Rankin v. Ontario Securities Commission

[Rankin v. Ontario Securities Commission]

Ontario Reports

Ontario Superior Court of Justice,

Divisional Court,

M. Brown R.S.J., Matlow and Swinton JJ.

January 11, 2013

113 O.R. (3d) 481 | 2013 ONSC 112

Case Summary

Securities regulation — Administrative proceedings — Settlement — Setting aside — Bias — Appellant and Ontario Securities Commission staff entering into settlement agreement in administrative proceeding and Securities Act charges against appellant withdrawn — Staff not disclosing to appellant during settlement negotiations that witness who had testified against him at his first trial on Securities Act charges was under investigation for breach of cease trade order — Appellant applying unsuccessfully under s. 144 of Securities Act to set aside settlement agreement — Appellant's appeal dismissed — Participation of same member in s. 144 hearing and witness' sanction hearing for breach of cease trade order not giving rise to apprehension of bias — Securities Act, R.S.O. 1990, c. S.5, s. 144.

Securities regulation — Administrative proceedings — Settlement — Setting aside — Disclosure — Appellant and Ontario Securities Commission staff entering into settlement agreement in administrative proceeding and Securities Act charges against appellant withdrawn — Staff not disclosing to appellant during settlement negotiations that witness who had testified against him at his first trial on Securities Act charges was under investigation for breach of cease trade order — Appellant applying unsuccessfully to set aside order approving settlement — Appellant's appeal dismissed — Commission properly asking itself whether it was likely that undisclosed information would likely have affected outcome of administrative proceeding and reasonably concluding that it was not — Criminal law principles regarding withdrawing guilty plea or setting aside conviction on basis of non-disclosure not applicable to administrative proceeding.

Securities regulation — Administrative proceedings — Standard of review — Ontario Securities Commission dismissing application under s. 144 of Securities Act to set aside order approving settlement of administrative proceeding — Standard of review of that decision being reasonableness — Securities Act, R.S.O. 1990, c. S.5, s. 144.

The appellant was charged with insider trading and tipping. It was alleged that he gave confidential information to D and that D used that information in purchasing securities. D admitted insider trading and reached a settlement agreement with Ontario Securities Commission staff. The sanctions imposed included an order that he cease trading permanently in Ontario. D was a key witness at the appellant's trial. The appellant was acquitted of insider trading and convicted of tipping. Commission staff commenced an administrative proceeding in order to determine whether it was in the public interest to make orders against the appellant under ss. 127 and 127.1 of the Securities Act. The appellant's conviction was overturned and a new trial was ordered, largely because of deficiencies in the trial judge's reasons concerning D's credibility. The appellant entered into a settlement agreement with staff regarding the administrative proceeding. As a result, the quasi-criminal charges were withdrawn. The settlement agreement was approved by the commission. The appellant subsequently learned that D had been under investigation for a breach of the cease [page482] trade order while the settlement negotiations were taking place. (D's breach of the cease trade order was ultimately found to be merely technical.) The appellant brought an application pursuant to s. 144 of the Act to set aside the settlement agreement because of non-disclosure of material information. The application was dismissed. The appellant appealed, renewing his argument based on non-disclosure and also arguing that there was bias because of the participation of a member of the commission in both the s. 144 hearing and D's sanction hearing for the breach of the cease trade order.

Held, the appeal should be dismissed.

Per Swinton J. (M. Brown R.S.J. concurring): The appropriate standard of review was reasonableness.

Criminal law principles on withdrawing a guilty plea or setting aside a conviction on the basis of non-disclosure were not applicable in the context of administrative proceedings by the commission. The commission's task was to determine whether it was in the public interest to set aside the settlement agreement that resolved an administrative proceeding. The commission asked itself whether facts unknown or subsequent facts would likely have affected the outcome of the administrative proceedings, had they been known at the time of the settlement. They approached the question from the perspective of a reasonable person, and concluded that the information about the D investigation, his breach of the cease trade order and subsequent sanction would not have had an impact on the appellant's settlement, if known at the time the settlement was entered into. That conclusion was reasonable. The commission was not required to adopt the test from the criminal context, and ask itself whether there was a "reasonable possibility" that the undisclosed information, if disclosed, would have caused the appellant not to enter into the settlement agreement. The commission reasonably exercised its discretion and rejected the s. 144 application because to set aside the settlement agreement was not in the public interest.

The participation of the same member in the s. 144 application and D's sanction hearing for breach of the cease trade order did not give rise to a reasonable apprehension of bias.

Per Matlow J. (dissenting): The appropriate standard of review for the determinations of an issue of law of broad application made by the commission was correctness, not reasonableness.

The settlement agreement was the near equivalent of an agreement to plead guilty in a criminal or quasi-criminal case. Before the appellant's agreement to the settlement could become binding on him, it was essential that his agreement be an informed agreement. That required the commission staff to inform him about all matters known to them that could be relevant to his decision whether or not to agree to the settlement. The appellant's submissions to the commission demonstrated that he had reasonable grounds to claim that the commission staff had not satisfied their legal obligation to provide full disclosure to him. As a result, the appellant's decision to agree to the settlement was not an informed one. The commission should have asked whether there was a reasonable possibility that the non-disclosure affected the appellant's decision to agree to the settlement. The difference between a reasonable possibility test and one based on the likelihood of a future event is significant. By failing to apply the proper test, the commission fell into irreparable error and the order in appeal did not meet the required standard of correctness. [page483]

Cases referred to

R. v. Dixon, 1998 805 (SCC), [1998] 1 S.C.R. 244, [1998] S.C.J. No. 17, 222 N.R. 243, J.E. 98-460, 166 N.S.R. (2d) 241, 122 C.C.C. (3d) 1, 13 C.R. (5th) 217, 50 C.R.R. (2d) 108, 37 W.C.B. (2d) 204; R. v. Taillefer, [2003] 3 S.C.R. 307, [2003] S.C.J. No. 75, 2003 SCC 70, 233 D.L.R. (4th) 227, 313 N.R. 1, J.E. 2004-84, 179 C.C.C. (3d) 353, 17 C.R. (6th) 57, 114 C.R.R. (2d) 60, 61 W.C.B. (2d) 432, not folld

Other cases referred to

Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, 2011 SCC 61, 2011EXP-3798, J.E. 2011-2083, 424 N.R. 70, 339 D.L.R. (4th) 428, 208 A.C.W.S. (3d) 434, 28 Admin. L.R. (5th) 177, 52 Alta. L.R. (5th) 1, [2012] 2 W.W.R. 434, 519 A.R. 1; Canadian College of Business and Computers Inc. v. Ontario (Private Career Colleges Act, Superintendent), [2010] O.J. No. 5435, 2010 ONCA 856, 272 O.A.C. 177, 17 Admin. L.R. (5th) 245; Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65, D.T.E. 2008T-223; Pezim v. British Columbia (Superintedent of Brokers), 1994 103 (SCC), [1994] 2 S.C.R. 557, [1994] S.C.J. No. 58, 114 D.L.R. (4th) 385, 168 N.R. 321, [1994] 7 W.W.R. 1, J.E. 94-1082, 46 B.C.A.C. 1, 92 B.C.L.R. (2d) 145, 22 Admin. L.R. (2d) 1, 14 B.L.R. (2d) 217, 4 C.C.L.S. 117, 48 A.C.W.S. (3d) 1279; R. v. Rankin, 2006 49283 (ON SC), [2006] O.J. No. 4579, 42 C.R. (6th) 297, 73 W.C.B. (2d) 130 (S.C.J.); Rankin (Re), 2011 LNONOSC 887, 34 OSCB 11797, 39 Admin. L.R. (5th) 77; Rankin (Re), 2008 ONSEC 6, 2008 LNONOSC 175, 31 OSCB 3303; Rankin (Re), September 29, 2008 (O.S.C.); Stetler v. Agriculture, Food and Rural Affairs Appeal Tribunal (2005), 2005 24217 (ON CA), 76 O.R. (3d) 321, [2005] O.J. No. 2817, 200 O.A.C. 209, 36 Admin. L.R. (4th) 212, 141 A.C.W.S. (3d) 157 (C.A.)

Statutes referred to

Criminal Code, R.S.C. 1985, c. C-46, s. 683(1)

Provincial Offences Act, R.S.O. 1990, c. P.33, s. 117 [as am.]

Securities Act, R.S.O. 1990, c. S.5, ss. 1.1, 76(1), (2), 127, 127.1, 129.1 [as am.], 144, (1)

APPEAL from a decision of the Ontario Securities Commission dismissing an application to set aside an order of the Commission approving a settlement.

James Lockyer and Richard Posner, for appellant.

Scott Fenton and Amy Ohler, for respondent.

SWINTON J. (M. BROWN R.S.J. concurring): —

Overview

[1] The appellant, Andrew Rankin, appeals the decision of the Ontario Securities Commission (the "Commission") dated November 21, 2011 [2011 LNONOSC 887, 34 OSCB 11797] dismissing his application to set aside an earlier order of the Commission approving a settlement he had made with the staff of the Commission. The appellant argues that the earlier order should have been set aside because of non-disclosure of material [page484] information by Commission staff prior to the settlement. He also argues that there was bias because of the participation of one member of the Commission in the revocation hearing.

[2] For the reasons that follow, I would dismiss the appeal on the grounds that the decision of the Commission was a reasonable one, and there was no evidence to support a finding of bias.

Factual Background

[3] The appellant was a managing director in the Mergers and Acquisitions Department of RBC Dominion Securities Inc. On February 2, 2004, he was charged with ten counts of insider trading and ten counts of tipping under s. 76(1) and (2) of the Securities Act, R.S.O. 1990, c. S.5 (the "Act"). It was alleged that he had given confidential information to Daniel Duic, an individual with whom he had had a close personal relationship since secondary school, and that Mr. Duic used this information in purchasing securities.

[4] Mr. Duic admitted insider trading and reached a settlement agreement with the staff that was approved by the Commission on March 3, 2004. The sanctions imposed included an order that Mr. Duic cease trading permanently in Ontario (the "cease trade order"), with the exception that he could trade mutual funds through a registered dealer for the account of his registered retirement savings plan.

[5] The charges against the appellant were tried between May 2 and June 15, 2005. Mr. Duic was a key witness in the staff's case. On July 15, 2005, the appellant was found guilty of ten counts of tipping, but not guilty of ten counts of insider trading, and he was sentenced to six months' imprisonment. In the course of his reasons, the trial judge rejected the appellant's evidence and accepted Mr. Duic's evidence.

[6] In December 2005, the Commission staff commenced an administrative proceeding in order to determine whether it was in the public interest to make orders against the appellant under ss. 127 and 127.1 of the Act.

[7] On November 9, 2006, the appellant's conviction was overturned by Nordheimer J. of the Superior Court of Justice, and a new trial was ordered, largely because of deficiencies in the trial judge's reasons concerning the credibility of Mr. Duic (R. v. Rankin, 2006 49283 (ON SC), [2006] O.J. No. 4579, 42 C.R. (6th) 297 (S.C.J.)).

[8] The re-trial was scheduled to begin on February 18, 2008. In October 2007, the appellant, through his then counsel, entered into negotiations with staff to see if there could be a resolution of both the quasi-criminal and administrative proceedings. A settlement agreement regarding the administrative proceeding was [page485] reached on February 19, 2008. As a result of the agreement, the quasi-criminal charges were withdrawn.

[9] In the settlement agreement, the appellant admitted his guilt with respect to "tipping" under s. 76(2) of the Act by allowing Mr. Duic unsupervised access to his home and permitting access to confidential material. The appellant agreed to sanctions that included a lifetime ban on registering under Ontario securities law and on becoming a director or officer of any registrant or reporting issuer, a ten-year prohibition against trading in securities (with exceptions for mutual and exchange traded funds) and the payment of costs in the amount of $250,000.

[10] The settlement agreement was approved by the Commission on February 21, 2008, with reasons released on March 17, 2008 2008 ONSEC 6, [2008 LNONOSC 175, 31 OSCB 3303]. In its reasons, the Commission noted that the appellant acknowledged his breach of s. 76(2) of the Act, and that his lawyer had acknowledged that the appellant's conduct included oral communications to Mr. Duic. In the view of the Commission, the appellant's behaviour was both illegal and unacceptable for an individual of his seniority and in his position of trust. It concluded that this was "an egregious case that warrants significant sanctions".

[11] In August 2008, the appellant learned that Mr. Duic had been under investigation in late 2007 for a breach of the cease trade order that had been part of Mr. Duic's settlement agreement. It turns out that in December 2007, during the settlement negotiations concerning the appellant, staff had orally informed the appellant's counsel that Mr. Duic was under investigation for a "possible technical breach" of the 2004 cease trade order, but there was no evidence of insider trading. The appellant maintains he was never informed of this communication by his counsel.

[12] Mr. Duic had been trading in equity securities on American exchanges through his accounts in Toronto. Prior to engaging in the trading, he had obtained legal advice that the cease trade order did not prevent him from trading in securities listed on a U.S. exchange.

[13] Mr. Duic was interviewed by staff on December 14, 2007 and January 25, 2008. In August 2008, staff issued a statement of allegations alleging a breach of the cease trade order. Mr. Duic entered into an agreed statement of facts with staff for purposes of a sanctions hearing before the Commission, which was held on August 18, 2008.

[14] In a decision dated September 29, 2008, the Commission found that Mr. Duic's breach of the order was serious and deserving of sanction. However, there were mitigating factors in [page486] Mr. Duic's favour, as he had relied on legal advice, and he believed in good faith that he had been acting in compliance with the cease trade order. The Commission concluded that Mr. Duic did not intentionally or knowingly breach the order, but he was in breach because acts in furtherance of the trades occurred in Ontario. Had those trades occurred wholly in the U.S., there would have been no breach. As a result, the Commission imposed a sanction, making orders that included a reprimand, an administrative penalty of $25,000 and costs of $15,000.

The Commission's S. 144 Decision

[15] On September 15, 2010, the appellant brought an application pursuant to s. 144 of the Act, which permits the Commission to revoke or vary a decision:

144(1) The Commission may make an order revoking or varying a decision of the Commission, on the application of the Executive Director or a person or a company affected by the decision, if in the Commission's opinion the order would not be prejudicial to the public interest.

[16] A hearing was held in May 2011, and the Commission released its reasons in November 2011, dismissing the application.

[17] In its reasons, the Commission examined its past jurisprudence and set out a number of principles to be applied in a s. 144 application, including the following (at para. 84):

(c) the Commission should revoke or vary a previous sanctions order where:

(i) there is manifest unfairness to a respondent; or

(ii) the facts and circumstances clearly demonstrate that the relevant sanctions order cannot be permitted to stand (such as in Re AiT);

(d) in determining whether to revoke or vary a sanctions order, we must consider all of the facts and circumstances; and

(e) the onus is on the applicant to show that the revocation or variation of the sanctions order is justified and not prejudicial to the public interest.

[18] The Commission then explained its task in the following words (at para. 85):

In our view, in determining whether there was manifest unfairness to Rankin, we should consider whether facts not known to Rankin, or subsequent events, make it reasonable to conclude that the outcome of the Rankin Administrative Proceeding would likely have been affected if those facts or events had been known (see paragraph 63 of these reasons for the test in Re Ultramar [(1991), 14 OSCB 5221]).

[19] The Commission determined that the appellant's agreement to the terms of his settlement agreement was "voluntary, unequivocal and informed" (reasons, at para. 95). It acknowledged staff's obligation to disclose relevant information to a [page487] respondent in a quasi-criminal or administrative proceeding, but found that the oral disclosure about the Duic investigation made to the appellant's counsel was sufficient.

[20] The Commission rejected the appellant's submission that he was deprived of "crucial information" regarding the Duic investigation prior to the settlement agreement. It characterized the Duic breach of the cease trade order as unintentional and concluded that this information would not have further substantially impaired Mr. Duic's credibility in the administrative or criminal proceedings. The Commission also concluded that the information would not likely have affected the outcome of the administrative proceeding.

[21] Finally, the Commission noted that granting the application would lead to a "perverse outcome", because new quasi-criminal charges or administrative proceedings were barred by the six-year limitation period in s. 129.1 of the Act.

[22] The Commission concluded that dismissing the application in the circumstances was not manifestly unfair to the appellant, while an order of revocation would be prejudicial to the public interest.

The Issues

[23] This appeal raises the following issues:

(1) What is the appropriate standard of review?

(2) Was the decision not to revoke the appellant's settlement agreement reasonable?

(3) Did the participation of Vice-Chair Turner give rise to an apprehension of bias?

Issue No. 1: What is the appropriate standard of review?

[24] The appellant submits that the standard of review is correctness, as he argues that the appeal raises a question of law of general importance to the legal system (see Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, at para. 60). More particularly, his counsel argues that the words "public interest" in s. 144 of the Act must be interpreted in the same manner as the words the "interests of justice" found in similar provisions governing the admission of fresh evidence in criminal proceedings (see s. 683(1) of the Criminal Code, R.S.C. 1985, c. C-46 and s. 117 of the Provincial Offences Act, R.S.O. 1990, c. P.33). He submits that the test should be the same in both the civil and the criminal context for the setting aside of a guilty plea. Therefore, as the Commission was applying a legal [page488] principle of general importance and in an area outside its specialized expertise, the standard of review is correctness.

[25] In determining the standard of review, it is important to consider the nature of the question before the administrative tribunal. Here, the Commission was not being asked to determine a motion for fresh evidence under the Criminal Code or the Provincial Offences Act, nor to set aside a guilty plea in a criminal proceeding. Rather, the appellant was asking the Commission to exercise the discretion conferred upon it by s. 144 of the Securities Act to set aside a settlement agreement pertaining to an administrative proceeding because it would be in the public interest to do so. The "public interest" is not defined in the Act, but the Commission is guided in its determination of the public interest by the purposes of the Act, set out in s. 1.1: "to provide protection to investors from unfair, improper or fraudulent practices" and "to foster fair and efficient capital markets and confidence in capital markets".

[26] The Supreme Court of Canada has made it clear that "[w] hen considering a decision of an administrative tribunal interpreting or applying its home statute, it should be presumed that the appropriate standard of review is reasonableness" (Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., 2011 SCC 61, [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, at para. 39). Moreover, the Commission is a specialized tribunal, with expertise in the regulation of capital markets, and it has been given a broad discretion to determine what is in the public interest (Pezim v. British Columbia (Superintendent of Brokers), 1994 103 (SCC), [1994] 2 S.C.R. 557, [1994] S.C.J. No. 58, at paras. 60 and 71).

[27] Given the nature of the question before the Commission, the regulatory framework and the specialized expertise of the Commission both in regulating capital markets and applying its public interest jurisdiction, the Commission is entitled to deference in its application of s. 144 of the Act. Accordingly, the standard of review of the decision is reasonableness.

Issue No. 2: Was the decision not to revoke the appellant's settlement agreement reasonable?

[28] The appellant argues that the Commission failed to meet its disclosure obligation, in that he was not informed that Mr. Duic was under investigation for a possible breach of a cease trading order nor given information about the content of the interviews with staff, in particular the second interview. He submitted that he would not have entered into the settlement agreement, had he had proper disclosure, nor would a reasonable person have done so. [page489]

[29] The Commission concluded that the staff met its disclosure obligation by informing the appellant's former counsel in December 2007 that Mr. Duic was being investigated for a possible technical breach of the cease trade order. The obligation then rested on the appellant's counsel to use due diligence in pursuing further details, if he felt they were needed.

[30] In the alternative, the Commission held that even if there had been insufficient disclosure, this did not cause manifest unfairness to the appellant. For purposes of this appeal, I will focus on this aspect of the Commission's reasons.

[31] In the argument on appeal, counsel for the appellant focused on the failure of staff to meet their disclosure obligation because the content of an interview with Mr. Duic in late January 2008 was not disclosed to the appellant or his counsel. The appellant argues that this information would have provided further fodder to attack Mr. Duic's credibility in the criminal and administrative proceedings. As well, it suggested further lines of investigation about possible insider trading that could also have been used to challenge Mr. Duic's credibility.

[32] The appellant also argues that the Commission should have applied principles from criminal law cases dealing with non-disclosure by the Crown in the context of guilty pleas, and it erred in not doing so.

[33] The criminal cases relied upon by the appellant make it clear that an individual who seeks to set aside a criminal conviction must prove two things: first, the Crown did not meet its disclosure obligations; and second, he or she must prove on a balance of probabilities that the lack of disclosure impaired the right to make full answer and defence. The test articulated by the Supreme Court of Canada in R. v. Dixon, 1998 805 (SCC), [1998] 1 S.C.R. 244, [1998] S.C.J. No. 17, 122 C.C.C. (3d) 1 requires the accused to demonstrate "that there is a reasonable possibility the non-disclosure affected the outcome at trial or the overall fairness of the trial process" (at para. 34) [emphasis added]. The court observed that the application of this test requires a balancing of factors, noting that "where the materiality of the undisclosed information is relatively low, an appellate court will have to determine whether any realistic opportunities were lost to the defence" (at para. 39).

[34] In R. v. Taillefer, 2003 SCC 70, [2003] 3 S.C.R. 307, [2003] S.C.J. No. 75, 179 C.C.C. (3d) 353, the Supreme Court of Canada discussed the impact of the Crown's failure to make adequate disclosure in the context of a guilty plea. It reframed the test that an accused must satisfy (at para. 90): [page490]

The accused must demonstrate that there is a reasonable possibility that the fresh evidence would have influenced his or her decision to plead guilty, if it had been available before the guilty plea was entered. However, the test is still objective in nature. The question is not whether the accused would actually have declined to plead guilty, but rather whether a reasonable and properly informed person, put in the same situation, would have run the risk of standing trial if he or she had had timely knowledge of the undisclosed evidence, when it is assessed together with all of the evidence already known.

(Emphasis added)

[35] The appellant argues that the January 25, 2008 interview shows far more than a technical breach by Mr. Duic, as his counsel had been informed. He suggests that he could have followed up with further investigations to determine whether Mr. Duic was again using friends in order to engage in insider trading. Moreover, the content of the interview would have provided fertile ground for cross-examination of Mr. Duic. Therefore, he submits that he met the test for setting aside a guilty plea, as he has shown there is a reasonable possibility that he would not have entered into the settlement agreement had he had full disclosure.

[36] The appellant also argues that the Commission failed to consider the possible impact of the information contained in the interview on the fairness of the settlement. Instead, the Commission characterized Mr. Duic's conduct as a technical breach of the order, failing to consider whether there was possible information to be pursued or used in cross-examination relating to continued insider trading.

[37] Despite the appellant's effort to import criminal law principles into the Commission's proceeding and now into this appeal, it is important to remember that the proceedings before the Commission were not criminal or quasi-criminal in nature. The settlement agreement resolved the administrative proceedings, although it also resulted in the withdrawal of the quasi-criminal charges. Therefore, this is not a situation analogous to that in Taillefer, where the accused sought to withdraw a guilty plea after learning that the Crown had failed to make disclosure of important information.

[38] The Commission's task was to determine whether it was in the public interest to set aside the settlement agreement that resolved an administrative proceeding. With respect to the disclosure issue, the Commission asked itself whether facts unknown or subsequent events would likely have affected the outcome of the administrative proceedings, had they been known at the time of the settlement (emphasis added). They approached the question from the perspective of a reasonable [page491] person, and concluded that the information about the Duic investigation, his breach of the cease trade order and subsequent sanction would not have had an impact on the appellant's settlement, if known at the time the settlement was entered into.

[39] Given the material before the Commission, its conclusion was reasonable for a number of reasons. First, the Commission was not required to adopt the "reasonable possibility" test from the criminal context. The administrative proceedings before it were regulatory in nature, where the case against the appellant would have had to be established on the basis of a balance of probabilities. In looking for "manifest unfairness" and a "likely" impact on the settlement, the Commission considered both the interests of the appellant and the interest in finality in administrative proceedings, as it was entitled to do under s. 144.

[40] Second, the Commission considered the utility of the undisclosed information to the appellant's defence. This information would at most have been available to use in challenging Mr. Duic's credibility if there were a criminal trial or an administrative proceeding. However, the appellant was already very well placed to attack Mr. Duic's credibility, given Mr. Duic's testimony in the first trial. Both the trial judge and Nordheimer J. had commented unfavourably on that evidence in their reasons.

[41] The appellant argues that there is an indication in the second interview that Mr. Duic might have engaged in insider trading, and this would have assisted the appellant. However, there is no evidence of further insider trading. At most, the appellant speculates that there might have been such activity. The Commission staff did not make further allegations to that effect and, ultimately, Mr. Duic was found guilty only of a technical breach of the cease trade order.

[42] The appellant has suggested in this appeal, as well as before the Commission, that the staff did not adequately pursue the investigation against Mr. Duic. Again, there is no evidence to support such an allegation, as the Commission itself noted in its reasons (at paras. 43-44). I do not accept the appellant's argument that the staff had no incentive to investigate Mr. Duic thoroughly, since he was no longer needed as a witness after the appellant entered into a settlement.

[43] Third, this is not information that would possibly have led a reasonable person to risk a lengthy criminal or administrative proceeding. The appellant received a good settlement, as the Commission agreed not to proceed with the criminal charges, where the appellant was at risk of a conviction. I note that [page492] the trial judge in the first trial had not found him to be a credible witness.

[44] Fourth, the Commission reasonably considered the admissions that the appellant had made in deciding whether there was unfairness to him in the settlement. In those admissions, the appellant agreed that he had communicated confidential information about corporate transactions to Mr. Duic and engaged in tipping. More precisely, he agreed:

Through Rankin's conduct as described above, Rankin informed Duic of confidential material facts with respect to each reporting issuer that had not been generally disclosed. The confidential material facts related to the potential Corporate Transactions, on which RBC DS was advising.

The appellant filed no affidavit material in the s. 144 hearing to indicate that those admissions were not true, or that he had been misled or was treated unfairly when he made them.

[45] The crux of the Commission's reasoning on the significance of the new Duic information is found at para. 112 of its reasons, where it stated:

In our view, the information that Duic had unintentionally breached the Duic Cease Trade Order, and the sanctions imposed on him by the Commission for doing so, was not crucial information in connection with the negotiation of the Rankin Settlement Agreement. Further, in our view, it was not information that would likely have affected the outcome of the Rankin Administrative Proceeding. It is not sufficient for this purpose that Rankin simply says he was denied the opportunity to make an informed choice. The question is whether, objectively, it is reasonable to conclude that such information would likely have affected the outcome of the Rankin Administrative Proceeding. In our view, the information relating to the unintentional breach by Duic of the Duic Cease Trade Order, including the sanctions ultimately imposed on him by the Commission, would not have had that effect. Further, we question whether that information would likely have affected the outcome of the second trial of the Criminal Charges.

[46] The Commission concluded that there was no unfairness to the appellant. That conclusion was a sound one, as no reasonable person would have run the risk of a second criminal trial or the administrative proceeding on the basis of the information disclosed in the second interview with Mr. Duic or on the basis of his subsequent sanction. Therefore, the Commission reasonably exercised its discretion and rejected the s. 144 application, because to set aside the settlement agreement was not in the public interest.

Issue No. 3: Did the participation of Vice-Chair Turner give rise to an apprehension of bias?

[47] In his factum, the appellant argued that there was a reasonable apprehension of bias because of Vice-Chair Turner's [page493] participation in the settlement agreement hearing involving the appellant, as well as the sanction hearing concerning Mr. Duic. Such an allegation is without merit.

[48] Prior to the s. 144 hearing, the appellant and his father were concerned about Vice-Chair Turner's participation in the hearing. When the concern was raised in a letter to the Commission, they were told that they would be required to bring a motion seeking the recusal of the vice-chair at the beginning of the hearing. The appellant's father advised, in an e-mail dated April 11, 2011, that they would not contest the participation of Vice-Chair Turner.

[49] No concern about bias was raised at the s. 144 hearing because of Vice-Chair Turner's participation. Therefore, the appellant must be taken to have waived this claim (see Stetler v. Agriculture, Food and Rural Affairs Appeal Tribunal (2005), 2005 24217 (ON CA), 76 O.R. (3d) 321, [2005] O.J. No. 2817 (C.A.), at paras. 98-100).

[50] At the hearing of the appeal, the appellant argued that the decision should be set aside because Vice-Chair Turner demonstrated actual bias in the s. 144 hearing. The vice-chair had presided over the hearing in which the Commission considered Mr. Duic's breach of the cease trading order and imposed a sanction. The appellant argues that as a result, in the s. 144 hearing, the vice-chair refused to consider submissions that ran counter to his view that the Duic breach was only technical. Thus, he closed his mind to the appellant's submissions on the significance of the information that had not been disclosed.

[51] I note that the allegation of actual bias was not raised in the appellant's factum or his amended notice of appeal. Such an allegation is very serious. As the Court of Appeal stated in Canadian College of Business and Computers Inc. v. Ontario (Private Career Colleges Act, Superintendent), [2010] O.J. No. 5435, 2010 ONCA 856 (at para. 24):

The threshold for a finding of real or perceived bias is high. Mere suspicion is insufficient to support an allegation of bias. Rather, a real likelihood or probability of bias must be demonstrated: (S. (R.D.), at paras. 111-14).

[52] In my view, the allegation of bias is without merit. The panel of the Commission that heard the s. 144 application was made up of three members. Their detailed reasons for decision show a careful consideration of the arguments made on behalf of the appellant. The fact that the panel characterized the Duic breach of the cease trade order as a technical breach was an exercise of their judgment, based on the facts presented to them. While the appellant may disagree with that conclusion, there is no basis to conclude that any of the panel members approached [page494] the s. 144 hearing with a closed mind or in an improper manner. Therefore, I would not give effect to this ground of appeal.

Conclusion

[53] For these reasons, the appeal is dismissed. If the parties cannot agree on costs, the Commission shall make brief written submissions through the Divisional Court office within ten days of the release of these reasons, with the appellant responding within ten days thereafter.

MATLOW J. (dissenting): --

[54] I respectfully disagree with the disposition of this appeal by the majority. I would allow the appeal and set aside the order in appeal and direct that a new hearing pursuant to s. 144 of the Act be held before another panel of the Commission, differently constituted, in accordance with these reasons. I would, as well, invite written submissions with respect to costs.

[55] I do not rest my decision on the secondary ground on which this appeal was argued, namely, that Vice-Chair Turner was required to disqualify himself from participating as a member of the panel presiding at the hearing before the Commission but failed to do so. On this issue, I share the view of the majority that we should not give effect to this ground because it was not raised in Rankin's amended notice of appeal or in his counsel's factum. As well, Rankin's father, Dr. Rankin, who represented Rankin, expressly advised the Commission prior to the hearing that he and Rankin did not intend to challenge Vice-Chair Turner's participation and there is no good reason to allow Rankin to adopt a position on this appeal that he abandoned earlier. However, I do not necessarily share the view of the majority that there was no bias or reasonable apprehension of bias and would prefer to leave that issue undetermined in this appeal.

[56] The ultimate issue in this appeal is whether or not this court should interfere with the order of the Commission refusing to revoke its previous order approving and giving effect to the settlement made by Rankin and the Commission. The outcome of this appeal will, therefore, turn on the correctness of the test applied by the Commission in deciding not to revoke its order approving the settlement. If the Commission applied the wrong test, the order in appeal cannot stand.

[57] The quasi-criminal proceeding against him has been terminated and, even if this appeal were to be successful, it would not result in Rankin being exonerated of the allegations made [page495] against him in the administrative proceeding. As indicated above, the relief that I would grant to Rankin would provide him only another opportunity to seek the order that was denied to him by the Commission.

[58] The order in appeal arises from a challenge made by Rankin before the Commission that he was not given proper disclosure of the allegations made against him before he agreed to the settlement and he now pursues that challenge in this appeal.

[59] The determination of that issue must commence with the determination of the appropriate standard of review that we should apply and conclude with the determination of whether the order in appeal meets that standard. In my view, the appropriate standard of review for the determinations of an issue of law of broad application made by the Commission is correctness and not reasonableness. As I will attempt to demonstrate below, there are no issues of law in this appeal that engage the expertise of the Commission so as to require us to give deference to the Commission or apply reasonableness as the appropriate standard of review. This appeal raises issues of law that are of importance not only to Rankin and the Commission but to the general evolution of administrative law.

[60] The settlement, as it related to Rankin, was the near equivalent of an agreement to plead guilty in a criminal or quasi-criminal case and submit to the imposition of a predetermined substantial penalty in the administrative proceeding before the Commission. By agreeing to the settlement, Rankin surrendered his right to a hearing in the proceeding before the Commission on the merits of the allegations and his right, if found guilty, to seek the imposition of penalties less severe than those contemplated by the settlement.

[61] Before Rankin's agreement to the settlement could become binding on him, it was essential, as a matter of law, that his agreement be an informed agreement. That required the Commission staff to inform him about all matters known to them that could be relevant to his decision whether or not to agree to the settlement. Like any person facing a decision whether or not to make an agreement, Rankin had a real interest in knowing what he stood to gain and what he could lose by agreeing and by refusing to agree with the settlement and what the odds were either way. If he were to agree to the settlement, he would know that he would avoid another trial and a hearing before the Commission and have certainty about the penalties that would be imposed on him. On the other hand, if he refused to agree to the settlement he would retain [page496] the possibility of emerging unscathed or with a lesser penalty but risk facing the imposition of penalties even more severe than the settlement contemplated. Ultimately, the odds depended on how likely his counsel could damage Duic's credibility and persuade the Commission panel to decide in his favour or to impose a lenient penalty.

[62] In such circumstances, any information about Duic's interview that Rankin's counsel might well have had a bearing on the odds and on Rankin's decision and that is why the undisclosed information would undoubtedly have been of great importance to him in arriving at his decision.

[63] I am persuaded that Rankin's submissions to the Commission demonstrated that he had reasonable grounds to claim that the Commission staff had not satisfied their legal obligation to provide full disclosure to him. Although their initial characterization, on December 21, 2007, of Duic's conduct as constituting "technical breaches" may have been reasonable on the evidence then available to them, it was no longer reasonable by January 25, 2008, approximately one month before the Commission gave its approval to the settlement. By then, the interview of Duic by Commission staff had taken place and the transcripts of that interview contained further potentially damaging evidence that could undermine Duic's evidence in the proceedings against Rankin.

[64] Although the Commission staff could not justifiably be faulted because their initial disclosure, made to Rankin's counsel, did not come to Rankin's personal attention, the same cannot be said about the subsequent conduct of Commission staff with respect to the Duic interview. I refer here specifically to their failure to reconsider the adequacy of their initial disclosure in light of Duic's interview and provide further updated disclosure to Rankin. That failure may have been deliberate.

[65] It was accepted by the Commission, and is not disputed in this appeal, that the Commission staff failed to disclose to Rankin any information about the Duic interview before he agreed to the settlement. However, the Commission excused the failure of the Commission staff by placing the blame for it by the failure of Rankin's counsel to explicitly ask for that disclosure.

[66] In paras. 97 and 98 of its reasons [Rankin (Re), 2011 LNONOSC 887, 34 OSCB 11797], at paras. 97-98, the Commission addressed this issue as follows:

There is no question that Staff has an obligation to make full disclosure of relevant information to a respondent in a quasi-criminal or administrative proceeding under the Act. In an administrative proceeding before [page497] the Commission, that disclosure obligation has been described as a "Stinchcombe-like" obligation (see R. v Stinchcombe, [1991] 2 S.C.R. 326 ("Stinchcombe")). It also seems to us that Staff's obligation to disclose relevant information to a respondent also applies prior to entering into a settlement agreement with that respondent.

However, we note in this respect that under Stinchcombe, where an accused is represented by counsel, "the obligation to disclose will be triggered by a request by or on behalf of the accused (Stinchcombe, supra, at p. 7). In this case, disclosure of the existence of the Duic Investigation was made to counsel for Rankin as more fully discussed below. No request was made by Rankin's counsel on behalf of Rankin for further disclosure related to that matter.

[67] The Commission continued, in paras. 100 and 101 of its reasons:

On December 21, 2007, legal counsel for Staff advised Rankin's legal counsel orally of the fact that Staff was investigating whether Duic had technically breached the Duic Cease Trade Order (see paragraph 52 of these reasons).

It is surprising that Rankin's legal counsel did not communicate the information related to the Duic Investigation to Rankin, but Staff is not disputing Rankin's assertion that he did not do so. That failure is, however, consistent with the view that Rankin's counsel did not consider the information with respect to the Duic Investigation material to the negotiation and entering into the Rankin Settlement Agreement. In our view, the oral disclosure to Rankin's counsel of the Duic Investigation was sufficient disclosure of that investigation. While it would have been preferable for Staff to have communicated that information to Rankin's counsel in writing, it was not obliged to do so. Once that communication was made, it was up to Rankin's counsel to make further enquiry if he considered that relevant or appropriate in the circumstances (in accordance with the principle in Stinchcombe referred to in paragraph 98 of these reasons.

(Emphasis added)

[68] I do not regard the statement, in para. 101 of the Commission's reasons, that I highlighted as a fair or correct statement of the law. Having been told initially that Duic was being investigated only for "technical breaches", Rankin's counsel had no reason to expect that there would be a new investigation of Duic or that there would be an interview of Duic on a broader range of subjects and neither Rankin nor his counsel had a reason or a duty to ask for further disclosure. Rather, it was the legal obligation of the Commission staff to provide ongoing disclosure and to inform Rankin about the interview of Duic and provide him with a transcript.

[69] The requirement to provide full disclosure, and to update it from time even without an explicit request, is a requirement of law. It follows, therefore, as a result of the failure of the Commission staff to do so, that Rankin's decision to agree to the settlement cannot be said to have been an informed decision. [page498]

[70] The test that the Commission wrongly applied is set out primarily in para. 112 of its reasons as follows:

In our view, the information that Duic had unintentionally breached the Duic Cease Trade Order, and the sanctions imposed on him by the Commission for doing so, was not crucial information in connection with the negotiation of the Rankin Settlement Agreement. Further, in our view, it was not information that would likely have affected the outcome of the Rankin Administrative Proceeding. It is not sufficient for this purpose that Rankin simply says he was denied the opportunity to make an informed choice. The question is whether, objectively, it is reasonable to conclude that such information would likely have affected the outcome of the Rankin Administrative Proceeding. In our view, the information relating to the unintentional breach by Duic of the Duic Cease Trade Order, including the sanctions ultimately imposed on him by the Commission, would not have had that effect. Further, we question whether that information would likely have affected the outcome of the second trial of the Criminal Charges.

(Emphasis added)

[71] There are many problems arising from the Commission's formulation and application of the test and I will attempt to demonstrate some of them. I will also contrast the Commission's formulation with what I consider to have been the correct formulation.

[72] The first step required the Commission to consider whether the undisclosed information was relevant to Rankin's decision whether or not to agree to the settlement. The Commission correctly recognized this requirement in para. 97 and following of its reasons.

[73] However, there does not appear to be any explicit statement in the reasons whether the Commission considered the undisclosed information regarding the Duic interview to be relevant to Rankin's decision.

[74] Instead, as stated in para. 112, the Commission turned its focus to whether or not the information was "crucial information in connection with the negotiation of the Rankin Settlement Agreement" (instead of "relevant to Rankin's decision") and concluded that it was not (emphasis added). By substituting "crucial" for "relevant" in this manner, the Commission lost sight of what its task was. There was no need whatsoever for the Commission to consider whether the undisclosed information was crucial to anything.

[75] Within a few words after changing its focus to "crucial" in para. 112, the Commission abandoned its consideration of the relationship between the undisclosed information and Rankin's decision and turned its attention instead to whether the undisclosed information "would likely have affected the outcome of the Rankin Administrative Proceeding" and concluded that it would not. [page499]

[76] By doing so, it is evident that the Commission had lost sight that the motion under consideration was in relation to whether the Commission staff's failure to make full disclosure denied Rankin the opportunity to make an informed decision. Viewed in this manner, there was absolutely no rational reason why, in the circumstances, Rankin's right to have the settlement revoked should have been affected in any way by whether or not the undisclosed information "would likely have affected the outcome of the Rankin Administrative Proceeding". Throughout this process what mattered was whether or not Rankin's decision was an informed decision and the focus of the Commission ought to have remained on the connection between the decision and the undisclosed information.

[77] The Commission's formulation of the test required the Commission to determine whether or not the undisclosed information, as at the time when Rankin agreed to the settlement, "would likely have affected the outcome of the Rankin Administrative Proceeding". Not only was this requirement irrelevant to the merits of Rankin's motion before the Commission but, because it called for the Commission to make a determination, as at that time, of the likely outcome of a future hearing, first assuming that Rankin did not have the undisclosed information and then comparing it on the assumption that he did, it was unworkable. The Commission had no rational way of predicting how a panel of the Commission would likely decide Rankin's case after a hearing at some time in the future that, with near certainty, would be based on evidence that was still not known at the time.

[78] In spite of this insuperable difficulty, the Commission assumed the competence to make a finding that the previously undisclosed information "was not information that would likely have affected of the outcome of the Rankin Administrative Proceeding".

[79] This meant that Rankin was required to establish that the outcome of the administrative proceeding that he might have to face would likely be determined in his favour if full disclosure had been made to him. As a matter of logic, that would have been an impossible burden for him to meet.

[80] In my view, the Commission ought to have applied the test in R. v. Dixon, 1998 805 (SCC), [1998] 1 S.C.R. 244, [1998] S.C.J. No. 17, referred to in para. 33 of the reasons of the majority, above, and in R v. Taillefer, 2003 SCC 70, [2003] 3 S.C.R. 307, [2003] S.C.J. No. 75, referred to in para. 34, and asked whether "there is a reasonable possibility that the non-disclosure affected Rankin's decision to agree to the settlement and thereby forgo his right to [page500] make full answer and defence". This would have been a fair and appropriate test that could have been rationally applied in the circumstances of this case. The difference between a reasonable possibility test and one based on the likelihood of a future event is significant.

[81] By failing to apply the correct test, the Commission fell into irreparable error and the order in appeal does not meet the required standard of review of correctness. It is manifestly unfair to Rankin and cannot be upheld.

[82] I conclude with several comments on s. 144(1) of the Securities Act, the statutory provision that confers on the Commission the power to revoke or vary an order of the Commission and how it is applied by the Commission. This section provides that this power may be exercised "if in the Commission's opinion the order would not be prejudicial to the public interest".

[83] The Commission addressed this provision in paras. 83 to 85, inclusive, and in paras. 113 to 115, inclusive. They read as follows:

2. When will the Commission Intervene under Section 144?

We will address first the legal tests we will apply in deciding whether or not to intervene under section 144 of the Act in the circumstances before us.

Because of the diverse circumstances in which a section 144 application can be brought, it is not practical to articulate all of the principles and criteria that should apply to all such applications. Based on the Commission decisions discussed in paragraphs 62 to 70 of these reasons, for purposes of the Application, we will apply the following principles:

(a) it is not generally in the public interest for the Commission to re-open settlements previously entered into and approved, or to revoke administrative sanctions previously imposed;

(b) accordingly, a revocation or variation of a Commission sanctions order under section 144 of the Act should be granted only in the most unusual or rarest of circumstances;

(c) the Commission should revoke or vary a previous order where:

(i) there is manifest unfairness to a respondent; or

(ii) the facts and circumstances clearly demonstrate that the relevant sanctions order cannot be permitted to stand (such as in Re AiT)

(d) in determining whether to revoke or vary a sanctions order, we must consider all of the facts and circumstances; and

(e) the onus is on the applicant to show that the revocation or variation of the sanctions order is justified and not prejudicial to the public interest.

In our view, in determining whether there was manifest unfairness to Rankin, we should consider whether facts not known to Rankin, or [page501] subsequent events, make it reasonable to conclude that the outcome of the Rankin Administrative Proceeding would likely have been affected if those facts or events had been known (see paragraph 63 of these reasons for the test applied in Re Ultramar).

We also note that granting the Application would lead to a perverse outcome. The Commission cannot bring new quasi-criminal charges or new administrative proceedings against the Act because of the six-year limitation period set out in section 129.1 of the Act. In our view, such an outcome in the circumstances is a relevant consideration in determining whether granting the relief requested in the Application is prejudicial to the public interest. We note in this respect that the Application was not brought by Rankin until almost two years after the public announcement of the sanctions imposed by the Commission on Duic as a result of his breach of the Duic Cease Trade Order.

Accordingly, in our view, dismissing the Application in these circumstances is not manifestly unfair to Rankin.

4. Conclusion

For all of these reasons, we find that Rankin has not satisfied the onus of establishing sufficient grounds for us to revoke the Commission order approving and giving effect to the Rankin Settlement Agreement. In our opinion, to order a revocation of the Rankin Settlement Agreement in these circumstances would be prejudicial to the public interest.

(Emphasis added)

[84] In my view, the blind application of the "principles" set out in para. 84(a) and (b) of the Commission's reasons as rules to be applied in motions brought under s. 144 of the Act, including Rankin's, must inevitably corrupt the determination of all such motions made to the Commission. The purpose of s. 144 is to empower the Commission to revoke or vary a decision of the Commission when justice requires the Commission's intervention and the order would not be prejudicial to the public interest.

[85] I disagree that it is "not generally in the public interest" for the Commission to intervene with settlements made or that the power of the Commission to intervene should be exercised "only in the most unusual or rarest of circumstances". Quite to the contrary, it is always in the public interest for the Commission to intervene whenever sufficient reasons for such intervention are brought to the Commission's attention, regardless of when or how many such instances occur. The Commission should not confine its interventions to "only the most unusual or rarest of circumstances".

[86] I also disagree with the statement made in para. 113 "that granting the Application would lead to a perverse outcome". The quasi-criminal charges against Rankin related to [page502] events that occurred prior to March 2001. It follows that the six-year limitation period for commencing proceedings against Rankin expired in or about April 2007, before Rankin discovered the Duic investigation on August 2008. Rankin bares no responsibility for the termination of the quasi-criminal proceeding and the passing of a limitation period that would bar the commencement of new quasi-criminal proceedings against him.

Appeal dismissed.

End of Document