veolia’s argument that K+S does not have the right to access the LOCs, and that any money already accessed by K+S should be repaid to Veolia. The interim order, by contrast, is a short-term request to prevent K+S from accessing the LOCs in the meantime (until the appeal is decided).

Justice Ottenbreit relied on the test from RJR-MacDonald Inc. v Canada (Attorney General), [1994] 1 SCR 31, which questions whether an applicant (here, Veolia) has shown: (a) that the appeal raises a serious question to be tried (generally a low threshold); (b) that irreparable harm will result if the relief is not granted; and (c) the balance of convenience or inconvenience is in its favour (essentially, Veolia would be more inconvenienced if the interim order was not granted than K+S would be if the interim order was granted).

Veolia satisfied all parts of the test. The ground for Veolia’s appeal crossed the “serious question” threshold, though Justice Ottenbreit did not elaborate on this point.

“Irreparable harm” was met, because if the interim order was not granted, K+S would likely have access to the LOCs—the very thing the appeal seeks to prevent. K+S’ access prior to the appeal would render the appeal itself pointless.

Finally, the “balance of convenience” question was answered in favour of Veolia. K+S’ access to the LOCs would be a greater harm to Veolia than the harm K+S would experience from being temporarily barred from the LOCs. If the appeal, for example, is decided in K+S’ favour, they will be compensated for the delay accordingly.

Though courts have been reluctant to grant interim orders in the past, this decision shows that a single judge, in considering the facts of a case, is empowered to grant this type of relief.

The basis for this decision requires an interim order to be incidental to its connected appeal or motion. The decision also emphasizes the importance of preserving the status quo leading up to an appeal, and a method by which a party may attain interim relief.