Proceedings


IN THE MATTER OF THE COMMODITY FUTURES ACT,
R.S.O. 1990, c. C.20, AS AMENDED

AND

IN THE MATTER OF AN APPLICATION FOR REVIEW OF A RULING OF THE ONTARIO DISTRICT COUNCIL OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA

AND

IN THE MATTER OF DISCIPLINE PURSUANT TO BY-LAW 20 OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA

AND

IN THE MATTER OF
DERIVATIVE SERVICES INC. AND MALCOLM ROBERT KYLE


Hearing:
September 22, 1999

Panel:
John A. Geller, QC - Vice-Chair
Howard I. Wetston, QC - Vice-Chair
John F. Howard, QC - Commissioner

Counsel:

For Derivative Services Inc. and M.R. Kyle
M.L. Biggar
Robert Nuttal

For The Investment Dealers Association of Canada
B.K. Awad
Douglas Walker

For the Staff of the Ontario Securities Commission
Johanna Superina
Susan Wolburgh Jenah
Rossana Di Lieto

REASONS FOR DECISION

Background

The Investment Dealers Association of Canada (the "IDA") is a self-regulatory organizationrecognized by the Commission under section 21.1 of the Securities Act and a self-regulatory body recognized by the Commission under section 15 of the CommodityFutures Act (the "CFA"). Subsection 15(2) of the CFA requires such a body to regulatethe standards and business conduct of its members, subject to the CFA, the regulationsmade thereunder, and any decision made by the Commission.

Under subsection 15(4) of the CFA, any person or company directly affected by anydirection, decision, order or ruling made under any by-law, rule or regulation of such abody may apply to the Commission for a hearing and review thereof, and section 4 of theCSA applies to the hearing and review in the same manner as to the hearing and reviewof a decision of the Director of the Commission.

Subsection 4(3) of the CFA provides that on a hearing and review, the Commission mayby order confirm the decision under review or make such other order as it considersproper.

By Notices of Hearing dated December 1, 1998, notice was given to Derivative ServicesInc. and Malcolm Robert Bruce Kyle ("collectively, the "Applicants") of a hearing ofdisciplinary actions brought by the IDA against them, the hearing to be held before theOntario District Council (the "Council") of the IDA. In the Notices, staff (the "AssociationStaff") of the IDA alleged that on or about June 1998, the Applicants engaged in businessconduct or practice that was unbecoming or detrimental to the public interest by failing toprovide documents or other information requested by Association Staff in the course of aninvestigation pursuant to By-Law 19 of the IDA, contrary to By-Law 29 of the IDA.

The Applicants brought a motion before the Council requesting a number of declarationsand orders, the net effect of the granting of which would be to terminate the hearing. TheCouncil agreed to deal with this motion before proceeding to the hearing on the merits.After hearing arguments on the motion, the Council ruled on June 28, 1999 against theApplicants on all grounds, giving extensive written reasons for its decision.

The Applicants then applied to the Commission under subsection 15(4) of the CFA for ahearing and review of the Council's decision on the preliminary motion, asking that thedecision be set aside and that various declarations and orders be made by theCommission in lieu thereof. On a preliminary review of this application, we had somedoubt that we had the power to make some of the declarations and orders requested, butin view of the decision which we arrived at it is unnecessary for us to decide this.

Prematurity - Arguments of the Parties

In its factum, Association Staff raised the question of prematurity, referring to "the wellestablished policy against the fragmentation of proceedings before tribunals", and arguedthat "[t] here are no exceptional or extraordinary circumstances in this case which wouldserve to over-ride the principle that judicial review should not occur in a piecemealfashion". They argued that the proceedings before the Council should be completedbefore any review by us, and referred us to the decision of the Divisional Court in OntarioCollege of Arts et al. v. Ontario Human Rights Commission (1993), 11 O.R. (3d) 798.

In its written submissions, the staff ("Commission Staff") of the Commission dealt with theApplicants' request for declaratory relief under the Charter of Rights and Freedoms,included in its motion. As to the granting of any relief under the Charter, Commission Staffargued that "it is not appropriate for the Commission to rule on the applicants'constitutional arguments until a full factual record is available, including findings of fact bythe District Council concerning information requested by the IDA", and that "only after adetermination by the District Council of all factual issues, including the scope and extentof the information requested, can a reviewing tribunal ascertain the merits of theapplicants' allegations of violation of section 8 of the Charter". In this connection,Commission Staff referred us to the decisions of the Manitoba Court of Appeal in ReBlackwoods Beverage Ltd. (1984), 15 D.L.R. (4th) 231 and the Federal Court of Appeal inDel Zotto v. Canada (1999), 116 C.C.C. (3rd) 123.

At the commencement of our hearing, we decided to deal with the prematurity argumentbefore proceeding with the Applicants' motion.

Mr. Awad, on behalf of Association Staff, urged us to apply Ontario College of Arts in thecontext of our review of the decision of the Council on the Applicants' preliminary motions.

Ms. Superina, on behalf of Commission Staff, supported this argument. In addition, sheargued that it is not within the Commission's jurisdiction to grant the relief requested by theApplicants in the form of a declaration that By-Law 19.5 of the IDA is unconstitutional onits face because it violates section 8 of the Charter, and is, therefore of no force and effectpursuant to section 52(1) of the Constitution Act, 1982. (The Applicants had argued intheir factum that the By-Law was unreasonably broad because it allowed Association Staffto conduct "unlicenced" fishing expeditions.) It was Commission Staff's position that anyalternative order sought by the Applicants appeared to be based on one of two potentialarguments. Firstly, that By-Law 19.5 could potentially violate section 8 of the Charter asconstituting an unreasonable search and seizure. Secondly, that the Applicants' privacyrights afforded protection under section 8 of the Charter have been violated as a result ofan unreasonable search and seizure pursuant to the By-Law. It was Commission Staff'sposition that in either case, the Commission would be assisted by a factual record orfindings of fact by the Council, in order to make a ruling on this issue.

Ms. Biggar, on behalf of the Applicants, acknowledged the applicability of Ontario Collegeof Arts to the review being sought, but argued that there were special circumstances inthis case that should lead us to not dismiss the Applicants' motion on a prematurity basis.She said that the Applicants were merely seeking to establish with clarity what the rulesof procedure were that applied, what the rules of evidence were that applied, and todetermine whether the Charter applies. "Its that easy". She said that she expected us togive full directions as to how the hearing by the Council should be conducted.

As to Commission Staff's Charter argument, Ms. Biggar acknowledged that that we did nothave the power to grant the declaratory relief which the Applicants had requested, andasked, instead, that we refuse to apply By-Law 19.5 of the IDA. When asked how wecould do so on a preliminary motion, rather than when dealing with the entire matter on areview of the Council's final decision, Ms. Biggar was unable to give a satisfactory answer.She argued, instead, that By-Law 19.5 was unconstitutional on its face, and that we did notneed a factual record before us because the Applicants were not alleging that anythinghad actually happened.

Prematurity - Authorities

Ontario College of Arts involved an application to the Divisional Court for an orderquashing a decision of the Ontario Human Rights Commission to seek the appointmentof a board of inquiry by the Minister of Citizenship. The Attorney General of Ontariointervened in the proceedings and moved to quash the application for judicial review onthe grounds that it was premature. Callaghan C.J.O.C., delivering the decision of theCourt, had the following to say:

This court has a discretion to exercise in matters of this nature. It can refuse tohear the merits of such an application if it considers it appropriate to do so. Wherethe application is brought prematurely, as alleged by the Attorney General in theseproceedings, it has been the approach of the court to quash the application, absentthe showing of exceptional or extraordinary circumstances demonstrating that theapplication must be heard: see Latif v. Ontario (Hospital Resources Commission)(an unreported decision of this court of March 11, 1992; leave to appeal was deniedon June 8, 1992 by the Ontario Court of Appeal) and Hancock v. Ontario (HumanRights Commission) (an unreported decision of this court of November 10, 1992).

These decisions follow a long line of authority which has indicated the need toavoid a piecemeal approach to judicial review of administrative action. The boardof inquiry in this case has jurisdiction to entertain and determine any of the issuesthat have been so ably advanced by Ms. Roberts. This includes her argument thatbias has tainted the appointment of the board of inquiry. The board of inquiry also,of course, has the jurisdiction to consider the allegation of delay as it has affectedthese proceedings.

For some time now the Divisional Court has, as I have indicated, taken the positionthat it should not fragment proceedings before administrative tribunals.Fragmentation causes both delay and distracting interruptions in administrativeproceedings. It is preferable, therefore, to allow such matters to run their fullcourse before the tribunal and then consider all legal issues arising from theproceedings at their conclusion. In particular, at that time, these applicants willhave a full right of appeal pursuant to s. 42 of the Human Rights Code, R.S.O.1990, c. H.19.

While there were constitutional issues raised in the course of this application, Ishould also point out that this court has followed a policy of not ruling on suchissues unless it is absolutely necessary to do so. Whether or not those issues willcontinue to be of interest at the time of an appeal to this court will depend on theoutcome before the board. It may well be that issues foreseen at this time will notexist at the termination of the proceedings. Furthermore, as has been said in manycases in relation to other boards and tribunals, it is preferable to consider issuessuch as those raised on this application against the backdrop of a full record,including a reasoned decision by the board or tribunal. Obviously, this is usuallyavailable to the court only after the administrative body has conducted a fullhearing.

The applicants, at the present time, can merely speculate about the impact of thealleged delay on their ability to present their defence. Depending on how theproceedings unfold before the board of inquiry and the measures the board takesto address any established prejudice, such problems may not in fact materialize.

In the result, the application is quashed as premature.

Ontario College of Arts has been followed in Newman Steel Ltd. (Receiver-Manager of) v.Ontario (Employment Standards Act Referee) [1996] O.J. No. 3505, Hughes v. College ofPhysicians and Surgeons of Ontario [1994] O.J. No. 312 and Falkiner v. Ontario (Ministryof Community and Social Services) [1996] O.J. No. 3737.

Blackwoods, a decision of the Manitoba Court of Appeal, involved a motion, made prior tothe preliminary inquiry on the charges, by persons or companies accused of an offenceunder the Combines Investigation Act, for an order that section 10 of that statute, underwhich certain documents were seized from the accused, was of no force and effect, thatthe seizure was unreasonable and illegal, and that the documents were inadmissible asevidence. Crown counsel admitted that without the documents the Crown had no case.Monnin C.J.M., speaking for the majority of the Court, said the following at page 237:

Rulings on the admissibility of evidence are normally the prerogative in thisprovince of the provincial court judges or the judge of first instance if the matterproceeds by trial in the Court of Queen's Bench. But these rulings must be madeon proper evidence with factual underpinning and when all the facts are known tothe trier. Such rulings ought not to be made on the basis of two short affidavits,lengthy argument of counsel and nothing more.

Counsel should be discouraged from seeking to enforce Charter rights prematurely.I am firmly convinced that it was premature to move in the Court of Queen's Benchfor such ruling. In this province, in criminal matters or quasi-criminal matters, theprovincial court is the proper court and the court of competent jurisdiction to dealwith matters of evidence from the inception of the trial until its conclusion. Then ifone of the parties is dissatisfied, there are ample appeal provisions to be found inthe Code or the various statutes dealing with the respective offences.

I can only repeat what Macfarlane J.A. so appropriately said in Re Anson and TheQueen (1983), 4 C.C.C. (3d) 119 at pp. 130-1, 146 D.L.R. (3d) 661 at pp. 672-3,[1983] 3 W.W.R. 336 at pp. 349-50:

On that point it was contended on behalf of the appellant that prohibitionshould have been granted to prevent an unconstitutional trial, appeals andnew trials. But if every case is to be interrupted each time a constitutionalpoint arises while prerogative relief is sought, while appeals are taken to thiscourt and to the Supreme Court of Canada, then the administration of justicewould be chaotic, the cost to accused persons would be oppressive and thecost to the public unjustified - particularly when many such points wouldprove to have been academic.

 

- - - - - - - - -

 

It has been a great temptation to jump into the forefront of the resolution ofthis legal question but I think it is of greater importance to make it clear atthe outset of questions arising under the Constitution Act, 1982 (and therewill be many of them based on s. 52) that each level of the judiciary shouldbe free to perform its proper function, and that counsel should not beencouraged to seek solutions to legal questions prematurely at thesupervisory or appellate level. I repeat, however, that there will be caseswhere it may be appropriate to grant prerogative relief. Such cases shouldbe few and far between, but it is best to leave the decision in those cases tothe fair and proper exercise of the discretion of the judge charged with theresponsibility for deciding whether immediate review and intervention isjustified in the particular case.

Trials must not proceed piecemeal or with frequent interruptions for supervisory orappellate rulings. The record should come complete to the appellate tribunal. Inexceptional circumstances, rulings may be requested of the Court of Queen'sBench on Charter matters ahead of the trial itself so as to finally determine pointsof law if possible. Rulings on evidence should be left to the trial judge andappealed at the conclusion of the trial. Rulings on suppression of evidence, theybeing rulings on evidence, should also be left to the trial judge.

In my view, although s. 24(1) could properly be invoked before Wilson J., s. 24(2)has no application at this stage to the known facts of the case. Wilson J. did nothave sufficient evidence to decide whether to exclude or not to exclude anyevidence. Pursuant to s. 24(2) of the Charter, the court of competent jurisdictionmust, "if it is established that, having regard to all the circumstances" after havingreceived all the evidence then make a ruling. In the instant case, all thecircumstances are obviously not before the court. At the trial proper an argumentmay then be raised under s. 24(2) for the exclusion of such evidence but only thenafter all the evidence has been tendered and full argument has been made on thesubject by all parties.

The matter was simply not ripe for a ruling on the admissibility of the evidence oron the bringing of the administration of justice into disrepute.

We must avoid fragmentation of trials with its necessary interference with theorderly administration of justice and its greater costs to the litigants. I purposely failto mention also the waste of the court and the court staff's time, both of which areexpensive for the State be it federal or provincial. As ever there is great need toproceed assiduously in any trial in order to bring about a speedy and finaldetermination of every case on its merits. Then the appellate or supervisoryprocedures come into force. The wheels of justice must not be allowed to grind toa halt or to be bogged down in innumerable preliminary skirmishes. "This is not afit case for a prerogative shortcut", to use the colourful expression of StevensonJ.A. in R. v. Canadian Pacific Ltd. (Alta. C.A., unreported, bench judgment April 8,1982) [since reported 39 A.R. 406 at p. 408].

Leave to appeal to the Supreme Court of Canada was refused.

Del Zotto, a decision of the Federal Court of Appeal, involved an investigation into thefinancial affairs of a taxpayer under the Income Tax Act, which led to the initiation of aninquiry into his financial affairs under section 231.4 of that statute. Counsel for thetaxpayer was advised that Revenue Canada proposed to charge the taxpayer with incometax evasion. The taxpayer challenged the inquiry under sections 7 and 8 of the Charterof Rights and Freedoms. Strayer J.A. (dissenting) had the following to say at page 150:

The gravamen of the appellants' complaint is that in certain circumstances aninquiry established under this section, or a particular subpoena issued by such aninquiry, or the production of a particular document, or the use in subsequentproceedings of evidence gleaned by the inquiry, could violate someone'sconstitutional rights under sections 7 or 8 of the Charter. The same could be saidof an inquiry established under the federal Inquiries Act, R.S.C. 1985, c. I-11, andthe various comparable provincial statutes which authorize in the broadest possibleterms the establishment of commissions of inquiry with powers of subpoena, etc.There have been many instances of successful attacks on particular terms ofreference of such commissions or on particular actions or findings ofcommissioners, some relating to constitutional rights similar to those in questionhere. But just because the Inquiries Act could on occasion be used forunconstitutional purposes, this would not justify a declaration of its total invalidity.Nor in my view do theoretical and potential invalid uses or consequences of the useof section 231.4 justify a declaration as to its invalidity.

Nothing has as yet happened in this particular inquiry to justify a declaration of itsinvalidity.

And further, at page 151:

In short if there are circumstances in which the use of this inquiry power, or thesubsequent use of evidence derived from it, may impinge on constitutional rightsthere will be opportunities to assert those rights at the time when an intrusion isimminent and demonstrable. So far the Court has only been treated to hypotheticalpossibilities.

The Supreme Court of Canada ([1999] 1 S.C.R. 3) allowed the appeal of the Federal Courtof Appeal's decision for the reasons given by Strayer J.A.

Although, in our view, Blackwoods and Del Zotto are not directly applicable to the reviewof a decision of an administrative tribunal, or a tribunal such as the Council, we find theprinciples which they enunciate to be helpful in our consideration.

Ms. Superina also referred us to Professor Robert J. Sharpe's book on Charter Litigation,in which, at page 342, the author says the following:

A very different situation also giving rise to the problem of prematurity arises wherean attempt is made to litigate a discrete Charter issue prior to the determination ofother factual and legal issues. This problem has arisen frequently in criminal caseswhere attempts have been made to appeal rulings on Charter issues made duringthe course of the trial prior to final verdict. It has been held consistently thatcollateral appeals should be discouraged, and that the higher court should only beasked to decide the Charter issue after the trial court has made a determination ofall issues.

Although Professor Sharpe's statement deals with criminal proceedings, Ontario Collegeof Arts is to the same effect as to administrative hearings.

Decision

We clearly had the discretion to proceed with the Applicants' motion. However, in ourview, the principles enunciated in Ontario College of Arts are applicable to theseproceedings, and the Applicants have not convinced us that there are "exceptional orextraordinary circumstances" in this case that should lead us to conclude that the interestsof justice require us to proceed to hear the motion. Ms. Biggar did not convince us that theApplicants would be irreparably harmed if the Council was permitted to proceed with itshearing on the merits. In our view, there are no "extraordinary circumstancesdemonstrating that the application must be heard", to use the language of Ontario Collegeof Arts. We are satisfied that the proper course is for us to dismiss the Applicants' motionand permit the Council to proceed with the hearing on the merits. If, after this has beencompleted, and the Council has made its determination, the Applicants wish to seek ahearing and review by the Commission of the Council's decision, then that will be theappropriate time for the Commission to deal with the arguments raised in the Applicants'motion, and any other matters they may then wish to raise.

Accordingly, we dismissed the Applicants' motion as being premature.

October 5, 1999

"J. A. Geller"
"Howard I. Wetston"
"J. F. Howard"