Alberta Securities Commission v. Workum et al.,

JudgeMcFadyen, O'Brien and McDonald, JJ.A.
Neutral Citation2010 ABCA 405
Date20 December 2010
CourtCourt of Appeal (Alberta)

Securities Comm. v. Workum (2010), 493 A.R. 1 (CA);

      502 W.A.C. 1

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. DE.082

Alberta Securities Commission (respondent/applicant) v. Peter J. Workum (appellant/respondent) and Theodor Hennig, Strategic Investment Fund, Cheshire Capital Inc., Lexington Capital Ltd., Ashland Holdings Corp. and Cofima Finanz AG (not parties to the appeal)

(0901-0012-AC)

Alberta Securities Commission (respondent/applicant) v. Peter J. Workum (appellant/respondent) and Theodor Hennig, Strategic Investment Fund, Cheshire Capital Inc., Lexington Capital Ltd., Ashland Holdings Corp. and Cofima Finanz AG (not parties to the appeal)

(0901-0013-AC)

Alberta Securities Commission (respondent/applicant) v. Theodor Hennig (appellant/respondent) and Peter J. Workum, Cheshire Capital Inc. and Strategic Investments Fund (not parties to the appeal)

(0901-0019-AC; 2010 ABCA 405)

Indexed As: Alberta Securities Commission v. Workum et al.

Alberta Court of Appeal

McFadyen, O'Brien and McDonald, JJ.A.

December 20, 2010.

Summary:

Hennig and Workum were directors and the senior officers of PPI, a junior capital corporation. The Alberta Securities Commission found them guilty of conduct contrary to the public interest and in violation of the Securities Act provisions respecting financial disclosure in PPI financial statements (1998 to 2000) which were not prepared in accordance with generally accepted accounting principles and contained misrepresentations. Both were also found guilty of receiving undisclosed financial benefits related to secret commissions, market manipulation, failure to report insider trades, and making misrepresentations to Commission staff. Workum was ordered to permanently cease trading, to resign all positions as a director or officer, and he was permanently prohibited from acting as an officer and director. Monetary sanctions included an administrative penalty of $750,000 and $200,000 of the costs of the investigation and hearing. Hennig was ordered to permanently cease trading for 20 years, to resign all positions as director or officer, and he was permanently prohibited from acting as an officer and director. His monetary sanctions included an administrative penalty of $400,000 and $175,000 in costs. Hennig and Workum appealed under s. 38 of the Act, challenging the Commission's three decisions: the rejection of their institutional bias claim, the decision on the merits, and the sanctions decision. The grounds of appeal, in part, were: (1) by allowing its own Chief Accountant to give expert testimony, the Commission created a reasonable apprehension of bias; (2) the findings related to secret commissions, market manipulations, insider trading and misrepresentations were unreasonable; (3) the Commission breached the rules of procedural fairness by failing to give adequate reasons for its decision; (4) the Commission erred in imposing increased sanctions under 2005 amendments to the Act (maximum increased from $100,000 to $1,000,000), where the conduct complained of predated the amendment; and (5) the actions of the Commission and its very structure created a reasonable apprehension of bias.

The Alberta Court of Appeal, O'Brien, J.A., dissenting in part, dismissed the appeal.

Administrative Law - Topic 2088

Natural justice - Constitution of board or tribunal - Bias - Apprehension of bias - [See all Securities Regulation - Topic 1305 ].

Evidence - Topic 7002

Opinion evidence - Expert evidence - General - Acceptance, rejection and weight to be given to expert opinion - The Alberta Securities Commission used an expert witness to confirm its own findings even though the Commission had earlier stated that the expert's evidence was not necessary to assist the Commission - The appellants argued that this violated the rules of expert evidence set down in R. v. Mohan (SCC) - The Alberta Court of Appeal stated that s. 29(f) of the Securities Act provided that "the laws of evidence applicable to judicial proceedings do not apply" to hearings before the Commission - Accordingly, the Mohan decision did not apply to administrative hearings - See paragraphs 81 to 83.

Securities Regulation - Topic 1305

Regulatory commissions (incl. self-regulatory organizations) - Hearings - Apprehension of bias - The Alberta Court of Appeal held that the institutional structure of the Alberta Securities Commission did not create a reasonable apprehension of bias - Following Brosseau (SCC), the law in Canada was that "a reasonable apprehension of bias did not exist where, pursuant to its legislation, a securities commission performs policy, investigative and adjudicatory functions. ... the Legislature can create tribunals with overlapping functions as long as a single officer does not participate in the investigation only to sit later as an adjudicator. ... the legislative and adjudicative functions are now more separate than they were when the system that was considered by the Supreme Court of Canada in Brosseau existed" - See paragraphs 49 to 54.

Securities Regulation - Topic 1305

Regulatory commissions (incl. self-regulatory organizations) - Hearings - Apprehension of bias - The appellants were found guilty by the Alberta Securities Commission of contravening the Securities Act and were sanctioned - The appellants learned that complaints were made regarding improper conduct in the Commission's enforcement activities - Following a privileged and confidential investigation by retained counsel, a confidential report to the Minister rejected the allegations - The appellants claimed that the alleged controversy within the Commission, which was unrelated to their cases, raised a reasonable apprehension of bias respecting their cases - The appellants' affidavits presented "uncontroverted evidence" - The Alberta Court of Appeal held that there was no reasonable apprehension of bias: "the 'uncontroverted evidence' represented personal opinion and speculation along with second or third hand opinion in the form of newspaper articles, legislative debates and the position papers attached to the affidavits. Not a single witness was called to testify in support of the institutional bias application. ... the appellants have not pointed to anything in their arguments that the Commission had a particular interest in convicting either or both of them due to the alleged controversy. ... The appellants have therefore not established a case of reasonable apprehension of bias arising from the alleged controversy." - See paragraphs 57 to 66.

Securities Regulation - Topic 1305

Regulatory commissions (incl. self-regulatory organizations) - Hearings - Apprehension of bias - The appellants were found guilty by the Alberta Securities Commission of contravening the Securities Act and were sanctioned - The appellants argued that the Commission, in qualifying its own Chief Accountant to testify as an expert at the hearing, was biased in favour of his evidence because it was an "institutional impossibility" for the Commission to find against the evidence given by its own Chief Accountant - The Alberta Court of Appeal rejected the argument - The court stated that "in another context, the fact that [the Chief Accountant] was a superior official within the same body deciding the case might give rise to a reasonable apprehension of bias. However, in the administrative context, this is not the case. Where the statute creating a tribunal authorizes overlapping functions of this sort, the traditional rules regarding bias do not apply. ... Section 16 of the Securities Act authorizes the Commission to retain an expert such as [the Chief Accountant] ... This statutory authorization means that in the administrative context, the fact that the expert is part of the same tribunal as the Commission does not give rise to a reasonable apprehension of bias." - See paragraphs 69 to 80.

Securities Regulation - Topic 1305

Regulatory commissions (incl. self-regulatory organizations) - Hearings - Apprehension of bias - The appellants were found guilty by the Alberta Securities Commission of contravening the Securities Act and were sanctioned by being ordered to pay administrative penalties and costs - The appellants argued that there existed a reasonable apprehension of bias where s. 199 of the Act entitled the Commission to keep the administrative penalties that it imposed, because the Commission had a pecuniary interest in finding market participants guilty - The Alberta Court of Appeal rejected the argument - The court stated that "in the case of pecuniary bias, the mere existence of an actual financial stake in the outcome of a case is sufficient to disqualify the decision maker ... to have a stake in the outcome involves the existence of tangible, incontrovertible links ... Section 19(5) of the Securities Act makes it explicitly clear that monies received by the Commission from administrative penalties under section 199 may only be expended for the purposes of educating investors and promoting or otherwise enhancing knowledge of the securities and financial markets. Under the circumstances there can be no reasonable apprehension of bias created by virtue of the fact that the administrative penalties are paid to the Commission for the use as stipulated in section 19(5)" - See paragraphs 85 to 109.

Securities Regulation - Topic 1386

Regulatory commissions - Statutory appeal to courts or judicial review - Scope of appeal or standard of review - The Alberta Court of Appeal stated the Alberta Securities Commission "is entitled to deference with respect to issues involving the interpretation of evidence, the interpretation of the Commission's enabling legislation and the imposition of sanctions [reasonableness standard of review] ... The analysis in Dunsmuir does not apply to issues of procedural fairness or natural justice. The fairness of the proceedings is not measured by whether they are 'correct' or 'reasonable' ... Because the court decides whether the fairness standard has been met with affording deference, in that sense fairness is reviewed for 'correctness' ... The issue regarding the Commission's retrospective application of penalty amendments also attracts the correctness standard. ... The standard of review for the issue of institutional bias is correctness." - See paragraphs 26 to 29, 32.

Securities Regulation - Topic 5310

Trading in securities - Offences - Giving false or misleading information - The appellants were the directors and senior officers of PPI - The Alberta Securities Commission found them guilty of conduct contrary to the public interest and in violation of the Securities Act provisions respecting financial disclosure in PPI financial statements (1998 to 2000) which were not prepared in accordance with generally accepted accounting principles and contained misrepresentations - The appellants argued that the Commission erred in finding them personally liable for PPI's misstatements in the financial statements - The Alberta Court of Appeal held that "on the facts as found by the Commission, there is more than an adequate basis to hold Workum and Hennig personally liable for the misstatements contained in the 1998, 1999 and 2000 PPI financial statements. Accordingly I find them so liable on the basis that the evidence disclosed that Workum and Hennig orchestrated the various transactions in question which led directly to the resultant misrepresentations contained in the financial statements" - O'Brien, J.A., dissenting, opined that Workum and Hennig should not have been found personally liable for PPI's misstatements, where the Commission neither cited, nor referred to, s. 194(4) of the Act, which made a director or officer guilty if he or she "authorized, permitted or acquiesced in the offence" and the Commission's finding of personal liability based solely on a director's or officer's responsibility for financial statements could not be sustained - O'Brien, J.A., stated that "with some hesitation and reluctance, having regard to the substantial evidence of their active participation, I have concluded that it would not be fair for Workum and Hennig to fix personal liability now upon them for PPI's breaches on a basis different from that of the Commission, and under a section of the Act that it deliberately chose not to invoke" - See paragraphs 125 to 160, 205 to 212.

Securities Regulation - Topic 5322

Trading in securities - Offences - Penalties and punishments - Administrative penalties - The appellants were found to have contravened the Securities Act for conduct from 1998 to 2000 - The Alberta Securities Commission imposed administrative penalties of $750,000 and $400,000 respectively - Prior to 2005, the maximum administrative penalty was $100,000 - Amendments to s. 199 of the Act in 2005 increased the maximum to $1,000,000 - The appellants argued that imposing penalties in excess of $100,000 constituted an impermissible retroactive application of the Act - The Alberta Court of Appeal followed its previous 2008 decision in Alberta Securities Commission v. Brost, which held that "the presumption against retroactive application of the 2005 amendment to the maximum administrative penalty in section 199 of the Securities Act does not apply because such penalties are not punitive but are instead designed to protect the public" - The court rejected other appellate authority (Thow (BCCA)) that an administrative penalty was not designed to protect the public - The court stated that "the Commission was correct to conclude that the presumption against retrospective application does not apply in this case because the administrative penalties under the Securities Act are not punitive but rather are designed to protect the public" - See paragraphs 110 to 122.

Statutes - Topic 6713

Operation and effect - Commencement, duration and repeal - Retrospective and retroactive enactments - Retrospective or retroactive operation - Public protection - [See Securities Regulation - Topic 5322 ].

Cases Noticed:

Del Bianco et al. v. Alberta Securities Commission (2004), 357 A.R. 361; 334 W.A.C. 361; 2004 ABCA 344, refd to. [para. 26].

Anderson v. Alberta Securities Commission (2008), 437 A.R. 55; 433 W.A.C. 55; 2008 ABCA 184, refd to. [para. 26].

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; 2008 SCC 9, refd to. [para. 26].

Conseil de la magistrature (N.-B.) v. Moreau-Bérubé, [2002] 1 S.C.R. 249; 281 N.R. 201; 245 N.B.R.(2d) 201; 636 A.P.R. 201; 2002 SCC 11, refd to. [para. 28].

Canadian Union of Public Employees et al. v. Ontario (Minister of Labour), [2003] 1 S.C.R. 539; 304 N.R. 76; 173 O.A.C. 38; 2003 SCC 29, refd to. [para. 28].

McLeod et al. v. Alberta Securities Commission et al. (2006), 391 A.R. 121; 377 W.A.C. 121; 2006 ABCA 231, refd to. [para. 28].

Ha v. Canada (Minister of Citizenship and Immigration), [2004] 3 F.C.R. 195; 316 N.R. 299; 2004 FCA 49, refd to. [para. 28].

Boardwalk Reit LLP v. Edmonton (City) et al. (2008), 437 A.R. 347; 433 W.A.C. 347; 91 Alta. L.R.(4th) 1; 2008 ABCA 220, refd to. [para. 28].

Ironside et al. v. Alberta Securities Commission (2009), 454 A.R. 285; 455 W.A.C. 285; 2009 ABCA 134, refd to. [para. 32].

Barry and Brosseau v. Alberta Securities Commission, [1989] 1 S.C.R. 301; 93 N.R. 1; 96 A.R. 241, appld. [para. 37].

Ocean Port Hotel Ltd. v. Liquor Control and Licensing Branch (B.C.), [2001] 2 S.C.R. 781; 274 N.R. 116; 155 B.C.A.C. 193; 254 W.A.C. 193; 2001 SCC 52, refd to. [para. 54].

Manning (E.A.) Ltd. et al. v. Ontario Securities Commission (1995), 80 O.A.C. 321; 23 O.R.(3d) 257 (C.A.), refd to. [para. 61].

Manning (E.A.) Ltd. et al. v. Ontario Securities Commission (1994), 72 O.A.C. 34; 18 O.R.(3d) 97 (Div. Ct.), refd to. [para. 63].

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 69].

Public Utilities Board Rules of Practice (Alta.), Rule 13, Re (1985), 67 A.R. 251; 42 Alta. L.R.(2d) 48 (C.A.), dist. [para. 74].

Syncrude Canada Ltd. v. Michetti et al. (1994), 162 A.R. 16; 83 W.A.C. 16; 120 D.L.R.(4th) 118 (C.A.), dist. [para. 78].

Workers' Compensation Board (Alta.) v. Workers' Compensation Board Appeals Commission (Alta.) (2005), 371 A.R. 318; 354 W.A.C. 318; 2005 ABCA 276, refd to. [para. 83].

Latimer (W.D.) Co. v. Ontario (Attorney General) (1973), 2 O.R.(2d) 391; 43 D.L.R.(3d) 58 (Div. Ct.), affd. (1974), 6 O.R.(2d) 129; 52 D.L.R.(3d) 161 (C.A.), refd to. [para. 88].

Canadian Pacific Ltd. v. Matsqui Indian Band et al., [1995] 1 S.C.R. 3; 177 N.R. 325, refd to. [para. 91].

R. v. Wigglesworth, [1987] 2 S.C.R. 541; 81 N.R. 161; 24 O.A.C. 321; 61 Sask.R. 105; 45 D.L.R.(4th) 235, refd to. [para. 93].

Pearlman v. Manitoba Law Society Judicial Committee, [1991] 2 S.C.R. 869; 130 N.R. 121; 75 Man.R.(2d) 81; 6 W.A.C. 81; 84 D.L.R.(4th) 105, refd to. [para. 97].

Rowan, Re (2010), 33 OSCB 91; 2009 LNONOSC 941, refd to. [para. 106].

Alberta Securities Commission v. Brost et al. (2008), 440 A.R. 7; 438 W.A.C. 7; 2008 ABCA 326, folld. [para. 112].

British Columbia v. Imperial Tobacco Canada Ltd. et al., [2005] 2 S.C.R. 473; 339 N.R. 129; 218 B.C.A.C. 1; 359 W.A.C. 1; 2005 SCC 49, refd to. [para. 114].

Thow v. British Columbia Securities Commission (2009), 266 B.C.A.C. 140; 449 W.A.C. 140; 90 B.C.L.R.(4th) 36; 2009 BCCA 46, disagreed with [para. 117].

Lavallee v. Alberta Securities Commission (2010), 474 A.R. 295; 479 W.A.C. 295; 2010 ABCA 48, refd to. [para. 121].

Ironside, Re, 2006 ABASC 1930, refd to. [para. 135].

Kerr et al. v. Danier Leather Inc. et al., [2007] 3 S.C.R. 331; 368 N.R. 204; 231 O.A.C. 348; 2007 SCC 44, refd to. [para. 139].

McCormick v. Greater Sudbury Police Service (2010), 259 O.A.C. 226; 2010 ONSC 270 (Div. Ct.), refd to. [para. 166].

Dr. Q., Re, [2003] 1 S.C.R. 226; 302 N.R. 34; 179 B.C.A.C. 170; 295 W.A.C. 170; 2003 SCC 19, refd to. [para. 167].

Anderson v. Alberta Securities Commission (2008), 437 A.R. 55; 433 W.A.C. 55; 2008 ABCA 184, refd to. [para. 213].

Statutes Noticed:

Securities Act, R.S.A. 2000, c. S-4, sect. 16 [para. 72]; sect. 19 [para. 90]; sect. 38(6) [para. 159]; sect. 149 [para. 200]; sect. 199, sect. 202 [para. 90].

Authors and Works Noticed:

Blake, Sara, Administrative Law in Canada (4th Ed. 2006), p. 102 [para. 91].

Jones, David, and de Villars, Anne, Principles of Administrative Law (5th Ed. 2009), p. 306 [para. 84].

Mullan, David J., Adminstrative Law (2001), p. 325 [para. 92].

Counsel:

D.A. Young and D.M. Volk, for the respondent, Alberta Securities Commission;

J. Groia, for the appellant, Workum;

J.K. Phillips, for the appellant, Hennig;

R.J. Normey, for the intervenor Alberta Justice.

These appeals were heard on March 9, 2010, at Calgary, Alberta, before McFadyen, O'Brien and McDonald, JJ.A., of the Alberta Court of Appeal.

On December 20, 2010, the judgment of the Court of Appeal was delivered and the following opinions were filed:

McDonald, J.A. (McFadyen, J.A., concurring) - see paragraphs 1 to 190;

OBrien, J.A., dissenting in part - see paragraphs 191 to 215.

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18 practice notes
  • Table of cases
    • Canada
    • Irwin Books Statutory Interpretation. Third Edition Preliminary Sections
    • June 23, 2016
    ......................................................................................... 88, 305 Alberta (Securities Commission) v Workum, 2010 ABCA 405 ..........................361 Alberta v McGeady, 2014 ABQB 104, aff’d 2015 ABCA 54................................. 299 Allen v Newfoundland......
  • Moffat c. Canada (Citoyenneté et Immigration),
    • Canada
    • Federal Court (Canada)
    • July 5, 2019
    ...SCC 61 , [2015] 3 S.C.R. 309; R. v D.D., 2000 SCC 43 , [2000] 2 S.C.R. 275 ; Alberta (Securities Commission) v. Workum, 2010 ABCA 405, 493 A.R. 1, [2010] A.J. No. 1468 (QL); Deemar v. College of Veterinarians of Ontario, 2008 ONCA 600, 92 O.R. (3d) 97; Drummond v. Canada (Minister of Citi......
  • Presumed Application: Time, Territory, and the Crown
    • Canada
    • Irwin Books Statutory Interpretation. Third Edition Presumptions Governing the Application of Legislation
    • June 23, 2016
    ...for example, Delivery Drugs Ltd v Ballem , 2007 BCCA 550 at para 82. 35 See, for example, Alberta (Securities Commission) v Workum , 2010 ABCA 405, and Thibault v Da Costa , 2014 QCCA 2347 at para 28ff. But see also Thow v British Columbia (Securities Commission) , 2009 BCCA 46, in which th......
  • Slawsky v Edmonton (City), 2019 ABQB 77
    • Canada
    • Court of Queen's Bench of Alberta (Canada)
    • January 30, 2019
    ...Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 SCR 249 at para 74; Dunsmuir at para 79; Alberta (Securities Commission) v Workman, 2010 ABCA 405 at para 28; Calgary (City) v Renfrew Chrysler Inc, 2017 ABQB 197 at para 20. The Alberta Court of Appeal in Boardwalk Reit LLP v Edmonton (Ci......
  • Request a trial to view additional results
16 cases
  • Moffat c. Canada (Citoyenneté et Immigration),
    • Canada
    • Federal Court (Canada)
    • July 5, 2019
    ...SCC 61 , [2015] 3 S.C.R. 309; R. v D.D., 2000 SCC 43 , [2000] 2 S.C.R. 275 ; Alberta (Securities Commission) v. Workum, 2010 ABCA 405, 493 A.R. 1, [2010] A.J. No. 1468 (QL); Deemar v. College of Veterinarians of Ontario, 2008 ONCA 600, 92 O.R. (3d) 97; Drummond v. Canada (Minister of Citi......
  • Slawsky v Edmonton (City), 2019 ABQB 77
    • Canada
    • Court of Queen's Bench of Alberta (Canada)
    • January 30, 2019
    ...Brunswick (Judicial Council), 2002 SCC 11, [2002] 1 SCR 249 at para 74; Dunsmuir at para 79; Alberta (Securities Commission) v Workman, 2010 ABCA 405 at para 28; Calgary (City) v Renfrew Chrysler Inc, 2017 ABQB 197 at para 20. The Alberta Court of Appeal in Boardwalk Reit LLP v Edmonton (Ci......
  • Cold Lake First Nations v. Alberta (Minister of Tourism, Parks and Recreation) et al., 2012 ABCA 36
    • Canada
    • Court of Appeal (Alberta)
    • December 28, 2011
    ...trial - General principles - Interpreter - [See Contempt - Topic 5102 ]. Cases Noticed: Alberta Securities Commission v. Workum et al. (2010), 493 A.R. 1; 502 W.A.C. 1; 2010 ABCA 405, refd to. [para. Moulton Contracting Ltd. v. British Columbia et al. (2011), 309 B.C.A.C. 15; 523 W.A.C. 15;......
  • Taylor v. Witt et al., 2016 ABQB 123
    • Canada
    • Court of Queen's Bench of Alberta (Canada)
    • March 1, 2016
    ...of natural justice is whether the proceedings met the level of fairness required by law: Alberta (Securities Commission) v Workum , 2010 ABCA 405 at para 28, 493 AR 1 and cases cited therein, Synergy Group (2000) Inc v Alberta (Securities Commission) , 2011 ABCA 194 at para 25, 510 AR 172. ......
  • Request a trial to view additional results
2 books & journal articles
  • Table of cases
    • Canada
    • Irwin Books Statutory Interpretation. Third Edition Preliminary Sections
    • June 23, 2016
    ......................................................................................... 88, 305 Alberta (Securities Commission) v Workum, 2010 ABCA 405 ..........................361 Alberta v McGeady, 2014 ABQB 104, aff’d 2015 ABCA 54................................. 299 Allen v Newfoundland......
  • Presumed Application: Time, Territory, and the Crown
    • Canada
    • Irwin Books Statutory Interpretation. Third Edition Presumptions Governing the Application of Legislation
    • June 23, 2016
    ...for example, Delivery Drugs Ltd v Ballem , 2007 BCCA 550 at para 82. 35 See, for example, Alberta (Securities Commission) v Workum , 2010 ABCA 405, and Thibault v Da Costa , 2014 QCCA 2347 at para 28ff. But see also Thow v British Columbia (Securities Commission) , 2009 BCCA 46, in which th......

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