2012 NBCA 73, 2012 NBCA 73

COURT OF APPEAL OF NEW BRUNSWICK 111-11-CA MR. A APPELLANT M. A APPELANT - and - - et - ARMEL DRAPEAU and the NEW BRUNSWICK SECURITIES COMMISSION RESPONDENTS ARMEL DRAPEAU et la COMMISSION DES VALEURS MOBILIÈRES DU NOUVEAU- BRUNSWICK INTIMÉS Mr. A v. Drapeau and the New Brunswick Securities Commission, 2012 NBCA 73 M. A c.

Drapeau et la Commission des valeurs mobilières du Nouveau-Brunswick, 2012 NBCA 73 CORAM: The Honourable Justice Larlee The Honourable Justice Richard The Honourable Justice Bell CORAM : L’honorable juge Larlee L’honorable juge Richard L’honorable juge Bell Appeal from a decision of the New Brunswick Securities Commission: July 19, 2011 Appel d’une décision de la Commission des valeurs mobilières du Nouveau-Brunswick : Le 19 juillet 2011 History of Case: Historique de la cause : Decision under appeal: Unreported Décision frappée d’appel : Inédite Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard: May 17, 2012 Appel entendu : Le 17 mai 2012 Judgment rendered: August 23, 2012 Jugement rendu : Le 23 août 2012

Reasons for judgment by: The Honourable Justice Larlee Motifs de jugement : L’honorable juge Larlee Concurred in by: The Honourable Justice Richard The Honourable Justice Bell Souscrivent aux motifs : L’honorable juge Richard L’honorable juge Bell Counsel at hearing: For the appellant: Yassin Choukri, Q.C. For the respondent New Brunswick Securities Commission: Matthew R. Letson Armel Drapeau appeared in person Avocats à l’audience : Pour l’appelant : Yassin Choukri, c.r. Pour l’intimée, la Commission des valeurs mobilières du Nouveau-Brunswick : Matthew R. Letson Armel Drapeau a comparu en personne.

THE COURT The appeal is allowed with costs. LA COUR Accueille l’appel et accorde des dépens. The judgment of the Court was delivered by LARLEE J.A. [ 1 ] This appeal raises the question of whether Mr. A, an anonymous appellant and informer to an investigative authority (the New Brunswick Securities Commission), ought to be protected as a confidential source. [ 2 ] Mr. A provided information to a Securities Commission investigator regarding questionable sales conducted by the respondent, Armel Drapeau, on the promise of anonymity and confidentiality. Mr.

A’s information led to administrative proceedings against Mr. Drapeau and others. In a disclosure of materials to Mr. Drapeau, portions of documents in evidence were redacted so as to protect the anonymity of Mr. A. Among the redacted information was included the identity of an investor, the identity of whom would lead to identification of the informer. Mr. Drapeau asked the Securities Commission to order the full disclosure of the materials. The Securities Commission ultimately ruled that Mr. A did not benefit from informer privilege, but that there was nevertheless a public interest privilege.

The Commission ruled this privilege applied to protect Mr. A’s identity but that it was not sufficiently broad to include the identity of the investor, even if the identity of this individual could reveal the identity of the informer. I. Preliminary Motion

[ 3 ] At the outset of the hearing, Mr. Drapeau presented a motion pursuant to Rule 62.23 of the Rules of Court seeking an order quashing the notice of appeal or dismissing the appeal on the ground that the appeal is frivolous, vexatious or without grounds. He alleges an abuse of process by the Commission, arguing that the Commission acted in bad faith, with unethical professional behaviour and without scruples to justify its decision. Mr.

Drapeau’s contention in this regard is without merit for two reasons: first, there is no evidence of any abuse of process; and, secondly, it is not the Commission who is the appellant, but Mr. A. In addition, Mr. Drapeau argues the appeal is moot because the investor is, at this point, already known; therefore, the informant is identified by inference. At the hearing, we rejected this ground, because the appeal is not moot. The identity of Mr. A is speculative at best.

Moreover, the greater precedential value of the proper test to be applied by a quasi-criminal Commission in determining whether informer privilege should be granted eclipses the individual circumstances of the case. II. Background [ 4 ] The appeal is from a July 19, 2011 decision of the New Brunswick Securities Commission in which the Commission refused to extend to Mr. A the benefits of informer privilege and ordered the disclosure of redacted portions of documents that could result in his identification, that is, disclosure of the identity of a particular investor. [ 5 ] Mr.

A became aware of an investment product offered in New Brunswick and was suspicious about its nature. He contacted Mr. Ed LeBlanc, a senior investigator of the Commission’s enforcement branch and advised him he had information regarding questionable investment products being offered for sale in New Brunswick. He advised Mr. LeBlanc that, in exchange for a guarantee of anonymity and confidentiality regarding his identity, he would provide Mr. LeBlanc with further information on the subject. Upon obtaining Mr. LeBlanc’s guarantee, Mr. A provided information to Mr.

LeBlanc allowing him to gather sufficient evidence to request and obtain the issuance of an Investigation Order by the Commission, pursuant to s. 171 of the Securities Act , S.N.B. 2004, c. S-5.5. As a result of the information provided by Mr. A to Mr. LeBlanc, the latter completed his investigation and subsequently the Commission issued a Statement of Allegations against Armel Drapeau and two others. [ 6 ] During the course of the proceedings, Mr. Drapeau sought unredacted copies of documents, as part of his right to disclosure.

In anticipation of an April 21, 2011 hearing, commission lawyers provided the tribunal with two sets of documents, one of which is not relevant to the present appeal. On April 21, 2011, the Commission held a hearing to consider, among other matters, Mr. Drapeau’s request for the unredacted portion of the disclosure materials. On May 6, 2011, the Commission ruled it should see the unredacted portions of the disclosure materials and on May 9, it reviewed these documents and issued its ruling. Reasons for the ruling were issued on July 19, 2011.

The Commission refused to recognize the existence of an informer privilege but recognized a public policy rationale for protecting the identity of an individual who contacts a securities regulator in confidence. Specifically, the Commission ordered that the information disclosing Mr. A’s name and other identifying information should remain redacted in the disclosure materials given to Mr. Drapeau but that the identity of the investor should be disclosed on the ground that the concept of “public interest immunity” does not extend to the investor. [ 7 ] Mr.

A is not a party, participant or witness before the Commission against Mr. Drapeau and the others. This appeal is brought with leave pursuant to s. 195(1) of the Securities Act , which provides as follows: 195(1) A person directly affected by a final decision of the Commission, other than a decision under

section 55 or 80, may with leave of a judge of the Court of Appeal appeal to the Court of Appeal. 195(1) La personne directement touchée par une décision définitive de la Commission, à l’exception d’une décision rendue aux termes de l’article 55 ou 88, peut, avec la permission d’un juge de la Cour d’appel, interjeter appel devant la Cour d’appel. III. Grounds of Appeal [ 8 ] Mr.

A relies on three grounds of appeal, contending the Commission erred: (1) in the procedure adopted to determine if an informer privilege applied in regards to the appellant; (2) in concluding that the appellant was not a confidential informer; and (3) in ordering the disclosure of unredacted portions of documents which contained the appellant’s name and/or other identifying information.

IV. Standard of Review [9] The respondent, Mr. Drapeau, argues in his written submission that the SecuritiesCommission’s decision regarding the common law informer privilege is reviewable on a standard of reasonableness. I am mindful of therecent decision of the Supreme Court of Canada in Nor-Man Regional Health Authority Inc. v.

Manitoba Association of Health CareProfessionals, 2011 SCC 59, [2011] 3 S.C.R. 616, which allows administrative tribunals some latitude in determining how to applycommon law rules within their own administrative contexts (for an explanation of Nor-Man in a recent New Brunswick case see HerMajesty the Queen in Right of the Province of New Brunswick, as represented by Board of Management on behalf of the Department ofNatural Resources v. Pinder, 2012 NBCA 60, [2012] N.B.J.

No. 241 (QL) and Her Majesty the Queen in Right of the Province of NewBrunswick, as represented by Board of Management on behalf of the Department of Justice v. CUPE, Local 1418, 2012 NBCA 61,[2012] N.B.J. No. 238 (QL), authored by Robertson J.A.). I agree that reasonableness is the appropriate standard in this case. V. Analysis and Decision [10] The Supreme Court of Canada has given a useful

summary of the informer privilege rule in R. v.Leipert, (SCC), [1997] 1 S.C.R. 281, [1997] S.C.J. No. 14 (QL). That case raised the issue of whether the defence isentitled to receive details of an informer’s telephone tip to Crime Stoppers. The accused asserted a right to receive it under the CanadianCharter or Rights and Freedoms to make full answer and defence. The Crown resisted by arguing the disclosure was barred by thecommon law rule that an informer’s communications are privileged and need not be disclosed.

McLachlin J. (as she then was) explained: A court considering this issue must begin from the proposition that informer privilege is an ancient and hallowed protection which playsa vital role in law enforcement. It is premised on the duty of all citizens to aid in enforcing the law. The discharge of this duty carrieswith it the risk of retribution from those involved in crime. The rule of informer privilege was developed to protect citizens who assist inlaw enforcement and to encourage others to do the same. As Cory J.A. (as he then was) stated in R. v. Hunter (1987), (ON CA), 57 C.R. (3d) 1 (Ont.

C.A.), at pp. 5-6: The rule against the non-disclosure of information which might identify an informer is one of long standing. It developed from anacceptance of the importance of the role of informers in the solution of crimes and the apprehension of criminals. It was recognized thatcitizens have a duty to divulge to the police any information that they may have pertaining to the commission of a crime.

It was alsoobvious to the courts from very early times that the identity of an informer would have to be concealed, both for his or her ownprotection and to encourage others to divulge to the authorities any information pertaining to crimes.

It was in order to achieve thesegoals that the rule was developed. [para. 9] McLachlin J. added that informer privilege is so important that it goes beyond the discretion of a trial judge: Informer privilege is of such importance that once found, courts are not entitled to balance the benefit enuring from the privilege againstcountervailing considerations […]. [para. 12] See also Bisaillon v. Keable, (SCC), [1983] 2 S.C.R. 60, [1983] S.C.J.

No. 65 (QL), in which the Court found that theapplication of the rule does not depend on the judge’s discretion; rather it is “a legal rule of public order by which the judge is bound” (p.93). [11] In Named Person v. Vancouver Sun, 2007 SCC 43, [2007] 3 S.C.R. 253, Bastarache J. outlinedthe procedure to follow in determining the existence of an informer privilege. In that case, a person subject to a request for extraditionwas testifying at a portion of his in camera extradition hearing when he advised the judge that he was a police informer.

On that basis, heclaimed informer privilege to prevent the media from having access to his activities as a police informant. He was not trying to keep theinformation out of the hands of the parties involved in the extradition hearing, because they already knew his identity, but rather from themedia. [12] What was being argued in Named Person was that the informer privilege rule is discretionary,and that judges have the power to determine, on a case-by-case basis, whether the courtroom should be closed to protect informerprivilege. The Court rejected this proposition.

It declared that the informer privilege rule is mandatory (subject to an exception which hasno application in the present case). Bastarache J. explained the rationale:

[…] To permit trial judges wide discretion in determining whether to protect informer privilege would undermine the purposes of therule. Part of the rationale for a mandatory informer privilege rule is that it encourages would-be informers to come forward and report oncrimes, safe in the knowledge that their identity will be protected.

A rule that gave trial judges the power to decide on an ad hoc basiswhether to protect informer privilege would create a significant disincentive for would-be informers to come forward, therebyeviscerating the usefulness of informer privilege and dealing a great blow to police investigations. [para. 39] [13] When determining whether the privilege applies, a judge begins with the assumption that itdoes. The judge then demands from the parties some evidence which satisfies the judge on a balance of probabilities that the person is aconfidential informer.

Once it has been established on the evidence that the person is a confidential informer, the privilege applies and itapplies fully. Recently, the Ontario Court of Appeal, in R. v. X.Y., 2011 ONCA 259, [2011] O.J. No. 1479 (QL), framed the issue asfollows: “It is so sacrosanct that even the right to make full answer and defence, of which the right to disclosure is an essential feature,does not alone trigger an exception to informer privilege” (para. 15). [14] In R. v.

Basi, 2009 SCC 52, [2009] 3 S.C.R. 389, Fish J. described the procedure to follow tokeep confidential information from the defence, where informer privilege is claimed by the prosecution. The following elements arenormally present for the privilege to arise: “a police officer, in the course of an investigation, guarantees protection and confidentiality toa prospective informer in exchange for useful information that would otherwise be difficult or impossible to obtain” (para. 36).

A bargainis made and accepted as “an indispensable tool in the detection, prevention and prosecution of crime” (Basi, para. 36; see also Bisaillonv. Keable, at 105). [15] When such a privilege is claimed, the trier of fact must determine its existence in camera at a"first stage" hearing. The existence of the claim cannot be publicly disclosed. Normally only the putative informant and the Crown mayappear before the judge. In determining whether the privilege exists, the test is that the judge must be satisfied, on a balance ofprobabilities, that the individual concerned is indeed a confidential informant.

And if the claim of privilege is established, the judge mustgive it full effect. As noted, trial judges have no discretion to do otherwise. [16] In R. v. Barros, 2011 SCC 51, [2011] 3 S.C.R. 368, Binnie J. described the importance ofinformer privilege: Police rely heavily on informers. Because of its almost absolute nature, the privilege encourages other potential informers to comeforward with some assurance of protection against reprisal. A more flexible rule that would leave disclosure up to the discretion of theindividual trial judge would rob informers of that assurance and sap their willingness to cooperate.

See Bisaillon v. Keable, (SCC), [1983] 2 S.C.R. 60; R. v. Hunter (1987), (ON CA), 57 C.R. (3d) 1 (Ont. C.A.); R. v. Scott, (SCC), [1990] 3 S.C.R. 979; Named Person v. Vancouver Sun, 2007 SCC 43, [2007] 3 S.C.R. 253; Leipert; and Basi. The obligation toprotect confidential sources clearly goes beyond a rule of evidence and is not limited to the courtroom.

As the trial judge in this case putit, "[t]he police need help, but people who are available to provide information typically won't give that information to the police unlessthey are protected" (A.R., at p. 7). [para. 30] We also know that the informer privilege rule applies equally to a criminal or a quasi-criminal proceeding (Named Person v.

VancouverSun at para. 45) and the reasons for the informer privilege, namely protection of informers and a desire to encourage informers, are ofequal significance to provincial investigative bodies. [17] In the present case, the part of the Commission’s decision entitled “Informer Privilege” coversseven paragraphs. The Commission articulated the issue in this way: Informer privilege allows for the greatest protection of information.

To succeed in obtaining a declaration that an informer privilegeapplies, the evidence should support the conclusion that the identity of the person must be concealed for his or her own protection. Otherconsiderations include, risk to ongoing investigations or to intelligence gathering techniques or risk to innocent persons, which have nopresent application. Citing R v. Leipert, Staff submits that once informer privilege is found, courts, and by implication the Commission,is not entitled to balance the benefit inuring from the privilege against countervailing considerations.

This privilege is non-discretionaryand broad in application; innocence at stake is the only exception to the informer privilege rule.

As noted at the outset of these reasons, Staff initially withheld unredacted copies of documents over which it claimed informer privilege. Items 1-11, 13-15, 26-29 and 37-38 on the Spreadsheet were withheld from the Commission on that basis.

Staff argued that these redacted items consisted of the name and contact details of an individual Staff characterizes as a confidential source (the “Source”), the name and contact details of an investor Staff claims can identify the Source (the “Investor”), details concerning the relationship between the Investor and the Source and specific dates which may identify the Source. Although the Commission does not dispute the extent and nature of informer privilege, it does question Staff’s position as to who is to make the preliminary determination that a person is indeed an “informer”. In Named Person v.

Vancouver Sun , the Supreme Court of Canada set out a detailed procedure to be followed by the judge in determining whether informer privilege applies. Staff disputes this process and maintains that the determination whether an individual is an “informer” is to be made by the Investigator, and not the Commission deciding the case. It was on this basis that the Commission was provided with redacted documents.

The procedure set out in Part D of the Named Person decision is affected by the particular facts of the Named Person case but, that said, is intended to provide guidance in all cases where a question of informer privilege arises. The procedure contemplates, at paragraph 46, an in camera session to “ determine if sufficient evidence exists to determine that the person is a confidential informer and therefore able to claim informer privilege ”.

Paragraph 47 continues: “ It is the responsibility of the judge at this stage to demand from the parties some evidence which satisfies the judge, on balance, that the person is a confidential informer. Once it has been established on the evidence that the person is a confidential informer, the privilege applies .” To be satisfied that such a strict privilege is to be applied, the Commission needs relevant and reliable evidence to classify someone as an informer.

There also needs to be a process in place to allow the Commission to make an independent assessment of the person and material to determine whether or not, as here, the Source is indeed an informer. Given the position taken by Staff, the focus was not on providing the Commission with the information necessary to engage in such an assessment. [paras. 19-24] [ 18 ] Finally, the Commission goes on to conclude in paragraph 25 of its decision: In this case, we have only the affidavit of Senior Investigator Ed LeBlanc, sworn to on 14 April 2011, indicating that the Source repeatedly requested confidentiality. Mr.

LeBlanc does go on, at paragraph 8, to summarize the nature of the information provided by the Source relating to the Investor, but that is his opinion, and is unfortunately uncorroborated. The evidence, as a result, does not satisfy the burden the Commission determines as needed to qualify the Source as an informer. [ 19 ] In my view, this paragraph, which is the nub of the Commission’s decision, is fatally flawed in three respects. First of all, the investigator related facts in his affidavit, not opinion.

Secondly, there is no need for corroboration under these circumstances, and, finally, the Commission does not explain which burden, other than that of one on a balance of probabilities, must be satisfied, and why it has not been. A trier of fact must begin with the presumption that the informer privilege applies, and then look at the evidence to see if it is convinced on a balance of probabilities. [ 20 ] Of significance in this case is the fact that Mr.

LeBlanc had been appointed as an investigator pursuant to s. 171(1) of the Act with various powers, including those contained in s. 174: 174 Every investigator in carrying out his or her duties under this Act and the regulations is a person employed for the preservation and maintenance of the public peace and has and may exercise all the powers, authorities and immunities of a peace officer as defined in the Criminal Code (Canada). 174 L’enquêteur est, dans l’exercice de ses fonctions aux termes de la présente loi et des règlements, une personne employée à la préservation et au maintien de la paix publique et a, et peut exercer, tous les pouvoirs et les droits et bénéficier de l’immunité d’un agent de la paix au sens qu’en donne le Code criminel (Canada).

Having been appointed by the Commission, Mr. LeBlanc has all the powers of a peace officer, including the power at common law to promise secrecy, expressly or by implication, in exchange for information necessary to assist him in an investigation. [ 21 ] These are the pertinent paragraphs of Mr. LeBlanc’s affidavit, sworn to on April 14, 2011: 5. Mr. A. first contacted me in this matter in 2006. At the time, he was concerned about my keeping his identity confidential.

He advised me that he did not want it known that he had contacted the Securities Commission with respect to Centre de traitement d’information de credit (CTIC). Before he provided me with any information I assured him that Staff would keep his identity confidential. 6. I have since spoken to Mr. A. on a number of occasions and he has asked for reaffirmation of his confidentiality several times. 7 . I last spoke to Mr. A. during the week of April 1, 2011 and he confirmed to me again his wish to remain confidential. [ 22 ] This assertion of fact that Mr.

A repeatedly requested confidentiality has not been refuted by any other evidence. There was no assertion to the contrary that the information given by Mr. A to Mr. LeBlanc was not useful to the investigation. There was no request to cross-examine Mr. LeBlanc on his affidavit and from a review of the record there was absolutely no reason to doubt the credibility of this peace officer. Mr. LeBlanc’s assertions of fact are not opinion. They qualify as some evidence which would satisfy a trier of fact on a balance of probabilities that the person is a confidential informer. They do not have to be corroborated.

In any event, how could the assertions have been corroborated? It is hard to imagine a confidential informer saying anything to anybody else (but the investigator) in order to corroborate the information. One cannot imagine putting Mr. LeBlanc to the burden of finding another informer to corroborate the information. For these reasons, I find the Commission’s decision regarding informer privilege to be unreasonable and in need of appellate intervention. Clearly, the test as expressed in the jurisprudence has been met. Mr.

LeBlanc, a peace officer in the course of an investigation, guaranteed confidentiality to a prospective informer in exchange for useful information that would have been otherwise difficult to obtain. The necessary bargain was made. The Commission had the obligation to apply the privilege throughout and prevent the disclosure of any portions of documents in which Mr. A’s name or other identifying information appeared. [ 23 ] The events that underlie this appeal occurred in a small community in this province.

There is a significant risk that revealing the name of the investor would lead directly or inadvertently to the identification of Mr. A. This is admitted by Mr. Drapeau. The informer privilege is broad in its application. In my view, the name of the investor must remain redacted from the documents because, in the circumstances, it clearly falls within the notion of “other identifying information.” [ 24 ] For these reasons, I would allow the appeal, set aside the decision of the New Brunswick Securities Commission dated July 19, 2011 and declare Mr.

A a confidential informer and order that all information that could reveal his identity be redacted and not be disclosed. I would award Mr. A costs of $3,000, and make both respondents jointly responsible for their payment. ____________________________________ M.E.L. LARLEE, J.A. WE CONCUR: ____________________________________ J.C. MARC RICHARD, J.A.

______________________________________ B. RICHARD BELL, J.A.