Twelve-year-old TeleZone case against Industry Canada will go to trial

TeleZone Inc. will be allowed to pursue its $250-million suit against the federal government over a 1995 Industry Canada spectrum decision, following a Supreme Court ruling in December. “The decision was extremely important ... what it means is that if anybody ... has a claim in law against the government which would give rise to a claim to money damages, they can pursue it automatically or directly in court the same way you would sue any other person or company,” Eliot Kolers, a partner at Stikeman Elliott in Toronto and co-counsel for TeleZone in the case, said in an interview. “And it's not necessary to seek judicial review of that decision first.” On Dec. 23, the Supreme Court of Canada ruled TeleZone had the right to pursue its case against the government over a decision by Industry Canada not to award the company a spectrum licence in 1995. “If we had been unsuccessful at the Supreme Court, with a very limited exception it may well have brought the matter to a very sudden end. But because the decision allows the suit to continue, we can now go ahead and schedule a trial and plan for that to get back on track,” Kolers said. Kolers said TeleZone and the Crown will be meeting with trial coordinators and a judge to schedule the trial as quickly as possible. The case will be heard in the Ontario Superior Court of Justice in Toronto. TeleZone was founded in 1992 with the express purpose of operating a mobile network, and in December of that year the company obtained a licence to provide mobile phone service. “Between 1993 and 1995, TeleZone alleges that it kept Industry Canada appraised of its efforts to raise capital and acquire the necessary expertise to provide PCS services,” reads the December court document. “TeleZone says that Industry Canada encouraged it to continue these efforts.” In June 1995, Industry Canada opened a call for applications to obtain a personal communication services (PCS) spectrum licence. The department indicated it would grant up to six licences, and TeleZone submitted an application. But Industry Canada only granted four licences, and rejected TeleZone’s application, which the company says cost it about $20 million to prepare. After being rejected from obtaining a spectrum licence, TeleZone filed access to information requests in an effort to discover the department's reasoning behind the decision. Kolers said TeleZone did not continue with substantial operations after it was unsuccessful in obtaining a spectrum licence, but that it retains a board of directors. In March 1999, the company switched gears and filed an action against the Federal Crown in the Ontario Superior Court for breach of contract, negligence and unjust enrichment. As part of the action, TeleZone sought $250 million in compensation for losses, but did not seek to annul the department’s decision. John Manley was industry minister at the time the spectrum licences were awarded. The company argued Industry Canada had implied it would issue fewer than six licences only if it did not receive enough applications that met its criteria. TeleZone submitted that since its application met Industry Canada's requirements, the department must have considered undisclosed factors when it rejected the application. But the attorney general challenged the court’s jurisdiction over the case, arguing that TeleZone first had to obtain an order from the Federal Court of Canada to reject the minister's decision to grant the licences. The court ruled against the government's challenge, but the trial was postponed when the Crown pursued its challenge before the Ontario Court of Appeal, which upheld the Superior Court’s ruling. Finally, the Crown's challenge was brought before the Supreme Court, which dismissed the Crown's appeal in December after 12 years of litigation. “It’s a pretty important decision, because it basically says the courts can go after Industry Canada for its spectrum allocation decisions, not by way of judicial review of the minister’s decision, but rather on civil ground in a provincial superior court on the basis of negligence,” Peter Grant, author of Communications Law and the Courts in Canada and counsel with McCarthy Tétrault in Toronto, told The Wire Report in May. Carole Saindon, a spokeswoman for the Department of Justice, said by email the Supreme Court ruling will have no direct impact on how companies and Industry Canada manage conflicts. “There will be no impact per se. The Supreme Court resolved the issue of where and how a company dissatisfied with a government decision can litigate the issue,” she wrote. “The determination of which court a party should address will be decided on the basis of the particular circumstances of each case.” kfournier@thewirereport.ca

Twelve-year-old TeleZone case against Industry Canada will go to trial

News | January 17, 2011

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