Vitug v. Ontario Securities Commission, 2010 ONSC 4464
CITATION: Vitug v. Ontario Securities Commission, 2010 ONSC 4464
DIVISIONAL COURT FILE NO.: 250/10
DATE: 20100812
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. WILSON, SWINTON AND NORDHEIMER JJ.
BETWEEN:
JULIUS CAESAR PHILLIP VITUG Appellant
– and –
THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA Respondent
- and –
ONTARIO SECURITIES COMMISSION Respondent
Alistair Crawley, Jocelyn Loosemore and Clarke Tedesco, for the Appellant
Natalija Popovic, Tamara Brooks and Milton Chan, for the Respondent, Investment Industry Regulatory Organization of Canada
Jonathon Feasby, for the Respondent, Ontario Securities Commission
HEARD at Toronto: August 12, 2010
ORAL REASONS FOR JUDGMENT
NORDHEIMER J. (ORALLY)
[1] This is an appeal by Julius Vitug from the decision of the Ontario Securities Commission dated April 23, 2010 in which the Commission dismissed the Appellant’s application for a review of the decision of a Hearing Panel of the Ontario District Council of the Investment Industry Regulatory Organization of Canada (“IIROC”). In that decision, the District Council found that the Appellant had engaged in business conduct or practice that was unbecoming or detrimental to the public interest in violation of IIROC’s by-law 29.1 in that he had undisclosed financial interest and undisclosed financial dealings in accounts, including accounts held at another member firm, of two of his clients. The two clients referred to were the Appellant’s aunt and father-in-law. The penalty imposed by the District Council was a permanent ban on Mr. Vitug being registered in any capacity under IIROC’s rules, a fine of $350,000 and a costs order of $80,000. The consequence of the ban, if upheld, would be the termination of the Appellant’s career as an investment advisor.
[2] The first issue that we address is the standard of review. In our view, with respect to the merits and the penalty, the standard is one of reasonableness. In considering the decision reached by IIROC, the Commission is engaged in an exercise that is at the core of its specialized expertise. In particular, the Commission is uniquely placed to determine what conduct, by persons engaged in the securities industry such as investment advisors, would be detrimental to the public interest.
[3] On the other hand, on questions of procedural fairness, including the adequacy of reasons, the Commission must be correct in its determination that IIROC met its obligations in those respects.
[4] The Appellant raises a number of issues regarding the decision of the District Council. These issues mirror the arguments made and dismissed by the Commission. To begin, the Appellant asserts that he was denied procedural fairness because he did not receive notice that IIROC was going to submit that his conduct was deceitful and involved a conflict of interest. We agree with the Commission that IIROC was not required to particularize that such findings might be sought, or result, from the hearing. We adopt the point made by the District Council that, given the nature of the complaint against the Appellant, any such characterizations of the Appellant’s conduct were a consequence that might flow, naturally and inevitably, from the findings of fact regarding the specifics of that conduct.
[5] The allegation of conduct that is unbecoming or detrimental to the public interest covers a broad spectrum of possible conduct. The proper characterizations of that conduct can ultimately only be determined once the relevant facts are found. It is unnecessary, and indeed inappropriate, to try and predetermine what characterizations should be made. What is necessary, for the person who is subject to the allegation, to know in order to respond to the allegation is not how his or her conduct will ultimately by characterized but rather what facts are being relied upon to sustain the allegation. Those facts were set out in detail in the Notice of Hearing. Consequently, we fail to see any prejudice occasioned to the Appellant that arises from the circumstances of this case. Given the details provided in the Notice of Hearing, the Appellant had to be aware that, depending on what factual findings were made, there was a distinct possibility that his actions might fairly be portrayed in the fashion that they were.
[6] The Appellant also asserts that the District Council did not give adequate reasons for its decision. We see no merit in this assertion. As correctly noted by the Commission, this was not a complicated case. The original hearing took three days and almost entirely involved documentary evidence. The Appellant did not give evidence or call any witnesses. Contrary to the Appellant’s submissions, we conclude that the District Council gave sufficient reasons in support of its decision. It referred in detail to the various activities that took place in the two accounts and the lack of any reasonable explanation for those activities that might suggest that the Appellant had no interest or involvement in them. We mention, by way of one notable example, that the account for the Appellant’s aunt (who worked as a nurse’s aide earning between $25,000 and $50,000) had transactions involving hundreds of thousands of dollars go through it with no apparent benefit to her.
[7] The purpose of reasons is outlined in R. v. R.E.M., 2008 SCC 51, [2008] 3 S.C.R. 3 where McLachlin C.J.C. said, at para. 25:
The functional approach advocated in Sheppard suggests that what is required are reasons sufficient to perform the functions reasons serve – to inform the parties of the basis of the verdict, to provide public accountability and to permit meaningful appeal.
[8] In our view, the reasons of the District Council fulfilled each of those functions. Indeed, the Appellant’s challenge to the adequacy of the reasons invokes the concern that was identified in Law Society of Upper Canada v. Neinstein (2010), 2010 ONCA 193, 99 O.R. (3d) 1 (C.A.) where Doherty J.A. said, at para. 4:
I am dubious about the merits of arguments claiming that reasons for judgment are inadequate. Experience teaches that many of those arguments are, in reality, arguments about the merits of the fact-finding made in those reasons. By framing the argument in terms of the adequacy of the reasons, rather than the correctness of the fact finding, an appellant presumably hopes to avoid the stringent standard of review applicable to findings of fact.
[9] The Appellant also contends that the District Council made “palpable and overriding errors” in its treatment of the evidence. With two exceptions, we find no merit in this contention. The mere fact that the District Council drew conclusions from the evidence with which the Appellant disagrees does not amount to error. By way of example, the District Council was not required to accept the affidavit evidence of the father-in-law just because it was not directly contradicted by other evidence. It was entitled to consider the contents of that affidavit in light of the other available evidence and to draw reasonable inferences from the evidence as a whole.
[10] Similarly, the District Council’s conclusion that there was insufficient evidence of a loan between Mr. Vitug and Mr. DeFrancesco is amply supported on the evidence, especially given that Mr. Vitug was unable to specify why the monies were loaned, could not produce evidence of the actual advance of any monies approaching the total monies allegedly loaned and could not produce full documentation regarding the alleged promissory notes given in return. We also agree with the District Council’s alternative conclusion that, even if there was a loan, Mr. Vitug still had a financial interest in the activities in his aunt’s account.
[11] The two exceptions are, first, the District Council’s finding that a signature of the aunt on an application form was not the genuine signature of the aunt. We agree that there was an insufficient evidentiary basis to permit the District Council to make that finding. The second was the fact that Mr. Vitug witnessed the aunt’s signature on the new account application form. However, we are not satisfied that either of these errors played any role in the ultimate conclusions reached by the District Council so the errors do not affect the reasonableness of the decision reached.
[12] The District Council reasonably concluded on the evidence that the Appellant, not his aunt or his father-in-law, controlled the two accounts and had a financial interest in them. The Appellant admitted that he did not advise either of the firms for which he worked, first TD Waterhouse and then Blackmont Capital, of his involvement in these two accounts, notwithstanding that the policies of both of those companies required such disclosure. The Appellant’s contention that he was unaware of his disclosure obligations in this regard was quite properly rejected by the District Council given the Appellant’s experience in the industry. Given the admission, given the rules applicable to the Appellant in terms of his dealings with these accounts and given the nature of the activities reflected in these accounts, the District Council concluded that the Appellant had failed to conduct himself in accordance with applicable industry standards. The District Council also concluded that the Appellant had placed himself in a position of conflict of interest regarding his obligations to his other clients and that he had concealed his involvement in these accounts. Both of those conclusions were reasonably available on the evidence.
[13] Finally, the Appellant complains that the Commission failed in its role by not engaging in a detailed independent review of the findings of the District Council. We do not accept that the Commission was required to do so. The Commission adopted an approach, as it has in the past, of providing a measure of deference to the decisions of self-regulatory organizations such as the District Council. The Commission fairly and reasonably concluded that, notwithstanding its broad powers of review, such organizations are entitled to that measure of deference given that they are “uniquely positioned to hear the facts and decide a case based on their expertise”. Nonetheless, the Commission recognized that there are situations where it will be required to intervene in decisions of self-regulatory organizations. It set out five general categories of cases where it will do so. The Commission properly concluded that this case did not fall within any of those categories.
[14] The appeal is therefore dismissed.
NORDHEIMER J.
J. WILSON J.
SWINTON J.
Date of Reasons for Judgment: August 12, 2010
Date of Release: August 19, 2010
CITATION: Vitug v. Ontario Securities Commission, 2010 ONSC 4464
DIVISIONAL COURT FILE NO.: 250/10
DATE: 20100812
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. WILSON, SWINTON AND NORDHEIMER JJ.
BETWEEN:
JULIUS CAESAR PHILLIP VITUG Appellant
– and –
THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA Respondent
ONTARIO SECURITIES COMMISSION Respondent
ORAL REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Reasons for Judgment: August 12, 2010
Date of Release: August 19, 2010