Ontario Superior Court Of Justice Awards Over CA$5M In Damages Under The Anti-reprisal Provisions Of The Securities Act

The Ontario Superior Court of Justice (the Court) recently handed down an authoritative decision addressing the application of the anti-reprisal provisions under the Securities Act (the Act). In McPherson v. Global Growth Assets Inc (McPherson),¹ the Court interpreted the anti-reprisal sections of Part XXI.2 of the Act to award a whistleblower an unprecedented over CA$5 million in damages when he was dismissed after making complaints. Significantly, the damages were awarded without reduction for other income earned by the employee following dismissal.

McPherson is the first case addressing the interpretation of the anti-reprisal sections under Part XXI.2 of the Act and will serve as helpful guidance to employers and employees regulated by the Ontario Securities Commission (the OSC).

Background

Global Growth Assets Inc. and Global RESP Corporation (collectively, Global) are entities regulated by the OSC that sold education savings plans. Global's sole shareholder, Mr. Issam Bouji, was the prior Chief Executive Officer (CEO) and Ultimate Designated Person (UDP). In 2014 Mr. Bouji was permanently suspended from acting as Global's UDP, and Global was ordered to replace him as CEO. The OSC had sanctioned Mr. Bouji on other occasions prior to this.

Subsequently, Global applied to the OSC to approve Mr. Bouji's daughter, Hanane Bouji, as UDP. The OSC denied the application on the basis that Ms. Bouji failed to or was unwilling to take steps to limit Mr. Bouji's involvement in Global as required by the OSC's prior orders. In 2018, the Plaintiff was hired as CEO and UDP and was tasked with bringing Global into compliance with Ontario securities law. However, Ms. Bouji remained an executive with supervision over certain departments which were required to operate in compliance with Ontario securities law and was the chair of the board of directors (the Board).

In January 2019, the Board ordered that Ms. Bouji would no longer report to the Plaintiff. The Plaintiff was concerned that Ms. Bouji was at Global to represent the interests of Mr. Bouji, which risked further non-compliance with Ontario securities law, and that the decision would impair his statutory obligations as UDP. The Plaintiff's requests to meet with the independent board members to raise his concern were unmet and, a month later, Global terminated the Plaintiff.

The anti-reprisal sections of the Act

At issue was whether Global's termination of the Plaintiff was considered a "reprisal" under Part XXI.2 of the Act, and if so, what remedy was available to the Plaintiff.

The relevant sections of the Act at the time of the termination were s. 121.5 (now s. 121.6). Specifically, s. 121.5(1)(a) (now s. 121.6(2)(a)) provided:

121.5 (1) No person or company, or person acting on behalf of a person or company, shall take a reprisal against an employee of the person or company because the employee has, (a) sought advice about providing information, expressed an intention to provide information, or provided information to the person or company, the Commission, a recognized self-regulatory organization or a law enforcement agency about an act of the person or company, or person acting on behalf of the person or company, that has occurred, is ongoing or is about to occur, and that the employee reasonably believes is contrary to Ontario securities law or a by-law or other regulatory instrument of a recognized self-regulatory organization;

Under s. 121.5(2) (now 121.6(3)), a reprisal included "any measure taken against an employee that adversely affects his or her employment and includes but is not limited to ... ending or threatening to end the employee's employment."²

Interpretation of anti-reprisal provisions

The Court held that Global's termination of the Plaintiff was a reprisal under the Act and ordered damages payable in accordance with the remedies set out in the Act. Before addressing the facts of the case, the Court undertook a statutory interpretation analysis to interpret the anti-reprisal provisions in Part XXI.2.

First, the Court held that the term "because" in s. 121.5(1) ("No Person or company, or person acting on behalf of a person or company, shall take a reprisal against an employee of the person or company because the employee...") required that there was a connection or nexus between the employee's protected activity and the employer's reprisal, but the protected activity did not have to be the sole reason for termination. In other words, an employer may have other valid reasons for terminating an employee, but if any part of that consideration included engaging in conduct protected under the Act, the termination would be a reprisal for the purposes of s. 121.5(1).³

The Court noted that the phrases "solely because," "only because," and "because" were used throughout the Act, which meant that the legislature had intended each phrase to have a different meaning. Further, case law interpreting analogous whistleblower provisions such as s. 74 of the Employment Standards Act and s. 50 of the Occupational Health and Safety Act were clear that even if there were other legitimate reasons to terminate an employee, a reprisal occurs if the employee's protected activity is taken into account.

The Court rejected Global's argument that a company did not engage in a reprisal if it could articulate a legitimate, non-retaliatory purpose of the reprisal. The Court found unpersuasive the American jurisprudence that Global relied on which interpreted the whistleblower provisions of publicly traded companies. The differences between US and Ontario employment law were important to consider, such as section 121.5 being enacted to protect employees and to advance the purposes of the Act, while many American states allowed "at-will" termination.

The second issue the Court addressed was the phrase "reasonably believes," since an employee was only protected from the anti-reprisal provisions if the employee expressed an intention to provide or did provide information about an act "that the employee reasonably believes is contrary to Ontario securities law." The Court concluded that an employee "must have a subjective belief that is objectively reasonable in light of the information available at the time" to be protected by the anti-reprisal provisions.⁴

Third, the Court held that s. 121.5(5) (now s. 121.6(6)) created a reverse-onus burden of proof such that the employer was required to prove that it did not take a reprisal against an employee. The Court rejected Global's argument that s. 121.5(5) created a burden shifting mechanism, such that the employee must first demonstrate that the employer took a reprisal against him, and only then did the burden shift to the employer to demonstrate that it had a legitimate, non-retaliatory reason for the adverse activity. Such an interpretation was not supported by the text, context, or purpose of s. 121.5(5).⁵

Decision

After conducting its statutory interpretation analysis, the Court addressed the evidence. Importantly, the Court found the Plaintiff to be forthright, and his evidence was credible and reliable. In contrast, the Court was concerned with Global's evidence and found its witnesses not credible on important points. Further, Global had failed to produce important documentation that was expected to exist, such as audit reports, board minutes and board resolutions. To the extent that the Court did not draw an adverse inference against Global, the absence of contemporaneous evidence meant that Global could not corroborate its witnesses' testimony. The absence of documents, including the absence of any evidence of progressive discipline, was particularly detrimental to Global's defence theory that it had terminated the Plaintiff for poor performance and failing to make progress in bringing Global into compliance with Ontario securities law.

The Court held that Global had violated s. 121.5(1) by terminating the Plaintiff's employment as an act of reprisal. The Court agreed that the Plaintiff had a reasonable belief that Global breached Ontario securities law when the Board decided that Ms. Bouji was not required to report to him, and that belief was objectively reasonable given the evidence. The Plaintiff believed that the decision to remove Ms. Bouji from his oversight interfered with his ability to discharge his obligations as UDP, which included supervising Global's activities and individuals and ensuring compliance with securities law. The areas under Ms. Bouji's supervision were identified as being deficient and not in compliance with Ontario securities law in prior audit reports. Moreover, the Plaintiff had a legitimate concern that Ms. Bouji was at Global to represent the interests of her father, and removal of her from the Plaintiff's oversight would make it difficult to ensure that Mr. Bouji did not reinsert himself into Global's affairs, in contravention of prior OSC orders.

The Court also found that the Plaintiff repeatedly provided or expressed his intention to provide information to Global about the acts that he reasonably believed to be contrary to Ontario securities law. Shortly after the Board conveyed its decision to the Plaintiff, he requested in camera meetings with the independent directors on three separate occasions to understand the powers and responsibilities of the Board and warned that there could be regulatory consequences. The Plaintiff also sent an email to an independent director with the subject line "UDP," which explained his UDP obligations.

Finally, the Court was satisfied that at least part of the motivation to terminate the Plaintiff was because of his engagement in protected activity.⁶ In response to the Plaintiff's attempts to provide Global with information that their decision to remove Ms. Bouji from his oversight interfered with his obligations as UDP, an independent director warned the Plaintiff not to do anything that he would regret. There was also evidence that the directors were concerned about how the Plaintiff's conduct could threaten their roles as directors.

The Court rejected Global's theory that it had decided to terminate the Plaintiff prior to him raising his concerns regarding his UDP obligations. In this regard, Global's witnesses gave evidence that an equity balancing issue whereby the Plaintiff realized a loss was the determinative factor for termination, but also that the decision to terminate him had been made a week prior. The inconsistent testimony, along with contradictory evidence and documentation relating to steps taken in advance of the Plaintiff's termination, caused the Court to doubt all their evidence about the termination. Even if there were legitimate reasons to terminate the Plaintiff, the Court determined that the predominant reason was that he was engaging in protected activity.⁷

Remedy

Having found that Global contravened s. 121.5 of the Act, the Court considered the remedy available under s. 121.5(6) and (7). Section 121.5(6) provided for a reinstatement or "[p]ayment to the employee of two times the amount of remuneration the employee would have been paid by the employer if the contravention had not taken place between the date of the contravention and the date of the order, with interest." Section 121.5(7) defined remuneration to include "... salaries and wages, bonuses, taxable allowances and commissions and other similar amounts fixed by reference to the volume of sales made or contracts negotiated."⁸

Ultimately, the Court ordered Global to pay the Plaintiff two times the amount of his salary plus his discretionary bonus from the date of the reprisal to the date of the order, with interest, being CA$5,379,808 plus prejudgment interest.⁹ Notably, the Court refused to deduct any income from a subsequent employer or amounts paid to him by Global after his termination as the anti-reprisal provisions did not impose a duty to mitigate. Based on the large quantum of damages, the Court deemed he had no additional damages arising from the termination of his employment (i.e., he had no additional right to wrongful dismissal damages), and the Plaintiff failed to satisfy the Court that he was entitled to aggravated and punitive damages.

Conclusion

As the first case addressing the anti-reprisal provisions under the Act, McPherson provides important guidance for employers and employees in Ontario's capital markets facing employee management and reprisal allegations. First, McPherson is clear that an employer will have violated the anti-reprisal provisions if any part of the decision to terminate is because the employee engaged in protected activity. It is not sufficient to escape liability by relying on the fact that other reasons existed for termination as well, even if those reasons are valid. Second, an employee alleging a reprisal must have a reasonable belief that the employer is contravening Ontario securities law, which means that their subjective belief must be objectively reasonable based on the evidence. Third, the employer will have the burden of proof to establish that it did not take a reprisal against the employee alleging the reprisal. This is a high burden, aligned with an employers' obligations in other reprisal legislation.

As the facts of McPherson demonstrate, good corporate governance and human resources hygiene and practices (including up to date policies and procedures and proper record keeping) are necessary to best position the employer to defend a reprisal action. Failure to do so risks a damages award of twice the employee's compensation, including bonuses, without reduction for any other income earned. This is a significant difference when compared to other legislation protecting employees from reprisal.

Employers regulated by the OSC should take proactive steps to avoid being in a situation where this liability arises. For example, creating an internal reporting system for whistleblowers to report potential misconduct fosters a culture of compliance, and encourages employees to report potential misconduct early and directly within the organization. This provides the company with the opportunity to address the issue in real time, and mitigate any potential liability.

Footnotes

1 2025 ONSC 5226[McPherson].

2 The language of the current s. 121.6(3) is slightly different but substantially the same: "a reprisal includes ... otherwise detrimentally affecting the specified individual by any act or failure to act..."

3 McPherson, supra note 1 at paras 87-88, 108-111.

4 Ibid at para 114.

5 Ibid at paras 116-125.

6 Ibid at paras 446-449.

7 Ibid at para 449.

8 The current s. 121.6(6) refers to "compensation" rather than "remuneration". There is no definition of "compensation" for the purposes of the reprisal provisions.

9 Ibid at paras 451-459.

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