The federal government has asked the Court of Appeal of Ontario to dismiss or vary the damages in the case related to investors in now-defunct telecom Mobilicity, alleging a lower court's decision relied on almost 30 errors of law, principle and 'palpable and overriding errors of fact.'Colin Perkel/The Canadian Press
The federal government has appealed a decision by an Ontario court that found it liable for hundreds of millions of dollars for causing investor losses, when it unexpectedly altered spectrum policy.
In legal filings to the Court of Appeal for Ontario on Sept. 5, Catherine Lawrence, director-general and senior general counsel to the Department of Justice, asked that the case related to investors in now-defunct telecom Mobilicity be dismissed or that the damages be varied. She alleged the decision relied on almost 30 errors of law, principle and “palpable and overriding errors of fact.”
This August, Justice Peter Osborne of the Ontario Superior Court of Justice ruled that Ottawa committed negligence and negligent misrepresentation when it induced Quadrangle Group LLC and Obelysk Media Inc. to invest hundreds of millions of dollars in Mobilicity in 2008 – only to change the rules for the resale of the startup’s wireless licences in 2013.
The decision reinforced the federal government’s “duty of care” to ensure its regulatory actions do not lead to unreasonable harm to business interests, and underlined the question of investors’ rights in the face of changing policy frameworks.
Judge sides with Mobilicity investors, orders Ottawa to repay hundreds of millions of dollars
In Ottawa’s appeal, Ms. Lawrence argued that Justice Osborne erred in his finding that the government owed the duty of care, and that the judge had not properly taken into account policy considerations and the public interest.
“Duty to the public is critical when considering the question of whether the Minister owes a private law duty to investors in companies who are subject to regulation,” she said.
In regards to Justice Osborne’s finding of negligent misrepresentation, Ms. Lawrence said the decision relied on irrelevant evidence, and was erroneous as it found the government made representations by omission and that the plaintiffs’ reliance on any such representations was reasonable.
She also rejected the finding that the government had specifically courted the Mobilicity investors, and that any harm to them was foreseen.
Stewart Lyons, former president of Mobilicity and adviser to the plaintiffs, called the government’s appeal “a highly counterproductive message to send to the business community” at a time when Canadians are seeking foreign investment.
“Rather than doubling down and trying to reargue the right to act negligently, capriciously and without a duty of care, we would hope this government would use this opportunity to turn the page and focus on the current challenges facing Canadians,” he said in an e-mail to The Globe and Mail.
Mr. Lyons said the investors plan to file their own appeal to Justice Osborne’s decision, as they believe the damages should have been more than $200-million higher. At the time of the decision, Jonathan Lisus, lead lawyer for the investors, said the parties had calculated the amount at more than $500-million.
The legal battle started over a decade ago, when Quadrangle and Obelysk alleged in a 2014 lawsuit that government officials encouraged them to invest in spectrum licenses to start a new telecom and compete with large incumbents. They alleged the government assured them there would be an “exit strategy” should the business fail, as they would be free to transfer the licenses after a five-year moratorium.
After the five-year moratorium on transfers had passed, Mobilicity’s board worked with Telus Corp. to try to transfer the licenses, but it was twice rebuffed by the ministry. The ministry then approved a sale of Mobilicity’s assets to Rogers – but this sale was worth less than what Telus had offered at its peak. In response, the Mobilicity investors sued the government for damages.