Electronic Benefits Inc. et al. v. Nova Scotia Securities Commission,

• Jurisdiction: Nova Scotia
• Judge: Bateman,Hamilton,Murphy
• Neutral Citation: 2009 NSCA 6
• Citation: 2009 NSCA 6,(2009), 274 N.S.R.(2d) 155 (CA),274 NSR(2d) 155,(2009), 274 NSR(2d) 155 (CA),274 N.S.R.(2d) 155
• Date: 03 December 2008
• Court: Court of Appeal of Nova Scotia (Canada)

Electronic Benefits v. N.S. Securities Comm. (2009), 274 N.S.R.(2d) 155 (CA);

    874 A.P.R. 155

MLB headnote and full text

Temp. Cite: [2009] N.S.R.(2d) TBEd. JA.047

Electronic Benefits Inc., Advantage Financial Group Inc. and Everett R. Stuckless (appellants) v. Nova Scotia Securities Commission (respondent)

(CA 294529; 2009 NSCA 6)

Indexed As: Electronic Benefits Inc. et al. v. Nova Scotia Securities Commission

Nova Scotia Court of Appeal

Bateman and Hamilton, JJ.A. and Murphy, J.(ad hoc)

January 22, 2009.

Summary:

Electronic Benefits Inc. (EBI), Advantage Financial Group Inc. (Advantage) and Stuckless were charged under the administrative public interest section of the Securities Act (N.S.). The Nova Scotia Securities Commission accepted EBI's admission that it participated in the furtherance of a trade of securities without having met the Act's registration (s. 31(1)(a)) and prospectus (s. 58(1)) requirements and found that Advantage had done the same. It found that Stuckless' role in the contraventions as director, president and CEO of EBI and Advantage fell below the required standard of care. It ordered a permanent cease trade order against EBI and imposed a $10,000 administrative penalty on EBI. It also ordered a 24 month cease trade order against Advantage and Stuckless, but its effect merely was to continue an interim cease trade order so that it coincided with the decision date. EBI, Advantage and Stuckless were ordered to jointly and severally pay $7,500 costs. They appealed.

The Nova Scotia Court of Appeal dismissed the appeal.

Administrative Law - Topic 24

Abuse of process - What constitutes - EBI, Advantage and Stuckless appealed a decision of the Nova Scotia Securities Commission - Stuckless alleged, inter alia, that the 16 month delay in rendering the Commission's decision amounted to an abuse of process justifying a remedy - The Nova Scotia Court of Appeal held that 16 months was an inordinately long time to wait for such a decision, especially when an order restricting one's activity was in place pending the decision - Despite Stuckless' protestations that the proceedings before the Commission including the cease trade order ruined him financially, the fact was that his ability to earn an income was not restricted by the cease trade order - As he indicated to the Vice-Chair when he agreed to the continuation of the cease trade order, it did not affect his ability to earn an income because he was not registered to trade securities and did not want to - In light of this admission, the continuation of the cease trade order did not affect his rights substantively and therefore the long delay before the decision was rendered, while of concern, did not amount to an abuse of process requiring a remedy - See paragraphs 60 to 63.

Administrative Law - Topic 2095

Natural justice - Constitution of board or tribunal (considerations incl. bias) - Attitudinal bias - EBI, Advantage and Stuckless appealed a decision of the Nova Scotia Securities Commission, written by the Vice-Chair - Bradshaw was the Commission investigator - At the hearing, during cross-examination by Stuckless, Bradshaw answered questions about Marchand, whom she had interviewed as part of her investigation - On appeal, Stuckless alleged that Bradshaw was biased as a result of a personal or family relationship with Marchand - The Nova Scotia Court of Appeal found no bias - If Stuckless wished to ask Bradshaw additional questions about Marchand, he could have done so then or later in the hearing when represented by counsel - It was too late to make unsupported allegations of investigative bias for the first time on appeal - Further, there was nothing to suggest that if the allegations Stuckless now made were proven to be true, they would have affected the decision - There was no suggestion that the Vice-Chair was biased - He made his decision following a hearing where EBI, Advantage and Stuckless made a number of admissions, evidence was presented, cross-examination conducted and arguments made by all parties - There was no reference to Marchand in the decision because his involvement was not relevant to it - See paragraphs 55 to 59.

Administrative Law - Topic 2293

Natural justice - Unfairness - Abuse of power or abuse of process - [See Administrative Law - Topic 24 ].

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previously raised (incl. new theory of the case) - [See Administrative Law - Topic 2095 ].

Securities Regulation - Topic 1242

Regulatory commissions (incl. self-regulatory organizations) - Powers or jurisdiction - Public interest - The appellants were charged under the administrative public interest section of the Securities Act (N.S.) - They appealed the Commission's decision - The Nova Scotia Court of Appeal stated that it was important to remember that only the administrative public interest provisions of the Act were in issue, which did not include the possibility of incarceration (i.e., not the quasi-criminal section) - Under the public interest section the Commission was given a broad mandate to determine and act in accordance with the public interest - The Commission's discretion was so broad that public interest orders could be made without proof that the Act had been breached - In making decisions under the public interest section the Commission could consider the consequences of its decision on the individuals involved but its paramount concern was what was in the public interest - The honesty of a director or officer did not prevent public interest orders being made - The Commission had more expertise than the court in determining the public interest - See paragraphs 36 to 39.

Securities Regulation - Topic 1247

Regulatory commissions (incl. self-regulatory organizations) - Powers or jurisdiction - Cease trading orders - EBI, Advantage and Stuckless were charged under the administrative public interest section of the Securities Act (N.S.) - The Nova Scotia Securities Commission accepted EBI's admission that it participated in the furtherance of a trade of securities without having met the Act's registration (s. 31(1)(a)) and prospectus (s. 58(1)) requirements and found that Advantage had done the same - It found that Stuckless' role in the contraventions as director, president and CEO of EBI and Advantage fell below the required standard of care - The Nova Scotia Court of Appeal held that the Commission did not err in, inter alia, making a 24 month cease trade order against Stuckless which did no more than retroactively confirm an interim order - The Commission found that Stuckless carelessly set in motion the process that led to impugned letters and emails seeking investment in EBI, being sent - Stuckless failed to adequately communicate with his staff to ensure that they understood his intention not to send an unrevised letter - This carelessness together with his failure to inform himself of the relevant securities law respecting soliciting public investment in EBI, in light of his earlier inquiries, was found not to meet the required standard - Further, the Commission did not err in confirming Commission Staff's request for $7,500 costs as prescribed under the regulations - The court was to give considerable deference to a securities commission's decision on costs - See paragraphs 34 to 55.

Securities Regulation - Topic 1386

Regulatory commissions (incl. self-regulatory organizations) - Statutory appeal or judicial review - Scope of appeal or standard of review - [See Securities Regulation - Topic 1247 ].

Securities Regulation - Topic 1386

Regulatory commissions (incl. self-regulatory organizations) - Statutory appeal or judicial review - Scope of appeal or standard of review - EBI, Advantage and Stuckless were charged under the administrative public interest section of the Securities Act (N.S.) - The Nova Scotia Securities Commission accepted EBI's admission that it participated in the furtherance of a trade of securities without having met the Act's registration (s. 31(1)(a)) and prospectus (s. 58(1)) requirements and found that Advantage had done the same - It found that Stuckless' role in the contraventions as director, president and CEO of EBI and Advantage fell below the required standard of care - It ordered a permanent cease trade order against and imposed a $10,000 administrative penalty on EBI - It also ordered a 24 month cease trade order against Advantage and Stuckless, but its effect merely was to continue an interim cease trade order so that it coincided with the decision date - EBI, Advantage and Stuckless were ordered to jointly and severally pay $7,500 costs - The Nova Scotia Court of Appeal held that the standard of review to be applied to whether the Commission erred in: (i) making the cease trade order against Stuckless and (ii) ordering Stuckless to pay costs, was reasonableness - See paragraphs 23 to 26.

Cases Noticed:

Schriver v. Securities Act (2006), 239 N.S.R.(2d) 306; 760 A.P.R. 306 (C.A.), appld. [para. 24].

Nova Scotia Securities Commission v. Schriver - see Schriver v. Securities Act.

Asbestos Corp., Société nationale de l'Amianté and Quebec (Province), Re, [2001] 2 S.C.R. 132; 269 N.R. 311; 146 O.A.C. 201, refd to. [para. 25].

Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) - see Asbestos Corp., Société nationale de l'Amiante and Quebec (Province), Re.

Baldwin, Re, [1999] 18 B.C.S.C.W.S. 12, refd to. [para. 25].

Cartaway Resources Corp. et al., Re (2000), 9 A.S.C.S. 3092, affd. in part (2002), 173 B.C.A.C. 235; 283 W.A.C. 235 (C.A.), revd. [2004] 1 S.C.R. 672; 319 N.R. 1; 195 B.C.A.C. 161; 319 W.A.C. 161, refd to. [para. 25].

Standard Trustco Ltd., Re (1992), 15 O.S.C.B. 4322, refd to. [para. 25].

Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1, refd to. [para. 25].

New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1, appld. [para. 26].

Miller v. Royal Bank of Canada (2008), 272 N.S.R.(2d) 179; 869 A.P.R. 179; 2008 NSCA 118, appld. [para. 27].

C.T.C. Dealer Holdings Ltd. and Billes et al. v. Ontario Securities Commission and Canadian Tire Corp. et al. (1987), 21 O.A.C. 216; 59 O.R.(2d) 79 (Div. Ct.), refd to. [para. 39].

Mithras Management Ltd., Re (1990), 13 O.S.C.B. 1600, refd to. [para. 39].

Banks v. Ontario Securities Commission (2003), 26 O.S.C.B. 3377, revd. in part (2005), 204 O.A.C. 290 (Div. Ct.), refd to. [para. 39].

Banks, Re - see Banks v. Ontario Securities Commission.

Soper v. Minister of National Revenue, [1998] 1 F.C. 124; 215 N.R. 372 (F.C.A.), refd to. [para. 39].

R. v. Wholesale Travel Group Inc. and Chedore, [1991] 3 S.C.R. 154; 130 N.R. 1; 49 O.A.C. 161, refd to. [para. 43].

Erikson v. Ontario Securities Commission (2003), 169 O.A.C. 80; 26 O.S.C.B. 1622 (Div. Ct.), refd to. [para. 44].

Lyons, Re, [1988] 57 B.C.S.C.W.S. 1, refd to. [para. 45].

Kusumoto, Re, 2007 ABASC 40, refd to. [para. 48].

Slightham, Re, [1996] 30 B.C.S.C.W.S. 38, refd to. [para. 49].

Specialized Surgical Services Inc., Re, 2002 BCSECCOM 675, refd to. [para. 49].

R. v. Petro-Canada (2003), 168 O.A.C. 247; 63 O.R.(3d) 219 (C.A.), refd to. [para. 50].

Counsel:

Everett (Roger) Stuckless, self-represented appellant;

Duane A.C. Eddy, for the Nova Scotia Securities Commission;

Heidi Schedler and Peter Forgeron, articled clerk, for the Staff of the Nova Scotia Securities Commission.

This appeal was heard on November 13 and December 3, 2008, in Halifax, N.S., by Bateman and Hamilton, JJ.A., and Murphy, J.(ad hoc), of the Nova Scotia Court of Appeal. Hamilton, J.A., delivered the following reasons for judgment for the court on January 22, 2009.