Sattva Capital Corp.

Sattva Capital Corp.

November 06, 2013 08:00 ET

Sattva Capital Announces Supreme Court of Canada Hearing Date and Intervention by Third Parties

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 6, 2013) - Sattva Capital today announced the Supreme Court has set a date of December 12, 2013 to hear oral arguments involving our case. Sattva Capital will appear as Appellant. Creston Moly, a wholly-owned subsidiary of Mercator Minerals, will appear as Respondent.

Sattva will ask the Court to reverse two judgements from the Court of Appeal for British Columbia (BCCA): 2010 BCCA 239 granting Creston leave to appeal and 2012 BCCA 329 varying the arbitral award made in Sattva's favour.

The Attorney General of British Columbia and the British Columbia International Commercial Arbitration Centre Foundation have applied for and been granted intervener status. They, too, have valuable perspectives to share with the Court on arbitration-related matters such as the importance of arbitration in Canadian society and the proper judicial approach to the review of arbitral awards.

The factums of all parties, including those of the interveners, are available for review at www.scc-csc.gc.ca/case-dossier/info/fac-mem-eng.aspx?cas=35026. Live webcast of the proceeding is available.

A complete background of the case can be found at www.sattvacapital.net/play-by-the-rules.htm.

ISSUES BEFORE THE COURT

Sattva Capital's counsel will argue the BCCA has made three fundamental errors: (1) granting Creston leave to appeal when there was no error of law; (2) exceeding its mandate by making new findings irreconcilable with the arbitrator's; and (3) setting a troublesome precedent by ruling that opinions made at the leave stage by the BCCA are binding on all levels of the provincial court system.

"In essence, the BCCA's approach runs counter to Western legal norms which grant arbitrators deference in questions of law," said Mr. Le. "Guidance from the Court on what constitutes an error of law will provide lower courts across Canada with a proper framework with which to review arbitral awards."

WHAT IS AN ERROR OF LAW?

Commercial arbitration is a private, voluntary mechanism between two supposedly sophisticated business players who desire a speedy and binding resolution to their dispute. Arbitrators are legal experts with a focus on a particular area of industry. By necessity, an arbitrator's work involves interpreting the contract as a whole within the context of the existing legal principles. The BC Arbitration Act allows appeal only on a question of law arising out of the award. Under the Act, an arbitrator's findings of fact and mixed fact and law are immutable and beyond the jurisdiction of the courts.

The unhappy, losing party who appeals an arbitral award invariably claims an error of law has been made. Based on a proviso in the contract specifying maximum finder's fee based on the Exchange's fee schedule, and ignoring all other provisions, Creston claims, the arbitrator made an error of law because he didn't take into account the fact the hypothetical market value of the fee to be paid in shares at the time they could be issued is greater than the cash value of the fee.

This has been the centrepiece of Creston's legal strategy.

In the real world, however, the value of the two is never the same! Creston's assertion is at odds with Policy 5.1 of the TSX Venture Exchange and with basic M&A principles. Anyone who has ever bought shares in a private placement issued by a TSX-listed company would know, the market value of the shares fluctuates constantly, from the time a financing announcement is made, to the time the shares are issued, and again when the 4-month compulsory hold period expires. (The process is the same for M&A transactions requiring the issuance of shares).

A HISTORY OF CONTRADICTORY DEMANDS

Creston has proven adept at reversing course when it was expedient to do so. During arbitration, it insisted on the right to pay Sattva in shares valued at $0.70/share, even though there was absolutely no basis for this in the contract. By December 2008, more than a year and a half after the acquisition had closed, Creston still had not paid us the fee owed. That month, its stock was trading in the $0.05 - $0.15 range.

There was no error of law in forcing Sattva to accept a steep loss (hypothetically as much as 80-94%), but because the arbitrator did not buy into its argument, he somehow had made an error of law, according to Creston.

In light of its history of contradictory demands, Creston's pleading "error of law" at the courts is at best a twisted form of logic and at worst, naked narrow self-interest with scant regard for principle.

BREACH OF CONTRACT - THE CRUX OF THE MATTER

Creston's approach skirts the real issue: the deliberate breach of contract and the subsequent cover-up attempt that gave rise to damages. Every action has consequences. Damages are but one far-reaching consequence of breach of contract.

In today's fast-changing world, complex and unpredictable situations will arise. Dialogue, respect and proactive engagement are the ways to resolve difficult issues, not unilateral actions by one party.

"The outcome of the upcoming Court's ruling will have profound implications for arbitration as a legal tool to resolve disputes," said Mr. Le. "We are confident in the end common sense will prevail."

To view all other Sattva press releases related to this case click here http://www.sattvacapital.net/news-events.htm.

About Sattva Capital

Sattva Capital is a boutique investment bank specializing in cross-border M&A and corporate finance in the mining industry. We pride ourselves on the quality of our advice, ideas and a vast network of contacts around the world to bring clients a steady flow of deals. For more information, visit www.sattvacapital.net.

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