COURT FILE NO.: CV-18-00606254-0000 DATE: 2019/04/23
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
IRIS TECHNOLOGIES INC. and ICE WIRELESS INC. Plaintiffs
- and - TELUS COMMUNICATIONS COMPANY Defendant
Counsel: Paul J. Davis, Ren Bucholz and Mireille Dahab for the Plaintiffs Mark A. Gelowitz and Sarah McLeod for the Defendant
HEARD: April 12, 2019
PERELL, J.
REASONS FOR DECISION
A. Introduction and Overview
[1] The Plaintiffs, Iris Technologies Inc. and its affiliate ICE Wireless Inc., and the Defendant TELUS Communications Company are telecommunications companies. Since 2016, they have periodically been embroiled in disputes about their contract to provide services to TELUS’s customers pursuant to a Direct Connect Call Termination Services Agreement (“DCCTS Contract”) dated October 7, 2014.
[2] There are currently applications before the Canadian Radio-Television and Telecommunications Commission (“CRTC”) about their respective grievances one against the other about completing (terminating) calls from TELUS’s customers.
[3] On October 2, 2018, notwithstanding the ongoing proceedings before the CRTC, Iris Technologies and ICE Wireless commenced an action in this court against TELUS. In their action, Iris Technologies sues TELUS for breach of the DCCTS Contract and ICE Wireless sues TELUS for unlawful interference with economic relations.
[4] TELUS now brings a motion for an Order: (a) temporarily staying the action on the ground that another proceeding is pending in Ontario between the same parties in respect of the same subject matter; (b) in the alternative, staying the action on the ground that the court has no jurisdiction over, or is not the appropriate forum for the subject matter of this action; and (c) dismissing the following causes of action on the ground that the court has no jurisdiction over their subject matter; namely: (i) violation of s. 36 of the Telecommunications Act; and (ii) violation of s. 75 of the Competition Act.
[5] For the reasons that follow, I grant a temporary stay of Iris Technologies’ and ICE Wireless’s action on the ground that the court has no jurisdiction over, or is not the appropriate forum, for the subject matter of this action.
[6] Given that the stay order is being granted for the essential reason that the parties essential dispute is within the jurisdiction of the CRTC, it is not necessary to rule on: (a) whether a temporary stay should be granted on the ground that that another proceeding is pending in Ontario between the same parties in respect of the same subject matter; or (b) whether the court has no jurisdiction over alleged violations of s. 36 of the Telecommunications Act or s. 75 of the Competition Act. The stay is temporary because depending on the CRTC determinations of the issues within its jurisdiction, which determinations would be binding on the parties, there may remedial issues for the court to determine.
B. Facts
[7] Iris Technologies, ICE Wireless, and TELUS are registered as telecommunications carriers or resellers with the CRTC.
[8] IRIS Technologies is authorized to charge telecommunications service providers, like TELUS, for “terminating” i.e., completing telephone calls. Iris Technologies provides Voice Over Internet Protocol (“VOIP”) services and is a Competitive Local Exchange Carrier (“CLEC”). CLECs compete with Incumbent Local Exchange Carriers (“ILECs”), which are established telecommunications carriers like TELUS, to provide telecommunications services in a particular area.
[9] On October 7, 2014, TELUS and Iris Technologies entered into a DCCTS Contract. It the terms, conditions and rates for the carriage of telecommunications traffic (“calls”) to Nunavut, the Yukon, and the Northwest Territories (the “North” or “NPA 867”). (NPA 867 refers to the telephone area code.)
[10] Under the DCCTS Contract, Iris Technologies is a non-exclusive carrier that receives calls from TELUS customers and delivers the calls in the North for termination (i.e., completion). Termination services are necessary because call often cannot be routed, from initiation to final destination, over the infrastructure of a single owner and the infrastructure of another service provider is used.
[11] Under the DCTTS Contract, TELUS pays Iris Technologies for this “Call Termination Service”. Iris Technologies’ provision of termination services to other telecommunications companies (e.g., Telus, Rogers Communications, etc.) is invisible to retail customers, who simply dial a number and are connected with the intended recipient of their call. Under the DCCTS Contract Iris Technologies calculates the number of minutes of TELUS’ customers’ traffic terminated on Iris Technologies’ infrastructure. It then sends a monthly invoice to TELUS setting out the amount owing for those minutes.
[12] The CRTC sets tariff rates for CLECs, like Iris Technologies, which complete calls for other telephone service providers. The CRTC will forbear from rate regulation when certain conditions are met, and then the service providers are free to negotiate mutually agreeable rates. The DCCTS Contract between TELUS and Iris Technologies was a negotiated rate contract with rates that are lower than the CRTC prescribed tariff rate for calls in the North.
[13] In 2016, traffic to Iris Technologies’ numbers in the North grew dramatically. TELUS believed that this increase in traffic was due to Iris Technology assigning phone numbers to parties located in the United States, southern Canada or other places. These parties offered services to the public that attracted calls, for example, some services were listen-only audio programs. Thus, interconnecting telecommunication service providers, such as TELUS, paid a higher terminating rate for a call supposedly destined for NPA 867, when, in fact, the call was destined for a place with a low call termination rate. This type of arrangement is known as traffic stimulation or traffic pumping.
[14] In response to the traffic stimulation activities, in 2016, Rogers Communications Canada Inc., another telecommunications provider, filed an application with the CRTC. Rogers’ Application led to Telecom Decision CRTC 2017-456. In the Rogers application, Iris Telecommunications admitted that it was sharing incoming call termination revenues with a customer who used its numbers in the North for call-in services. The CRTC concluded that Iris Telecommunications was involved in regulatory arbitrage and that Iris Technologies was conferring a preference upon itself in violation of the federal Telecommunications Act.
[15] In response to the traffic stimulation activities, TELUS disputed some of the charges levied by Iris Technologies in 2016 for calls sent to the North, and on January 30, 2017, TELUS and Iris Technologies entered into a letter agreement to settle the dispute. Iris Technologies agreed to accept payment by TELUS of charges at a lower rate than the rates included in the DCCTS Contract, for the stimulated traffic, defined as “867 Transit Traffic”. In consideration, TELUS agreed not to intervene in the CRTC proceeding initiated by Rogers.
[16] In April 2018, TELUS’s traffic to Iris Technologies numbers in the North began an upward trend again, which TELUS believed was indicative of artificially stimulated traffic. By May 2018, traffic levels were four to five times normal levels and climbing. This upward trend in traffic between March 2018 and April 2018 was similar to the trend between June 2016 and August 2016, the period of stimulated traffic that ended after the release of the CRTC’s decision in the Rogers Application.
[17] Beginning in April 2018, TELUS disputed certain amounts in the monthly invoices issued by Iris Technology because they related to stimulated traffic. TELUS withheld payment for the disputed amounts. TELUS has failed to pay invoices totaling $158,477.98.
[18] Iris Technologies submits that the withholding of payments is contrary to the dispute resolution provision in s. 4.9 of the DCCTS Contract, which states:
4.9 Each monthly invoice issued hereunder will be deemed to have been accepted by TELUS if no written objection has been made thereto within ninety (90) calendar days from the date of receipt of the invoice. If TELUS, in good faith, disputes any portion of an invoice which it has received from IRISTEL hereunder, TELUS shall, within ninety (90) calendar days of the date of receipt of the invoice, (i) notify IRISTEL in writing of such dispute, and (ii) provide the following documentation to IRISTEL: (A) minute dispute – a hard copy of the type of minute dispute being issued (all minute disputes shall be in the form of a flat text file and must be accompanied by a call detail record from TELUS’ call detail records supporting the alleged erroneous calls or minute duration variations); or (B) rate dispute – documentation identifying the time period, appropriate rate, total minutes and amount in dispute for each destination and documentation detailing the rate agreed upon. IRISTEL is not required to resolve minute count discrepancies of less than 1% of the total minutes invoiced by service type (landline or mobile) to a discrete destination country or city.
TELUS shall be entitled to withhold payment of any disputed charges hereunder, provided that TELUS (i) pays IRISTEL all undisputed charges in the applicable invoice, and (ii) provides IRISTEL with written notice of the dispute prior to the applicable Due Date along with the written documentation described above identifying and substantiating the disputed amount. TELUS will be required to remit the entire withheld disputed amount by the Due Date if TELUS fails to submit the required notice and documentation within the time prescribed herein.
If the dispute is resolved in favour of IRISTEL, TELUS will pay IRISTEL the disputed charges resolved in favor of IRISTEL. If the dispute is resolved in favor of TELUS, TELUS will receive a credit for the disputed charges resolved in favor of TELUS. If TELUS is entitled to any credits or adjustments pursuant to the terms of this Agreement or the terms of any resolution made hereunder, then IRISTEL will credit TELUS’ invoice for such amount on the next appropriate billing cycle.
If the parties cannot resolve a dispute within thirty (30) calendar days of the date of dispute notification at the operational level, then the Parties agree to resolve the dispute in accordance with the resolution of disputes procedure set forth in the main body of the agreement.
[19] On August 3, 2018, TELUS filed an application with the CRTC against Iris Technology requesting an investigation of the traffic stimulation activities and a review of Iris Technologies’ tariff rate for long distance call termination in the North. Iris Technologies denies TELUS’s allegations.
[20] On August 7, 2018, Iris Technologies and ICE Wireless filed an Application with the CRTC for interim and permanent relief. They alleged that TELUS had intentionally reduced capacity to Iris Technologies numbers, which caused congestion and led to the failure of the majority of calls from all TELUS customers to certain Iris Technologies and ICE Wireless customers. Iris Technologies and ICE Wireless alleged that TELUS had breached sections 27(2) and 36 of the Telecommunications Act. In their CRTC Application, Iris Technologies and ICE Wireless requested, among other things, an order compelling TELUS to maintain an adequate capacity on its network to properly terminate calls that originate from its end users, or transit through its network, and terminate on Iris Technologies’ network.
[21] On August 20, 2018, the CRTC consolidated both the TELUS Application and the Iris Technologies Application into a single proceeding. The CRTC established a schedule for each party to answer the application against it and reply to the other party’s answer.
[22] On October 2, 2018, notwithstanding the ongoing proceedings before the CRTC, Iris Technologies and ICE Wireless commenced an action in this court against TELUS.
[23] In their action, Iris Technologies sues TELUS for breach of the DCCTS Contract and ICE Wireless sues TELUS for unlawful interference with economic relations. They allege that: TELUS has abused Iris Technologies’ services, contrary to s. 5 of the DCCTS Contract and the duty of good faith and honest performance. They allege that the breach of contract was as a result of: (a) TELUS deliberately failing to use the available infrastructure to allow TELUS customers to connect calls that would use Iris Technologies’ services; (b) TELUS violating s. 36 of the Telecommunications Act; and (c) TELUS violating s. 75 of the Competition Act; and (d) TELUS deliberately manipulating its network to block calls. They allege that TELUS has failed to pay for services that continue to be provided to it.
[24] On November 23, 2018, the CRTC released interim Telecom Decision CRTC 2018-432 directing: (a) TELUS to take the necessary measures to ensure that calls from TELUS end-users to Iris Technologies end-users in the North, or calls that transit through TELUS’s network and terminate on Iris Technologies’ network in the North, reach Iris Technologies’ network so they can be consistently terminated correctly; and (b) that Iris Technologies’ tariff rate applicable to the North is made interim, which would allow for compensation to TELUS related to the charging of that rate to be addressed in the CRTC’s final rate determination.
[25] In the Interim Decision, the CRTC noted that it has yet to determine whether the traffic at issue is stimulated by Iris Technologies and/or is inappropriate, and given the apparent changes in traffic levels, whether Iris Technologies current tariff rate for long distance call termination in the North remains just and reasonable. The CRTC also indicated that as part of its assessment of the TELUS Application and the Iris Technologies Application, the CRTC will consider the appropriateness of imposing administrative monetary penalties.
C. Discussion and Analysis
[26] Iris Technologies and ICE Wireless submit that their action should not be stayed because their predicate claims are for damages arising from a tort claim and for breach of contract. They submit that the essential wrongdoing is TELUS’s failure to pay for the termination services provided by Iris Technologies. They submit that their claims for damages are not issues in the CRTC proceedings.
[27] Iris Technologies and ICE Wireless submit that the CRTC Proceedings are not directed at tort and breach of contract claims. They submit that the CRTC proceedings are rather directed at determining: (a) whether Telus has failed to comply with CRTC regulatory policy and/or the Telecommunications Act by purposely failing to terminate its customers’ calls on Iris Technologies infrastructure despite having capacity to do so, and (b) whether Iris Technologies has failed to comply with CRTC regulatory policy and/or the Telecommunications Act by engaging in traffic stimulation. Iris Technologies and ICE Wireless submits that the CRTC will not determine their entitlement to damages for breach of contract or for intentional interference with economic relations.
[28] In my opinion, Iris Technologies’ and ICE Wireless’ have not accurately characterized the nature of their action in relation to the proceedings before the CRTC. The factual and legal underpinning of the civil action and the CRTC proceedings are the same.
[29] While it is true that Iris Technologies’ and ICE Wireless’ claims for damages for breach of contract or for the tort of intentional interference with economic relations could not be determined by the CRTC, it is also true that what is before the CRTC is: (a) the alleged predicate misconduct for Iris Technologies’ breach of contract claim; (b) the alleged predicate misconduct for ICE Wireless’ wrongful intentionally interference with economic relations claim; and (c) the alleged predicate misconduct by Iris Technologies that TELUS would rely on in defence of the Plaintiffs’ claims.
[30] The predicate misconduct of all the claims and defences in the civil action before this court concerns matters that are within the exclusive jurisdiction of the CRTC.
[31] In cases such as: Mahar v. Rogers Cablesystems Ltd.; 934691 Ontario Inc. v. Bell Canada; B & W Entertainment Inc. v. Telus Communications Inc.; Shaw Cablesystems (SMB) Ltd. v. MTS Communications Inc., MTS Allstream Inc. v. Telus Communications Company; Allarco Entertainment 2008 Inc. v. Rogers Communications Inc.; Penney v. Bell Canada; and Bazos v. Bell Media Inc., courts have recognized that where the adjudication of a dispute would require a consideration of the legislative scheme administered by the CRTC, then the court does not have the jurisdiction to hear the matter or the court ought not to exercise any jurisdiction to hear the matter even where some of the relief being sought may not precisely be available from the CRTC.
[32] In Mahar v. Rogers Cablesystems Ltd., Justice Sharpe stated at paragraphs 16-17 and 35:
I express no opinion as to the merit or lack thereof in the substantive claim of the applicant. It is, however, clear that the regulations under the Broadcasting Act and the interpretation of those regulations, are not only a central substantive component of the applicant's case, but indeed the focus of the relief that the applicant seeks. To decide this case would require a detailed consideration and interpretation of those regulations. That exercise would require consideration of how those regulations operate in the overall framework of the scheme established by the Act and by the Regulations as that scheme is administered by the CRTC.
I have concluded that given the nature of the claim and relief sought, this court does not have jurisdiction to dispose of the application and alternatively, that even if the court does have jurisdiction, it would not be an appropriate exercise of the discretion of the court to proceed with this matter with a view to granting declaratory relief. […]
[…] If the applicant's submissions were accepted and this court were to decide the case, there would, in effect, be an alternate forum for the determination of an important aspect of the relationship between suppliers of cable services and subscribers. A superior court would be deciding that issue without the benefit of the opinion of the CRTC. Because this is but one of ten provincial superior courts, the spectre of various approaches from various provincial courts is raised. Assumption of jurisdiction by this court would not only evade the CRTC, it would also remove the case from the authority of the Federal Court of Appeal which is mandated to review the CRTC. The net result would be to disrupt the scheme envisaged by Parliament for the interpretation of the regulations, a scheme which includes scrutiny by a court exercising jurisdiction akin to that of a superior court.
[33] In cases such as: Brake v. University of Toronto Community Radio Inc. Toronto (City) v. AT&T Canada Inc., where the court was not being asked to exercise jurisdiction more appropriately exercised by the CRTC, then motions for a stay have been dismissed.
[34] The analytical approach used in these cases is to determine whether the essence of the litigation between the parties falls within the CRTC exclusive or concurrent jurisdiction. This approach requires an analysis of the jurisdiction of the CRTC and a characterization of the essence of the litigation.
[35] In the immediate case, the fact that both parties have brought applications before the CRTC about their grievances associated with the DCCTS Contract means that it does not require much analysis to conclude that the dispute and the litigation between the parties is a matter within the exclusive jurisdiction of the CRTC. The essence of the litigation before the court would involve a determination of matters within the specialized expertise of the CRTC.
[36] The alleged predicate wrongdoings are matters to be determined by the CRTC. Once the CRTC exercises its telecommunications jurisdiction, Iris Technologies and ICE Wireless may assert their claims and pursue damages and TELUS may assert any counterclaim for damages, but the action and any potential counterclaim should be temporarily stayed until the CRTC has disposed of the parties’ consolidated application.
D. Conclusion
[37] For the above reasons, I grant a temporary stay of Iris Technologies’ and ICE Wireless’s action with costs (as agreed by the parties) of $25,000, all inclusive.
Perell, J. Released: April 23, 2019