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Reasons for Decision: In the Matter of William Norman Maxwell et al.
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IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
WILLIAM NORMAN MAXWELL, JOHN DZAMBAZOV
and ANTONINO CANDIDO
Hearing:
Panel:
John A. Geller, QC - Vice-Chair
Howard I. Wetston, QC - Vice-Chair
John F. Howard, QC - Commissioner
Counsel:
William Norman Maxwell - In person
John Dzambazov - In person
Antonino Candido - In person
Melanie Sopinka - For the Staff of the Ontario Securities Commission
Tony Mandl
At this hearing, the Commission dealt with a motion brought by the Respondents tochallenge the jurisdiction of the Commission to proceed with a hearing on the meritspursuant to a Notice of Hearing issued against them on July 4, 1995 (the "Notice ofHearing"). The Respondents argued that the disposition of prior proceedings against themin the General Division and the Provincial Division of the Ontario Court precluded theCommission from hearing the allegations against the Respondents made by the Staff ofthe Commission ("Staff") in connection with the Notice of Hearing.
In addition, the Respondents argued that:
a. the presumption against the retroactive application of statutes precludes Staff fromproceedings on allegations brought under the Securities Act, as amended byChapter 11 of the 1994 Statutes of Ontario, for conduct which occurred prior tothose amendments;
b. the Commission, "by failing to respond in a timely manner to a request set beforeit February 13, 1998 is deemed to have abandoned its right to proceed;" and
c. the Notice of Hearing "is in construction flawed", since it refers to clause 3 ofsubsection 127(1) of the Act, which was added, in its current form, by the 1994amendments to the Act, which did not come into effect until after the date of theNotice of Hearing.
For convenience of reference, we will refer to the Securities Act, as it read before thecoming into force of Chapter 11 of the 1994 Statutes of Ontario as the "Old Act", and theSecurities Act, as it read after the coming into force of Chapter 11, as the "New Act".
The Notice of Hearing, together with a Statement of Allegations of Staff, were issued bythe Commission on July 4, 1995, naming the Respondents and others. The proceedingsagainst the others were concluded by the Commission under a settlement agreement.
The allegations made in the Statement of Allegations were as follows:
"1. Between February 1, 1993, and October 28, 1993, William Norman Maxwell("Maxwell"), John Dzambazov ("Dzambazov"), Antonino Candido ("Candido")and David Conforzi ("Conforzi") did make statements in the financialstatements of Megalode Resources Inc. for the year ended May 31, 1993,that, in material respects and at the time and in light of the circumstancesunder which they were made, were misleading or untrue or did not state afact that was required to be stated or that was necessary to make thestatements not misleading.
2. Between February 1, 1993, and April 28, 1994, Maxwell, Conforzi and ArthurLawler ("Lawler") did make statements in the financial statements ofMegalode Corporation for the nine months ended February 28, 1994, that,in material respects and at the time and in light of the circumstances underwhich they were made, were misleading or untrue or did not state a fact thatwas required to be stated or that was necessary to make the statements notmisleading.
3. Between February 1, 1993, and July 30, 1994, Maxwell, being a person ina special relationship with Megalode Corporation, sold securities ofMegalode Corporation with knowledge of material facts or material changeswith respect to Megalode Corporation that had not been generally disclosedin contravention of section 76 of the Securities Act R.S.O. 1990, c. S.5, asamended (the "Act").
4. Between February 1, 1993, and July 30, 1994, Candido, being a person ina special relationship with Megalode Corporation, sold securities ofMegalode Corporation with knowledge of material facts or material changeswith respect to Megalode Corporation that had not been generally disclosedin contravention of section 76 of the Act.
5. Between February 1, 1993, and July 30, 1994, Conforzi, being a person ina special relationship with Megalode Corporation, sold securities ofMegalode Corporation with knowledge of material facts or material changeswith respect to Megalode Corporation that had not been generally disclosedin contravention of section 76 of the Act.
6. This conduct of Maxwell, Dzambazov, Candido, Conforzi and Lawler wascontrary to the public interest."
On July 5, 1995, an investigator on the Staff swore an information that he had reasonableand probable grounds to believe that the Respondents committed the following offences:
"1. Between February 1, 1993, and October 28, 1993, William Norman Maxwell,John Dzambazov, Antonino Candido and David Conforzi did makestatements in the financial statements of Megalode Resources Inc. for theyear ended May 31, 1993, that, in material respects and at the time and inlight of the circumstances under which they were made, were misleading oruntrue or did not state a fact that was required to be stated or that wasnecessary to make the statements not misleading and did thereby commit anoffence contrary to section 122(1)(b) of the Securities Act R.S.O. 1990, c.S.5, as amended. [Count 1]
2. Between February 1, 1993, and April 28, 1994, William Norman Maxwell,David Conforzi and Arthur Lawler did make statements in the financialstatements of Megalode Corporation for the nine months ended February 28,1994, that, in material respects and at the time and in light of thecircumstances under which they were made, were misleading or untrue ordid not state a fact that was required to be stated or that was necessary tomake the statements not misleading and did thereby commit an offencecontrary to section 122(1)(b) of the Securities Act R.S.O. 1990, c. S.5, asamended. [Count 2]
3. Between February 1, 1993, and July 30, 1994, William Norman Maxwell,being a person in a special relationship with Megalode Corporation, soldsecurities of Megalode Corporation with knowledge of material facts ormaterial changes with respect to Megalode Corporation that had not beengenerally disclosed in contravention of section 76 of the Securities ActR.S.O. 1990, c. S.5, as amended and did thereby commit an offencecontrary to section 122(1)(c) of the Securities Act R.S.O. 1990, c. S.5, asamended. [Count 3]
4. Between February 1, 1993, and July 30, 1994, Antonino Candido, being aperson in a special relationship with Megalode Corporation, sold securitiesof Megalode Corporation with knowledge of material facts or materialchanges with respect to Megalode Corporation that had not been generallydisclosed in contravention of section 76 of the Securities Act R.S.O. 1990,c. S.5, as amended and did thereby commit an offence contrary to section122(1)(c) of the Securities Act R.S.O. 1990, c. S.5, as amended [Count 4]
5. Between February 1, 1993, and July 30, 1994, David Conforzi, being aperson in a special relationship with Megalode Corporation, sold securitiesof Megalode Corporation with knowledge of material facts or materialchanges with respect to Megalode Corporation that had not been generallydisclosed in contravention of section 76 of the Securities Act R.S.O. 1990,c. S.5, as amended and did thereby commit an offence contrary to section122(1)(c) of the Securities Act R.S.O. 1990, c. S.5, as amended."
On January 15, 1996, a temporary order was made by the Commission which adjournedthe Hearing under the Notice of Motion to November 8, 1996. In addition, it was orderedthat the exemptions in Ontario securities law did not apply to the Respondents until theconclusion of the hearing with the exception of certain trades for their personal accounts.Subsequent orders of the Commission continued to adjourn the hearing from time to time,and, on February 3, 1997, the hearing was adjourned sine die to be brought back on onseven days notice.
On January 24, 1996 the Attorney-General of Ontario laid an indictment against theRespondents, charging the Respondents with the following offences:
"1. WILLIAM MAXWELL, ANTONINO CANDIDO and JOHN DZAMBOZOVstand charged that they, during the period from and including the 1st day ofJanuary in the year 1993 to and including the 9th day of August in the year1994, at the Municipality of Metropolitan Toronto, and elsewhere in theProvince of Ontario, by deceit, falsehood or other fraudulent means, diddefraud Megalode Resources Inc. of a sum of monies, property, or othervaluable securities of a value exceeding one thousand dollars, contrary tothe Criminal Code.
2. WILLIAM MAXWELL, ANTONINO CANDIDO and JOHN DZAMBOZOVstand further charged that they on or about the 9th day of August in the year1994, at the Municipality of Metropolitan Toronto, and elsewhere in theProvince of Ontario, did knowingly make false documents, to wit: apromissory note and receipts with intent that they be acted upon as genuineand did thereby commit forgery, contrary to the Criminal Code.
3. WILLIAM MAXWELL, ANTONINO CANDIDO and JOHN DZAMBOZOVstand further charged that they on or about the 9th day of August in the year1994, at the Municipality of Metropolitan Toronto, and elsewhere in theProvince of Ontario, did conspire together the one with the other, and withpersons known or unknown, to commit an indictable offence, contrary to theCriminal Code."
In September and October, 1996, a trial was held in the Ontario Court (Provincial Division)before Judge Reinhardt based on the information sworn on July 5, 1995. A lawyer whowas a member of Staff acted as Crown prosecutor at the trial. On December 5, 1996,Judge Reinhardt released his Reasons for Judgment, in which he acquitted theRespondents of the charges laid by the Commission. The finding of the Judge can besummarized as follows.
a. On Counts 1 and 2, he found that the Crown had proved beyond areasonable doubt that the Respondents had made statements which weremisleading and untrue in "material respects" as charged under the New Act;
b. On Counts 3 and 4, he found that the Crown had failed to prove beyond areasonable doubt that the Respondents had engaged in insider trading asthere was insufficient evidence that the facts of which the Respondents hadknowledge were "material facts" ie. facts that significantly affect, or wouldreasonably be expected to have a significant effect on, the market price orvalue of the securities in question.
c. He found that the Respondents were charged under the New Act, but theconduct which formed the basis for the charges occurred prior to the cominginto force of the New Act. Applying the prohibition against the retroactiveapplication of statutes, he found that the Old Act had to be applied.
d. As the Old Act required any misrepresentation to be as to a material fact, heconcluded that Counts 1 and 2 were lacking the same evidence as theinsider trading charges and therefore were not proved beyond a reasonabledoubt.
e. The application of the Old Act led him to conclude that the prosecution wasdefective as the wrong consent to prosecute was obtained. Under the OldAct, the Commission required the consent of the Minister to initiate aprosecution; under the New Act, the Commission itself provided the consent.As the Commission's consent was obtained for this prosecution and not theMinister's, the prosecution was defective. A new information could not besworn, as the limitation period had expired.
On September 22, 1997, the criminal trial of the Respondents, based on the indictment laidon January 24, 1996, came on before Mr. Justice Hamilton of the Ontario Court (GeneralDivision). The charges against the Respondents were stayed on the basis of section11(1)(b) of the Charter of Rights and Freedoms, as Mr. Justice Hamilton determined thatthe delay from the time the Respondents were charged constituted unreasonable delay.
Staff is now seeking to bring back on the Commission proceeding under the Notice ofHearing.
Mr. Maxwell presented the Respondents' arguments on this application. His principalargument, phrased in a number of different ways, was that the decision of JudgeReinhardt, and that of Mr. Justice Hamilton, had, in effect, disposed of all matters betweenthe Respondents and the Commission, the Commission was bound by the decision ofJudge Reinhardt, and, as a result, the Commission did not have the jurisdiction to proceedwith the hearing under the Notice of Motion. The argument was basically one of issueestoppel.
Essentially the same argument was made before the Commission in In the Matter ofRobert Seal (1996), 19 OSCB 1529.
In that case, counsel for the respondent requested a stay order from the Commission andargued that the respondent had been acquitted of essentially the same charge that wasto be heard by the Commission on essentially the same burden of proof, that the doctrineof issue estoppel prohibits a party from putting into contention anew an issue that hasbeen finally determined, and that to use a civil proceeding to launch a collateral attack onthe findings of the court acquitting the respondent constituted an abuse of the process ofthe Commission. It was his submission that, under the doctrine, if a particular issue isdetermined as part of the decision of a court, then a party is stopped from putting forwardthat issue to be argued again.
The Commission said the following, commencing at page 1531:
In our view, the issues in the proceedings before German, J. and in theseproceedings are not identical. The issue before German, J. was whether it hadbeen proven beyond a reasonable doubt that Seal was guilty of forgery. The issuebefore us is whether Seal participated in a misrepresentation to the Commission,and Staff is not required to prove its case beyond a reasonable doubt. Some or allof the facts on which each of these decisions have to be based are no doubt thesame, but in our view the issues are not identical.
In response to Mr. Peters' arguments, Ms. Blake, on behalf of Staff, argued that thefact that Seal was acquitted of the criminal charge of forgery does not in any wayaffect the ability of the Commission to conduct its hearing respecting his registrationunder the Act. She pointed out that neither the Commission nor Staff was a partyto the criminal proceedings before German, J. She cited to us the decision of theBritish Columbia Court of Appeal in Bennett v. British Columbia SecuritiesCommission (1992), 94 D.L.R. (4th) 339. In that case, quasi-criminal proceedingswere brought under the Offence Act of British Columbia alleging unlawful insidertrading prohibited by the Securities Act of British Columbia. The information wassworn by an investigator employed by the British Columbia Securities Commission(the "BCSC"). The charges were dismissed. Administrative proceedings were thencommenced before the BCSC in respect of the same activities to which the quasi-criminal proceedings related. In the quasi-criminal proceedings, the judge foundthat the Crown had not proved its case beyond a reasonable doubt. However, hewent on to find that the case had not even been proved on a balance ofprobabilities. In the administrative proceedings, the respondents argued that thevery issue to be determined in those proceedings had been determined by thejudge in the quasi-criminal proceedings. It would appear that this argument wasbased on the balance of probabilities finding, and that it was not even argued thatthe finding based on the no reasonable doubt test should be considered asaffecting the issue. The judge at first instance found as follows (quoted at page 352of the Court of Appeal decision):
"In the trial before him Judge Craig was required to determinewhether, on an assessment of all of the evidence, the Crown hadproved beyond a reasonable doubt that the Bennetts and/or Domanwere guilty of violating s. 68 of the Securities Act.
Thus when Judge Craig said, at p. 50, that he was "obliged to gobeyond [his] initial finding of fact of credibility and say whether [thewitness's] evidence [was] in accordance with the preponderance ofprobabilities", he did not state the test laid down by Mr. JusticeO'Halloran in the sense I find it was intended, namely, an inquiry intothe preponderance of probabilities being simply one step in theanalysis of credibility. It is not, with respect, a step subsequent to afinding of credibility as Judge Craig indicated. This becomesapparent when one considers the above-quoted passages fromFaryna.
One must also take note of the order in which Judge Craig arrived athis conclusions based on a balance of probabilities. He clearly cameto decisions as to guilt on all of the evidence using the test ofreasonable doubt before going on to indicate that it had beenestablished "at least on a balance of probabilities" that the Bennettsmade the decisions to sell their shares and instruct their brokersbefore they could possibly have received any alleged tip.
Thus, given the placement of the decisions based on a balance ofprobabilities in his judgment, it is clear that they did not formfundamental bases of his judgment, it is clear that they did not formfundamental bases of his decisions to acquit the Bennetts andDoman. I am of the view that Judge Craig's findings based on abalance of probabilities, with respect to the fact that the Bennetts'respective orders to sell DIL shares must have been placed beforeany alleged tip could have been received should not be, and are not,binding on any subsequent forum, such as a civil court or acommission hearing. That is, a hearing of the British ColumbiaSecurities Commission is not estopped, on the basis of issueestoppel at least, from determining the issues of whether Domangave, or whether the Bennetts acted upon, a tip in buying or sellingshares in DIL on the basis of the standard of proof applicable in sucha hearing. I say that, of course, based upon the understanding thatthe commissioners conducting the hearing will not be required tocome to their conclusion on the basis of reasonable doubt."
The Court of Appeal agreed with this conclusion, and said, at page 353:
"We detect no errors in Mr. Justice Melnick's reasoning or hisconclusion. We wish, however, to emphasize the third element ofissue estoppel. In Carl Zeiss Stiftung [[1967] 1 A.C. 853] Lord Guestdescribed the three elements at p. 935:
The requirements of issue estoppel still remain (1) that thesame question has been decided; (2) that the judicial decisionwhich is said to create the estoppel was final; and, (3) that theparties to the judicial decision or their privies were the samepersons as the parties to the proceedings in which theestoppel is raised or their privies.
To state the obvious, the Commission, which is the party sought to beestopped, was not a party to the Offence Act proceedings, and willnot be a party to the hearing it conducts. The third test is nottherefore met.
We are of the view that issue estoppel only applies as betweenparties and that it is an exclusionary rule of evidence which binds aparty by way of preventing reliance upon or denying the existence ofcertain facts."
Although we have some difficulty in understanding the court's reference to theBCSC being the party sought to be estopped, it is at least clear that the court didnot consider that issue estoppel applied, even though the information in the quasi-criminal proceedings had been sworn by an investigator employed by the BCSCand the alleged illegal act the criminal court had dealt with was the same as that onwhich the administrative proceedings before the BCSC were based.
To invoke the doctrine of issue estoppel, Seal must satisfy the threefold testenunciated in Brown and in Carl Zeiss. Firstly, he must establish that the samequestion was decided by German, J.. As we have said, in our view, German, J. wasdeciding whether Seal was guilty of forgery, the question to be decided on the basisof the no reasonable doubt test. This is not the issue before us. Secondly,German, J.'s decision must be final. This part of the test has been satisfied.Thirdly, the parties to the decision or their privies must be the same persons as theparties to these proceedings or their privies must be the same persons as theparties to these proceedings or their privies. In our view, they are not. The Crownin right of Canada, and not the Commission or Staff, and Seal were the parties tothe criminal proceedings. Staff and Seal are the parties to these proceedings.
Accordingly, we found that the principles of issue estoppel and abuse of processdid not bar the proceedings from continuing.
The Divisional Court has also dealt with the issue estoppel question. In Re Gillen andCollege of Physicians & Surgeons of Ontario (1989) 68 O.R. (2d) 278, the Divisional Courtdealt with an application for certiorari and prohibition to prevent the College fromcontinuing with a disciplinary hearing against a doctor who had been charged with theoffence of sexual assault against a female patient in his care, and had been acquitted inProvincial Court, with the acquittal being upheld on appeal. The Divisional Court had thefollowing to say commencing at page 279.
"We see no merit in the submission that the discipline proceedings in the collegerepresent an abuse of process, or that they are barred in any way by issue estoppelor by any constitutional principle.
It is true that the criminal trial and the discipline proceedings share an identicalissue of fact; that is, did the doctor sexually assault the patient or did he not?
The standard of proof in the criminal trial, however, was proof beyond a reasonabledoubt. It was on that basis, on all the evidence from the Crown and the defenceincluding conflicting evidence from the complainant and the doctor, that the doctorwas acquitted.
Notwithstanding the obiter comments on the summary conviction appeal it is mostinaccurate to say that the learned trial judge, in his reasons for acquittal, specificallyrejected the complainant's testimony or her version of the events or that he foundthat her version of events did not occur. He did no such thing. The learned trialjudge on the contrary merely concluded after hearing all of the Crown and defenceevidence that he was left with a reasonable doubt.
His reasons for judgment include the following observations:
In summary therefore, the issue before this court is solely a factualone, that being has the Crown on the basis of all the evidence andnot only on parts thereof, met the standard required in a criminalproceeding. That being proof beyond a reasonable doubt that theaccused did, in fact, sexually assault [the complainant]. Certainlythere is no question as to what [the complainant] in her mind thoughtshe felt and saw. I found [the complainant] to be quite an intelligentand articulate person, however, in light of the evidence as to thepossible effects of diazepam or valium as well as the evidencedealing with nocturnal emissions, the results of the tests conductedon the accused, and the accused's own evidence, I am left with areasonable doubt as to the guilt of the accused and must thereforefind him not guilty.
The stringent criminal standard of proof beyond a reasonable doubt which securedthe applicant's acquittal in the criminal trial in the face of all the evidence againsthim does not apply at a discipline hearing where the applicable standard set out incases such as Re Bernstein and College of Physicians and Surgeons of Ontario(1977), 15 O.R. 2d 447, 76 D.L.R. (3d) 38 (Div. Ct. ), and Re Coates and Registrarof Motor Vehicle Dealers and Salesmen (1988) 65 O.R. 526, 52 D.L.R. (4th) 272,34 Admin. L.R. 70 (Div. Ct.) at pp. 535-7 is significantly lower than that in a criminalcase and could therefore yield a different result. The evidence will not necessarilybe the same at both hearings. It is clear from the Health Disciplines Act, R.S.O.1980, c. 196, that the strictures of criminal evidence do not apply at the disciplinehearings where the civil rules will apply.
Because the standard of proof is different, and the rules of evidence different, thereis here no issue estoppel or res judicata and no issue arises of abuse of process.
There is no authority or logic for the proposition that a criminal acquittal is indisciplinary proceedings prima facie evidence or proof that the gravamen of thecriminal charge was unfounded or untrue. There is no novel point in this case. Thesignificant differences between criminal and disciplinary proceedings have beendealt with on many occasions in cases such as Re Imrie and Institute of CharteredAccountants of Ontario, [1972] 3 O.R. 275, 28 D.L.R. (3d) 53 (H.C.J.).
We are of the view that the issue estoppel doctrine does not apply in these circumstances,and therefore find no merit in the argument of the Respondents that the acquittal by JudgeReinhardt on the trial of the quasi-criminal charges in any way precludes the Commissionfrom proceeding with the hearing under the Notice of Motion.
We find even less merit in the argument that Mr. Justice Hamilton's dismissal of thecriminal proceedings on an Askov basis would provide a basis for precluding theCommission from proceeding with the hearing.
The second argument of the Respondents is that, since the allegations of Staff against theRespondent are based on the language of the New Act, as was the information in theproceedings dealt with by Judge Reinhardt, the proceedings before the Commissionshould be stayed on the basis of the presumption against the retroactive application ofstatutes. The Respondents were acquitted by Judge Reinhardt, in part, on the basis thatthe conduct in issue occurred prior to the amendments made by Chapter 11 of the 1994Statutes of Ontario. Judge Reinhardt concluded that the amendments had reduced theCrown's burden and that, on the basis of the presumption against the retroactiveapplication of statutes, he was required to apply the pre-amendment provisions. Heconcluded that the Crown at trial had failed to prove the more onerous offence as set outin the Old Act, and thus acquitted the Respondents in respect of certain charges.
In Brosseau v. Alberta Securities Commission [1989] 1 S.C.R. 301, the Supreme Court ofCanada had to determine whether an action taken by the British Columbia SecuritiesCommission under amended provisions of the Securities Act of British Columbia attractedthe presumption against the retroactivity of statutes. L'Heureux-Dubé, J. delivered theunanimous decision of the Court. Commencing at page 316, she said the following:
The appellant claims that ss.165 and 166 of the new Act (1981) cannot be appliedretrospectively to him. The appellant maintains that these provisions of the new Actbroaden the powers of the Commission. He submits that the Court of Appeal erred"in relying upon the case of Re A Solicitor's Clerk, [1957] 3 All E.R. 617, as authorityfor the proposition that where the objectives of a statute are 'protective', rather than'penal', then the presumption against retrospective operation of statutes does notapply." The appellant contends that under ss. 165 and 166 of the new Act (1981),sanctions are penal and consequently the Act should not be applied retrospectively.
The relevant legislation consists of s. 136 of the Securities Act, R.S.A. 1970, c. 333,and ss. 165 and 166 of the current Securities Act, S.A. 1981, c. S-6.1:
136 (1) Every person or company who
(b)makes a statement in any application, report, prospectus...requiredto be filed or furnished...that...is false or misleading is...guilty of anoffence.
165 (1) The Commission may order that
(a) trading cease in respect of any security for a period of time as isspecified in the order, or
(b) that a person or company cease trading in securities or specifiedsecurities for a period of time as is specified in the order.
(2) The Commission shall not make an order under subsection (1)without conducting a hearing.
166 (1) The Commission may order that any or all of the exemptionscontained in sections 65, 66, 107, 115, 116, 132 and 133 or in theregulations do not apply to the person or company named in theorder.
(2)The Commission shall not make an order under subsection (1)without conducting a hearing.
The basic rule of statutory interpretation, that laws should not be construed so asto have retrospective effect, was reiterated in the recent decision of this Court inAngus v. Sun Alliance Insurance Co., [1988] 2 S.C.R. 256. That case, however,dealt with the question of the retrospective effect of procedural versus substantiveprovisions. The present case presents a different facet of the problem ofretrospectivity.
While the presumption against retrospective effect is clear, there seems to be agreat deal of confusion among the authorities and case law as to what constitutessuch an effect. Michel Krauss in "Réflexions sur la rétroactivité de lois" (1983), 14R.G.D. 287, observes at p. 291:
[TRANSLATION]...there is unanimity when it comes to recognizing that the "non-retrospectivity rule" is now applicable. However, the content of this presumptionhas still to be determined in order to apply it consistently and precisely. In ouropinion, this concept is not precisely defined in our law.
Pierre-André Côté (The Interpretation of Legislation in Canada (1984)) wrote on thesubject of the application of the rule against retroactive application of laws at p. 91:
Examination of the case law reveals a great number of judgements based ongeneral principles. It is difficult to discern a logical thread in this panoply ofdecisions that are difficult to reconcile.
This Court has had the opportunity to consider the matter of the retrospectiveapplication of laws. In Nova, An Alberta Corporation v. Amoco Canada PetroleumCo., [1981] 2 S.C.R. 437, Estey J. dealt with the issue of retrospectivity byscrutinizing the intent behind the particular piece of legislation. He stated at p. 448that "each statute must, for the purpose of its interpretation, stand on its own andbe examined according to its terminology and the general legislative pattern itestablishes". In Gustavson Drilling (1964) Ltd. v. Minister of National Revenue,[1977] 1 S.C.R. 271, Dickson J. (as he then was) stated the general principle withrespect to retrospectivity of enactments at p. 279:
The general rule is that statutes are not to be construed as having retrospectiveoperation unless such a construction is expressly or by necessary implicationrequired by the language of the Act. An amending enactment may provide that itshall be deemed to have come into force on a date prior to its enactment or it mayprovide that it is to be operative with respect to transactions occurring prior to itsenactment. In those instances the statute operates retrospectively.
The so-called presumption against retrospectivity applies only to prejudicialstatutes. It does not apply to those which confer a benefit. As Elmer Driedger,Construction of Statutes (2nd ed. 1983), explains at p. 198:
...there are three kinds of statutes that can properly be said to be retrospective, butthere is only one that attracts the presumption. First, there are the statutes thatattach benevolent consequences to a prior event; they do not attract thepresumption. Second, there are those that attach prejudicial consequences to aprior event; they attract the presumption. Third, there are those that impose apenalty on a person who is described by reference to a prior event, but the penaltyis not intended as further punishment for the event; these do not attract thepresumption.
A sub-category of the third type of statute described by Driedger is enactmentswhich may impose a penalty on a person related to a past event, so long as thegoal of the penalty is not to punish the person in question, but to protect the public.This distinction was elaborated in the early case of R. v. Vine (1875), 10 L.R. Q.B.195, where Cockburn C.J. wrote at p. 199:
If one could see some reason for thinking that the intention of this enactment wasmerely to aggravate the punishment for felony by imposing this disqualification inaddition, I should feel the force of Mr. Poland's argument, founded on the rule whichhas obtained in putting a construction upon statutes - that when they are penal intheir nature they are not to be construed retrospectively, if the language is capableof having a prospective effect given to it and is not necessarily retrospective. Buthere the object of the enactment is not to punish offenders, but to protect the publicagainst public-houses in which spirits are retailed being kept by persons of doubtfulcharacter...the legislature has categorically drawn a hard and fast line, obviouslywith a view to protect the public, in order that places of public resort may be keptby persons of good character; and it matters not for this purpose whether a personwas convicted before or after the Act passed, one is equally bad as the other andought not be intrusted with a licence.
In Re A Solicitor's Clerk, supra, a statute concerning the practice of law by solicitorswas amended so as to enable an order disqualifying a person from acting as asolicitor's clerk if such person had been convicted of larceny, embezzlement orfraudulent conversion of property. A clerk who had been convicted of one of thoseoffenses before the coming into effect of the new law, contested his disqualificationon the basis that the law was being given a retrospective effect. The Court ofQueen's Bench dismissed these arguments. Lord Goddard C.J. found that therewas no retrospective effect since the real aim of the law was prospective and aimedat protecting the public. He wrote at p. 619:
In my opinion, however, this Act is not in truth retrospective. It enables an order tobe made disqualifying a person from acting as a solicitor's clerk in the future andwhat happened in the past is the cause or reason for the making of the order; butthe order has no retrospective effect. It would be retrospective if the Act providedthat anything done before the Act came into force or before the order was madeshould be void or voidable or if a penalty were inflicted for having acted in this orany other capacity before the Act came into force or the order was made. This Actsimply enables a disqualification to be imposed for the future which in no wayaffects anything done by the appellant in the past.
Elmer Driedger summarizes the point in "Statutes: Retroactive, RetrospectiveReflections" (1978), 56 Can. Bar Rev. 264, at p. 275:
In the end, resort must be had to the object of the statute. If the intent is to punishor penalize a person for having done what he did, the presumption applies,because a new consequence is attached to a prior event. But if the newpunishment or penalty is intended to protect the public, the presumption does notapply.
Stevenson J.A. of the Court of Appeal likened the situation in the present appealto that in the Re A Solicitor's Clerk case at p. 229:
In my view the principle in the Solicitor's Clerk case is indistinguishable. Anadditional power is given to the Commission - based on previous conduct. A newpunishment cannot be added but that is not the nature of the office of ss. 166 and167. It is the same office that the Solicitor's Clerk case deals with, namely toprovide a disqualification based on past conduct which may show unfitness for theexemption.
The present case involves the imposition of a remedy, the application of which isbased upon conduct of the appellant before the enactment of ss. 165 and 166.Nonetheless, the remedy is not designed as a punishment for that conduct. Rather,it serves to protect members of the public.
The fact that the relief is not really punitive in nature is supported by the conclusionof Stevenson J.A. that the imposition of the new remedy did not lie at the root of theappellant's concern in this matter at p. 229:
In essence, the appellants fear the stigma arising from a finding that theydid, or failed to do, what is alleged in the hearing notice. That root concernwas well illustrated by the suggestion made in argument that neither wouldbe particularly aggrieved by the remedy being imposed against them, indeedthey could accept the remedies, but were concerned about the finding ofwrong doing.
The provisions in question are designed to disqualify from trading in securitiesthose persons whom the Commission finds to have committed acts which call intoquestion their business integrity. This is a measure designed to protect the public,and it is in keeping with the general regulatory role of the Commission. Since theamendment at issue here is designed to protect the public, the presumption againstthe retrospective effect of statutes is effectively rebutted.
These are a number of Commission and court authorities which establish that, like theprovision at issue in Brosseau, section 127 of the Act, at issue in these proceedings, is aremedial and not a punitive provision. In In the Matter of Glendale Securities Inc., LouisShefsky and Westall Parr (1996), 19 OSCB 6273 at page 6274, the Commission said:
"It is clear, however, that an administrative proceeding, such as this one, under theAct, is not a criminal, or even a quasi-criminal, proceeding. Its purpose is not topunish anyone. Rather it is to take such administrative action, if any, under section127 of the Act as, on the basis of the evidence presented and the findings made,is required for the protection of investors and of the capital markets."
In its recent decision in Sa Majesté du Chef du Québec et al. v. Committee for the EqualTreatment of Asbestos Minority Shareholders, the Court of Appeal had the following to say:
The purpose of the Commission's public interest jurisdiction is neither remedial norpunitive; it is protective and preventive, intended to be exercised to prevent likelyfuture harm to Ontario's capital markets. The past conduct of offending marketparticipants is relevant but only to assessing whether their future conduct is likelyto harm the integrity of the capital markets.
Accordingly, as regards these proceedings, it is our view that the presumption againstretroactively does not apply, and the correct version of the Securities Act to be applied isthat contained in the New Act. In any event, unlike the proceedings before JudgeReinhardt in which the elements of the specific offences had to be proved in order for aconviction to be entered, it is not necessary for the Commission to determine that aviolation of the Securities Act has occurred in order for it to impose sanctions provided forin section 127 of the New Act, it is only necessary that the Commission determine that thesanction is in the public interest. (See In the Matter of Larry Woods (1995), 18 OSCB4625, Re The Securities Commission and Mitchell (1957), O.W.N. 595 and Re TheSecurities Act and Gardiner et al [1948] O.R. 71, Asbestos (supra)).
In our view, the argument of the Respondents that the Commission, "by failing to respondin a timely manner to a request set before it February 13, 1998 is deemed to haveabandoned its rights to proceed" under the Notice of Hearing is also without merit. Itwould appear that the letter to which the Respondents refer is an undated letter written byMr. Maxwell to the then Acting Chairman of the Commission requesting a meeting "toclarify the commission's intentions." This was followed by another undated letter from Mr.Maxwell to the Acting Chairman stating that, as a result of not receiving a response to theearlier letter, the Respondents "can only assume that you have closed your file on thismatter". The Respondents had the right to bring on for hearing the proceedings under theNotice of Hearing on seven days notice. They did not do so. There was no duty on theActing Chairman of the Commission to respond to a letter requesting a meeting, nor to aletter stating an "assumption" as to the closing of "your file on this matter".
The fourth argument of the Respondents is that the Notice of Hearing is "in constructionflawed", because the Notice of hearing refers to the consideration of a sanction "pursuantto clause 3 of section 127(1) of the Act", the Notice of Hearing is dated July 4, 1995, the1994 amendments to the Act were proclaimed in force July 11, 1994, and the sanction tobe considered is provided for in section 127 of the Act, as amended in 1994, and notsection 127 of the Act as it read before the amendment.
Section 6 of the Statutory Powers Procedure Act provides as follows:
6. (1) The parties to a proceeding shall be given reasonable notice of the hearingby the tribunal.
(2) A notice of hearing shall include a reference to the statutory authority underwhich the hearing will be held.
The Notice of Hearing does precisely what the section requires. It correctly describes thestatutory authority "under which the hearing will be held."
As well, the Respondents could not be, or have been, in any doubt as to the case whichthey would be required to meet.
In the course of his oral argument, Mr. Maxwell raised what we understood to be a fairnessargument, to the effect that what he characterized as too lengthy delays on the part of Staffmade it unfair for Staff to proceed with the hearing on the merits. We had before us noevidentiary basis for such an argument, and, as we have said, the Respondents couldhave brought on the hearing on the merits on seven days notice. In any event, we did notconsider this argument to be one which went to the basis of the Commission's jurisdictionto proceed with the hearing on the merits.
In the result, we dismissed the Respondents' application, and directed that the hearingunder the Notice of Motion be proceeded with.
April 20,1999.
"J. A. Geller"
"Howard I. Wetston"
"J. F. Howard"
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