The wording of a recent Quebec Superior Court ruling on a Waswanipi sawmill’s attempt to break with Montreal-based Domtar was simple and direct: no way.
The 12-page ruling, handed down February 16, states that the shareholders’ agreement between Waswanipi’s Mishtuk Corporation and Domtar has no expiration date and must be respected to the letter.
“We’re obviously very disappointed, to say the least,” said Mishtuk Corporation Director General Jack Blacksmith.
As a result, Mishtuk must pay all court costs, which have yet to be tabulated.
The sawmill’s lack of options in selling their goods and the pittance of a price they receive from Domtar for thousands of tons of wood chips was at the heart of Waswanipi’s decision to try to quash the current relationship.
“I joined Mishtuk in April 2004 and bad blood was already there,” Blacksmith said. “There had already been discussions to form a joint venture without Domtar. It’s gotten worse today. We can’t even sit down for a meeting with them.”
Blacksmith said the initial mistake was made by Waswanipi. “When we first started the company we signed a protocol agreement, describing the various issues in relation to how the company was going to function. About a year and a half later, we signed the shareholders’ agreement, which is the main agreement to any venture.”
Although the protocol agreement should have expired in 2005, the shareholders’ agreement takes precedence.
“In hindsight, the shareholders’ agreement was totally in favour of Domtar. It is my understanding that the community wanted to phase out Domtar, but that wasn’t in the agreement. And the shareholders’ agreement has no life limit, it’s essentially forever.”
Together, both companies form a board of directors and a company called the Nabakatuk Corporation, which is set up to facilitate the original agreement and to make sure both sides act in good faith.
Domtar’s Razvan Theodoru, who sits as the Corporate Secretary on the Nabakatuk Board of Directors, was elated with the decision.
“Obviously we felt that this is in line with what our position was all along, so it’s something we expected,” Theodoru said. “We’re not there to fight with anyone; we’re there to continue on with this relationship that we’ve had for over 10 years. The ball is in Chief Kitchen’s court to see how he will deal with this.”
Blacksmith told the Nation that the agreement was signed as such because Waswanipi was desperate for a sawmill. An increase in wood allocation from the government in the early 1990s forced Waswanipi to put out a tender call to harvest the larger CAAF area. At the time, Blacksmith said, it was the best they could get. “Waswanipi didn’t have the expertise to run a sawmill,” he said.
The joint Nabakatuk Corporation built the Waswanipi sawmill in the mid-90s.
“We manufacture raw lumber at our mill – two-by-six or two-by-four lumber, whatever the case may be,” said Blacksmith. “They’re all rough and unfinished and we don’t have the equipment in Waswanipi to finish them. So we take them to Val d’Or and the lumber is finished, planed and dried there and then wrapped up and sold. All of this at a cost to Waswanipi.”
According to Blacksmith, Domtar told them to go to Val d’Or instead of Lebel-sur-Quevillion, adding to the transportation costs.
Theodoru disagrees. “The transportation of wood was agreed upon by both parties. There was a board meeting in 2001 and they came to an agreement that the wood would be processed wherever it was most advantageous to both parties. So this is water under the bridge.”
Also, Mishtuk found out that if they sold their wood chips to other companies, such as Fonds SFK Pate, also named in the lawsuit, they would make $13 to $18 more per metric ton. When multiplied by 22,000 metric tons, that’s a lot of dough.
“Over the course of the year there was a scarcity of chips and they projected that over the long term, so the price increased,” said Theodoru. “Mishtuk went to SFK in the summer of 2005 and got a better price than we were giving. If they had come to us and asked if we can match that, of course we would have said yes. We started paying that once we found out that was the market price.”
Blacksmith wasn’t swayed. “Can you believe a big company like Domtar wasn’t aware of the market price? They’re pulling your leg,” he told the Nation.
The mill currently employs 90 people, but they are looking to add at least 30 jobs as they shoot for the next phase. At year-end 2005, the Nabakatuk Corporation was running a $10.4 million deficit.
Worker’s salary and benefits however, have meant a $15 million injection into the community’s economy, according to Domtar.
“But we didn’t make any profit on it that’s for sure,” said Theodoru. “The major advantage was on the community side as far as salaries and everything else. We’ve also invested a lot of resources, energy and technical and financial expertise and that hasn’t even been calculated. The business hasn’t made any money over the last 10 years.”
Theodoru added that Domtar’s dismal performance on the stock market over the past year, coupled with recent mill closings across the province did not add to their sense of urgency. “Whether the business was going bad or good is irrelevant as far as we’re concerned.”
“We’re determined to get to phase two,” said Blacksmith. “Phase two includes everything we don’t have right now, the planer, the dryer, so we can finish all of our products here in Waswanipi. We’ll save more money in terms of transportation costs, we’ll have more of a professional operation here and our people will move to the next level, acquiring all those skills necessary to operate a full-scale sawmill.”
Blacksmith says that despite the ruling, all is not lost.
“There is a way under the Canadian Business Act where we could declare that the partners can no longer work together. We need the courts to rule on that. I guess you’d call it an oppression remedy.”
Domtar wants to save the partnership at all costs. “We’re ready to talk, we’ve always been ready,” said Theodoru. “It would be really foolish on our side to just forget about it (the partnership). For 10 years we collaborated for the benefit of everyone, we aren’t just going to walk away.”
