Anderson v. British Columbia Securities Commission, (2004) 192 B.C.A.C. 119 (CA)

• Jurisdiction: British Columbia
• Judge: Southin, Braidwood and Mackenzie, JJ.A.
• Neutral Citation: 2004 BCCA 7
• Citation: (2004), 192 B.C.A.C. 119 (CA),2004 BCCA 7, 315 WAC 119, 192 BCAC 119, 23 BCLR (4th) 182, [2004] 4 WWR 81, [2004] BCWLD 367,[2004] 4 WWR 81,[2004] BCWLD 367,23 BCLR (4th) 182,192 BCAC 119,315 WAC 119, 315 W.A.C. 119,315 W.A.C. 119,(2004), 192 BCAC 119 (CA),192 B.C.A.C. 119
• Date: 09 January 2004
• Court: Court of Appeal (British Columbia)

Anderson v. Securities Comm. (2004), 192 B.C.A.C. 119 (CA);

    315 W.A.C. 119

MLB headnote and full text

Temp. Cite: [2004] B.C.A.C. TBEd. JA.049

Carl Glenn Anderson and Douglas Victor Montaldi (appellants/respondents) v. Executive Director of the British Columbia Securities Commission (respon­dent/applicant)

(CA030661; 2004 BCCA 7)

Indexed As: Anderson et al. v. British Columbia Securities Commission

British Columbia Court of Appeal

Southin, Braidwood and Mackenzie, JJ.A.

January 9, 2004.

Summary:

Anderson and Montaldi, through their numbered company 439288 B.C., made loans to in­dividuals and small businesses. To raise capital for its lend­ing activities, the company sold promissory notes to investors. The promissory notes consisted of personal guar­an­tees of Anderson and Montaldi. The B.C. Securities Commission found Anderson and Montaldi to be in breach of the Secur­ities Act by (1) trading in secu­rities without registration or exemption (s. 34(1)) or by dis­tributing securities without filing a pro­spectus (s. 61(1)); (2) making misrepresenta­tions (s. 50(1)(d)); (3) engaging in a series of transactions that perpetrated a fraud (s. 57(b)), and (4) acting contrary to the public interest. Both men appealed the findings of mis­representation, fraud and act­ing contrary to the public in­terest.

The British Columbia Court of Appeal allowed the appeal and set aside the findings of fraud and misrepresentation. The court referred the issue of failure to act in the public interest to the Commission for recon­sideration.

Evidence - Topic 104

Degree, standard or burden of proof - Standard or degree of proof - Proof of crime in civil cases - The British Colum­bia Court of Appeal stated that fraud was a very serious allegation which carried a stigma and required a high standard of proof - While proof in a civil or regula­tory case did not have to meet the criminal law standard of proof beyond a reasonable doubt, it did require evidence that was clear and convincing proof of the elements of fraud, in­cluding the mental element - See paragraph 29.

Securities Regulation - Topic 5310

Trading in securities - Offences - Giving false or misleading information - The respondents, through their numbered com­pany, lent money to individuals and small businesses - They were convicted under the Securities Act with making statements which they knew or ought to have known were misrepresentations, i.e., that they did not disclose to investors that the funds they invested "might be used" to pay interest and capital due to existing investors - The British Columbia Court of Appeal held that the allegation did not clearly distinguish between income and cash flow - Further, the Securities Com­mission relied on Tables not in evidence that did not merely sum­marize evidence but purported to draw conclusions that were controversial if not analytically flawed - The cumulative effect of these deficiencies vitiated the Commis­sion's conclusion - See paragraphs 34 to 42.

Securities Regulation - Topic 5313

Trading in securities - Offences - Fraud - The Securities Act, s. 57, outlined the prohibitions against fraudulent transactions relating to trading - The British Columbia Court of Appeal held that s. 57 did not dispense with the requirement that there must be a fraud involved in the transac­tion, which required a guilty state of mind as well as an act - Section 57(b) did not dispense with proof of fraud and proof of a guilty mind - Section 57(b) prohibited participation in transactions by participants who knew or ought to have known that a fraud was being perpetuated by others, as well as those who participated in perpe­trating the fraud - See paragraphs 22 to 28.

Securities Regulation - Topic 5321.1

Trading in securities - Offences - Penalties and punishments - Considerations - The re­spondents, through their numbered com­pany, lent money to individuals and small businesses - They were charged with con­travening the Securities Act - It was undis­puted that they traded securities without being regis­tered and without filing a pro­spectus, contrary to the Act - The British Colum­bia Court of Appeal held that the Secur­ities Commis­sion was properly en­titled to consider that finding in formulating a penalty in the public interest under s. 161 of the Act - The Commis­sion was also en­titled to take account of direc­tors' duties to exercise reasonable care and skill inas­much as the respondents used their com­pany as a vehicle to conduct business - See para­graphs 43 to 46.

Cases Noticed:

R. v. White, [1999] B.C.J. No. 1543 (Prov. Ct.), refd to. [para. 23].

Derry v. Peek (1889), 14 A.C. 337 (H.L.), refd to. [para. 26].

R. v. Théroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184; 79 C.C.C.(3d) 449; 100 D.L.R.(4th) 624, refd to. [para. 27].

R. v. Long (1990), 51 B.C.L.R.(2d) 42; 61 C.C.C.(3d) 156 (C.A.), refd to. [para. 27].

Gill v. Canadian Venture Exchange Inc. et al. (2003), 185 B.C.A.C. 197; 303 W.A.C. 197; 15 B.C.L.R.(4th) 259; 26 C.C.E.L.(3d) 1; 2003 BCCA 431, refd to. [para. 28].

R. v. Cuerrier (H.G.), [1998] 2 S.C.R. 371; 229 N.R. 279; 111 B.C.A.C. 1; 181 W.A.C. 1; 162 D.L.R.(4th) 513; 127 C.C.C.(3d) 1, refd to. [para. 30].

R. v. Zlatic (Z.), [1993] 2 S.C.R. 29; 151 N.R. 81; 54 Q.A.C. 161; 79 C.C.C.(3d) 466; 100 D.L.R.(4th) 642, refd to. [para. 33].

Statutes Noticed:

Securities Act, R.S.B.C. 1996, c. 418, sect. 50(1)(d) [para. 34]; sect. 57(b) [para. 22].

Counsel:

R.W. Taylor and C.D. Veinotte, for the appellants;

J.A. Angus and K.M. Mactaggart, for the respondent.

This appeal was heard in Vancouver, British Columbia, on November 27 and 28, 2003, before Southin, Braidwood and Mackenzie, JJ.A., of the British Columbia Court of Appeal. The decision of the court was delivered by Mackenzie, J.A., on Jan­uary 9, 2004.