Vidéotron Ltée. v. Netstar Communications Inc., 2004 FCA 299

Date: 20040917

Docket: A-64-03

Citation: 2004 FCA 299

CORAM :       DESJARDINS J.A.

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

                                                             VIDÉOTRON LTÉE

                                                                           and

                                                       QUEBECOR MÉDIA INC.

                                                                                                                                          Appellants

                                                                           and

                                            NETSTAR COMMUNICATIONS INC.

                                            LE RÉSEAU DES SPORTS (RDS) INC.

                                                                           and

                                                      BELL GLOBEMEDIA INC.

                                                                                                                                      Respondents

                                                                           and

                                           CANADIAN RADIO-TELEVISION AND

                                        TELECOMMUNICATIONS COMMISSION

                                                                                                                                          Intervener

                                      Hearing held at Montréal, Quebec, on May 17, 2004.

                             Judgment rendered at Ottawa, Ontario, on September 17, 2004.

REASONS FOR JUDGMENT:                                                                                 PELLETIER J.A.

CONCURRED IN BY:                                                                                          DESJARDINS J.A.

                                                                                                                           LÉTOURNEAU J.A.

Date: 20040917

Docket: A-64-03

Citation: 2004 FCA 299

CORAM :       DESJARDINS J.A.

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

                                                             VIDÉOTRON LTÉE

                                                                           and

                                                       QUEBECOR MÉDIA INC.

                                                                                                                                          Appellants

                                                                           and

                                            NETSTAR COMMUNICATIONS INC.

                                            LE RÉSEAU DES SPORTS (RDS) INC.

                                                                           and

                                                      BELL GLOBEMEDIA INC.

                                                                                                                                      Respondents

                                                                           and

                                           CANADIAN RADIO-TELEVISION AND

                                        TELECOMMUNICATIONS COMMISSION

                                                                                                                                          Intervener

                                                    REASONS FOR JUDGMENT

PELLETIER J.A.

[1]                When entered on the roll, this appeal raised two main questions: the power of the Canadian Radio-television and Telecommunications Commission (CRTC) to intervene in a contractual dispute between two licence holders and the effect of a settlement reached between the parties, subject to the appellant's right to challenge the validity of the order made by the CRTC. However, after new evidence was entered in the record, the argument turned on the effect of that new evidence, which apparently showed that the order in question was the result of misleading, if not false, evidence. For the reasons that follow, the matter must be referred back to the CRTC for it to decide the question in light of that new evidence.

PARTIES

[2]                The appellant Vidéotron Ltée (Vidéotron) is a wholly owned subsidiary of Groupe Vidéotron Ltée, which in turn is entirely controlled by Quebecor Média Inc. The Réseau des Sports Inc. (RDS) is a wholly owned subsidiary of Netstar Communications Inc. (Netstar), a company 80% of whose voting shares are held directly or indirectly by Bell Globemedia Inc. Bell Globemedia Inc. is controlled by BCE Inc., which also controls Bell ExpressVu Inc. (ExpressVu). All parties agreed that for the purposes of the case at bar Netstar and RDS are interchangeable with each other.

[3]                Vidéotron and RDS are related by an affiliation contract which includes a so-called "most-favoured-nation" clause. The purpose of that clause is to guarantee Vidéotron the right to be treated by RDS on terms as advantageous as those RDS gives to a third party. RDS is also linked by an affiliation contract with ExpressVu, a company with which it is associated as a result of the fact that both are controlled by BCE Inc. ExpressVu and Vidéotron are engaged in fierce competition in the Quebec francophone market. Although they are both broadcasting enterprises, ExpressVu uses satellite distribution technology while Vidéotron operates the largest cable distribution network in Quebec.

DISPUTE BETWEEN VIDÉOTRON AND RDS

[4]                Vidéotron objected that RDS tolerated the practice by ExpressVu of offering multiple terminals to its subscribers for a single subscription, which had the effect of reducing the amount owing to RDS since the latter is calculated on the number of subscriptions. Vidéotron maintained that this gave ExpressVu an advantage which RDS was not giving to Vidéotron. Relying on the "most-favoured-nation" clause, Vidéotron unilaterally reduced the fees paid to RDS by 62%. RDS accordingly suffered a lost of income which amounted to over $16 million.

[5]                RDS completely rejected Vidéotron's allegations and filed a complaint with the CRTC, alleging that Vidéotron had contravened section 9 of the Broadcasting Distribution Regulations, SOR/97-555, giving itself an undue preference and thereby subjecting RDS to an undue disadvantage. At the same time, Vidéotron filed its own complaint, alleging that RDS contravened section 10.1 of the Specialty Services Regulations, 1990, SOR/90-106, giving ExpressVu an undue preference, the effect of which was to subject Vidéotron to an undue competitive disadvantage. Although two separate sets of regulations are in question, the provisions are identical:

[6]                RDS maintained that its complaint was not simply a contractual and commercial dispute between two businesses. It argued that the CRTC had the power to intervene because the reduction in fees imposed by Vidéotron had an impact that affected the public interest. Vidéotron, for its part, reminded the CRTC that the resolution of contractual disputes is a matter for the civil courts and the case only concerns the application of the "most-favoured-nation" clause.

CRTC DECISIONS

[7]                The CRTC rendered a decision disposing of each complaint. Decision CRTC 2002-254 disposed of the complaint filed by Vidéotron. The CRTC found that it was for the complainant to submit sufficient evidence to establish that a preference had been given or a disadvantage imposed. Once that stage was complete, the complainant still had to show that the preference or disadvantage was undue. In the instant case, the CRTC considered that Vidéotron first had to present evidence there had been a reduction in RDS's income in favour of ExpressVu, and that this was with the approval of RDS. Secondly, Vidéotron had to establish that there were serious consequences of the preference given to ExpressVu, either for Vidéotron itself or for the Canadian broadcasting system.

[8]                The CRTC came to the conclusion that Vidéotron had not presented evidence of a reduction in RDS's income in favour of ExpressVu. First, the CRTC noted a certificate filed by the president of Netstar/RDS, Rick Brace, indicating that Netstar/RDS had concluded no affiliation agreement with a third party that was more advantageous than the one it concluded with Vidéotron. Specifically, the certificate deposed that "Netstar has not entered into an agreement with any third party in which such third party pays a fee for the NetStar services . . . which is less than fee paid by Vidéotron" (Tab 7 of Vol. 2 of Appeal Book).

[9]                The CRTC further concluded that RDS did not tolerate ExpressVu's practice of offering several terminals for a single subscription and that its parent company Netstar had undertaken discussions with ExpressVu within a reasonable time to clarify the situation. However, there was a possibility that RDS and ExpressVu were not acting independently of each other. For this reason, the CRTC examined the corporate links existing between the two and came to the conclusion that they had independent management structures and minority shareholders whose economic interests differed. In short, the CRTC found that Vidéotron had not established that RDS had given ExpressVu a preference, and accordingly there was no basis for considering the second aspect of the analysis, namely whether that preference was undue.

[10]            In CRTC decision 2002-255, the CRTC allowed RDS's complaint that Vidéotron had given itself an undue preference by reducing the fees owed to RDS unilaterally and without justification. The CRTC considered that it had the power to intervene in this dispute arising from an affiliation contract between licensees because the public interest was involved, due to the commanding position held by Vidéotron in the French-language market in Quebec and the impact of a reduction of fees on the purposes of the broadcasting system.

[11]            The CRTC considered that Vidéotron was not justified in relying on the "most-favoured-nation" clause and unilaterally reducing the amounts owed to RDS, since in its written submission Vidéotron admitted that it did not know the extent of the alleged advantage and it had no specific measurement to support the reduction which it imposed on the fees payable to RDS. By unilaterally reducing the fees owed to RDS, therefore, Vidéotron was giving itself a preference and thereby subjecting RDS to a disadvantage.

[12]            To decide whether the preference was undue, the CRTC considered the question of the public interest in the Canadian broadcasting system. The CRTC found that the reduction in fees was likely to compromise RDS's ability to provide a programming service and might even undermine the viability of RDS. Further, the reduction in income imposed by Vidéotron made compliance with certain licensing conditions imposed on RDS by the CRTC difficult or impossible. Finally, the CRTC considered that Vidéotron had acted wrongfully by unilaterally imposing reductions without having exhausted reasonable means at its disposal for resolving the dispute. For all these reasons, the CRTC found that Vidéotron had given itself an undue preference and had accordingly contravened the Regulations.

[13]            The CRTC gave RDS the following remedy:

[TRANSLATION]

The Commission requires Vidéotron to pay Netstar/RDS all the fees owed since the date of the first unilateral reductions. Further, within ten days of the instant decision, Vidéotron shall inform the Commission in writing how it intends to comply with this decision. Additionally, in the event Vidéotron does not comply with this decision, the Commission might convene a public hearing for it to justify why the Commission should not make an order or have recourse to other enforcement measures at its disposal.

[14]            Vidéotron promptly indicated that it did not intend to comply with the order made by the CRTC. It filed an application for leave to appeal both CRTC decisions, which was granted. In the meantime the CRTC, at the request of RDS, informed the parties of the date of a public hearing to which Vidéotron had been summoned to explain why an enforceable order should not be made pursuant to subsection 12(2) of the Broadcasting Act, S.C. 1991, c. 11, compelling it to pay the fees owned to RDS. Before the hearing was held, the parties reached an agreement and Vidéotron paid the amounts owed, subject to its right to challenge the validity of the CRTC decision. In their memorandum of agreement, the parties agreed that:

[TRANSLATION]

1. It is agreed that this memorandum of agreement and any payment contemplated or resulting therefrom are made under reserve and without any admission whatsoever, and that the parties reserve all their rights in this regard.

                                                                      . . .

7. This agreement is without prejudice to rights which the parties may claim to have in the Vidéotron action, the RDS action and in the Federal Court of Appeal.

8. The proceedings in the provincial courts and the Federal Court described in this memorandum of agreement will be stayed until January 10, 2003, as it is agreed that the parties will assist each other in ensuring that the necessary proceedings are taken to ensure that the parties' rights are not affected, including:

                                                                      . . .

- Vidéotron et al. may file their notice of appeal and any other necessary pleading if the Federal Court's strict deadline should fall due before January 10, 2003.

Following this agreement, the parties appeared before the CRTC to indicate their settlement.

NEW EVIDENCE

[15]            One week before its appeal was heard in this Court, Vidéotron filed a motion for leave to enter new evidence in the record. This new evidence questioned the certificate issued by RDS indicating that it had concluded no contract containing terms more advantageous than those offered to Vidéotron. The application for leave was granted and, at the start of the hearing of the appeal, Vidéotron filed its new evidence.

[16]            Netstar offers broadcasting undertakings two sports programming services: RDS in French and TSN in English. ExpressVu is associated by an affiliation contract with each of these undertakings. The new evidence consisted of an amendment to each of these affiliation contracts. In the case of the TSN affiliation contract, the amendment provided that when a subscriber who received RDS programming in a francophone market added the TSN service, the amount payable to TSN for this "add-on" was $0.50. At the same time, the amendment to the affiliation contract between ExpressVu and RDS provided that when a subscriber to the TSN service added the RDS service, the amount payable to RDS was $0.50. Each of these amendments provided that it was made in consideration of the other. These amendments are both relevant and important in terms of the certificate issued by RDS, which stated that it had concluded no contracts containing terms more advantageous than those offered to Vidéotron. The amount payable by Vidéotron for each subscription to the RDS service was $1.50, three times the price payable by ExpressVu in the conditions specified by the amendments.

[17]            The amendments were dated April 1, 2000, while the certificate in question, which was entered in evidence before the CRTC, was dated December 20, 2001. The certificate was signed by Rick Brace, Netstar president. It was Mr. Brace himself who signed the amendment to the contract between TSN and ExpressVu as president of TSN. In view of the fact that RDS and TSN are both Netstar subsidiaries, and that each amendment contains the statement that it is in consideration of the other, it is inconceivable that Mr. Brace was not aware of the amendment to the contract between RDS and ExpressVu when he issued the certificate entered in evidence before the CRTC.

[18]            RDS alleged that the amendment to the contract between RDS and ExpressVu was incomplete, in that it did not reflect the parties' intention, namely that the reduced price would only apply in the case of the add-on to the RDS programming in the anglophone market. In the submission of RDS, the fact that this limitation did not appear in the wording of the amendment was simply an oversight. Further, RDS maintained that Vidéotron had long been aware of these amendments. In this regard, it filed a copy of a letter to a Vidéotron manager dated December 7, 2001, in which we find the following passage:

[TRANSLATION]

We have concluded two amendments to the contract with Bell ExpressVu for TSN and RDS ("the amendments"), specifying the terms and conditions of the "complementary" clause, namely obtaining the signal as a supplement for only $1. The purpose of these amendments was to enable ExpressVu to provide the TSN service for RDS customers as a supplement in the Francophone market only, and conversely, to provide the RDS service as a supplement for TSN customers in the Anglophone market only.

[19]            RDS submitted that it follows that Vidéotron was aware of the amendments and that, if it did not know, it should have known that if the price to the consumer was one dollar, the price payable by ExpressVu would necessarily be less than that amount. Additionally, ExpressVu informed Vidéotron on December 19, 2001, that it had discontinued addition of the RDS signal as an "add-on".

POINTS AT ISSUE

[20]            As mentioned above, the parties raised several points in their memorandums, but the introduction of the new evidence changed the nature of the argument. If, as Vidéotron maintained, the new evidence required that the case be referred back to the CRTC so it could reexamine its decision based on the new evidence, the other points raised are premature because they only arise if the CRTC confirms its order. The first point for consideration, therefore, is whether the new evidence justifies referring the matter back to the CRTC for it to deal with complaints filed by the parties based on that evidence and all the other evidence at its disposal. As I have come to the conclusion that the case should be referred back to the CRTC, it is not necessary to deal with these other points.

WHETHER NEW EVIDENCE WARRANTS REFERRAL OF CASE BACK TO CRTC

[21]            To begin with, the Court must consider whether the new evidence could have had a conclusive effect on the CRTC decision. At this stage, the question is simply whether that evidence was persuasive enough to warrant this Court's intervention.

[22]            Reading the amendments leads me to conclude that RDS had in fact signed an agreement

according to which it was providing its service to a third party for a price less than that paid by Vidéotron for the same service, and this squarely contradicts Mr. Brace's certificate entered in evidence before the CRTC. As I noted earlier, it is simply inconceivable that Mr. Brace was not aware of these amendments, which, in any case, were not drawn to the CRTC's attention. In view of the importance attached to Mr. Brace's certificate in disposing of the complaint filed by Vidéotron, the CRTC could well have come to a different conclusion if it decided to disregard this certificate or to reconsider the evidentiary value that should be given to it. If the CRTC ruled in Vidéotron's favour on its own complaint, it could well have seen the RDS complaint from a different standpoint. The nature and content of the amendments were such that when the new evidence was brought to the CRTC's attention it could have had a conclusive effect on the decisions made by that agency.

[23]       The grounds for intervention by this Court in CRTC decisions are very limited:

[24]       On the other hand, subparagraph 52(c)(ii) of the Federal Courts Act, R.S.C. 1985, c. F-7, enables the Court to refer the matter back for determination in accordance with such directions as it considers to be appropriate.

[25]       Apart from a single exception, this Court's previous decisions are consistent: for there to be such a reference, there must be a ground of intervention in the wording of the applicable legislation. See Canada (Director of Investigation and Research) v. Southam Inc., [1995] 3 F.C. 557, para. 84, Canada (Minister of Employment and Immigration) v. De Decaro, [1993] 2 F.C. 408, para. 15 (note 5), and Orelien v. Canada (Minister of Employment and Immigration), [1992] 1 F.C. 592, para. 26. There is nothing surprising in that conclusion. The power conferred on the Court by subparagraph 52(c)(ii) is not a basis for intervention as such, simply a remedy available to the Court in the event its intervention is warranted.

[26]       The exception that was found to exist in Bow River Pipe Lines Ltd. v. Canada (1997), 216 N.R. 123, has a bearing on the facts of the case at bar. In that case, the appellant tried to raise a ground of appeal that had not been argued at first instance. The Court referred to the requirements in Athey v. Leonati, [1996] 3 S.C.R. 458, "that an appellant may not raise a point that was not pleaded or argued in the trial court unless there is relevant evidence in the record" (p. 478). All the relevant evidence was not in the record, because of "respondent's failure to properly amend Her Reply to the Notice of Appeal, which in turn led the appellant to present and argue the case on a wrong footing" (para. 63). In short, the appellant was misled as to the basis of the dispute.

[27]       This Court allowed the appeal only to refer the matter back to the Tax Court of Canada for the latter to consider the point again based on more complete evidence:

[68] On the authority of s. 52(c)(ii) of the Federal Court Act which gives the Court of Appeal the discretionary power, in the case of an appeal other than an appeal from the Trial Division, to "refer the matter back for determination in accordance with such directions as it considers to be appropriate", I have reached the conclusion that the new argument raised before us by the appellant with respect to the cost amount should be considered by this court, but that in the special circumstances of this case, where arguably more complete evidence is required, it would be appropriate to have it determined by the Tax Court of Canada on the evidence that is in the record or on such further evidence as it may allow.

[69] I am, therefore, prepared to allow the appeal _ which is otherwise dismissed _ but only to the extent of remitting the matter back to the Tax Court of Canada for determination of the cost, if any, which the appellant is entitled to add to its cumulative Canadian Oil and Gas Property Expense account, pursuant to paragraphs 66.4(5)(a) and (b) of the Income Tax Act, in respect of Canadian resource property it received on the termination of the Lone Rock Resources Limited Partnership.

[28]       The reasoning in Bow River Pipe Lines Ltd. applies here, and in the circumstances the Court must refer the matter back to the CRTC for it to consider, based on the amendments entered in evidence in this Court and the evidence which the CRTC had before it when it made decisions 2002-254 and 2002-255, whether either Vidéotron or RDS gave itself an undue advantage.

[29]       There is no question here of allowing either of the parties to reopen the matter and file new evidence so as to obtain a decision favourable to its arguments. This is a special situation in which the CRTC may have been led to base its decision on misleading, if not false, evidence. It is the CRTC's function to assess this new evidence and, if necessary, accept additional evidence relating to it. It must do this based on all the evidence and decide whether its original decisions should be altered.

[30]       RDS can make its arguments that Vidéotron was aware of the amendments, and should have objected to the certificate when it was entered in evidence before the CRTC, when the latter considers the matter again. It will be the CRTC's function to assess their merit and evidentiary value.

[31]       For these reasons, I would allow the appeal with costs, but only to refer the matter back to the CRTC for it to reconsider its decisions in view of the two amendments entered in evidence in this Court, the evidence already in the record and any other evidence which it may consider should be admitted in the circumstances.

"I concur in this opinion.

     Alice Desjardins J.A."

"I concur.

     Gilles Létourneau J.A."

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

                          FEDERAL COURT OF APPEAL

                              SOLICITORS OF RECORD

DOCKET:                               A-64-03

STYLE OF CAUSE:               VIDÉOTRON LTÉE and

QUEBECOR MÉDIA INC.                                          Appellants

and

NETSTAR COMMUNICATIONS INC.

LE RÉSEAU DES SPORTS (RDS) INC.

and

BELL GLOBEMEDIA INC. and                                  Respondents

CANADIAN RADIO-TELEVISION

AND TELECOMMUNICATIONS COMMISSION Intervener

PLACE OF HEARING:                           Montréal, Quebec

DATE OF HEARING:                             May 17, 2004

REASONS FOR JUGMENT:                 PELLETIER J.A.

CONCURRED IN BY:                            DESJARDINS J.A.

LÉTOURNEAU J.A.

DATE OF REASONS:                             September 17, 2004

APPEARANCES:

Daniel Urbas                                                                             FOR THE APPELLANTS

James A. Woods

Pierre Trottier                                                                            FOR THE RESPONDENTS

William Atkinson

Guy Pratte                                                                                 FOR THE INTERVENER

Caroline Matte

SOLICITORS OF RECORD:

Woods & Partners                                                                    FOR THE APPELLANTS

Montreal, Quebec

McCarthy, Tétreault                                                                  FOR THE RESPONDENTS

Montreal, Quebec

Borden, Ladner, Gervais                                                            FOR THE INTERVENER

Montreal, Quebec