Canada: Stay Of Proceedings Based On AMF Failings In Its Disclosure Of Evidence : Baazov v. AMF, 2018 QCCQ 4449

In the recent decision Baazov v. AMF, Mascia J. of the Quebec Court, Criminal and Penal Chamber granted a stay of proceedings in respect of all tipping, insider trading and market manipulation charges laid against the accused based on the repeated failings of the prosecutor, the Autorité des marchés financiers (AMF), the Quebec securities regulator, in its disclosure of evidence to the accused. The AMF has decided not to appeal the judgment, which is now final.

Background to the Decision

In March 2016, the AMF laid 23 penal charges against David Baazov, Benjamin Ahdoot, Yoel Altman and three companies, alleging breaches of the Quebec Securities Act (QSA) in connection with the acquisition by Amaya Gaming of Rational Group (PokerStars) announced on June 12, 2014. All accused pleaded not guilty to the charges.

Pursuant to R. v. Stinchcombe, [1991] 3 RCS 326 and subsequent Supreme Court of Canada judgments, the AMF had a constitutional duty to disclose to the accused all relevant evidence, which includes all evidence that can be useful to the defense.

The disclosure of evidence by the AMF to the accused was plagued with mistakes.

In November 2017, nearly two months after the AMF chose to disclose to the accused 16 million documents it had collected in a related investigation referred to as Project Bronze, the AMF asked the accused to immediately cease reviewing same since it had inadvertently disclosed 14 million documents, including documents that fell outside the period authorized by the search warrants issued by the courts.

In January 2018, the AMF asked the accused to stop reviewing disclosed evidence which the AMF had obtained directly from Amaya's external auditors because the documents had not been reviewed for privilege by Amaya.

In February 2018, the AMF was ordered to disclose to the accused the remaining 6 million documents collected in Project Bronze as well as all of the evidence collected by the AMF in yet another related investigation referred to as Project Cordon. This evidence contained a number of documents which disclosed Mr. Ahdoot's defense strategy and were protected by privilege.

In April 2018, Mr. Ahdoot filed a Motion for a stay of proceedings based namely on access of the AMF to his privileged documents.

Mid-May 2018, as the parties were entering week five of their trial which would require at least 12 more weeks, the AMF asked the Court to order the accused to put in place measures to quarantine more than 320,000 documents which had been disclosed over the previous eight months and which were potentially protected by privilege of third parties. All accused filed a joint Motion for a stay of proceedings in connection thereto.

In support of both Motions for a stay, the accused argued that:

  • the AMF had had access to privileged documents disclosing Mr. Ahdoot's defense strategy.
  • the quarantine of 320,000 documents during the trial would have a clear and definite impact on all accused's right to a fair trial as they would lose access to evidence disclosed to them due to its potential relevance to their defense.
  • the repeated errors committed by the AMF in matters wholly within its control, i.e. disclosure of its evidence, warranted a stay of proceedings.
  • allowing the trial to continue would bring the administration of justice into disrepute as the sloppy and careless manner in which the AMF dealt with the evidence showed a blatant disregard for privilege despite having a duty, as public prosecutors and officers of the Court, to protect it.

The Court's Analysis

Legal principles

When the Crown institutes a complex prosecution, it must ensure that it is prepared to proceed within a reasonable time and that it has "a well thought-out plan" in order to bring the proceedings to completion, under acceptable conditions. No manageable trial may be held unless a number of conditions are present:

  • Disclosure has to be timely.
  • Disclosure must present the evidence in an accessible, searchable and appropriately inventoried manner.
  • While the duty to disclose is continuous, disclosure must have an end which should be closer to the laying of charges than to the trial.

When complying with its disclosure obligations, the prosecution is tasked with protecting privilege.

If the prosecution finds itself in possession of a document of the accused protected by professional secrecy, the prejudice to the accused is presumed. It has been held that it would be difficult, if not impossible, for the court to determine what effect the privileged document may have had on a witness's testimony and whether the prosecutor's strategy has been indirectly, at least, affected by its witnesses having read the privileged document.

While a stay of proceedings is the most drastic remedy a criminal court can order, there are rare occasions — the "clearest of cases" — when a stay of proceedings for an abuse of process will be warranted. According to the Supreme Court in R. v. Babos, 2014 CSC 16, these cases generally fall into two categories: (1) where state conduct compromises the fairness of an accused's trial (the "main" category) and and (2) where state conduct creates no threat to trial fairness but risks undermining the integrity of the judicial process (the "residual" category). The test used to determine whether a stay of proceedings is warranted is the same for both categories and consists of three requirements:

(1) There must be prejudice to the accused's right to a fair trial or the integrity of the justice system that "will be manifested, perpetuated or aggravated through the conduct of the trial, or by its outcome";

(2) There must be no alternative remedy capable of redressing the prejudice; and

(3) Where there is still uncertainty over whether a stay is warranted after steps (1) and (2), the court is required to balance the interests in favour of granting a stay, such as denouncing misconduct and preserving the integrity of the justice system, against "the interest that society has in having a "final decision on the merits".

Application of legal principles to the facts

Based on the evidence, including admissions made by the AMF, Justice Mascia found that the AMF had indeed had access to documents disclosing the defense strategy of Mr. Ahdoot which were protected by privilege; as per the case law, prejudice to Mr. Ahdoot was presumed. As the AMF had offered no convincing evidence that it would not be making use of the privileged information of which it gained knowledge in order to rebut the presumption, Justice Mascia concluded that the equity of the trial was compromised.

In respect of the 330,000 potentially privileged documents to be quarantined, Justice Mascia found that it would be impossible for defense counsel to "unsee" documents that they had already reviewed and integrated in their defense strategy and that defence counsel could not be asked, in the middle of a trial, to isolate the 330,000 potentially privileged documents while preparing cross-examinations of witnesses.

Justice Mascia found that the treatment of potentially privileged documents by the AMF was preoccupying, the evidence having shown not only that the protocol of the AMF to protect potentially privileged documents is inadequate but that in this instance, its implementation was deficient. The laxism and lack of rigour of the AMF in the treatment of potentially privileged documents was found to be unacceptable by the Court and that continuing the trial despite the impugned conduct would further compromise the integrity of the judicial system.

Justice Mascia held that there was no alternative remedy and ordered the stay of proceedings.

Take Aways

The volume of evidence to be managed by the Crown cannot serve as an excuse for repeated failings in respect of its disclosure to the accused. The greater the volume of evidence, the greater the need for the prosecution to organize it and make it accessible and searchable for the accused.

While society has an interest in having penal charges heard and decided on the merits, there comes a point where it is no longer acceptable to have the accused suffer the consequences of repeated errors of the prosecution.

Justice Mascia cited R. v. Keyes, 2017 ONCJ 5 (CanLII) in support of the propositions that "for the most part, ... disclosure, and its timing, is a matter entirely within the Crown's control. ... It is the Crown's job to monitor and manage the process of disclosure" and that "[i]t is not the court's function to excuse the Crown's miscarriage of its constitutional duties by elevating routine "mistakes" into exceptional circumstances."

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