Court File and Parties

COURT FILE NO.: CV-15-10824-00CL DATE: 2019/03/11 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST

RE: QUADRANGLE GROUP LLC, QCP CW S.A.R.L., and OBELYSK MEDIA INC. Plaintiffs

AND:

ATTORNEY GENERAL OF CANADA Defendant

BEFORE: HAINEY J.

COUNSEL: Matthew Law and Khrystina McMillan, for the Plaintiffs Quadrangle Group LLC and QCP CW S.A.R.L. Robert A. Centa for the Plaintiff Obelysk Media Inc. J Sanderson Graham and Karen Lovell for the Defendant

HEARD: February 27, 2019

Endorsement

Background

[1] The plaintiffs move for an order removing Peter Hill as the defendant`s representative at its examination for discovery and for an order that the plaintiffs are entitled to examine Kelly Gillis as the defendant’s representative at its examination for discovery.

[2] The grounds for the plaintiffs’ motion are the fact that Mr. Hill is currently engaged in a contractual relationship with a telecommunications service provider that requires him to prefer the interests of his client over all others and to avoid doing or saying anything prejudicial to his client’s interests.

[3] The plaintiffs maintain that these contractual obligations put Mr. Hill in an irreconcilable conflict of interest with his and the defendant’s duties at its examination for discovery, such that he is not an appropriate representative of the defendant.

[4] The plaintiffs further submit that Kelly Gillis, who is a senior employee of Industry Canada, is the best alternative witness to Mr. Hill, given her involvement in the matters at issue in the action.

Facts

[5] The plaintiffs are companies that made significant investments in a new entrant to the Canadian wireless market called Mobilicity. The defendant, through the department formerly known as Industry Canada, was responsible for licensing wireless spectrum and overseeing the wireless industry in Canada.

[6] According to the plaintiffs, Mobilicity spent hundreds of millions of dollars acquiring spectrum from the defendant, building out its networks and providing competitive handsets and services in a market dominated by the incumbents – Rogers, Telus, and Bell (“Incumbents”). The crux of the plaintiffs’ claim is that the defendant solicited the plaintiffs to invest in the Canadian wireless market and promised that it would protect them against the Incumbents’ predatory and anti-competitive conduct by, among other things:

a) setting aside spectrum in the 2008 auction that only new entrants would be allowed to bid on; b) mandating roaming on the Incumbents’ networks at commercial rates and on commercial terms; c) requiring the Incumbents to share space on their towers and sites with new entrants; and d) allowing the new entrants to sell their set-aside spectrum to the Incumbents after five years.

[7] According to the plaintiffs, the defendant did none of the things it said it would do to protect the new entrants. Further it failed to restrain the Incumbents’ predatory and anti-competitive practices, and ultimately reneged on its commitment to allow the new entrants to sell their spectrum after five years. As a result, Mobilicity went into receivership and the plaintiffs lost their investments.

[8] The conduct of the Incumbents is central to the plaintiffs’ claims in this action. According to them, Industry Canada breached its commitments to them and ultimately caused the demise of Mobilicity by, among other things:

a) allowing the Incumbents to impose mandatory roaming agreements on new entrants at far above commercial rates; b) allowing the Incumbents to disregard the requirement to share space on their towers and other sites; c) failing to stop the Incumbents from abusing their market dominance and engaging in anti-competitive practices to drive new entrants out of the market; and d) refusing to allow Mobilicity to sell its spectrum to the Incumbents after the company had gone into receivership.

[9] Following documentary production, the defendant selected Mr. Hill as its deponent for the defendant’s examination for discovery. Before he retired in May 2017, Mr. Hill had been the Director of Spectrum Management Operations Branch in Industry Canada.

[10] Mr. Hill was first examined for discovery on April 17, 2018. Early on in his examination he was asked whether he had an economic relationship with any of the Incumbents. Mr. Hill refused to answer the question in the following exchange:

I just wanted to clarify something. I presume, sir, in your Industry Canada career, you don’t have any kind of engagements for any of the wireless companies, Rogers, Bell, Telus or any of them? A. I’m bound by Post-Employment Conflict of Interest Guidelines which I totally respect. Q. And that means that’s a “no”, to my question; is that right? A. I’ve answered the question how I’m going to answer it. Q. I’m not so much interested in your conflict of interest guidelines with respect to your former employer. I’m interested with respect to your role here as a witness. A. Yeah. Q. And I’d like to understand whether you have any kind of economic relationship with any of the incumbents or other providers of wireless services. Can you confirm for me you do not? A. It’s not relevant. Q. I think it is, sir. And your lawyer – A. That’s how I’m answering it. Q. Just hold on a second. Mr. Graham, who is a very able counsel will determine relevance. A. That’s fine. I’ve answered the question. Q. Well, the question – MR. GRAHAM: The question is relevant. THE WITNESS: I’ve answered the question. MR. LISUS: Pardon? MR. GRAHAM: The question is relevant. MR. LISUS: It is relevant, I agree. THE WITNESS: And I’ve given you my answer.

BY MR. LISUS: Q. I don’t understand your answer. A. That’s the answer you’re getting.

[11] The examination was adjourned for the day at the defendant’s counsel’s request to allow him to deal with Mr. Hill’s refusal to answer the question notwithstanding that he had indicated to Mr. Hill that it was a relevant question.

[12] Mr. Hill acknowledged to the defendant’s counsel that he had a consulting contract with one of the Incumbents (“Contracting Incumbent”), but he refused to provide a copy of his contract to the defendant so that it could be produced to the plaintiffs’ or to even to advise which of the Incumbents it was with. As a result, the parties attended before me on May 14, 2018 and I made the following endorsement:

Counsel for the Attorney General will attempt to obtain the documents requested from Mr. Hill to be produced to the plaintiff. Hopefully a formal order requiring Mr. Hill to produce relevant documents will not be required. However, if it is, counsel may schedule a 9:30 a.m. attendance with me.

[13] Even after my endorsement Mr. Hill did not produce the contract for a period of over four weeks.

[14] The contract, which is dated April 12, 2017 (“Consulting Contract”) provides that Mr. Hill will provide consulting services to the Contracting Incumbent for an hourly fee of $625. Further, it provides that he will receive minimum compensation of between $200,000 and $225,000 for each 6-month period regardless of how much work he performs. As of October 31, 2018, Mr. Hill had been paid $698,481 under the Consulting Contract with at least another $250,000 to be paid in the first 6 months of 2019.

[15] Section 5 of the Consulting Contract provides that Mr. Hill must:

guard against prejudicial interests and avoid any situation likely to create a conflict of interest between the services performed for [the Contracting Incumbent] and any other personal or professional situation or occupation.

[16] Under the Consulting Contract Mr. Hill is to provide the Contracting Incumbent with advice on matters that are at issue in this action. This includes:

a) mandatory roaming rules for incumbents; b) videotron Toronto spectrum; and c) AWS spectrum renewal.

[17] During his examination Mr. Hill confirmed that he has given advice to the Contracting Incumbent on Industry Canada’s spectrum management and decision-making process based on his experience at Industry Canada. This is directly in issue in this action. He also admitted that he is advising the Contracting Incumbent on spectrum license transfer, roaming rules and government treatment of non-Canadians. These issues are central to the plaintiffs’ claims.

Issue

[18] I agree with the defendant that the sole issue to be determined is whether Mr. Hill is a demonstrably unsatisfactory witness as the defendant’s representative on its examination for discovery.

Positions of the Parties

[19] The plaintiffs submit that Mr. Hill should be disqualified as the defendant’s representative on its examination for discovery because he is not an officer or servant of the Crown and he has an irreconcilable conflict of interest.

[20] The defendant submits that Mr. Hill is an appropriate representative of the Crown because he is the person who is most knowledgeable about the facts in issue in this action and the plaintiffs’ contention that he is in a conflict of interest is purely speculative. According to the defendant, the plaintiffs have not established that Mr. Hill is demonstrably unsatisfactory as the defendant’s witness on its examination for discovery.

Analysis

[21] Section 7 of the Crown Liability and Proceedings (Provincial Court) Regulations (“Regulations”) allows the federal Crown to designate an “officer or servant” to be examined for discovery on its behalf. Section 2 of the Crown Liability and Proceedings Act (“CLPA”) defines “servant” to include agents. The defendant submits that Mr. Hill is the Crown’s agent for the purpose of its examination for discovery in this action.

[22] The defendant designated Mr. Hill as its representative for discovery prior to his retirement because he had extensive involvement in the matters in issue in this action. Mr. Hill worked at Industry Canada for 34 years mainly in spectrum management. He is the former Director and Director General of Industry Canada’s Spectrum Management Operations Branch and is one of the officials who made many of the alleged representations relied upon by the plaintiffs in this action.

[23] I accept the defendant’s submission that Mr. Hill is in the best position to answer the plaintiffs’ questions on the defendant’s examination for discovery because he is the person most knowledgeable about the facts in issue in this action.

[24] I also accept the defendant’s submission that he is a “servant” for the purpose of s. 7 of the Regulations because he is the Crown’s agent for its examination for discovery.

[25] However, the main issue that I must decide is whether Mr. Hill is demonstrably unsatisfactory as the defendant’s discovery witness by reason of a conflict of interest.

[26] I agree with the defendant’s submission that where the Crown has designated a witness to represent it on its examination for discovery, that designation “is entitled to deference and should only be interfered with in the clearest of circumstances”.

[27] However, this deference must be balanced with the plaintiffs’ entitlement to a fair and meaningful discovery process. This includes the right to examine a representative of the defendant who is free from any conflicts of interest that may affect that person’s evidence.

[28] The plaintiffs submit that Mr. Hill has an irreconcilable conflict of interest because of his Consulting Contract which requires him to protect the Contracting Incumbent’s interests. They rely upon the following in support of this submission:

a) The fact that Mr. Hill did not disclose his Consulting Contract to the defendant when it selected him to be its representative for discovery; b) Mr. Hill’s refusal on the defendant’s examination for discovery to answer whether he had any engagements with any of the Incumbents even after the defendant’s counsel advised him that it was a relevant question; c) Mr. Hill’s refusal to provide the defendant’s counsel with a copy of his Consulting Contract until I made my May 14, 2018 endorsement; d) Section 5 of the Consulting Contract that requires Mr. Hill to avoid saying or doing anything that might be prejudicial or contrary to the Contracting Incumbent’s interests; e) The fact that Mr. Hill is advising the Contracting Incumbent on matters that are directly at issue in the action such as mandatory roaming rules for Incumbents, Videotron Toronto spectrum and AWS spectrum renewal; f) Mr. Hill’s admission that he is advising the Contracting Incumbent on spectrum licence transfers, roaming rules and government treatment of non-Canadians all of which are central to the plaintiffs’ claims; g) The fact that throughout the defendant’s examination for discovery Mr. Hill appeared to give evidence that was consistent with his contractual obligation to the Contracting Incumbent to guard against any prejudicial interests. Rather than providing straightforward answers to straightforward questions he attempted to avoid saying anything negative about the Incumbents. For example, he refused to acknowledge that the government’s decision to set aside spectrum for new entrants arose out of a desire for additional competition for the Incumbents testifying that he did not understand the term “enhanced competition”. He refused to admit that the Incumbents have “deep pockets”, which he also claimed not to understand. He claimed not to know what was meant by a reference in a government email to “the possibility of coordinated behavior … by incumbents frustrating competitive entry”; and h) A review of the entire transcript of Mr. Hill’s discovery evidence demonstrates that he appeared to be tailoring his evidence so as not to say anything detrimental about the Incumbents.

[29] It was because of Mr. Hill’s reluctance to say anything negative about the Incumbents that prompted the plaintiffs’ counsel to ask him if he had an engagement with any of the Incumbents.

[30] I accept the plaintiffs’ submission that Mr. Hill appears to be influenced by his contractual obligations to the Contracting Incumbent for the reasons set out above at para. 28.

[31] The plaintiffs claim damages of over $1 billion based upon an allegation that the defendant preferred the interests of the Incumbents over those of the plaintiffs and failed to enforce its own rules and regulations against the Incumbents thereby allowing the them to engage in anti-competitive and predatory conduct designed to drive new entrants like Mobilicity out of the market. The Incumbents’ conduct is clearly a major issue in the action that the plaintiffs must explore on the defendant’s examination for discovery.

[32] Mr. Hill has a million-dollar contract to advise one of the three Incumbents whose conduct is at issue. He is contractually bound to act in that Incumbent’s best interests and avoid any prejudicial conduct toward it. In my view, Mr. Hill’s conduct on the defendant’s examination for discovery demonstrates that he prefers the Contracting Incumbent’s interests over his obligations as a witness on the defendant’s examination for discovery. As a result, the plaintiffs will not receive fair and meaningful discovery if Mr. Hill is the defendant’s representative on its examination for discovery.

[33] For these reasons I have concluded that the plaintiffs have established that Mr. Hill is a demonstrably unsatisfactory witness for the purpose of the defendant’s examination for discovery and he must be replaced.

[34] Ms. Gillis appears to be an appropriate witness. However, s. 7 of the Regulations provides that the Crown may select its discovery witness. Therefore, if the defendant wishes to produce someone other than Ms. Gillis to replace Mr. Hill as its discovery witness it may do so. Otherwise, Ms. Gillis should be produced as the defendant’s representative on its examination for discovery.

Conclusion

[35] For the reasons outlined above I have concluded that Mr. Hill should not be permitted to represent the defendant on its examination for discovery in this action. He should be replaced by Ms. Gillis or another witness selected by the defendant.

Costs

[36] If the parties cannot agree on costs they may schedule a 9:30 am attendance with me to determine costs.

[37] I thank counsel for their helpful submissions.

HAINEY J. Date: March 11, 2019