COURT FILE NO.: DC-09-00000071-0000
DATE: 20090427
SUPERIOR COURT OF JUSTICE - ONTARIO
(DIVISIONAL COURT)
RE: Xanthoudakis et al. v. Ontario Securities Commission
BEFORE: Karakatsanis J.
COUNSEL: Alistair Crawley and Alexander Tedesco, for the Appellant/Applicant
L. David Roebuck, Melissa J. MacKewn and Usman Sheikh, for the Respondent
HEARD AT TORONTO: April 16, 2009
E N D O R S E M E N T
Karakatsanis J.
[1] The appellants have brought a motion to stay Ontario Securities Commission (OSC) proceedings pending disposition of the appeal of a decision of the OSC dated February 3, 2009 pursuant to s. 9(1) of the Securities Act, R.S.O. 1990, c. S.5. The OSC had brought a motion to quash the appeal on the basis that the decision appealed from is not a “final” decision as required under s. 9(1) of the Securities Act. That motion was withdrawn by the OSC at the hearing without conceding that the decision was a final decision.
[2] The issues in this motion to stay the OSC proceedings are:
Whether the motion to stay is precluded by issue estoppel or should be dismissed as an abuse of process;
If not, whether the test for a stay has been met in this case.
Background
[3] The OSC commenced proceedings against the appellants under s. 127 of the Securities Act in October 2008. The proceedings allege serious breaches of the Securities Act and put the honesty and integrity of the appellants in issue. Fourteen days of evidence were concluded in November 2008. Submissions were scheduled for December 2008.
[4] Before the date for submissions, the appellants brought an application for judicial review on the basis that a reasonable apprehension of bias had been raised by public comments made by the Chair of the OSC (who is not a member of the Hearing Panel in this case) that the appellants were “not honest.”
[5] On December 5, 2008 Ferrier J. dismissed both the appellants’ motion to stay the OSC proceedings pending the hearing of the judicial review application and the OSC’s cross-motion to quash the application.
[6] On the issue of whether to grant an interim stay, Ferrier J. held at paras. 11-13:
There is ample authority in this court to the effect that absent exceptional or extraordinary circumstances demonstrating that the application must be heard, this court should only consider issues arising from a tribunal’s proceedings on a full record, including a decision by the tribunal on the very issue.
Shortly put, proceedings below should be pursued to completion, including all remedies available below before this court should entertain an application. (See Ontario College of Art v. Ontario J.R.C., Coady v. Law Society of Upper Canada, Hamilton Street Rentway Cot v. Ontario H.R.C.)…
Even in cases of allegations of bias, this court has dismissed applications as premature.
[7] He further considered the test for an interim stay and found that while there was a serious issue to be tried, there was no irreparable harm and the balance of convenience did not favour a stay.
[8] The appellants subsequently brought a motion before the Hearing Panel of the OSC to stay the proceedings on the basis that it lacked jurisdiction to hold a hearing because of a reasonable apprehension of bias arising out of the Chair’s public comments and the same factual record.
[9] The Panel dismissed the motion and refused to grant a stay in a decision dated February 3, 2009.
[10] On February 13, 2009, the appellants delivered a Notice of Appeal from that decision and perfected it on March 11, 2009. Closing submissions before the OSC are scheduled for May 9, 2009.
Issue estoppel; Abuse of process
[11] The OSC argues that this second stay application is an impermissible attempt to re-litigate the decision rendered by Ferrier J. on December 5, 2008. They submit that it is a collateral attack on the Ferrier J. decision and subject to the doctrine of issue estoppel.
[12] Issue estoppel precludes re-litigation of an issue already decided and precludes a collateral attack of that judicial order. In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460 at para. 20, the Supreme Court of Canada noted that a judicial order should not be brought into question in subsequent proceedings except those provided for by law for the express purpose of attacking it. The test set out in Danyluk (paras. 53-60) for issue estoppel is whether:
i. the same issue has been decided;
ii. the previous judicial decision was final; and
iii. the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.
[13] The OSC submits that the appellants are asking a different judge of the same court to determine the same issue on the same record. There is no dispute that the same parties are before the court seeking to stay the same proceedings and that the decision of Ferrier J. was not appealed or challenged. The doctrine of issue estoppel may apply to interlocutory decisions. As Chapnik J. held in Newmarch Mechanical Constructors Ltd. v. Hyundai Auto Canada Inc. (1994), 1994 7278 (ON SC), 18 O.R. (3d) 766 at para. 10 (Gen.Div.): “It is consistent with both logic and justice that the rule apply to interlocutory orders which finally determine an issue in the absence of appeal, material change in circumstances, or new evidence which had been previously suppressed or unavailable.” The issue in this case, then, is whether the same issue has been decided or whether there has been a change of circumstances that has altered the nature of the issue to be determined and justifies a further determination of whether to grant the same relief.
[14] The previous motion to stay was brought in the context of a judicial review before a motion to stay had been brought before the OSC. This motion to stay is brought in the context of an appeal after the decision below on the issue of bias has been determined. The lack of a decision below on the very issue in the application before the Divisional Court was a factor referred to in the previous decision. Ferrier J. specifically referred (at paras. 11-12) to the fact that the remedy had not been pursued below and the Divisional Court did not have the benefit of the decision below on the issue of bias.
[15] The issue and the record before the court on this motion are therefore somewhat different. While the record of the facts which give rise to the complaint about the reasonable apprehension of bias is the same, the record now includes the decision of the OSC being appealed from. The record is now complete as it relates to the issue of bias. The circumstances have changed and the issues and considerations before the court have been modified as a result. Specifically, whether there is a serious issue to be tried relates to whether there is a serious ground of appeal. Whether the balance of convenience favours a stay may be influenced by the fact that the record is now complete as it relates to the issue of bias and there has been a decision on the merits. In my view issue estoppel does not prevent the motion from being considered, although it may apply to some findings of Ferrier J. in relation to the test for a stay.
[16] The OSC argues the motion to stay is an abuse of process. In Toronto (City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77 at paras. 37 and 51, Arbour J. described how the doctrine of abuse of process may be applied where the strict requirements of issue estoppel have not been met but where allowing the litigation would nonetheless violate such principles as judicial economy, consistency, finality and the integrity of the administration of justice. Given the change in circumstances, however, I do not find this motion to be an abuse of process.
Test for a stay
[17] I turn next to the three pronged test for granting a stay of proceedings set out in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311 at para. 43.
Serious issue to be tried
[18] Ferrier J. found that the allegations of reasonable apprehension of bias raised a serious issue to be tried. Given that the motion to stay is now brought in the context of an appeal, the issue to be tried relates to a serious issue to be resolved in the appeal of the decision.
[19] This is a low bar and counsel have set out a number of grounds that are not frivolous but raise legitimate questions for the Divisional Court on appeal.
[20] I find that there is a serious issue to be resolved.
Irreparable harm
[21] With respect to whether the appellants will suffer irreparable harm if the motion is refused, the appellants submit that they could suffer irreparable harm to their reputations if the OSC makes adverse findings against them, even if the decision was to be subsequently invalidated as a consequence of a reasonable apprehension of bias. They also submit that they are prejudiced by the costs of preparing and making final submissions on the merits that are not recoverable under the Securities Act and may prove to be unnecessary if the tribunal is found to be without jurisdiction because of a reasonable apprehension of bias.
[22] These same submissions were made before Ferrier J. and he rejected them at para. 14:
Irreparable harm: It is argued that the damage to the reputation of the applicants will be irreparable should the O.S.C. proceeding continue to a conclusion, on the merits, against the applicants, even if the court overturns the result. I disagree. The issue of bias, if decided against the applicants below, can be fully and appropriately dealt with in this court.
[23] The appellants submit that this finding is ambiguous based upon the previous paragraphs of the decision, quoted above, referring to the need to have the specific issue addressed by the tribunal before proceeding with a judicial review on that very issue. They suggest that the finding on the previous motion, that reputation would not be irreparably harmed, may have been based upon the fact that this court could deal with the issue of bias on appeal after the decision below on the motion but before findings on the substantive issues in the proceedings.
[24] I am not persuaded that Ferrier J.’s finding suggests that there would be no irreparable harm because an appeal could be determined prior to the conclusion of the proceedings on the merits. His explicit reference to the continuation of the OSC proceeding to a conclusion and the reference to decisions of this court suggest otherwise: Coady v. Law Society of Upper Canada, [2004] O.J. No. 4576 (S.C.J.); Ontario College of Art v. Ontario (Human Rights Commission), 1993 3430 (ON SCDC), [1993] O.J. No. 61 (Div.Ct.).
[25] As a result, I do not accept the appellants’ submission that Ferrier J.’s finding in relation to irreparable harm was premised on an appeal to the Divisional Court prior to the conclusion of the proceeding on the merits. Issue estoppel therefore applies to the finding that the appellants have failed to establish that failure to grant the stay would result in irreparable harm.
[26] In any event, I am not satisfied that irreparable harm will arise if the stay is not granted. The appellants submit that they could suffer irreparable harm to their reputations if the OSC makes adverse findings against them; they did not file any evidence that failure to grant a stay would result in irreparable harm. While it is a reasonable inference that reputations could be affected by adverse findings on the merits given the nature of the allegations, the nature and extent of that harm is speculative: Noble v. Noble, [2002] O.J. No. 4997 at para. 16 (S.C.J.). Such an argument based solely on the nature of the allegations would mean that any professional conduct or regulatory proceeding based upon integrity or wrongdoing would automatically qualify as irreparable harm. The impact upon reputation of any adverse findings, as well as the issue of bias, can be fully and appropriately dealt with in this court on appeal.
[27] With respect to the issue of costs, the cases relied upon by the appellant do not deal with costs of defending allegations before the tribunal prior to the determination on the merits. Rather, they relate to costs relating to the remedy ordered by the tribunal after findings have been made. In such circumstances, a final decision of the OSC may be stayed pending appeal.
[28] The appellants rely upon the case of Ontario (Commissioner, Provincial Police) v. MacDonald, [2008] O.J. No. 5053 at para. 14 (Div.Ct.), decided days after the decision by Ferrier J. on the previous motion to stay. The Commissioner in that case sought a stay of disciplinary proceedings against police officers pending determination of an application for judicial review following the adjudicator’s refusal to recuse himself. The decision of the motions judge refusing to grant a stay was appealed to a full panel of the Divisional Court. The majority decision stated:
In my view, the applicant will suffer irreparable harm if the stay is not granted. As noted by the court in RJR MacDonald, supra, at para. 59, “‘Irreparable’ refers to the nature of the harm rather than its magnitude.” In the case of a denial of natural justice or bias, it is difficult to see how it could be cured. A tribunal loses jurisdiction when a reasonable apprehension of bias arises. To force a litigant to continue to appear before such a tribunal would constitute irreparable harm. Anything the tribunal did to attempt to cure the appearance of bias would be suspect.
[29] I do not agree that this court’s decision in Ontario (Commissioner, Provincial Police) v. MacDonald stands for the proposition that an allegation of reasonable apprehension of bias that may deprive the tribunal of jurisdiction will automatically satisfy the requirement of irreparable harm. In that case the allegations of bias were based upon the conduct of the adjudicator, and the court found that the Commissioner would suffer irreparable harm if he was forced, by reason of a stay not being granted, to appear before a tribunal where there was a reasonable apprehension of bias. The language of the paragraph quoted suggests that the court was relying on the factual circumstances of that particular case. In addition, the application before the Divisional Court was already scheduled to be heard within a month’s time. The court held (at para. 16) that its conclusion to grant a stay in that case might be different if there were a longer period of delay for the hearing of the application, or if the administrative hearing was likely to be more severely disrupted.
[30] In conclusion, the question of irreparable harm has already been decided by Ferrier J. and issue estoppel applies to prevent a collateral attack on that finding. However, even if I were determining this issue without the benefit of his prior finding, I would not be satisfied that there would be irreparable harm if the stay is not granted for the reasons given above.
The balance of convenience
[31] Finally, with respect to the balance of convenience, Ferrier J. found at para. 14:
Balance of convenience: For the same reason that this court rejects premature applications, so should the court reject a motion for an interim stay, absent “exceptional or extraordinary circumstance demonstrating that the applicants must be heard” . . .
[32] The fact that a decision has now been made by the OSC on the issue of bias, and the strength of the appellants’ appeal, are new factors that may be weighed in determining the balance of convenience.
[33] The appellants submit that there is no harm to the public interest in a short delay given that these proceedings have been ongoing for more than two years, the appellants are no longer registered with the OSC, the company is in receivership, and there is no risk that evidence will deteriorate given that the evidence has been completed. Furthermore, the appellants note that they acted with diligence once the comments allegedly giving rise to the apprehension of bias were made, and that the record on the issue of reasonable apprehension of bias is now complete.
[34] However, there is no indication when an appeal could be determined or how long a delay would ensue. On the other hand, two days have been scheduled in early May before the OSC for final submissions. If there is an adverse decision of the OSC on the merits of the proceedings before it, the issue of the reasonable apprehension of bias could be addressed in an appeal, together with any other grounds of appeal. Furthermore, a third respondent in the OSC proceedings is not a party to the motion to stay, or to the appeal, and has already delivered a summary of his closing argument to the OSC. In my view, the balance of convenience does not favour a stay.
[35] The overarching consideration in determining whether a stay should be granted is whether the interests of justice call for a stay. This court has often said that it is undesirable to grant a stay of tribunal proceedings absent “exceptional or extraordinary circumstance demonstrating that the applicants must be heard.”
[36] In Ontario College of Art at para. 6, the court made the following frequently quoted statement:
For some time now the Divisional Court has …taken the position that it should not fragment proceedings before administrative tribunals. Fragmentation causes both delay and distracting interruptions in administrative proceedings. It is preferable, therefore, to allow such matters to run their full course before the tribunal and then consider all legal issues arising from the proceedings at their conclusion. In particular, at that time, these applicants will have a full right of appeal….”
[37] In Coady, at paras. 8-9, the court referred specifically to the availability of an appeal and the virtual certainty that an adverse finding on the merits would result in an appeal or an application to the Divisional court during which all the issues raised could be addressed. The result of hearing the application prior to completion of the proceedings would be an unproductive duplication and multiplicity of proceedings.
[38] These cases involved allegations of bias. Furthermore, even in cases of allegations of bias this court has dismissed applications as premature.
[39] In my view the public interest favours the continuation of this proceeding to allow the timely determination of the proceedings. The OSC has an important public interest mandate in regulating the financial market. These are important public interest proceedings that have been outstanding for two years and are near completion. The Divisional Court could address the issues raised in this appeal, together with any other grounds of appeal, in one hearing after the OSC proceedings have been concluded on the merits.
[40] For these reasons, the motion to stay the proceedings before the OSC is dismissed. The parties agreed that $7,500 was an appropriate quantum of costs. Costs to the OSC are fixed in the amount of $7,500.
Karakatsanis J.
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