



COURT OF APPEAL FOR ONTARIO

CITATION: Investment Industry Regulatory Organization of
    Canada v. Vitug, 2013 ONCA 636

DATE: 20131018

DOCKET: C56827

Weiler, Gillese and Lauwers JJ.A.

BETWEEN

The Investment Industry Regulatory Organization
    of Canada

Plaintiff (Respondent in Appeal)

and

Julius Caesar Phillip Vitug

Defendant (Appellant)

Alistair Crowley and Kate McGrann, for the appellant Julius
    Caesar Phillip Vitug

Christopher D. Bredt and Kristen Riess, for the
    respondent The Investment Industry Regulatory Organization of Canada

Heard and released orally: October 16, 2013

On appeal from the judgment of Justice Elizabeth M.
    Stewart of the Superior Court of Justice, dated February 28, 2013.

ENDORSEMENT

By The Court:

[1]

The appellant, Vitug, is a former investment dealer who failed to pay a
    costs award made against him in disciplinary proceedings instituted by the
    respondent, Investment Industry Regulatory Organization of Canada
[1]
,
    IIROC. The narrow issue on this appeal is whether IIROC is entitled to bring an
    action for breach of contract to enforce the costs award.

[2]

In
Investment Dealers Assn. of Canada v. Taub
(2009) ONCA 628,
    at paras. 58-60, Feldman J.A. held that there was no legal impediment
    preventing the IDA
[2]
from imposing a fine on a former member who was found guilty of professional
    misconduct and enforcing payment by an action in breach of contract.

[3]

On the appeal before us, the summary motions judge held, at paras. 28-29
    of her reasons:

[28] The analysis employed by the Court of Appeal for Ontario
    in
Investment Dealers Association of Canada v. Taub,
likewise supports
    a conclusion that an IIROC costs order is enforceable as a matter of contract. In
    Taub, the Court expressed the view that an IIROC fine is enforceable against a
    [sic former] member unless it falls into the realm of the unconscionable. Even
    if an unconscionability test were required to be applied to a costs order,
    which I do not consider to be the case as the nature of a costs order is
    compensatory and punitive, I am of the view that the amount imposed by way of
    costs of this hearing and investigation is both fair and reasonable in light of
    the issues involved, their complexity and the length of the hearing.

[29] As is suggested by the decision in
Taub,
Vitugs
    agreement to the terms of his registration includes a promise to pay any lawful
    costs awards made against him in disciplinary proceedings. This term is a
    contractually binding obligation that may be sued upon in a civil action. The
    absence of specific statutory authority in that regard does not serve to alter
    that conclusion.

[4]

The appellant submits that this case is a step further than
Taub
and
    that the summary judgment judge erred in not taking into consideration s. 9 of
    the Recognition Order, which limits the purposes for which money collected as
    fines and settlements may be used. He submits that the costs award is akin to a
    fine and encompassed by s. 9.

[5]

We disagree with this submission. The plain wording of section 9 is
    limited to fines and settlements. There is nothing in s. 9 of the Recognition
    Order that speaks to costs awards.

[6]

We agree with the comments of the summary judgment judge and her
    analysis quoted above, as well as her conclusion at para. 36 of her reasons:

[36] In my opinion, it is evident that Vitug submitted to the
    rules of this regulatory scheme of which he was a member. He went through a
    fair and legitimate disciplinary proceeding and was found guilty of having
    breached IIROCs rules for its proper conduct of its members. The very
    reasonable order for costs pursuant to the IIROCs rules made by the Hearing
    Panel, which represent only a fraction of IIROCs actual costs of this
    investigation and prosecution, which I am satisfied it has incurred, must
    therefore be paid by him. The bringing of an action by IIROC to recover those
    costs, framed as an action for breach of contract, is both appropriate and
    available in view of the contractual terms which govern Vitugs membership
.

[7]

The respondent is entitled to the costs of the appeal fixed in the
    amount of $23,014.26 inclusive of disbursements and all applicable taxes.

K.M. Weiler J.A.

E.E. Gillese J.A.

P. Lauwers J.A.





[1]
Pursuant to a Recognition Order, IIROC carries out regulatory functions
    delegated to it by the Ontario Securities Commission in its capacity as a
    self-regulatory organization under the
Securities Act (Ontario),
R.S.O.
    1990, c.S.5. However, the legal relationship between IIROC and its members, of
    whom the appellant was one, has been characterized by the courts in Ontario as
    contractual.  As such, disciplinary proceedings are conducted on the basis that
    they are not governed by the
Statutory Powers Procedures Act,
R.S.O. 1990,
    c. S.22.




[2]
The IDA later combined with Market Regulation Services Inc. into IIROC, and was
    recognized as the body for complaint handling, investigations and disciplinary
    actions.


