Court Stays Arbitration but Denies Costs to Successful Party for “Blameworthy Conduct”

Andrew Ottaway, B.A. (Hons.), LL.B.Arbitration, Civil Litigation, Commercial Arbitration, Commercial Litigation, Contract Disputes, Contract Termination, Partnerships and Shareholder Disputes0 Comments

In Gorman v Kosowan, 2016 ONSC 5085, the applicant commenced a proceeding regarding a business dispute. The applicant and individual respondent were joint owners of a transportation and warehouse business.  A dispute arose between them.   The respondents subsequently terminated the applicant’s employment and excluded him from the business.  The applicant sought relief from the allegedly oppressive conduct under the Canada Business Corporations Act and the Ontario Business Corporations Act.  The respondents brought a motion to stay the oppression application based on an arbitration clause in the parties’ Unanimous Shareholders’ Agreement (“USA”).

The USA arbitration clause required arbitration for “disputes under” the USA. The Judge found that the applicant’s claims were covered by the arbitration clause and granted the respondents’ motion to stay the application.

In the Judge’s subsequent costs decision, here, the Judge denied the respondents’ request for costs of the motion.  While a winning party is typically entitled to its costs of a motion, the Judge found that the respondents’ conduct disentitled them to costs.  Although both parties were to “blame” for the Application and motion, the Judge found the respondents to be more “blameworthy”. Specifically, the respondents did not refer the dispute with the applicant to arbitration, as required by the USA. Rather, the respondents terminated the respondent, in breach of the arbitration provision, and then used the arbitration provision in the stay motion to have to have the application stayed.

Please contact us if you require advice on business disputesshareholders’ disputes and arbitration.

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About the Author
Andrew Ottaway, B.A. (Hons.), LL.B.

Andrew Ottaway, B.A. (Hons.), LL.B.

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