Nova Scotia

Nova Scotia ordered to pay in rural high-speed internet court case

The Nova Scotia government has been court-ordered to compensate a failed startup after misusing its confidential research to help create a program intended to bring high-speed internet to rural communities.

The province 'went through a backdoor' for confidential research, Nova Scotia Supreme Court rules

TDC Broadband developed a method and business plan to bring high-speed internet to rural communities. The Nova Scotia Supreme Court ruled provincial staff took that confidential information and misused it to serve as the backbone of the province's Broadband for Rural Nova Scotia initiative. (iStock)

The Nova Scotia government has been court-ordered to compensate a failed startup after misusing its confidential research to help create a program intended to bring high-speed internet to rural communities.

TDC Broadband Inc., a company owned by three brothers, had developed a method and business plan to bring high-speed internet to Caledonia, Queens County, in 2006. The company went bankrupt a year later, shortly after losing a bid for a massive internet pilot project unveiled by the province.

TDC Broadband's creditors took the province to court, alleging the details of its Caledonia project were used as the backbone of the Rodney MacDonald Progressive Conservative government's $75 million Rural Broadband Initiative. MacDonald had promised affordable high-speed internet everywhere in Nova Scotia by 2009.

'Tight deadline to meet'

Misusing TDC's information is indeed what the province did, Nova Scotia Supreme Court Justice Patrick Duncan wrote in a 54-page decision released Friday.

Following the MacDonald's government's election win, a government staffer was tasked with planning for the provincewide initiative.

The staffer "had no technical background in the provision of broadband internet, no system to deliver the service, no specific geographical area in which to test a delivery system and a tight deadline to meet," said Duncan.

'Went through a backdoor'

To this day, rural Nova Scotians complain about the lack of reliable internet.

The project's merits aside, in making those plans, government officials "showed antipathy" toward TDC Broadband, said Duncan.

Instead, they "went through a backdoor for this information, asking for increasingly detailed information."

"It is mystifying as to why [government staff] would not have made efforts to engage with TDC at the outset, even if it was only to determine whether they could be useful as consultants."

As a result, Duncan ordered the province to pay company creditors $125,000 in damages, plus court costs.

'Dire financial problems' predate rejection

The company's 2007 bankruptcy wasn't connected to losing the contract that same year, the judge found.

Instead, the "company's dire financial problems" started well before the proposal request, dating back to the cancellation of its Queens County project, the judge said.

​At the time of bankruptcy, TDC owed creditors $126,900, but only had $113,700 in assets, according to the federal bankruptcy superintendent.

Nova Scotia 'did not want to pay'

The government's behaviour was "blame worthy," though not malicious, Duncan said in the decision.

The three brothers, all with the last name Cockerill, worked full-time on the project without drawing a salary while their wives covered their personal expenses, the judge said.

"The [province] did not want to pay TDC for the hard work and financial risk taking" by the families, said Duncan. 

'Not a credible business'

In the end, the company was not awarded the sizeable project contract because government staff decided it was "not a credible business entity," Duncan said.

"This was a reasonable decision."

Therefore, the judge awarded no punitive damages.

The project was divided into seven zones. The contracts were awarded to Eastlink (four), Seaside Communications (two) and Omniglobe (one).

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Corrections

  • A previous version of the story said Eastlink and Seaside Communications were awarded the contracts to install high-speed internet across the province. In fact, there was also a third company involved, Omniglobe.
    Aug 13, 2016 8:24 AM AT
  • An earlier version of this article said Rodney MacDonald was a Liberal. In fact, he was a Progressive Conservative.
    Aug 12, 2016 7:26 PM AT

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