CITATION: Gong v. OSC, 2023 ONSC 3718

DIVISIONAL COURT FILE NO.: 117/23

DATE: 20230621

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: XIAO HUA (EDWARD) GONG, Appellant/Responding Party

AND:

THE ONTARIO SECURITIES COMMISSION, Respondent/Moving Party

BEFORE: Nishikawa J.

COUNSEL: Paul Stern & Margot Davis, for the Responding Party/Appellant, Xiao Hua (Edward) Gong

Mark Bailey & Braden Stapleton, for the Moving Party/Respondent, Ontario Securities Commission

HEARD at Toronto: June 15, 2023 (in writing)

ENDORSEMENT

Overview

[1] The Ontario Securities Commission (the “OSC”) brings this motion to quash Xiao Hua (Edward) Gong’s appeal of the order of the Capital Markets Tribunal (the “Tribunal”) dated February 3, 2023 (the “Decision”) on the basis of prematurity.

[2] After an investigation by the OSC, on December 20, 2017, the appellant and Edward Enterprise International Group Inc. (the “Edward Group”) were charged with offences relating to a pyramid scheme. On February 10, 2021, the appellant entered a guilty plea on behalf of the Edward Group. The Edward Group was convicted of using forged documents and operating a pyramid scheme, contrary to ss. 368(1)(b) and 206(1)(e) of the Criminal Code, R.S.C. 1986, c. C-46. The charges against the appellant personally were withdrawn on consent.

[3] On June 13, 2022, the OSC commenced a proceeding before the Tribunal against the appellant under s. 127 of the Securities Act (the “Act”). A hearing on the merits of the allegations has not yet been scheduled. On November 10, 2022, the appellant brought a motion seeking an order that the OSC be constrained in the use of certain evidence until the process outlined by the Court of Appeal in D.P. v. Wagg (2004), 2004 39048 (ON CA), 71 O.R. (3d) 229, 39048 (C.A.) had been complied with. The appellant argued that under the Wagg process, the OSC was required to obtain the consent of the Attorney General or a court order before materials included in the disclosure provided to him in the criminal matter could be used in the proceeding before the Tribunal.

[4] The OSC opposed the motion. The OSC argued that the Wagg process applies where a party in a civil action receives Crown disclosure and seeks to disclose or otherwise use that material in the civil action. The OSC further argued that the Wagg process is not applicable to the facts in this case because the OSC conducted the investigation, collected the documents, and gave them to the Crown for the criminal proceeding. Moreover, the OSC disclosed those documents in the proceeding before the Tribunal in accordance with its disclosure obligations.

The Decision

[5] In the decision dated February 3, 2023, the Tribunal concluded that the materials did not come to the OSC through disclosure to the OSC by the Crown. Rather, the uncontroverted evidence was that the OSC obtained the documents through its own investigation. The Tribunal held that the Wagg procedure was therefore inapplicable. The OSC could use the documents, which it had obtained, in accordance with the mechanisms set out in the Act. The Tribunal further found that in the circumstances of this case, the concerns underlying the Wagg process, namely, the privacy interests of third parties identified in the disclosure and the public interest, as promoted and defended by the Attorney General, did not arise.

Analysis

[6] Subsection 10(1) of the Securities Act permits appeals only from “final” decisions of the Tribunal, and states as follows:

10(1) The Chief Executive Officer of the Commission or a person or company directly affected by a final decision of the Tribunal may appeal to the Divisional Court within 30 days after the later of the making of the final decision or the issuing of the reasons for the final decision.

[7] In Cheng v. Ontario Securities Commission, 2018 ONSC 2502 (Div. Ct.), this court considered the predecessor provision to the current s. 10(1), which dealt with appeals from decisions of the OSC acting in its adjudicative capacity. In Cheng, the appellant appealed an OSC decision on a motion for a stay of proceedings or the exclusion of evidence on the ground of solicitor and client privilege. This Court quashed the appeal on the basis that the decision was interlocutory and not final. In coming to this conclusion, the Court determined that a “final” decision under the Act was a final determination of “the allegations made against [the defendant], including any sanction if the allegations are proven.”: Cheng, at para. 11.

[8] In Law Society of Upper Canada v. Kivisto, 2016 ONSC 1400 (Div. Ct.), this court interpreted “final” in the Law Society Act, R.S.O. 1990, c. L.8, to mean after a determination as to whether professional misconduct had occurred. This court emphasized the importance of the expeditious resolution of administrative proceedings as follows (at para. 24):

The hearing process would soon grind to a halt if mid-hearing rulings were generally subject to immediate appeal. Seized panels would be unable to fulfill their responsibilities in a timely and effective way. This has implications for the public, members of the profession, and the Society. This is especially so when it is remembered that a full hearing on the merits may make the appeal academic, and that there is an appeal from the final decision following the disciplinary hearing.

[9] In Ontario (Attorney General) v. Ontario Secondary Schools Teachers Federation, 2015 ONSC 2438 (Div. Ct.), in the context of an application for judicial review, this court declined to rule on the issue of whether the Wagg procedure applied in arbitral proceedings based on the courts’ reluctance to review interim or interlocutory decisions of administrative decision-makers.

[10] In this case, the issue that the Tribunal determined was whether the Wagg process applies to documents produced by the OSC that the OSC intends to tender as evidence at the hearing. No merits hearing has been held. The Decision is not a final decision because it does not dispose of a defence or right that, if upheld, would have finally disposed of the proceeding against the appellant. Because the decision at issue is not final, the appeal is premature and this court lacks jurisdiction to hear it.

Conclusion

[11] For the foregoing reasons, the motion to quash the application for judicial review is granted.

[12] Both parties requested costs of the motion. However, as of today’s date, no cost outlines or bills of costs were uploaded to CaseLines. Accordingly, I make no order as to costs.

“Nishikawa J.”

Date: June 21, 2023