The Applicants applied for an Injunction to prevent the Respondent from drawing on an irrevocable $117,162,384 letter of credit. The letter of credit was issued to secure the Applicants' performance in a large pipeline construction project. The Injunction Application was ultimately denied and affirmed by the Court of Appeal. The Respondent applied for Costs as well as “interest” on the Undertaking as to Damages.

The Court denied the Applicants’ request for an Order directing an assessment of the Respondent’s legal costs, pursuant to Rule 10.34(1), as it was to everyone’s benefit to have the question of Costs resolved by the Application.

The Court awarded the Respondent Costs of $287,816.30 in fees and $34,366.16 in disbursements, representing indemnification at a level of 35%. The Court reviewed the factors in Rules 10.2 and 10.33 and found the matter was both very important and urgent, given the time value of money for such a large sum.

The case warranted a level of indemnification below the 40-50% range because the approach adopted by the Respondent in the initial proceedings was unrealistic. The Action could not have been fairly disposed of in urgent Chambers as the Respondent insisted.

Though the Court noted that it was desirable to conclude the matters without further litigation, and that it could determine the Respondent’s claim on the undertaking in the context of the present Application, it nevertheless found it necessary to refer the matter of interest to a Referee. The Respondent’s approach to simply apply the rate of interest contained in an inapplicable contractual provision to the face value of the letter of credit was problematic. Further, the evidence relied upon by the Respondent in support of its damages was too scant to enable a fair determination. Finally, the damages amount at issue was large; ordering the Applicants to pay over $2 million in the context of the present Application would be inadvisable and unfair, and a more robust inquiry was required.

The Court also noted that a Justice of the Court of Kings Bench was not a Referee within the meaning of Rule 6.44. Therefore, an inquiry or direction by a Referee had to be made by an Applications Judge or others.