



COURT OF APPEAL FOR ONTARIO

CITATION:
Ontario Securities
    Commission v. MRS Sciences Inc., 2017 ONCA 279

DATE: 20170404

DOCKET: C62121

Juriansz, Lauwers and Hourigan JJ.A.

BETWEEN

Ontario Securities Commission

Respondent

and

MRS Sciences Inc. (formerly Morningside Capital
    Corp.),
America Derosa,
Ronald Sherman,
Edward Emmons
,
Ivan
    Cavric
and Primequest Capital Corporation

Appellants

Peter-Paul E. DuVernet, for the
    appellants

Scott C. Hutchison, Samuel Walker and Derek J. Ferris,
    for the respondent

Heard: March 28, 2017

On appeal from the decision of the Divisional Court
    (Justices Anne M. Molloy and David L. Corbett, Regional Senior Justice Robbie
    D. Gordon dissenting), dated November 26, 2016, with reasons reported at 2015
    ONSC 6317, affirming the decisions of the Ontario Securities Commission, dated
    December 6, 2011, December 5, 2013 and June 4, 2014.

By the Court:

A.

Introduction

[1]

The
Rules of Procedure
of the Ontario Securities Commission
    (the Commission) contemplate two phases in a proceeding before it: (1) a
    merits hearing, where the Commission makes findings about alleged breaches of
    the
Securities Act
, R.S.O. 1990, c. S.5; and (2) a sanctions hearing,
    where the Commission decides what sanctions and costs, if any, are appropriate.

[2]

The issue on this appeal is whether these two hearings are each part of
    a single, quasi-judicial proceeding that must be presided over by the same
    decision-maker, or if each hearing is a distinct proceeding that can be
    presided over by different decision-makers should the circumstances warrant it.
    The Commission adopted the latter view.

[3]

On appeal, the Divisional Court was unanimous that the Commissions
    decision should be reviewed on a reasonableness standard, but it split on the
    outcome. The minority held that the merits hearing and sanctions hearing were
    two phases of a single proceeding that should have the same decision-maker. The
    majority held that, while the minoritys interpretation was a reasonable one,
    it was not the only reasonable interpretation. They concluded that the
    Commissions interpretation was also reasonable and, accordingly, dismissed the
    appeal.

[4]

For the reasons that follow, we dismiss the appeal of the Divisional Courts
    order.

B.

Background

[5]

In 2007, the Commission issued a notice of hearing against MRS Sciences
    Inc. and the individual appellants alleging various breaches of the
Securities
    Act
arising from a scheme to sell shares in a high return venture fund.

[6]

The merits hearing took place in 2009 before Commissioners Patrick
    LeSage and Carol Perry. On February 2, 2011, the panel released its decision holding
    that the appellants had sold securities without being registered as dealers and
    traded securities without a prospectus. The Commissioners dismissed all other
    allegations.

[7]

On February 10, 2011 and February 14, 2011 respectively, Commissioner
    LeSages and Commissioner Perrys five-year appointments to the Commission
    expired. In May 2011, the Secretary to the Commission informed the parties that
    the Commissioners terms had expired and that neither would be scheduled to
    preside over the sanctions hearing.

[8]

The appellants objected and brought a preliminary motion challenging the
    jurisdiction of the differently constituted sanctions panel to preside over the
    sanctions hearing. That motion was dismissed by the Commission on December 6,
    2011.

[9]

In January 2012, the appellants filed a notice of appeal and a notice of
    application for judicial review of the Commissions decision on the panel
    composition issue. In December 2012, the Divisional Court dismissed the appeal
    and quashed the application for judicial review as premature.

[10]

The sanctions hearing proceeded over four days in late 2013 and early
    2014. Commission staff adduced transcripts of the merits hearing before the
    sanctions panel. The appellants objected, arguing that the transcripts should
    be excluded. The sanctions panel admitted the transcript evidence in a decision
    dated December 5, 2013.

[11]

The sanctions panel released its sanctions decision on June 4, 2014. It
    ordered 10-year trading bans, 10-year director and officer bans, reprimands,
    administrative penalties and costs against the appellants.

C.

Divisional Court Judgment

[12]

The appellants appealed the 2011 panel composition decision, the 2013
    decision to admit transcript evidence from the merits hearing in the sanctions
    hearing, and the 2014 sanctions decision to the Divisional Court.

[13]

Gordon R.S.J., writing in the minority, rejected the appellants
    submission that the standard of review was correctness and held that the
    applicable standard of review was reasonableness.

[14]

Gordon R.S.J. proceeded to hold that the Commissions decision was
    unreasonable. In his view, the merits hearing and the sanctions hearing were
    both part of a single, quasi-judicial process initiated by a notice of hearing.
    As such, s. 4.3 of the
Statutory Powers Procedures Act
, R.S.O. 1990,
    c. S.22 (SPPA) operated to extend the Commissioners terms of office until
    the entire proceeding was concluded. That section provides:

4.3
If
    the term of office of a member of a tribunal who has participated in a hearing
    expires before a decision is given, the term shall be deemed to continue, but
    only for the purpose of participating in the decision and for no other purpose.

[15]

Gordon R.S.J. also held that the principles of procedural fairness
    supported the view that a new panel ought not to be appointed when the merits
    panel continued to be available.

[16]

Gordon R.S.J. dismissed the appellants appeal from the sanctions decision,
    holding that the decision revealed that the sanctions panel received the
    parties positions, considered the aggravating and mitigating factors, and
    explained why it imposed the sanctions it did for each party. He likewise
    dismissed the ground of appeal that it was unfair to put the merits hearing
    transcripts before the sanctions panel.

[17]

Molloy and Corbett JJ. agreed with Gordon R.S.J. that the standard of
    review should be reasonableness. They also agreed with him that one possible,
    and reasonable conclusion is that the merits hearing and the sanctions hearing
    are two stages of a single quasi-judicial hearing, such that s. 4.3 of the SPPA
    would be operative: see para. 40. However, the majority held that this was not
    the only reasonable interpretation and that the Commissions interpretation was
    also reasonable, as was its conclusion that the principles of procedural
    fairness had not been violated. In support of their finding of reasonableness,
    the majority cited the logistical challenges the Commission had identified,
    including that it has a limited number of members who are all appointed to
    fixed five-year terms.

[18]

The majority concurred with the decision of Gordon R.S.J. on the
    transcript and sanctions issues.

D.

Analysis

[19]

On appeal to this court, the appellants submit that the Divisional Court
    erred in not finding that the standard of review is correctness. They argue
    that the issues before the Commission concerned true questions of
vires
and matters of general importance to the legal system as a whole within the
Dunsmuir
exception: see
Dunsmuir v. New Brunswick
, 2008 SCC 9, [2008] 1 S.C.R.
    190, at paras. 59-60.

[20]

We disagree. We are not satisfied that the issues in this appeal fall
    within one of the few recognized exceptional categories of cases where the
    presumption of reasonableness is rebutted.

[21]

The issues surrounding the appointment of a sanctions panel is not an
    issue of true
vires
that attracts a correctness standard. Questions of
    true
vires
are exceedingly rare, and an administrative bodys
    interpretation of its home statute is presumptively reviewed on a
    reasonableness standard:
Alberta (Information and Privacy Commissioner) v.
    Alberta Teachers Association
, 2011 SCC 61, [2011] 3 S.C.R. 654, at para.
    34. There is no doubt that the Commission had jurisdiction over the proceeding
    against the appellants. The decision on how the Commission chooses to allocate
    its adjudicative resources in constituting the sanctions panel is a matter that
    falls squarely within its expertise.

[22]

We agree with the majority of the Divisional Court, who said at para.
    43:

In this case, the sanctions panel considered the impact on the
    Commission and its procedures if the
SPPA
applied to extend the term of
    panel members who had participated in a merits hearing through to the end of
    the sanction hearing. Such an interpretation, in the view of the panel, would
    not be consistent with the makeup of the Commission and how it operates.
    Further, the panel concluded that such an interpretation of the
SPPA
was
    not mandated by the language of the
SPPA
itself. The panel held that the
SPPA
contemplates that a hearing and a proceeding are not
    synonymous, even within that statute. Likewise, the panel considered that there
    is a difference between the words hearing and proceeding within the
    Commissions own Rules of Procedure. In particular, rule 17.3(1) provides that,
    following the merits hearing, Unless the parties to a
proceeding
agree
    to the contrary, a
separate hearing
shall be held to determine the
    matter of sanctions and costs.

[23]

Nor is this a matter of general importance. Similar to the situation in
McLean
    v. British Columbia (Securities Commission)
, 2013 SCC 67, [2013] 3 S.C.R.
    895, the composition of a sanction panel is
a nuts-and-bolts question of statutory interpretation
    confined to a particular context: see para. 28.

[24]

The appellants also renew their objection to the composition of the
    sanctions panel. They complain that the appointment of a new panel is not
    authorized by statute and is procedurally unfair.

[25]

We would not give effect to this submission. We accept the reasoning of
    the majority that both the interpretation advanced by the appellants and the
    one adopted by the Commission are reasonable. In
McLean,
at paras. 37-39,
    the Supreme Court held that in some cases a statutory provision can be given
    two opposing but equally reasonable interpretations.

[26]

We see no error in the majoritys reasoning that, having regard to the
    scheme of the SPPA, the
Securities Act
, the
Rules of Procedure
of the Commission, and the legislated policy decision to maintain a Commission
    that is small in a number with a rotating composition, the Commissions
    interpretation was a reasonable one.

[27]

There is also no procedural unfairness or breach of natural justice in
    constituting a different sanctions panel. Courts have frequently referred
    matters back to a different administrative tribunal for a decision on penalty
    and on occasion specifically indicated that a different panel should deal with
    those issues:
Sussman Mortgage Funding Inc.  v. Ontario (Superintendent of
    Financial Services)
(2005), 205 O.A.C. 237 (C.A.), at para. 3;
Seed
    (Re)
(1992), 55 O.A.C. 161 (Div. Ct.); and
Banks v. Ontario
    (Securities Commission)
(2005), 204 O.A.C. 290 (Div. Ct.).

[28]

Nor is the principle of
audi alteram partem
violated on the
    facts of this case. The panel that decided the issue of sanctions and costs did
    so based on the evidence and submissions that it heard on those issues.

[29]

The appellants also assert two additional grounds of appeal that are closely
    related to the panel composition issue. First, they argue that the Commission
    should not have admitted the transcripts from the merits hearing. We disagree.
    There was no unfairness in admitting transcripts that were relevant to the
    issues before the sanctions panel. The appellants were free in the sanctions
    hearing to adduce evidence relevant to the determination of the sanctions and
    costs, as well as to contest opposing evidence.

[30]

Finally, the appellants submit that the Commissions reasons were
    inadequate. There is no merit to this submission. The reasons were thorough,
    clearly articulated the panels decision and the reasoning process behind the
    decision.

E.

DISPOSITION

[31]

We dismiss the appeal. As agreed among the parties, the Commission is
    entitled to costs of the appeal in the amount of $16,000, inclusive of fees,
    disbursements, and H.S.T.


