Appeals are usually an uphill battle for the party that loses at trial, but for more than two decades the hill has been even steeper for losing parties before the Ontario Securities Commission (OSC) and other securities commissions. Traditionally, appellants from OSC and other securities tribunal decisions have had little to no success. However, the extreme level of deference of appeal courts to OSC decisions may be coming to an end, thanks to the 2019 Supreme Court of Canada (SCC) decision in Minister of Citizenship and Immigration v. Vavilov and the Ontario Divisional Court decision this past July in Quadrexx Hedge Capital Management Ltd. et al. v. Ontario Securities Commission.
The SCC’s seminal 1994 decision in Pezim v. British Columbia (Superintendent of Brokers) set the traditional rule for appeals from securities commission decisions. It recognized the highly specialized nature of securities regulation and prescribed a high level of deference to securities commissions who have such specialized expertise. The SCC directed that the decisions of securities commission tribunals should generally not be overturned “unless the Commission has made some error in principle in exercising its discretion or has exercised its discretion in a capricious or vexatious manner.” While securities commissions could be overturned if they got it wrong on an issue of law of general application, their decisions on specialized matters of securities regulation became all but untouchable. Since then, Ontario appeal courts have seemingly interpreted that high standard of review as “almost never;” meaning OSC decisions are almost never overturned on appeal. That may be changing.
In Vavilov the SCC recognized that, while it is open to the legislature to insulate administrative and regulatory decisions from judicial interference, when a statute expressly provides for a right of appeal, it should be treated by the courts like any other appeal from a trial court’s decision. This means a high level of deference on issues of fact or mixed fact and law (the palpable and overriding error standard), but a standard of correctness on issues of law – even issues of law on which the tribunal has specialized expertise.
On the facts in Quadrexx, the new standard of review made little practical difference to the Quadrexx companies and former members of management. The OSC had found that three Quadrexx companies and two of their directing minds had breached the Securities Act and engaged in fraud in relation to three different securities transactions that cost investors more than $3 million. While the Divisional Court applied this new, less deferential standard to the OSC’s decision, it found no reason to interfere. There was no error of law in the decision below and the factual findings were fully supported by the record.
It remains to be seen how much of an impact the decisions in Vavilov and Quadrexx will have on future appeals from the OSC and other securities commissions. However, it is fair to say that the current, extremely low to non-existent success rate for appellants on securities appeals can only improve.