R. v. Rankin, 2007 ONCA 127
COURT OF APPEAL FOR ONTARIO
GILLESE J.A. (In Chambers)
B E T W E E N :
HER MAJESTY THE QUEEN
Michael Code and Kelley M. McKinnon
for the moving party,
(Moving Party)
the Ontario Securities Commission
- and -
ANDREW RANKIN
Brian H. Greenspan and Joanne K. Stuart
for the responding party
(Responding Party)
Heard: February 2, 2007
On a motion for leave to appeal, under s. 131 of the Provincial Offences Act, the judgment of Justice Ian V. B. Norderheimer of the Superior Court of Justice dated November 9, 2006, with reasons reported at 2006 49283 (ON SC), [2006] O.J. No. 4579, allowing an appeal from the convictions entered by Justice Ramez Khawly of the Ontario Court of Justice on July 15, 2005, with reasons reported at [2005] O.J. No. 3202.
GILLESE J.A.:
1Andrew Rankin was charged with ten counts of insider trading and ten counts of tipping contrary to s. 76 of the Securities Act, R.S.O. 1990, c. S.5. He pleaded not guilty.
2After a lengthy trial, he was convicted of all ten counts of tipping and found not guilty in respect of the ten counts of insider trading. He was sentenced to six months imprisonment on each tipping count, to be served concurrently.
3Mr. Rankin appealed both his convictions and sentence. The Ontario Securities Commission (the “OSC”) appealed the sentence.
4The appeal was heard by Nordheimer J. of the Superior Court of Justice (the “Provincial Offences Act Appeal”). On November 9, 2006, the appeal court judge issued a judgment in which he allowed the convictions appeal, set aside the convictions and ordered a new trial (the “Judgment”).
5The OSC brings a motion for leave to appeal the Judgment. For the reasons that follow, I would refuse to grant leave to appeal.
BACKGROUND
6Mr. Rankin was a managing director in the mergers and acquisitions group at RBC Dominion Securities (“DS”). In this role, he advised various reporting issuers on confidential transactions. He was responsible also for staffing DS’s transactions. He received information about deals as they arose so that he could assign staff members appropriately. He had considerable access to undisclosed information about several reporting issuers.
7Mr. Rankin came to the attention of the OSC as a result of suspicious trades made by Daniel Duic, Mr. Rankin’s long-time close friend. The charges relate to ten such trades completed by Mr. Duic, all of which involved the purchase and sale of shares of reporting issuers. In each case, the reporting issuer had been engaged in a transaction on which DS was advising one of the parties. In all ten trades, Mr. Duic purchased shares shortly before material information was publicly disclosed, and then sold the shares shortly after disclosure occurred. In total, Mr. Duic earned approximately $4.5 million from the ten trades.
8After Mr. Duic completed one particularly high volume transaction, the OSC began an investigation. It seized some of Mr. Duic’s offshore bank accounts. Mr. Duic then entered into a settlement agreement with the OSC, under the terms of which he identified Mr. Rankin and other individuals as the sources of his tips and agreed to testify against them in any future proceedings.
THE TRIAL
9The prosecution took a two-pronged approach at trial. The first prong consisted of extensive documentary evidence demonstrating the pattern of Mr. Duic’s trades. The second was Mr. Duic’s testimony.
10The trial judge found the documentary proof establishing that Mr. Duic had been tipped was “compelling and undeniable”. However, it did not establish who had tipped Mr. Duic. In that regard, the trial judge described the circumstantial case against Mr. Rankin as one that “lacks lift”. He was not convinced that it was a reasonable inference that Mr. Rankin had tipped Mr. Duic, noting that many other people had access to the information in question.
11The defence conceded that Mr. Duic had acted on the basis of tips but argued that Mr. Rankin was not the tipper. Thus, the central issue at trial was whether it was Mr. Rankin who had tipped Mr. Duic. Mr. Rankin testified that he had not provided tips; Mr. Duic testified that he had.
12Credibility was a critical matter for the trial judge to decide.
13The trial judge found that Mr. Rankin’s evidence was not believable and failed to raise a reasonable doubt as to his guilt. In particular, he found suspicious Mr. Rankin’s acceptance of expensive trips and money from Mr. Duic and noted, with scepticism, Mr. Rankin’s refusal to concede that he knew much of anything in respect of the transactions in question.
14He accepted Mr. Duic’s evidence despite the fact that Mr. Duic was the “only one to have benefited handsomely from the transgression”. He found that Mr. Duic could not recall how he got the information for most of the deals because Mr. Duic’s focus, at the relevant times, had been on obtaining the information. The trial judge stated that this problem with Mr. Duic’s testimony did not matter because he had concluded that Mr. Rankin had voluntarily passed on the material information.
15In finding Mr. Rankin guilty of ten counts of tipping, the trial judge made global findings of fact; no specific findings were made regarding the circumstances of any individual tip.
16The trial judge found that there was no evidence proving either that Mr. Rankin knew that Mr. Duic was engaged in insider trading on the basis of the tips he provided or that Mr. Rankin engaged in improper trading on his own. Consequently, he acquitted Mr. Rankin on the insider trading charges.
THE PROVINCIAL OFFENCES ACT APPEAL
17The appeal court judge overturned Mr. Rankin’s convictions on the grounds that the trial judge failed to: (1) properly assess Mr. Duic’s credibility and give sufficient reasons for his conclusion in that regard; and (2) either consider each tipping count separately or explain why evidence of each count was admissible as similar act evidence in relation to the other counts. A brief elaboration of each of these grounds follows.
Inadequate assessment of Mr. Duic’s credibility
18The appeal court judge noted that the trial judge must have accepted Mr. Duic’s evidence because he found that the rest of the trial evidence was not sufficient to sustain a conviction. However, the appeal court judge found the trial judge’s assessment of Mr. Duic’s credibility to be wholly inadequate. He also found that the trial judge gave an inadequate explanation for accepting Mr. Duic’s evidence.
19The trial judge’s findings reveal the following. Mr. Duic was a highly unreliable witness. He was a cheat. He would not necessarily tell the truth. He admitted that he engaged in illegal activity (trading on inside information) from which he realized a substantial profit. He made a favourable deal with the prosecution that permitted him to retain a significant portion of his illegitimate profits but which required him to identify a tipper. He tailored the evidence that he gave to the OSC. He provided conflicting evidence under oath on critical details regarding his dealings with Mr. Rankin – when he tried to recall how he got the information from Mr. Rankin, he “failed to get it right”.
20In light of these factors, the appeal court judge held that the trial judge was obliged to approach Mr. Duic’s evidence with a high degree of caution or, at least, subject it to a rigorous examination. He was obliged, as well, to seek out independent evidence to confirm Mr. Duic’s allegations.
21The appeal court judge viewed the trial judge as having done neither. Paragraphs 38, 42 and 44 of the reasons of the appeal court judge summarize his determinations in those regards.
[38] Given all of these factors, there was every reason for the trial judge to approach Daniel Duic’s evidence with a high degree of caution and to seek out, from the rest of the evidence proferred, as much other independent evidence to confirm Mr. Duic’s allegations as could be found.
[42] I appreciate that the statement by the trial judge that “I don’t necessarily take that position” does not amount to a clear-cut rejection of the need to look for evidence that might confirm aspects of Mr. Duic’s evidence. There is no doubt that there is always a risk in dissecting any judge’s reasons too finely. Nonetheless, the fact remains that, if the trial judge did accept that there was a need to find confirmatory evidence before reaching a favourable conclusion regarding Mr. Duic’s reliability, he does not subsequently identify any such evidence before reaching his ultimate conclusion that Mr. Duic’s evidence provided the necessary basis upon which findings of guilt beyond a reasonable doubt could be made.
[44] Of all of these problems regarding Mr. Duic’s veracity as a witness, the trial judge only explained why one of them did not trouble him and that is the last one, the fact that Mr. Duic could not correctly recall the details of how he got the information from Mr. Rankin. The trial judge excused Mr. Duic’s failings in this respect by saying that Mr. Duic’s focus was on getting the information and that the when and where of how that happened did not matter. The trial judge then went on to say “Nor does it matter for our purposes”. With respect, I do not see how the trial judge could have properly reached that conclusion. The reliability of Mr. Duic’s evidence as to when and where he received the information from Mr. Rankin was an essential way of determining the overall reliability of his allegations.
Failure to consider each tipping count
22The appeal court judge noted the trial judge’s failure to consider each of the ten counts of tipping independently to determine whether Mr. Rankin’s guilt had been proven beyond a reasonable doubt. He held that as the trial judge made no express finding that the evidence of each count was admissible as similar act evidence in relation to each other count, the trial judge was obligated to consider each count independently.
23From the reasons of the appeal court judge, it appears that in making this determination, he was responding, at least in part, to a submission of the OSC. He wrote this, at para. 65 of the reasons:
[65] The OSC fairly concedes that the trial judge’s global approach to the ten counts would appear, on the surface, to be improper. That concession was subject to an important exception, however. The OSC submitted that the trial judge was justified in dealing with the ten counts as a whole if he was satisfied that the evidence on each of the counts could be used as evidence on all of the other counts on the basis of similar act evidence.
24At para. 73 of the reasons, the appeal court judge summarized his conclusion on this matter as follows:
[73] Absent that careful analysis, and a clear and definitive conclusion that similar act evidence was admissible, the trial judge was obliged to consider each count individually. Contrary to the OSC’s submission, I do not agree that “the verdicts withstand scrutiny on each individual count”. Given the numerous inconsistencies in Mr. Duic’s evidence, and the other possible ways in which Mr. Duic could have obtained inside information at different times regarding different transactions, the proper verdict on each count is far from certain. The trial judge’s failure to undertake a count by count analysis is an error of law.
THE TEST
25Sections 131(1) and (2) of the Provincial Offences Act, R.S.O. 1990, c. P.33, set out the test for determining whether leave to appeal the Judgment should be granted:
131.(1) A defendant or the prosecutor or the Attorney General by way of intervention may appeal from the judgment of the court to the Court of Appeal, with leave of a judge of the Court of Appeal on special grounds, upon any question of law alone or as to sentence.
(2) No leave to appeal shall be granted under subsection (1) unless the judge of the Court of Appeal considers that in the particular circumstances of the case it is essential in the public interest or for the due administration of justice that leave be granted.
ANALYSIS
26Provincial offences appeal judgments are intended to be final. The jurisprudence of this court is clear: leave should be granted under s. 131 only in exceptional cases raising issues of broad public importance. Justice Carthy explained in R. v. Zakarow (1990), 1990 6991 (ON CA), 74 O.R. (2d) 621 at 625-6:
… [S. 131] of the Provincial Offences Act sets a very high threshold for granting leave to appeal. There must be special grounds on a question of law and it must be essential in the public interest or for the due administration of justice that leave be granted. No matter how wrong the judgment under appeal may be, these other criteria must be met. The section was clearly drafted to eliminate all but appeals on the most significant issues.1
27If leave to appeal is granted, the OSC will advance three grounds of appeal. These grounds are that the appeal court judge erred in: (1) substituting his view of the credibility of Mr. Duic for that of the trial judge; (2) misapplying the law regarding similar fact evidence; and, (3) misapplying the standard of review regarding a trial judge’s reasons.
28The OSC argues that the appeal it seeks leave to pursue is of extraordinary importance in securities regulation. It notes that the tipping provisions in the Securities Act are essential tools for maintaining the integrity of the capital markets and fostering investor confidence. As this case is the first tipping prosecution, it is of considerable interest and importance to both the investment industry and the public generally. Thus, the OSC argues, it is essential in the public interest and for the due administration of justice, that the grounds on which the appeal court judge reversed the trial judge be clarified so that future insider tipping prosecutions are conducted properly.
29Section 131(2) provides that leave is not to be granted unless, in the particular circumstances of the case, it is “essential in the public interest or for the due administration of justice”. In my view, that wording does not preclude granting leave in a case of considerable public importance even if the question of law raised is not new, novel or otherwise unsettled, so long as the resolution of the question is essential. Nonetheless, I would refuse to grant leave in this case.
30I begin with this observation. When considering whether a proposed appeal raises an issue of broad public importance, the focus is not on the subject matter of the appeal but on the questions of law to be resolved on appeal. Thus, the fact that insider tipping and the proper prosecution of tipping offences are important matters of public significance is not sufficient to warrant granting leave. Leave under s. 131 is to be granted only if the appeal raises questions of law on which this court’s guidance is essential in the public interest or for the due administration of justice. None of the proposed grounds of appeal raise such questions.
31Simply stated, the appeal court judge overturned the convictions on the basis of errors made by the trial judge in the application of well-established legal principles, none of which are specific to tipping. Consequently, the questions raised on the proposed appeal do not meet the very high threshold for leave in s. 131.
32There is no statutory interpretation issue raised on the proposed appeal. Unlike Ontario (Ministry of Labour) v. Hamilton (City of), 2002 16893 (ON CA), [2002] O.J. No. 283 (Ont. C.A.), where there were conflicting lower court judgments as to the proper application of the regulations under the Occupational Health and Safety Act, R.S.O. 1990, c. O.1, there is no conflicting jurisprudence in relation to insider tipping. This case is also unlike Memorial Gardens Ltd. v. Ontario (1991), 1991 7329 (ON CA), 2 O.R. (3d) 417 (C.A.), in which leave to appeal was granted because the trial judgment created uncertainty in relation to the meaning of certain provisions in the Business Practices Act, R.S.O. 1980, c. 55. The Judgment does not engender uncertainty in respect of the Securities Act.
33The first and third proposed grounds of appeal frequently arise in appeals; they are based on settled law. In addition, the reasonableness of the trial judge’s credibility findings, and the sufficiency of his reasons in that regard, are matters relevant only to the parties to this case. Thus, there is nothing in those grounds that raises a question on which this court’s guidance is required.
34In relation to the second ground, the appeal court judge identified, on the basis of settled legal principles, the key error of law made by the trial judge: his failure to consider the evidence on each count independently. The trial judge could not simply accept Mr. Duic’s evidence and then conclude that each of the ten tipping counts had been made out. Guilt or innocence had to be decided on a count-by-count basis. The evidence on each count was different and the trial judge had to consider the evidence that was admissible on each count to determine whether he was satisfied, beyond a reasonable doubt, that the elements of the offence had been made out in relation to that count.
35I accept that it was open to the trial judge to find that the global evidence about the ongoing relationship between Mssrs. Duic and Rankin became part of the evidentiary backdrop against which each count was to be considered. In that regard, the appeal court judge may have taken an unduly narrow approach to the admissibility and use that could be made of the evidence relating to that relationship. However, even if the appeal court judge was in error in saying that a strict similar act evidence analysis was required, the appropriate handling of that evidence raises no new question of law. Further, in light of the appeal court judge’s conclusion in respect of Mr. Duic’s credibility, a new trial is required in any event.
36Finally, I see nothing in the appeal court decision that would have a negative effect on the OSC’s ability to prosecute tipping, either against Mr. Rankin or more generally. Although the OSC may have suffered negative publicity as a result of the first tipping convictions being overturned, I do not see the Judgment as creating new or additional legal impediments to such prosecutions.
DISPOSITION
37Accordingly, the motion is dismissed and leave to appeal the Judgment is refused.
RELEASED: February 27, 2007 (“EEG”)
“E. E. Gillese J.A.”
Footnotes
- See also R. v. Krukowski (1991), 1991 7305 (ON CA), 2 O.R. (3d) 155 (C.A.) to the same effect. Zakarow and Krukowski were decided pursuant to the predecessor to s. 131: Provincial Offences Act, R.S.O. 1980, c. 400, as am. by S.O. 1984, c. 11, s. 114. This provision was identical in all relevant respects to the current s. 131.