Wilder et al. v. Ontario Securities Commission [Indexed as: Wilder v. Ontario Securities Commission]
53 O.R. (3d) 519
[2001] O.J. No. 1017
Docket No. C34363
Court of Appeal for Ontario
Abella, Goudge and Sharpe JJ.A.
March 22, 2001
Administrative law--Boards and tribunals--Jurisdiction --Ontario Securities Commission--Ontario Securities Commission having jurisdiction to reprimand lawyer acting in professional capacity--Securities Act, R.S.O. 1990, c. S.5, s. 127.
Professions--Barristers and solicitors--Discipline--Ontario Securities Commission having jurisdiction to reprimand lawyer acting in professional capacity--Securities Act, R.S.O. 1990, c. S.5, s. 127.
The Ontario Securities Commission ("OSC") commenced proceedings to reprimand LDW, who was a solicitor, for alleged misconduct in his representation of YBM Magnex International Inc., in connection with the filing of a preliminary prospectus. The notice of hearing stated that the OSC would consider whether it was in the public interest to make an order pursuant to s. 127(1), para. 6 of the Securities Act to reprimand LDW and whether, if it was determined that he had not complied with Ontario securities law, application should be made to the Superior Court of Justice for a declaration pursuant to s. 128(1) or a remedial order pursuant to s. 128(3) of the Act. LDW and his law firm, Cassels Brock and Blackwell ("Cassels"), supported by the intervenor, the Law Society of Upper Canada, applied for judicial review and called into question the OSC's authority to reprimand LDW. The Divisional Court dismissed their application. Leave having been granted, they appealed to the Court of Appeal.
Held, the appeal should be dismissed with costs.
The Securities Act, Part XXII provides the OSC with three methods of enforcement. The first, pursuant to s. 122(1), is a quasi-criminal proceeding in the Ontario Court of Justice leading to conviction and fine or imprisonment. The second, pursuant to s. 127, is an administrative proceeding for an order in the public interest, including a reprimand. The third, pursuant to s. 128, is an application to the Superior Court of Justice for a declaration that a person or company has not complied, or is not complying with Ontario securities law.
In the immediate case, the specific allegation against LDW could have proceeded by way of a quasi-criminal prosecution under para. 122(1)(a), but this did not preclude an administrative proceeding pursuant to s. 127. The appellants submitted that s. 122(1)(a) conferred exclusive jurisdiction to the Superior Court because of the principle of statutory interpretation in that where a statute provides for a specific remedy, other remedies may be excluded by inference and the presumption that the legislature should not be taken to have limited the rights of the individual -- in this case, Charter rights and the stricter rules of evidence and proof in criminal proceedings -- unless it does so expressly. However, another well-known principle of statutory interpretation is that the courts must consider the broader legislative purpose of an Act when giving meaning to its constituent provisions. The appellant's interpretation was an excessively narrow and literal approach that ignored fundamental aspects of the statutory scheme and frustrated the attainment of the objects of the Act. The legislature clearly manifested its intention to provide the OSC with a range of remedial options to assist it in carrying out its statutory mandate. The reduction in procedural rights under s. 127 from those available under s. 122 resulted from the simple fact that there is no criminal sanction attached to a s. 127 order. The essence of the statutory scheme is remedial flexibility, not remedial exclusivity and differing procedural consequences are an inevitable result in such a scheme.
Further, it was not the case, as submitted by the appellants, that the reprimand power of s. 127(1) para. 6 is limited to situations falling within paras. 1-5. And, contrary to the submissions of the appellants, it was not the case that a reprimand is a punitive sanction beyond the powers conferred by s. 127(1).
Finally, with the caveat that solicitor-client privilege must be maintained and protected, for the reasons given by the Divisional Court, the OSC has jurisdiction to reprimand lawyers for their conduct as solicitors before the OSC. The need to respect solicitor-client privilege did not require a blanket preclusion preventing the OSC from reprimanding lawyers in all cases. The Law Society's Rules of Professional Conduct define the terms upon which a lawyer's promise of confidentiality is made. They contain a general provision allowing for disclosure of confidential information where necessary to defend the lawyer's legal interests, and there is no reason why that provision should not apply to an allegation of misconduct by the OSC. This exemption does not allow the OSC to ignore the importance of solicitor-client privilege, and it must, on a case-by-case basis, ensure that the substantive legal right to solicitor-client privilege is respected.
APPEAL from a judgment of the Divisional Court (2000), 2000 29062 (ON SCDC), 47 O.R. (3d) 361, 184 D.L.R. (4th) 165 on an application for judicial review.
Cases referred to Anderson v. Bank of British Columbia (1876), 2 Ch. D. 644, [1874-80] All E.R. Rep. 396, 45 L.J. Ch. 449, 35 L.T. 76, 24 W.R. 624, 724, 3 Char. Pr. Cas. 212 (C.A.); Brosseau v. Alberta (Securities Commission), 1989 121 (SCC), [1989] 1 S.C.R. 301, 65 Alta. L.R. (2d) 97, 57 D.L.R. (4th) 458, 93 N.R. 1, [1989] 3 W.W.R. 456, 47 C.R.R. 394n (sub nom. Barry and Alberta Securities Commission, Re); Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., 1993 31 (SCC), [1993] 3 S.C.R. 724, 108 D.L.R. (4th) 1, 160 N.R. 321, 93 C.L.L.C. 14,062 (sub nom. Canadian Pacific Airlines Ltd. v. CALPA); Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) (1999), 1999 7316 (ON CA), 43 O.R. (3d) 257, 169 D.L.R. (4th) 612 (C.A.) [Leave to appeal to S.C.C. granted January 27, 2000, S.C.C. Bulletin 2000 at p. 155, appeal heard and judgment reserved December 15, 2000, S.C.C. Bulletin 2000 at p. 2368]; Covert v. Nova Scotia (Minister of Finance), 1980 229 (SCC), [1980] 2 S.C.R. 774, 41 N.S.R. (2d) 181, 32 N.R. 275, 76 A.P.R. 181, 8 E.T.R. 69 (sub nom. Jodrey v. Nova Scotia (Minister of Finance); Jodrey Estate v. Nova Scotia); Gregory & Co. v. Québec (Commission des valeurs mobilières), 1961 75 (SCC), [1961] S.C.R. 584, 28 D.L.R. (2d) 721; Jones v. Smith, 1999 674 (SCC), [1999] 1 S.C.R. 455, 62 B.C.L.R. (3d) 209, 169 D.L.R. (4th) 385, 236 N.R. 201, [1999] 8 W.W.R. 364, 60 C.R.R. (2d) 46, 132 C.C.C. (3d) 225, 22 C.R. (5th) 203; Morguard Properties Ltd. v. Winnipeg (City), 1983 33 (SCC), [1983] 2 S.C.R. 493, 25 Man. R. (2d) 302, 3 D.L.R. (4th) 1, 50 N.R. 264, [1984] 2 W.W.R. 97, 24 M.P.L.R. 218; Pacific Coast Coin Exchange of Canada v. Ontario (Securities Commission), 1977 37 (SCC), [1978] 2 S.C.R. 112, 2 B.L.R. 212, 80 D.L.R. (3d) 529, 18 N.R. 52; Pezim v. British Columbia (Superintendent of Brokers), 1994 103 (SCC), [1994] 2 S.C.R. 557, 92 B.C.L.R. (2d) 145, 114 D.L.R. (4th) 385, 168 N.R. 321, 14 B.L.R. (2d) 217 (sub nom. Ivany v. British Columbia); Pointe-Claire (City) v. S.E.P.B., Local 57, 1997 390 (SCC), [1997] 1 S.C.R. 1015, 146 D.L.R. (4th) 1, 211 N.R. 1, 28 C.C.E.L. (2d) 177, 97 C.L.L.C. 220-039; R. v. McClure, 2001 SCC 14, 2001 S.C.C. 14, 195 D.L.R. (4th) 513, 80 C.R.R. (2d) 217, [2001] S.C.J. No. 13 (S.C.C.); Roncarelli v. Duplessis (1958), 1959 50 (SCC), [1959] S.C.R. 121, 16 D.L.R. (2d) 689; Solosky v. Canada, 1979 9 (SCC), [1980] 1 S.C.R. 821, 105 D.L.R. (3d) 745, 30 N.R. 380, 50 C.C.C. (2d) 495, 16 C.R. (3d) 294 (sub nom. Solosky v. R.) Statutes referred to Canadian Charter of Rights and Freedoms, ss. 7, 11 Provincial Offences Act, R.S.O. 1990, c. P.33, s. 29(1) Securities Act, R.S.O. 1990, c. S.5, ss. 1.1, 122, 127, 128, Part XXII Authorities referred to Law Society of Upper Canada, Rules of Professional Conduct, rule 2.03(4) R. Sullivan, ed., Driedger on the Construction of Statutes, 3d ed. (Toronto: Butterworths, 1994)
H. Lorne Morphy, Linda L. Fuerst and Miriam Saksznajder, for appellants. Brian Greenspan, for intervenor. Ian R. Smith and Kathryn J. Daniels, for respondent.
1SHARPE J.A.:--This appeal calls into question the authority of the Ontario Securities Commission (the "OSC") to reprimand the appellant, Lawrence D. Wilder ("Wilder"), a solicitor, for alleged misconduct in connection with his representation of a client before the OSC. The appellants, Wilder and Cassels Brock and Blackwell ("Cassels"), supported by the intervenor, The Law Society of Upper Canada ("The Law Society"), submit that the OSC lacks a statutory mandate to reprimand Wilder for his conduct. They argue that the allegations against Wilder must be dealt with either by way of quasi-criminal proceedings before the Ontario Court of Justice or by The Law Society. They appeal, with leave of this court, the order of the Divisional Court dismissing their application for judicial review, asking for an order that the OSC be prohibited from continuing proceedings against the appellants and quashing a Notice of Hearing.
Facts
2Wilder is a solicitor and a partner in the Cassels firm. At all relevant times, YBM Magnex International Inc. ("YBM") was a client of Cassels and Wilder in connection with the filing of a preliminary prospectus with the OSC. Wilder is not and never has been an officer, director, shareholder or promoter of YBM. In all of his dealings with the OSC on behalf of YBM, Wilder acted exclusively as YBM's counsel.
3The proceedings at issue before the OSC were commenced by a Notice of Hearing, dated November 1, 1999, naming Wilder, YBM, the directors of YBM, its CEO and CFO and the co-lead underwriters for a YBM financing. The Notice advises the named parties of a hearing to determine whether various orders should be made against them pursuant to ss. 127 and 128 of the Securities Act, R.S.O. 1990, c. S.5. With respect to Wilder, the Notice of Hearing states that at the hearing, the OSC will consider:
whether, in its opinion, it is in the public interest to make an order pursuant to s. 127(1), para. 6 of the Act to reprimand Wilder; and
whether, if the OSC determines that Wilder has not complied with Ontario securities law, application should be made to the Superior Court of Justice for a declaration that Wilder has not complied with Ontario securities law, pursuant to s. 128(1) of the Act, and/or a remedial order against Wilder, pursuant to s. 128(3) of the Act.
4The Statement of Allegations of the Staff of the OSC, served in support of the Notice of Hearing, provides details of the specific allegations. The Staff alleges that a letter to the OSC written by Wilder on behalf of YBM contained misleading or untrue statements of fact:
Wilder made statements in a letter dated July 4, 1997 to Staff of the Commission that in a material respect, and at the time and in the light of the circumstances under which the statements were made, were misleading or untrue or did not state a fact that was required to be stated or that was necessary to make the statements not misleading; specifically, statements concerning the result of due diligence conducted in respect of YBM. In doing so, Wilder acted in a manner contrary to the public interest.
The allegations against the other named parties relate to alleged non-disclosure by YBM in prospectuses filed with the OSC and to YBM's alleged failure to comply with its continuous disclosure obligations. The allegations against these parties concern contraventions of duties and obligations imposed by Ontario securities law.
Legislation
5The Securities Act, Part XXII provides for three methods of enforcement that are available to the OSC in carrying out its mandate to regulate the securities industry. The first method is a quasi-criminal proceeding in the Ontario Court of Justice, pursuant to s. 122(1), leading to conviction and fine or imprisonment:
122(1) Every person or company that,
(a) makes a statement in any material, evidence or information submitted to the Commission, a Director, any person acting under the authority of the Commission or the Executive Director or any person appointed to make an investigation or examination under this Act that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading;
(b) makes a statement in any application, release, report, preliminary prospectus, prospectus, return, financial statement, information circular, take- over bid circular, issuer bid circular or other document required to be filed or furnished under Ontario securities law that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading; or
(c) contravenes Ontario securities law,
is guilty of an offence and on conviction is liable to a fine of not more than $1,000,000 or to imprisonment for a term of not more than two years, or to both.
6The second enforcement method is an administrative proceeding, such as that taken in the present case, before the OSC pursuant to s. 127 for an "order in the public interest":
127(1) The Commission may make one or more of the following orders if in its opinion it is in the public interest to make the order or orders:
An order that the registration or recognition granted to a person or company under Ontario securities law be suspended or restricted for such period as is specified in the order or be terminated, or that terms and conditions be imposed on the registration or recognition.
An order that trading in any securities by or of a person or company cease permanently or for such period as is specified in the order.
An order that any exemptions contained in Ontario securities law do not apply to a person or company permanently or for such period as is specified in the order.
An order that a market participant submit to a review of his, her or its practices and procedures and institute such changes as may be ordered by the Commission.
If the Commission is satisfied that Ontario securities law has not been complied with, an order that a release, report, preliminary prospectus, prospectus, return, financial statement, information circular, take-over bid circular, issuer bid circular, offering memorandum, proxy solicitation or any other document described in the order,
i. be provided by a market participant to a person or company,
ii. not be provided by a market participant to a person or company, or
iii. be amended by a market participant to the extent that amendment is practicable.
An order that a person or company be reprimanded.
An order that a person resign one or more positions that the person holds as a director or officer of an issuer.
An order that a person is prohibited from becoming or acting as director or officer of any issuer.
7The third enforcement method is an application pursuant to s. 128 to the Superior Court of Justice for an order from that court.
128(1) The Commission may apply to the Ontario Court (General Division) for a declaration that a person or company has not complied with or is not complying with Ontario securities law.
(2) The Commission is not required, before making an application under subsection (1), to hold a hearing to determine whether the person or company has not complied with or is not complying with Ontario securities law.
(3) If the court makes a declaration under subsection (1), the court may, despite the imposition of any penalty under section 122 and despite any order made by the Commission under section 127, make any order that the court considers appropriate against the person or company, including, without limiting the generality of the foregoing, one or more of the following orders:
An order that the person or company comply with Ontario securities law.
An order requiring the person or company to submit to a review by the Commission of his, her or its practices and procedures and to institute such changes as may be directed by the Commission.
An order directing that a release, report, preliminary prospectus, prospectus, return, financial statement, information circular, take- over bid circular, issuer bid circular, offering memorandum, proxy solicitation or any other document described in the order,
i. be provided by the person or company to another person or company,
ii. not be provided by the person or company to another person or company, or
iii. be amended by the person or company to the extent that amendment is practicable.
An order rescinding any transaction entered into by the person or company relating to trading in securities including the issuance of securities.
An order requiring the issuance, cancellation, purchase, exchange or disposition of any securities by the person or company.
An order prohibiting the voting or exercise of any other right attaching to securities by the person or company.
An order prohibiting the person from acting as officer or director or prohibiting the person or company from acting as promoter of any market participant permanently or for such period as is specified in the order.
An order appointing officers and directors in place of or in addition to all or any of the officers and directors of the company then in office.
An order directing the person or company to purchase securities of a security holder.
An order directing the person or company to repay to a security holder any part of the money paid by the security holder for securities.
An order requiring the person or company to produce to the court or an interested person financial statements in the form required by Ontario securities law, or an accounting in such other form as the court may determine.
An order directing rectification of the registers or other records of the company.
An order requiring the person or company to compensate or make restitution to an aggrieved person or company.
An order requiring the person or company to pay general or punitive damages to any other person or company.
An order requiring the person or company to disgorge to the Minister any amounts obtained as a result of the non-compliance with Ontario securities law.
An order requiring the person or company to rectify any past non-compliance with Ontario securities law to the extent that rectification is practicable.
Judgment of the Divisional Court (Southey, MacFarland and Swinton JJ. (2000), 2000 29062 (ON SCDC), 47 O.R. (3d) 361)
8Before the Divisional Court, the focus of the appellants' attack on the OSC proceedings was the submission that s. 127(1) should be interpreted so as not to apply to lawyers acting in their professional capacity. It was further submitted that if the provision does apply to lawyers acting in their professional capacity, it is to that extent unconstitutional and should be read down.
9Swinton J., writing for the court, rejected the appellants' submission. She observed that there was nothing in the language of s. 127(1) nor in its legislative history to suggest that it should not apply to lawyers. Indeed, she noted at p. 367, adoption of the provision indicated a legislative intention "to broaden the powers of the [OSC] to make orders in the public interest" and that the legislature "chose words which do not preclude their application to lawyers." The Divisional Court rejected the contentions that The Law Society has exclusive jurisdiction to regulate the professional conduct of lawyers, and that to allow the OSC to involve itself in the professional conduct of lawyers would have a chilling effect upon the ability of members of the public to obtain independent legal representation.
10The Divisional Court found that the OSC's proposed exercise of jurisdiction over Wilder was not inconsistent with the important role of The Law Society in regulating the legal profession. Both The Law Society and the OSC exercise public interest functions, but (at p. 368 O.R.) "the public interests which they seek to protect are not the same." The Law Society's role, as stated by the Divisional Court at p. 368 is "to govern the legal profession in the public interest, and to ensure that members of the profession do not engage in professional misconduct or conduct unbecoming a barrister and solicitor". The role of the OSC, on the other hand, was described at p. 368 as "that of protecting investors and the proper functioning of Ontario's capital markets. Ensuring proper disclosure and maintaining the integrity of its processes are an important part of this role." The Divisional Court concluded at p. 368 that there was no basis for holding lawyers immune from the regulatory powers of the OSC:
In proceedings such as these, the [OSC] is not usurping the role of the Law Society, as its objective is not to discipline the lawyer for professional misconduct; rather, its concern is to remedy a breach of its own Act which violates the public interest in fair and efficient capital markets, and to control its own processes.
11Finally, the Divisional Court rejected the contention that by exercising jurisdiction over Wilder, the OSC would infringe the rule of law by interfering with the independence of the bar. The Divisional Court observed at p. 369 that all the OSC was seeking to do was "to ensure that lawyers, among others, do not mislead" it and that the exercise of that jurisdiction "will not interfere with the ability of lawyers who practise securities law to continue to provide excellent and vigorous representation to their clients."
Issues
Does the OSC have jurisdiction, as a matter of statutory interpretation, to reprimand Wilder for the alleged misconduct?
Does the OSC have jurisdiction to reprimand lawyers for their conduct as solicitors before the OSC?
Analysis
Issue 1: Does the OSC have jurisdiction, as a matter of statutory interpretation, to reprimand Wilder for the alleged misconduct?
12Before this court, the principal submission relied on by the appellants was that the allegation against Wilder fell squarely and exclusively within the terms of the offence created by s. 122(1)(a). The appellants submit that, as a matter of statutory construction, the legislature has assigned exclusive jurisdiction to deal with conduct amounting to an offence under s. 122(1)(a) upon the Ontario Court of Justice pursuant to that section and the Provincial Offences Act, R.S.O. 1990, c. P.33, s. 29(1). It follows, they say, that the OSC has no statutory authority to deal with the allegation pursuant to the administrative process contemplated by s. 127. Second, the appellants contend that the reprimand power in s. 127(1), para. 6 is limited to situations where the party would otherwise be subject to an order contemplated by s. 127(1), paras. 1-5. Third, the appellants submit that a reprimand is punitive in nature and that punitive orders are beyond the scope of s. 127.
13These arguments, it should be noted, have nothing to do with Wilder's status as a solicitor or member of The Law Society. They are based entirely upon the wording of the relevant provisions of the Act and would apply to any person or corporation alleged to have provided misleading or untrue information to the OSC.
14These arguments were not raised before the Divisional Court, but they were raised on the motion for leave to appeal. The OSC takes the position that in the normal course, the OSC ought to make the initial determination as to its own jurisdiction. However, the OSC acknowledges that it is in the interests of justice for this court to rule on all of the arguments made by the appellants relating to the jurisdiction of the OSC to proceed with the proposed hearing.
(i) Is the alleged conduct within the exclusive jurisdiction of the Ontario Court of Justice pursuant to s. 122(1)(a)?
15The specific allegation against Wilder precisely tracks the wording of the prohibition contained in s. 122(1)(a). There can be no doubt that on this allegation the OSC could have proceeded by way of a quasi-criminal prosecution against Wilder in the Ontario Court of Justice. Nor, in my view, can there be any doubt that the Ontario Court of Justice has exclusive jurisdiction [to] try any charges that are laid under s. 122(1) (a). The question is whether the OSC is limited to that enforcement route in dealing with conduct that could form the subject of a charge pursuant to s. 122(1)(a).
16The appellants submit that s. 122 makes an important distinction between the kind of conduct alleged against Wilder, set out in s. 122(1)(a), and the different and more general offence of contravening Ontario securities law set out in s. 122(1)(c). They concede that the Act allows the OSC to use all three means of enforcement where the conduct at issue amounts to a contravention of Ontario securities law. Section 127(1), para. 5 expressly provides that the OSC may impose administrative sanctions for a contravention of Ontario securities law. Similarly, s. 128(1) specifically allows the OSC to ask the Superior Court of Justice for a remedy in the case of a contravention of Ontario securities law. However, the appellants argue that as the legislature found it necessary to create the separate and distinct offence of making misleading or untrue statements in s. 122(1)(a), that same conduct does not and cannot fall within the words of s. 122(1)(c) creating the offence "contravenes Ontario securities law". They say that it inevitably follows that the statutory scheme should be read as conferring upon the Ontario Court of Justice exclusive jurisdiction to deal with allegations of making misleading or untrue statements as described in s. 122(1)(a).
17The appellants call in aid of their contention that s. 122(1)(a) confers exclusive jurisdiction two well-known principles of statutory interpretation. First is the principle that where a statute provides for a specific remedy, other remedies may be excluded by inference: Canadian Pacific Air Lines Ltd. v. Canadian Air Line Pilots Assn., 1993 31 (SCC), [1993] 3 S.C.R. 724 at pp. 741-42, 108 D.L.R. (4th) 1. Second is the presumption that the legislature should not be taken to have limited the rights of the individual unless it does so expressly: Morguard Properties Ltd. v. Winnipeg (City), 1983 33 (SCC), [1983] 2 S.C.R. 493 at p. 509, 25 Man. R. (2d) 302. If Wilder were charged with the offence created by s. 122(1)(a), he would enjoy significant advantages and procedural protections not available under the administrative procedure of s. 127. On the quasi-criminal charge before the Ontario Court of Justice, the OSC would be required to prove guilt under the strict rules of criminal evidence and on the criminal standard of beyond a reasonable doubt. Wilder could assert Charter rights and the statutory due diligence defence specified in s. 122(2).
18Despite the very forceful and able argument presented by Mr. Morphy, I cannot accept the contention that allegations of misrepresentation of the kind made against Wilder must be dealt with exclusively as a quasi-criminal offence under s. 122(1) (a). It seems to me that to accept the appellants' submission would be to adopt an excessively narrow and literal approach that would ignore fundamental aspects of the statutory scheme and that would frustrate rather than foster the attainment of the purposes and objects of the Act.
19Another well-known principle of statutory interpretation is that courts must consider the broader legislative purpose of an Act when giving meaning to its constituent provisions. The purposive approach to interpretation best ensures the attainment of the true object sought by the legislators: Covert v. Nova Scotia (Minister of Finance), 1980 229 (SCC), [1980] 2 S.C.R. 774 at p. 807, 41 N.S.R. (2d) 181; Pointe-Claire (City) v. S.E.P.B., Local 57, 1997 390 (SCC), [1997] 1 S.C.R. 1015 at pp. 1063-64, 146 D.L.R. (4th) 1; R. Sullivan, ed., Driedger on the Construction of Statutes, 3d ed. (Toronto: Butterworths, 1994) at pp. 38-41, 131.
20With respect to the Securities Act, the legislature directed its mind to specifying the purposes of the Act. They are explicitly stated in s. 1.1:
1.1 The purposes of this Act are,
(a) to provide protection to investors from unfair, improper or fraudulent practices; and
(b) to foster fair and efficient capital markets and confidence in capital markets.
21As this statement of statutory purpose indicates, and as the Divisional Court and other decisions have confirmed, the Act confers an important public mandate on the OSC to regulate capital markets. At the very core of that supervisory role is the need to ensure that the public is given fair and accurate information regarding securities. In Pacific Coast Coin Exchange of Canada v. Ontario (Securities Commission), 1977 37 (SCC), [1978] 2 S.C.R. 112 at p. 126, 2 B.L.R. 212, de Grandpré J. described the policy of the Securities Act as being "the protection of the public" and adopted the following description of the basic aim or purpose of the Act: ". . . [T]he protection of the investing public through full, true and plain disclosure of all material facts relating to securities being issued". Pezim v. British Columbia (Superintendent of Brokers), 1994 103 (SCC), [1994] 2 S.C.R. 557 at pp. 592-93, 92 B.C.L.R. (2d) 145, and Brosseau v. Alberta (Securities Commission), 1989 121 (SCC), [1989] 1 S.C.R. 301 at p. 314, 65 Alta. L.R. (2d) 97, both adopt Fauteux J.'s statement of the role of securities commissions in Gregory & Co. v. Québec (Commission des valeurs mobilières), 1961 75 (SCC), [1961] S.C.R. 584 at p. 588, 28 D.L.R. (2d) 721:
The paramount object of the Act is to ensure that persons who, in the province, carry on the business of trading in securities or acting as investment counsel, shall be honest and of good repute and, in this way, to protect the public, in the province or elsewhere, from being defrauded as a result of certain activities initiated in the province by persons therein carrying on such a business.
22The OSC is charged with the statutory obligation to do its best to ensure that those involved in the securities industry provide fair and accurate information so that public confidence in the integrity of capital markets is maintained. It is difficult to imagine anything that could be more important to protecting the integrity of capital markets than ensuring that those involved in those markets, whether as direct participants or as advisers, provide full and accurate information to the OSC.
23The remedial and enforcement provisions of the Act must be read in light of the fundamental purpose and aim of the legislation. In the light of the overall purpose of the Act, I cannot accept the proposition that the wording of the provision creating the offences prescribed by s. 122 indicates a legislative intention to confer exclusive jurisdiction on the Ontario Court of Justice where it is alleged that a party has been guilty of misrepresentation. The legislature has quite clearly manifested its intention to provide the OSC with a range of remedial options to assist the OSC in carrying out its statutory mandate. The Act provides the OSC with three different enforcement tools: prosecution before the Ontario Court of Justice pursuant to s. 122; administrative sanctions before the OSC itself pursuant to s. 127; and declaratory, injunctive, and other orders from the Superior Court of Justice pursuant to s. 128. These enforcement tools provide the OSC with a range of remedial options to be deployed in the OSC's discretion to meet the wide variety of problems and issues that it must confront. In some cases, the OSC may determine that quasi-criminal prosecution leading to fine or imprisonment is the most effective and appropriate means to ensure compliance with the Act and to ensure public confidence in the capital markets. In other cases, the OSC may prefer the more flexible and less drastic administrative sanctions available pursuant to s. 127 as the best way to achieve the objectives of the legislation. To the extent one can discern a legislative intention from this scheme, it seems to me that the overwhelming message is one of remedial variety and flexibility, rather than one that creates hived-off areas of remedial exclusivity. A court should be loath to prefer a rigidly narrow and literal interpretation over one that recognizes and reflects the purposes of the Act.
24It is true that if Wilder were prosecuted under s. 122, he would enjoy procedural protections and other advantages not available in proceedings brought under s. 127. I fail to see, however, how that leads to the conclusion that he can only be prosecuted under s. 122. Different procedural rights are accorded because different consequences follow. The Act provides for various remedial routes which themselves entail varying procedural consequences. The reduction in procedural rights under s. 127 from those available in a prosecution under s. 122 results from the simple fact that there is no criminal sanction attached to a s. 127 order. The essence of the statutory scheme is remedial flexibility, not remedial exclusivity, and differing procedural consequences are an inevitable result of such a scheme.
(ii) Is the reprimand power of s. 127(1) para. 6 limited to situations falling within s. 127(1) paras. 1-5?
25I am unable to accept the proposition advanced by the appellants that the reprimand power of s. 127(1), para. 6 is limited to situations falling within s. 127(1), paras. 1-5. This argument seems to me to ignore the opening words of s. 127(1) which states that the OSC has the statutory power to make any one or more of the various orders specified in s. 127(1) where "in its opinion it is in the public interest" to do so. Contrary to the submission of the appellants, this power is not limited by the language of s. 127(1), paras. 1-5 which simply enumerates the orders that may be made. The power under s. 127(1), para. 6 is, of course, not unlimited. Statutory discretionary powers are constrained by the objects and purposes of the Act that creates them: Roncarelli v. Duplessis (1958), 1959 50 (SCC), [1959] S.C.R. 121, 16 D.L.R. (2d) 689. Excessive exercise of statutory powers will be curtailed. At the same time, a legislative decision to confer broadly worded powers must be respected. There can be no doubt tha t the power conferred on the OSC to issue orders that are "in its opinion . . . . in the public interest" is a broad and plenary power. In my view, reprimanding a person for making untrue or misleading statements to the OSC regarding a public offering falls squarely within the objects and purposes of the Act. The conduct is specifically proscribed by s. 122(1)(a). It threatens the integrity of the process before the OSC. Nothing could be more central to protecting "investors from unfair, improper or fraudulent practices" nor to fostering "fair and efficient capital markets and confidence in capital markets". It follows, in my view, that the OSC does have the power to reprimand a person for making untrue or misleading statements pursuant to s. 127(1), para. 6, even if the conduct is not subject to one of the other orders contemplated by s. 127(1), paras. 1-5.
(iii) Is a reprimand a punitive order outside the jurisdiction under s. 127(1)?
26The appellants also submit that there is no jurisdiction under s. 127(1) to make an order that is punitive in nature and that the threatened reprimand against Wilder would be a punitive measure that can only be imposed as a sanction upon conviction of an offence pursuant to s. 122. I do not agree that a reprimand is a punitive sanction beyond the powers conferred by s. 127(1). It is undoubtedly the case that if Wilder were reprimanded for failure to tell the truth or misrepresentation of the facts, the reprimand would amount to a sanction for wrongful behaviour. That, however, does not make it "punitive" and beyond the scope of the powers conferred by s. 127(1). In Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) (1999), 1999 7316 (ON CA), 43 O.R. (3d) 257 at p. 272 (C.A.), leave to appeal to S.C.C. granted 27 January 2000 (S.C.C. Bulletin 2000 at p. 155), appeal heard and judgment reserved 15 December 2000 (S.C.C. Bulletin 2000 at p. 2368), this court described the purpose of the OSC's public interest jurisdiction in the following way:
The purpose of the [OSC]'s public interest jurisdiction is neither remedial nor punitive; it is protective and preventive, intended to be exercised to prevent likely future harm to Ontario's capital markets. The past conduct of offending market participants is relevant but only to assessing whether their future conduct is likely to harm the integrity of the capital markets.
27Taken to its logical conclusion, the appellants' argument would eliminate the reprimand power from the remedial arsenal of the OSC. I find it impossible to see how one could reach such a result through an exercise of statutory interpretation. The legislature has, after all, given the OSC the power to reprimand. Moreover, formal statements of reproof or disapproval of conduct in the form of reprimands are commonly used as administrative sanctions. In my view, reprimands qualify as preventative sanctions. They represent a formal statement that the conduct is unacceptable and will not be tolerated in the future. They are not imposed to punish or exact retribution and are therefore removed from the realm of pure penal sanction.
Issue 2: Does the OSC have jurisdiction to reprimand lawyers for their conduct as solicitors before the OSC?
28The appellants submit that that s. 127(1) should be interpreted so as not to apply to lawyers acting in their professional capacity and that the attempt by the OSC to assert jurisdiction with respect to Wilder's conduct collides with the authority of The Law Society to discipline lawyers. The appellants further submit that the assertion of jurisdiction by the OSC infringes the constitutional principle of the rule of law.
29In my view, these arguments were fully and correctly dealt with in the reasons for judgment of Swinton J., writing for the Divisional Court. I cannot improve upon her analysis of these issues and for the reasons she gave, I would dismiss this aspect of the appeal.
30I would, however, add this caveat with respect to the importance of ensuring that solicitor-client privilege is maintained and protected.
31Solicitor-client privilege was described by Dickson J. in Solosky v. Canada, 1979 9 (SCC), [1980] 1 S.C.R. 821 at p. 839, 105 D.L.R. (3d) 745, as a "fundamental civil and legal right" and more recently by Major J. in R. v. McClure, 2001 SCC 14, [2001] S.C.J. No. 13 at para. 2 as "fundamental to the justice system in Canada". It is an important substantive right, long recognized as essential to ensuring that citizens have access to full and candid advice about their legal rights. The rationale for the privilege was explained in Anderson v. Bank of British Columbia (1876), 2 Ch. D. 644 at p. 649, [1874-80] All E.R. Rep. 396, per Jessel M.R. in terms that have been quoted by the Supreme Court of Canada in Jones v. Smith, 1999 674 (SCC), [1999] 1 S.C.R. 455 at p. 474, 62 B.C.L.R. (3d) 209, and R. v. McClure, supra, at para. 32:
The object and meaning of the rule is this: that as, by reason of the complexity and difficulty of our law, litigation can only be properly conducted by professional men, it is absolutely necessary that a man, in order to prosecute his rights or to defend himself from an improper claim, should have recourse to the assistance of professional lawyers, and it being so absolutely necessary, it is equally necessary, to use a vulgar phrase, that he should be able to make a clean breast of it to the gentleman whom he consults with a view to the prosecution of his claim, or the substantiating [of] his defence against the claim of others; that he should be able to place unrestricted and unbounded confidence in the professional agent, and that the communications he so makes to him should be kept secret, unless with his consent (for it is his privilege, and not the privilege of the confidential agent), that he should be enabled properly to conduct his litigation. That is the meaning of the rule.
Members of the public engaged in activities in the capital markets and subject to the authority of the OSC need to be able "to place unrestricted and unbounded confidence" in their legal advisors.
32However, I do not accept the contention of the appellants and The Law Society that the need to respect solicitor-client privilege requires a blanket preclusion, preventing the OSC from reprimanding lawyers in all cases, provided the OSC pays adequate heed to the importance of solicitor-client privilege.
33Where a lawyer is threatened with a reprimand by the OSC, there are two important interests at stake. On the one hand, the lawyer is entitled to be dealt with fairly and to be permitted to answer the allegations that have been made. On the other hand, where the lawyer's answer involves revealing the confidence of the client, the client's interest in confidentiality is invoked. In this regard, the lawyer's promise of confidentiality is not absolute. It is recognized by The Law Society's Rules of Professional Conduct, rule 2.03(4), there are situations in which a lawyer may be entitled to reveal the confidence of a client to defend against allegations of criminal misconduct, claims of civil liability or allegations that the lawyer is "guilty of malpractice or misconduct". It seems to me that a lawyer facing a reprimand for making an untrue or misleading statement is facing an allegation of "misconduct". The Law Society's Rules of Professional Conduct define the terms upon which a lawyer's promise of confidentiality is made. They contain a general provision allowing for disclosure of confidential information where necessary to defend the lawyer's legal interests, and there is no reason that provision should not apply to an allegation of misconduct by the OSC.
34However, this exemption for the lawyer does not, in my view, allow the OSC to ignore the importance of solicitor- client privilege in the exercise of its enforcement powers. The OSC, like any other public body exercising statutory authority, must ensure on a case-by-case basis that the substantive legal right to solicitor-client privilege is respected. In my view, the OSC must exercise particular caution where it decides to proceed against both the lawyer and the lawyer's client. Such a situation creates an inherent danger that the lawyer will have to reveal the client's confidence in order to mount a full defence. The OSC should avoid creating a dynamic where the lawyer is placed in the dilemma of either forgoing the right to defend his or her own interests or harming the interests of the client by disclosing privileged information. In such a case, it may well be that the OSC will have to decide to forgo proceeding against the lawyer or, at a minimum, ensure that adequate steps are taken to ensure that the proceedings are conducted in a fashion that fully respects the procedural rights of the lawyer and the substantive legal rights of the client. Failure to do so could well result in a situation where it would not be in the public interest to continue the proceedings against both the lawyer and the client.
35I hasten to add that as the application for judicial review amounted to a pre-emptive strike against the OSC's intended hearing, there is nothing in the record as it now stands to indicate either that Wilder will argue the need to reveal privileged information in his own defence or, if that be the case, how the OSC will protect the client's interest.
Conclusion
36For these reasons, I would dismiss the appeal with costs.
Appeal dismissed with costs.
