The Yip v. HSBC Holdings plc[1] saga continues with the granting of a costs award in the amount to $1,000,455.22 to the successful defendants following a successful motion by the corporate defendant to stay the action on jurisdictional grounds and an unsuccessful cross-motion by the plaintiff for a declaration that the corporate defendant was a responsible issuer (discussed in our post here). That decision is under appeal.

The decision is a cautionary tale for entrepreneurial plaintiffs bringing big dollar claims that may be perceived as overreaching.

The Allegations and Motions

Yip sued HSBC Holdings plc (HSBC) and David Bagley on behalf of purchasers of HSBC shares or American Depository Receipts. He alleged that the defendants misled purchasers to believe that HSBC was complying with anti-money laundering and anti-terrorist financing laws when it was not, and that HSBC had made misrepresentations about its nonparticipation in an illegal scheme to manipulate benchmark rates used by banks. As a result, he claimed that putative class members overpaid for their shares and suffered a collective loss of $7 billion (USD).

Causes of action under Pt. XXIII.1 of the Ontario Securities Act and for common law negligent misrepresentation were asserted.  In response to the motion for certification, the defendants brought a motion to stay or dismiss the action on the grounds that the Ontario court lacked jurisdiction simpliciter over the claim or that Ontario was forum non conveniens.

Voluminous evidence was filed on the motion to stay or dismiss and cross-motion for declaratory relief. The plaintiff adduced evidence from 2 fact witnesses and 8 experts. The defendants filed evidence from 4 fact witnesses and 4 experts. A total of 12 witnesses were cross-examined in 4 different cities spanning 3 countries. Yet another witness testified by video link from Hong Kong. In total the evidentiary record comprised 18,000 pages.

Ultimately, Perell J. determined that HSBC was not a responsible issuer in Ontario and that Ontario courts did not have jurisdiction simpliciter over HSBC and Bagley. As such, Yip’s action was stayed.

Reasons for Costs Award

Justice Perell rejected the contention of Yip’s lawyers that there should be no costs award to the successful defendants or an award of less than the amount for partial indemnity costs claimed, for reasons including the following

a) No novel or important issues justifying a departure from the principle that the loser pays

Neither the issue associated with jurisdiction simpliciter nor the issue about forum non conveniens was novel. The court decided these issues based on existing Canadian jurisprudence.

b) The Litigation was Entrepreneurial

The putative class members had other remedies available to them in the jurisdictions in which they traded. They had no reasonable expectation that Ontario law might apply to foreign stock markets regulated by foreign regulators.

Mr. Yip’s lawyers knew that class action would be jurisdictionally challenged. The prime motivation for pursing this class action was entrepreneurial and Mr. Yip’s lawyers had no basis to believe that they would be relieved of the regular cost regime.

c) The Quantum of the Costs Sought by the Defendants Was Reasonable in the Circumstances

The quantum of the defence costs was found to be reasonable in the circumstances. The litigation was complex with “ardent advocacy” on both sides.

It ought to have been within the reasonable expectation of Yip that the defendants would expend $1 millon to defend themselves against a claim seeking $8 billion  in damages.

Significance of Recent Decisions Relating to Costs of Certification Motions

Last year, in Green v Canadian Imperial Bank of Commerce[2], Strathy J. awarded costs to the plaintiffs on a partial indemnity basis in the amount of $2,679,277.82. In September 2017, Perell J. awarded significant costs in favour of plaintiff in  Berg v. Canadian Hockey League[3], a decision which we wrote about in our previous post. In that case, Perell J. awarded the Plaintiffs $1,212,065.63 in costs, with $500,000 payable forthwith and the balance of $712,065.63 payable to the plaintiffs if they succeed at trial. Shortly thereafter, in Das v. George Weston Limited[4], Perell J. awarded the successful defendants costs of $1,350,000 and $985,601.60 respectively.

Given the foregoing, litigants are well advised to carefully consider, weigh and mitigate the risks of adverse cost in aggressively pursuing and defending certification motions in class actions – entrepreneurial or otherwise.


 The author would like to thank Saam Pousht-Mashhad, Student-At-Law, for his contribution to this article.

[1] 2017 ONSC 6848 [Yip].

[2] 2016 ONSC 3829.

[3] 2017 ONSC 5382.

[4] 2017 ONSC 5583.