City of Yellowknife sued for more than $700k by Ontario marketing firm

An Ontario marketing and advertising agency is suing the City of Yellowknife for hundreds of thousands of dollars in allegedly unpaid invoices.

In documents filed in N.W.T. Supreme Court, Stream Three Inc., operating as Cornerstone Sponsorship Management, said it has had a contract with the city to manage sponsorships since 2017.

Cornerstone says it would arrange sponsorship at Yellowknife facilities like the Field House and the Ruth Inch Memorial Pool and for events hosted by the city. In return, the city was to display the sponsors' logos at its facility or event, court documents say.

As part of its contract, Cornerstone said it would negotiate the sponsorship agreements and then it was up to the city to make sure the agreement was upheld and to collect payment.

In return, Cornerstone said it would receive 25 per cent of all the sponsorship funds as an "agency fee." The company also said that even if the city recruited sponsors on its own, without Cornerstone's involvement, it would still receive 25 per cent.

But, the company says the city often didn't hold up its side of the sponsorship agreements Cornerstone negotiated, and is now suing the city for $689,000 in unpaid "agency fees" and $50,000 in damages. The city has yet to file its defence.

None of these allegations have been proven in court. The City of Yellowknife says it won't comment on the allegations because it's before the courts.

In one allegation, Cornerstones said it was instructed by the city to sell sponsorships to dressing rooms in several facilities in 2017.

Businesses sponsoring those dressing rooms were to have their name listed on the city's recreation guides and their name on the dressing room door. However, Cornerstone said the city hasn't done any of that.

It said it was able to get sponsorship for 30 per cent of the dressing rooms but then stopped selling packages because the city failed to uphold its end of the deal.

"Cornerstone in good conscience has been unable to participate in further sales of dressing rooms sponsorship until Cornerstone is satisfied that the city is and will carry out its obligations to sponsors," the company says in court documents.

Cornerstone also said the city failed to appease sponsors who had paid for signage at the Yellowknife Community Arena when it was temporarily converted into a sobering centre.

The company says the city's failure to fulfil its sponsorship obligations has damaged its credibility.

"The false perception through association with the city in the marketplace of being responsible for fraudulent activity of systematically taking money from sponsors and not providing the promotional consideration the city if obliged to do has a significant effect on Cornerstone's reputation," the court documents state.

Cornerstone is also claiming that the city failed to report sponsorship it had acquired on its own and failed to pay the company's "agency fee" for those agreements.

Cornerstone is asking to be able to file remaining court documents by email and to be represented by its director, William Montgomery.

Both parties are scheduled to appear in court July 8.