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NATURAL JUSTICE - Duty of fairness - Discovery and disclosure

Friday, January 22, 2021 @ 6:40 AM  

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Appeal by Investment Industry Regulatory Organization of Canada (IIROC) from a decision of the Financial and Consumer Services Tribunal setting aside the appellant’s decision finding the respondent guilty of unauthorized trading activities. The IIROC regulated investment dealers and their trading and advising activity throughout Canada. IIROC instituted disciplinary proceedings against the respondent, an investment adviser with NBF. Throughout the investigation and enforcement proceedings, the respondent maintained that there existed various work records in possession of NBF. Although IIROC staff made numerous requests of NBF to obtain such documents, the respondent’s personal notes could not be located by NBF. The respondent chose not to testify, insisting he was unable to do so without his notes. He sought review of the panel’s decision by the Financial and Consumer Services Tribunal raising numerous grounds for review, including that he was denied access to his personal work documents and thus could not adequately defend himself. The Tribunal brought its own motion on whether NBF should be ordered to produce documents and found that NBF should be ordered to provide disclosure. On its own initiative, without giving the parties any opportunity to be heard on the matter, and for no stated reasons, the Tribunal severed the grounds of review and first considered the disclosure issue which the Tribunal itself had reformulated. The Tribunal held that the personal work documents sought from NBF were relevant and that the failure to provide these documents during the IIROC proceedings was a breach of IIROC’s duty of procedural fairness. The Tribunal rescinded IIROC’s decision and ordered a stay of proceedings.

HELD: Appeal allowed. The process before the Tribunal was procedurally unfair to IIROC. Nothing in the legislative provision invoked allowed the Tribunal to make its own motion and to adjudicate it. Allowing a decision maker to make a motion and then adjudicate it, at the very least, raised a reasonable apprehension of bias. No notice was given that the Tribunal was considering severance of the grounds of review, no opportunity was afforded to the parties to be heard on the question, no authority was cited in support of the severance of issues and no reasons were given for the Tribunal’s decision. This was a clear violation of the rules of procedural fairness. IIROC could have made a compelling argument that severance was not appropriate because to determine whether disclosure of the missing documents would have changed the result, the Tribunal should have to consider the entire evidentiary record before the IIROC panel. These procedural errors raised a reasonable apprehension of bias. The Tribunal erred in law in holding that the duty of procedural fairness imposed upon IIROC an obligation to disclose materials not in its possession. IIROC repeatedly asked for the documents from NBF. Even on the more exacting obligations required in the criminal law context, no more could be expected of IIROC. Whether or not this characterization is well-founded, the Tribunal nevertheless erred when it concluded that the failure of full disclosure of the NBF documents could be attributed to IIROC. This was not a disclosure case but a missing documents case as the documents were lost or destroyed by a third party. There was no violation of the duty to disclose, no attempt to interfere with procedural fairness and, therefore, no basis to order a remedy. The respondent failed to show he suffered actual prejudice from the loss of any documents as he failed to testify at the IIROC hearing.

Investment Industry Regulatory Organization v. Crandall, [2020] N.B.J. No. 287, New Brunswick Court of Appeal, J.C.M. Richard C.J.N.B., K.A. Quigg and L.A. LaVigne JJ.A., December 3, 2020. Digest No. TLD-January182021009