Canada: Still In Jeopardy: Supreme Court Of Canada Refuses Leave To Appeal BC Court Of Appeal Decision Confirming That A Securities Commission Financial Penalty Does Not Prevent Being Penalised In Criminal Fraud Proceedings

This morning the Supreme Court of Canada refused leave to appeal1 from the decision of the BC Court of Appeal in R. v. Samji2, which confirms that the Charter does not preclude criminal proceedings where a defendant had already been ordered to pay penalties for fraud under the Securities Act.

Rashida Samji, a former licensed notary public, committed a $100 million fraud involving at least 200 investors through a Ponzi scheme she ran between 2003 and 2012. Proceedings were brought against her in front of both the BC Securities Commission (the Commission) and the BC Provincial Court arising out of this scheme. The Commission ordered various penalties, including a $33 million administrative monetary penalty (AMP).3 The Court sentenced Samji to six months' imprisonment and made restitutionary orders.

During her criminal trial Samji sought a stay on the basis that the criminal proceedings infringed her Charter rights. The Provincial Court, upheld by the Court of Appeal, refused this application and found that the financial penalty did not prevent a criminal sanction for the same underlying wrong. Since leave to appeal has been refused, this result will stand and all appeals of the stay refusal are now exhausted.

The Securities Act proceeding

The Commission undertook a regulatory proceeding in which it found that Samji had perpetrated a fraud contrary to s. 57(b) of the Securities Act, and ordered various penalties, including an AMP of $33 million, disgorgement of over $10 million, and that Samji be permanently banned from participating in BC's capital markets.

The AMP was imposed under s. 162 of the Securities Act which provides that where the Commission considers it to be in the public interest it may order an AMP of "not more than $1 million for each contravention" of the Securities Act. Although an AMP of over $100 million was sought based on the hundreds of contraventions, the Commission found that this would be punitive and inappropriate. Instead, the Commission ordered an AMP of $33 million as an amount that it found reflected the seriousness of the misconduct and served "as a meaningful and substantial general deterrent to others who would engage in similar misconduct".

Samji did not appeal the Commission's decision.

The Criminal Trial

Around the same time, the Crown also laid criminal charges against Samji for theft and fraud relating to the same scheme, with the investigation focussed on 14 specific investors. The matter went to trial in 2016, which was after the Commission's decisions.

Section 11 of the Charter provides that persons have a right not to be tried or punished twice for the same offence, often known as the rule against double jeopardy. During her criminal trial Samji sought a stay on the basis that proceeding was contrary to this rule. In an interim ruling,4 the trial judge considered whether the criminal matter ought to be stayed on the basis that the AMP ordered by the Commission was a "true penal consequence", such that Samji could not be punished again for the same wrongdoing. The trial judge dismissed Samji's application, finding that the AMP served a regulatory purpose and as such did not constitute a true penal consequence, so the Charter did not preclude the criminal proceeding.

Samji also challenged the criminal proceedings as amounting to an abuse of process contrary to s. 7 of the Charter. The trial judge dismissed this challenge, finding that the criminal proceeding and regulatory proceeding considered two different offences, were tried by two separate and independent entities, and that the regulatory proceeding had not redressed Samji's misconduct to society at large as the criminal proceeding was intended to do.

Samji was convicted of all counts of theft and fraud on the basis of an agreed statement of facts. The Court subsequently imposed a sentence of six years' imprisonment for the fraud convictions, as well as restitution orders totalling over $10 million.5

The Appeal

The BC Court of Appeal upheld the trial judge's determination that the regulatory proceeding and imposition of the AMP did not entitle Samji to a stay of the criminal proceedings. The Court also confirmed that the disgorgement order, the purpose of which is neither punitive nor compensatory as per Poonian, summarised previously, is not relevant to the consideration of whether the AMP is a true penal consequence.

Implications

While it may provide cold comfort to investors who are the victims of fraud, this decision confirms that the imposition of financial penalties by a regulatory body, which a wrongdoer may be unable to pay, will not permit them to escape possible criminal sanctions including imprisonment.

In refusing leave, the Supreme Court of Canada has endorsed the Court of Appeal's finding that criminal sanctions were not precluded by the Commission's imposition of an AMP.

Footnotes

1 37862 (May 31, 2018)

2 2017 BCCA 415

3 2014 BCSECCOM 186. 2015 BCSECCOM 29

4 2016 BCPC 145

5 2016 BCPC 301


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