The Supreme Court of Canada recently denied leave to appeal the Court of Appeal for Ontario's decision in Ontario Securities Commission v. MRS Sciences Inc. (MRI Sciences), which considered the bifurcated nature of proceedings before the Ontario Securities Commission (the OSC). The decision is significant for its judicial endorsement of the OSC's current two-phased approach of holding an initial hearing to determine the outcome of a proceeding on its merits, and then a subsequent separate hearing to determine sanctions and costs.
Background
On February 2, 2011, an OSC panel comprised of two commissioners released a decision holding that MRI Sciences Inc., as well as a number of related individuals (including the current Applicants for leave), had sold securities without being registered as dealers and traded securities without a prospectus. Shortly after the release of this decision on the merits, the terms of the commissioners on that panel expired; accordingly, the OSC informed the parties that the upcoming sanctions hearing would be presided over by a differently constituted panel.
The Applicants brought a motion before the OSC to dispute the jurisdiction of a differently-constituted panel to preside over a sanctions hearing. The OSC dismissed the motion on December 6, 2011 (the Panel Composition Decision). Subsequent attempts to challenge the Panel Composition Decision before the Divisional Court were dismissed as premature.
The sanctions hearing eventually proceeded in late 2013, and the Applicants were penalized with 10-year trading bans, 10-year director and officer bans, reprimands, administrative penalties and costs.
Judicial History
Following the sanctions hearing, the Applicants commenced an appeal before the Divisional Court to once again challenge the Panel Composition Decision (among other things). At the core of the Applicants' argument was a provision Statutory Powers Procedures Act (the SPPA) that provides as follows:
If the term of office of a member of a tribunal who has participated in a hearing expires before a decision is given, the term shall be deemed to continue, but only for the purpose of participating in the decision and for no other purpose.1
Essentially, the Applicants argued that a merits hearing and a sanctions hearing are functionally two stages of a single quasi-judicial hearing. Therefore, the Applicants argued, the terms of commissioners presiding over the merits hearing should have been extended until the conclusion of the sanctions hearing. In response, the OSC argued that while the merits hearing and the sanctions hearing may be part of the same proceeding, they do not represent a single hearing, and the SPPA provision is therefore inapplicable; indeed, the OSC's Rules of Procedure clearly contemplate that a proceeding and a hearing are not the same.
In a split decision, the Divisional Court dismissed the appeal. While the majority accepted that the Applicants' interpretation of the SPPA was reasonable, it held that the OSC's interpretation was also reasonable, which was sufficient to dismiss the appeal under the applicable standard of review. On further appeal, the Court of Appeal for Ontario agreed enthusiastically with the majority decision of the Division Court, emphasizing that there was no procedural unfairness or breach of natural justice associated with the OSC's decision to consitute a different sanctions panel.
Significance
In refusing leave, the Supreme Court of Canada endorsed the Court of Appeal's assessment that the current practice of bifurcating proceedings is neither contrary to the SPPA nor is it in conflict with requirements of procedural fairness, even in circumstances where a sanctions panel is differently constituted than the merits panel.
Footnote
[1] Statutory Powers Procedures Act, RSO 1990, c S 22, s 4.3.
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