Law Times

Law Times • June 2, 2014 Page 7 www.lawtimesnews.com COMMENT Teranet forging ahead despite class action, credit rating setbacks hen I last reported on the goings on at Teranet Inc., the Borealis Infrastructure Management Inc. subsid- iary that operates Ontario's land registry system, the company was riding a wave of good news. At about this time last year, Teranet had just won a mandate to bring Mani- toba's land registration system into the 21st century. It was a 30-year deal said to be worth $75 million upfront to Manitoba with royalties to the province starting at around $11 million per year and increas- ing to $24 million by 2043 when the li- censing exclusivity will end. Almost at the same time, Teranet faced a $50-million class action proceeding in Keatley Surveying Ltd. v. Teranet Inc. In his claim, the plaintiff, a surveyor, brought suit for and on behalf of all Ontario land surveyors for copyright infringement under the federal Copyright Act for all of the reference, subdivision, and condo- minium plans stored in Teraview (and in a similar Teranet data access portal called GeoWarehouse and marketed to real es- tate agents, planners, and municipalities) for which the company collected a fee for retrieval and transmission. While the beginning of 2013 didn't prove an end to the litigation, Teranet could at least sigh a major sigh of relief at that time when the plaintiff lost a motion for class certifica- tion in the Ontario Superior Court. It wasn't a bad way to start 2013. But fast-forward about a year and Teranet's road has gotten a bit rockier. This year started off with a credit rating down- grade by the Dominion Bond Rating Service. Citing continuing declines in tra nsaction volume and rev- enue in 2013, Dominion cut Teranet's creditworthiness to BBB with a stable outlook. According to the Dominion scale for long-term paper, BBB is about the middle of the pack and constitutes "adequate credit quality. The capacity for the payment of financial obligations is considered ac- ceptable. May be vulnerable to future events." The downgrade in Teranet's credit rat- ing wasn't the only reversal of fortune for the company. In its surveyor class action suit, the Divisional Court overturned the Superior Court's refusal to certify, a situ- ation signaling the risk of potential royal- ties owed to Ontario surveyors for plans registered on title. Although the credit downgrade has nothing to do with class certification in the Keatley litigation, both events became public at about the same time. That made them far more newswor- thy than either would have been had they not occurred so closely together. Of course, these slight bumps in the road for Teranet may be little more than just that: de minimus setbacks in a busi- ness model that continues to work. As Greg Pope, Teranet's chief financial of- ficer, notes when discussing the credit downgrade, Dominion had publicly pre- dicted it some time ago and it came as no surprise. The situation was ref lective of the aggressive government efforts to curb access to mortgage financing at the low end of the market (Teranet's revenue being a function of the total number of registrations and not the total value they ref lect) and the credit down- grade had nothing to do with management or the basic Ter- anet business model, both of which remain sound, compe- tent, and robust. Besides, as Pope confirmed, although Ter- anet has a current long-term debt f loat of around $2 billion, it's not raising any new capital any time soon. That means the credit downgrade to BBB has almost no financial impact on Teranet's operating income. Agostino Russo, Teranet's chief legal officer, similarly concluded that the Ke- atley lawsuit wouldn't materially affect operations at Teranet. First of all, the Divisional Court ruling is under appeal, but even if it wasn't, the decision is en- tirely interlocutory in nature. There re- mains a considerable way ahead for the plaintiff to get from a successful class certification to actual success on the merits. While the surveyors may now have a true class action lawsuit against Teranet, there's still a relatively novel argument under the Copyright Act for the plaintiffs to win before recovering any alleged royalties. Further still, Ke- atley may well be alone in pursuing this cause. While this may eventually change as a result of the class certification at Divisional Court, it's important to note that, prior to the appeal, there had been few, if any, other surveyors actually will- ing or able to come out and join the class and it's not clear to me just how many will want or actually be eligible to do so. Indeed, neither the credit downgrade nor the re-emergence of the surveyors' lawsuit seems to be slowing down Ter- anet. At about the same time as the credit downgrade and the release of the Divi- sional Court's class certification, Manito- ba Finance Minister Jennifer Howard an- nounced a comprehensive master agree- ment with Teranet and that, as of March 29 , the province had officially transferred both its property registry and its personal property security system to a Teranet af- filiate headquartered in Winnipeg. According to Eric Black, director of government relations for Teranet, Manitoba isn't adopting a mirror of On- tario's Teraview system. Instead, Mani- toba's property register continues to op- erate much as it did before the turnover to Teranet. Manitoba customers should, therefore, experience a relatively seam- less transition to a more convenient, faster, and secure online property search and registrations system that will ultimately revolutionize conveyancing practice in the province. As Black points out, Manitoba was but the most recent of Teranet success stories. He notes Teranet continues to seek out business opportunities, both in Canada and beyond, to provide government lead- ers with ways to create stable revenue streams while effectively modernizing and maintaining their land registry sys- tems. None of these efforts show any signs of abating just because of a long-predicted BBB credit rating and the threat of a po- tentially one-person class action lawsuit for royalties on surveys in Ontario. LT Jeffrey W. Lem is a partner in the real estate group at Miller Thomson LLP. His e- mail address is jlem@millerthomson.com. Defence of mandatory minimums misses the mark er many years of evidence- free criminal justice policy pro- nouncements from Ottawa, any thoughtful contribution to the debate from the right side of the spectrum is more than welcome. ose of us who are critical of the tough- on-crime agenda are a little tired of speaking into an echo chamber. We have waited in vain for defenders of the laws to counter the criticisms with arguments rather than edicts. I was hoping Lincoln Caylor and Gannon Beaulne's paper, "A defence of mandatory minimum sentences," would provide an articulate counterargument to well-known criticisms of federal sentencing policy. I was disappointed. If this is the best de- fence available, it's not surprising that Prime Minister Stephen Harper and his support- ers have preferred talking points and sound bites to rational exposition. e problem begins with the title. Despite advertising it- self as a defence of mandatory minimums, it only attempts to vindicate the propriety of mandatory minimums in the abstract and then goes on to chastise the essentially non- existent judges who brazenly fl out them. "If rational, proportionate mandatory minimum sentences are imposed, they pro- mote justice," wrote the authors. "Judges who ignore the rule of law and seek to make decisions according to their personal views of justice in the face of clear legislation to the contrary assault the justice system and off end the duties of their offi ce," they continued. e authors miss the point on both scores. Few people have argued that all mandatory minimums are per se problematic simply because they fetter a judge's dis- cretion. As the authors rightly point out, legislation constrains judges' discretion in all kinds of ways, something that's not inher- ently bad. And few would dispute that the mandatory life sentence for murder serves a legitimate denunciatory and symbolic pur- pose. But what about the three- year minimum for possession of a prohibited weapon or the one-year sentenc- ing fl oor for growing between 200 and 501 marijuana plants? Here, crucially, Caylor and Beaulne have nothing to say. eir defence of mandatory minimum sentences doesn't even attempt to defend a single mandatory minimum the government has actually enacted. is is like writing a defence of having a minimum drinking age without bothering to weigh in on whether it should be 12 or 21. e lack of content robs the argument of all force. e dominant criticism made against the Harper agenda has been that the spe- cifi c mandatory minimums the government has actually enacted are harsh, pointless, and counterproductive. e minimums are based not on sound criminological evidence but on the gut feeling that some off enders are getting off lightly. Caylor and Beaulne provide an intellectualized gloss for this gut feeling but are either unable or unwilling to do the hard work of actually justifying any particular minimum sentence. Even on the theoretical level at which they pitch their de- fence, their account is overly simplistic in its emphasis on legislative supremacy. e very same judges now commanded by the Criminal Code to im- pose minimum jail sentences for a range of off ences must also respect the fundamental principle that the punishment must be "proportionate to the gravity of the off ence and the degree of responsibility of the off ender." In addition, the law directs judges to ensure they don't deprive an off ender of liberty "if less restrictive sanctions may be appropri- ate in the circumstance" and take into ac- count a range of statutory mitigating fac- tors such as aboriginal status. To the extent that judges have bridled against mandatory minimums, it's less because they don't like Parliament telling them what to do than of a natural frustration at having to do contra- dictory things at once. In my view, bad mandatory minimums tend to fall into two categories: those that are demonstrably harsh and vulnerable to a challenge under s. 12 of the Charter of Rights and Freedoms (as happened to the three-year minimum for prohibited gun possession in R. v. Nur) and those that are troublesome mainly because they take useful sentencing options other than jail off the table. Take the 90-day minimum for sexual interference. No court is likely to strike it down as cruel and unusual. But it means that a non-custodial option, like a conditional sentence, is categori- cally unavailable. e prosecutor's choice to charge a diff erent off ence that doesn't carry a mandatory minimum displaces the judge's discretion to impose sanctions other than imprisonment. If the prosecu- tor chooses not to do that or if no such alternative off ence is available, jail is a certainty. is is a good result only if you take the view that imprisonment is the proper sentence for every single person who commits off ences such as sexual in- terference or marijuana production. at's a very tough case to make, and Caylor and Beaulne don't even try. Caylor and Beaulne do off er up s. 12 as the ultimate bulwark against injustice in mandatory sentencing. But in doing so, they overlook this second category of bad enactments altogether. For those of us concerned about a move toward an Americanized, jail-fi rst mindset — just as the Americans themselves are starting to move away from it — these low-level but increasingly pervasive minimum sentences are the most troubling of all. LT Matthew Gourlay handles criminal and regulatory matters at Henein Hutchison LLP with an emphasis on appellate litigation. is is his fi rst column a er our previous A Criminal Mind columnist, Rosalind Conway, stepped down from the role following her appointment as a deputy judge of the Small Claims Court. Gourlay is available at mgourlay@hhllp.ca. A A Criminal Mind Matthew Gourlay W The Dirt Jeffrey Lem Jeffrey Lem

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