Law Times

Law Times • November 2, 2009 COMMENT Military commission hearing turns into kangaroo court had a line for those who came before him with lame excuses: "None are so deaf as those who don't want to hear." How about those who say they never A n old judge whose court I used to attend The Hill By Richard Cleroux heard? Three years ago, we first learned that Canadian soldiers were turning over captured Taliban prisoners to Afghan police who then tortured them. It was big news in Canada. The Globe and Mail ran a front- page photo of Canadian soldiers herd- ing their blindfolded and handcuffed prisoners around the wing of a mili- tary aircraft. The accompanying article explained the prisoners were going into the custody of the notoriously brutal Afghan police. Now, Prime Minister Stephen Harper and his cabinet ministers are saying they never knew anything about captured Taliban being abused or tortured. That Harper personally didn't know is something we can understand. As he claims, he never watches Canadian news, only American TV coverage. Presumably, the prisoner story didn't make Fox News. It's likely Harper doesn't read the Globe, either. The story kept growing. More reports of torture kept coming out. By 2007, Harper had a tough time denying the torture reports out of Kandahar. Still, he refuted them cat- egorically, saying it was all Taliban propaganda. But Harper was careful in his word- ing. He said Canadian troops had never tortured their prisoners. That was true. No one ever said they had. Instead, the prisoners were handed to Afghan police. It was they who did the torturing. That approach is known in Ottawa as the Arar defence: "No, your Honour, we didn't torture Maher Arar; we just sent him to Syria. They did the torturing." The trouble is that such defences don't wash with the Geneva Convention. Not all Taliban prisoners were tortured. Some had money to bribe Afghan police and got out soon after to kill more Canadians. Soldiers later rec- ognized some of them on the street. Still, there was one man who stood proud in all this. Richard Colvin, a diplomat from Ottawa who has refused to be part of the coverup, wants to tell the truth before the Military Police Complaints Commission if only Harper and his government will pay for a law- yer of his choosing. Colvin arrived in Kandahar in April 2006 as political direc- tor of the provincial reconstruction team. He quickly learned what was going on and visited the notorious Sarpoza prison on May 16 of that year. On May 26, he wrote for his superiors in Ottawa the first of 12 scathing reports calling attention to "serious, imminent, and alarming" treatment of suspected Taliban prisoners. He was thorough. His 16-page report went to four divi- sions in Foreign Affairs and to 76 addresses in the Department of National saw of Defence's chain of command, includ- ing the command- er of all Canadian troops abroad and the commander of the Canadian military mis- sion in Afghanistan. Colvin couldn't have been any more thorough if he had shouted it from the Peace Tower on Parliament Hill. Still, nothing happened. Now, Harper is saying he never any those reports "at the time." The minister of foreign affairs at the time, Peter MacKay, and the former defence minister, Gordon O'Connor, are saying the same thing. So on June 2, Colvin issued his second report warning about "the risk of tor- ture and/or actual torture of Afghan detainees." The message was clear. So was every- body in Ottawa, from the prime minis- ter on down, asleep? Then Colvin sent another 10 reports back to Ottawa, none of which Harper allegedly saw. Neither MacKay, nor O'Connor or anybody else in the mili- tary's upper echelons got the memos. Liberal MP Bob Rae, who has been to Kandahar himself, calls it a huge "coverup" implicating the highest levels of government. Then we have the latest develop- ments, including attempts by govern- ment lawyers to try to stop Colvin from testifying before the commission. To allow him to do so could breach national security, they argue. That's when commission chairman Peter Tinsley said if Colvin could be barred on those grounds, then "most, if not all other witnesses" could face similar restrictions on testifying. Was it a warning to Harper? Did Harper really want an inquiry without witnesses? How would that look? Harper has since changed his approach. He said Colvin could tes- tify but only if he used a government lawyer. But Colvin insisted on a lawyer of his own choosing, something that seems to be common in Canada. You have the right to a lawyer of your own choosing before an inquiry. The Fredy Villanueva case in Montreal settled that earlier this year. So Colvin hired Lori Bokenfohr. But Harper said the government would pay her legal bills only if she tells Justice Department lawyers who she has been speaking to about the case. So much for solicitor-client privilege in Harper's Canada. Would the kangaroos please take their places in the jury box? No way, Colvin replied. At this point, Tinsley had had enough. He adjourned the hearing for an indefinite period of time. That suits Harper just fine. It's likely the truth will eventually come out when one of the 76 people who received copies of one of the 12 Colvin reports talks to the press. But that could take a long time. By then, we may be well beyond the next election. LT Richard Cleroux is a freelance reporter and columnist on Parliament Hill. His e-mail address is richardcleroux@rogers.com. PAGE 7 Are late fees illegal interest or cost recovery? BY IAN WINTRIP For Law Times I f you pay late, you pay more. At some point in your life, you will likely be late paying a bill and then be subject to a fee when you catch up on that overdue account. Such charges have been the target of class action proceedings that claim the fees represent interest, but de- fendants have successfully ar- gued that they are merely re- covering actual administration costs incurred in providing service. If the fee charged counts as inter- est, it could amount to a criminal rate relative to the length of time the account is overdue. In Canada, un- der s. 347 of the Criminal Code, it's an offence to receive or enter into an agreement or arrangement to receive interest at a rate exceeding 60 per cent per year. However, administration or other such fees that service providers col- lect on overdue accounts may not be a criminal rate of interest if they can show that the charge is a recovery of costs incurred by the service pro- vider in pursuing payment. This was the case in the recent Ontario Court of Appeal decision in DeWolf v. Bell ExpressVu Inc. The DeWolf class action targeted a $25 administration fee collected by Bell ExpressVu from its custom- ers who were more than two months late paying their bills. The represen- tative plaintiff claimed this adminis- tration fee amounted to a criminal rate of interest. In April 2009, the DeWolf mat- ter received certification as a class ac- tion. On Sept. 11, the appeal court overturned the class certification. At issue in the case was whether the administration fee was a form of interest or if it dealt with work the defendant had to perform and there- fore was a recovery of costs. The appeal judges concluded the ad- ministration fee charged wasn't interest for the purposes of s. 347 since Bell Ex- pressVu incurs costs when an account enters the collection stream and must follow up to obtain payment. The costs were considered to be legitimate and therefore justified the $25 charge. Although tracking individual col- lection expenses was impractical, the court was satisfied with a review Bell ExpressVu undertook of its overall costs. The first review covered 2002 when the average cost per subscriber amounted to $19. A second check for 2004 determined the average collec- tion expense was $25 per subscriber. The legal distinction between a criminal rate of interest and a recov- ery of costs has been the subject of other litigation matters as well. In a similar case to DeWolf involv- ing Richard Prendiville against 407 ETR, a class action targeted the toll highway company's late payment fee charged to customers. The parties reached a settlement in 2003 offering a credit to custom- ers charged the fee. A press release www.lawtimesnews.com issued by 407 ETR provided valu- able insights into how they came to the agreement and the impor- tance of being able to justify the charge. The company also openly acknowledged that it needed to im- prove its late payment fee and make it more transparent. As a result of its review, 407 ETR Speaker's Corner replaced its late payment fee with charges "that are directly tied to the collection costs the company incurs when a customer has not paid a bill for at least three months." Al- though the defendants made no ad- mission of liability, the actions of the company as part of the settlement highlight the importance of being able to justify the fees it charges. These types of actions should make companies that charge admin- istration fees look carefully at their policies and the costs of their collec- tions departments to make sure they are in alignment. The courts may view the charges as interest if a com- pany can't justify its costs. Some of the accounting issues in- volved in the analysis of such admin- istration fees include: • Assessing the expenses incurred by the service provider to enforce collection. These include but are not limited to the costs of a col- lections department in salaries, benefits, incremental overhead, and other department expenses; the cost of communication to overdue account holders; and the cost of contracting work to col- lections agencies. • Assessing the number of delin- quent accounts that may be sub- ject to such administration fees. • Given the costs and the number of delinquent accounts, deter- mining whether the cost per ac- count is reasonable relative to the fee that was charged. • Determining whether the cost of collection is already included in the price charged for the service performed with the expectation that expenses for a certain level of delinquency will be spread across the entire customer base. If such costs are already considered in the price, an additional administra- tion fee may not be reasonable. In large organizations, the pro- cess of isolating the costs specifically related to the collection of overdue accounts can be difficult. Some or- ganizations' accounting systems may not be set up to extract the informa- tion necessary to perform such an analysis. The key is to isolate the in- cremental costs associated with the collection function and know where to find that information. Is it interest or is it cost recov- ery? Beyond the legal issues, the an- swer may lie in the accounting. LT Ian Wintrip is a director at Wintrip Wolkoff Shin Inc., a firm specializing in forensic accounting and business valuation services. He can be reached at (416) 849-9973 or iwintrip@ wws-forensic.com.

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