SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Ontario Securities Commission, Applicant

AND:

Brilliante Brasilcan Resources Corp., Munket Capital Holdings Inc., and 2810353 Ontario Inc., Respondents

BEFORE: D. M. Brown J.

COUNSEL: H. Craig, for the Applicant

HEARD: January 30, 2013

REASONS FOR DECISION

Continuation of interim preservation order under s. 126(5) of the Ontario Securities Act

[1] On October 21, 2008, the Ontario Securities Commission issued directions to three financial institutions pursuant to section 126(1) of the Securities Act, R.S.O. 1990, c. S.5 - the interim preservation of property section of that Act - requiring them to hold specified accounts in the name of Brilliante Brasilcan Resources Corp., 2180353 Ontario Inc. and Munket Capital Holdings Inc. Section 126(1) provides as follows:

126. (1) If the Commission considers it expedient,

(a) for the due administration of Ontario securities law or the regulation of the capital markets in Ontario; or

(b) to assist in the due administration of the securities laws or the regulation of the capital markets in another jurisdiction,

the Commission may direct a person or company having on deposit or under its control or for safekeeping any funds, securities or property of any person or company to retain those funds, securities or property and to hold them until the Commission in writing revokes the direction or consents to release a particular fund, security or property from the direction, or until the Superior Court of Justice orders otherwise.

[2] Section 126(5) of the Act requires that such directions be reviewed by the Court as follows:

(5) As soon as practicable, but not later than 10 days after a direction is issued under subsection (1), the Commission shall serve and file a notice of application in the Superior Court of Justice to continue the direction or for such other order as the court considers appropriate.

Commencing with the October 28, 2008 order of C. Campbell J., various judges of this court have granted extensions of the Directions, most recently Wilton-Siegel J. who extended the Directions until January 31, 2013.

[3] This morning OSC counsel appeared before me at a 9:30 appointment seeking a further extension of the Directions. I granted an extension in the following terms:

I will extend this order until Feb 22/13, on which date any further continuation order shall be returned on my list. Brief Reasons will follow.

[4] In these brief Reasons I wish to make a few comments about the practice of seeking extensions of directions under s. 126(5) of the Act. It appears that a certain degree of informality has grown up around such extensions. While informality may spawn efficiency, which is a “good thing” recognized by Rule 1.04(1) of the Rules of Civil Procedure,[^1] at the same time procedures adopted by parties, including government agencies, must continue to respect the reality that any request made of the Court for an order engages the rights of several parties and therefore should adhere to some basic formalities to ensure that justice not only is done, but appears to be done.

[5] Put in more concrete terms, in my view any request by the OSC for an extension of directions under SA s. 126(5) should be made by way of a notice of motion accompanied by an affidavit which explains why a further extension is required. Those documents need not be complex, and in the case of successive requests for extensions can build upon, and rely on, information contained in previous court filings. But, at a minimum, the OSC should place before the Court some evidence to support its request for an extension.

[6] That did not happen in this case. The OSC did not file a notice of motion, nor did it provide the Court with even a brief affidavit explaining why it needed a further extension. I learned from oral submissions by OSC counsel that the Commission requires an extension because the panel which heard the Brilliante Brasilcan Resources matter took its decision under reserve on December 19, 2011 and has not yet released its decision. With respect, that explanation should have been put in an affidavit filed with the Court.

[7] Section 126 directions essentially operate as orders freezing assets. Just as a Court monitors interlocutory orders made in court proceedings to ensure that delays in proceedings do not have the effect of turning temporary orders into permanent ones, so too this Court, when considering requests by the OSC under SA s. 126(5), needs to be satisfied that good reasons exist to continue the directions, so that those who funds have been frozen are not unduly prejudiced.

(original signed by)____________
D. M. Brown J.

Date: January 30, 2013

[^1]: Rule 1.04(1) states: “These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”