On December 5, 2013, the Supreme Court of Canada released its much-anticipated decision in McLean v. British Columbia (Securities Commission)1,providing clarity on the limitation period applicable to "secondary proceedings" in the securities enforcement context. Specifically, the principal issue before the Supreme Court was when the 6-year limitation period under the B.C. Securities Act begins to run when one provincial securities regulator wishes to enforce the order of another – as of the date of the underlying misconduct or the date of the extra-provincial order? The BCSC argued that the event giving rise to the proceeding against McLean was not her original misconduct, but rather the fact of having agreed with a securities regulator to be subject to regulatory action. Writing for the majority, Justice Moldaver upheld the BCSC's order, finding that, on a standard of reasonableness, the interpretation advanced by the BCSC should be given deference.
Background
In 2008, the appellant Patricia McLean entered into a settlement agreement with the Ontario Securities Commission ("OSC") in respect of misconduct that predated 2001. The salient parts of the resulting OSC order 2 (the "OSC Order") barred McLean from trading in securities for 5 years, and banned her from acting as an officer or director of certain entities registered under Ontario's Securities Act for 10 years. In 2010, the BCSC issued a reciprocal order adopting the same prohibitions of the OSC Order pursuant to s. 161(6)(d) of its Securities Act. McLean appealed the reciprocal order on the basis that the relevant limitation period had expired: s. 159 of the B.C. Securities Act provides that proceedings "must not be commenced more than 6 years after the date of the events that give rise to the proceedings".
The issue before the Supreme Court was whether, for the purposes of s. 161(6)(d) of the B.C. Securities Act, "the events" that trigger the 6-year limitation period in s. 159 was (i) the underlying misconduct that gave rise to the settlement agreement, or (ii) the settlement agreement itself. Under the former interpretation – advanced by McLean – the BCSC order would be statute-barred. If, however, the limitation period clock began to run on the date of the OSC Order (as the BCSC contended), the BCSC order would stand as the proceeding was commenced well within 6 years of the OSC Order.
Discussion
Moldaver J. first focused on the preliminary issue of the appropriate standard of review regarding the BCSC's order. Contrary to the BC Court of Appeal's decision, Moldaver J. held that the governing standard of review was one of reasonableness, not correctness, on the basis that the resolution of unclear language in an administrative decision maker's "home statute" is usually best left to the decision maker. This approach is consistent with recent Supreme Court of Canada jurisprudence (see Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Association 3) which held that there is a presumption of reasonableness when it comes to a tribunal's interpretation of its home statute(s).
With respect to the limitation period issue, although Moldaver J. concluded that "both interpretations are reasonable" and "both find some support in the text, context, and purpose of the statute", he held that judicial deference must be given to the BCSC's order:
[40] The bottom line here, then, is that the Commission holds the interpretative upper hand: under reasonableness review, we defer to any reasonable interpretation adopted by an administrative decision maker, even if other reasonable interpretations exist...Judicial deference in such instances is itself a principle of modern statutory interpretation.
[41] Accordingly, the appellant's burden here is not only to show that her competing interpretation is reasonable, but also that the Commission's interpretation is unreasonable...
According to the Supreme Court, when faced with two competing reasonable interpretations of an administrative body's "home statute", the administrator – in this case, the BCSC – with the benefit of its expertise, is entitled to choose between those interpretations and "courts must respect that choice".
Conclusion
The Supreme Court's decision reinforces judicial deference when it comes to securities regulators dealing with their own governing statutes and regulations. The resolution of unclear language in a "home statute" is usually best left to administrative tribunals, as a tribunal is presumed to be in the best position to weigh the policy considerations in choosing between multiple reasonable interpretations of such ambiguous language. Although the interpretation of a limitation period was at issue, which is arguably a general question of law, the Court applied a reasonableness standard of review because of the tribunal's construal of its home statute. This proposition will likely have far-reaching application.
Moreover, an important policy consideration that appears to motivate the decision is the need for inter-jurisdictional cooperation among securities regulators, given the challenges inherent in the decentralized model of securities regulation in Canada. While a securities commission cannot abrogate its responsibility to make its own determination as to whether an order is in the public interest, sections like s. 161(6) of the B.C. Securities Act obviate the need for inefficient parallel and duplicative proceedings – in this case, by providing a triggering "event" other than the underlying misconduct. It remains to be seen whether provinces can "piggy-back" on reciprocal orders sequentially, a question that the court did not want to specifically answer at this time. However, in addressing McLean's concerns that the interpretation of the BCSC could effectively lead to indeterminate proceedings by provincial securities regulators, the Supreme Court seemed to suggest that an overall reasonableness approach to a regulator's discretion would alleviate such concerns.
Footnote
[1] http://canlii.ca/en/ca/scc/doc/2013/2013scc67/2013scc67.html
[2] http://www.osc.gov.on.ca/en/9009.htm
For more information, visit our Canadian Securities Litigation blog at www.canadiansecuritieslitigation.com/
About Dentons
Dentons is a global firm driven to provide you with the competitive edge in an increasingly complex and interconnected marketplace. We were formed by the March 2013 combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton.
Dentons is built on the solid foundations of three highly regarded law firms. Each built its outstanding reputation and valued clientele by responding to the local, regional and national needs of a broad spectrum of clients of all sizes – individuals; entrepreneurs; small businesses and start-ups; local, regional and national governments and government agencies; and mid-sized and larger private and public corporations, including international and global entities.
Now clients benefit from more than 2,500 lawyers and professionals in 79 locations in 52 countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US who are committed to challenging the status quo to offer creative, actionable business and legal solutions.
Learn more at www.dentons.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.
