An Ontario court has awarded $170,000 in costs to the defendant in a failed secondary market securities class action against a major bank.
The Superior Court of Justice ruled that National Bank of Canada is entitled to $170,000 for part of the costs of defending a proposed class action that was dismissed by the courts earlier this year. In that case, the plaintiff investor brought a proposed class action, alleging that the bank was a “promoter” of the securities of failed energy firm, Poseidon Concepts Inc. The plaintiffs argued that the bank should be liable for alleged misrepresentations in Poseidon’s disclosure documents.
In the ruling on costs, Justice Edward Belobaba refers to an earlier decision in which he found there was no “reasonable possibility that the plaintiff could show at trial that either the defendant bank or its capital markets subsidiary, National Financial, were ‘promoters’ as defined in the Act and thus liable for the secondary market misrepresentations allegedly made by the issuer.”
The bank had asked for more than $230,000 in costs. The plaintiff investors argued that the “promoter” argument involved a novel point of law, and therefore no costs should be awarded. At the most, the plaintiffs said, the costs award should not be more than $47,000. (Under Ontario’s Class Proceedings Act, a court may reduce costs in circumstances where the allegations involve a novel issue of law, among other factors.)
Belobaba did not agree that the claim involved a novel issue. “This was not a test case. It did not raise any novel point of law. Nor did it involve a matter of public interest. This was a relatively conventional secondary market misrepresentation claim,” the judge said. “The plaintiff sued the defendant bank because the primary target, Poseidon Concepts, was insolvent.”
Indeed, the court noted that the argument that the bank or its brokerage subsidiary were “promoters” had no merit. “In making this argument, the plaintiff was trying to force a square peg into a round hole – hardly a novel activity. The defendant is clearly entitled to its costs,” the decision says.