Bell Aliant Regional Communications et al. v. Cabletec Ltd. et al., (2013) 325 N.S.R.(2d) 242 (SC)

• Judge: Warner, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: January 04, 2013
• Jurisdiction: Nova Scotia
• Citations: (2013), 325 N.S.R.(2d) 242 (SC);2013 NSSC 3

Bell Aliant v. Cabletec Ltd. (2013), 325 N.S.R.(2d) 242 (SC);

    1031 A.P.R. 242

MLB headnote and full text

Temp. Cite: [2013] N.S.R.(2d) TBEd. JA.021

Bell Aliant Regional Communications, Limited Partnership by its General Partner, Bell Aliant Regional Communications Inc. (plaintiff) v. Cabletec Limited (defendant)

(Hfx. No. 307920)

Bell Aliant Regional Communications, Limited Partnership by its General Partner, Bell Aliant Regional Communications Inc. (plaintiff) v. J. Clair Callaghan (defendant)

(Hfx. No. 307917; 2013 NSSC 3)

Indexed As: Bell Aliant Regional Communications et al. v. Cabletec Ltd. et al.

Nova Scotia Supreme Court

Warner, J.

January 4, 2013.

Summary:

Cabletec Ltd., a telecommunication service provider, leased telephone lines, internet and cellular access, and other products at wholesale prices from Bell Aliant Regional Communications (Aliant). Cabletec installed and serviced its own hardware, and repackaged and sold access to Aliant's communication system. It failed to keep its account with Aliant up to date and to make an arrangement satisfactory to Aliant for the payment of arrears. On January 3, 2008, Aliant disconnected Cabletec's access to Aliant's telecommunication system, including its trunk lines and internet service. Aliant sued Cabletec for $1,697,115.22 as of December 31, 2008, plus interest at 1% per month to October 31, 2012, for a total of $2,682,220.82. Cabletec defended and counterclaimed, alleging negligent misrepresentation and claiming that it suffered loss and damage by the manner in which Aliant disconnected Cabletec's lines and effectively stole Cabletec's customers. In a separate action, Aliant sued Callaghan on his personal guarantee of Cabletec's liabilities to Aliant.

The Nova Scotia Supreme Court granted Aliant judgment against Cabletec for $1,197,628.75, with simple interest at 5% per annum from January 3, 2009. The court dismissed Cabletec's counterclaim and Aliant's action against Callaghan.

Contracts - Topic 1484

Formation of contract - Collateral contracts - What constitutes a collateral contract - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - At trial, Cabletec advanced the existence of a collateral agreement to offset the uneconomic rates charged and that Aliant would seek approval of lower rates from CRTC - Cabletec also asserted that Aliant officials agreed that Aliant would reduce the rates that it charged and/or pay Cabletec an administrative fee to create the same result, when it knew or ought to have known that Aliant's senior officer had no intention of doing so - The Nova Scotia Supreme Court held that Cabletec had not met the strict standard of clear evidence of a definitive collateral agreement - Aliant account executives agreed at various times to ask senior executives to consider approval of an application to CRTC for a reduced rate and Cabletec was advised that "it was in the works" - However, the head of Aliant's wholesale group testified that senior executives had not agreed to the request - Cabletec failed to establish that Aliant agreed to a reduced line access rate - While there were likely discussions for relief in the form of an administrative fee, at Cabletec's initiative, Cabletec was advised that Aliant's bosses had not approved the proposal - See paragraphs 86 to 91.

Contracts - Topic 4704

Discharge and termination - By notice - What constitutes notice of termination - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - Cabletec defended and counterclaimed, asserting that it suffered loss and damage by the manner in which Aliant disconnected Cabletec's lines and effectively stole Cabletec's customers - Aliant's notice of termination was contained in a letter that stated that services would be terminated "on or about" a specified date, but that a reasonable deferred payment agreement could be entered into - Cabletec testified that it had received similar notices in the past and Aliant had always negotiated a payment schedule or other terms that led to the continuation of their business relationship - Cabletec asserted that it immediately attempted to negotiate a resolution but was given the run around - Cabletec asserted that if the letter had been more clear that services would be terminated on the specified date, it would have spent the time moving its business to another carrier instead of attempting to negotiate a payment plan - It further asserted that 30 days notice of disconnection was not reasonable - The Nova Scotia Supreme Court agreed that, in the context of the parties' relationship over the years and how earlier defaults had been handled, the letter was unclear - It suggested that the termination or disconnect was not firm as to date and conditional on a reasonable deferred payment agreement not being reached - However, while the court had reservations about the manner in which Aliant terminated Cabletec's service and took away its main number and contacted it customers, Cabletec failed to show that the notice was contrary to any standards applicable to the matrix that existed or how Aliant's subsequent contact with its customers was unlawful - Even if Cabletec had established wrongful termination, the counterclaim would have failed for a failure to prove damage - Cabletec gave evidence that the going price for lines was $450 per line, but there was no evidence that it would or could have sold those lines to another carrier or wholesaler, or of how many lines that it had leased from Aliant - It also failed to show how many customers it had had or how many it had lost - See paragraphs 93 to 106.

Contracts - Topic 4706

Discharge and termination - By notice - What constitutes reasonable notice - [See Contracts - Topic 4704 ].

Damages - Topic 224

When available - Requirement of proof of basis of claim - [See Contracts - Topic 4704 ].

Damages - Topic 7076

Contracts - Contracts for services - Evidence and proof - [See Contracts - Topic 4704 ].

Damages - Topic 7076

Contracts - Contracts for services - Evidence and proof - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - In his summary of accounts, Aliant's financial analyst listed $614,942.83 owing as of October 15, 2003 - Neither he nor any Aliant witness produced any business record or other document that showed where that figure came from, how it was calculated and whether it was part of the regulated service or part of the non-regulated services and, if so, in what proportion - The Nova Scotia Supreme Court held that Aliant failed to discharge the evidentiary onus of proving that $614,942.83 was owed by Cabletec as of October 15, 2003 - The best evidence was the acknowledgment of Cabletec, contained in a January 2004 guarantee and a March 27, 2004 e-mail - Based solely on that evidence, the court found that Cabletec owed Aliant $364,708.29 respecting the pre-October 2003 debt - That debt was owed without interest - The only evidence before the court was that the past due account was "placed in a box" by Aliant, a phrase intended to reflect that interest would not be charged on that debt - No agreement, or CRTC-approved General Tariff, was produced respecting regulated or non-regulated services by which it could be established that interest was payable - Section 5.2 of the Telecommunications Services Agreement provided for interest at the rate specified in Aliant's invoices, but no invoices were tendered - The CRTC-approved General Tariff gave Aliant "the right and privilege to charge a surcharge" on overdue accounts, but did not require a surcharge - The oldest Tariff authorizing interest on overdue accounts tendered was effective May 16, 2002 - See paragraphs 33 to 55.

Estoppel - Topic 379

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Cause of action - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - Aliant commenced a separate action against Callaghan under Callaghan's personal guarantee of Cabletec's debt - The Nova Scotia Supreme Court dismissed the action against Callaghan on the basis that there had been no demand for payment as required by the guarantee - The court stated that "It is significant that the action against Callaghan ... constitutes a separate action by Aliant on the guarantee. Applying the logic of Cromwell J.A. (as he then was) in Hoque v Montreal Trust, 1997 NSCA 153, the doctrine of 'cause of action estoppel' should constitute an impediment to a proper demand and new action on the same guarantee." - See paragraph 125.

Evidence - Topic 2401

Special modes of proof - Presumptions - Specific presumptions - Inference from failure to call or adduce available evidence - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - At trial, Cabletec advanced the existence of a collateral agreement to offset the uneconomic rates charged and that Aliant would seek approval of lower rates from CRTC - Cabletec asserted that an adverse inference should be drawn respecting Aliant's late decision not to call two witnesses, both of whom worked for Aliant and had dealings with Cabletec and whom Aliant had on its List of Witnesses - Aliant asserted that it was Cabletec that gave notice, at the time of a summary judgment hearing, that it intended to call them - The Nova Scotia Supreme Court held that it was not reasonable for Cabletec to rely on Aliant calling witnesses whom Cabletec stated, at an early date in the litigation, it intended to call - In those circumstances, it was no more appropriate to draw an adverse inference against Aliant than against Cabletec - See paragraph 88.

Guarantee and Indemnity - Topic 1050

Liability of surety to creditor - Acting against surety - Whether prior demand against debtor required - Bell Aliant Regional Communications (Aliant) sued Callaghan on his personal guarantee of Cabletec Ltd.'s liabilities to Aliant, claiming $200,000.00, plus prejudgment interest at the rate of 12.7% from the date of the demand, both before and after judgment - Aliant asserted that the guarantee made Callaghan's liability concurrent with Cabletec's and made the terms in the guarantee requiring a formal demand for payment irrelevant to Callaghan's liability, except in respect of interest - Further, it asserted, that Callaghan could not rely on the absence of a demand for payment as a defence because Civil Procedure Rule 38.05(b) required Callaghan to "specifically plead non-performance or nonconcurrence of a condition to a right or obligation" in his defence, and he had not done so - The Nova Scotia Supreme Court dismissed the claim against Callaghan - The condition precedent to Aliant's entitlement under the guarantee to payment of the principal sum or interest was a written demand for payment - Absent evidence of a demand for payment, neither principal nor interest was payable - Commencing an action on a guarantee was not a demand for payment that accorded with the guarantee - Commencement of an action was a legal proceeding based on default - There was no default by Callaghan because there was no formal demand for payment - See paragraphs 107 to 120 - If a written demand was not a precondition to Aliant's entitlement for the principal sum, the court would still have denied interest on the principal sum where the guarantee provided for interest from "... the date of the demand" and there was no demand - Further, the guarantee provided that liability was limited to $200,000, not $200,000 plus interest - That suggested that the total liability was limited to $200,000 - Any interest that would cause Callaghan's total liability to exceed $200,000 would not have been allowed - See paragraphs 107 to 124.

Guarantee and Indemnity - Topic 1055

Liability of surety to creditor - Action against surety - What constitutes a demand on the surety - [See Guarantee and Indemnity - Topic 1050 ].

Guarantee and Indemnity - Topic 1057

Liability of surety to creditor - Action against surety - Whether demand on surety required - [See Guarantee and Indemnity - Topic 1050 ].

Guarantee and Indemnity - Topic 1109

Liability of surety to creditor - Judgment against surety - Interest - [See Guarantee and Indemnity - Topic 1050 ].

Interest - Topic 2004

Agreement to pay interest - Default in payment of debt - [See second Damages - Topic 7076 ].

Interest - Topic 2004

Agreement to pay interest - Default in payment of debt - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - At issue included what debt accrued after October 15, 2003 - Aliant's predecessors provided regulated services in Nova Scotia pursuant to two consecutive agreements for the periods December 15, 1999 to August 19, 2004, and August 20, 2004 onward - Aliant also provided non-regulated services pursuant to the "Telecommunication Services Agreement" (TSA) dated July 29, 2003 - The TSA appeared to cover both regulated and non-regulated services - The summary of accounts prepared by Aliant's financial analyst, supported by the computer records extracted from Aliant's records, showed Cabletec's accounts for Nova Scotia, New Brunswick and Prince Edward Island for the period from October 15, 2003 to December 31, 2008 - That summary showed total billings of $6,010,460.36, less adjustments and payments, for a total, including late payment charges, of $1,697,195.50 - The analyst estimated that $243,275.01 of that amount constituted late payment charges, incurred at the interest rate set out in Aliant's accounting system - There was no document or record showing how the estimate was reached - There was no breakdown of the total billing as between the regulated and non-regulated services - There was no indication as to how much of the late payment charges related to regulated services in Nova Scotia, the only region for which the parties signed "election" forms - The Nova Scotia Supreme Court concluded that Aliant had not proven entitlement to interest for non-regulated services, nor interest for the CRTC-approved services in New Brunswick or Prince Edward Island, absent evidence that it invoiced late payment charges in accord with the authorization contained in the General Tariff - The only agreement respecting non-regulated services was the TSA in which Cabletec agreed to pay charges set out in two Appendices - Neither Appendix was produced - Although the TSA provided that charges not paid on the due date would bear interest at the rate specified in Aliant's invoices, no invoices were produced - Aliant was entitled to interest on regulated services in accordance with the General Tariff for Centrex service in Nova Scotia - However, there was no evidence as to what portion of the charges were for regulated services in Nova Scotia and no invoices or other evidence that Aliant invoiced Cabletec for late payment charges that the Tariff authorized it to charge - Therefore, from the claim for services, the court deducted the analyst's estimate of $243,275.01 - See paragraphs 56 to 66.

Interest - Topic 2021

What constitutes an agreement to pay interest - General - [See second Damages - Topic 7076 and second Interest - Topic 2004 ].

Interest - Topic 3002

Statutory interest - Interest Act - General - Application of - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - Aliant claimed, inter alia, interest at the CRTC-approved General Tariff rate from the date that it terminated services to Cabletec to October 31, 2012, totalling $985,105.47 - The Nova Scotia Supreme Court held that, absent proof as to what portion of the debt was for regulated services versus non-regulated services and absent proof of an agreement to pay interest, Aliant had failed to establish its claim for pre-judgment interest on the basis of a contract or agreement - However, there were other potential sources of entitlement to interest - Section 3 of the Federal Interest Act provided that where interest was payable by agreement or law, and no rate was fixed by agreement or by law, the rate was 5% per annum - Section 3 only applied if the party claiming interest proved that it had a right to interest but the right was left ambiguous or unspecified - It did not create an entitlement to interest - Section 41(i) of the Judicature Act required the court to include interest in a judgment at such rate as it thought fit for the period between the date when the cause of action arose and the date of judgment - Section 41(k) gave the court discretion to decline to award interest under s. 41(i) or to reduce the interest period - That discretion could not be exercised arbitrarily - The court concluded that Aliant was entitled to simple interest at the rate of 5% per annum, non-cumulative from January 2, 2009, to the date of judgment - See paragraphs 70 to 79.

Interest - Topic 5004

Interest as damages (prejudgment interest) - General principles - Discretion of judge - [See Interest - Topic 3002 ].

Interest - Topic 5008

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Entitlement - [See Interest - Topic 3002 ].

Interest - Topic 5009

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Calculation of (incl. rate) - [See Interest - Topic 3002 ].

Interest - Topic 5010

Interest as damages (prejudgment interest) - General principles - Calculation of interest - Simple or compound - [See Interest - Topic 3002 ].

Interest - Topic 5308

Interest as damages (prejudgment interest) - Interest on payment of money or debt withheld - Rate of interest applicable - [See Interest - Topic 3002 ].

Practice - Topic 1335

Pleadings - The issues - Issues to be raised must be pleaded - Time for - Bell Aliant Regional Communications (Aliant) sued Cabletec Ltd., a telecommunication service provider, for payment of arrears and interest owing for the provision of wholesale telecommunication services - At trial, Cabletec advanced the existence of a collateral agreement to offset the uneconomic rates charged and that Aliant would seek approval of lower rates from CRTC - In its post-trial brief, Cabletec alleged negligent misrepresentation - The Nova Scotia Supreme Court held that Cabletec had failed to establish the existence of a collateral contract - Alternatively, because the defence of negligent misrepresentation was not pleaded, and no notice that it would be relied upon was given before trial, it was too late for Cabletec to raise it in its post-trial brief - See paragraph 92.

Cases Noticed:

Foundation Co. of Canada Ltd. v. Prince Albert Pulp Co. et al., [1977] 1 S.C.R. 200; 8 N.R. 181, refd to. [para. 73].

Bank of Montreal v. Stephen (1990), 111 N.B.R.(2d) 330; 277 A.P.R. 330; 81 D.L.R.(4th) 421 (C.A.), refd to. [para. 74].

Robb (K.W.) & Associates Ltd. v. Wilson (1998), 169 N.S.R.(2d) 201; 508 A.P.R. 201 (C.A.), refd to. [para. 77].

Bush v. Air Canada (1992), 109 N.S.R.(2d) 91; 297 A.P.R. 91 (C.A.), refd to. [para. 77].

Giffin v. Soontiens et al. (2012), 313 N.S.R.(2d) 34; 990 A.P.R. 34; 2012 NSSC 2, refd to. [para. 79].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 81].

Gesner v. Ernst et al. (2007), 254 N.S.R.(2d) 284; 810 A.P.R. 284; 2007 NSSC 146, refd to. [para. 83].

Heilbut Symons & Co. v. Buckleton, [1913] A.C. 30 (H.L.), refd to. [para. 84].

Alberta Opportunity Co. v. Moulton et al., [1991] 2 W.W.R. 624; 112 A.R. 87 (C.A.), refd to. [para. 110].

Alberta Opportunity Co. v. Schinnour - see Alberta Opportunity Co. v. Moulton et al.

Bank of Montreal v. Balsom (1994), 119 Nfld. & P.E.I.R. 354; 370 A.P.R. 354 (Nfld. T.D.), refd to. [para. 110].

Caribou Hotels (1980) Inc. v. 5857 Yukon Ltd., [1990] Y.J. No. 124 (C.A.), refd to. [para. 110].

Manulife Bank of Canada v. Conlin et al., [1996] 3 S.C.R. 415; 203 N.R. 81; 94 O.A.C. 161, refd to. [para. 115].

Bank of Nova Scotia v. Williamson (2009), 256 O.A.C. 286; 97 O.R.(3d) 561; 2009 ONCA 754, refd to. [para. 116].

Burin Peninsula Community Business Development Corp. v. Grandy (2010), 302 Nfld. & P.E.I.R. 163; 938 A.P.R. 163; 2010 NLCA 69, refd to. [para. 116].

Brown Estate, Re, [1893] 2 Ch. 300, refd to. [para. 117].

Bradford Old Bank v. Sutcliffe, [1918] 2 K.B. 833 (C.A.), refd to. [para. 117].

Hoque v. Montreal Trust Co. of Canada et al. (1997), 162 N.S.R.(2d) 321; 485 A.P.R. 321; 1997 NSCA 153, refd to. [para. 125].

Statutes Noticed:

Interest Act, R.S.C. 1985, c. I-15, sect. 3 [para. 72].

Judicature Act, R.S.N.S. 1989, c. 240, sect. 41(i) [para. 75]; sect. 41(k) [para. 76].

Authors and Works Noticed:

Hall, Geoff R., Canadian Contractual Interpretation Law (2007), p. 168 [para. 115].

Halsbury's Laws of Canada, Debtor and Creditor (2010), paras. HGI-99, HGI-187 [para. 118].

McGuinness, Kevin Patrick, The Law of Guarantee (2nd Ed. 1996), c. 6, ss. 6.26 to 6.38 [para. 118].

Counsel:

Joseph M. Herschorn, for the plaintiff, Bell Aliant Regional Communications;

J. Clair Callaghan, self-represented, and representing Cabletec Limited.

These actions were heard at Halifax, Nova Scotia, on November 5-7, 2012, by Warner, J., of the Nova Scotia Supreme Court, who delivered the following judgment on January 4, 2013.