Pacific Coast Coin Exchange of Canada et al. v. Ontario Securities Commission, (1977) 18 N.R. 52 (SCC)

• Judge: Laskin, C.J.C., Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 16, 1977
• Jurisdiction: Canada (Federal)
• Citations: (1977), 18 N.R. 52 (SCC);80 DLR (3d) 529;2 BLR 212;18 NR 52;[1978] 2 SCR 112;1977 CanLII 37 (SCC);AZ-78111091

Pacific Coast Coin v. Securities Comm. (1977), 18 N.R. 52 (SCC)

MLB headnote and full text

Pacific Coast Coin Exchange of Canada et al. v. Ontario Securities Commission

Indexed As: Pacific Coast Coin Exchange of Canada et al. v. Ontario Securities Commission

Supreme Court of Canada

Laskin, C.J.C., Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré, JJ.

November 16, 1977.

Summary:

This case arose out of an order by the Ontario Securities Commission which prohibited a company from trading in "commodity account agreements" because the agreements were unregistered securities. The agreements in question (between the company and its customers) were for the purchase of silver coins on margin. Under such agreements the silver coins were not deliverable until the purchase price was paid in full and most customers closed out their accounts without taking delivery of the silver coins. When an account was closed the customer realized a profit or suffered a loss depending upon the current market price for silver.

The appeal by the Company to the Ontario Divisional Court was dismissed and the order of the Ontario Securities Commission was affirmed.

On appeal to the Ontario Court of Appeal the appeal was dismissed and the judgment of the Ontario Divisional Court was affirmed.

On appeal to the Supreme Court of Canada the appeal was dismissed and the judgment of the Ontario Court of Appeal was affirmed.

Laskin, C.J.C., dissenting, in the Supreme Court of Canada, would have allowed the appeal, would have set aside the judgments of the Ontario courts and would have quashed the prohibitory order of the Ontario Securities Commission. Laskin, C.J.C. stated that the agreements in question did not constitute investment contracts. Laskin, C.J.C. stated that the customer's profits or losses were controlled by the market and not be managerial effort by the company and, accordingly, there was no common enterprise between the company and the customers.

Securities Regulation - Topic 103

Definitions - What constitutes a security - Investment contract defined - The Ontario Securities Commission ordered a company to stop trading in "commodity account agreements" because the agreements were unregistered securities - The agreements in question (between the company and its customers) were for the purchase of silver coins on margin - Under such agreements the silver coins were not delivered until the purchase price was paid in full and most customers closed out their accounts without taking delivery of the silver coins - When the accounts were closed the customers realized a profit or suffered a loss depending upon the current market price for silver - The Supreme Court of Canada held that the "commodity account agreements" were securities for purposes of the Ontario Securities Act - The Supreme Court of Canada stated that the agreements were "investment contracts" (a term included in the statutory definition of security) because there was a common enterprise between the company and its customers and because profits were realized from the efforts and risks assumed by the company.

Words and Phrases

Security - The Supreme Court of Canada discussed the meaning of the word "security" as found in s. 1(1)22 of the Ontario Securities Act, R.S.O. 1970, c. 424.

Words and Phrases

Investment contract - The Supreme Court of Canada discussed the meaning of the words "investment contract" as found in s. 1(1)22 of the Ontario Securities Act, R.S.O. 1970, c. 424.

Cases Noticed:

Regina Great Way Merchandising Ltd., Re (1971), 20 D.L.R.(3d) 67, refd to. [para. 17].

Bestline Products of Canada Ltd., Re (1971), 29 D.L.R.(3d) 505, refd to. [para. 17].

Ontario Securities Commission and Brigadoon Scotch Distributors (Canada) Limited, Re, [1970] 3 O.R. 714, folld. [para. 18].

Tcherepnin v. Knight (1967), 389 U.S. 332, folld. [para. 21].

SEC v. W.J. Howey Co. (1946), 328 U.S. 293, folld. [para. 22].

SEC v. Koscot Interplanetary, Inc. (1974), 497 F. 2d. 473, refd to. [para. 25].

SEC v. Glen W. Turner Enterprises, Inc. (1973), 474 F. 2d. 476, refd to. [para. 25].

Hawaii Commissioner of Securities v. Hawaii Market Centre Inc. (1971), 485 P. 2d 105, folld. [para. 31]; dist. [para. 37].

Securities and Exchange Commission v. Howey (1946), 328 U.S. 293, dist. [para. 37].

Jenson v. Continental Financial Corporation (1975), 404 F. Supp. 792, refd to. [para. 43].

Statutes Noticed:

Securities Act, R.S.O. 1970, c. 424, sect. 1(1)22(viii).

Authors and Works Noticed:

Loss, Louis, Securities Regulation, (1961), Vol. 1, page 483 [para. 20].

Counsel:

Douglas Laidlaw, Q.C., for the appellants;

B.P. Bellmore and M.W. Bader, for the respondent, Ontario Securities Commission.

This appeal was heard by LASKIN, C.J.C., MARTLAND, JUDSON, RITCHIE, SPENCE, PIGEON, DICKSON, BEETZ and de GRANDPRE, JJ., at Ottawa, Ontario on February 15 and 16, 1977.

The judgment of the Supreme Court of Canada was delivered on November 16, 1977 and the following opinions were filed:

de GRANDPRE, J. - see paragraphs 1 to 35;

LASKIN, C.J.C., dissenting - see paragraphs 36 to 46.

MARTLAND, JUDSON, RITCHIE, SPENCE, PIGEON, DICKSON and BEETZ, JJ. concurred with de GRANDPRE, J.