Synergy Group (2000) Inc. v. Alberta Securities Commission, (2011) 510 A.R. 172

• Judge: Costigan, Paperny and O'Ferrall, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: June 15, 2011
• Citations: (2011), 510 A.R. 172;2011 ABCA 194

Synergy Group (2000) Inc. v. Securities Comm. (2011), 510 A.R. 172; 527 W.A.C. 172 (CA)

MLB headnote and full text

Temp. Cite: [2011] A.R. TBEd. JL.004

Synergy Group (2000) Inc. (appellant) v. Alberta Securities Commission (respondent)

(1001-0250-AC; 2011 ABCA 194)

Indexed As: Synergy Group (2000) Inc. v. Alberta Securities Commission

Alberta Court of Appeal

Costigan, Paperny and O'Ferrall, JJ.A.

June 15, 2011.

Summary:

The Alberta Securities Commission found that Synergy Group (2000) Inc., an Ontario corporation that offered alternative tax strategies, illegally traded in, and distributed, securities and acted contrary to the public interest. Synergy appealed, arguing the Commission erred in applying an excessively broad approach to determine what constituted a security under the Securities Act; finding the three documents purchasers signed constituted evidence of an interest in profits and earnings; finding that tax benefits stemming from corporate losses were profits; and, making findings on issues beyond those raised in the Amended Amended Notice of Hearing.

The Alberta Court of Appeal dismissed the appeal. The Commission's decision was reasonable. It was rational, transparent and supported by the evidence. Moreover, it was consistent with the remedial purposes of the Securities Act. No breach of procedural fairness occurred.

Administrative Law - Topic 2266

Natural justice - The duty of fairness - What constitutes procedural fairness - [See Securities Regulation - Topic 1370 ].

Securities Regulation - Topic 6

General principles - Securities legislation - Nature of - [See Securities Regulation - Topic 101 ].

Securities Regulation - Topic 101

Definitions - Security - Generally - Synergy Group (2000) Inc. offered alternative tax strategies - Tax losses assigned to the Synergy Tax Program purchasers were used to reduce income tax liability - The Alberta Securities Commission found the three documents purchasers signed "constituted evidence of an interest in profits and earnings within the meaning of, and should be classified as a 'security'" under s. 1(ggg)(ii) of the Securities Act - The Alberta Court of Appeal held that the Commission's finding was reasonable - "Securities legislation is remedial and must be construed broadly in the context of economic realities. Substance, not form, governs" - Although the documents were "skeletal", it was clear that the purchasers entered into an agreement with Synergy to purchase units in the pooled profits and losses of businesses to allow the purchasers to reduce or defer income tax - The term "profit" included financial gain - The documents were more than agreements to agree - The Commission's findings were consistent with the aim of securities legislation to extend protection to investors - See paragraphs 18 to 20, 26 to 28.

Securities Regulation - Topic 103

Definitions - Security - Investment contract defined - Synergy Group (2000) Inc. offered alternative tax strategies - Tax losses assigned to the Synergy Tax Program purchasers were used to reduce income tax liability - The Alberta Securities Commission found the Synergy Tax Program arrangements were "investment contracts" and therefore securities under s. 1(ggg)(xiv) of the Securities Act - In so finding, it relied on the definition of an investment contract set out in Pacific Coast, i.e., "an investment of money in a common enterprise with expected profits arising significantly from the efforts of others" - The Alberta Court of Appeal held that the Commission did not err in concluding the record established that Synergy traded in investment contracts within the meaning of s. 1(ggg)(xiv) - See paragraphs 21 and 22, 29 and 30.

Securities Regulation - Topic 1370

Regulatory commissions (incl. self-regulatory organizations) - Practice - Hearings - Evidence - Synergy Group (2000) Inc. offered alternative tax strategies - The Alberta Securities Commission found the Synergy Tax Program constituted a security and that Synergy illegally traded in, and distributed, securities - Synergy appealed - It asserted the Commission breached principles of natural justice and procedural fairness by making findings with respect to non-parties (businesses) that participated in the Synergy Tax Program and then making findings with respect to Synergy based on the findings relating to those non-parties - The Alberta Court of Appeal held that no breach of procedural fairness occurred - The Amended Amended Notice of Hearing summarized the alleged participation of the non-parties - In the context of the issues raised, it was well within the Commission's role to make fact findings as to the involvement of the non-parties in the Synergy Tax Program and those findings were supported on the record - See paragraphs 31 and 32.

Securities Regulation - Topic 5202

Trading in securities - General - What constitutes - The Alberta Securities Commission found that Synergy Group (2000) Inc., a corporation that offered alternative tax strategies, illegally traded in, and distributed, securities and acted contrary to the public interest - Synergy appealed, arguing the Commission erred in applying an excessively broad approach to determine what constituted a security under the Securities Act; finding the three documents purchasers signed constituted evidence of an interest in profits and earnings; and finding that tax benefits stemming from corporate losses were profits - The Alberta Court of Appeal dismissed the appeal - The Commission's decision was reasonable - It was rational, transparent and supported by the evidence - Moreover, it was consistent with the remedial purposes of the Securities Act.

Words and Phrases

Investment contract - The Alberta Court of Appeal considered the meaning of the words "investment contract" as found in s. 1(ggg)(xiv) of the Alberta Securities Act, R.S.A. 2000, c. S-4 - See paragraphs 29 and 30.

Words and Phrases

Security - The Alberta Court of Appeal considered the meaning of the term "security" as found in s. 1(ggg)(ii) and in s. 1(ggg)(xiv) of the Alberta Securities Act, R.S.A. 2000, c. S-4 - See paragraphs 26 to 30.

Cases Noticed:

Pacific Coast Coin Exchange of Canada et al. v. Ontario Securities Commission, [1978] 2 S.C.R. 112; 18 N.R. 52, refd to. [para. 18].

Alberta Securities Commission v. Workum et al. (2010), 493 A.R. 1; 502 W.A.C. 1; 2010 ABCA 405, refd to. [para. 24].

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. 24].

Del Bianco et al. v. Alberta Securities Commission (2004), 357 A.R. 361; 334 W.A.C. 361; 2004 ABCA 344, refd to. [para. 25].

Kolibash v. Sagittarius Recording Co. (1986), 626 F. Supp. 1173 (S.D. Ohio), refd to. [para. 28].

Statutes Noticed:

Securities Act, R.S.A. 2000, c. S-4, sect. 1(ggg)(ii), sect. 1(ggg)(xiv) [para. 16]; sect. 75(1)(a), sect. 110(1) [para. 17].

Counsel:

A. Markiewicz, for the appellant;

T. McCartney and W.E.B. Code, for the respondent.

This appeal was heard and decided on June 15, 2011, before Costigan, Paperny and O'Ferrall, JJ.A., of the Alberta Court of Appeal. The Court filed the following memorandum of judgment at Calgary, Alberta, on June 28, 2011.