Words Matter: The Battle Over the Exact Meaning of an Undertaking

Case: Steelhead LNG (ASLNG) Ltd. v Cedar LNG Partners LP, 2026 CanLII 36266 (FC).

In the recent decision of Steelhead LNG (ASLNG) Ltd. v Cedar LNG Partners LP, Justice Pallotta heard an appeal of an order from a motion arising out of an alleged failure to adhere to an undertaking. The central issue was whether the case management judge (CMJ), Associate Judge Crinson, had erred in his discretion by granting leave to amend a claim rather than dismissing the action outright.

The defendants’ (collectively, Cedar) sought dismissal of the infringement action on the basis that the plaintiffs (collectively, Steelhead) had breached its undertaking to discontinue the action in the event the asserted patent claims were found invalid in a separate action against other defendants (T-1448-20).

The circumstances of the undertaking

In the underlying action, Steelhead asserts that Cedar is infringing Canadian Patent Number 3,027,085 (the 085 Patent) which relates to an “at-shore” floating liquified natural gas (FLNG) facility. Steelhead claimed Cedar infringed a subset of the 085 Patent claims through design, development, and marketing efforts aimed at securing funding for their own project.  

Early in the proceedings, Cedar served a notice of motion to strike the claim, arguing the pleading failed to disclose a sustainable cause of action. Steelhead proposed staying both the action and the motion to strike pending a decision in T-1488-20, which challenged the validity of every claim of the 085 Patent. Steelhead wrote to the Court, stating:

“If all the asserted claims are held to be invalid, which is one possible outcome, Steelhead will discontinue this action and the defendants’ motion will be moot. If any asserted claim is held to be valid, the parties can proceed with scheduling the defendants’ motion to strike.”

The ambiguity of “asserted claims”

In T-1488-20, Justice Manson found five claims of the 085 Patent were valid (the Valid Claims), and that certain claims were valid only insofar as they depended on the Valid Claims. While Steelhead hadn’t asserted any of the Valid Claims against Cedar, it had asserted several of these dependent claims.

Subsequently, Cedar sought confirmation that Steelhead would discontinue the action, as it had undertaken to do if all asserted claims were held invalid. Steelhead responded saying that all asserted claims were not invalid, and it intended to amend its pleading to assert at least one of the Valid Claims.

The first decision: Was the undertaking met? What does that mean for Steelhead?

The CMJ found that the precondition for the undertaking had been met, noting that asserting claims is not merely a mechanical exercise, but requires all factual elements be pleaded.

On the motion, he found that while a party can allege infringement of dependent claims without alleging infringement of the claims on which they depend, Steelhead had failed to plead the requisite material facts. Because the valid dependencies were not properly pleaded, the CMJ concluded that no asserted claims had been held to be valid. As a result, the CJM found the precondition to the undertaking was met, and accordingly Steelhead should not be able to continue pursuing the claims it undertook to discontinue. However, he found it clear that the Valid Claims were excluded from the scope of the undertaking; Steelhead did not undertake to forego its right to pursue Valid Claims, or claims which depend from them.

Weighing both the interests of the parties and the Court in securing the “just, most expeditious and least expensive outcome”,  the CJM ordered:

• the original Statement of Claim be struck;
• Steelhead pay costs as a sanction; and
• Steelhead be granted leave to amend the claim to assert the Valid Claims.

The appeal: Should Steelhead have been allowed to amend? What did Steelhead actually undertake to do?

Cedar appealed, arguing that the CMJ’s finding that the prerequisites of the undertaking had been met should have led "inexorably" to a dismissal of the action. It contended that Steelhead was being permitted to "litigate by instalments" and abuse the Court’s process.

Justice Pallotta dismissed the appeal, affirming the CMJ’s characterization of the undertaking:

• The undertaking was to discontinue an action founded entirely on invalid claims. It was not a broad waiver of Steelhead’s right to assert valid claims in the future.
• Meeting the prerequisites or conditions of an undertaking does not mandate a particular relief. The CMJ retains discretion to award relief and in the “unusual circumstances” of the mixed validity results in T-1488-20, a remedy different from a full discontinuance could be appropriate.
• The order did not amount to Steelhead abusing the Court’s processes. Allowing an amendment rather than forcing the filing of a brand-new action was a practical application of judicial efficiency.

Justice Pallotta concluded that the CMJ properly exercised his discretion and dismissed the appeal of his order. Without a palpable and overriding error, the Court would not disturb a remedy that balanced the enforcement of undertakings with the interests of justice. For practitioners, the message is clear: the exact wording of any undertaking could define the boundaries of your litigation strategy.