Telus 2011 Annual Report Download - page 163

TELUS 2011 ANNUAL REPORT . 159
FINANCIAL STATEMENTS & NOTES: 22
(c) Indemnification obligations
In the normal course of operations, the Company may provide indem-
nification in conjunction with certain transactions. The terms of these
indemnification obligations range in duration and often are not explicitly
defined. Where appropriate, an indemnification obligation is recorded
as a liability. In many cases, there is no maximum limit on these
indemnification obligations and the overall maximum amount of such
indemnification obligations cannot be reasonably estimated. Other
than obligations recorded as liabilities at the time of the transaction,
historically the Company has not made significant payments under
these indemnifications.
In connection with its 2001 disposition of TELUS’ directory business,
the Company agreed to bear a proportionate share of the new owner’s
increased directory publication costs if the increased costs were to arise
from a change in the applicable CRTC regulatory requirements. The
Company’s proportionate share is 15% through, and ending, May 2016.
As well, should the CRTC take any action which would result in the owner
being prevented from carrying on the directory business as specified
in the agreement, TELUS would indemnify the owner in respect of any
losses that the owner incurred.
As at December 31, 2011, the Company has no liability recorded in
respect of indemnification obligations.
(d) Claims and lawsuits
General
A number of claims and lawsuits (including class actions) seeking
damages and other relief are pending against the Company. As well,
the Company has received or is aware of certain possible claims
(including intellectual property infringement claims) against the Company
and, in some cases, numerous other wireless carriers and telecommu-
nications service providers. In some instances, the matters are at a
preliminary stage and the potential for liability and magnitude of potential
loss currently cannot be readily determined. It is impossible at this
time for the Company to predict with any certainty the outcome of any
such claims, possible claims and lawsuits. However, subject to the
foregoing limitations, management is of the opinion, based upon legal
assessment and information presently available, that it is unlikely that
any liability, to the extent not provided for through insurance or otherwise,
would be material in relation to the Company’s consolidated financial
position, excepting the following items.
Certified class actions
Certified class actions against the Company include a class action
brought in August 2004, in Saskatchewan, against a number of past and
present wireless service providers including the Company. The claim
alleges that each of the carriers 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. In September
2007, a national class was certified by the Saskatchewan Court of Queen’s
Bench. The Company’s 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. Since the
enactment of opt-out class action legislation in Saskatchewan, Plaintiffs’
counsel applied to certify a new national class in Saskatchewan making
substantially the same allegations. That application 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 circum-
stance. 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.
The Company believes that it has good defences to these actions.
Should the ultimate resolution of these actions differ from manage-
ment’s assessments and assumptions, a material adjustment to the
Company’s financial position and the results of its operations could result;
management’s assessments and assumptions include that a reliable
estimate of the exposure cannot be made at this preliminary stage of
the lawsuit.
Uncertified class actions
Uncertified class actions against the Company include a 2008 class
action brought in Saskatchewan (with similar proceedings having also
been filed by plaintiffs’ counsel in Alberta) alleging that, among other
things, Canadian telecommunications carriers including the Company
have failed to provide proper notice of 9-1-1 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. 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.
Intellectual property infringement claims
Claims and possible claims received by the Company include notice of
one claim that certain wireless products used on the Company’s network
infringe two third-party patents. The Company is assessing the merits
of this claim but the potential for liability and magnitude of potential loss
cannot be readily determined at this time.