Nunavut judge rejects injunction bid from MLA-owned company

Justice Earl Johnson, in a lengthy judgment issued March 22, has denied an application by Polar Supplies Ltd. of Cape Dorset for a temporary injunction that would have barred the Hamlet of Cape Dorset from using its equipment to compete against them.

Polar Supplies Ltd., wholly owned by Fred Schell, a former Cape Dorset mayor and the current MLA for South Baffin, filed three lawsuits last year against the Hamlet of Cape Dorset and a local outfitting company called Huit Huit Tours.

After gaining his seat in the legislative assembly in 2008, Schell put his assets into a blind trust. In May 2009, he named Cheryl Constantineau of Cape Dorset as manager of his businesses.

In two of the lawsuits, Polar Supplies alleges the hamlet damaged the company by terminating contracts and by unlawfully competing with them in contravention of the Hamlets Act.

In another lawsuit, Polar Supplies alleges Huit Huit Tours, owned by Kristina and Timmun Alariaq, broke Cape Dorset’s domestic animals bylaw and that the hamlet failed to enforce that bylaw.

To protect themselves this year from what they allege is unlawful competition by the hamlet, Polar Supplies asked the court to issue an injunction against the hamlet, claiming further loss of business could cause irreparable damage.

Beset by creditors, Polar Supplies already suffers from serious financial problems and in 2009, the company filed for bankruptcy protection.

Under a deal worked out in court in June 2010, Polar Supplies agreed to pay its creditors $18,958 a month between Jan. 16, 2011 and Sept. 16, 2012, with a final payment of $10,882 by Oct. 16, 2012.

But Johnson said he found problems with evidence that Polar Supplies introduced in court, especially evidence related to allegations concerning the hamlet’s actions in 2009.

For example, Johnson found that work the hamlet did to complete gravel work on a sewage lagoon contract wasn’t “competition.”

He said the hamlet terminated that contract because they weren’t satisfied with the quality of Polar Supplies’ work and voted to finish the job themselves.

“I am satisfied the Sewage Lagoon Contract allegations concern a dispute over the Plaintiff’s performance rather than an issue about unfair competition…” Johnson wrote in his judgment.

“Cape Dorset did not compete for the contracts but took over the work after the contract was terminated,” he said.

Another complaint, involving site-preparation work the hamlet did for the Nunavut Housing Corp. on a five-plex construction unit, “also involved problems with the Plaintiff’s [Polar Supplies’] performance,” Johnson said.

To support that, he quoted an email sent by a housing corporation official to the hamlet:

“Polar Supply, a local contractor, has been unable to show to our satisfaction that they have the capacity to deliver the material. The ‘truck’ listed in their correspondence to us is not in operating condition and appears to have been impounded behind a barrier by a local citizen.”

Johnson found the hamlet did make “some mistakes” in 2010 by doing work that should have been first offered to the private sector. Under the Hamlets Act, municipalities must first get permission from the minister of Community Government and Services.

Johnson found, however, that there is no administrative procedure in the Hamlets Act setting how a muncipality can request ministerial approval.

And he also found that Cape Dorset’s new SAO, Olayuk Akesuk, “was on a learning curve and was acting in good faith.”

Johnson did say Cape Dorset may want to provide an undertaking not to compete with the private sector without ministerial approval and that the GN move quickly to create a temporary system for granting such approval.

The allegations made by Polar Supplies in its three lawsuits are still in dispute and unresolved in court.

Johnson also denied a request by the hamlet that would force Polar Supplies to put up security money to pay for its share of court costs.