Jacob Securities Inc. v. Typhoon Capital B.V., 2016 ONSC 1478

Court File No.: CV-15-520149

Date: 2016-03-02

Superior Court of Justice - Ontario

Re: Jacob Securities Inc.

and

Typhoon Capital B.V. and Typhoon Offshore B.V.

Before: Mr. Justice Graeme Mew

Counsel: Richard P. Quance, for the Applicant Michael Schafler, for the Respondents

Heard: In Writing

Costs Endorsement

[1] In reasons for decision reported at 2016 ONSC 604 I dismissed this application to set aside an arbitral award.

[2] The applicant, having lost at arbitration, had sought to set aside the arbitrator’s award on the grounds of what the applicant alleged was a conflict of interest that should have been disclosed by the arbitrator to the parties.

[3] In my reasons, in respect of the issue of costs, I characterised the application as “a thinly disguised attempt to avoid the consequences of an adverse decision on the merits” (see para. 64). I questioned whether an award of substantial indemnity costs should be made “to deter losing parties in international commercial arbitrations from launching baseless ex post facto challenges to an arbitrator’s impartiality.”.

[4] Continuing, I noted that although the parties had provided costs summaries, they had not been given the express opportunity to make submissions on what the appropriate scale of costs should be, but said that I was provisionally of the view that the applicant should pay costs to the respondents on a substantial indemnity basis.

[5] The applicant requested an opportunity to address the scale and quantum of costs and, accordingly, I have now received submissions from both parties.

[6] The applicant submits that, while unsuccessful, its application raised an important and novel issue as to the obligation of an arbitrator to determine potential conflicts that might arise in the course of arbitration proceedings where the arbitrator’s past firm or firms had acted for parties or potential witnesses in the arbitration proceeding.

[7] Reference is made to the decision of Newbould J. in Royal Bank of Canada v. Haywood Welton, 2009 55107 (ON SC) at para. 3:

It is only in exceptional cases that an order for substantial indemnity costs should be made and such an order should not be made unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action or in the proceedings which makes such costs desirable as a form of chastisement. A party is entitled to defend his or her case, in this case to defend a motion, without fear of a substantial indemnity costs order being made against the party absent some form of reprehensible conduct in the defence of the action or motion.

[8] I agree that the point taken by the applicant was a novel one. There was a dearth of authority directly on point, not only in Canada and the Commonwealth but, also, in the United States.

[9] That said, while costs should not become too blunt an instrument that resourceful counsel are discouraged from advocating novel points of law, the fact remains that the applicant purposefully went out looking for some reason to be able to challenge an award which, because it was an international arbitral award, was not susceptible to appeal.

[10] Having reflected further, I would regard this application as straddling the dividing line between a speculative claim on the one hand, and, on the other, one which raises bona fide novel or untested issues. Given that assessment, the applicant should receive the benefit of the doubt. I therefore award costs on a partial indemnity basis, fixed in the amount of $55,000 (all inclusive).

Graeme Mew J.

Date: 2 March 2016