Toronto has lost its bid to force a Michigan landfill to continue taking its treated sewage sludge, but the city's lawyers say the fight is not over.

An Ontario Superior Court judge denied the city's request for an injunction against Republic Services, a company that cancelled its contract to take the city's sludge.

Lawyers for the company argued the site had been ordered by the state to stop accepting sludge because of complaints about the sewage's smell.

The company had already been fined for violating state environmental regulations.

Justice Katherine Swinton ruled there is a real risk the company could be fined again if forced to accept more sludge, and it would be difficult for the Ontario court to enforce any order.

Shortly after the decision, Mayor David Miller told reporters he was disappointed with the ruling but accepts it.

The city's lawyers plan to seek arbitration on the matter to try to come to an agreement with Republic Services over the contract dispute.

Can't find sludge takers

Meanwhile, the city continues to struggle to find takers for nearly half of the 160,000 tonnes of sludge the Michigan company used to accept annually.

Miller emphasized that Toronto can handle sludge disposal for the next four to six months.

Late Thursday, the city announced a new contract had been signed, but no details were released on the amount of sludge the site will accept.

Two landfills in Quebec began taking the city's sludge after the Michigan company stopped accepting it on Aug. 1.