COURT OF APPEAL FOR ONTARIO

CITATION: Investment Industry Regulatory Organization of Canada v. Vitug, 2013 ONCA 636

DATE: 20131018

DOCKET: C56827

Weiler, Gillese and Lauwers JJ.A.

BETWEEN

The Investment Industry Regulatory Organization of Canada

Plaintiff (Respondent in Appeal)

and

Julius Caesar Phillip Vitug

Defendant (Appellant)

Alistair Crowley and Kate McGrann, for the appellant Julius Caesar Phillip Vitug

Christopher D. Bredt and Kristen Riess, for the respondent The Investment Industry Regulatory Organization of Canada

Heard and released orally: October 16, 2013

On appeal from the judgment of Justice Elizabeth M. Stewart of the Superior Court of Justice, dated February 28, 2013.

ENDORSEMENT

By The Court:

[1] The appellant, Vitug, is a former investment dealer who failed to pay a costs award made against him in disciplinary proceedings instituted by the respondent, Investment Industry Regulatory Organization of Canada[1], IIROC. The narrow issue on this appeal is whether IIROC is entitled to bring an action for breach of contract to enforce the costs award.

[2] In Investment Dealers Assn. of Canada v. Taub (2009) ONCA 628, at paras. 58-60, Feldman J.A. held that there was no legal impediment preventing the IDA[2] from imposing a fine on a former member who was found guilty of professional misconduct and enforcing payment by an action in breach of contract.

[3] On the appeal before us, the summary motions judge held, at paras. 28-29 of her reasons:

[28] The analysis employed by the Court of Appeal for Ontario in Investment Dealers Association of Canada v. Taub, likewise supports a conclusion that an IIROC costs order is enforceable as a matter of contract. In Taub, the Court expressed the view that an IIROC fine is enforceable against a [sic former] member unless it falls into the realm of the unconscionable. Even if an unconscionability test were required to be applied to a costs order, which I do not consider to be the case as the nature of a costs order is compensatory and punitive, I am of the view that the amount imposed by way of costs of this hearing and investigation is both fair and reasonable in light of the issues involved, their complexity and the length of the hearing.

[29] As is suggested by the decision in Taub, Vitug’s agreement to the terms of his registration includes a promise to pay any lawful costs awards made against him in disciplinary proceedings. This term is a contractually binding obligation that may be sued upon in a civil action. The absence of specific statutory authority in that regard does not serve to alter that conclusion.

[4] The appellant submits that this case is a step further than Taub and that the summary judgment judge erred in not taking into consideration s. 9 of the Recognition Order, which limits the purposes for which money collected as fines and settlements may be used. He submits that the costs award is akin to a fine and encompassed by s. 9.

[5] We disagree with this submission. The plain wording of section 9 is limited to fines and settlements. There is nothing in s. 9 of the Recognition Order that speaks to costs awards.

[6] We agree with the comments of the summary judgment judge and her analysis quoted above, as well as her conclusion at para. 36 of her reasons:

[36] In my opinion, it is evident that Vitug submitted to the rules of this regulatory scheme of which he was a member. He went through a fair and legitimate disciplinary proceeding and was found guilty of having breached IIROC’s rules for its proper conduct of its members. The very reasonable order for costs pursuant to the IIROC’s rules made by the Hearing Panel, which represent only a fraction of IIROC’s actual costs of this investigation and prosecution, which I am satisfied it has incurred, must therefore be paid by him. The bringing of an action by IIROC to recover those costs, framed as an action for breach of contract, is both appropriate and available in view of the contractual terms which govern Vitug’s membership.

[7] The respondent is entitled to the costs of the appeal fixed in the amount of $23,014.26 inclusive of disbursements and all applicable taxes.

“K.M. Weiler J.A.”

“E.E. Gillese J.A.”

“P. Lauwers J.A.”

[^1]: Pursuant to a Recognition Order, IIROC carries out regulatory functions delegated to it by the Ontario Securities Commission in its capacity as a self-regulatory organization under the Securities Act (Ontario),R.S.O. 1990, c.S.5. However, the legal relationship between IIROC and its members, of whom the appellant was one, has been characterized by the courts in Ontario as contractual. As such, disciplinary proceedings are conducted on the basis that they are not governed by the Statutory Powers Procedures Act, R.S.O. 1990, c. S.22.

[^2]: The IDA later combined with Market Regulation Services Inc. into IIROC, and was recognized as the body for complaint handling, investigations and disciplinary actions.