Deposit Insurance Corporation of Ontario v. Vinski, 2014 ONCJ 301

ONTARIO COURT OF JUSTICE

Old City Hall - Toronto

BETWEEN:

DEPOSIT INSURANCE CORPORATION OF ONTARIO

(In its capacity as liquidator of the Croatian Credit Union)

– AND —

JOSIP VINSKI,

STEVEN FRANKLIN TROSTER

and

FERDINANDO POLLA

J. Naster For the Prosecutor/Respondent

Self-Represented Defendant/Applicant

F. Addario and R. McConchie For the Defendant/Applicant S.F. Troster

B. Salsberg For the Defendant/Applicant F. Polla

Heard: January 6-8, March 20-21 and April 16, 2014

REASONS for RULING

(Re Statutory Limitation Period and Abuse of Process Motions)

MELVYN GREEN, J.:

A. INTRODUCTION

[1] The three defendants are charged with creating an unauthorized security interest in an Ontario credit union, a regulatory or, as it is sometimes called, quasi-criminal offence. They assert that the Information was laid outside the statutory limitation period and, as a result, is a nullity that should be quashed. In the alternative, they also claim the motives for laying the charge and the reasons for the delay in its institution each constitutes an abuse of process and that a judicially ordered stay should therefor follow. In either event, say the defendants, the proceedings should be immediately abated and before any evidence is led respecting the merits of the offence charged.

[2] A complex skein of legislation regulates Canadian financial institutions. In the case of Ontario credit unions, responsibility for regulatory oversight primarily rests in two provincial Crown agencies with complimentary if not somewhat overlapping responsibilities and functions: the Deposit Insurance Corporation of Ontario (“DICO” or “the Corporation”) and the Financial Services Commission of Ontario (“FSCO”). Their statutory authority, and that governing the conduct of Ontario credit unions, is found, respectively, in the Credit Unions and Caisses Populaires Act, S.O. 1994, C. 11, as amended (“the CUCP Act” or “the Act”) and the Financial Services Commission of Ontario Act, 1997, S.O. 1997, C. 28 (“the FSCO Act”). The former statute, the CUCP Act, was materially amended on October 1, 2009.

[3] The three defendants are charged by DICO, then acting in its capacity as liquidator, with an offence under s. 184 of the CUCP Act. At the time of the alleged offence (March 1, 2009 to July 31, 2009), s. 184 read: “A credit union shall not create a security interest in any property of the credit union to secure an obligation of the credit union unless it is authorized by its by-laws and approved, in writing, by the Superintendent”. The “Superintendent”, as statutorily defined, is not an office of DICO but, rather, the chief executive officer of FSCO. Absent reference to the language of a statutory provision or a transaction directly involving the person holding the office of Superintendent, “Superintendent”, “FSCO” and “the Commission” are used interchangeably throughout this Ruling.

[4] The credit union said to be the vehicle for the alleged misconduct is the now-liquidated Croatian Credit Union (“the CCU”). The impugned “security interest” relates to three mortgages registered on title to three properties owned by the CCU. Pursuant to an order issued by the Superintendent, the CCU was under the supervision of DICO at the time the alleged offence is said to have commenced. On July 7, 2009 (some three weeks before the closing bracket of the relevant time frame) DICO, pursuant to its statutory powers, appointed itself the “administrator” of the CCU thereby assuming full “control of the property and business of the Credit Union”. Later, on October 18, 2010, DICO lawfully appointed itself the “liquidator” of the CCU’s “estate and effects”, a capacity that includes the power to lay charges under the CUCP Act.

[5] Section 331 of the CUCP Act imposes a limitation period on the commencement of offence-related proceedings under the Act: they are not to be “started more than two years after the facts on which the proceedings are based first came to the knowledge of the Superintendent”. In short, the statutory limitation period for the commencement of prosecutions under the CUCP Act begins not when the offence is said to have occurred or when its occurrence comes to the knowledge of DICO (which was supervising and then administering the CCU at the relevant times) but, rather, when the Superintendent of a sister agency comes to know of the factual foundation for the alleged offence.

[6] In the case before me, the Information charging the offence under s. 184 was sworn on October 16, 2012. DICO first expressly apprised the Superintendent of FSCO of the “facts on which the[se] proceedings are based” one day earlier, on October 15th. The events said to make out the offence are alleged to have occurred more than three years earlier, and DICO initially learned of the “facts” which culminate in the defendants’ prosecution (if not their full legal significance or potential gravity) while serving as the administrator of the CCU in July 2009, considerably well more than two years before the Superintendent was notified and the charge implicating all three defendants was laid.

[7] The close functional, operational and informational ties between DICO and FSCO are such, says the Defendant Troster (“Troster”), that DICO’s earlier knowledge of “the facts on which the proceedings are based” can be imputed to the Superintendent, directly or constructively. In either event, he says, the instant charge was laid beyond the two-year limitation period, and accordingly the prosecution should be quashed. Alternatively, he alleges that the prosecution is an effort to use the machinery of regulatory enforcement to collect a civil debt, amounting to an abuse of the court’s process and one remediable only by way of an order staying the proceedings.

[8] The Defendant Polla (“Polla”) adopts these arguments. In addition, he alleges that the record reasonably supports the inference that DICO deliberately or knowingly delayed informing the Superintendent of “the facts on which the proceedings are based” so as to effectively extend the limitation period beyond the two-year statutory boundary and in a manner that breached his clients Charter s. 7 rights and for which, again, a stay of proceedings is the only just and appropriate remedy. Polla, like all the defendants, bears the burden of proof, on the civil standard of balance of probabilities, respecting any claim of abuse of process or Charter breach and the legal propriety of the remedies sought.

[9] The Defendant Vinski (“Vinski”), while advancing no independent arguments, adopts those of his co-defendants. He is content to be the silent beneficiary of whatever favourable ruling their efforts may generate.

[10] DICO resists the defendants’ various challenges. It accepts that it bears the burden of establishing to the conventional criminal standard that the prosecution commenced within the statutory limitation period. DICO also accepts that the limitation period clock begins to tick once anyone acting on behalf of the Superintendent has the requisite “knowledge”, and that proof of the actual or personal “knowledge of the Superintendent” (as phrased in s. 331 of the CUCP Act) is unnecessary. As put in DICO’s factum, “knowledge within the Financial Services Commission of Ontario (of which the Superintendent is the Chief Executive Officer) would be sufficient to trigger the limitation period”.

[11] The voluminous documentary record filed on these motions includes correspondence between and among the parties, DICO activity reports, formal operational and information-sharing protocols between DICO and FSCO, the redacted minutes of liaison committee meetings involving these two organizations and the Ministry of Finance, supplementary affidavit materials, and pleadings in related civil litigation. In addition, DICO called two witnesses: William (Bill) Foster, the Vice-President, Asset Management and Recoveries, at DICO, and Anatol Modid, the Director of the Market Regulation Branch of FSCO. Each testified to his agency’s understanding of its own statutory powers and responsibilities and of the mechanisms their respective agencies instituted to share information, co-ordinate their regulatory enforcement of the industry and negotiate their jurisdictional boundaries. Foster’s testimony, in particular, also helps explain the genesis of the matter before me, DICO’s evolving understanding of the significance of the impugned mortgages and its reasons for the delay in launching a prosecution – in short, a narrative chronology (if from DICO’s perspective) of the events culminating in the Corporation’s resolve to charge the defendants with an offence under s. 184 of the CUCP Act.

B. THE CRITICAL TIMELINE

[12] A rudimentary timeline of the events that milestone the instant dispute affords an early orientation to the issues bearing on an assessment of limitation period compliance. A review of the statutory and institutional framework follows, as does a more detailed history of the critical events, DICO’s response to the impugned mortgages and its ultimate decision to charge the defendants.

September 5, 2007: The Superintendent orders the CCU under the supervision of DICO as stabilization authority.

June 25, 2009: Troster registers $2 million mortgage on the Toronto Branch of the CCU.

July 7, 2009: DICO appoints itself the administrator of the CCU.

July 9, 2009: Troster registers $2 million mortgage on the Mississauga Branch of the CCU.

July 14, 2009: Troster registers $2 million mortgage on the Hamilton Branch of the CCU.

July 15, 2009: Troster notifies the CCU that the three mortgages have been registered and that interest payments are due.

November 18, 2009: CCU applies to Director of Land Titles for deletion of the three mortgages from title.

January 4, 2010: Statement of Claim issued against the CCU respecting the three mortgages with the Plaintiff seeking court-supervised sale of the properties with the proceeds to be applied to the CCU’s claimed indebtedness to the Plaintiff.

February 16, 2010: Statement of Defence and Counterclaim issued by the CCU, denying all claims and seeking orders dismissing the action, declaring the three mortgages invalid and deleting the Plaintiff’s impugned mortgages and cautions from title. In the alternative, if the mortgages are valid CCU seeks contribution and indemnity from Vinski.

October 18, 2010: Pursuant to its powers as administrator, DICO appoints itself liquidator of the CCU with the authority to “exercise all of the powers of the Liquidator under the Act”.

February 17, 2011: Order of Superior Court Justice Newbould (entered February 25, 2011) requiring proceedings to determine, inter alia, the validity, enforceability, beneficial ownership and quantum of the three mortgages.

October 15, 2012: DICO advises FSCO of its intention, as liquidator of the CCU, to commence the instant proceedings and of the facts upon which the proceedings are based.

October 16, 2012: DICO, as liquidator, swears Information charging the three defendants with offence under s. 184 of CUCP Act.

October 18, 2013: FSCO issues Certificate certifying that facts on which the s. 184 proceedings are based first came to Superintendent’s knowledge on October 15, 2012.

April 2015: Scheduled trial of the issues identified by Justice Newbould.

The significance of these occurrences, their institutional context, and DICO’s role in the events subsequent to its first being informed of the impugned mortgages on July 15, 2009 are set out in the aforementioned documentary record and the affidavits and testimony of Anatol Monid (“Monid”) of FSCO and, in particular, Bill Foster (“Foster”) of DICO.

C. THE REGULATORY SCAFFOLDING

(a) Introduction

[13] The various preliminary motions were heard together. An appreciation of the evidence tendered on these motions commands an introduction to the institutional organization of FSCO and DICO, its regulatory culture and the statutory framework governing the operation, management and compliance oversight of Ontario credit unions and caisses populaires, both at the time of the alleged offence and, where relevant, subsequent to the October 2009 amendments to the CUCP Act. An outline of the division of responsibilities between FSCO and DICO and the formalization of their information sharing and co-operative governance of credit unions is also of assistance.

(b) The Institutional and Statutory Framework

[14] FSCO and DICO are distinct legal entities with separate governance structures, employees, offices and legal counsel. Both, however, have statutory duties imposed by the CUCP Act. DICO is a corporation governed by directors. FSCO is a commission within the Ministry of Finance established under the FSCO Act and governed by members of the commission. None of the members of the DICO board serve on the commission and none of the commissioners serve on DICO’s board. The FSCO Act requires the appointment of a Superintendent of Financial Services (the “Superintendent”) responsible for the enforcement and administration of FSCO’s statutory obligations under the FSCO Act and others, including the CUCP Act. FSCO and DICO each independently report to the Minister of Finance. While institutionally autonomous, “FSCO”, as said by Monid, “works closely together with DICO to regulate credit unions and caisses populaires under the CUCP Act”.

[15] The respective roles of the two Crown agencies are set out in a Letter of Understanding (“LOU”) and, in 2009, by a superseding Memorandum of Understanding (“MOU”). (Both are discussed more fully below.) FSCO is characterized in the latter agreement as “a Regulatory Agency” while DICO is styled “an Operational Enterprise Agency”. Consistent with its statutory obligations (FSCO Act, s. 5(2)(c)), the MOU describes the “role of the Superintendent” as including “the responsibility to administer and enforce the Credit Unions and Caisses Populaires Act, 1994”. The MOU’s replacement of the LOU is said to be “premised on the transfer of solvency regulation authority from the Superintendent to DICO” as a result of the amendments to the CUCP Act that came into force on October 1, 2009. The MOU, unlike its predecessor LOU, speaks of FSCO’s and DICO’s “common interest” in, among other things, “avoiding … overlap of regulatory functions and ensuring the sharing of information related to those regulatory functions”. DICO’s role is otherwise described as follows:

The role of DICO is to carry out the duties and responsibilities set out in the Act and the regulations under the Act, which include, but are not limited to, providing deposit insurance for depositors of credit unions and caisses populaires in Ontario, acting on solvency issues affecting credit unions and caisses populaires in Ontario, and fulfilling the objects listed for it under the Act.

[16] As a statutory corporation, DICO has no powers other than those prescribed by its enabling legislation. Among the powers conferred on DICO by the amended CUCP Act, DICO may order a credit union subject to its supervision (s. 279) or administration (s. 294), a form of statutory receivership in which DICO then effectively exercises the powers of a credit union’s officers and board of directors. DICO, as administrator, does not require the consent or authorization of a credit union’s members or shareholders or that of the Superintendent.

[17] As noted, the October 1, 2009 amendments to the CUCP Act had the effect of transferring a number of FSCO’s statutory responsibilities respecting credit unions to DICO, in particular those pertaining to solvency-related issues. For example, prior to the 2009 amendments any supervision order – such as that placing the CCU under DICO supervision in September 2007 – was issued by FSCO. Pursuant to the 2009 amendments, DICO now has the power to issue a supervision order. Prior to October 1, 2009 FSCO had jurisdiction to regulate both market conduct and solvency issues associated with credit unions. As explained by the two agencies’ representatives, solvency administration fell within the jurisdiction of DICO under the 2009 amendments, with FSCO continuing to regulate market conduct. As construed by FSCO and DICO, the practical effect of a credit union being placed under administration by DICO is that the conduct of the credit union’s business affairs are then under the exclusive control of DICO. While the CUCP Act does not expressly direct that FSCO’s regulatory obligations then cease, in practice FSCO withdraws from its regulatory functions upon DICO’s appointment as administrator and relies on DICO to then ensure a credit union’s compliance with the CUCP Act. This construction is reflected in the following exchange during the cross-examination of Monid:

Q. And after DICO became the administrator of the Croatian Credit Union, FSCO took no role in supervising it. Is that fair?

A. Correct.

Q. And you [i.e., FSCO] didn’t take any role in ensuring the credit union was abiding by the Credit Unions and Caisses Populaires Act, after that point?

A. We rely on DICO to continue to do that.

Q. And you didn’t investigate any breaches by people associated with the Croatian Credit Union?

A. [Not o]nce it went into administration.

Q. And you didn’t take a role in deciding to lay the charges in this case?

A. No.

[18] From DICO’s perspective, as explained by Foster, “there is no longer any purpose … for FSCO to supervise [a credit union’s] activities” once another “Crown agent” (that is, DICO) is controlling the credit union’s business operations by way of an administration order. Foster agreed, however, that neither the Act nor its regulations assigned exclusive regulatory control to DICO upon it being appointed the administrator of a credit union. Likewise, the MOU negotiated between the two Crown agencies does not detail the division of regulatory responsibilities once a credit union is placed under administration or liquidation. Neither the Act nor the MOU explicitly speaks of a regulatory role for DICO, nor does the MOU at any point qualify the “general” proposition that the continuing and overarching “role of the Superintendent [and not DICO] includes the responsibility to administer and enforce the Credit Unions and Caisses Populaires Act, 1994”. However, and as further addressed below, since the October 2009 amendments to the CUCP Act, DICO, once acting as liquidator of a credit union, shares with FSCO the power to lay a charge for breaching a provision of the Act.

[19] Acting in its capacity as administrator DICO may require a credit union to be wound up (s. 295(1)). As of the 2009 amendments, it may also appoint itself (or, as the only prescribed alternative, a licensed trustee in bankruptcy) liquidator of a credit union (s. 298(4)). DICO, as liquidator, effectively replaces DICO as administrator in the governance of the subject credit union. The liquidator (that is, DICO) then controls all of a credit union’s rights and privileges and, in such capacity (but not that of administrator), may bring or defend any action, suit or prosecution, or other legal proceedings, civil or criminal, in the name and on behalf of the credit union (s. 307(1)(a)), and it may do so whether or not it has received the prior approval of the Superintendent (s. 307(4)). Critical to the resolution of the matter before me, the effective exercise of this power is subject to compliance with s. 331, which, as earlier noted, provides that no proceeding for an offence under the CUCP Act “shall be started more than two years after the facts on which the proceedings are based first came to the knowledge of the Superintendent”.

[20] DICO is empowered to lay a charge under the CUCP Act only when it acts in the capacity of liquidator. While FSCO does not have jurisdiction to act as administrator or liquidator of a credit union, it can, as Foster acknowledged, lay a charge at any point and irrespective of a credit union’s solvency or DICO’s level of involvement or superintendence. In fact, FSCO had laid charges against Vinski for breaches of the CUCP Act on September 5, 2008 and August 4, 2010 regarding, respectively, offences alleged to have occurred in mid-2007 and between July 2008 and January 2009. The charges were thus referable to intervals before DICO’s appointment as administrator of the CCU, although the latter charge was laid after this appointment.

[21] The CUCP Act authorizes the Superintendent to impose an “administrative penalty” for various compliance irregularities at any time: s. 331.2. DICO is similarly empowered with respect to a somewhat different inventory of regulatory contraventions: s. 331.3. The imposition of such penalties is subject to a limitation period. Section 331.2(4) states that, “The Superintendent shall not make an order [imposing an administrative penalty] under this section more than two years after the day the Superintendent became aware of the contravention”. Section 331.3(4) is identical but for the substitution of the word “Corporation” (that is, DICO) for “Superintendent”.

[22] FSCO’s regulatory jurisdiction is much broader than that conferred on DICO. It bears primary responsibility for the regulation of Ontario’s financial services sector. While FSCO’s regulatory compass extends to credit unions, it also includes insurance companies, pension plans, mortgage brokerages, agents and administrators, loan and trust companies and co-operatives. FSCO is also responsible for the administration of the Motor Vehicle Accident Claims Fund and the administration of the Pension Benefits Guarantee Fund. The Superintendent of Financial Services is the chief executive officer of FSCO and exercises the powers and duties conferred on the Superintendent by legislation. These include, as set out in s. 2.2 of the MOU, “the provision of regulatory services that protect the public interest and enhance public confidence in credit unions and caisses populaires”. More specifically, the Superintendent, pursuant to s. 5(2) of the FSCO Act, is mandated to “administer and enforce” the CUCP Act and “supervise generally” all credit unions and caisses populaires subject to the same Act.

(c) Information Sharing

(i) Introduction

[23] There is a high degree of mutual reliance between FSCO and DICO. As DICO is more closely involved in the day-to-day regulation of credit unions and exercises the functions of supervisor and administrator in times of financial stress, FSCO is to a considerable degree dependent on information obtained from DICO to execute its own statutory duties. Their related responsibilities for the regulation of credit unions led the two agencies to establish an operational framework to promote effective coordination and avoid redundancy. As the CUCP Act affords no statutory structure or direction in this regard, it was left to FSCO and DICO to harmonize their respective roles and responsibilities under and in accordance with the CUCP Act.

[24] FSCO and DICO entered into a Letter of Understanding (“LOU”), dated May 23, 2003, providing for a co-operative operational framework. It includes a mechanism for sharing information, a matter left unaddressed in the enabling legislation. Following the passage of the 2009 amendments to the CUCP Act, FSCO and DICO entered a revised agreement, dated November 6, 2009 and styled a Memorandum of Understanding (“MOU”), which superseded and replaced the LOU. In so far as they impact on matters here at issue, the propositions inscribed and language employed in the LOU and MOU are near identical. The principles governing the “operational relationship” between the two agencies, as set out in the MOU, include the efficient and effective use of resources, the development of regulatory standards and criteria, cost minimization, and “to develop and maintain a high degree of mutual reliance”. One example, already noted, of the two agencies’ operation understanding is that FSCO is effectively relieved of its regulatory burden once a credit union is placed under the control of DICO acting as administrator or liquidator as control of the credit union is then viewed as safely under the jurisdiction of a sister regulator. Nonetheless, s. 4.3.8 of the MOU, like its predecessor LOU, directs that, “if the Superintendent or DICO … becomes aware of a serious breach of the [CUCP] Act or regulations, the Superintendent or DICO, as the case may be, will notify the other of the matter in a timely fashion”.

[25] Monid agreed that creating an unauthorized security interest in the property of a credit union (that is, a violation of s. 184 of the Act) was a “serious offence”. He agreed, as well, that the charges laid by FSCO against Vinski (the second of two Informations being sworn after DICO was appointed administrator of the CCU) were “serious offences”. Information respecting these charges was shared with DICO at the agencies’ regular quarterly meeting in September 2010. However, Monid “would not go so far to say [that] any serious breach” of the CUCP Act required DICO to notify the Superintendent upon becoming aware of the breach. The “level of information sharing”, he maintained, “is dependent on the circumstances”.

[26] There are three primary vectors of information sharing between DICO and FSCO: a centralized data collection to which both agencies ordinarily have access, quarterly liaison meetings and, finally, ad hoc communications. A description of each follows.

(ii) Shared Data Base

[27] The MOU recognizes that both FSCO and DICO separately require and receive information from credit unions to assist in fulfilling their respective statutory duties. The MOU, like the LOU before it, centralizes with DICO the collection of routinely required information from credit unions. To the extent that either FSCO or DICO collects information, they agreed to share it on a timely basis and as may be required by the other, to provide each other with mutual access to such information, and to develop and maintain a list of information requirements, including format, time frames and method of delivery.

[28] The standard process of information sharing includes the maintenance on DICO’s database (the Corporate Information System Portal, or “CIS Portal”) of all monthly credit union (financial) filings, examination reports, member institution returns, management generated risk assessment reviews, contact information, orders and credit union incorporation information. FSCO has routine on-line access to the CIS Portal. The Superintendent provides DICO with additional information (pertaining to such matters as offering statement approvals, statutory approvals, amalgamations, incorporations, and dissolutions) for inclusion in the CIS Portal.

[29] FSCO’s ready access to information collected and stored by DICO is curtailed once DICO is acting in its capacity as administrator or liquidator. As explained by the FSCO and DICO witnesses, the information then shared by DICO is only that necessary “for the broad purpose of permitting FSCO to keep informed of issues that may impact the stability and confidence of the credit union sector”. DICO, as liquidator, ceases to enter information in the CIS Portal. It then uses a separate information storage system that is firewalled from the rest of DICO and inaccessible to FSCO. In Monid’s words:

FSCO understands that information that comes to the attention of DICO in its capacity as administrator or liquidator is for DICO to address as it sees fit in a manner consistent with the statutory jurisdiction being exercised by DICO. FSCO would not and does not expect DICO to inform FSCO of particular information learned by DICO, when acting in the capacity as administrator or liquidator …

According to Monid, this non-expectation “includes the facts upon which the instant charge is based”.

(iii) The Liaison Committee

[30] The Liaison Committee, which includes representatives of DICO, FSCO, and the Ministry of Finance, affords a second method of sharing information between the two Crown bodies. The Committee meets quarterly to exchange information of common interest. DICO representatives attend these meetings in DICO’s corporate capacity and also, when applicable, in its capacity as administrator and liquidator of a specific credit union. Minutes of the Liaison Committee meetings are distributed to each participant. The meetings generally focus on matters of systemic importance. Particular credit unions are rarely discussed and only when they are on a watchlist, subject to DICO supervision, in administration or liquidation, or involved in significant litigation that will likely attract public attention or that of the Minister of Finance.

[31] Although neither the Act nor the MOU prohibit earlier disclosure, Foster and Monid testified that FSCO typically advises DICO of any regulatory investigation it conducts only after a charge is laid. In those rare cases where DICO is informed of a current FSCO investigation, the particulars are kept private due, according to Monid, to their confidential nature and the risk of investigatory compromise. No examples or further explanation was advanced of the risk to the integrity of DICO or FSCO investigations that might arise through the sharing of such information between institutional co-regulators. The two agencies’ operational agreement contemplates such inter-agency disclosure and, as set out in the MOU, explicitly invests both FSCO and DICO with a duty of confidentiality in such circumstances:

The Superintendent and DCIO agree to treat as confidential all information and records containing financial, commercial or any other confidential information collected or supplied by either of them under this MOU.

The predecessor LOU is to identical effect. Arguably, a failure to share such information appears inconsistent with FSCO’s and DICO’s mutual resolve, as expressed in their LOU and MOU, to conserve resources and reduce redundancy and duplication.

[32] As alluded to earlier, information respecting a FSCO investigation of “former managers” of the CCU and of FSCO having laid “charges … in connection with the Croatian CU” was shared with DICO at the quarterly Liaison Committee meeting held September 2, 2010. There is no reference, direct or otherwise, in any of the minutes of the Liaison Committee meetings held between July 15, 2009 and October 15, 2012 to any of the three mortgages that bottom the s. 184 charge faced by the defendants.

(iv) Ad Hoc Communications

[33] Finally, DICO and FSCO have ad hoc communications with each other as required on a case-by-case basis depending on specific issues that may arise at a credit union. According to Foster, there were no ad hoc communications between DICO and FSCO respecting the CCU subsequent to the CCU coming under DICO’s administration

(v) Information Sharing Summary

[34] Information regarding the three impugned mortgages placed on the CCU properties was not included in the CIS Portal and, hence, was not routinely accessible by FSCO. The same information was not discussed at any Liaison Committee meetings prior to charges being laid. Nor were the mortgages discussed at any ad hoc meetings between DICO and FSCO. There is no provision in the CUCP Act or any other statute that compelled DICO to disclose the three questionable mortgages to FSCO, nor, according to Foster, did such obligation arise under the LOU or MOU. On the other hand, no statutory provision or term of the LOU or MOU prevented DICO from disclosing such information to FSCO.

D. EVIDENCE

(a) Introduction

[35] A more detailed chronology of significant events, DICO’s evolving appreciation of their salience and, ultimately, its decision to inform FSCO and lay the instant charge follows.

(b) A Narrative Account

(i) Supervision

[36] DICO assumed the role of supervisor of the CCU upon the Superintendent’s issuance of a Supervision Order on September 5, 2007. DICO was to serve as stabilization authority following the credit union’s cashing of $8 million in fraudulent cheques that engendered a state of capital deficiency and compromised the credit union’s liquidity. The CCU endeavoured to redress this problem in 2008 by raising additional capital, including the sale of $5 million worth of shares to Polla. Immediately following the recapitalization Vinski, then the General Manager of the CCU, issued a number of large loan facilities that were above the credit union’s legal lending limit and thereby attracted DICO’s attention. DICO’s suspicions were heightened when it learned that one of the loan recipients, Arnold Milan and his family, were involved in questionable transactions at a second credit union, that Vinski had an undisclosed conflict of interest by virtue of his participation in certain of the loans, and that there was insufficient security for at least some of the loans. Further, the CCU received notice that its insurance would be cancelled in August 2009, causing the CCU to then shut its doors.

(ii) Administration

[37] As a result of these developments, DICO issued an order placing the CCU under its administration on July 7, 2009, with DICO to “forthwith take control of the property and business of the Credit Union until such time as DICO may further order”. John Hutton was the DICO official responsible for the administration of the CCU. He in turn retained John Wood to serve as Acting General Manger of the credit union.

[38] On July 15, 2009, approximately a week after DICO assumed the role of administrator, the CCU received a letter from Troster, a lawyer, asserting that mortgages “consented to by the credit Union, on its properties, have been registered on title” and demanding payment of accrued interest payable to Beachfront Developments Inc. (“Beachfront”). The letter further noted that a copy had been sent to John Paul Evans, described as the CCU’s “solicitor”. John Wood, then serving as the CCU’s general manager, immediately retained counsel, the firm of Gardiner Roberts LLP (“GR”), to respond to Troster’s letter. By letter sent the same day, GR advised Troster that the CCU had “no knowledge of the alleged mortgages” and that Evans was not and had never been retained by the CCU. GR’s letter also demanded all documentation related to the CCU’s purported consent to the transactions.

[39] A CCU-directed title search quickly confirmed that mortgages, each in the amount of $2 million, had been registered against three CCU-owned properties: one in Toronto on June 25, 2009, one in Mississauga on July 9, 2009 and one in Hamilton on July 14, 2009. Cautions had also been registered against the two former properties. The three mortgages, as set out in an affidavit sworn by Wood in November 2009, “appear to have been registered and assigned by Mr. Troster acting on behalf of the charger (i.e. the Credit Union)”, the address for which was said to be care of John Paul Evans in Mississauga.

[40] Troster responded to GR’s letter the following day, July 16, 2009, identifying himself as the trustee for Beachfront and enclosing the requested documentation, including copies of the mortgages and a bank draft. Also included were an “Acknowledgement and Delivery Agreement” and a “Guarantee and Agreement to Purchase” (executed on March 16 and 17, 2009, respectively) that, together, were said to set out “the structure of the transaction”. That transaction, in brief, involved Polla, at the request of one Miroslav Anicic, advancing $2 million to Beachfront to be secured by a second mortgage on a property in Wasaga Beach (the “Loan”). Anicic, in turn, agreed to buy $5 million in CCU shares owned by Polla, with 25,000 of the shares to be purchased within four months and the balance within one year. The terms of the Acknowledgement further include Beachfront advancing $1,900,0000 from the Loan to the CCU, the CCU consenting to Troster registering cautions on the three CCU properties, Anicic’s direction that Polla endorse the first 25,000 share purchase in favour of Troster (the “Security”), and Troster discharging the cautions upon his receipt of the Security. Finally: failing Anicic’s purchase of Polla’s shares, the CCU consents to Troster’s securing of the loan through registration of mortgages on the three CCU properties and on the same terms and conditions as Polla’s Wasaga Beach mortgage.

[41] The Acknowledgement was accompanied by a Guarantee and Agreement to Purchase that confirms the Loan, Polla’s stake in the CCU, and the sale and purchase agreement as between Polla and Anicic. The copy of the bank draft included in Troster’s letter of July 16th was in the amount of $1,898,000 and payable to the CCU. Wood’s search determined that the CCU received the draft on March 17, 2009 with a Direction from Arnold Milan that $1.4 million of the funds be allocated to a line of credit in his own name and $406,000 to a line of credit in the name of his wife, Sara (or “Sarah”) Milan, and that the remaining $92,000 be applied towards an outstanding mortgage held by the CCU on a property (the “Tansley property”) owned by a numbered company, 864401Ontario Inc., for which Polla was a principal. In short, the CCU did not receive any value for the mortgages registered against its properties. Or, as put in subsequent civil pleadings of the CCU: “Any funds advanced by Beachfront were directed to, and were for the benefit of Milan, and were therefore not for the benefit of the Credit Union”.

[42] Vinski signed the Acknowledgement and Delivery Agreement on behalf of the CCU on March 16, 2009. He had been suspended as General Manager of the credit union in January 2009 and, accordingly, was not authorized to enter any agreements on behalf of the CCU in March 2009. In a Statutory Declaration provided to DICO’s counsel and dated August 31, 2009, Vinski said he, at Polla’s initiative, met with Polla and Troster at Troster’s office on March 12 and 13, 2009 and that he subsequently signed documents provided by Troster. Vinski, among other assertions, claimed that he did not tell Troster or anyone else that he had authority to sign anything on behalf of the CCU; although he knew he had been suspended as general manager in January, he nonetheless provided Troster with a business card identifying himself as the “Manager” of the CCU. Vinski also claimed that he did not understand that he was mortgaging or otherwise encumbering properties of the CCU, that he did not discuss the transaction with anyone at the CCU, and that he believed the money being advanced ($2 million, less finder’s and legal fees) was a loan to Arnold Milan to pay down his indebtedness to the CCU. The CCU formally terminated Vinski’s employment in April 2009.

[43] GR promptly responded to Troster’s letter of July 16, 2009. Having reviewed the documentation provided by Troster, GR advised, inter alia, that, Vinski, who had signed the agreements earlier provided by Troster, was suspended by the CCU on January 28, 2009, and thus “prohibited from entering into any agreements or signing any documents on behalf of the Credit Union at the time in question”. The letter further advised that:

[I]t is illegal to create a security interest in any property owned by the Credit Union pursuant to section 184 of the Credit Unions and Caisses Populaires Act, 1994, S.O. 1994. As a lawyer, you are deemed to know the laws of the Province of Ontario and you therefore ought to have known that the purported mortgages were prohibited by statute. The mortgages registered by you are accordingly unlawful and accordingly void.

The Credit Union is currently under the administration of the Deposit Insurance Corporation of Ontario but the Credit Union has no record of receiving any of the funds purportedly advanced by you as trustee for your client. We are currently investigating the matter. We will also be reporting this transaction to the Police as it would appear to be clearly fraudulent.

Finally, GR asked Troster to immediately expunge the three mortgages from title and cautioned that failure to do so would lead to immediate “appropriate proceedings”. There is no evidence before me of any fraud-related prosecution arising from the impugned “transaction”.

[44] GR, as counsel for the CCU, wrote John Paul Evans (described as the CCU’s “solicitor” in Troster’s letter of July 15, 2009) on July 22, 2009, enclosing the mid-July correspondence it exchanged with Troster. In an obvious allusion to s. 184, GR’s letter asserted that “it is our position that the agreements and mortgages were not authorized the Credit Union and that the mortgages are in fact illegal and contrary to the Credit Unions and Caisses Populaires Act, 1994.” (The letter was copied to both John Hutton and John Wood who were then responsible for administering the CCU on behalf of DICO.) Evans subsequently confirmed that he never acted for the CCU. He acknowledged dealings with Troster and Beachfront in March 2009 when acting on behalf of Polla who was then advancing money to Beachfront. He was not aware, he said, of any involvement of the CCU with respect to that transaction.

[45] The CCU, through its counsel GR, applied to the Director of Land Titles (the “Director”) on November 18, 2009 to have the mortgages and cautions registered against the three CCU-owned properties deleted from title “on the basis that the same are fraudulent instruments”. Attached to the application was the aforementioned affidavit of John Wood, the CCU’s acting manager. As essentially repeated in GR’s covering letter to the Director, Wood’s affidavit asserts, inter alia,

The Acknowledgement [and Delivery Agreement delivered by Troster on July 16, 2009] purports to have been signed by Josip Vinski (“Vinski”), A.S.O. on March 16, 2009, on behalf of the Credit Union. Vinski was suspended as General Manager of the Credit Union as of January 2009. Vinski was not authorized to enter into any agreements on behalf of the Credit Union as of March 2009. In any event, … it is illegal to create a security interest in any property owned by the Credit Union pursuant to s. 184 of CUPC A[ct]. Accordingly, no one, including Vinski, has ever been authorized to enter into a mortgage transaction, on behalf of the Credit Union, that creates a security interest in any property owned by the Credit Union.

Wood further attests that his affidavit is sworn “in support of the Credit Union’s application to have [the encumbrances] deleted from title … on the basis that the mortgages and the cautions were not authorized by the Credit Union and are fraudulent instruments”. (Neither the GR letter or Wood’s affidavit refers to the CCU then being under administration. Indeed, neither the letter nor the affidavit ever refers to DICO.)

[46] By Statement of Claim issued January 4, 2010, Beachfront commenced an action against the CCU seeking payment of approximately $2.1 million, plus interest, and possession and Court-supervised sale of the CCU properties against which the three mortgages were registered in order to use the proceeds to satisfy the debt claimed owed to Beachfront. (Any further effort to describe the byzantine if not abstruse architecture of the Beachfront transactions and their nexus to the CCU mortgage on the Tansley property is beyond the factual demands of these Reasons.) The CCU (through DICO, then acting as administrator of the credit union) issued a Statement of Defence and Counterclaim on February 16, 2010 reiterating its position that the impugned mortgages and cautions be deleted from title as fraudulent instruments. Relying on s. 184 of the CUCP Act, the CCU re-asserted that the mortgages were “also invalid as it is illegal to create as security interest in any property owned by the Credit Union”, and sought a declaration to this effect. In the event that the mortgages were found valid, the CCU sought contribution and indemnity from Vinski for any amounts the CCU was found liable to Beachfront. By way of an Amended Statement of Claim, Beachfront added Troster as a defendant to its civil action on the basis that if the three mortgages were invalid by virtue of s. 184 of the CUCP Act, as pled by the CCU, Troster was liable for the claimed amount by virtue of his negligence when acting as Beachfront’s lawyer at the time of the July 2009 transaction.

[47] As a result of Liaison Committee meetings and activity reports filed on the CIS Portal, FSCO was informed of various civil actions for and against the CCU. However, the information shared with FSCO in this regard was entirely generic. No specific details of the litigation were disclosed and, in particular, there was no mention, by name or any other identifying features, of the claim commenced by Beachfront. According to Foster, this skeletal level of information sharing with FSCO “was the same as with all” credit unions.

(iii) Liquidation

[48] DICO appointed itself liquidator of the CCU on October 18, 2010, with, as earlier noted, the authority to “exercise all of the powers of the Liquidator under the [CUCP] Act”, including the power to commence the instant prosecution. In the process of winding up the CCU’s affairs and realizing and distributing its property, DICO, as liquidator, commenced proceedings seeking, as part of a complex series of claims, to have the three impugned mortgages declared invalid and unenforceable because they contravened s. 184 of the CUCP Act. Polla and 864401 Ontario Inc. resisted DICO’s action. They claimed, inter alia, that the three mortgages were “good, valid and enforceable security” that did not contravene s. 184 of the CUCP Act or, alternatively, remained valid despite such contravention by virtue of s. 329 of the Act. (Section 329 preserves the validity of any contract entered into in contravention of a provision of the CUCP Act “unless otherwise expressly provided in this Act”.) Further, Polla asserted the right to set off any indebtedness to the CCU against the amounts he claimed the CCU owed him or his numbered company. On February 17, 2011, Superior Court Justice Newbould ordered, inter alia, an adjudication of the validity, enforceability, beneficial ownership and quantum of the three mortgages purportedly granted by the CCU. Justice Newbould’s Order was entered on February 25, 2011. A trial of the outstanding issues is scheduled to begin in April 2015.

(iv) The Current Prosecution

[49] By letter faxed on October 15, 2012, Andrew Poprawa, the president and CEO of DICO, advised the Superintendent of FSCO that DICO, as liquidator of the CCU, “intends to commence proceedings under the Provincial Offences Act for a breach of section 184” of the CUCP Act. Poprawa set out his “grounds” as follows:

Among the numerous highly irregular, if not fraudulent, transactions engaged in by CCU leading to its collapse was a transaction entered into in March 2009 whereby contrary to s. 184 of the Act … the former Chief Executive Officer, Josip Vinski agreed to provide a security interest in property of CCU as security for a $2 million loan being provided to CCU by Beachfront Developments Inc. Further to the Agreement, three mortgages were registered on three CCU owned branches. …

In agreeing to provide the [three particularized] mortgages CCU was clearly acting in contravention of s. 184 of the Act. In particular, the provision of the security interest was neither authorized by CCU’s by-laws nor approved in writing (or otherwise) by the Superintendent.

In the circumstances, DICO acting it its capacity as liquidator, conducted an investigation into the facts and circumstances which resulted in these three illegal mortgages being provided by CCU. Those circumstances revealed that in agreeing to provide the mortgages Vinski was aided and abetted by a lawyer acting for the lender, Steven Troster, and two other lawyers, Ferdinand (Fred) Polla who was a party to the Agreement and his lawyer on the transaction, John Paul Evans. The four men conceived of, structured and implemented an Agreement dated March 16, 2009 which required the provision of the illegal mortgages. Troster subsequently registered the mortgages in the name Steven Franklin Troster in trust.

…[T]he transaction contemplated by the Agreement dated March 16, 2009 is [also] highly suspicious as it contemplated Polla lending money to Beachfront so that Beachfront could lend money to CCU which was ultimately to be used somehow to facilitate a third party’s ability to purchase shares in CCU owned by Polla.

We have formed the view … that DICO, in its capacity as liquidator of CCU, has reasonable and probable grounds to believe that Vinski, Troster, Polla and Evans committed the offence.

In our view, the provision of a security interest in the property of the credit union was an egregious violation of the Act which completely undermined the scheme contemplated by the Act to protect the integrity of credit union property. …

[50] Poprawa then turned to s. 331 of the CUCP Act. “As you may be aware”, he wrote, “despite the powers and duties conferred under the Act on DICO in respect of the regulation of credit unions one of the anomalies which remain” is a limitation period, s. 331, premised on the timing of the Superintendent’s knowledge of the predicate facts. Accordingly, Poprawa requested that the Superintendent confirm that he “had no knowledge of the facts upon which the proceedings described above are based” prior to receipt of his, Poprawa’s, letter. The next day, October 16, 2012, and long before any reply was received from the Superintendent, Foster, on behalf of DICO as liquidator, swore an Information charging the four purported offenders with breaching s. 184 of the CUCP Act. (As Evans had since passed away, DICO withdrew the charge against him at the commencement of the proceedings before me.) DICO had never previously laid a charge under the CUCP Act.

[51] FSCO’s letter confirming that Poprawa’s letter of October 15, 2012 “was the first notice that FSCO received regarding these allegations” was mailed to Poprawa on January 3, 2013, some two and half months later. And on October 18, 2013 a Certificate, pursuant to ss. 16(g) of the FSCO Act, was issued certifying that the facts underlying the charge first came to the Superintendent’s knowledge on October 15, 2012.

[52] Section 17 of the FSCO Act prescribes that a certificate “that purports to be signed by or on behalf of the Superintendent shall be received in evidence in any proceedings as proof, in the absence of evidence to the contrary, of the facts stated” in the certificate.

(c) DICO’s Response to the Section 184 “Facts”

[53] John Hutton, who did not testify at this hearing, was tasked with the administration of the CCU on behalf of DICO on July 7, 2009. DICO first learned of the three mortgages about a week later, upon receipt of Troster’s letter of July 15, 2009. Foster was not directly involved with the CCU until he took on the duties of winding up the CCU upon DICO’s appointment as liquidator on October 18, 2010. He had, however, familiarized himself with the file and had discussed the matter with Hutton following the appointment of DICO as liquidator. Foster agreed that the documentation provided by Troster in mid-July 2009 “enable[d DICO’s] lawyers to see that entire [mortgage] transaction as … reduced to writing at the end of the negotiation”. He agreed that the lawyers who consistently characterized the impugned mortgages as a violation of s. 184 in their correspondence with Troster and pleadings in various forums, were retained by and acting on the instructions of DICO in its capacity as administrator. Foster also agreed that it was “one of [DICO’s] beliefs” in July 2009 that “the mortgages were contrary to the [CUCP] Act”. However, in Foster’s understanding DICO viewed the mortgages as nothing more than a “technical mistake” at that time. The Troster mortgages were not then considered pressing concern in comparison to the other fraud and liquidity problems besetting the CCU, and it was thought that the mortgages “could be discharged quickly” as they were fraudulent instruments rather than an enforceable CCU obligation. As explained by Foster, the mortgages only became a serious issue when DICO, as liquidator, was unable to realize on them, and the question of their validity was directed to trial by Justice Newbould in February 2011. In Foster’s words:

It was only when the fact that this mortgage stayed there and impeded the ability of the liquidator to do his job that suddenly this became rather than an inconvenient issue that had to be addressed, a very serious issue [that] has caused tremendous problems with [the CCU] liquidation.

[54] Even then, and despite the reciprocal notice requirement triggered in such “serious” circumstances by s. 4.3.8 of the MOU, DICO did not notify the Superintendent of any breach of s. 184 of the CUCP Act. Nor did Foster believe that the MOU – which he characterized as an “operational understanding” rather than a “legal commitment” – obliged DICO to do so. This, according to Foster, was because “there is really no sense in delegating the response or the activity to someone else when it’s totally within your statutory mandate” – meaning, here, DICO’s mandate as liquidator. Monid, testifying as FSCO’s institutional memory, confirmed that although FSCO had earlier laid charges against Vinski under the CUCP Act, it made no further inquiries of DICO respecting any other breaches of the Act once the CCU was placed under DICO’s administration. According to Monid, and as noted earlier, FSCO would not expect to be informed of every “serious breach” of the Act by DICO, but only those that focused on systemic risk to the industry as opposed to that to which an individual credit union might be exposed.

[55] Foster served as liquidator of the CCU on behalf of DICO. He was, however, not personally aware that any prosecution of an offence under the Act required compliance with a limitation period pivoting on the Superintendent’s knowledge until he first contemplated laying charges against the defendants. This prospect occurred, he said, “basically about the time of the Justice Newbould order” of February 25, 2011. The purpose of prosecuting the defendants was, in lay-speak, “to send a message”. Or, as Foster more fully explained:

It was then determined that this was such a serious matter that it warranted a provincial offences charge as a deterrent to send a signal to anyone else that ever considered this, that this would not be tolerated. … [I]t’s intended to be a very clear message to the credit union system that talks, that communicates by rumour all the time, that this type of behaviour does have consequences and will not be tolerated.

Later, during the course of a cross-examination intended to lay a foundation for an abuse of process motion, Foster was asked whether he agreed that DICO “knew all the facts that give rise to these charges … from the middle of July ‘09”. Foster replied:

We knew the facts you’re talking about. We did not know their importance, we did not appreciate until this transaction that these mortgages could not be dealt with as easily as we anticipated, and in fact they were a serious impediment to the liquidation, and for that reason, which has got nothing to do with collecting these funds (because, as you see we’re not going to even have a chance at those funds for another year or so), [we laid the charge]. The reason this was done was solely on public policy purposes.

In any event, Foster did not swear the Information charging the defendants with a breach of s. 184 of the Act until October 16, 2012, well more than a year and a half after Justice Newbould’s Order was formally entered. There is no explanation for the duration of this delay on the record before me.

E. ANALYSIS

(a) Introduction

[56] The analysis that follows is directed to the meaning and application of s. 331 of the CUCP Act and to answering the base question of whether the charge faced by the defendants was laid within the statutory limitation period prescribed by that provision. Again, s. 331 reads:

No proceedings for an offence under this Act shall be started more than two years after the facts on which the proceedings are based first came to the knowledge of the Superintendent.

As more fully developed below, I find that the “facts on which the proceedings are based” first came to the knowledge of DICO in mid-2009, in excess of three years before the “proceedings” at issue were “started” on October 16, 2012. I also find that the Superintendent (and, more generally but to the same legal effect, FSCO) had no direct or actual knowledge of these “facts” until apprised by DICO on October 15, 2012. What then remains at issue is whether FSCO, as urged by the defendants, can be fixed in law with knowledge of the material facts at any point before October 16, 2010, as a result of the doctrine of constructive or imputed knowledge, the Commission’s own failure to diligently pursue the issue, or on any other basis. If so, the Certificate issued by FSCO and certifying that the Superintendent had no knowledge of “the facts on which the proceedings are based” until October 15, 2012 must be disregarded in the face of “evidence to the contrary” – that is, evidence that raises a reasonable doubt about the validity, in law, of the critical assertion in the Certificate. Absent reliance on the Certificate and in the face of contrary evidence, DICO would then fail to meet its legal burden to establish to the requisite criminal standard that the terms of the statutory limitation period were here honoured. As a result, the Information before me would be quashed as statute-barred. If, however, the requisite knowledge cannot be assumed by or ascribed to the Superintendent prior to October 16, 2010, the prosecution remains viable, and failing the defendants’ establishment of an abuse of process their trial on the merits must advance.

(b) Statutory Limitation Periods

[57] A statutory limitation period is very different from the constitutional protection afforded accused persons against “unreasonable delay”. So long as the statutory conditions are met, a limitation period, unlike the right enshrined in s. 11(b) of the Charter, is of fixed rather than an elastic duration determined by case-specific circumstances. Absent positive hindrance of factual discovery, the calculation of a statutory limitation period is not affected by the interim conduct of the accused. Nor do societal factors, including the gravity of the charges or the public’s interest in their prosecution, factor into the assessment. Most importantly, the protection afforded by s. 11(b) is not engaged until a charge is laid unlike, as here, upon expiration of a two-year period commencing with the particularized regulator’s knowledge of the facts on which that charge is predicated. Put otherwise, s. 11(b) is concerned with post-charge delay while the limitation period that forms the subject of the current inquiry is concerned solely with pre-charge delay. That said, statutory limitation periods and s. 11(b) address overlapping concerns: prosecutorial laches, evidentiary fairness and the security interests of defendants.

[58] There are no reported cases expressly interpreting s. 331 of the CUCP Act. However, statutes of limitation are routine in civil and regulatory proceedings. Their purposes and the interests they protect are long settled. Three rationales are conventionally identified: certainty, evidentiary concerns and diligence. As set out by the Supreme Court in M.(K.) v. M.(H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, at paras. 22-24:

Statutes of limitations have long been said to be statutes of repose. . . . The reasoning is straightforward enough. There comes a time, it is said, when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations. . . .

The second rationale is evidentiary and concerns the desire to foreclose claims based on stale evidence. Once the limitation period has lapsed, the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim. . . .

Finally, plaintiffs are expected to act diligently and not “sleep on their rights”; statutes of limitation are an incentive for plaintiffs to bring suit in a timely fashion.

The Supreme Court has reaffirmed these passages on several occasions. See, for example, Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 32; Novak v. Bond, 1999 CanLII 685 (SCC), [1999] 1 S.C.R. 808, at para. 64; and McLean v. British Columbia (Securities Commission), 2013 SCC 67, [2013] 3 S.C.R. 895, at para. 63. There is no suggestion that these same rationales do not animate s. 331 of the CUCP Act.

[59] The application of these principles in the context of regulatory offences was addressed in R. v. Fingold, [1996] O.J. No. 3464 (C.J.), an Ontario Securities Act prosecution involving a statutory limitation period near-identically worded to s. 331 of the CUCP Act. As said by Babe J. at para. 58:

The obvious intent of this section was to provide some measure of protection for potential defendants from having to face charges arising out of transactions from the distant past without barring prosecutions for matters that the [Securities] Commission was unaware of, and providing the Commission a reasonable opportunity to investigate once it had been made aware of a matter, in order to make a considered decision on whether to prosecute, based on the usual considerations in exercising prosecutorial discretion such as the strength of the case and whether the matter is serious enough to warrant the allocation of resources necessary to prosecute it.

[60] The rationales underlying limitations statutes generally preference the security of potential defendants over those seeking to sue or charge them. However, jurisprudential construction of these provisions has increasingly endeavoured to balance the interests of defendants with those of the plaintiffs or regulators bound by a limitation rule. The Supreme Court summarized these “modernizing” developments in Novak and Bond, supra, at para. 65:

Arbitrary limitation dates have been discouraged in favour of a more contextual view of the parties’ actual circumstances. To take just one example, it has been well-recognized that it is unfair for the limitation period to begin running until the plaintiff could reasonably have discovered that he or she had a cause of action: [citations omitted]. Even on this new approach, however, limitation periods are not postponed on the plaintiff’s whim. There is a burden on the plaintiff to act reasonably.

[61] Put otherwise, and subject to the important “burden” flagged in Novak, there is a principle of discoverability that obtains with respect to limitation periods. One cannot prosecute that of which one is ignorant. Or, in the language of Peixeiro v. Haberman, supra, at para. 36: “discoverability is a general rule applied to avoid the injustice of precluding an action before the person is able to raise it”. The Supreme Court unanimously expressed the “general rule” in Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, at para. 77:

[A] cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence.

While most of the relevant authorities address civil actions, the same principle, for reasons of public policy and fairness, applies to the assessment of pre-charge delay in the case of regulatory authorities as it does to a plaintiff’s commencement of a cause of action.

[62] As with many similar regulatory statutes, the limitation period at issue is engaged not by the occasion of an event or transaction but by when the relevant “facts … first came to the knowledge” of the named regulator – here, the Superintendent. In construing closely comparable provisions, courts unsurprisingly have had cause to address both the meaning of the word “facts” and the standard by which to determine their occurrence and when they come within a regulator’s knowledge.

[63] The standard is an objective one. And the “facts” are simply those that make out the elements of the offence. The seminal, frequently quoted and most succinct expression of these propositions appears in Ontario (Securities Commission) v. International Containers Inc., [1989] O.J. 1007 (H.C.), where Carruthers J. wrote:

The yardstick by which … to measure the nature of the facts for purpose of [a limitation period] is that which constitutes the essential or material averments required by law. This is to be determined on an objective view of that which was available to the Commission.

Carruthers J. further made clear that the correct approach to assessing the “facts” is austere: the facts “are not that which [the Commission] thinks is necessary or all that which may be admitted into evidence at the trial or the subject of the granting of particulars” (emphasis added).

[64] Keenan J., expanded on these themes in dismissing an appeal brought by the same Securities Commission in the earlier-noted case of R. v. Fingold, [1999] O.J. No. 369 (C.J.(G.D.)), at para. 61:

The process of evidence gathering, verification and analysis is to take place during the limitation period. That process is not to be used as any ground for delaying the commencement of the limitation period which is to be objectively viewed as the point at which information of sufficient cogency to amount to the facts upon which the prosecution is based, first came to the knowledge of the Commission. When the point of commencement is in issue, it is for the Court to determine on an objective standard when those facts first came to the knowledge of the Commission. It is not the prerogative of the Commission to decide when the limitation period commenced by asserting a need to investigate or verify the original information. [Emphasis added.]

“Facts”, as Keenan J. observed at paras. 56, “must mean more than mere rumour or gossip”, but the requisite standard of “sufficient cogency” falls well short of independent validation or persuasive proof. As said at paras. 56 and 59:

It must be information obtained from an identifiable source which might reasonably be expected to have such information and obtained in circumstances which would tend to support the accuracy and reliability of the information given. Similarly, “knowledge” does not require proof or verification to constitute knowledge.

In order to trigger the commencement of the limitation period, it is not necessary that the [regulator] have acquired all the details of evidence and the particulars that are to be introduced in evidence at trial.

(See also, Romashenko v. Real Estate Council of British Columbia, [2000] B.C.J. 1292 (C.A.), at para. 17; Theriault v. Canada (Royal Canadian Mounted Police) (2006), 2006 FCA 61, 267 D.L.R. (4th) 169 (Fed. C.A.), at paras. 31-32, 45, 50 and 69.)

[65] To be clear: it is the apprehension of the salient facts and not an appreciation of their potential legal implications that instigates a limitation period. A regulator’s assessment of whether these facts amount to an offence or warrant a prosecution, let alone one likely to result in a conviction, is factored into the interval prescribed by a statutory limitation period. It does not suspend or extend it. Nor do most limitation periods, including that here at issue, prescribe a standard of persuasion that must be met to trigger its operation. Section 331 speaks only of when “the facts on which the proceedings are based first came to the knowledge of the Superintendent”. The clock does not begin to run only when the Superintendent determines that a violation of the Act impedes his office’s execution of its regulatory or solvency management functions or interferes with the discharge of other statutory duties. Nor is the provision effective only once the Superintendent forms “reasonable” or “probable” “grounds to believe” that a CUCP Act offence has been committed. As said in Theriault v. Canada (Royal Canadian Mounted Police), supra, at para. 69:

To start a limitation period running, it is not necessary to have available all the evidence or information required to carry out a prosecution. It is not necessary to have reasonable grounds for prosecution.

Nor, finally, is s. 331 restricted only to those facts that underlie a “serious breach” of the Act; that language is a purely administrative gloss added by FSCO and DICO to their MOU and the predecessor LOU. As plainly set out in the former agreement: “In the event of a conflict between the provisions of this MOU and the law, the law will govern”.

[66] Absent a contrary provision in an individual statute, the conventional limitation period for provincial offences in Ontario is six months: Provincial Offences Act, s. 76(1). It is reasonable to infer that the Legislature, bearing in mind the complex and sometime arcane transactions that occur within the financial sector, intended to grant FSCO a generous two years to investigate the forensic implications, if any, of “facts” within its knowledge on the basis that the Superintendent would thereby have adequate time to determine whether those facts give rise to an offence and, if so, justify an exercise of its discretion to prosecute. Any longer period is conclusively deemed to trespass on the interests protected by the limitation period.

(c) The Parties’ Positions

[67] The key question, then, is when were the facts apprehended – whether or not forensically comprehended – by the Superintendent? Unlike most inquiries into the application of statutory limitation periods, the instant case is complicated by the requisite knowledge clearly resting in one Crown body, DICO, and well more than two years before the charge was laid, while the limitation period, on its face, is only activated when that knowledge reposes in a second, here the Superintendent (or, more broadly, the agency, FSCO, for which the Superintendent serves as the CEO). The core inquiry is further complicated by virtue of the two Crown agencies operating within a single regulatory regime in which they both share and partition superintendence of one sector of the financial service industry.

[68] The defendants say that the institutional distinction between DICO and FSCO is of no legal moment for purposes of determining compliance with the limitation period in the circumstances of this case. FSCO, it is said, effectively delegated its regulatory powers to DICO upon the occasion of the CCU’s solvency crisis and, accordingly, DICO’s knowledge of the facts is properly imputed to its principal, FSCO. In the alternative, the defendants allege that FSCO had a duty – given the information of which it was aware about the CCU’s financial difficulties and history of legal improprieties and, as well, as primary regulator – to make timely inquiries about facts respecting the CCU that might give rise to charges under the CUCP Act. Its failure to do so, the argument continues, was so negligent or unreasonable as to negative any claim of non-discoverability.

[69] DICO repudiates both defence theories vesting the Superintendent with “knowledge” prior to FSCO learning on October 15, 2012 that DICO intended to lay the s. 184 charge against the defendants. Through its prosecutor, DICO effectively allows that it, DICO, had knowledge of the predicate facts more than two years before the Information was sworn on October 16, 2012. If somewhat more gingerly, DICO is also prepared to acknowledge that it might have acted with greater diligence in discovering the legal consequences of those facts, at least those invoking a charge under s. 184 of the CUCP Act.

[70] However, says the prosecution, DICO’s knowledge and any dilatoriness on its part are not to be visited on the Superintendent. What, says DICO, the defendants characterize as a delegation of FSCO’s powers was actually a statutory transfer of responsibilities from one independent body, FSCO, to another, DICO, upon the introduction of the October 2009 amendments to the Act. DICO, in short, was not acting at the behest or as an agent of FSCO but, rather, as a legally autonomous entity exercising those duties assigned it, and not FSCO, by the Legislature.

[71] Nor, says the prosecution, did FSCO fail to pursue the factual foundation for the s. 184 charge that is the subject of this prosecution. Given the statutory division of powers occasioned by a credit union’s insolvency, there is no basis to infer that FSCO (and perforce, the Superintendent) did not act diligently within its own sphere of responsibility. In view of the structure of the amended CUCP Act and the information sharing regime grounded in the distribution of powers prescribed in the amended Act, the Superintendent’s Certificate is an accurate statement of when he and FSCO were fastened with the requisite knowledge of the material facts and, further, there is no reasonable basis to infer that these facts were discoverable any earlier by FSCO.

[72] I turn now to resolving the dispute as to the basis and timing of the Superintendent’s awareness of the “facts” underlying the prosecution pursuant to s. 184 of the CUCP Act. I begin with the timing of DICO’s knowledge of these facts. I then address the questions pertaining to the legal foundation, if any, for FSCO having knowledge – by imputation, constructively or otherwise – of these same facts more than two years prior to the “start” of the proceedings before me.

(d) DICO’s Knowledge of the Facts

[73] The impugned transactions date from March 2009. However, it was Troster’s letter of July 15, 2009 that clearly alerted DICO to the facts underpinning the current prosecution. DICO was then acting as the CCU’s administrator. It quickly confirmed that three mortgages had indeed been registered on properties owned by the CCU and that cautions attached to two of them. At the request of the CCU’s counsel, GR, Troster promptly provided documentation setting out the legal and financial bases for the encumbrances or, in Troster’s words, “the structure of the transaction”. Knowing that Vinski had no authority to endorse the agreement on behalf of the CCU and that the impugned mortgages had neither been “authorized by [the CCU’s] by-laws” nor “approved, in writing, by the Superintendent”, GR, acting on DICO’s instructions, immediately cautioned Troster about a violation of s. 184 of the CUCP Act. As said in its letter of July 16, 2009,

[I]t is illegal to create a security interest in any property owned by the Credit Union pursuant to s. 184 of the [CUCP Act]. As a lawyer, you … ought to have known that the purported mortgages were prohibited by statute. [They] are accordingly unlawful and accordingly void.

[74] I infer from this exchange, and the correspondence that soon followed, not only that DICO, acting as administrator, knew of the predicate “facts” by mid-July 2009 but, as well, that it swiftly recognized that they amounted to a breach of s. 184 of the Act. DICO’s further investigations only reinforced its early assessment. Through Vinski’s statutory declaration and (if to lesser degree) Evans’ contribution, by late-August 2009 DICO had confirmed the elements of the transaction disclosed by Troster and, further, had deciphered the mechanics of its execution. Not only had its own lawyers identified a violation of s. 184 in its July 2009 letters to Troster and Evans but, in its February 2010 pleadings (more than two and a half years before it notified the Superintendent), DICO effectively acknowledged that the mortgages might be “valid” and sought alternative relief to simply having them set aside. Further, the “facts” recited in Poprawa’s letter of October 15, 2012 to the Superintendent and said to amount to “reasonable and probable grounds” for the s. 184 offence are materially no different than those “facts” available to and investigated and confirmed by DICO in mid-2009.

[75] The prosecutor argues that until Justice Newbould’s Order of February 2011, DICO was still trying to decide whether the Troster mortgages created a debt obligation on behalf of the CCU, and therefore remained uncertain until then as to whether a s. 184 offence was made out. I have considerable difficulty with this submission. It is inconsistent with the unqualified position taken by counsel for DICO in its correspondence and pleadings as to a violation of s. 184. Further, Justice Newbould’s Order did not decide the validity or enforceability of the mortgages, but only that a trial – now scheduled for April 2015 – was the appropriate venue to determine these issues. Put otherwise, the uncertainty said to earlier plague DICO’s resolution of the question of whether an offence had occurred has not changed. Its determination has merely been delayed. Further, Poprawa’s letter to the Superintendent discloses no hint of equivocation as to the integrity of the charge facing the defendants; rather, the very “facts” disclosed to and confirmed by DICO more than three years prior are there characterized as “an egregious violation of the Act”.

[76] In my view, the “facts” known to DICO in mid-2009 were not materially amplified or diluted by any intermediate events during the more than three years that then passed before the defendants were finally charged. What did change in this interregnum was DICO’s appreciation of the impact of the “facts” on its efforts to liquidate the CCU and its consequent decision to pursue the defendants, by way of the instant prosecution, as a lesson to other like-minded miscreants in the same financial sector. Assuming DICO’s knowledge alone was determinative of the issue before me, the earlier-cited authorities make patent that neither of these latter developments (that is, neither the mortgages’ impediment to the CCU’s efficient liquidation nor the general deterrence purpose of laying a charge under s. 184 of the Act) has any role in assessing the application of or compliance with the limitation period. Determined objectively, “the facts on which the proceedings are based first came to the knowledge” of DICO while serving as administrator of the CCU in the summer of 2009. DICO then knew that a security interest, the mortgages, had been created in the credit union’s property, that the encumbrances were unauthorized, and the names of parties responsible for the impugned transactions. Further (although unnecessary for a strict limitation period analysis), DICO appreciated as fully in August 2009 as it did when it swore the Information in October 2012 that these facts legally supported the charge now faced by the defendants.

[77] DICO was appointed liquidator of the CCU on October 18, 2010. It then assumed the power to lay charges under the Act. It was not, however, until it digested the potential impact of Justice Newbould’s Order of February 25, 2011 that DICO first contemplated charging the defendants with an offence under s. 184. While Foster, as the personal representative of DICO as liquidator, might well have been expected (and is certainly presumed) to know the provisions of DICO’s enabling legislation, he testified that he only then learned of the existence of a statutory limitation period predicated on the Superintendent’s knowledge of the facts material to the offence. More than a year and half later, on October 15, 2012, DICO, by way of what Foster described as a “courtesy”, informed the Superintendent of the facts respecting the alleged breach of s. 184 and, the next day, charged the defendants. The Information was sworn just two days shy of the second anniversary of DICO’s appointment as liquidator and coincident assumption of the power to commence a prosecution. Put otherwise: if DICO’s knowledge, as liquidator, was attributable to or otherwise legally conflated with that of the Superintendent such that the limitation period was triggered when “the facts … first came to the knowledge” of DICO acting in that capacity, the charge would have been laid at the very outer margin of, but still within, the two-year grace interval afforded by s. 331.

[78] This logic, if such it is, may explain the somewhat peculiar locution employed by Poprawa in his October 2012 letter to the Superintendent. In outlining his basis for charging the defendants, Poprawa reports that DICO, “acting in it capacity as liquidator, conducted an investigation into the facts and circumstances which resulted in these three illegal mortgages being provided by CCU”, which investigation ultimately “revealed” the alleged offence. This assertion is facially disingenuous or, at minimum, inconsistent with the evidence led at this hearing. DICO, qua liquidator, conducted no initial, fresh or supplementary investigation into the facts. Again: the only reasonable inference arising from my review of the record is that DICO was informed of, investigated and confirmed – that is, knew – the material “facts” while acting as administrator of the CCU some 14 or 15 months before it assumed the role of liquidator, and more than three years before it first shared this information with FSCO. DICO-as- administrator silver-plattered DICO-as-liquidator with the information capable of supporting a charge for contravention of s. 184, and Foster was at pains to make clear that he was fully briefed by Hutton (who oversaw DICO’s administration of the CCU) respecting the impugned mortgages when he assumed control of the liquidation process. DICO’s appreciation of the gravity or potential consequences of the alleged offence likely evolved during the discharge of its responsibilities as liquidator, but it well knew the underlying facts when, as administrator, it appointed itself to the former office. It institutionally inherited that knowledge by virtue of the informed and seamless transfer from administrator to liquidator within the same Corporation. Keenan J.’s dictum in Fingold, supra, at para. 61, here bears repeating: “It is not the prerogative of the [regulator] to decide when the limitation period commenced by asserting a need to investigate or verify the original information”.

(e) The Superintendent’s Knowledge of the Facts

(i) Introduction

[79] There is no caselaw interpreting s. 331 of the CUCP Act. While similar statutory limitation periods have attracted judicial attention, determining the meaning and objects of this particular provision is largely a matter of first impressions. In Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53, at para. 77, the Supreme Court recently reaffirmed that,

Under the modern approach to statutory interpretation, “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26.

The Supreme Court endorsement of Professor Driedger’s expression of the rule first appears in Rizzo and Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21. In Novak v. Bond, supra, the Court expressly applied the Rizzo formulation to the construction of a limitation period. As there distilled, at para. 63: “The cardinal principle of statutory interpretation is that a legislative provision should be construed in a way that best furthers its objects”.

[80] The contextual discernment of a provision in light of the legislature’s intention and the scheme and object of the statute in which it’s embedded can prove a daunting task. It is even more challenging where, as here, amendments to the statute impact, at least arguably, on the construction of the unaltered provision at immediate issue. More specifically, the CUCP Act was here amended so as to empower one regulator, DICO, to lay a charge while the general provision prescribing a limitation period, s. 331, remains unchanged and triggered exclusively by the knowledge of a co-regulator (FSCO) of the facts underlying that charge even if, as in instant situation, it has no operational role in supervising the subject credit union or investigating the offence. From the defendants’ perspective, an overly rigorous construction of s. 331 risks defeating the protections afforded by the limitation period. In DICO’s view, anything other than a strict construction of “Superintendent” and one sensitive to the regulators’ own practice respecting the provision threatens to undermine the Legislature’s intendment, particularly that expressed through the 2009 amendments. This tension frames the central dispute on this application. It is a variant of the same tension between the public interest in prosecuting wrongdoers and the interests protected by a statutory limitation period that informs the judicial examination of every challenge to the application of the rule in a regulatory context.

[81] I accept that the FSCO and DICO are distinct legal entities. I accept, as well, that an orthodox application of the doctrine of discoverability should here focus on the conduct of FSCO and not DICO. While FSCO’s predominant enforcement mandate remained undisturbed, I accept, further, that the 2009 amendments to the CUCP Act transferred the frontline regulatory oversight of credit unions in financial distress to DICO. I think it contrived to read this transfer of responsibilities, including the power to lay charges when acting as liquidator, as a delegation from FSCO to DICO, or to conceive of FSCO and DICO as engaged in a principal-agent relationship. While delegation and agency may be useful analytical tools in some assessments of limitation period compliance, neither construct fits the statutory scheme nor regulatory culture that here defines FSCO’s and DICO’s respective institutional roles.

[82] However, in order to give meaningful effect to what I view as the intended purpose of the limitation period I do conclude that the s. 331 clock began to run once DICO had knowledge of “the facts on which the proceedings are based” or, at minimum, well more than two years before the Superintendent was directly notified of the material facts. As a result, the prosecution before me is statute-barred. I reach this determination on two alternative footings, both of which engage (indeed, simply re-assemble) many of the same evidentiary building blocks. The first rests on the principle of functional equivalence and the risk of generating absurd results that flows from condoning the interpretation urged by the prosecution. The second, founded on the doctrine of discoverability, holds that FSCO “ought to have known” of the facts grounding the s. 184 breach more than two years before it was informed by DICO and that its prior ignorance is substantially a product of its own failure to act in a reasonably diligent manner.

(ii) Functional Equivalence, Absurdity and Reasonableness

[83] The 2009 amendments to the CUCP Act transferred regulation of credit unions in financial distress from FSCO to DICO. The transfer included granting DICO the power to lay charges for contraventions of the Act when it acted in the capacity of liquidator of a credit union. The prosecution argues that had the Legislature intended to impose a limitation period on DICO in its exercise of this enforcement power or invite other than a strict reading of the terms of the limitation prescribed in s. 331, one would have expected this purpose mirrored in the package of 2009 amendments to the CUCP Act. The amended Act, however, is silent in this regard, a silence the prosecution construes as a purposeful reflection of the Legislature’s intention to delay the commencement of any limitation period until such time as the Superintendent, or more generally FSCO, has knowledge of the facts on which alleged offence is based – irrespective of any knowledge vested in a co-regulator on which Superintendent relies to conduct its own enforcement responsibilities and comply with s. 331 and irrespective of how long the co-regulator may have harboured that knowledge.

[84] There is an attractive literalism to the prosecution’s proposed resolution of the instant dispute: the limitation period does not begin until the Superintendent has in fact the requisite knowledge. Period. However, as said by the Supreme Court respecting the construction of limitation periods in the regulatory context, “no order … is immune from appellate review for its reasonableness”: McLean v. British Columbia (Securities Commission), supra, at para. 65.

[85] There are here sufficiently disquieting consequences to adoption of the prosecution’s interpretation to at least compel consideration of its reasonableness. The interplay between the relevant provisions of the CUCP Act, as amended, is neither self-executing nor a model of clarity. The regulatory structure is somewhat unusual by virtue of what I earlier described as the “shared and partitioned superintendence” of credit unions by FSCO and DICO. And then there are the long-settled rationales for limitation periods. These concerns invite more than a literal reading of the provision at issue in the immediate regulatory context. The appropriate analysis is one that includes a holistic review of the statutory framework, the division of powers between FSCO and DICO and the information and regulatory management arrangements fashioned by the two Crown agencies to fill the lacunae left by the Legislature. There is no other way to give meaningful effect to the Supreme Court’s directive in Novak v. Bond, supra, that “a legislative provision should be construed in a way that best furthers its objects”.

[86] The prosecution’s reading of the Act undoubtedly risks extending the time for which a suspected wrongdoer may be charged with a regulatory offence. This is for more than a hypothetical possibility. The instant case affords one tangible illustration of the risk realized. The Act prescribes a two-year limitation period predicated on when one regulator, the Superintendent, garners knowledge of the facts underlying the offence charged. As negotiated between the two agencies, DICO, a co-regulator, bore sole regulatory jurisdiction over the affairs of the CCU at the critical times. DICO also possessed the requisite knowledge. It did not, however, inform the Superintendent of the material facts until more than three years after it learned of them. Yet, on DICO’s theory, the defendants remain liable to prosecution. On the same construction, offence-related proceedings against any defendant that arise during the administration or liquidation of a credit union could be lawfully deferred indefinitely – so long as a prosecution eventually “started” no longer than two years after DICO, finally and whenever, informed the Superintendent of the underlying facts.

[87] Read against the rationales for any limitation period, this interpretation approaches the perverse. It effectively converts a defence shield into a prosecutorial sword by which the commencement of a prosecution under DICO’s insolvency watch can, through DICO’s mere inaction, be interminably prolonged. DICO itself appears to have recognized the disconnect between this construction of the Act and the protections afforded by s. 331. It, of course, was exclusively positioned to secure the requisite facts and exclusively responsible for regulatory superintendence during the CCU’s insolvency. In his earlier-quoted letter of October 15, 2012 to the Superintendent, Poprawa, then DICO’s CEO, alluded to the illogic of a limitation period triggered by the knowledge of the Superintendent who, as a result of the two Crown agencies’ protocols and practices, remained ignorant of the facts underlying the offence until DICO decided, in its discretion, to inform FSCO, its sister regulator. It is the peculiarity of this arrangement that, in my view, moved Poprawa to characterize it as an “anomaly”.

[88] Nor is this the only anomaly that flows from the prosecution’s proposed construction. FSCO, it may be recalled, retains the authority to charge persons for offences under the CUCP Act at any time – including offences of which it becomes aware while DICO acts in the capacity of administrator or liquidator of a credit union in financial distress. FSCO-initiated charges would, of course, be bound by the limitation period set out in s. 331: a prosecution would have to commence within two years of FSCO acquiring the requisite knowledge or it would fail as statute-barred. On the construction urged by the prosecutor, the interests of persons whose conduct is alleged to contravene the Act are subject to very different protection if the facts grounding their offences come first to the attention of DICO rather than FSCO. In this latter case, the s. 331 two-year limitation period is activated only once DICO elects to notify the Superintendent of the relevant facts, no matter how long after those facts were acquired by DICO. No explanation has been offered for this invidious distinction in the treatment of suspect offenders, nor can I conceive of one. It appears counter-rational to suggest that the Legislature intended to exempt DICO from the restraints of a limitation period once a credit union is under its administration to permit sufficient time for the investigation of potential offences. Indeed, the justifications for a lengthy limitation period in cases of regulatory offences are attenuated where, as here, the regulator in question, DICO, exercises complete control over the subject credit union and has immediate and unlimited access to all its books and records.

[89] All exercises of statutory power are subject to judicial review. As said in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 28, the “function” of such review is “to ensure the legality, the reasonableness and the fairness of the administrative process and its outcomes”. The application of a reasonableness standard of review imports an element of deference in matters of statutory interpretation: Dunsmuir, supra, at para. 54. Strictly speaking, the rule applies to administrative decision-makers interpreting their home statutes, a situation that does not obtain in the presenting scenario. (See, by way of further authority, Ontario (Community Safety and Correctional Services) v. Ontario (Information and Privacy Commissioner), 2014 SCC 31, at para. 26.) In any event, the conventional bases for deference are here readily displaced. It cannot realistically be said that FSCO and DICO, the two CUCP Act regulators, have any “specialized area of expertise” or “particular familiarity”, as it is sometimes put, in the interpretation of the provision at issue. The relevant amendments are of recent vintage, coming into force very soon after DICO became aware of the material facts. Section 331 was not amended, yet even Foster (DICO’s helmsman during the CCU’s liquidation) was unaware of the existence of a statutory limitation period until sometime after Newbould J.’s Order. The instant prosecution, as already noted, was the first ever brought by DICO under the Act. Further, the MOU is completely silent on s. 331 and the division of regulatory authority that arises upon insolvency under the amended legislation. It is hardly surprising that DICO itself had difficulty reconciling its statutory grant of an enforcement power with the controlling influence of the Superintendent’s knowledge on the initiation of the limitation period. Even apart from such “anomalies”, it appears that Poprawa was doubtful whether the Superintendent himself was familiar with the statutory limitation provision, introducing the subject in his October 2012 letter with the words “As you may be aware, …”.

[90] In McLean, supra, at para. 32, the Supreme Court observed that, “legislatures do not always speak clearly” when drafting administrative and regulatory statutes. They also, as in the case before me, do not address through statute all the circumstances that may arise in the supervision of a regulated industry. In particular, the reconciliation of s. 331 with DICO’s expanded statutory powers was not addressed in the amended legislation. It was plainly left to FSCO and DICO, the two Crown agencies responsible for enforcing the Act, to design and implement an appropriate protocol – one, as I read the necessary implications of the legislation, that facilitates the agencies’ co-operative performance of their regulatory duties while respecting s. 331 and the interests it protects.

[91] Again, the MOU nowhere speaks to s. 331. The agreements co-developed and instituted by FSCO and DICO serve to undermine the rationales for the limitation period. It is only FSCO’s statutory mandate that imposes a responsibility to enforce the Act and it is only FSCO’s knowledge, through the Superintendent, that triggers the protections afforded by s. 331. Yet the agencies’ protocols insulate FSCO from the information it needs to activate s. 331 once DICO assumes the role of administrator or liquidator. The conventional information exchange between the two agencies is curtailed once DICO appoints itself administrator of a credit union. DICO no longer deposits institutional detail into the CIS Portal to which FSCO has routine access before such appointment. The information shared at Liaison Committee meetings is restricted to matters of systemic concern only. And, as apparent from the record, ad hoc communications between DICO and FSCO failed to touch on any matters that may ground charges under the Act, at least in the case of the CCU.

[92] FSCO maintains a plenary jurisdiction to charge alleged offenders for contraventions of the CUCP Act. The 2009 amendments extended to DICO, while acting in the capacity of liquidator, a parallel authority to lay a charge under the same Act. However, I cannot find that the Legislature thereby intended to eliminate the protections afforded by s. 331 or substitute any other limitation period for that prescribed in the provision. Section 331 was not amended, nor were the limitation periods capping pre-order delay in the case of administrative penalties. Despite DICO’s power, qua liquidator, to lay a charge under the amended Act, no separate or special statutory limitation rule was created for liquidators, or DICO more broadly. Nor was any exception attached to s. 331 that relaxed the safeguard there afforded potential wrongdoers in cases in which DICO has primary regulatory oversight. The language of the provision makes clear that it applies to any and all “proceedings for an offence under this Act”. Further, I remain unconvinced that there is any reasonable basis in policy or practice to infer that the Legislature, in granting charging authority to a liquidator, must have contemplated that DICO, once so appointed, would control the timing of both a prosecution and the Superintendent’s related knowledge and, thus, the running of the limitation period clock.

[93] On the prosecutor’s theory, the settled rationales for any limitation period have no application to the prosecution of suspect offenders once a credit union is subject to insolvency superintendence by DICO, unless and until DICO, acting as administrator or liquidator, elects to inform the Superintendent of the facts said to ground an offence under the Act. Only then, it is said, is the limitation period triggered. I find this approach inconsistent with the legislative history of the CUCP Act. If the Legislature intended so drastic a departure from what I take to be the conventional objects of the rule prescribed in s. 331 it would surely have said so in the course of amending the Act in 2009. It is not as though the Legislature had never distinguished between DICO and FSCO in the context of regulatory sanctions. As noted earlier, ss. 331.2 and 331.3 of the Act authorize both FSCO and DICO to levy administrative penalties, but the contraventions for which each of the two agencies is empowered to impose such sanctions is expressly, exhaustively and independently set out in these provisions. Had the Legislature sought to vary the universal application of s. 331 it could readily have created an exception or a special regime applicable to DICO when acting as administrator and liquidator. It did not. And I am loath to infer the Legislature’s intention to abandon the purpose of limitation periods or otherwise depart from the repeatedly reaffirmed rationales for their existence without express words of direction or exemption. As recently said by a unanimous Supreme Court in R. v. Summers, 2014 SCC 26, at para. 56, with respect to the proper interpretation of amendments to the pre-sentence custody credit provisions contained in s. 719 of the Criminal Code, it is “inconceivable that Parliament intended to overturn a principled and long-standing sentencing practice, without using explicit language”. Rather than signaling an intention to suspend the commencement of s. 331 until such time as DICO chooses to alert the Superintendent, the Legislature’s silence speaks to the abiding application of the limitation period to the entirety of the regulatory process, irrespective, in my view, of which of the two named regulators is then “in charge”.

[94] Nor, in my view, does it make sense to suggest that DICO, if subject to s. 331, here met the statutory obligation by informing the Superintendent of the relevant “facts” and laying the charge – if only two days shy of the outer limit – within two years of the date it appointed itself liquidator of the CCU. This argument necessarily rests on DICO’s power, as liquidator, to prosecute and, in effect, its assumption of FSCO’s authority in this regard while it oversees solvency management. However, the transfer of regulatory responsibilities to DICO encompasses its role as administrator as well as liquidator of financially distressed credit unions. It has no authority to lay an Information when acting in the former capacity yet, pursuant to its operational protocol with FSCO, is not expected to share prosecution-relevant information with the Superintendent when wearing either an administrator’s or liquidator’s hat. Accordingly, even if s. 331 embraced DICO qua liquidator, the protection afforded by the provision is then effectively suspended (for more than 15 months in the instant case) so long as DICO acts as administrator. I cannot credit the suggestion that the Legislature intended this result or that it conforms to the policy objectives of the statutory limitation period. As said in Theriault v. Canada (Royal Canadian Mounted Police), supra, at para. 63, “an interpretation which does not take into account the intended purpose and the context in which the [limitation period] provision occurs results in making it completely meaningless and depriving it of its content and consequences at the expense of the offender”.

[95] Theriault v. Canada, supra, is the single case, if imperfectly so, analogous to the contest framed by the instant application. The appellant was an RCMP officer subject to disciplinary proceedings. He objected to the proceedings on the basis that they were barred by a limitation period, s. 43(8) of the Royal Canadian Mounted Police Act, R.S.C., 1985, c. R-10, which read:

No hearing may be initiated by an appropriate officer under this section in respect of an alleged contravention of the Code of Conduct by a member after the expiration of one year from the time the contravention and the identity of that member became known to the appropriate officer.

As in the matter before me, the applicable limitation period is knowledge- rather than event-based. The key issue in the Theriault case turned on whether a member of the RCMP regulatory apparatus with knowledge of the relevant facts was included in the phrase “appropriate officer” for purposes of applying s. 43(8). The Federal Court of Appeal’s purposive construction of these words bears directly on the meaning of the phrase “first came to the knowledge of the Superintendent” in s. 331 of the CUCP Act.

[96] The Adjudication Board that initially conducted the appellant’s disciplinary hearing concluded that a superior officer, Supt. Sugrue, acquired the requisite knowledge as supervisor of an investigation into the suspect member’s alleged misconduct. Sugrue was later temporarily appointed an acting commanding officer, a position that rendered him, for strict definitional purposes, an “appropriate officer”. “However”, as Letourneau J.A. explained, at para. 53, on behalf of the Federal Court of Appeal, “the Adjudication Board excluded him [from the statutory definition] on the ground … that when he was acting as appropriate officer he did not have the knowledge in that capacity, but in his capacity as officer responsible” for the preliminary investigation and, as a result, the appellant could not rely on the limitation period prescribed in s. 43(8). The Federal Court of Appeal dismissed the Board’s reasoning as “artificial”. It held that the filing of the disciplinary complaint against the errant RCMP member was “beyond the limitation period” and, as a result, it reversed the tribunal and judicial decisions below and set aside the appellant’s dismissal.

[97] The following passages, as set out at paras. 58-65 of the Theriault decision, are especially relevant to the matter before me:

It may have been desirable for purposes of internal management that the proceedings be initiated by the incumbent appropriate officer, Commanding Officer Lange, rather than by the acting appropriate officer, Supt. Sugrue, but that is not the purpose of subsection 43(8). The two officers could speak to each other in order to carry out the purposes of the prosecution contemplated by the Act, and so comply with the requirements of the subsection 43(8) limitation.

The requirement that the acting appropriate officer pass on his knowledge to the incumbent appropriate officer is apparent from the fact that the knowledge referred to in subsection 43(8) is knowledge which relates to the position or function, not to its incumbent. It is institutional knowledge, not personalized or ad personam knowledge. …

A literal interpretation of subsection 43(8) leads to an absurdity that Parliament could not have intended. Note that the substance of subsection 43(8) is that the appropriate officer cannot initiate a hearing more than a year after the contravention and the identity of its perpetrator became known to the appropriate officer.

If this statement was seen to contain, and limited to containing, personal and individualized knowledge of the two components required, this would mean that one week before the limitation was to run out it would only be necessary to appoint a new appropriate officer who was not aware of the contravention and of the identity of its perpetrator, and the 12-month limitation would not begin to run until the date he acquired such knowledge.

Worse still, the limitation might already have run out so far as the incumbent officer was concerned, but it would only be necessary to appoint a new appropriate officer for the limitation period to begin over again and not begin to run until the day he personally had knowledge of the contravention and its perpetrator.

In short, an interpretation which does not take into account the intended purpose and the context in which the provision occurs results in making it completely meaningless and depriving it of its content and consequences at the expense of the offender. As I mentioned at the start of these reasons, the subsection 43(8) limitation serves the twofold purpose of protecting the public and the credibility of the institution and providing fair treatment for the members of that institution.

On the other hand, an interpretation of subsection 43(8) of the Act by which the knowledge is linked to the position or function of appropriate officer rather than to the incumbent makes it possible to reconcile these two objectives. Thus, the appropriate officer who signs the certificate certifying the time knowledge of the contravention and the identity of its perpetrator occurred is not certifying the date on which he personally acquired knowledge of these two matters, but the date the knowledge of these two matters was attributable to the position or function of appropriate officer.

The objectives sought by Parliament in enacting the limitation rule in subsection 43(8) clearly cannot be avoided by allowing one appropriate officer to disregard or divest himself of knowledge which he has and another, who ultimately initiates the proceedings, to rely on belated knowledge or a lack of knowledge, when objectively the conditions of subsection 43(8) were met … [Underscoring in original. Italicization added.]

[98] Although not expressly cited in Letourneau J.A.’s reasons, his repudiation, at para. 60, of a statutory construction that results in an “absurdity” evokes the Supreme Court’s more general pronouncement on the same issue in the earlier cited case of Rizzo. As there explained, at para. 27:

It is a well established principle of statutory interpretation that the legislature does not intend to produce absurd consequences. …[A]n interpretation can be considered absurd if it leads to ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment. … Sullivan [Driedger on the Construction of Statutes (3rd ed. 1994), at p. 88] echoes these comments noting that a label of absurdity can be attached to interpretations which defeat the purpose of a statute or render some aspect of it pointless or futile.

[99] At issue in Rizzo was the construction of a provision of the Ontario Employment Standards Act that, as interpreted by the Court of Appeal, entitled “employees ‘fortunate’ enough to have been dismissed the day before a bankruptcy ... [to severance payments, while] those terminated on the day the bankruptcy became final would not be so entitled”. The Supreme Court, in reversing the Court of Appeal, held the consequence of such interpretation “unreasonable” and an “absurdity” that “defeat[ed] the intended working of the legislation”. By way of illustration, the Court said, at para. 29, that,

If the Court of Appeal’s interpretation of the termination and severance pay provisions is correct, it would be acceptable to distinguish between employees merely on the basis of the timing of their dismissal.

Absent, as here, any policy rationale or clear indication of a contrary legislative intent, an interpretation of s. 331 of the CUCP Act that distinguishes between potential offenders on the basis of which of two co-regulators first comes into knowledge of the material facts is equally offensive. As is an operational protocol that indefinitely shields the limitation period triggerman, the Superintendent, from the relevant facts once a credit union is subject to primary oversight by a co-regulator, DICO. And so too the notion that DICO can harbour the “facts” for years or even decades and still maintain that its eventual prosecution complies with the objects of the limitation period.

[100] The rather simple factual and statutory scenario presented by the Theriault case allowed for a straightforward resolution by the Federal Court of Appeal. The situation before me is more complex. The critical take-away, however, is the notion of functional equivalence. As said repeatedly in Theriault, the “knowledge” that activates the limitation period is “knowledge which relates to the position or function” of the regulator. In Theriault, these two concepts were effectively indistinguishable on the facts. Not so here as the language of s. 331 unambiguously directs that the limitation clock only begins once the requisite facts are within the knowledge of the “Superintendent”, a “position” exclusively defined in ss. 1 and 5 of the FSCO Act to mean the chief executive officer of the Commission. Nor, as I have earlier determined, is it legally appropriate to either characterize DICO as the Superintendent’s agent or to conceive of its mandate as administrator or liquidator as a general delegation of FSCO’s authority during these stages of regulatory oversight.

[101] While their “positions” do not correspond, it is in my view proper to describe DICO and FSCO as serving functionally equivalent roles within the regulatory regime governing Ontario credit unions, at least during the exercise of DICO’s insolvency supervision mandate. As has now been said many times, the 2009 amendments to the CUCP Act transferred principal regulatory responsibility – including a parallel authority to lay charges once acting in the capacity of liquidator – to DICO when a credit union is in a solvency crunch. In response to this division of labour, DICO and FSCO crafted a co-management and information sharing protocol that reinforces this partitioning of enforcement and, as part of the same inter-agency agreement, shelters the Superintendent from the knowledge necessary to engage the protections afforded by s. 331 until such time as DICO elects to make such information available. There is nothing in the Act, its amendments or any apparent policy or investigatory imperative that requires institutional knowledge pertaining to an offence and within the ken of one co-regulator to be embargoed from the second where, as here, the failure to share such information risks compromising both the interests secured by s. 331 and the legal integrity of a prosecution. This is simply an unreasonable construction of the provision and one contrary to a purposive reading of the provision. It defeats, as put in Theriault, “the twofold purpose of protecting the public and the credibility of the institution and providing fair treatment for the members of that institution”.

[102] The 2009 reassignment of principal regulatory authority to DICO while a credit union faces insolvency transformed DICO into FSCO’s functional equivalent for regulatory purposes when acting in the capacity of administrator or liquidator. However, the limitation period entrenched in s. 331 was not rewritten. Accordingly, reconciliation of this latter provision with the statutory transfer of regulatory responsibilities depends on DICO informing the Superintendent of the “facts” that may ground an offence under the Act within the two-year limitation period prescribed by s. 331. To be clear, the word “Superintendent” in s. 331 does not encompass “DICO” or, more abstractly, “administrator” or “liquidator”. Rather: when DICO acts in either of these capacities it assumes regulatory authority that renders it FSCO’s functional equivalent for enforcement purposes. As such, compliance with the terms prescribed by s. 331 and, hardly incidentally, fulfillment of the provision’s objects, requires DICO to notify the Superintendent of the facts that may underlie a prosecution within two years of acquiring that knowledge itself. Substituting “DICO (as administrator or liquidator)” for the words “the acting appropriate officer” and “Superintendent” for incumbent appropriate officer”, in this earlier-quoted passage from Theriault, supra, at para. 59, captures the point:

[T]he requirement that DICO (as administrator or liquidator) pass on his knowledge to the Superintendent is apparent from the fact that the knowledge referred to in [the statutory limitation] is knowledge which relates to the position or function, not to its incumbent. It is institutional knowledge ….

[103] Reiterating “the cardinal principle of statutory interpretation” encapsulated in Novak v. Bond, supra, a construction that comprehends the timely transfer of material information from DICO to FSCO “best furthers [the] objects” of s. 331 within the scheme of shared regulatory responsibilities imposed by the Act. A reading of the provision that allows DICO to indefinitely delay informing the Superintendent of the facts grounding a contravention of the Act subverts the rationales for the limitation period. It is not only unreasonable but, for the reasons earlier canvassed, attracts that “label of absurdity [that] can be attached to interpretations which defeat the purpose of a statute or render some aspect of it pointless or futile”: Rizzo, supra, at para. 27. DICO, in short, was obliged as co-regulator to inform FSCO of the material facts in a timely manner to preserve the legal viability of a prosecution for a contravention of s. 184 of the Act. It’s failure to do so frustrated the Superintendent’s capacity to comply with the dictates of s. 331. As a result, the prosecution before me is statute-barred.

(iii) FSCO’s Due Diligence

[104] The alternative basis for my concluding non-compliance with s. 331 rests on the doctrine of discoverability. Repeating the concise statement of principle expressed in Central Trust Co. v. Rafuse, supra, at para. 77:

[A] cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. [Emphasis added.]

In my view, the “material facts” were institutionally apparent by mid-2009. They “ought to have been discovered” by FSCO within two years of that date to comport with the limitation period afforded by s. 331. FSCO’s belated discovery flows from its failure to “exercise reasonable diligence”. The analysis that follows relies on the evidence already canvassed in minute detail. Accordingly, I here draw on the relevant portions of the record by way of reference rather than re-recital.

[105] FSCO was well aware that the CCU was in financial difficulties. It had appointed DICO to supervise the failing credit union and knew, through its quarterly meetings, that DICO had subsequently appointed itself administrator and then liquidator of the CCU. FSCO also knew that, prior to the transfer of insolvency management to DICO, it, FSCO, had had cause to instigate its own investigation of former managers of the CCU and had twice laid charges under the Act against Vinski respecting his conduct while serving as general manager of the credit union. As a result of Liaison Committee meetings and activity reports filings, FSCO also knew that various civil actions had brought on behalf of and against the CCU. FSCO, of course, was throughout the sole regulator with an explicit statutory mandate to “administer and enforce” the CUCP Act. Further, the limitation period governing the viability of any prosecution under the Act depended solely on FSCO’s knowledge, through the office of the Superintendent, of the facts supporting such proceedings. Despite this predicate knowledge and its powers and responsibilities, FSCO made no inquiries while the CCU was under DICO’s regulatory watch about any contraventions of the Act during the course of the quarterly Liaison Meetings or by way of the ad hoc discussions intended to provide a further avenue of information collection and assessment. More telling, in my view, is FSCO’s participation in the creation and implementation of inter-agency management and information sharing procedures, including the MOU, which not only fails to expressly address the interests safeguarded by s. 331 of the Act but, I find, risks frustrating their protection (as in the instant case) were the prosecution’s literalist reading of the provision to be given effect.

[106] Again, the 2009 amendments left to FSCO and DICO the task of devising an operational mechanism for executing the resulting realignment of regulatory responsibilities. The two Crown agencies responded through their MOU and related informational and management agreements. As explained by Foster and Monid, DICO’s and FSCO’s shared understanding was that FSCO was to “withdraw” from the regulatory oversight of a credit union once it fell into financial distress and, as a result, under DICO’s control as administrator and, if it so transpired, liquidator. Further to their co-management pact, the routine sharing of information pertaining to such credit unions then ceased and FSCO could no longer access the relevant data collections ordinarily maintained and populated by DICO. These developments were not dictated by the Act or its amendments, either expressly or by necessary implication. They were, rather, the product of the two agencies’ agreement that DICO would assume exclusive regulatory superintendence of insolvent credit unions, that FSCO would concurrently withdraw from the same field, and that any passage of information between the two agencies would be restricted to matter of systemic significance. The protocols and practices crafted by the two co-regulators reflect this operational partition.

[107] The agencies’ decision to dam the flow of information while a credit union is under DICO’s insolvency management may advance, as set out in their MOU, the regulators’ “common interest” in “efficiency”-related values. One latent consequence, however, is to insulate FSCO from knowledge of a contravention of the Act that arises during DICO’s execution of its insolvency mandate until such time as DICO, acting in the capacity of administrator or liquidator, elects to pass on information pertaining to the facts relevant to the alleged offence.

[108] DICO has a statutory mandate respecting failing credit unions. Accordingly, it cannot be said that FSCO delegated its authority to DICO. Rather, FSCO, together with its co-regulator, fashioned an information sharing regime that left to the discretion of its MOU partner the timing, if ever, of disclosure of the knowledge needed to trigger the statutory limitation period. Further, DICO’s obligation “to notify” FSCO of a potential offence, as directed by their co-authored MOU, arose only upon the latter “becom[ing] aware of a serious breach of the Act”. And, as canvassed earlier, FSCO did “not expect” DICO to inform it of any “particular information” it gleaned when serving as administrator or liquidator of a credit union, let alone of “any serious breach”. Disclosure of even serious breaches – including, as said by Monid, of “the facts upon which the instant charge is based” – was “dependent on the circumstances” and left “for DICO to address as it sees fit”. With respect, I find this approach inconsistent with Keenan J.’s determination in R. v. Fingold, supra, at para. 61, that it “is not the prerogative of the [regulator] to decide when the limitation period commenced”. It is also, in my view, inconsistent with FSCO’s obligation to exercise due diligence in discovering the facts relevant to a prosecution within its regulatory jurisdiction. FSCO ought to have discovered the material facts within two years of DICO’s receipt of this information. It would have, but for the impediments the co-regulators imposed to the transmission of offence-related information learned by DICO while serving as administrator or liquidator.

[109] A hypothetical scenario inspired by the law of tort may here be of assistance. Assume that Ms. Smith suffers a minor concussion as a result of a slip and fall in a commercial mall in Ottawa. Out of an abundance of caution, she visits a doctor who refers her to a specialist for neurological tests. She tells her doctor to mail her the test results if there is any cause for concern. Ms. Smith then goes to the post office and files an indefinite “Hold Mail” for her address. Sure enough, the test results raise cause for concern and her doctor begins mailing Ms. Smith reporting letters and invitations to contact his office to arrange an appointment. The letters pile up at the post office. Four years later, Ms. Smith begins to experience severe headaches that, on a return visit to her GP, are attributed to trauma she suffered during the Ottawa fall. She immediately commences an action against the owners of the mall. A provision of the applicable Limitations Act requires that such action be brought within two years of “when the material facts on which it is based have been discovered or ought to have been discovered” by the plaintiff. I think it beyond dispute that Ms. Smith’s action would be statute-barred. While she may have brought her suit well within two years of when she first acquired knowledge of her trauma, her originating notice is well outside the two-year period within which she would have discovered the material facts had she exercised due diligence rather than, through her own behaviour, prevented their timely receipt.

[110] I appreciate that Ms. Smith’s predicament is readily distinguishable from the Superintendent’s. The factual scenario before me is far more complex and nuanced. Nonetheless, the critical common element is the intervening conduct of the person relying on the limitation period to secure the integrity of the proceedings they wish to commence. Like Ms. Smith, FSCO (if in collaboration with a regulatory partner) positively inhibited the flow of information pertaining to material facts respecting a potential legal proceeding. It does not now lie in DICO’s (or FSCO’s) mouth to say that it complied with a limitation period dependent on FSCO’s knowledge when both regulators relied on a regime of their own manufacture to insulate FSCO from information that would have started the clock. Given FSCO’s familiarity with the CCU’s financial jeopardy, the misconduct of its general manager and the institution of regulatory offences pertaining to his watch, it was reasonably foreseeable that further contraventions of the Act would be unearthed during the course of DICO’s insolvency management of the credit union. It is clearly not my place to micro-manage the procedures or practices by which those entrusted with the regulation of Ontario credit unions go about their business. (See Dunsmuir, supra, at para. 27.) However, FSCO’s withdrawal from the field of insolvency superintendence, its neglect to make appropriate inquiries in the face of the historical knowledge and information respecting current civil litigation it did possess, and its participation in the creation and implementation of protocols that insulated it from timely receipt of information bearing on offensive conduct under the Act reflect, together, a failure to exercise due diligence. FSCO ought to have known the material facts within two years of the time they came to DICO’s attention. That it did not is to a large degree a function of its own acts and omissions that, as a result, place the commencement of this prosecution beyond the outer margin of the statutory limitation period.

[111] To be clear, FSCO is not positively obliged to learn the “facts” in a timely manner. No sanction follows its neglect or indifference in this regard. But where the material facts are, as here, reasonably discoverable, the failure to act with appropriate diligence inevitably jeopardizes the viability of any prosecution arising from those facts. As said by the Supreme Court in Novak and Bond, supra, at para. 65, “There is a burden on the plaintiff to act reasonably”. That burden, here borne by a regulator FSCO, was not met.

(f) Result

[112] The charge faced by the defendants was laid beyond the two-year limitation period prescribed by s. 331 of the CUCP Act. The “facts on which the proceedings are based first came to the knowledge of the Superintendent” when DICO, as “administrator” (and, in this capacity, the functional equivalent of FSCO), became aware of the material facts and, in the particular circumstances of this case, that these same facts amounted to an offence under the Act. This occurred more than three years before the Information was sworn. Alternatively, but for its failure to exercise reasonable diligence in discovering the occurrence of the material events in a timely manner, FSCO would have known the “facts” long before the statutory limitation period expired.

[113] I am satisfied, as asserted in the Certificate issued pursuant to s. 16(g) of the FSCO Act, that neither the Superintendent nor his office had actual knowledge of the facts underlying the charge until advised by DICO on October 15, 2012. I am also satisfied that, on alternative bases, the legal effect of the record before me amounts to sufficient “evidence to the contrary” to negative any reliance on that assertion for purposes of assessing compliance with s. 331 of the Act and, further, that no other evidence adequately establishes FSCO’s compliance with the statutory limitation period. Accordingly, the prosecution is out-of-time and thus statute-barred.

F. CONCLUSION

[114] For the reasons here recited the Information is statute-barred. Accordingly, it is quashed and the charge against all three defendants dismissed. In view of this disposition, there is no need to address the defendants’ motions to stay the prosecution on grounds of abuse of process or a violation of s. 7 of the Charter.

[115] I am indebted to all counsel for the thoroughness of their research, the quality of their submissions, and their patience and civility throughout this hearing.

Decision rendered on May 15, 2014

Reasons released and filed on June 19, 2014

Justice Melvyn Green