Executive Summary: Key Legal and Evidentiary Issues

• Hybrid Wireless Inc. appealed an arbitration decision and costs award arising from alleged breaches of a 2015 Fiber Rights Acquisition Agreement ("2015 FRA") with Rohl Gateway Fibers Inc.

• Four assignments of fiber rights to third parties (ATCO, AltaLink, CFOC, and the Whitecourt Extension) were made without providing Rohl the required 30-day written notice under Article 18.2(i).

• The Arbitrator's interpretation of Article 18.2(iii) — requiring assignees to pay a fixed maintenance value — was found to violate the law of assignment, as contractual obligations cannot be imposed on third-party assignees.

• Unauthorized access to Rohl's POP Sites without prior notice, installation of excess equipment, and allowing third-party assignees to install equipment without approval constituted separate breaches of the 2015 FRA.

• Expert evidence from Mr. Pumphrey, based on a POP Site audit conducted by Mr. Denis, was relied upon to quantify damages; Hybrid's failure to produce its own equipment inventory undermined its evidentiary objections.

• The original solicitor-client costs award of $1,736,246.29 was set aside as its foundational premise — Rohl's substantial success on Article 18.2(iii) — was nullified on appeal.

The parties and their agreement

Rohl Gateway Fibers Inc. (formerly Rohl Geomatics Inc.) owns a fiber optic transmission system running from Edmonton, Alberta to Fort St. John, British Columbia, comprising a 24-strand fiber optic network with nine Point of Presence Sites ("POP Sites") along the route.

In March 2015, a predecessor company entered into a Fiber Rights Acquisition Agreement ("2015 FRA") with Rohl, granting an indefeasible right of use ("IRU") in six strands of the fiber network — referred to as the Hybrid Lines. Following a 2017 amalgamation, Hybrid Wireless Inc. assumed all rights and obligations under the 2015 FRA. Hybrid provides internet services to rural communities and oil and gas facilities in Alberta and British Columbia.

The policy terms at issue

The 2015 FRA set out several key obligations. Under Article 13.2, Hybrid was required to pay an Annual Maintenance Cost of $33,000 and its proportionate 25% share of actual maintenance costs. Article 18.2 governed Hybrid's right to assign its fiber rights to third parties and imposed three conditions: (i) 30 days' written notice to Rohl identifying the assignee; (ii) an optional novation mechanism releasing Hybrid from its obligations if agreed to by all parties; and (iii) a requirement that, for assignments to unrelated third parties, a fixed value for maintenance be paid per fiber assigned, with Hybrid liable at its contractual rate in the event of the assignee's default.

Articles 6.1, 6.2, 7.1, and Exhibit G collectively governed access to and use of the POP Sites. Exhibit G specifically required Hybrid technicians to contact Rohl's Operations Center and obtain permission before opening any POP Site door.

The assignments and discovery of breaches

Between 2017 and 2023, Hybrid made four assignments of portions of its fiber rights — to ATCO Electric Ltd. in June 2017, an extension of the ATCO assignment in June 2022, to AltaLink LP in July 2022, and to Canadian Fiber Optics Corp. in October 2023 — without ever notifying Rohl. The situation came to light in 2023 when Rohl noticed Hybrid requesting an extended service interruption notice period to accommodate ATCO. Rohl demanded disclosure of all parties holding interests in the Hybrid Lines, and when Hybrid was not forthcoming, Rohl conducted a POP Site audit. The audit revealed unauthorized equipment installations and access beyond Hybrid's contractual entitlement. In November 2023, Rohl issued a Notice to Arbitrate.

The arbitration proceedings

Arbitration was held in January 2025. The Arbitrator found that all three conditions under Article 18.2 were mandatory preconditions to a valid assignment, and that Hybrid had breached the 2015 FRA by failing to provide notice and by failing to ensure payment of the fixed maintenance value for each assignment. The Arbitrator further found that Hybrid violated the POP Site access and usage provisions by entering sites without notice, installing excess equipment, and permitting third-party assignees to install equipment without Rohl's knowledge or approval.

The Arbitrator awarded Rohl $200,000 in damages for the POP Site breaches and a separate damages award for the breach of Article 18.2(iii), though the final amount for the latter had not yet been assessed at the time — Hybrid stated the amount was somewhere in the range of $774,325.35 to $1,744,554.45. The Arbitrator also imposed solicitor-client costs of $1,736,246.29.

The appeal and the court's analysis

Hybrid appealed to the Court of King's Bench of Alberta before Justice S. Leonard. The court applied the appellate standard of review — correctness for extricable questions of law, and palpable and overriding error for questions of mixed law and fact, in accordance with the principles from Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53.

On the Article 18.2(iii) issue, the court found that the Arbitrator committed a legal error. While the Arbitrator acknowledged that contractual obligations cannot be assigned to third parties, other passages in his decision clearly imposed direct payment obligations on the assignees — contradicting that acknowledgment and violating the law of assignment as established in National Trust Co v Mead, [1990] 2 SCR 410. The court set aside the Arbitrator's finding on Article 18.2(iii). However, the court upheld the finding that Hybrid breached Article 18.2(i) by failing to provide the required 30 days' written notice of any of the assignments, a finding Hybrid did not challenge on appeal.

On the POP Site issues, the court dismissed all of Hybrid's grounds of appeal. The Arbitrator had sufficient reasons for his findings, supported by the POP Site audit conducted by Mr. Denis, the uncontradicted expert evidence of Mr. Pumphrey, and the testimony of Hybrid's own representative Mr. Kuryluk. The court found no palpable and overriding error in the Arbitrator's conclusion that Hybrid breached the POP Site provisions or in the $200,000 damages award for those breaches.

The ruling and outcome

The court confirmed the $200,000 damages award in favour of Rohl for the POP Site breaches, establishing that this portion of the arbitration award stands. The damages award tied to the breach of Article 18.2(iii) was set aside and remitted to the Arbitrator, along with the question of what damages, if any, arise solely from Hybrid's failure to provide notice under Article 18.2(i). The original costs award of $1,736,246.29 was also set aside and returned to the Arbitrator for reconsideration, given that its foundational premise — Rohl's substantial success at arbitration — had been partially undermined. The final total damages remain to be determined upon the Arbitrator's reconsideration, and the exact amount that will ultimately be awarded in favour of Rohl beyond the confirmed $200,000 cannot yet be determined.