CITATION: Ontario Securities Commission v. DaSilva, 2017 ONSC 4576
COURT FILE NO.: SCA (P) 1782-16; SCA (P) 1780-16 DATE: 20170727
ONTARIO SUPERIOR COURT OF JUSTICE (Provincial Offences Appeal Court)
BETWEEN:
Ontario Securities Commission Respondents
– and –
Carlos DaSilva and David Campbell Appellants
COUNSEL: C. Watson, counsel for the Ontario Securities Commission (OSC) P. Slansky, counsel for David Campbell (Campbell) N. Roushan, counsel for Carlos DaSilva (DaSilva)
HEARD: June 30, 2017
REASONS FOR JUDGMENT
[On appeal from the judgment of Duncan J., dated June 15, 2015]
Contents
BACKGROUND TO THE APPEAL.. 2 THE GROUNDS OF APPEAL.. 3 THE FACTS. 3 Trading in ECM... 3 Trading in Ameron. 5 WHAT IS NOT DISPUTED ON APPEAL.. 6 THE LAW... 6 ISSUE #1: THE KNOWLEDGE ISSUE.. 7 Strict Liability Offence. 7 Count #4 Does not Require Knowledge of the Limelight Order 10 Express Finding of Knowledge on Counts #1 and 3. 10 Conclusion on Knowledge Issue. 11 ISSUE #2: THE JURISDICTION ISSUE.. 11 Does the Limelight Order prohibit Campbell and DaSilva from trading shares outside of Ontario? 13 Does the Libman Test apply to provincial legislation?. 15 Does the OSC have jurisdiction over these offences?. 17 International Comity. 18 ISSUE #3: THE SENTENCE APPEAL.. 19 CONCLUSION.. 22
BACKGROUND TO THE APPEAL
1The Appellants were charged as follows:
Count #1 - Campbell and DaSilva - for trading in Equity Capital Management (ECM) while prohibited by order dated December 10, 2008 (the Limelight Order) contrary to s. 122(1) of the Securities Act;
Count #2 - Campbell - for trading securities of ECM while prohibited by order dated March 9, 2008 (the Al-Tar Order) contrary to s. 122(1) of the Securities Act;
Count #3 - Campbell - for trading securities of Ameron Oil and Gas (Ameron) when prohibited by the Limelight Order contrary to s. 122(1) of the Securities Act;
Count #4 - Campbell and DaSilva – for trading in securities without being registered under s. 25(10) of the Securities Act;
Count #5 - Campbell and DaSilva - for engaging or holding themselves out as engaging in the trading of securities in ECM without being registered under s. 25(10) of the Securities Act.
2After a trial, Duncan J. found Campbell guilty on counts 1, 3, and 4 and found DaSilva guilty on counts 1 and 4.
THE GROUNDS OF APPEAL
3These two appeals were heard together. These are the reasons in both appeals.
4Campbell and DaSilva appeal their convictions and sentences on the following primary grounds:
a) the learned trial judge erred in finding that each accused had knowledge of the Limelight Order;
b) the court lacked jurisdiction over the offences; and
c) the learned judge's sentence was not a fit sentence in the circumstances.
THE FACTS
5DaSilva had been registered under the Ontario Securities Act (Act) to trade in securities up until 2000. Campbell was never registered.
6On December 10, 2008 Campbell and DaSilva were found by the Ontario Securities Commission (OSC) to have violated the Act by engaging in unregistered trading, illegal distribution, prohibited representation and giving undertakings as to the future value of Limelight Entertainment. Further, they were also found to have breached a previous cease trade order in a case called Al-tar in March of 2008. They were found to have deprived investors of more than $2,000,000. The OSC banned Campbell and DaSilva from trading in securities for life (no trade order).
7During an unrelated investigation, OSC staff discovered evidence that DaSilva was continuing to trade in securities despite the Limelight Order. Further investigation into DaSilva’s activities uncovered evidence that Campbell was also involved in trading in securities. Campbell and DaSilva were charged with these offences.
Trading in ECM
8The primary evidence against Campbell and DaSilva were emails.
9Potential investors were contacted by "Ian Sparks" or DaSilva with regard to investing in ECM. Those who agreed to invest were told to, and some did, wire money to a bank account in Switzerland. The Swiss bank account was controlled by Julius Csurgo of Merger Law Group. Mr. Csurgo provided emailed instructions to Campbell and DaSilva as to how the investor funds were to be deposited in the Swiss bank account. Mr. Csurgo then forwarded 80% of the investor's monies to an RBC bank branch in Mississauga in the name of the Zap Group Incorporated, a company previously identified with Mr. Campbell during OSC's Al-Tar investigation. The Zap Group was registered in Nevada. Campbell was the sole signatory on the Zap bank account. Most of the money received into the Zap bank account was withdrawn in cash within a few days of the deposits. The Appellants submit that there is no evidence that the money from the Swiss Bank was the proceeds of the ECM trades. I disagree. The emails clearly establish the trail of the investment monies from the ECM trades to Switzerland and the demands by Campbell and DaSilva to have 80% of the money forwarded to them from the Switzerland bank account to Mississauga bank account. This finding was readily available to the learned trial judge.
10The trial judge found Campbell was “Ian Sparks”; Campbell also used the name “Dave” in his dealings with ECM and Dave Bell with respect to his dealings in Ameron securities. The Appellant Campbell submits that there was no evidence to support this "theory". I disagree. There was evidence which permitted the learned trial judge to make this finding of fact including the email addresses, the ISP provider information and the context of the contents of the emails. As a result, this finding was supportable on the evidence at trial.
11Email addresses for the various communications were reviewed by OSC staff. The OSC identified email addresses with Csurgo, Campbell and DaSilva. The emails addresses were connected, by the ISP provider, as coming from or to the homes of Campbell and DaSilva in the GTA or the Premises in Toronto and from the Premises.
12The emails show that Campbell (using the names Ian Sparks and Dave) and DaSilva directly solicited and engaged in trading ECM securities. They earned commissions of 80% of the price of the securities. The emails contain documentation relating to the solicitation and potential investment in ECM including dealings with investors, Share Purchase Agreements and instructions regarding wiring the funds for the purchase of the securities. The emails also show that Campbell, as "Ian Sparks", stating he was calling from London England.
13The emails show communications between Campbell (using the names Ian Sparks and Dave), DaSilva and Csurgo relating to the ECM investment and the deposit and movement of monies from the investors to Switzerland to Mississauga. The Appellants submit that there is no evidence that the emails were sent or received by the Appellants. I disagree. The email addresses were those of Campbell and DaSilva. The emails were sent or received at their homes or the Premises. An inference that Campbell and DaSilva were the persons sending or receiving the emails, in the absence of any other evidence, was clearly available to the learned trial judge and supported by the evidence.
14During the investigation, OSC staff learned that a business had been opened at 3337 Bathurst Street (the Premises). The landlord had rented the Premises to two males. The landlord identified Campbell and DaSilva as the two men who rented the Premises (although there were some issues with the photo lineup). Campbell and DaSilva had used fictitious names with the Landlord. Mr. Campbell used the name Ian Gibbs. DaSilva used the name Steve DaSilva. Rent was paid in cash throughout the tenancy despite the tenancy requiring postdated cheques. The Appellants submit that there was no evidence that this business was involved in trading. I disagree. There was evidence that the learned trial judge could find that the Premises had been used for trading including the fact both Campbell and DaSilva were involved in renting the Premises; both used fictitious names; equipment from which trading could be conducted was at the Premises; and some emails to and from the investors originated or terminated at the Premises. Based on the entire evidence and in the absence of other evidence, the learned trial judge's finding of fact was readily supported.
Trading in Ameron
15There was also evidence that Campbell attended at a sales office for a company called Ameron Oil and Gas Ltd. (Ameron). There was evidence that Campbell worked in that office attempting to sell securities of Ameron across Canada. Mr. Pasternak, a salesman of the Ameron securities testified that "Dave Bell" - identified as Campbell as the person using that name- worked in the office selling Ameron. Mr. Pasternak testified that Campbell told him that he should not be selling securities. During closing submissions, it was acknowledged that Campbell tried to sell the Ameron securities but had not concluded any sales. Campbell also admitted that the office was a fraudulent boiler room operation.
WHAT IS NOT DISPUTED ON APPEAL
16The Appellants do not dispute that Campbell and DaSilva were engaged in trading securities as alleged.
THE LAW
17The Provincial Offences Act provides:
120 (1) On the hearing of an appeal against a conviction ….., the court by order,
(a) may allow the appeal where it is of the opinion that,
(i) the finding should be set aside on the ground that it is unreasonable or cannot be supported by the evidence,
(ii) the judgment of the trial court should be set aside on the ground of a wrong decision on a question of law, or
(iii) on any ground, there was a miscarriage of justice; or
(b) may dismiss the appeal where,
(i) the court is of the opinion that the appellant, although the appellant was not properly convicted on a count or part of an information, was properly convicted on another count or part of the information,
(ii) the appeal is not decided in favour of the appellant on any ground mentioned in clause (a), or
(iii) although the court is of the opinion that on any ground mentioned in subclause (a) (ii) the appeal might be decided in favour of the appellant, it is of the opinion that no substantial wrong or miscarriage of justice has occurred.
122 (1) Where an appeal is taken against sentence, the court shall consider the fitness of the sentence appealed from and may, upon such evidence, if any, as it thinks fit to require or receive, by order,
(a) dismiss the appeal; or
(b) vary the sentence within the limits prescribed by law for the offence of which the defendant was convicted, and, in making any order under clause (b), the court may take into account any time spent in custody by the defendant as a result of the offence.
ISSUE #1: THE KNOWLEDGE ISSUE
18Campbell and DaSilva were represented by counsel, Mr. Tuovi, at the commencement of the OSC Limelight proceedings in April 2006. Campbell and DaSilva chose not to attend the entirety of the OSC Limelight proceedings. Mr. Tuovi did not continue to attend at the continuation of the OSC proceedings. A final order was eventually made in the OSC Limelight proceedings in December 2008 which included an order prohibiting Campbell and DaSilva from trading in securities – commonly referred to as a “no trade order”.
19Because they had failed or refused to be in attendance during the OSC Limelight proceeding, Campbell and DaSilva were not present when the OSC final order was made in the OSC Limelight proceedings. As a result, copies of the Limelight Order were mailed and emailed to Campbell and DaSilva.
20The Appellants suggest that there was no proof that the emails or mailing of the Limelight Order was received by or known to the Appellants.
21The learned trial judge found:
First, the Crown does not have to prove such service or knowledge. These are regulatory offences and do not require the prosecution to prove mens rea. ...
Secondly, in any event in my view there is overwhelming evidence that the defendants had knowledge. They were aware of and were represented by counsel at least at the start of the proceedings that gave rise to the Order. They were served with the final Order by mail and by email at their known addresses. I find that both defendants knew of the Order made against them and knew they were prohibited.
Strict Liability Offence
22The Appellants submit that the learned trial judge erred in finding that these offences are strict liability offences, thereby not requiring mens rea. I am satisfied that the offences in question are strict liability offences not requiring the OSC to prove mens rea.
23In Libman on Regulatory Offences in Canada, Earlscourt, Looseleaf, the author states at para 2.1(a):
Public welfare offences prima facie constitute offences of strict liability. They are neither offences in which mens rea must be proved by the prosecution, either as an inference from the nature of the act committed, or by additional evidence, nor are they offences of absolute liability where it is not open to the accused to exculpate himself or herself by showing that he or she was free of fault.
In Strasser v. Roberge 1979 236 (SCC), [1979] 2 SCR 953 , Beetz, for the majority, explained that for a provincial offence to be considered a mens rea offence, it would require the use of the words such as "knowingly", "wilfully" and "intentionally".
24A number of authorities have stated that Securities Act offences are strict liability offences. See R. v. O'Brien, 2011 O.J. No. 6610 at para 5. See also R. v. Fingold [1999] OJ. No. 369 (O.C.J.).
25In Libman on Regulatory Offences at page 6-67, paragraph 6.5(y), there are examples where the courts have found that Securities Act offences are strict liability offences including:
a) Trading in securities without a license: R. v. MacDonald, [1983] A.J. No. 868; and
b) Trading in securities without being registered: R. v. Richardson (19810 34 OR (2d) 248 (Div Ct), affirmed on Appeal 68 CCC92d) 447 and leave refused [1981] 1 SCR viii; R. v. Buck River Resources, [1988] AJ 1248 (QL); R. v. Boyle (2001) 2001 ABPC 18, 290 AR 201 (Prov Ct); and R. v. Kelly (19970 33 CCLA 169 (BC Prov Ct).
26The issue of whether offences under the Act are strict liability offences was specifically considered in R. v. Maitland Capital Limited et al., 2011 ONCJ 1 and found to be strict liability offences:
91With respect to mens rea, it is clear that offences under the Ontario Securities Act are matters of strict liability, meaning that the accused are not liable if they prove that they were duly diligent in complying with the Act. The leading definition of a strict liability offence was established as follows in R. v. Sault Ste. Marie (City), 1978 11 (SCC), [1978] 2 S.C.R. 1299, [1978] S.C.J. No. 59, at p. 1326 S.C.R.:
Offences in which there is no necessity for the prosecution to prove the existence of mens rea; the doing of the prohibited act prima facie imports the offence, leaving it open to the accused to avoid liability by proving that he took all reasonable care. This involves consideration of what a reasonable man would have done in the circumstances. The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event. These offences may properly be called offences of strict liability.
92In R. v. Armaugh Corp., [1993] O.J. No. 4360 (C.J.), at para. 31, Westman J. adopted the reasoning in R. v. Richardson (1981), 1982 1976 (ON CA), 34 O.R. (2d) 348, [1981] O.J. No. 2511 (Div. Ct.) in ruling that securities offences are offences of strict liability:
The purpose of the prohibition against trading in securities by a person who is not registered under the Act is, as Steele J. points out, to protect the investing public from being defrauded. That purpose puts the contravention of the prohibition in the category of a public welfare offence and it is now clear that public welfare offences, again as Steele J. says, are prima facie strict liability offences. [page524]
93As submitted repeatedly by the prosecution, the purposes of the Act are as stated in Armaugh, supra, and the Securities Act, s. 1.1 -- namely, the protection of the public, and the fostering of fair and efficient capital markets.
27The Appellants’ analogy with "contempt" proceedings is misplaced. Contempt proceedings have always required that, to establish contempt, the court must be satisfied beyond a reasonable doubt that the alleged contemnor had knowledge of the order allegedly breached. Contempt proceedings are not analogous to strict liability offences in public welfare statutes.
28The Appellants rely on R. v. Stucky 2009 ONCA 151, [2009] O.J. No. 600 (C.A.) and point to the fact that pre-1999 the offence under the Competition Act provided for a due diligence defence but subsequent to the amendments in 1999, the offence was a mens rea offence. The Court of Appeal does not engage in any analysis at paragraphs 6-9. The reason for this change is found in the trial decision:
22 ...In addition, in relation to the post-1999 counts, the requirement that the false or misleading misrepresentation be made "knowingly or recklessly" means that mens rea is required to be proved by the Crown beyond a reasonable doubt.
29Stucky has no application to this case.
30I am satisfied that the Securities Act offences in question are strict liability offences as the purpose and objectives of the Securities Act is maintaining the public protection and ensuring the integrity and confidence in the public markets in a fair and open manner by regulating the trading of securities and the persons that trade in such securities.
Count #4 Does not Require Knowledge of the Limelight Order
31In any event, even if I am wrong, knowledge was not necessary for Count #4. Section 25 of the Act provides that a person shall not trade in securities unless they are registered. In this case, the OSC established beyond a reasonable doubt that Campbell and DaSilva were not registered. In other words, if the OSC establishes a person is not registered, the OSC has established what is necessary for this essential element. It would be no defence for a person to say I didn't know that I needed to be registered under s. 25(1) of the Act - that would be a mistake of law which is not a defence. The OSC would not have to prove beyond a reasonable doubt that the accused knew he needed to be registered under s. 25 (1) of the Act. All the OSC would need to prove beyond a reasonable doubt is that the accused traded in securities and was not registered.
32As a result, knowledge of the Limelight Order by Campbell and DaSilva was not necessary to be proven by the OSC on Count #4.
Express Finding of Knowledge on Counts #1 and 3
33In any event, the learned trial judge found as a fact that Campbell and DaSilva had knowledge of the Limelight Order.
34In my view, there was overwhelming evidence that permitted the learned trial judge to arrive at this finding of fact. Campbell and DaSilva were represented by counsel at the commencement of the Limelight proceeding where a temporary order was made that Campbell and DaSilva cease trading in securities. The Limelight decision in the evidence refers to an Agreed Statement of Facts where DaSilva admitted breaches of the Act but did not agree to what sanctions were appropriate. DaSilva chose not to participate in the OSC proceedings and left after the commencement of the hearing on the merits. Campbell chose not to participate in the balance of the hearing. Both made a deliberate choice not to be present throughout the OSC Limelight proceeding either personally or by counsel.
35The Defence submits that the learned judge erred in fixing Campbell and DaSilva with knowledge of the Limelight Order because their counsel was present for a portion of the Limelight proceeding. I am satisfied there is considerable additional evidence which supports the learned trial judge’s finding that Campbell and DaSilva had knowledge of the Limelight Order including:
a) the Limelight Order was mailed to their correct home addresses;
b) the Limelight Order was emailed to Campbell and DaSilva at the same email addresses used in this case;
c) the use of fictitious names when dealing with prospective investors, suggests they knew that they could not trade in securities;
d) renting premises with fictitious names, again suggests that they knew they could not trade in securities;
e) routing of the funds through Switzerland and eventually to Mississauga into a bank account in a Nevada corporation's name also suggests that they knew they could not trade in securities; and
f) in Campbell's case, Mr. Pasternark testified that Campbell told him he wasn't allowed to trade providing direct evidence of Campbell's knowledge of a no trade order.
Conclusion on Knowledge Issue
36On this issue, I find no reversible error in law or a finding that is unreasonable or cannot be supported by the evidence that both Campbell and DaSilva knew of the Limelight Order at the time they engaged in trading in securities.
ISSUE #2: THE JURISDICTION ISSUE
37As stated above, Campbell and DaSilva do not dispute that they "traded" in securities as defined in the Act.
38Campbell and DaSilva submit that the Limelight Order did not prohibit them from "trading securities" in this case as the OSC did not have jurisdiction to prohibit the trading of securities outside of Ontario.
39The Appellants submit that the test set out in R. v. Libman 1985 51 (SCC), [1985] 2 S.C.R. 178 and R. v. Greco 2001 8608 (ON CA), 159 CCC (3d) 146; 155 OAC 316 does not apply to confer jurisdiction over extra-provincial offences. The Appellants submit that both cases involved federal legislation which, constitutionally, can have extra-territorial effect. The Province of Ontario does not have jurisdiction to pass legislation which has extra-territorial effect. The Appellants submit the offences in question occurred outside the Province of Ontario and, as such, the Act (and any orders made thereunder) has no application.
40The additional facts relied upon by the Appellants to demonstrate that these offences occurred outside of Ontario include:
a) ECM is a United Kingdom company;
b) the potential and actual investors were from Europe (UK and Netherlands);
c) The ECM shares traded in Germany;
d) the investors believed they were dealing with UK persons (Ian Sparks which the learned trial judge found was Campbell); and
e) the investor’s monies were sent to Switzerland.
41The OSC points to the following facts to establish that there was a real and substantial connection between the circumstances of the offences and Ontario:
a) Campbell and DaSilva were subject to a no trade order made in Ontario;
b) Campbell and DaSilva resided in Ontario throughout the activities in question;
c) Campbell and DaSilva "traded" while physically being present in Ontario through their email communications and the overseas investors;
d) The monies in Switzerland eventually forwarded a portion of the investment monies to an Ontario bank for the benefit of Campbell and DaSilva; and
e) emails were sent to and received from the investors from Ontario (the Appellants' homes and the Premises);
Does the Limelight Order prohibit Campbell and DaSilva from trading shares outside of Ontario?
42There is no dispute that provincial legislation cannot have extra-territorial effect. See Royal Bank of Canada v. The King, 1913 401 (UK JCPC), [1913] A.C. 283. As a result, the Act has no jurisdiction to regulate trading or enforce OSC orders by person outside Ontario and when the entirety of the offence occurs outside of Ontario.
43Having said this, does, and if so when, is there jurisdiction in Ontario under the Act when the offence takes place partially or even substantially outside the province?
44The Appellants submit that the no trade order, which did not contain a territorial limitation, presupposed its extra-territorial effect, thereby making the order unenforceable. I cannot accede to this submission. The enforcement of a no trade order does not exist in a vacuum. Jurisdiction over the enforcement of the no trade order is entirely dependent on the circumstances of the trading. For example, where there is no connection between the circumstances of the trading and Ontario, the no trade order, would have no effect because of the limitation on the territorial jurisdiction of the Act. Where the circumstance of the trading entirely occur in Ontario, the no trade order would have effect. It is where the circumstances of the trading occurs in Ontario and elsewhere, where the issue arises. Those are the circumstances in this case.
45In my view, the proper question is when does Ontario have jurisdiction over an offence?
46Much of the Appellant's submission is implicitly suggestive that an offence can only occur in one jurisdiction. That is incorrect. In the appropriate circumstances, more than one state can have jurisdiction over the same offence.
47When it comes to solicitation of investment in securities (which is contained within the definition of trading in the Act), the offence does occur where the communication originated and where the communication was received. In R. v. McKenzie Securities Limited, 1966 485 (MB CA) a person in Ontario solicited investments from a person in Manitoba. The Manitoba Court of Appeal analyzed the situation as follows:
The issue as to whether the activities of the accused constituted a violation of the Securities Act of Manitoba falls to be decided solely on what occurred within this Province. That they were registered to trade in securities in Ontario would only be relevant if they were faced with a charge of violating the corresponding statute of that Province. It is an irrelevant circumstance in the present prosecution. The sole point to be determined is whether the accused Dubros and the accused West, both of whom were unlicenced here, traded in securities in Manitoba. That they did not physically enter the borders of the Province is not conclusive of the matter. A person may, from outside the borders of a Province, do certain acts within the Province so as to make himself liable to the provisions of this statute. Williamson, op. cit., at p. 204 says: There seems to be no reason why a person cannot become subject to a licensing statute of a province without ever entering the province, constitutional questions aside. Although offences are local, the nature of some offences is such that they can properly be described as occurring in more than one place. This is peculiarly the case where a transaction is carried on by mail from one territorial jurisdiction to another, or indeed by telephone from one such jurisdiction to another. This has been recognized by the common law for centuries. Thus, where a threatening letter was written and posted in London, and delivered in Middlesex, it was held by the Court that the writer could properly be tried in Middlesex: R. v. Girdwood (1776), 1 Leach 142, 168 E.R. 173 (C.A.). Vide also R. v. Esser (1767), 2 East P.C. 1125. It is appropriate to note that one of the acts which is included in the definition of "trade" or "trading" in s. 2 (k) of the Securities Act is "the solicitation or obtaining of a sub- scription to the capital stock of any organization, whether incorporated or not". Solicitation of subscriptions to the capital stock of various corporations is precisely what the accused were engaged in doing in the present case. Can it effectively be denied that such solicitation took place, at least in part, in Manitoba? I think not. It was to Mr. McCaffrey in Manitoba that the accused sent their letters and other literature in which subscriptions for the purchase of capital stock were solicited. It was to Mr. McCaffrey in Manitoba that telephone calls for the same purpose were made by the accused. I think it completely unrealistic to suggest that when the accused sent their letters by mail from Toronto, Ontario, to Shilo, Manitoba, the act of solicitation there represented took place only in Toronto or at most within the borders of Ontario. Such an approach ignores completely the nature and character both of a letter and of the postal service. The invitation put forward by the accused in their letters was a continuing one. It started when written in Toronto ; it continued when deposited in the post box there ; it did not cease to exist during the period when it was being transported through the postal service (the agency selected for that purpose by the accused) ; and it retained its vitality and spoke with special effectiveness to McCaffrey at the time when he opened and read the letter in Shilo in Manitoba. It was in this Province that McCaffrey was solicited by the accused to purchase the shares in question, and it was in this Province that McCaffrey responded favourably to such solicitation. I would agree with the learned Magistrate and the learned County Court Judge that what took place in the present case constituted an act of trading in securities within the definition of the Securities Act of Manitoba.
(emphasis added)
48There are many authorities where activities conducted outside of the province have nevertheless been subject to provincial Securities legislation. See R. v. Jaasam [1971] 1 WWR 245 (Alta Prov. Ct.) and Midland Doherty Ltd. v. Zonaila (1983) 1983 364 (BC CA), 43 BCLR 138 (C.A.).
49The province has jurisdiction over the offence when there is a “sufficient connection between Ontario and the impugned activities”. See Gregory & Co. v. Quebec (Securities Commission), 1961 75 (SCC), [1961] SCR 584 and Crowe v. Ontario Securities Commission, (2011) 2011 ONSC 6918, 108 O.R. (3d) 410 (Div. Ct.) where the court stated:
....Provincial securities legislation can also be applied to regulate corporations or individuals within the province in order to protect investors outside the province from unfair, improper or fraudulent activities. Where the Commission is regulating trades that have an extra provincial character, the question is not the location of the investors; [page418] rather, it is whether there is a sufficient connection between Ontario and the impugned activities and the entities involved to justify regulatory action by the Commission.
(emphasis added)
50What is the proper test to be applied to determine when the province has jurisdiction over the offence?
Does the Libman Test apply to provincial legislation?
51In The Interpretation of Legislation in Canada, by Pierre-Andre Cote, Carswell, the author makes the following comments at pages 203-204:
Problems resulting from attempts to situate the person, the property and the transactions which fall within the ambit of the enactment. On the one hand, the physical location of person or property, the place where a transaction takes place or where an event occurs, does not necessarily coincide with the situs which the law ascribes. On the other hand, considerations of international comity influence the characterization of the text's territorial effect.
A statute does not have an extraterritorial effect simply because it applies to person, property or transactions physically situated outside the enacting body's jurisdiction. In the eyes of the law, it is the situs which is relevant....
A statute of a given State will be said to have an extraterritorial effect if it governs persons, property, juridical acts or facts which do not have a "real and important link" with that State. [footnoted to Libman]
52The "extraterritorial" reach of provincial securities legislation was specifically considered by the Alberta Securities Commission in World Stock Exchange (Re) 2000, 9 ASCS 658:
territoriality of section 52(1)
The WSE is active in and has connections to many jurisdictions, including Alberta. Our jurisdiction under the Securities Act is basically territorial, and we must consider whether the WSE's activities fall within that jurisdiction.
We find that the same territoriality considerations apply in this case as discussed by the Supreme Court of Canada in Libman v. The Queen, 1985 51 (SCC), [1985] 2 S.C.R. 178 ("Libman"). Libman involved a fraud charge under the Criminal Code where the accused conducted activities in several countries, including Canada. La Forest J. reviews the history of English and Canadian law in relation to transnational offences and distills it down to a concise rationale and conclusion which we find directly applicable to the case at hand.
Although the Libman decision addresses territoriality in the context of criminal law, in our view the same principles are applicable to the Act, including section 52(1).
(emphasis added)
53The Libman test was recently applied in Ontario to the Securities Act. See R. v. Lowman 2017 33.
54In the technology world we live in, where faxes, emails, and the internet permits carrying on business globally, the logical ramification of the Appellants’ submission would be to permit unscrupulous traders to use Ontario as its site to carry on illegal and improper trades around the world and, provided that the investors and shares traded elsewhere, there would be no provincial regulation over such unscrupulous trader’s activities. Permitting such traders to carry on business in this manner from Ontario without regulation would erode the fairness, efficiency and confidence in Ontario’s securities market.
55In my view, the Libman test is not limited to federal legislation but is principle of general jurisdictional application to determine whether a state (the federal government or a province) has jurisdiction over the offence. In other words, where there is a real and substantial connection between the circumstances of the offence and the state, the state has jurisdiction over the offence.
56I conclude that the Libman test applies to offences under provincial legislation, where the circumstances of the offence has a "real and substantial connection" to Ontario.
Does the OSC have jurisdiction over these offences?
57In this case, there was a real and substantial connection to Ontario and the circumstances of the offence:
a) Campbell and DaSilva were prohibited from trading securities by a no trade order in Ontario;
b) Campbell and DaSilva resided in Ontario;
c) While in Ontario, Campbell and DaSilva engaged in "trading" in securities by sending and receiving emails soliciting potential investors and completing trades with investors;
d) Campbell and DaSilva established the Premises in Ontario from which they conducted some of the trades;
e) a portion of the profits from their trading was returned to Ontario and to Campbell and DaSilva.
58The fact that the investors and the shares traded were outside Ontario, does not lessen the real and substantial connection with Ontario in the circumstances of this case. It is not necessary to determine whether another state(s) also has jurisdiction over the same offences.
59In similar circumstances, this court has found a real and substantial connection. See McKenzie Securities supra. In Ontario Securities Commission, and 1367682 Ontario Ltd. (c.o.b. as De Freitas & Associates), Jason Wong, JWV Consulting Inc., 1606884 Ontario Inc., Alena Dubinsky and Ralph Papa [2008] O.J. No. 2020 the court stated:
39 There remains, however, a jurisdictional issue raised by 136. It argues that, because the trading of the securities in the account of De Freitas Associates Ltd. occurred in the United States, the OSC has failed to demonstrate that the offences described above were committed in Ontario.
40 The evidence before the Court establishes that De Freitas resides in Ontario. There is, therefore, a strong prima facie case that De Freitas provided trading instructions to Franklin Ross from Ontario. Such activity is sufficient to constitute trading in securities in Ontario for purposes of the Act having regard to the public interest object of the legislation as articulated by the Supreme Court in Gregory & Co. v. Quebec (Securities Commission), 1961 75 (SCC), [1961] S.C.R. 584 at p. 588.
The paramount object of the Act is to ensure that persons who, in the province, carry on the business of trading in securities or acting as investment counsel, shall be honest and of good repute and, in this way, to protect the public, in the province or elsewhere, from being defrauded as a result of certain activities initiated in the province by persons therein carrying on such a business.
41 On the basis of the same principle, I conclude that such activity, together with the receipt of the proceeds of such trading in a bank account in Ontario, is also sufficient to constitute the perpetration of a fraud in Ontario for the purposes of section 126.1(b) of the Act and to constitute market manipulation activity in Ontario for the purposes of section 126.1(a) of the Act: see also Regina v. Libman, 1985 51 (SCC), [1985] 2 S.C.R. 178 at paras. 71-74 and 76-78, which articulates the test of a "real and substantial link" between an offence and this country, which I am satisfied is amply demonstrated in this proceeding.
42 Accordingly, I am satisfied that the OSC has established a strong prima facie case of contravention of the Act by 136 and De Freitas.
(emphasis added)
60The learned judge properly concluded that there was a real and substantial connection between the activities of Campbell and DaSilva to establish jurisdiction over the offences charged.
International Comity
61The Appellants submit that the learned trial judge erred in failing to consider international comity. There is no reference to the learned trial judge considering international comity before considering whether Ontario had jurisdiction over these offences.
62The Appellants submit that the sovereignty of the UK, Netherlands and/or Germany would be impacted by jurisdiction over these offences. There is no basis in the evidence to draw such a conclusion and it makes no sense. Trading in the ECM securities can continue. They may be traded by traders in those countries and no doubt other countries. The ECM securities simply cannot be traded by Campbell and DaSilva in a manner where there continues to be a real and substantial connection to Ontario. In any event, as set out in Chowdhury v. Canada, 2014 ONSC 2635 at para 11, where a real and substantial link exists between the offence and the province, asserting jurisdiction would not offend the principle of comity.
63Without deciding whether international comity must be considered when applying the Libman test, I am satisfied it would not have altered the learned trial judge’s conclusion that Ontario had jurisdiction over the offences charged. On the evidentiary record at trial, there is nothing to suggest that a prosecution under the Act in Ontario would offend international comity. That issue is easily disposed of by the fact that Campbell and DaSilva are here – they reside in Ontario, they pursued investors in this jurisdiction, and they received monies from the investors in this jurisdiction. As stated in Libman, "I see nothing in the requirements of international comity that would dictate that this country [read province] refrain from exercising its jurisdiction."
ISSUE #3: THE SENTENCE APPEAL
64The learned trial judge imposed sentences on Campbell and DaSilva as follows: 3 months custody concurrent on each count followed by probation for 18 months and 125 hours of community service.
65The learned trial judge concluded that the paramount governing sentencing principles were deterrence and denunciation. He concluded that general deterrent goals required a period of custody, albeit a short term, coupled with community service.
66The Appellants submit that the learned trial judge erred in that he “presumed that a jail sentence was required”. I see no such presumption from the learned trial judge's sentencing reasons. He found a short custodial sentence to be appropriate in this case based on similar reasoning set out in Robinson, ante.
67One of the aggravating factors in this case was the prior trading activity in Limelight contrary to the Act and the disregard for the prior OSC sanctions. The Limelight Order, required Campbell and DaSilva (as well as the others involved) to disgorge $2,747,089.45; Limelight was required to pay an administrative penalty of $200,000; DaSilva was required to pay an administrative penalty of $200,000; Campbell was required to pay an administrative penalty of $175,000; Campbell and Limelight were required to pay costs of $114,979.79 plus disbursements; DaSilva was required to pay costs of $15,000 because he had settled. Neither Campbell nor DaSilva have paid the amounts ordered by the OSC. The learned trial judge found that the provisions of the Limelight Order “could not have been more fully ignored than they were”.
68Three of the investors have received nothing for their investments. The total amount of money that went into the Zap account was between $19,000 and $20,000.
69The learned trial judge, while finding that Campbell and DaSilva were intelligent, articulate men capable of succeeding in anything they set out to do, neither had any remorse for their offences but felt they were the victims of the OSC for destroying their business.
[70]
71The Appellants submit that the learned trial judge placed too much weight on the issue of the use of false names and fraudulent Ameron operation. In my view, these facts go to the means, method and extent the offenders used to perpetrate the offences, all of which are relevant sentencing considerations on the issue of moral blameworthiness.
72The Appellants submit that the learned trial judge erred in considering facts establishing the dishonesty of Campbell and DaSilva when fraud had not been pleaded. The learned trial judge correctly recognized and considered that fraud was not alleged and the investor losses proven were not large but the moral blameworthiness of the offenders was nevertheless high. Dishonesty in carrying out the offences is relevant. Sentencing requires a consideration of the moral blameworthiness of the offender. It was entirely appropriate to consider the means and methods used by Campbell and DaSilva to carry out the offences as aggravating factors.
73Campbell’s counsel submits that there was no basis to infer knowledge of the fraudulent nature of the Ameron operation. I disagree. While there was conflicting evidence as to whether other traders believed that the Ameron was a legitimate business, it was open to the learned trial judge to conclude that Campbell, using a fictitious name (different from even the other fictitious names used) knew of the illegitimate Ameron operations. Besides, as the learned judge set out in his reasons, Campbell admitted the operations were fraudulent.
74Campbell’s counsel submits that the learned trial judge failed to give appropriate weight, as a mitigating factor, that once Campbell knew of the fraudulent Ameron operation, he stopped working there and alerted investors. The sentencing judge found that Campbell admitted it was a fraudulent boiler room operation. The difficulty with the Defence submission is that Campbell suggested in his submissions that it wasn't him that selected the false name of Dave Bell; that they at Ameron office, the operators wouldn't let him take any document home to check with a lawyer; that he didn't sell anything except "I might have got about $500" - "I was upset 'cause they wasted my time". All of these factors would have made it clear, particularly with Campbell’s background, that he either needed direct or clear answers to such questions or the operation was a “scam”. This Appellant submissions do not place Campbell on the moral high ground when it comes to his involvement in trading Ameron securities.
75The Appellant’s counsel also submits that the learned trial judge erred in giving sufficient weight to the small amount of the investor losses and assumed that the money forwarded to Zap Group was proceeds of trades. The learned trial judge was fully aware of this factor and specifically refers to it in his reasons for sentence. Had this been a first breach of the Act, this would have had been a more persuasive argument but, all relevant factors including the prior breaches of the Act are proper aggravating factors.
76The Appellants submit that the sentences were not a fit and proper sentence and point to R. v. Bandali, 2015 ONCJ 652 and OSC v. Robinson 2011 ONCJ 89. In Robinson, a guilty plea, while the sentencing judge generally accepted the prosecutor’s submission of three months, he reduced the appropriate custodial term by imposing a significant community service term. Bandali was a guilty plea, a significant mitigating factor.
77What the Appellants essentially allege is that the sentencing judge erred in his final decision after having weighed the various competing factors. That is not a basis for this court to interfere with the sentence imposed by itself, unless undue weight is given or failed to be given to a relevant factor resulting in an unfit sentence in the circumstances.
78I am not persuaded that the sentences imposed are not fit in the circumstances of the offenders and the offences.
79The sentence appeal is dismissed.
CONCLUSION
80The Appeals are dismissed.
Ricchetti, J.
Released: July 27, 2017
CITATION: Ontario Securities Commission v. DaSilva, 2017 ONSC 4576 COURT FILE NO.: SCA (P) 1782-16; SCA (P) 1780-16 DATE: 20170727
ONTARIO SUPERIOR COURT OF JUSTICE
Ontario Securities Commission – and – Carlos DaSilva and David Campbell
REASONS FOR JUDGMENT
Ricchetti J.
Released: July 27, 2017
