Indexed As: Walker v. British Columbia Securities Commission

Transcription

1 Andrew Gordon Walker (appellant) v. British Columbia (Securities Commission) (respondent) (CA038350; 2011 BCCA 415) Indexed As: Walker v. British Columbia Securities Commission British Columbia Court of Appeal Saunders, Groberman and Hinkson, JJ.A. October 28, Summary: Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. The British Columbia Securities Commission found that Walker had contravened the Securities Act by perpetrating a fraud on Panterra by taking $86,000 from the corporation to purchase Panterra shares from a third party on his own account contrary to s. 57 of the Act, and by selling 200,000 finder's fee shares intending to keep the proceeds for himself, knowing that the shares had been wrongfully issued. Further, Walker breached ss (b) and of the Act by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure. Sanctions were imposed. Walker appealed. At issue was whether: (1) the Commission erred in law in finding that the share purchase was a transaction that perpetrated a fraud on the corporation contrary to s. 57; (2) the Commission erred in law in finding that the processing of shares for a finders fee was a prohibited act, and in finding that the lawyer "sold" the shares; (3) the Commission erred in finding that financial documents signed by the lawyer were false filings by him, contrary to s ; and (4) the sanctions were unduly harsh. The British Columbia Court of Appeal held that the standard of review on the issues raised on appeal attracted a reasonableness standard of review. Applying that standard, the court dismissed the appeal, except to the extent of ordering the Commission to reconsider the expiry date of the prohibition orders imposed on Walker. Securities Regulation - Topic 1242 Regulatory commissions - Powers or jurisdiction - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker contravened s. 57 of the Securities Act by perpetrating a fraud on Panterra by taking $86,000 from the corporation to purchase Panterra shares from a third party on his own account - Walker appealed, arguing that the Securities Commission did not have jurisdiction over his conduct - The British Columbia Court of Appeal held that the Securities Commission had jurisdiction, notwithstanding that the Business Corporations Act or Criminal Code might also have applications to a securities transaction or that the lawyer was also governed by the law society legislation - See paragraphs 23 to 28. Securities Regulation - Topic 1386 Regulatory commissions - Statutory appeal or judicial review - Scope of appeal or standard of review - Walker, a lawyer, was a director, corporate secretary and legal counsel to a corporation - The British Columbia Securities Commission found that the

2 lawyer had contravened the Securities Act by perpetrating a fraud on a corporation (s. 57) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure (ss (1)(b) and 168.2) - The lawyer appealed - At issue was whether the Commission erred in law in finding that the Act was breached and in imposing the sanctions that it did - The British Columbia Court of Appeal held that the standard of review on the issues raised on appeal attracted a reasonableness standard of review - See paragraphs 16 to 22. Securities Regulation - Topic 5313 Trading in securities - Offences - Fraud - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker contravened s. 57 of the Securities Act by perpetrating a fraud on Panterra by taking $86,000 from the corporation to purchase Panterra shares from a third party on his own account (the nominee share transaction) - Walker appealed, arguing that in order to be prohibited under s. 57, the fraud had to be related to a securities or exchange contract which was not the case here - The British Columbia Court of Appeal stated that the purpose of appropriating Panterra's funds was to acquire the nominees' shares - It was clear that the panel treated the transfer of the funds as one part of an overall transaction to acquire securities - In the court's view, this specialty tribunal could not be said to have acted unreasonably in treating Walker's conduct in that way - Seen as one transaction, Walker's conduct contravened s. 57 of the Act - Giving deference to those findings of the panel in its application of s. 57 of the statute, the court did not accede to this ground of appeal - See paragraphs 29 to 36. Securities Regulation - Topic 5313 Trading in securities - Offences - Fraud - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker contravened s. 57 of the Securities Act by perpetrating a fraud on Panterra by selling, with the intent of keeping the proceeds for himself, 200,000 finder's fee shares for his own account, knowing that the shares had been wrongfully issued - Walker appealed, arguing that the Commission erred in its findings regarding the processing of the shares for a finder's fee - The British Columbia Court of Appeal rejected this ground of appeal, holding that the Commission's conclusions were reasonable - See paragraphs 37 to 46. Securities Regulation - Topic Trading in securities - Offences - Penalties and punishments - Considerations - A lawyer, who was sanctioned by the Securities Commission for breaches of the Securities Act, appealed, arguing that the sanctions were unduly harsh and excessive, given that he had also been punished for his conduct by a settlement of a civil action against him - The British Columbia Court of Appeal was unable to accept that the civil consequences should in any way reduce the sanctions that the lawyer should face for his breaches of the Act - The court stated that it was clear from the prior decisions of the Commission that were considered by the panel that neither criminal penalties nor partial repayment of monies wrongfully taken would necessarily avoid even lifetime prohibitions and significant monetary administrative penalties - Further, any consequences that the lawyer

3 agreed to with the Law Society of British Columbia did not necessarily mitigate the appropriate sanctions for the breaches of the Act - See paragraphs 71 to 74. Securities Regulation - Topic 5322 Trading in securities - Offences - Penalties and punishments - Administrative penalties - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker had contravened the Securities Act by perpetrating a fraud on Panterra (s. 57) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure (ss (b) and 168.2) - Sanctions were imposed, including prohibitions on trading or purchasing securities, acting as a director or officer of any issuer, and on engaging in investor relations activities, plus an administrative penalty of $60,000 - The prohibitions were to remain in force until the later of October 7, 2020 or when the $60,000 was paid - Walker appealed - The British Columbia Court of Appeal refused to disturb the sanctions, except for ordering the Commission to reconsider the expiry date of the sanctions taking into account that the lawyer was already subject to a suspension prior to the imposition of the Commission's sanctions - See paragraphs 55 to 89. Securities Regulation - Topic 5325 Trading in securities - Offences - Penalties and punishments - Misrepresentation in documents filed or given under securities laws - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker had breached ss (b) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure - Walker appealed, arguing that he had only signed the statements and that in doing so he was not certifying the accuracy of the documents - He had no intent to make a false filing - The British Columbia Court of Appeal stated that the finding of a breach of s (1)(b) was supported by the factual findings of the panel and was not unreasonable - The finding that Walker failed to exercise reasonable diligence to make inquiries about the statements in circumstances where he knew there was a high risk of their being inaccurate was also supported by the factual findings of the panel, and the rejection of the due diligence defence under s (2) of the Act was therefore not unreasonable - The court declined to accede to this ground of appeal - See paragraphs 47 to 54. Securities Regulation - Topic 5336 Trading in securities - Offences - Penalties and punishments - Fines - [See Securities Regulation - Topic 5322]. Securities Regulation - Topic 5338 Trading in securities - Offences - Penalties and punishments - Cease trade order - [See Securities Regulation - Topic 5322]. Securities Regulation - Topic 5339 Trading in securities - Offences - Penalties and punishments - Ban on acting as director or

4 officer - [See Securities Regulation - Topic 5322]. Cases Noticed: New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 16]. Thow v. British Columbia Securities Commission (2009), 266 B.C.A.C. 140; 449 W.A.C. 140; 90 B.C.L.R.(4th) 36; 2009 BCCA 46, dist. [para. 17]. Dass v. British Columbia Securities Commission et al. (2008), 261 B.C.A.C. 157; 440 W.A.C. 157; 302 D.L.R.(4th) 354; 2008 BCCA 413, refd to. [para. 20]. Weyerhaeuser Co. v. Assessor of Area No Nanaimo Cowichan (2010), 283 B.C.A.C. 82; 480 W.A.C. 82; 2010 BCCA 46, appld. [para. 21]. Wilder et al. v. Ontario Securities Commission (2001), 142 O.A.C. 300; 53 O.R.(3d) 519 (C.A.), refd to. [para. 27]. R. v. Eurosport Auto Co. et al. (2003), 182 B.C.A.C. 275; 300 W.A.C. 275; 2003 BCCA 281, refd to. [para. 28]. Gill Financial Corp., Re, 2001 BCSECCOM 331, 2001 LNBCSC 231, refd to. [para. 32]. British Columbia Securities Commission v. Gill et al. (2003), 180 B.C.A.C. 221; 297 W.A.C. 221; 11 B.C.L.R.(4th) 102; 2003 BCCA 169, refd to. [para. 32]. R. v. Park (S.J.) (2009), 465 A.R. 20; 2009 ABQB 470, dist. [para. 41]. Asbestos Corp., Société nationale de l'amianté and Quebec (Province), Re, [2001] 2 S.C.R. 132; 269 N.R. 311; 146 O.A.C. 201, refd to. [para. 68]. Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission) - see Asbestos Corp., Société nationale de l'amiante and Quebec (Province), Re. Cartaway Resources Corp. et al., Re, [2004] 1 S.C.R. 672; 319 N.R. 1; 195 B.C.A.C. 161; 319 W.A.C. 161; 2004 SCC 26, refd to. [para. 68]. R. v. Wigglesworth, [1987] 2 S.C.R. 541; 81 N.R. 161; 24 O.A.C. 321; 61 Sask.R. 105, refd to. [para. 73]. Rast, Re, 2003 BCSECCOM 609; 2003 LNBCSC 567, refd to. [para. 75]. O'Connor, Re, 2005 BCSECCOM 197; 2005 LNBCSC 5, refd to. [para. 75]. Dennis, Re, 2005 BCSECCOM 388; 2005 LNBCSC 6, refd to. [para. 75]. Maudsley, Re, 2005 BCSECCOM 577; 2005 LNBCSC 350, refd to. [para. 75]. Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1, refd to. [para. 87]. Pezim v. Superintendent of Brokers (B.C.) - see Pezim v. British Columbia Securities Commission et al. Ryan v. Law Society of New Brunswick, [2003] 1 S.C.R. 247; 302 N.R. 1; 257 N.B.R. (2d) 207; 674 A.P.R. 207; 2003 SCC 20, refd to. [para. 87]. Statutes Noticed: Securities Act, R.S.B.C. 1996, c. 418, sect. 57 [para. 14]; sect , sect [para. 15]. Counsel: L.J. Alexander, for the appellant; R.N. Pelletier, for the appellant on CA038549;

5 S.K. Boyle, for the respondent. This appeal was heard in Vancouver, British Columbia, on September 8 and 9, 2011, before Saunders, Groberman and Hinkson, JJ.A., of the British Columbia Court of Appeal. The following decision was delivered for the court by Hinkson, J.A., on October 28, Editor: Elizabeth M.A. Turgeon Appeal allowed in part. Securities Regulation - Topic 5336 Trading in securities - Offences - Penalties and punishments - Fines - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker had contravened the Securities Act by perpetrating a fraud on Panterra (s. 57) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure (ss (b) and 168.2) - Sanctions were imposed, including prohibitions on trading or purchasing securities, acting as a director or officer of any issuer, and on engaging in investor relations activities, plus an administrative penalty of $60,000 - The prohibitions were to remain in force until the later of October 7, 2020 or when the $60,000 was paid - Walker appealed - The British Columbia Court of Appeal refused to disturb the sanctions, except for ordering the Commission to reconsider the expiry date of the sanctions taking into account that the lawyer was already subject to a suspension prior to the imposition of the Commission's sanctions - See paragraphs 55 to 89. Securities Regulation - Topic 5338 Trading in securities - Offences - Penalties and punishments - Cease trade order - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker had contravened the Securities Act by perpetrating a fraud on Panterra (s. 57) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure (ss (b) and 168.2) - Sanctions were imposed, including prohibitions on trading or purchasing securities, acting as a director or officer of any issuer, and on engaging in investor relations activities, plus an administrative penalty of $60,000 - The prohibitions were to remain in force until the later of October 7, 2020 or when the $60,000 was paid - Walker appealed - The British Columbia Court of Appeal refused to disturb the sanctions, except for ordering the Commission to reconsider the expiry date of the sanctions taking into account that the lawyer was already subject to a suspension prior to the imposition of the Commission's sanctions - See paragraphs 55 to 89.

6 Securities Regulation - Topic 5339 Trading in securities - Offences - Penalties and punishments - Ban on acting as director or officer - Walker, a lawyer, was a director, corporate secretary and legal counsel to Panterra Resource Corp. - The British Columbia Securities Commission found that Walker had contravened the Securities Act by perpetrating a fraud on Panterra (s. 57) and by authorizing, permitting, or acquiescing to the corporation's filing of financial statements which contained a false and misleading disclosure (ss (b) and 168.2) - Sanctions were imposed, including prohibitions on trading or purchasing securities, acting as a director or officer of any issuer, and on engaging in investor relations activities, plus an administrative penalty of $60,000 - The prohibitions were to remain in force until the later of October 7, 2020 or when the $60,000 was paid - Walker appealed - The British Columbia Court of Appeal refused to disturb the sanctions, except for ordering the Commission to reconsider the expiry date of the sanctions taking into account that the lawyer was already subject to a suspension prior to the imposition of the Commission's sanctions - See paragraphs 55 to 89.