Telus 2011 Annual Report Download - page 101

TELUS 2011 ANNUAL REPORT . 97
MANAGEMENT’S DISCUSSION & ANALYSIS: 10
Class actions
TELUS and certain subsidiaries are defendants in a number of certified
and uncertified class actions. The Company has observed an increased
willingness on the part of claimants to launch class actions whereby a
representative plaintiff seeks to pursue a legal claim on behalf of a large
group of persons, and the number of class actions filed against the
Company has continuously increased in recent years. The adoption by
governments of increasingly stringent consumer protection legislation
(such as Quebec’s Bill 60 in 2010) may also increase the number of class
actions. A successful class action lawsuit, by its nature, could result in
a sizable damage award that negatively affects a defendant’s financial
or operating results.
Certified class actions
Certified class actions against the Company include a class action
brought in 2004 in Saskatchewan against a number of past and present
wireless service providers including TELUS. The claim alleges that
each of the carrier defendants is in breach of contract and has violated
competition, trade practices and consumer protection legislation across
Canada in connection with the collection of system access fees, and
seeks to recover direct and punitive damages in an unspecified amount.
Similar proceedings were commenced in other provinces. A national
class was certified in September 2007 by the Saskatchewan Court of
Queen’s Bench. TELUS’ appeal of the certification order was dismissed
on November 15, 2011. An application for leave to appeal this decision
to the Supreme Court of Canada was filed on January 13, 2012.
Certification is a procedural step. If the Company is unsuccessful on
appeal of the certification decision, the plaintiff would still be required
to prove the merits of the claim.
A new class action making substantially the same allegations was
brought in 2009 in Saskatchewan. The Company believes this was
done in an attempt to take advantage of the expanded scope in class
action legislation since 2004. The new class action was stayed by the
court in December 2009 upon an application by the defendants to
dismiss it for abuse of process, conditional on possible future changes
in circumstance. In March 2010, the plaintiffs applied for leave to
appeal the stay decision and that application was adjourned pending
the outcome of the 2004 class action.
In late 2011, a further class action relating to system access fees
was filed in British Columbia; this action is not yet certified.
Risk mitigation: Certification of a class action does not determine the
merits of the claim, and the plaintiffs are still required to prove the merits
of their claims. The Company believes that it has good defences to
these actions and is vigorously defending them. Should the ultimate
resolution of these actions differ from management’s assessments and
assumptions, a material adjustment to the Company’s financial position
and the results of its operations could result.
Uncertified class actions
Uncertified class actions against the Company include a 2008 class
action brought in Saskatchewan alleging that, among other things,
Canadian telecommunications carriers including the Company have
failed to provide proper notice of 911 charges to the public and have
been deceitfully passing them off as government charges, as well
as a 2008 class action brought in Ontario alleging that the Company
has misrepresented its practice of rounding up wireless airtime to the
nearest minute and charging for the full minute. In 2011, the Company
learned that a further class action relating to 911 charges was filed
in Alberta in 2008, but has not yet been served on the Company.
The plaintiffs in these actions seek direct and punitive damages and
other relief. The Company is assessing the merits of these claims,
but the potential for liability and magnitude of potential loss cannot
be readily determined at this time.
Risk mitigation: The Company is vigorously defending against certifica-
tion of these actions. Certification is a procedural step that determines
whether a particular lawsuit may be prosecuted by a representative
plaintiff on behalf of a class of individuals. Certification of a class action
does not determine the merits of the claim, so that if the Company
were unsuccessful in defeating certification, the plaintiffs would still be
required to prove the merits of their claims.
Civil liability in the secondary market
Like other Canadian public companies, TELUS is subject to civil liability
for misrepresentations in written disclosure and oral statements, and
liability for fraud and market manipulation. Legislation creating liability
was first introduced in Ontario in 2005. Since then, other provinces
and territories have adopted similar legislation.
The legislation creates a right of action for damages against TELUS,
its directors and certain of its officers in the event that TELUS, or a
person with actual, implied or apparent authority to act or speak on
behalf of TELUS, releases a document or makes a public oral statement
that contains a misrepresentation, or TELUS fails to make timely
disclosure of a material change.
The legislation permits action to be taken by any person or company
that acquires or disposes of TELUS securities in the secondary market
during the period of time that the misrepresentation remains uncorrected
in the public or, in the case of an omission, until such time as the material
change has been disclosed. It is not necessary for the person or com-
pany to establish that they relied on the misrepresentation in making the
acquisition or disposition.
Risk mitigation: When the legislation was first introduced, TELUS
conducted a review of its disclosure practices and procedures and the
extent to which they were documented. As part of that review, TELUS
consulted external advisors. This review indicated that TELUS has well-
documented and fulsome processes in place, including a corporate
disclosure policy that restricts spokespersons to specifically designated
senior management, provides a protocol for dealing with analysts and
oral presentations, outlines the communication approach to issues,
and has a disclosure committee to review and determine disclosure of
material information. TELUS monitors legal developments and annually
re-evaluates its disclosure practices and procedures, including in 2011,
and believes that they continue to be appropriate and prudent and
that its risk exposure is reasonable and has not changed significantly
over the past 12 months. However, there can be no assurance that
TELUS’ processes will be followed by all team members at all times.
Legal compliance
TELUS relies on its employees, officers, Board of Directors, key suppliers
and partners to demonstrate reasonable legal and ethical standards.
Situations might occur where individuals do not adhere to TELUS policies
or contractual obligations. For instance, there could be cases where
personal information of a TELUS customer or employee is inadvertently
collected, used or disclosed in a manner that is not fully compliant
with legislation or contractual obligations. In the case of TELUS Health
Solutions, personal information includes sensitive health information
of individuals who are TELUS customers or healthcare providers’ end
customers. In addition, there could be situations where compliance