



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



British Columbia (Securities Commission) v. Pioneer
  Ventures Inc.,









2021 BCCA 1




Date: 20210104

Docket: CA46666

Between:

British Columbia
Securities Commission

Respondent

(Respondent)

And

Pioneer Ventures
Inc.

Appellant

(Applicant)




Before:



The Honourable Madam Justice Newbury

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Harris




On appeal from:  A decision
of the British Columbia Securities Commission, dated
December 30, 2019 (
Re Application to revoke certain orders
,
2019 BCSECCOM 454).




Counsel for the Appellant
(via videoconference):



R.N. Pelletier





Counsel for the Respondent
(via videoconference):



D.J. Chapman
J.L. Whately





Place and Date of Hearing:



Vancouver, British
  Columbia

November 24, 2020





Place and Date of Judgment:



Vancouver, British
  Columbia

January 4, 2021









Written Reasons by:





The Honourable Madam Justice Newbury





Concurred in by:





The Honourable Madam Justice Saunders

The Honourable Mr. Justice Harris








Summary:

Appeal of decision by
Securities Commission that freeze orders were validly issued in the public
interest and should not be revoked. Held: Appeal dismissed. Freeze orders do
not require that an onerous evidentiary burden be met. The Commission was not
clearly wrong to conclude that the allegations were serious and that the freeze
orders were issued in the public interest, nor did the Commission exercise its
discretion on a wrong principle or fail to consider all relevant factors. There
was evidence before the Commission to justify the orders, including allegations
of undisclosed insider trading, misrepresentations in public disclosure and
self‑dealing.

Reasons for Judgment of the Honourable
Madam Justice Newbury:

[1]

This appeal  and it
is
a statutory appeal, not a petition for
judicial review  requires us to consider the granting and revocation of so‑called
freeze orders made by the Securities Commission under the
Securities Act
,
R.S.B.C. 1996, c. 418. These are orders granted under s. 151 of
the
Act
(which section has since been repealed) that required persons in
control or possession of funds, securities or other property of alleged
wrongdoers to hold such property or refrain from withdrawing it from bank or
other accounts; or to hold it for authorities having possible claims, such as
interim receivers or liquidators in bankruptcy. Under s. 171, such orders
could be revoked by the Commission where it would not be prejudicial to the
public interest to do so. (I have attached as a schedule to these reasons the
relevant statutory provisions that were in force at all material times.)

[2]

The Commission has described freeze orders as discretionary tools
intended to preserve the
status quo
, ensuring that the frozen property
is not dissipated or destroyed before the Commission is in a position to
determine what, if any, further steps or orders in the public interest should
be made under the
Act
. (See
Re Amswiss Scientific Inc.
[1992] 7 B.C.S.C.W.S. 12 at 32.) The Commission has interpreted
its discretion to make such orders very broadly. It has said it is not
possible to state an evidentiary test that must be met in every case to support
a freeze order. (See
H&R Enterprises Inc. (Re)
[1997] 41
B.C.S.C.W.S. 18 at 7.) It has rejected the notion that before issuing
a freeze order, the Commission must find that the person whose assets would be
subject to the order has been dissipating, removing or disposing of assets or
may do so in future; and the notion that a connection must be shown between
the frozen property and the wrongdoing. (See
Re Samji
2012 BCSECCOM 91
at paras. 337.)

[3]

Freeze orders have been considered only rarely by this court on appeal.
We were referred to two of those occasions  first, in
Exchange Bank &
Trust Inc. v. British Columbia Securities Commission
2000 BCCA 389 (
EBT
),
where Mr. Justice Braidwood in chambers denied leave to appeal the
Commissions refusal to revoke a freeze order; and second, in
Zhu v. British
Columbia (Securities Commission)
2013 BCCA 248, where a division of
the Court dismissed an appeal from a similar refusal.

[4]

In
EBT
, Braidwood J.A. set out the Commissions reasons at
length with approval, beginning at para. 12 of his reasons. The passage
quoted included the Commissions observations that:

In seeking an investigation order, Commission
staff does not face an onerous evidentiary burden. Staff must show that the
circumstances relate to the trading of securities and is expected to provide a
basis on which to conclude the subjects of the proposed investigation have
acted, are acting or may act in contravention of the securities laws of British
Columbia or of another jurisdiction or in a manner contrary to the public
interest.

One of the grounds for making an order under section 151
appears to require nothing more than the existence of an investigation order,
or the intention to issue one. However, a freeze order generally has
far
more serious and immediate consequences than an investigation order. Property
of the alleged wrongdoers is immediately affected and the property of innocent
third parties can be captured in the freeze. The Commission must therefore
consider the seriousness of the allegations and the evidence supporting them so
it can weigh the threat to the public interest against the potential
consequences of the order.

That said, freeze orders are
often made at a very early stage
of an investigation. They are not
determinative of the facts in issue; they are made to preserve property until
the facts can be established, either through investigation or through a hearing
before the Commission. [Emphasis added.]

Braidwood J.A.s order was upheld on appeal for
reasons that focussed on procedural fairness: see 2000 BCCA 549.

[5]

In
Zhu
, Commission staff were investigating serious
allegations against the appellants, including fraud, participation in a Ponzi
scheme, failing to file a prospectus when required and selling certain
securities contrary to the
Act.
These allegations had not been heard by
the time the Executive Director applied for an extension of various temporary
orders designed to prevent future violations of the
Act
, including a
freeze order made April 30, 2012. The appellants applied for an order
revoking that freeze order under s. 171, but for unexplained reasons did
not apply for the revocation of a second freeze order made on May 4, 2012.

[6]

The Commission found that the evidence fell far short of
prima
facie
evidence of a Ponzi scheme or of fraudulent conduct. As a result, it
concluded that it was neither necessary nor in the public interest to extend
the temporary orders. However, it declined to vacate the freeze order. This decision
was the subject of the appeal to this court.

[7]

Speaking for the Court, Madam Justice Prowse noted at the outset of her analysis
that the
interpretation and application
of s. 171 of the
Act
had not been properly raised. She therefore restricted her comments to the
question of whether the Commissions refusal to vacate the April freeze order
was
reasonable
.
Zhu
was decided prior to the recent changes in
administrative law made by the Supreme Court of Canada in
Canada (Minister
of Citizenship and Immigration) v. Vavilov
2019 SCC 65 regarding
statutory appeals from administrative tribunals; see especially paras. 3652.

[8]

Prowse J.A. described the parties positions at paras. 516
of her reasons and then began her analysis of the law at para. 57. She
noted
Amswiss
,
EBT
and
H&R Enterprises
. She agreed
with the Executive Director that the approach adopted by the Commission
and reflected in these decisions is clearly
within their mandate and does not lend itself to guidance by this Court by way
of tests, mandatory criteria, or other guidelines which would tie the hands of
the Commission. She continued:

I agree with the submission of the Executive
Director in this respect, particularly in the circumstances of this case.
I
would decline the appellants invitation to set down guidelines, criteria or
mandatory tests for the exercise of the Commissions discretion under either
s. 151
or
s. 171
of the
Act
. ...

In assessing the
reasonableness of the Commissions decision against this backdrop, it is
important to note that, in this case,
there was an admitted breach of
s. 61
of the
Act
, and
evidence of other breaches of the
Act
, albeit
not to the level of a
prima facie
case.
...
In all of the circumstances, having regard to the breadth of the Commissions
mandate to act in the public interest in the area of its expertise, and the
broad discretion available to it under
s. 171
, I find that the Commissions decision not to revoke the freeze order
was reasonable. [At paras. 656; emphasis added.]

[9]

The case at bar involves quite different facts and, since it arises post‑
Vavilov
,
engages different standards of review from those applied in the past to the
appellate review of the Commissions orders. (See especially
Pezim v.
British Columbia (Superintendent of Brokers)
[1994] 2 S.C.R. 557.)
In
Vavilov
, the Supreme Court reversed its previous jurisprudence (last
reformulated in
Dunsmuir v. New Brunswick
2008 SCC 9) concerning
standards of review applicable to appeals like this one, i.e., statutory appeals
from decisions of administrative tribunals. The Court

adopted the
principle that where the legislature has indicated the applicable standard of
review, courts are bound to respect that designation, within the limits imposed
by the rule of law. (At para. 35.) It continued:

this principled position also
requires
courts to give effect to the legislatures intent, signalled by the presence of
a statutory appeal mechanism from an administrative decision to a court, that
the court is to perform an appellate function with respect to that decision
.
... Where a legislature has provided that parties may appeal from an
administrative decision to a court, either as of right or with leave, it has
subjected the administrative regime to appellate oversight and indicated that
it
expects

the court to scrutinize such administrative decisions on an
appellate basis. This expressed intention necessarily rebuts the blanket presumption
of reasonableness review.
...

It should therefore
be recognized that, where the legislature has provided for an appeal from an
administrative decision to a court, a court hearing such an appeal is
to
apply appellate standards of review to the decision. This means that the
applicable standard is to be determined with reference to the nature of the
question and to this Courts jurisprudence on appellate standards of review.
Where, for example, a court is hearing an appeal from an administrative
decision, it would, in considering questions of law, including questions of
statutory interpretation and those concerning the scope of a decision makers
authority, apply the standard of correctness in accordance with
Housen v.
Nikolaisen
... Where the scope of the statutory appeal includes questions
of fact, the appellate standard of review for those questions is palpable and
overriding error (as it is for questions of mixed fact and law where the legal
principle is not readily extricable): see
Housen
... . [At paras. 357;
emphasis added.]

[10]

By the same token, one assumes the exercise of a discretion by a
statutory tribunal is now subject on appeal to the standard of review described
in cases such as
Friends of the Oldman River v. Canada (Minister of
Transport)
[1992] 1 S.C.R. 3 at 76-7 and
Penner v.
Niagara Regional Services Board
2013 SCC 19 at para. 27.

Chronology

[11]

Having laid out the legal context of this case, I turn to a chronology
of the material facts.

·

November
23, 2016
 Based on information from a complainant not identified at the
time, a Commission investigator formed the view that an individual (whom I will
refer to as Mr. Z), the sole director and officer of the appellant
Pioneer Ventures Inc. (Pioneer), was an insider and
de facto
director
of a publicly-listed company, referred to as Yco. The investigator reviewed
trading information of Yco, which indicated that Pioneer was an active trader
and seller of shares of Yco. Mr. Z had not made any filings required of
insiders or directors of Yco. The investigators source also alleged that Mr. Z
was taking and using corporate funds for his own personal purposes, including
through other companies owned by [him] and had been stealing corporate
opportunities from [Yco], by setting up other companies that benefitted from
what are supposed to be the Companys transactions. In the course of a sworn
interview, the complainant did acknowledge that Ycos directors had approved
the payment of fees to Mr. Z and related companies.

·

November
29, 2016
 The Chair of the Commission issued an investigation order in
respect of Mr. Z, Pioneer, Pinto Ventures Ltd. and Yco.

·

June
5, 2018
 A Commission investigator recommended that the investigation
order be amended to clarify its scope and name additional subjects. The
investigator noted that according to the evidence gathered to date, Yco was a
developmental stage medical marijuana company; that it had entered into a
land lease and purchase agreements for marijuana-growing equipment with
companies controlled by Mr. Z, including Pioneer; and that Mr. Z
appeared to be on both sides of the agreements  a fact not disclosed by Yco
in its public filings.

·

May
22, 2019
 The Chair of the Commission granted a freeze order in respect of
Pioneers accounts at two banks. A typographical error in the original order
was corrected by subsequent order dated May 24, 2019.

·

May
27, 2019
 Pioneer applied under s. 171 of the
Act
for an order
revoking the freeze orders. The application was made by letter from counsel for
Pioneer, who submitted that the orders represented a substantial overreach of
the Commissions powers. He quoted a statement from
Amswiss
that:

the Commission must ... consider
the seriousness of the allegations the evidence supporting them so it can weigh
the threat to the public interest against the potential consequences of the
[freezing order].

Counsel argued that the evidence considered by the Chair in
granting the freeze orders contain[ed]  no evidence whatsoever concerning
the seriousness of the allegations or how the public interest was served by the
granting of the freeze orders. It was said that since the Commission had had no
such substantive evidence when it granted the freeze orders, the orders were
improper and should not have been granted.

·

June
10, 2019
 Counsel for the Executive Director filed his response,
addressing both the validity of the freeze orders under s. 151 and the
application to revoke them under s. 171. On the latter point, counsel
submitted that the onus was on Pioneer as applicant to demonstrate that it
would not be prejudicial to the public interest to revoke the orders. He argued
that since Pioneer had not tendered any evidence to this effect, it had not
discharged its onus and the application should be dismissed.

With respect to the validity of the freeze orders
themselves, counsel noted that certain parties in other investigations before
the Commission had challenged the constitutional validity of s. 151 and
that the Attorney General, under s. 43(3) of the
Administrative
Tribunals Act
, S.B.C. 2004, c. 45, had required the Commission to
refer the matter to the Supreme Court of British Columbia as a stated case. (I
understand the stated case has now been heard, but not yet decided, by the
Supreme Court: see
In the Matter of certain Applications Before the British
Columbia Securities Commission
, Vancouver Registry, Docket VA S1914058.)
Counsel in the case at bar recommended that the Commission as master of its
own procedures [should] defer ruling on Pioneers submission that s. 151
incorporate[s] factors, a test, or guidelines beyond what is in the
Act
as this issue will be dealt with by the Supreme Court.

·

June 14, 2019
 Counsel for Pioneer filed a reply,
submitting that the Executive Directors position was both tautological and
contrary to the principles of fundamental justice and that:

In any event, Pioneer requests that the Commission conclude
that
it cannot be prejudicial to the public interest to revoke any Order of
the Commission that was granted without evidence
and without compliance
with the law in force in British Columbia.

The evidentiary burden upon the Executive Director in respect
of obtaining the Freeze Orders in the first place is incredibly low and the
failure in this case to even attempt to meet such burden renders the granting
of the Freeze Orders to be itself prejudicial to the public interest and
contrary to the most basic principles of fundamental justice.

In other words, refusing to
revoke
the Freeze Orders would itself be
prejudicial to the public
interest. [Emphasis
added.]

Reasons of September
5, 2019

[12]

The Commission elected to treat the Executive Directors application to
defer the hearing of the application as an adjournment application. Pioneer
opposed the Directors request on the basis that it would be an abuse of
process. Pioneer said it was content
not
to challenge the constitutional
validity of s. 151 and
not
to ask that the panel craft any
particular test or approach to s. 151.

[13]

The Commission set out paras. 151 and 171 of the
Act
and s. 8.10(a) of Commission Policy 15‑601. The latter provides:

Discretion to revoke or vary
A
party may apply to the Commission for an order revoking or varying a decision.
Generally, the Commission does not hold a hearing, it considers written
submissions and makes its decision.
Before the Commission changes a
decision, it must consider that it would not be prejudicial to the public interest.
This usually means that the party must show the Commission new evidence or a
significant change in circumstances.
[Emphasis added.]

[14]

The Commission adopted the reasoning of the panel in
Re BridgeMark
Financial
2019 BCSECCOM 248 that in most circumstances, the intent of
the
Act
is that the tribunal of the Commission, with its presumed
expertise in the subject matter, is best placed to consider all questions of
law and assessments of the public interest that arise from the interpretation
of the
Act
and acts taken by the Commission in furtherance thereof. The
Executive Directors application for an adjournment was dismissed.

[15]

Turning to Pioneers application under s. 171, the Commission
confirmed that in usual circumstances, the onus is on the applicant to show
that revoking the order would not be prejudicial to the public interest.
(Citing
Re Bossteam
2012 BCSECCOM 377 at para. 70.) The
Commission continued:

This general guidance makes
perfect sense in the context of section 171 applications
where the public
interest considerations already form part of the record
. In most cases
these applications are heard by the original decision maker, and occur
following orders issued after substantial proceedings have taken place up to
and including hearings on the merits and orders relating to sanctions for
misconduct.
In the present matter, however, no allegations have been made,
no notice of hearing has been issued and the Applicant has from the Commission
only the Investigation Orders and Freeze Orders upon which to base its
Application.
Furthermore, as this panel did not grant the underlying
orders, we do not have the context and considerations from the original
proceedings, as is often the case in a section 171 application.
In these
circumstances, applying the onus on the Applicant to show new evidence or a
significant change of circumstances makes little sense.
[At para. 43;
emphasis added.]

[16]

The Commission found that it was impossible to consider whether
revoking the freeze orders would or would not be prejudicial to the public
interest in the absence of consideration of at least some of the underlying
evidence. In the result, it adjourned Pioneers application and ordered the
Executive Director to provide the evidence, if any, to the Applicant that was
provided to the Chair for her consideration before issuing the Investigation
Orders and the Freeze Orders sufficient, in the Executive Directors judgement,
to sustain the Freeze Orders.

[17]

Between October and December, 2019, the Executive Director provided Pioneer
with copies of an affidavit of a member of the Commissions investigative staff
to which he exhibited copies of two memoranda. These had been submitted to the
Chair in support of the original investigation orders. The first memorandum was
redacted to protect the identification of a complainant; the second memorandum
was essentially unredacted. Pioneer filed further submissions and a reply was
filed on November 1, 2019.

Reasons of December 30, 2019

[18]

After receiving the further information and submissions, the Commission
panel (being the same panel that had made the September orders) issued a second
set of reasons on December 30, 2019. It began by describing the parties
respective positions. Pioneer continued to assert that the Chair had not had
before her
any

evidence whatsoever
to support her exercise of discretion
to issue the freeze orders in the first instance and that the Commission had
entirely failed to provide even a scintilla of the required evidence of the
public interest, or consideration thereof, to maintain the Freeze Orders. (At para. 7.)
It was said the memoranda expressed only concerns, were based on hearsay and
that the Commission had not been forthright in its dealings with the
subjects. Pioneer did acknowledge that the two memoranda purported to show that
the same individual was sole director and officer of Pioneer and of another
company, Xco, and that Pioneer and Xco had together sold more shares of Yco
than any other person. In addition:

The Applicant also provided information regarding an
individual who the Applicant stated was obviously the Complainant. The
Applicant described civil litigation between [Mr. Z] and the Complainant
and included a copy of an Interim Order of the Court of Queens Bench of
Alberta (Interim Order), which enjoined the Complainant from making further
defamatory statements against [Mr. Z]. The Applicant submitted that the
statements of the nature and type alleged to have been made by the Complainant
to the Commission were of the same nature and type as those subject to the
Interim Order. The Applicant says that this is hugely problematic for the
Commission and for the proper administration of justice in this matter.

. . .

The Applicant submitted that
it remains impossible for the Applicant to tender evidence to satisfy the usual
onus in a section 171 application as the

evidence submitted by the
Commission which is to be addressed by [the Applicant] has either been withheld
or is nonexistent. This amounts to the Commission asserting that the granting
of an investigation order is sufficient, without more, to grant a freeze order
.
The Applicant submitted that the Chair accepted the opinion and conclusions of
an investigator in respect of the evidence of the public interest rather than
having such evidence put to the Chair and having her review such evidence and
draw her own opinions and conclusions. The Applicant says that this is clearly
wrong in law and on the particular facts of this matter and constitutes a
breach of procedural fairness and fundamental justice. [At paras. 9, 12;
emphasis added.]

[19]

For her part, the Executive Director summarized the information gathered
by investigators that had led to the concerns set out in the memoranda. This
information included the following:

o

Securities of Yco were publicly traded

o

[Mr. Z] was actively involved in the business of Yco
including finding projects, asset acquisition opportunities, private financings
and preparing public filings

o

The Complainants serious allegations against [Mr. Z] and
members of his family

o

The Applicant and Xco sold more shares of Yco than any other
person in a specified period

o

[Mr. Z] and [Mr. Z]s family members were trading in
Xco shares without public disclosure

o

Yco had entered into several agreements for investor relations,
leases of land and product purchases with companies controlled by [Mr. Z] (including
named Subjects) and his son (also a named Subject), which agreements were not
disclosed by Yco

o

[Mr. Z] made decisions for Yco including hiring and firing

The Commission investigators set
forth their apprehensions that the information outlined in the Memoranda raised
significant concerns that [Mr. Z] may have been acting as an unreported
de
facto
director of Yco and, if so, Yco had failed to comply with section 85
of the Act and [Mr. Z] had failed to file insider trading reports for the
trading in securities of Yco that the Applicant and Xco had made. Furthermore,
if [Mr. Z] were a
de facto
director of Yco, given [Mr. Z]s
involvement with Yco summarized above, Ycos public filings may have contained
misrepresentations. [At paras. 1516; emphasis added.]

[20]

The Director submitted that the burden needed to support the issuance of
an investigation order is not an onerous one, but that there must be trading
in securities and a basis to conclude that the subjects of the requested order
acted or may act in a manner contrary to the public interest. (At para. 17.)
Freeze orders, she said, may be issued even before an investigation is
commenced and a quick response is often necessary to enhance the Commissions
capacity to protect the capital markets. Echoing statements made in
Re
Samji
,
supra
, she submitted that the issuance of a freeze order does
not require evidence that the property sought to be frozen is closely involved
with the alleged wrongdoing or the dissipation or threatened dissipation of
the assets; nor does it require evidence of a connection between the frozen
assets and the wrongdoing. (At para. 19.)

[21]

In the Directors submission, there
had been
evidence before the
Chair prior to the granting of the freeze orders, i.e., the two memoranda
prepared by staff. Although the Director was not prepared to disclose the identity
of the complainant, she observed that his or her reliability could be tested at
a later stage if the matter proceeded. In the meantime, it was said the order had
been properly issued and that the applicant had provided no evidence of any
prejudice or inconvenience caused to the public by the freeze orders. (At para. 21.)

[22]

The panel began its own analysis at para. 22 of the December
reasons. It rejected Pioneers assertion that there was no evidence at all to
support the freeze orders. This assertion suggested that a high standard of
evidence was required, reflecting a misapprehension by the Applicant of what
the
Act
require[d]. (At para. 23.) The panel noted that
freeze orders may be issued as soon as an investigation is proposed, as well as
during and after an investigation. They may be based on very preliminary
information and their objective is to maintain the
status quo
.

[23]

In this case, the issuance of the freeze orders in May 2019 had been
supported by the second memorandum, which identified further subjects for the
investigation and further potential misconduct. The length of time between the
second memorandum and the issuance of the freeze orders had been reasonable,
given the need to obtain and review financial records and verify details before
the requests for freeze orders could be presented to the Chair. Like
investigation orders, freeze orders do not require that the Commission satisfy
an onerous evidentiary burden. The Commission continued:

Having reviewed the evidence that
was before the Chair prior to issuing the Freeze Orders,
we agree with the
Executive Director that the Chairs exercise of discretion to issue the Freeze
orders required consideration of the public interest in all of the
circumstances known at the time
. The information in the Memoranda provided
to the Chair before she issued the Investigation Orders indicated the
possibility of multiple breaches of securities law including failures to make
required disclosure of [Mr. Z]s de facto directorship of Yco, undisclosed
insider trading by [Mr. Z] and members of his family, failure to report
trading in securities of Yco by [Mr. Z], misrepresentations in public
documents of Yco and possible self- dealing by [Mr. Z]. The affidavits in
support of the Freeze Orders identified assets of the Applicant, which provided
the opportunity to freeze such assets and maintain the
status quo
. [At para. 30;
emphasis added.]

[24]

Accordingly, the Commission found that Pioneers contention there had
been no evidence before the Chair was simply not correct. The information
in the affidavit and memoranda satisfied the burden described in the chambers
decision in
EBT
and fully justified the issuance of the freeze orders.
As far as the public interest was concerned, the Commission found that the
public interest in issuing the freeze orders was compelling. The panel quoted
from
EBT,
where Braidwood J.A. had approved the following reasoning of
the Commission:

In our view, it is not possible to state an evidentiary
test that must be met in every case to support a freeze order.Where a freeze
order is imposed to preserve property at an early stage of an investigation, as
in this case, the
Commission expects staff to review the status of the order
on the basis of the emerging evidence as the investigation unfolds and, if
appropriate, to apply to have an order varied or revoked
. [At para. 33;
emphasis added.]

The panel concluded that the freeze orders had been
validly
issued
in the public interest.

[25]

With respect to Pioneers application for the
revocation
of the
freeze orders, the Commission observed that
Pioneer
had produced no
evidence and, in the Commissions analysis, had failed to make any compelling
argument in support of the conclusion that revoking the orders would not be
prejudicial to the public interest. This application was also dismissed.

[26]

Leave to appeal the Commissions order was granted to Pioneer by a
justice of this court on February 19, 2020.

On Appeal

[27]

In this court, Pioneer stated only one ground of appeal in its factum,
namely that:

the Commission erred in law, or
alternatively in fact and law, in finding that the Freeze Orders were validly
issued and thereon [
sic
] dismissing the Application.

This ground of appeal is stated in such general terms
that no particular error of law or fact can be gleaned from it. Such
compendious grounds are unhelpful to this court and should be avoided. From
the Argument portion of the factum, however, I draw the following grounds of
appeal, namely that the Commission erred in equating the evidentiary burden
required to issue an investigation order with that required for a freeze order;
and that it failed to consider the public interest before granting the freeze
orders.

[28]

In addition, counsel in his oral submissions in this court contended
that the Commissions decision represented a failure of fundamental justice
or a breach of procedural fairness.

The Evidentiary
Burden

[29]

In arguing that the Commission equated the evidentiary burdens required
for investigation orders with those required for freeze orders, Pioneer relied
specifically on the panels comment at para. 29 of its reasons that the
following passage quoted at para. 12 by Braidwood J.A. in
EBT
is also applicable to a freeze order:

In seeking an investigation
order, Commission staff
does not face an onerous evidentiary burden.
Staff
must show that the circumstances relate to the trading of securities and is
expected to provide a basis on which to conclude the subjects of the proposed
investigation have acted, are acting or may act in contravention of the
securities laws of British Columbia or of another jurisdiction or in a manner
contrary to the public interest. [Emphasis added.]

To
ensure that this it will not be taken out of context, I also note the two paragraphs
that followed that passage:

One of the grounds for making an order under section 151
appears to require nothing more than the existence of an investigation order,
or the intention to issue one. However,
a freeze order generally has far
more serious and immediate consequences than an investigation order.
Property of the alleged wrongdoers is immediately affected and the property of
innocent third parties can be captured in the freeze.
The Commission must
therefore consider the seriousness of the allegations and the evidence
supporting them so it can weigh the threat to the public interest against the
potential consequences of the order.

That said, freeze orders are
often made at a very early stage
of an investigation. They are not
determinative of the facts in issue; they are made to preserve property until
the facts can be established, either through investigation or through a hearing
before the Commission.
[
At para. 12;
emphasis added.]

[30]

I do not read the foregoing as equating the evidentiary burden
required for an investigation order with that required for freeze orders. As I
read the reasons, the Commission is saying simply that like investigation
orders, freeze orders do not require that a heavy evidentiary burden be met.
Although the consequences of a freeze order may be onerous in particular
circumstances, the jurisprudence is replete with references to the fact that
the realities of modern technology and instantaneous securities transactions
are such that in the absence of freeze orders, wrongdoers could avoid or circumvent
penalties or compensation ultimately ordered by the Commission, thus rendering
the entire process meaningless.

[31]

The Commission must of course always act in what it believes is the
public interest, no matter what type of order is being contemplated. It seems
to me likely that in most cases, the public interest considerations that are
relevant to the granting of an investigation order will at least overlap with,
if not be the same as, those that are relevant to the granting of a freeze
order. As for the seriousness of the allegations, this may change as the
investigation proceeds, as occurred in this case. There may be circumstances in
which the allegations are not at all serious, or in which serious allegations
are withdrawn, leaving only wrongdoing that would merit nothing more than a
small fine or even only a cease and desist order. In these situations, it
might well be appropriate for the Commission to conclude a freeze order is not
necessary in the public interest, or to vary the terms of an existing order. Or
it may be that a large amount of money belonging to innocent parties is caught
by a freeze order and it becomes apparent that the effects of the order are not
justifiable in the public interest.

[32]

I suspect, however, that such situations are fairly rare. In most
situations, I would suggest that the existence of allegations that if proven
would constitute non‑trivial contraventions of the
Act
and that
could result in adverse financial consequences (be they penalties, damages or
restitutionary orders of some kind) to the alleged wrongdoers would justify the
issuance of a freeze order. As the Commission acknowledged at para. 33 of
its December reasons (quoted
supra
), Commission staff is expected to
monitor the status of freeze orders and if appropriate, apply to have them
revoked or varied. If it becomes apparent the complaining party is not to be
believed (as was argued unsuccessfully by Pioneer in this case) or that the
freeze order is causing serious harm to innocent members of the public, the
onus under s. 171 might well be met. Or the concerns underlying a freeze
order might be addressed by proof of financial means of the alleged wrongdoer.
None of the foregoing situations existed in this case; nor had a long delay in
the bringing of charges against the subjects of the investigation occurred.

[33]

The Commission found that the public interest in
issuing
the
freeze orders was compelling in the present circumstances. These
circumstances consisted primarily of a review of the allegations made by the
complainant, which were not frivolous, and a recounting of the specific facts
alleged in support. By their nature, allegations of breaches of the
Act
will almost always involve conduct that may be contrary to the public interest
in having securities markets that are transparent, honest and efficient and
that inspire investor confidence. I am unable to say the Commission was clearly
and palpably wrong in concluding that the freeze orders in this case were
issued in the public interest, or that the panel exercised its discretion on a
wrong principle or failed to consider all relevant factors.

[34]

I take further comfort from the Commissions September reasons for my
conclusion that the tribunal did not equate the evidentiary burdens required
for investigatory orders and freeze orders respectively. In those reasons, the
Commission fully accepted the passage from
Amswiss
in which it acknowledged
that a freeze order generally has more serious and immediate consequences than
an investigation order and that the Commission must consider all the evidence
supporting the freeze order so that it can weigh the threat to the public
interest against the potential consequence of the order. (At para. 41.)
The Executive Director was given the opportunity to provide the evidence on
which she had relied, and did so. At para. 31 of its December
reasons, the Commission found that:

The
information contained in the affidavits and Memoranda satisfies the evidentiary
burden set forth in [
EBT
] and thereby fully justified the issuance of
the Freeze Orders.
This potential misconduct may also cause serious harm to
investors and Yco if the status quo is not maintained
. [Emphasis added.]

[35]

I am not persuaded that the Commission erred in law in misapprehending
the evidentiary burdens required to issue investigative orders and freeze
orders, or that the Commission erred in the application of the law to the facts
(i.e., the evidence put before the Commission prior to the December hearing)
before it. I would not accede to this ground of appeal.

Applied Wrong
Test?

[36]

At para. 11 of its factum, Pioneer asserts that:

The Decision does not address the
requirement that the Chair consider the seriousness of the allegations and the
evidence supporting those allegations, and then weigh the threat to the public
interest against the potential consequences of the Freeze Orders prior to
granting the Freeze Orders.

It is
true that nowhere in its December decision did the Commission
expressly
ask itself whether the allegations being investigated against Pioneer were
serious. However, it will be recalled that the information gathered during
the course of the investigation included those items listed in para. 15 of
the reasons, including a reference to the Complainants serious allegations
against [Mr. Z] and members of his family. The Commission continued:

The Commission investigators set
forth their apprehensions that the information outlined in the Memoranda raised
significant concerns that [Mr. Z] may have been acting as an unreported de
facto director of Yco and, if so, Yco had failed to comply with section 85 of
the Act and [Mr. Z] had failed to file insider trading reports for the
trading in securities of Yco that the Applicant and Xco had made. Furthermore,
if [Mr. Z] were a
de facto
director of Yco, given [Mr. Z]s
involvement with Yco summarized above, Ycos public filings may have contained
misrepresentations. [At para. 16.]

[37]

It may be that Pioneer or counsel do not regard these allegations as
serious, but I cannot say that the Commission would be clearly and palpably
wrong to so characterize them. Nor did the Commission consider a factor it
should not have or fail to consider a relevant matter. It did, for example,
consider the fact that an interim stay had been granted by an Alberta court in
a defamation action against the alleged complainant in this case; but the
Commission was apparently of the view that that evidence was not determinative
at that point.

[38]

I would not accede to this ground of appeal.

Breach of
Procedural Fairness?

[39]

Finally, counsel for Pioneer asserted at the hearing of the appeal that
it and the other subjects of the investigation were denied fundamental justice
as a result of the process followed in this case. In particular, Pioneer
asserts that in addressing the validity of a freeze order, procedural fairness
requires that the Commission produce the evidence relied upon by the Chair and
the Commission in granting [the Freeze Order]. It also suggested that if the Chair
had attempted to address the allegations made against Pioneer, it would have
been apparent to her that the allegations were unsubstantiated. In summary,
Pioneer says the Chair did not engage in the evidentiary and weighing
analyses mandated by the governing authorities before issuing the freeze
orders.

[40]

In my view, this argument must also fail. In its September reasons, the
Commission acknowledged that it would be procedurally unfair to the Applicant
to require it to tender evidence or provide a factual basis that revocation of
the Freeze Orders would not be prejudicial to the public interest

while at the

same time withholding the
evidence that was before the chair when she granted the investigative orders
and the freeze orders. The Commission explained that in most instances,
applications for the variation or revocation of a previous order are heard by
the original decision-maker after substantial proceedings have taken place, up
to and including hearings on the merits. In the circumstances of this case,
however, the panel had not granted the underlying orders and therefore did not
have the context and considerations from the original proceedings, as is often
the case in a section 171 application and no specific allegations had yet been
made or notice of hearing issued. (At para. 42.) As seen above, the
Commission found it would be impossible to proceed under s. 171 in the
absence of consideration of at least some of the underlying evidence.

[41]

As we have seen, by the time of the December hearing, the affidavit and
memoranda had been provided to the Commission. It found at the end of the day
that that information fully justified the issuance of the Freeze Orders and
that the public interest in maintaining those orders was compelling.

[42]

I agree with the Commission that it was simply not the case that there
was no evidence before the Commission that could have justified the issuance
of the freeze orders. The fact that this evidence may not have complied with
the rules of evidence is not fatal: s. 173(c) of the
Act
provides
that the Commission is generally not bound by the rules of evidence in
conducting a hearing. This means that information provided by a complainant may
be relied upon even though he or she has not been cross-examined on it. At this
stage, the Commission is not called upon to assess the merits of the complaint
or to assess the credibility of the complainant or anyone else.

[43]

In my view, no breach of the rules of procedural fairness has been
shown.

Disposition

[44]

For the foregoing reasons, I would dismiss the appeal. I emphasize that
Pioneer expressly elected not to advance any constitutional argument in this
case regarding s. 151. These reasons should not be read as commenting on
that issue in any way.

The Honourable Madam Justice Newbury

I agree:

The
Honourable Madam Justice Saunders

I agree:

The Honourable Mr. Justice
Harris

Schedule of Legislation

Appeal of commission
decision

167
(1)
A person directly affected by a decision of the commission, other than

(a) a decision under
section 48 or 76,

(b) a decision under
section 165 in connection with the review of a decision of the executive
director under section 48 or 76, or

(c) a decision by a
person acting under authority delegated by the commission under section 7,

may appeal to the
Court of Appeal with leave of a justice of that court.

(2) The commission or the Court of Appeal may grant a stay of the
decision appealed from until the disposition of the appeal.

(3) If an appeal is taken under this section, the Court of Appeal may
direct the commission to make a decision or to perform an act that the
commission is authorized and empowered to do.

(4) Despite an order of the Court of Appeal in a particular matter, the
commission may make a further decision on new material or if there is a
significant change in the circumstances, and that decision is also subject to
this section.

(5) The commission is a
respondent to an appeal under this section.

Order to freeze property

151
(1)
The commission may make a direction under subsection (2) if

(a) it proposes to order
an investigation in respect of a person under section 142 or during or after an
investigation in respect of a person under section 142 or 147,

(b) it or the executive
director proposes to make or has made an order under section 161 in respect of
a person,

(c) criminal proceedings
or proceedings in respect of a contravention of this Act or the regulations are
about to be or have been instituted against a person and the commission
considers the proceedings to be connected with or to arise out of a security or
exchange contract or a matter relating to trading in securities or exchange
contracts, or out of any business conducted by the person,

(d) a person fails or
neglects to comply with financial conditions applicable to the person under
this Act, or

(e) it proposes to apply
or has applied to the Supreme Court for an order under section 157, or the
Supreme Court has made an order under section 157.

(2) In the circumstances described in
subsection (1), the commission may direct, in writing,

(a) a person having on
deposit, under control or for safekeeping any funds, securities, exchange
contracts or other property of the person referred to in subsection (1), to
hold those funds, securities, exchange contracts or other property, and

(b)
a person referred to in subsection (1)

(i) to refrain from
withdrawing any funds, securities, exchange contracts or other property from
any person having them on deposit, under control or for safekeeping, or

(ii) to hold all
funds, securities, exchange contracts or other property of clients or others in
the person's possession or control in trust for an interim receiver, custodian,
trustee, receiver manager, receiver or liquidator appointed under the
Bankruptcy
Act
(Canada), the
Company Act
, the
Business Corporations Act
,
the
Law and Equity Act
, the
Personal Property Security Act
, the
Winding-up
Act
(Canada), the
Supreme Court Act
or this Act.

(3) In the case of a savings institution, a direction of the commission
under subsection (2) applies only to the offices, branches or agencies of the
savings institution that are named in the direction.

(4) A direction of the commission under subsection (2) does not apply
to funds, securities, exchange contracts or other property in a clearing agency
or to securities in process of transfer by a transfer agent unless the
direction expressly so states.

(5) In any of the circumstances referred to in subsection (1), the
commission may, in writing, notify a land title office or gold commissioner
that proceedings are being or are about to be taken that may affect land or
mining claims belonging to the affected person.

(6) The commission may, in writing, revoke or modify a notice given
under subsection (5) and, if a notice is revoked or modified, the commission
must send a copy of the written revocation or modification to the land title
office or gold commissioner, as the case may be.

(7) A notice sent under
subsection (5) or a copy of a written revocation or modification under subsection
(6) must be registered or recorded against the lands or claims mentioned in it
and has the same effect as the registration or recording of a certificate of
pending litigation or a caveat.

Discretion to revoke or vary decision

171    If the
commission, the executive director or a designated organization considers that
to do so would not be prejudicial to the public interest, the commission,
executive director or designated organization, as the case may be, may make an
order revoking in whole or in part or varying a decision the commission, the
executive director or the designated organization, as the case may be, has made
under this Act, another enactment or a former enactment, whether or not the
decision has been filed under section 163.

Authority
of persons presiding at hearings

173

The person
presiding at a hearing required or permitted under this Act



(c)
is not
bound by the rules of evidence.


