To the extent it was ever really open, the door to relevant appeals from decisions of the Ontario Securities Commission (“OSC” or the “Commission”) has inexorably been swinging closed. The presumption cultivated in the jurisprudence of the Supreme Court of Canada that the Commission engages its specialized expertise on all matters that come before it, has made an appeal an exercise in futility. The appellate courts in Ontario have made it clear that they are not enthusiastic about the prospect of reviewing, let alone overturning, a decision of the Commission on a matter within its presumed expertise. As the standard of a review on an appeal is now the deferential standard of “reasonableness” in practically all cases, it would take a disastrously bad decision for the courts to consider overturning a merits decision of the Commission. To date, the Commission has never been overturned on a merits decision.
One fleeting exception was the decision of the Divisional Court in Finkelstein et al. v Ontario Securities Commission, discussed further below, in which the Commission’s finding of liability for insider trading was overturned against one of the respondents, Francis Cheng. The OSC appealed the decision and the Commission’s finding of liability was restored. It was in this context that one last opening emerged to argue that decisions of the Commission on certain issues of law should be reviewed by a standard of “correctness” rather than “reasonableness”. Shortly before the appeal was heard, a decision of the British Columbia Court of Appeal in Poonian v. British Columbia Securities Commission was released in which the Court held that the British Columbia Securities Commission’s (“BCSC”) interpretation of the “disgorgement” section of the B.C. Securities Act should be reviewed by a standard of correctness on the basis that the Act gave the same remedial power to the B.C. Supreme Court in an identically worded section. The B.C. Court of Appeal applied the decision of the Supreme Court of Canada in Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, and held that it must be presumed that the Legislature would not have intended the courts and the Commission to interpret the section differently.
The Court of Appeal ruled that it was an error for the BCSC to order disgorgement against all the respondents on a joint and several basis, thereby requiring the Poonians to disgorge money that they had not received. Surprisingly, the BCSC did not seek leave to appeal to the SCC.
Back in Ontario, Cheng and co-respondent Miller sought leave to make supplementary submissions on the standard of review based on the decision of the B.C. Court of Appeal. After granting leave to hear submissions on the point, the Ontario Court of Appeal thought better of it and declined to rule on the issue, leaving it for “another day”. Leave to appeal to the Supreme Court of Canada has been sought by Cheng and Miller on the issue of the standard of review.
In light of the decision of the B.C. Court of Appeal in Poonian, which reintroduces in B.C. a correctness standard of review for issues of law in which the courts exercise a concurrent jurisdiction, there is a possibility that the Supreme Court will adjudicate this issue on appeal from Ontario.
What are the Prospects for a Correctness Standard on Appeal?
Probably not good. Since the decision of the Supreme Court of Canada in Dunsmuir v. New Brunswick, the trend line in Supreme Court decisions has been one directional in favour of letting the provincial securities commissions interpret their governing securities legislation as they see fit. Indeed, in McLean v. BCSC, the Court expressed irritation that it has become “fashionable” for defence counsel to try to have the decisions of administrative tribunals on questions of law reviewed on appeal by a standard of correctness (can they not just get with the program?). The Supreme Court has reiterated that, the “modern approach to judicial review” recognizes that courts “may not be as well qualified as a given agency to provide interpretations of that agency’s constitutive statute that make sense given the broad policy context within which that agency must work”.
The exception to an assumption of greater expertise on the part of the administrative tribunal to interpret its “home” statute, alluded to so tantalizingly in Dunsmuir, is with respect to a true jurisdictional issue or more broadly, to “general questions of law that are both of central importance to the legal system as a whole and outside of the adjudicator’s specialized area of expertise”. The “wave” of appeals in which appellants have (annoyingly) suggested that their issue of law is such an issue, has not yet revealed any. The Supreme Court’s goal of introducing “predictability and clarity” into judicial review is steadily erasing the Dunsmuir exception to one of mere legend.
This leaves the issue of where the legislature has given the courts a concurrent jurisdiction to interpret and apply statutory provisions in the tribunal’s “home” statute. Even the Supreme Court has recognised that it is a bit of a stretch to infer that the legislature intended the interpretation of an administrative tribunal to prevail over that of the courts when it has given the same jurisdiction to the courts. Plus, there is the prospect of inconsistent decisions by the tribunal and the courts.
This was the basis for the decision of the Supreme Court in Rogers, which arose in the context of the Copyright Board under the Copyright Act, R.S.C. 1985, c. C-42:
It would be inconsistent for the court to review a legal question on judicial review of a decision of the Board on a deferential standard and decide exactly the same legal question de novo if it arose in an infringement action in the court at first instance. It would be equally inconsistent if on appeal from a judicial review, the appeal court were to approach a legal question decided by the Board on a deferential standard, but adopt a correctness standard on an appeal from a decision of a court at first instance on the same legal question.
The question is whether the decision in Rogers carves out a category of statutory provisions in which there is a shared jurisdiction with the courts at first instance from the presumption of a deferential standard of review? Justice Rothstein, writing for the majority in Rogers, referred to the “unusual statutory scheme” under consideration. This turn of phrase was latched onto by the Divisional Court in Cornish v. OSC to distinguish the copyright regime from the securities regime, in which the courts have “long recognized the special expertise of securities commissions”. However, if one considers the full quote from Justice Rothstein, it allows no such distinction:
Because of the unusual statutory scheme under which the Board and the court may each have to consider the same legal question at first instance, it must be inferred that the legislative intent was not to recognize superior expertise of the Board relative to the court with respect to such legal questions.
The logic of the reasoning of the majority in Rogers is unassailable. The Supreme Court appears to recognize that there is a limit to how far the presumption of a legislative intent to defer to a specialized tribunal can be taken. In Ontario it is apparent that neither the Divisional Court or the Court of Appeal are enthusiastic about this development. In addition to the Divisional Court side-stepping the issue in Cornish and the Court of Appeal side-stepping the issue in Finkelstein, the Court of Appeal also refused leave to appeal from the Divisional Court in Phillips v. OSC, in which it was argued that the legislature could not have intended the courts to apply a deferential standard of review with respect to the legal test for fraud under s.126.1 of the Securities Act.  Accordingly, it will be necessary for the Supreme Court to weigh in on this issue in the securities context for there to be any movement away from the reasonableness standard in Ontario.
The issue of concurrent jurisdiction as outlined in Rogers was raised before the Supreme Court in McLean. In that case the issue was whether the BCSC’s interpretation of the statutory limitation period in the Act should be reviewed by a standard of correctness or reasonableness. The Commission’s position was that the limitation period was a provision within its home statute so, in accordance with Dunsmuir, its interpretation should be accorded deference. McLean argued that as limitation periods are of general application and are routinely interpreted and applied by the courts, judicial review of the Commission decision should be by a standard of correctness, the standard by which a decision of a judge would be reviewed on appeal.
The Supreme Court opted in favour of the reasonableness standard. However, critically, the Court ruled that there was no issue of concurrent jurisdiction in McLean as only the B.C. Commission had jurisdiction to consider the provision at first instance. Accordingly, Rogers was distinguished. The Court also held that the case did not fall within the general issue of law exception provided for in Dunsmuir because although limitation periods generally are of importance in the legal system, the limitation period in the B.C. Securities Act was not. In this regard, it is fair to observe that the limitation periods in the provincial Securities Acts are differently constructed from the typical limitation periods contained in the provincial statutes for civil actions. In particular, the limitation periods are triggered by the occurrence of certain “events” rather than a discoverability analysis.
Accordingly, McLean did not present the best case, or even a particularly good case, for the application of the principles in Rogers to be considered in the securities regulatory context. In light of the fact that the principles in Rogers have been applied by the B.C. Court of Appeal in Poonian in the securities regulatory context, and have been applied in other administrative contexts, including by the Supreme Court of Canada with respect to a decision of the Quebec Human Rights Tribunal, the issue is ripe for consideration by the Supreme Court in the securities context.
At the Cross-Roads
If the Supreme Court decides to hear the appeal from Cheng and Miller, the implications are potentially quite significant as there are a number of provisions of the Securities Act which contain important legal concepts with respect to which the courts and the Commission have concurrent jurisdiction. Accordingly, there is the potential for a roll-back of the post-Dunsmuir presumption that all issues of law arising from the Securities Act decided by the Commission will be accorded a deferential standard of review. This will no doubt make the Supreme Court a bit queasy as it runs contrary to the principle of deference to the specialized expertise of the securities commissions which the Court has been championing over the last decade.
Accordingly, the Cheng and Miller (potential) appeal represents an important cross-roads in the development of the jurisprudence for securities law in Canada; important because there is an urgent need for a rebalancing of the respective roles of the courts and the Commission. As matters stand, too much reliance is being placed on the Commission to decide important securities law issues at first instance without the benefit of subsequent scrutiny and refinement on appeal. In my respectful view, the courts have consistently over-estimated the expertise of the Commission on issues of securities law and under-estimated the benefits of the development of substantive principles of securities law through appellate review. As a result, respondents to OSC enforcement proceedings are being unfairly denied a meaningful right of appeal.
The Real Intent of the Legislature: Complementary Roles for the Commission and the Courts
The legal issues that arise from enforcement proceedings under the Securities Act raise issues of law that are not easily confined to the jurisdiction of the Commission and often intersect with the governance of business corporations, subject to principles of corporate law and overseen by the courts. For a start, a critically important area of concurrent jurisdiction is with respect to the disclosure regime in the Securities Act, in which the courts are routinely called upon to adjudicate cases involving prospectus misrepresentation and secondary market liability. The role of the courts is essential because the mandate of the Commission does not include facilitating compensation for investors. Determining civil liability for disclosure breaches will continue to be the domain of the courts, and it necessarily involves deciding fundamental issues of securities law, including the disclosure of material facts and material changes within the context of the Securities Act (see the decision of the Supreme Court in Kerr v. Danier Leather, which involved a detailed analysis by the Court of the distinction between material facts and material changes in the context of an alleged prospectus misrepresentation). Securities class actions based on prospectus misrepresentations and secondary market liability based on faulty continuous disclosure are an important part of the legal system.
With the courts interpreting and applying the same legal concepts within the disclosure regime, it is counterintuitive and illogical to conclude that the legislature intended the Commission to be considered more expert that the courts in deciding those issues. However, that is not the current state of the law in Ontario as applied by the Divisional Court, even since Rogers. Specifically, in Cornish, notwithstanding Cornish’s submission that the legal principles defining a material change should be reviewed by a standard of correctness, the Divisional Court held that the interpretation of a material change is an issue falling within the specialized expertise of the Commission and concluded that the Commission’s interpretation would be reviewed by a reasonableness standard.
Although properly a topic for another paper due its complexity, it is worth noting that the law on materiality has been compromised by the evangelical adoption by the courts of the notion of the Commission’s expertise. The decision in Cornish is concerning because the Divisional Court supported the Commission’s reliance on its own expertise as a substitute for evidence in determining whether there had been a material change requiring timely disclosure. According to the Divisional Court, because the Commission is a specialized tribunal, while shareholder or expert evidence may be relevant or useful, it is not necessary. In Rex Diamonds v. OSC, after the customary genuflection to the expertise of the Commission, the Divisional Court upheld the Commission’s decision that a material change had occurred but did so on the basis of a different but equally erroneous analysis of the legal test for materiality. In both cases the assumption that the Commission is expert in determining disclosure decisions permeated the reasoning of the court beyond the standard of review into the analysis of the substantive law. Leave to appeal to the Court of Appeal was sought and dismissed in both cases.
Another important area of concurrent jurisdiction is the jurisdiction of the Ontario Court of Justice under section 122 of the Securities Act to hear quasi-criminal charges. This jurisdiction has serious implications for an accused. A person is guilty of an offence can be ordered to pay a fine of up to $5 million or to serve a term of imprisonment of up five years, less a day. The range of misconduct under the Securities Act that can constitute an offence includes making a misrepresentation to OSC staff in an investigation, a misrepresentation in a prospectus or other public filing or, more broadly, a contravention of Ontario securities law. Specific reference is made to section 76, the insider trading provision. Proceedings under s.122 are regularly brought by OSC staff, including for alleged insider trading (albeit not so often recently as OSC staff have opted for hearings before the Commission). In recent years, the newly formed Joint Serious Offences Team (“JSOT”) has brought numerous quasi-criminal cases for alleged contraventions of Ontario securities law, including fraud under s.126.1(b), unregistered trading contrary to s.25(1) and trading without a prospectus as required by s.53(1). JSOT has also brought a number of Criminal Code cases for fraud. The OSC’s press releases emphasise the importance of these cases to the securities regulatory apparatus:
JSOT was established by the OSC as an enforcement partnership between the OSC, the Royal Canadian Mounted Police Financial Crime program and the Ontario Provincial Police Anti-Rackets Branch. The primary objective of JSOT is to protect investors and further enhance confidence in the Canadian capital markets through effective enforcement. This is accomplished through collaborative investigations of serious violations of the law using the provisions of the Securities Act or the Criminal Code.
It is clear that there is a robust concurrent jurisdiction in the courts in which alleged breaches of the Securities Act are adjudicated, including misrepresentation, fraud, insider trading and tipping, and unregistered trading. The serious offences and penalties suggest that the legislature has full confidence in the ability of the courts to interpret the Securities Act at least as proficiently as the Commission. Accordingly, a presumption that the Commission is better qualified than the courts to interpret the same provisions of the Securities Act upon which administrative proceedings and quasi-criminal proceedings are brought cannot be sustained based on divining legislative intent.
It is important to have uniform and consistent jurisprudence with respect to the fundamental legal principles in the securities regulatory regime. Allowing meaningful appeals from the decisions of the Commission on issues of law, reviewed on appeal by a standard of correctness, will improve the quality of the jurisprudence. The refinement of the law through appellate practice is a well-recognised feature of our legal system. A lack of rigour through appellate scrutiny will lead to less principled decision-making, as reflected in the examples above.
No analysis has been undertaken in the decisions to date of the significant concurrent jurisdiction afforded the courts and securities commissions. Certainly this is not addressed by the Supreme Court in Pezim v. British Columbia or McLean. Rather, the imposition of a deferential “reasonableness” standard of review with respect to decisions of the Commission is largely based on jurisprudence concerning different administrative tribunals. As outlined above, the concurrent jurisdiction reflects the important role of the courts, alongside the Commission, in applying and enforcing securities laws. It does not appear that any analysis has been undertaken from a policy perspective as to the appropriate standard of review to apply to the decision of the Commission pursuant to the statutory right of appeal under s.9 of the Securities Act.
Is it Ok to be Reasonably Wrong?
The notion that it is acceptable for the Commission to make a decision that contains errors of law that could affect the outcome of the case, so long as those errors are within a range of reasonable interpretations or outcomes, is not consistent with the rule of law in the common law tradition. That is particularly the case in the context of proceedings in which the Commission can order multi-million dollar financial penalties and orders banning individuals from participating in the capital markets. It is a deeply disconcerting prospect for a person to face an enforcement proceeding with such potentially profound consequences without a genuine right of appeal to seek to correct, at a minimum, errors of law.
Both England and Australia have administrative appeals tribunals that hear appeals on the merits. Recourse to the courts is limited to judicial review applications, which are confined to addressing errors of law. While in Australia judicial review is limited to errors of law that go to jurisdiction, this distinction was set aside in England. As stated by Lord Denning,
“I would suggest that this distinction should now be discarded … The way to get things right is to hold thus: no court or tribunal has any jurisdiction to make an error of law on which the decision of the case depends. If it makes such an error, it goes outside its jurisdiction and certiorari will lie to correct it.
All questions of law decided by administrative decision-makers are reviewed on the standard of correctness. Similarly in New Zealand, the interpretation of the governing statute of an administrative body is always considered to be a question of law for the courts and is reviewed by the standard of correctness.
Is it too much to ask to get the law right? Apparently it is in Canada, as long as the tribunal is reasonably wrong.
The Importance of a Right Of Appeal from Decisions of the Commission
It is sobering to consider that since the year 2000, of the 174 enforcement proceedings that have proceeded to a contested hearing on only seven occasions have the allegations been dismissed in full, exonerating the respondents. The asymmetries in the OSC’s enforcement proceedings to the disadvantage of respondents are well known. Unlike a civil proceeding, only OSC staff have investigation powers (which are routinely used for discovery purposes). The costs regime is one-way, against respondents. Although respondents receive disclosure, unlike in a criminal or quasi criminal proceeding, they must also disclose to OSC staff any documents they intend to rely on and witness statements of any witnesses they intend to call. Any problems with disclosure or any other procedural issues are not reviewable prior to the hearing, based on the Divisional Court’s concept of prematurity.
As noted above, there has never been a successful appeal from a merits decision of the Commission. An enviable track record indeed.
It should not be forgotten that in October 2004 the Standing Committee on Finance and Economic Affairs recommended that “the adjudicative function of the OSC should be separated from its other functions, based on the recommendations of the Fairness Committee”. Following exhaustive consultation and research, the Fairness Committee had concluded:
We are satisfied that the nature of the apprehension of bias has become sufficiently acute as to not only undermine the Commission's adjudicative process, but also the integrity of the Commission as a whole among the many constituencies that we interviewed. Matters of institutional loyalty, the involvement of the Chair in the major cases, the increased penalties, the sense that "the cards are stacked against them", the home-court advantage, the lengthy criminal law-like trials, and the Commission's aggressive enforcement stance, which likely will only increase over time, all combine to make a compelling case for a separate adjudicative body.
The implementation of the Standing Committee’s recommendation was to occur failing substantial progress towards the establishment of a single National securities regulator within 12 months. “Tweaking” the existing structure would not, in the view of the Committee, alleviate the problem. Fourteen years and a few tweaks later, the Commission continues to adjudicate enforcement proceedings. I don’t think that restricting the right of appeal from the decisions of the Commission in the interim was the solution the Fairness Committee or the Standing Committee had in mind.
For the reasons outlined above, the issue of the standard of review for Commission decisions on appeal is one of heightened importance. The trend of limiting the right of appeal needs to be brought to a halt, urgently. Reviewing decisions on questions of law over which the courts share jurisdiction under the Securities Act by a standard of correctness would be a good start. Failure to do so will further undermine the already shaky confidence in the process.
 Finkelstein et al. v Ontario Securities Commission, 2018 ONCA 61.
 Poonian v. British Columbia Securities Commission (2017), 98 B.C.L.R. (5th) 319.
 Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada,  2 S.C.R. 283
 Dunsmuir v. New Brunswick,  1 S.C.R. 190
 McLean v. BCSC,  3 S.C.R. 895.
 McLean, supra at p. 912, quoting National Corn Growers Assn. v. Canada (Import Tribunal),  2.S.C.R. 1324, at p. 1336.
 McLean, supra at p. 910.
 Rogers, supra at p. 296.
 Cornish v. OSC, 2013 ONSC 1310 at para 35.
 Rogers, supra at p. 296
 Phillips v. OSC, 2016 ONSC 7901.
 Securities Act, R.S.O. 1990, c. S.5.
 Kerr v. Danier Leather Inc.  3 SCR 331.
 Cornish, supra at para. 35.
 Cornish, supra at paras. 58 and 59.
 Rex Diamonds v. OSC, 2010 ONSC 3926 at paras. 3 and 7.
 Pezim v. British Columbia, 2 S.C.R. 557. Note that the secondary market liability had not been introduced in Ontario when this case was decided.
 Pearlman v. Keepers and Governors of Harrow School, 1979 Q.B. 56 (COA).
 In one other case insider allegations were and made out against 5 and dismissed against 3 of the respondents.