Deposit Insurance Corporation of Ontario v. Vinski, 2014 ONCJ 301

Citation: Deposit Insurance Corporation of Ontario v. Vinski , 2014 ONCJ 301 ONTARIO COURT OF JUSTICE Old City Hall - Toronto BETWEEN: DEPOSIT INSURANCE CORPORATION OF ONTARIO (In its capacity as liquidator of the Croatian Credit Union) – A ND — JOSIP VINSKI, STEVEN FRANKLIN TROSTER and FERDINANDO POLLA ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) J. Naster For the Prosecutor/Respondent Self-Represented Defendant/Applicant F. Addario and R. McConchie For the Defendant/Applicant S.F. Troster B. Salsberg For the Defendant/Applicant F.

Polla Heard: January 6-8, March 20-21 and April 16, 2014 REASONS for RULING (Re Statutory Limitation Period and Abuse of Process Motions) MELVYN GREEN, J.: A. INTRODUCTION [ 1 ] The three defendants are charged with creating an unauthorized security interest in an Ontario credit union, a regulatory or, as it is sometimes called, quasi-criminal offence. They assert that the Information was laid outside the statutory limitation period and, as a result, is a nullity that should be quashed.

In the alternative, they also claim the motives for laying the charge and the reasons for the delay in its institution each constitutes an abuse of process and that a judicially ordered stay should therefor follow. In either event, say the defendants, the proceedings should be immediately abated and before any evidence is led respecting the merits of the offence charged.

[ 2 ] A complex skein of legislation regulates Canadian financial institutions. In the case of Ontario credit unions, responsibility for regulatory oversight primarily rests in two provincial Crown agencies with complimentary if not somewhat overlapping responsibilities and functions: the Deposit Insurance Corporation of Ontario (“DICO” or “the Corporation”) and the Financial Services Commission of Ontario (“FSCO”).

Their statutory authority, and that governing the conduct of Ontario credit unions, is found, respectively, in the Credit Unions and Caisses Populaires Act , S.O. 1994, C. 11 , as amended (“the CUCP Act ” or “the Act ”) and the Financial Services Commission of Ontario Act , 1997, S.O. 1997, C. 28 (“the FSCO Act ”). The former statute, the CUCP Act , was materially amended on October 1, 2009. [ 3 ] The three defendants are charged by DICO, then acting in its capacity as liquidator, with an offence under s. 184 of the CUCP Act .

At the time of the alleged offence (March 1, 2009 to July 31, 2009), s. 184 read: “A credit union shall not create a security interest in any property of the credit union to secure an obligation of the credit union unless it is authorized by its by-laws and approved, in writing, by the Superintendent”. The “Superintendent”, as statutorily defined, is not an office of DICO but, rather, the chief executive officer of FSCO .

Absent reference to the language of a statutory provision or a transaction directly involving the person holding the office of Superintendent, “Superintendent”, “FSCO” and “the Commission” are used interchangeably throughout this Ruling. [ 4 ] The credit union said to be the vehicle for the alleged misconduct is the now-liquidated Croatian Credit Union (“the CCU”). The impugned “security interest” relates to three mortgages registered on title to three properties owned by the CCU.

Pursuant to an order issued by the Superintendent, the CCU was under the supervision of DICO at the time the alleged offence is said to have commenced. On July 7, 2009 (some three weeks before the closing bracket of the relevant time frame) DICO, pursuant to its statutory powers, appointed itself the “administrator” of the CCU thereby assuming full “control of the property and business of the Credit Union”. Later, on October 18, 2010, DICO lawfully appointed itself the “liquidator” of the CCU’s “estate and effects”, a capacity that includes the power to lay charges under the CUCP Act . [ 5 ]

Section 331 of the CUCP Act imposes a limitation period on the commencement of offence-related proceedings under the Act: they are not to be “started more than two years after the facts on which the proceedings are based first came to the knowledge of the Superintendent”.

In short, the statutory limitation period for the commencement of prosecutions under the CUCP Act begins not when the offence is said to have occurred or when its occurrence comes to the knowledge of DICO (which was supervising and then administering the CCU at the relevant times) but, rather, when the Superintendent of a sister agency comes to know of the factual foundation for the alleged offence. [ 6 ] In the case before me, the Information charging the offence under s. 184 was sworn on October 16, 2012.

DICO first expressly apprised the Superintendent of FSCO of the “facts on which the[se] proceedings are based” one day earlier, on October 15th.

The events said to make out the offence are alleged to have occurred more than three years earlier, and DICO initially learned of the “facts” which culminate in the defendants’ prosecution (if not their full legal significance or potential gravity) while serving as the administrator of the CCU in July 2009, considerably well more than two years before the Superintendent was notified and the charge implicating all three defendants was laid. [ 7 ] The close functional, operational and informational ties between DICO and FSCO are such, says the Defendant Troster (“Troster”), that DICO’s earlier knowledge of “the facts on which the proceedings are based” can be imputed to the Superintendent, directly or constructively.

In either event, he says, the instant charge was laid beyond the two-year limitation period, and accordingly the prosecution should be quashed. Alternatively, he alleges that the prosecution is an effort to use the machinery of regulatory enforcement to collect a civil debt, amounting to an abuse of the court’s process and one remediable only by way of an order staying the proceedings. [ 8 ] The Defendant Polla (“Polla”) adopts these arguments.

In addition, he alleges that the record reasonably supports the inference that DICO deliberately or knowingly delayed informing the Superintendent of “the facts on which the proceedings are based” so as to effectively extend the limitation period beyond the two-year statutory boundary and in a manner that breached his clients Charter s. 7 rights and for which, again, a stay of proceedings is the only just and appropriate remedy.

Polla, like all the defendants, bears the burden of proof, on the civil standard of balance of probabilities, respecting any claim of abuse of process or Charter breach and the legal propriety of the remedies sought. [ 9 ] The Defendant Vinski (“Vinski”), while advancing no independent arguments, adopts those of his co-defendants. He is content to be the silent beneficiary of whatever favourable ruling their efforts may generate. [ 10 ] DICO resists the defendants’ various challenges.

It accepts that it bears the burden of establishing to the conventional criminal standard that the prosecution commenced within the statutory limitation period. DICO also accepts that the limitation period clock begins to tick once anyone acting on behalf of the Superintendent has the requisite “knowledge”, and that proof of the actual or personal “ knowledge of the Superintendent” ( as phrased in s. 331 of the CUCP Act ) is unnecessary.

As put in DICO’s factum, “knowledge within the Financial Services Commission of Ontario (of which the Superintendent is the Chief Executive Officer) would be sufficient to trigger the limitation period”. [ 11 ] The voluminous documentary record filed on these motions includes correspondence between and among the parties, DICO activity reports, formal operational and information-sharing protocols between DICO and FSCO, the redacted minutes of liaison committee meetings involving these two organizations and the Ministry of Finance, supplementary affidavit materials, and pleadings in related civil litigation.

In addition, DICO called two witnesses: William (Bill) Foster, the Vice-President, Asset Management and Recoveries, at DICO, and Anatol Modid, the Director of the Market Regulation Branch of FSCO. Each testified to his agency’s understanding of its own statutory powers and responsibilities and of the mechanisms their respective agencies instituted to share information, co-ordinate their regulatory enforcement of the industry and negotiate their jurisdictional boundaries.

Foster’s testimony, in particular, also helps explain the genesis of the matter before me, DICO’s evolving understanding of the significance of the impugned mortgages and its reasons for the delay in launching a prosecution – in short, a narrative chronology (if from DICO’s perspective) of the events culminating in the Corporation’s resolve to charge the defendants with an offence under s. 184 of the CUCP Act .

B. THE CRITICAL TIMELINE [ 12 ] A rudimentary timeline of the events that milestone the instant dispute affords an early orientation to the issues bearing on an assessment of limitation period compliance. A review of the statutory and institutional framework follows, as does a more detailed history of the critical events, DICO’s response to the impugned mortgages and its ultimate decision to charge the defendants. September 5, 2007: The Superintendent orders the CCU under the supervision of DICO as stabilization authority. June 25, 2009 : Troster registers $2 million mortgage on the Toronto Branch of the CCU.

July 7, 2009: DICO appoints itself the administrator of the CCU. July 9, 2009 : Troster registers $2 million mortgage on the Mississauga Branch of the CCU. July 14, 2009 : Troster registers $2 million mortgage on the Hamilton Branch of the CCU. July 15, 2009 : Troster notifies the CCU that the three mortgages have been registered and that interest payments are due. November 18, 2009: CCU applies to Director of Land Titles for deletion of the three mortgages from title.

January 4, 2010: Statement of Claim issued against the CCU respecting the three mortgages with the Plaintiff seeking court-supervised sale of the properties with the proceeds to be applied to the CCU’s claimed indebtedness to the Plaintiff. February 16, 2010: Statement of Defence and Counterclaim issued by the CCU, denying all claims and seeking orders dismissing the action, declaring the three mortgages invalid and deleting the Plaintiff’s impugned mortgages and cautions from title. In the alternative, if the mortgages are valid CCU seeks contribution and indemnity from Vinski.

October 18, 2010 : Pursuant to its powers as administrator, DICO appoints itself liquidator of the CCU with the authority to “exercise all of the powers of the Liquidator under the Act”. February 17, 2011: Order of Superior Court Justice Newbould (entered February 25, 2011) requiring proceedings to determine, inter alia , the validity, enforceability, beneficial ownership and quantum of the three mortgages. October 15, 2012: DICO advises FSCO of its intention, as liquidator of the CCU, to commence the instant proceedings and of the facts upon which the proceedings are based.

October 16, 2012 : DICO, as liquidator, swears Information charging the three defendants with offence under s. 184 of CUCP Act . October 18, 2013: FSCO issues Certificate certifying that facts on which the s. 184 proceedings are based first came to Superintendent’s knowledge on October 15, 2012. April 2015: Scheduled trial of the issues identified by Justice Newbould.

The significance of these occurrences, their institutional context, and DICO’s role in the events subsequent to its first being informed of the impugned mortgages on July 15, 2009 are set out in the aforementioned documentary record and the affidavits and testimony of Anatol Monid (“Monid”) of FSCO and, in particular, Bill Foster (“Foster”) of DICO. C. THE REGULATORY SCAFFOLDING (

a) Introduction [ 13 ] The various preliminary motions were heard together. An appreciation of the evidence tendered on these motions commands an introduction to the institutional organization of FSCO and DICO, its regulatory culture and the statutory framework governing the operation, management and compliance oversight of Ontario credit unions and caisses populaires, both at the time of the alleged offence and, where relevant, subsequent to the October 2009 amendments to the CUCP Act . An outline of the division of responsibilities between FSCO and DICO and the formalization of their information sharing and co-operative governance of credit unions is also of assistance. (

b) The Institutional and Statutory Framework [ 14 ] FSCO and DICO are distinct legal entities with separate governance structures, employees, offices and legal counsel. Both, however, have statutory duties imposed by the CUCP Act . DICO is a corporation governed by directors. FSCO is a commission within the Ministry of Finance established under the FSCO Act and governed by members of the commission. None of the members of the DICO board serve on the commission and none of the commissioners serve on DICO’s board.

The FSCO Act requires the appointment of a Superintendent of Financial Services (the “Superintendent”) responsible for the enforcement and administration of FSCO’s statutory obligations under the FSCO Act and others, including the CUCP Act . FSCO and DICO each independently report to the Minister of Finance.

While institutionally autonomous, “FSCO”, as said by Monid, “works closely together with DICO to regulate credit unions and caisses populaires under the CUCP Act ”. [ 15 ] The respective roles of the two Crown agencies are set out in a Letter of Understanding (“LOU”) and, in 2009, by a superseding Memorandum of Understanding (“MOU”). (Both are discussed more fully below.) FSCO is characterized in the latter agreement as “a Regulatory Agency” while DICO is styled “an Operational Enterprise Agency”.

Consistent with its statutory obligations ( FSCO Act , s. 5(2)(c)), the MOU describes the “role of the Superintendent” as including “the responsibility to administer and enforce the

Credit Unions and Caisses Populaires Act, 1994 ”. The MOU’s replacement of the LOU is said to be “premised on the transfer of solvency regulation authority from the Superintendent to DICO” as a result of the amendments to the CUCP Act that came into force on October 1, 2009. The MOU, unlike its predecessor LOU, speaks of FSCO’s and DICO’s “common interest” in, among other things, “avoiding … overlap of regulatory functions and ensuring the sharing of information related to those regulatory functions”.

DICO’s role is otherwise described as follows: The role of DICO is to carry out the duties and responsibilities set out in the Act and the regulations under the Act, which include, but are not limited to, providing deposit insurance for depositors of credit unions and caisses populaires in Ontario, acting on solvency issues affecting credit unions and caisses populaires in Ontario, and fulfilling the objects listed for it under the Act. [ 16 ] As a statutory corporation, DICO has no powers other than those prescribed by its enabling legislation.

Among the powers conferred on DICO by the amended CUCP Act , DICO may order a credit union subject to its supervision (s. 279) or administration (s. 294), a form of statutory receivership in which DICO then effectively exercises the powers of a credit union’s officers and board of directors.

DICO, as administrator, does not require the consent or authorization of a credit union’s members or shareholders or that of the Superintendent. [ 17 ] As noted, the October 1, 2009 amendments to the CUCP Act had the effect of transferring a number of FSCO’s statutory responsibilities respecting credit unions to DICO, in particular those pertaining to solvency-related issues. For example, prior to the 2009 amendments any supervision order – such as that placing the CCU under DICO supervision in September 2007 – was issued by FSCO.

Pursuant to the 2009 amendments, DICO now has the power to issue a supervision order. Prior to October 1, 2009 FSCO had jurisdiction to regulate both market conduct and solvency issues associated with credit unions. As explained by the two agencies’ representatives, solvency administration fell within the jurisdiction of DICO under the 2009 amendments, with FSCO continuing to regulate market conduct. As construed by FSCO and DICO, the practical effect of a credit union being placed under administration by DICO is that the conduct of the credit union’s business affairs are then under the exclusive control of DICO.

While the CUCP Act does not expressly direct that FSCO’s regulatory obligations then cease, in practice FSCO withdraws from its regulatory functions upon DICO’s appointment as administrator and relies on DICO to then ensure a credit union’s compliance with the CUCP Act . This construction is reflected in the following exchange during the cross-examination of Monid: Q. And after DICO became the administrator of the Croatian Credit Union, FSCO took no role in supervising it. Is that fair? A. Correct. Q.

And you [i.e., FSCO] didn’t take any role in ensuring the credit union was abiding by the Credit Unions and Caisses Populaires Act , after that point? A. We rely on DICO to continue to do that. Q. And you didn’t investigate any breaches by people associated with the Croatian Credit Union? A. [Not o]nce it went into administration. Q. And you didn’t take a role in deciding to lay the charges in this case? A.

No. [ 18 ] From DICO’s perspective, as explained by Foster, “there is no longer any purpose … for FSCO to supervise [a credit union’s] activities” once another “Crown agent” (that is, DICO) is controlling the credit union’s business operations by way of an administration order. Foster agreed, however, that neither the Act nor its regulations assigned exclusive regulatory control to DICO upon it being appointed the administrator of a credit union.

Likewise, the MOU negotiated between the two Crown agencies does not detail the division of regulatory responsibilities once a credit union is placed under administration or liquidation. Neither the Act nor the MOU explicitly speaks of a regulatory role for DICO, nor does the MOU at any point qualify the “general” proposition that the continuing and overarching “role of the Superintendent [and not DICO] includes the responsibility to administer and enforce the Credit Unions and Caisses Populaires Act, 1994 ”.

However, and as further addressed below, since the October 2009 amendments to the CUCP Act , DICO, once acting as liquidator of a credit union, shares with FSCO the power to lay a charge for breaching a provision of the Act . [ 19 ] Acting in its capacity as administrator DICO may require a credit union to be wound up (s. 295(1)). As of the 2009 amendments, it may also appoint itself (or, as the only prescribed alternative, a licensed trustee in bankruptcy) liquidator of a credit union (s. 298(4)). DICO, as liquidator, effectively replaces DICO as administrator in the governance of the subject credit union.

The liquidator (that is, DICO) then controls all of a credit union’s rights and privileges and, in such capacity (but not that of administrator), may bring or defend any action, suit or prosecution, or other legal proceedings, civil or criminal, in the name and on behalf of the credit union (s. 307(1)(a)), and it may do so whether or not it has received the prior approval of the Superintendent (s. 307(4)).

Critical to the resolution of the matter before me, the effective exercise of this power is subject to compliance with s. 331 , which, as earlier noted, provides that no proceeding for an offence under the CUCP Act “shall be started more than two years after the facts on which the proceedings are based first came to the knowledge of the Superintendent”. [ 20 ] DICO is empowered to lay a charge under the CUCP Act only when it acts in the capacity of liquidator.

While FSCO does not have jurisdiction to act as administrator or liquidator of a credit union, it can, as Foster acknowledged, lay a charge at any point and irrespective of a credit union’s solvency or DICO’s level of involvement or superintendence. In fact, FSCO had laid charges against Vinski for breaches of the CUCP Act on September 5, 2008 and August 4, 2010 regarding, respectively, offences alleged to have occurred in mid-2007 and between July 2008 and January 2009.

The charges were thus referable to intervals before DICO’s appointment as administrator of the CCU, although the latter charge was laid after this appointment. [ 21 ] The CUCP Act authorizes the Superintendent to impose an “administrative penalty” for various compliance irregularities at any time: s. 331.2. DICO is similarly empowered with respect to a somewhat different inventory of regulatory contraventions: s. 331.3.

The imposition of such penalties is subject to a limitation period.

Section 331.2(4) states that, “The Superintendent shall not make an order [imposing an administrative penalty] under this

section more than two years after the day the Superintendent became aware of the contravention”.

Section 331.3(4) is identical but for the substitution of the word “Corporation” (that is, DICO) for “Superintendent”. [ 22 ] FSCO’s regulatory jurisdiction is much broader than that conferred on DICO. It bears primary responsibility for the regulation of Ontario’s financial services sector. While FSCO’s regulatory compass extends to credit unions, it also includes insurance companies, pension plans, mortgage brokerages, agents and administrators, loan and trust companies and co-operatives.

FSCO is also responsible for the administration of the Motor Vehicle Accident Claims Fund and the administration of the Pension Benefits Guarantee Fund. The Superintendent of Financial Services is the chief executive officer of FSCO and exercises the powers and duties conferred on the Superintendent by legislation. These include, as set out in s. 2.2 of the MOU, “the provision of regulatory services that protect the public interest and enhance public confidence in credit unions and caisses populaires”.

More specifically, the Superintendent, pursuant to s. 5(2) of the FSCO Act , is mandated to “administer and enforce” the CUCP Act and “supervise generally” all credit unions and caisses populaires subject to the same Act . (

c) Information Sharing (

i) Introduction [ 23 ] There is a high degree of mutual reliance between FSCO and DICO. As DICO is more closely involved in the day-to-day regulation of credit unions and exercises the functions of supervisor and administrator in times of financial stress, FSCO is to a considerable degree dependent on information obtained from DICO to execute its own statutory duties. Their related responsibilities for the regulation of credit unions led the two agencies to establish an operational framework to promote effective coordination and avoid redundancy.

As the CUCP Act affords no statutory structure or direction in this regard, it was left to FSCO and DICO to harmonize their respective roles and responsibilities under and in accordance with the CUCP Act . [ 24 ] FSCO and DICO entered into a Letter of Understanding (“LOU”), dated May 23, 2003, providing for a co-operative operational framework. It includes a mechanism for sharing information, a matter left unaddressed in the enabling legislation.

Following the passage of the 2009 amendments to the CUCP Act , FSCO and DICO entered a revised agreement, dated November 6, 2009 and styled a Memorandum of Understanding (“MOU”), which superseded and replaced the LOU. In so far as they impact on matters here at issue, the propositions inscribed and language employed in the LOU and MOU are near identical.

The principles governing the “operational relationship” between the two agencies, as set out in the MOU, include the efficient and effective use of resources, the development of regulatory standards and criteria, cost minimization, and “to develop and maintain a high degree of mutual reliance”.

One example, already noted, of the two agencies’ operation understanding is that FSCO is effectively relieved of its regulatory burden once a credit union is placed under the control of DICO acting as administrator or liquidator as control of the credit union is then viewed as safely under the jurisdiction of a sister regulator.

Nonetheless, s. 4.3.8 of the MOU, like its predecessor LOU, directs that, “if the Superintendent or DICO … becomes aware of a serious breach of the [CUCP] Act or regulations, the Superintendent or DICO, as the case may be, will notify the other of the matter in a timely fashion”. [ 25 ] Monid agreed that creating an unauthorized security interest in the property of a credit union (that is, a violation of s. 184 of the Act ) was a “serious offence”.

He agreed, as well, that the charges laid by FSCO against Vinski (the second of two Informations being sworn after DICO was appointed administrator of the CCU) were “serious offences”. Information respecting these charges was shared with DICO at the agencies’ regular quarterly meeting in September 2010. However, Monid “would not go so far to say [that] any serious breach” of the CUCP Act required DICO to notify the Superintendent upon becoming aware of the breach.

The “level of information sharing”, he maintained, “is dependent on the circumstances”. [ 26 ] There are three primary vectors of information sharing between DICO and FSCO: a centralized data collection to which both agencies ordinarily have access, quarterly liaison meetings and, finally, ad hoc communications. A description of each follows. (ii) Shared Data Base [ 27 ] The MOU recognizes that both FSCO and DICO separately require and receive information from credit unions to assist in fulfilling their respective statutory duties.

The MOU, like the LOU before it, centralizes with DICO the collection of routinely required information from credit unions.

To the extent that either FSCO or DICO collects information, they agreed to share it on a timely basis and as may be required by the other, to provide each other with mutual access to such information, and to develop and maintain a list of information requirements, including format, time frames and method of delivery. [ 28 ] The standard process of information sharing includes the maintenance on DICO’s database (the Corporate Information System Portal, or “CIS Portal”) of all monthly credit union (financial) filings, examination reports, member institution returns, management generated risk assessment reviews, contact information, orders and credit union incorporation information.

FSCO has routine on-line access to the CIS Portal. The Superintendent provides DICO with additional information (pertaining to such matters as offering statement approvals, statutory approvals, amalgamations, incorporations, and dissolutions) for inclusion in the CIS Portal. [ 29 ] FSCO’s ready access to information collected and stored by DICO is curtailed once DICO is acting in its capacity as administrator or liquidator.

As explained by the FSCO and DICO witnesses, the information then shared by DICO is only that necessary “for the broad purpose of permitting FSCO to keep informed of issues that may impact the stability and confidence of the credit union sector”. DICO, as liquidator, ceases to enter information in the CIS Portal. It then uses a separate information storage system that is firewalled from the rest of DICO and inaccessible to FSCO.

In Monid’s words: FSCO understands that information that comes to the attention of DICO in its capacity as administrator or liquidator is for DICO to address as it sees fit in a manner consistent with the statutory jurisdiction being exercised by DICO. FSCO would not and does not expect DICO to inform FSCO of particular information learned by DICO, when acting in the capacity as administrator or liquidator … According to Monid, this non-expectation “includes the facts upon which the instant charge is based”.

(iii) The Liaison Committee [ 30 ] The Liaison Committee, which includes representatives of DICO, FSCO, and the Ministry of Finance, affords a second method of sharing information between the two Crown bodies. The Committee meets quarterly to exchange information of common interest. DICO representatives attend these meetings in DICO’s corporate capacity and also, when applicable, in its capacity as administrator and liquidator of a specific credit union. Minutes of the Liaison Committee meetings are distributed to each participant. The meetings generally focus on matters of systemic importance.

Particular credit unions are rarely discussed and only when they are on a watchlist, subject to DICO supervision, in administration or liquidation, or involved in significant litigation that will likely attract public attention or that of the Minister of Finance. [ 31 ] Although neither the Act nor the MOU prohibit earlier disclosure, Foster and Monid testified that FSCO typically advises DICO of any regulatory investigation it conducts only after a charge is laid.

In those rare cases where DICO is informed of a current FSCO investigation, the particulars are kept private due, according to Monid, to their confidential nature and the risk of investigatory compromise. No examples or further explanation was advanced of the risk to the integrity of DICO or FSCO investigations that might arise through the sharing of such information between institutional co-regulators.

The two agencies’ operational agreement contemplates such inter-agency disclosure and, as set out in the MOU, explicitly invests both FSCO and DICO with a duty of confidentiality in such circumstances: The Superintendent and DCIO agree to treat as confidential all information and records containing financial, commercial or any other confidential information collected or supplied by either of them under this MOU. The predecessor LOU is to identical effect.

Arguably, a failure to share such information appears inconsistent with FSCO’s and DICO’s mutual resolve, as expressed in their LOU and MOU, to conserve resources and reduce redundancy and duplication. [ 32 ] As alluded to earlier, information respecting a FSCO investigation of “former managers” of the CCU and of FSCO having laid “charges … in connection with the Croatian CU” was shared with DICO at the quarterly Liaison Committee meeting held September 2, 2010.

There is no reference, direct or otherwise, in any of the minutes of the Liaison Committee meetings held between July 15, 2009 and October 15, 2012 to any of the three mortgages that bottom the s. 184 charge faced by the defendants. (iv) Ad Hoc Communications [ 33 ] Finally, DICO and FSCO have ad hoc communications with each other as required on a case-by-case basis depending on specific issues that may arise at a credit union. According to Foster, there were no ad hoc communications between DICO and FSCO respecting the CCU subsequent to the CCU coming under DICO’s administration (

v) Information Sharing

Summary [ 34 ] Information regarding the three impugned mortgages placed on the CCU properties was not included in the CIS Portal and, hence, was not routinely accessible by FSCO. The same information was not discussed at any Liaison Committee meetings prior to charges being laid. Nor were the mortgages discussed at any ad hoc meetings between DICO and FSCO. There is no provision in the CUCP Act or any other statute that compelled DICO to disclose the three questionable mortgages to FSCO, nor, according to Foster, did such obligation arise under the LOU or MOU.

On the other hand, no statutory provision or term of the LOU or MOU prevented DICO from disclosing such information to FSCO. D. EVIDENCE (

a) Introduction [ 35 ] A more detailed chronology of significant events, DICO’s evolving appreciation of their salience and, ultimately, its decision to inform FSCO and lay the instant charge follows. (

b) A Narrative Account (

i) Supervision [ 36 ] DICO assumed the role of supervisor of the CCU upon the Superintendent’s issuance of a Supervision Order on September 5, 2007. DICO was to serve as stabilization authority following the credit union’s cashing of $8 million in fraudulent cheques that engendered a state of capital deficiency and compromised the credit union’s liquidity. The CCU endeavoured to redress this problem in 2008 by raising additional capital, including the sale of $5 million worth of shares to Polla.

Immediately following the recapitalization Vinski, then the General Manager of the CCU, issued a number of large loan facilities that were above the credit union’s legal lending limit and thereby attracted DICO’s attention. DICO’s suspicions were heightened when it learned that one of the loan recipients, Arnold Milan and his family, were involved in questionable transactions at a second credit union, that Vinski had an undisclosed conflict of interest by virtue of his participation in certain of the loans, and that there was insufficient security for at least some of the loans.

Further, the CCU received notice that its insurance would be cancelled in August 2009, causing the CCU to then shut its doors. (ii) Administration [ 37 ] As a result of these developments, DICO issued an order placing the CCU under its administration on July 7, 2009, with DICO to “forthwith take control of the property and business of the Credit Union until such time as DICO may further order”. John Hutton was the DICO official responsible for the administration of the CCU. He in turn retained John Wood to serve as Acting General Manger of the credit union.

[ 38 ] On July 15, 2009, approximately a week after DICO assumed the role of administrator, the CCU received a letter from Troster, a lawyer, asserting that mortgages “consented to by the credit Union, on its properties, have been registered on title” and demanding payment of accrued interest payable to Beachfront Developments Inc. (“Beachfront”). The letter further noted that a copy had been sent to John Paul Evans, described as the CCU’s “solicitor”. John Wood, then serving as the CCU’s general manager, immediately retained counsel, the firm of Gardiner Roberts LLP (“GR”), to respond to Troster’s letter.

By letter sent the same day, GR advised Troster that the CCU had “no knowledge of the alleged mortgages” and that Evans was not and had never been retained by the CCU. GR’s letter also demanded all documentation related to the CCU’s purported consent to the transactions. [ 39 ] A CCU-directed title search quickly confirmed that mortgages, each in the amount of $2 million, had been registered against three CCU-owned properties: one in Toronto on June 25, 2009, one in Mississauga on July 9, 2009 and one in Hamilton on July 14, 2009. Cautions had also been registered against the two former properties.

The three mortgages, as set out in an affidavit sworn by Wood in November 2009, “appear to have been registered and assigned by Mr. Troster acting on behalf of the charger (i.e. the Credit Union)”, the address for which was said to be care of John Paul Evans in Mississauga. [ 40 ] Troster responded to GR’s letter the following day, July 16, 2009, identifying himself as the trustee for Beachfront and enclosing the requested documentation, including copies of the mortgages and a bank draft.

Also included were an “Acknowledgement and Delivery Agreement” and a “Guarantee and Agreement to Purchase” (executed on March 16 and 17, 2009, respectively) that, together, were said to set out “the structure of the transaction”. That transaction, in brief, involved Polla, at the request of one Miroslav Anicic, advancing $2 million to Beachfront to be secured by a second mortgage on a property in Wasaga Beach (the “Loan”). Anicic, in turn, agreed to buy $5 million in CCU shares owned by Polla, with 25,000 of the shares to be purchased within four months and the balance within one year.

The terms of the Acknowledgement further include Beachfront advancing $1,900,0000 from the Loan to the CCU, the CCU consenting to Troster registering cautions on the three CCU properties, Anicic’s direction that Polla endorse the first 25,000 share purchase in favour of Troster (the “Security”), and Troster discharging the cautions upon his receipt of the Security.

Finally: failing Anicic’s purchase of Polla’s shares, the CCU consents to Troster’s securing of the loan through registration of mortgages on the three CCU properties and on the same terms and conditions as Polla’s Wasaga Beach mortgage. [ 41 ] The Acknowledgement was accompanied by a Guarantee and Agreement to Purchase that confirms the Loan, Polla’s stake in the CCU, and the sale and purchase agreement as between Polla and Anicic. The copy of the bank draft included in Troster’s letter of July 16 th was in the amount of $1,898,000 and payable to the CCU.

Wood’s search determined that the CCU received the draft on March 17, 2009 with a Direction from Arnold Milan that $1.4 million of the funds be allocated to a line of credit in his own name and $406,000 to a line of credit in the name of his wife, Sara (or “Sarah”) Milan, and that the remaining $92,000 be applied towards an outstanding mortgage held by the CCU on a property (the “Tansley property”) owned by a numbered company, 864401Ontario Inc., for which Polla was a principal. In short, the CCU did not receive any value for the mortgages registered against its properties.

Or, as put in subsequent civil pleadings of the CCU: “Any funds advanced by Beachfront were directed to, and were for the benefit of Milan, and were therefore not for the benefit of the Credit Union”. [ 42 ] Vinski signed the Acknowledgement and Delivery Agreement on behalf of the CCU on March 16, 2009. He had been suspended as General Manager of the credit union in January 2009 and, accordingly, was not authorized to enter any agreements on behalf of the CCU in March 2009.

In a Statutory Declaration provided to DICO’s counsel and dated August 31, 2009, Vinski said he, at Polla’s initiative, met with Polla and Troster at Troster’s office on March 12 and 13, 2009 and that he subsequently signed documents provided by Troster. Vinski, among other assertions, claimed that he did not tell Troster or anyone else that he had authority to sign anything on behalf of the CCU; although he knew he had been suspended as general manager in January, he nonetheless provided Troster with a business card identifying himself as the “Manager” of the CCU.

Vinski also claimed that he did not understand that he was mortgaging or otherwise encumbering properties of the CCU, that he did not discuss the transaction with anyone at the CCU, and that he believed the money being advanced ($2 million, less finder’s and legal fees) was a loan to Arnold Milan to pay down his indebtedness to the CCU. The CCU formally terminated Vinski’s employment in April 2009. [ 43 ] GR promptly responded to Troster’s letter of July 16, 2009.

Having reviewed the documentation provided by Troster, GR advised, inter alia , that, Vinski, who had signed the agreements earlier provided by Troster, was suspended by the CCU on January 28, 2009, and thus “prohibited from entering into any agreements or signing any documents on behalf of the Credit Union at the time in question”. The letter further advised that: [I]t is illegal to create a security interest in any property owned by the Credit Union pursuant to

section 184 of the Credit Unions and Caisses Populaires Act , 1994, S.O. 1994. As a lawyer, you are deemed to know the laws of the Province of Ontario and you therefore ought to have known that the purported mortgages were prohibited by statute. The mortgages registered by you are accordingly unlawful and accordingly void. … The Credit Union is currently under the administration of the Deposit Insurance Corporation of Ontario but the Credit Union has no record of receiving any of the funds purportedly advanced by you as trustee for your client. We are currently investigating the matter.

We will also be reporting this transaction to the Police as it would appear to be clearly fraudulent. Finally, GR asked Troster to immediately expunge the three mortgages from title and cautioned that failure to do so would lead to immediate “appropriate proceedings”. There is no evidence before me of any fraud-related prosecution arising from the impugned “transaction”. [ 44 ] GR, as counsel for the CCU, wrote John Paul Evans (described as the CCU’s “solicitor” in Troster’s letter of July 15, 2009) on July 22, 2009, enclosing the mid-July correspondence it exchanged with Troster.

In an obvious allusion to s. 184, GR’s letter asserted that “it is our position that the agreements and mortgages were not authorized the Credit Union and that the mortgages are in fact illegal and contrary to the Credit Unions and Caisses Populaires Act, 1994 .” (The letter was copied to both John Hutton and John Wood who were then responsible for administering the CCU on behalf of DICO.) Evans subsequently confirmed that he never acted for the CCU. He acknowledged dealings with Troster and Beachfront in March 2009 when acting on behalf of Polla who was then advancing money

to Beachfront. He was not aware, he said, of any involvement of the CCU with respect to that transaction. [ 45 ] The CCU, through its counsel GR, applied to the Director of Land Titles (the “Director”) on November 18, 2009 to have the mortgages and cautions registered against the three CCU-owned properties deleted from title “on the basis that the same are fraudulent instruments”. Attached to the application was the aforementioned affidavit of John Wood, the CCU’s acting manager.

As essentially repeated in GR’s covering letter to the Director, Wood’s affidavit asserts, inter alia , The Acknowledgement [and Delivery Agreement delivered by Troster on July 16, 2009] purports to have been signed by Josip Vinski (“Vinski”), A.S.O. on March 16, 2009, on behalf of the Credit Union. Vinski was suspended as General Manager of the Credit Union as of January 2009. Vinski was not authorized to enter into any agreements on behalf of the Credit Union as of March 2009. In any event, … it is illegal to create a security interest in any property owned by the Credit Union pursuant to s. 184 of CUPC A[ct].

Accordingly, no one, including Vinski, has ever been authorized to enter into a mortgage transaction, on behalf of the Credit Union, that creates a security interest in any property owned by the Credit Union. Wood further attests that his affidavit is sworn “in support of the Credit Union’s application to have [the encumbrances] deleted from title … on the basis that the mortgages and the cautions were not authorized by the Credit Union and are fraudulent instruments”. (Neither the GR letter or Wood’s affidavit refers to the CCU then being under administration.

Indeed, neither the letter nor the affidavit ever refers to DICO.) [ 46 ] By Statement of Claim issued January 4, 2010, Beachfront commenced an action against the CCU seeking payment of approximately $2.1 million, plus interest, and possession and Court-supervised sale of the CCU properties against which the three mortgages were registered in order to use the proceeds to satisfy the debt claimed owed to Beachfront. (Any further effort to describe the byzantine if not abstruse architecture of the Beachfront transactions and their nexus to the CCU mortgage on the Tansley property is beyond the factual demands of these Reasons.) The CCU (through DICO, then acting as administrator of the credit union) issued a Statement of Defence and Counterclaim on February 16, 2010 reiterating its position that the impugned mortgages and cautions be deleted from title as fraudulent instruments.

Relying on s. 184 of the CUCP Act , the CCU re-asserted that the mortgages were “also invalid as it is illegal to create as security interest in any property owned by the Credit Union”, and sought a declaration to this effect. In the event that the mortgages were found valid, the CCU sought contribution and indemnity from Vinski for any amounts the CCU was found liable to Beachfront.

By way of an Amended Statement of Claim, Beachfront added Troster as a defendant to its civil action on the basis that if the three mortgages were invalid by virtue of s. 184 of the CUCP Act , as pled by the CCU, Troster was liable for the claimed amount by virtue of his negligence when acting as Beachfront’s lawyer at the time of the July 2009 transaction. [ 47 ] As a result of Liaison Committee meetings and activity reports filed on the CIS Portal, FSCO was informed of various civil actions for and against the CCU. However, the information shared with FSCO in this regard was entirely generic.

No specific details of the litigation were disclosed and, in particular, there was no mention, by name or any other identifying features, of the claim commenced by Beachfront. According to Foster, this skeletal level of information sharing with FSCO “was the same as with all” credit unions. (iii) Liquidation [ 48 ] DICO appointed itself liquidator of the CCU on October 18, 2010, with, as earlier noted, the authority to “exercise all of the powers of the Liquidator under the [CUCP] Act”, including the power to commence the instant prosecution.

In the process of winding up the CCU’s affairs and realizing and distributing its property, DICO, as liquidator, commenced proceedings seeking, as part of a complex series of claims, to have the three impugned mortgages declared invalid and unenforceable because they contravened s. 184 of the CUCP Act . Polla and 864401 Ontario Inc. resisted DICO’s action.

They claimed, inter alia , that the three mortgages were “good, valid and enforceable security” that did not contravene s. 184 of the CUCP Act or, alternatively, remained valid despite such contravention by virtue of s. 329 of the Act . (Section 329 preserves the validity of any contract entered into in contravention of a provision of the CUCP Act “unless otherwise expressly provided in this Act”.) Further, Polla asserted the right to set off any indebtedness to the CCU against the amounts he claimed the CCU owed him or his numbered company.

On February 17, 2011, Superior Court Justice Newbould ordered, inter alia , an adjudication of the validity, enforceability, beneficial ownership and quantum of the three mortgages purportedly granted by the CCU. Justice Newbould’s Order was entered on February 25, 2011. A trial of the outstanding issues is scheduled to begin in April 2015. (iv) The Current Prosecution [ 49 ] By letter faxed on October 15, 2012, Andrew Poprawa, the president and CEO of DICO, advised the Superintendent of FSCO that DICO, as liquidator of the CCU, “intends to commence proceedings under the Provincial Offences Act for a breach of

section 184 ” of the CUCP Act . Poprawa set out his “grounds” as follows: Among the numerous highly irregular, if not fraudulent, transactions engaged in by CCU leading to its collapse was a transaction entered into in March 2009 whereby contrary to s. 184 of the Act … the former Chief Executive Officer, Josip Vinski agreed to provide a security interest in property of CCU as security for a $2 million loan being provided to CCU by Beachfront Developments Inc.

Further to the Agreement, three mortgages were registered on three CCU owned branches. … In agreeing to provide the [three particularized] mortgages CCU was clearly acting in contravention of s. 184 of the Act. In particular, the provision of the security interest was neither authorized by CCU’s by-laws nor approved in writing (or otherwise) by the Superintendent. In the circumstances, DICO acting it its capacity as liquidator, conducted an investigation into the facts and circumstances which resulted in these three illegal mortgages being provided by CCU.

Those circumstances revealed that in agreeing to provide the mortgages Vinski was aided and abetted by a lawyer acting for the lender, Steven Troster, and two other lawyers, Ferdinand (Fred) Polla who was a party to the Agreement and his lawyer on the transaction, John Paul Evans. The four men conceived of, structured and implemented an Agreement dated March 16, 2009 which required the provision of the illegal mortgages. Troster subsequently registered the mortgages in the name Steven Franklin Troster in trust.

…[T]he transaction contemplated by the Agreement dated March 16, 2009 is [also] highly suspicious as it contemplated Polla lending money to Beachfront so that Beachfront could lend money to CCU which was ultimately to be used somehow to facilitate a third party’s ability to purchase shares in CCU owned by Polla. We have formed the view … that DICO, in its capacity as liquidator of CCU, has reasonable and probable grounds to believe that Vinski, Troster, Polla and Evans committed the offence.

In our view, the provision of a security interest in the property of the credit union was an egregious violation of the Act which completely undermined the scheme contemplated by the Act to protect the integrity of credit union property. … [ 50 ] Poprawa then turned to s. 331 of the CUCP Act . “As you may be aware”, he wrote, “despite the powers and duties conferred under the Act on DICO in respect of the regulation of credit unions one of the anomalies which remain” is a limitation period, s. 331, premised on the timing of the Superintendent’s knowledge of the predicate facts.

Accordingly, Poprawa requested that the Superintendent confirm that he “had no knowledge of the facts upon which the proceedings described above are based” prior to receipt of his, Poprawa’s, letter.

The next day, October 16, 2012, and long before any reply was received from the Superintendent, Foster, on behalf of DICO as liquidator, swore an Information charging the four purported offenders with breaching s. 184 of the CUCP Act . (As Evans had since passed away, DICO withdrew the charge against him at the commencement of the proceedings before me.) DICO had never previously laid a charge under the CUCP Act . [ 51 ] FSCO’s letter confirming that Poprawa’s letter of October 15, 2012 “was the first notice that FSCO received regarding these allegations” was mailed to Poprawa on January 3, 2013, some two and half months later.

And on October 18, 2013 a Certificate, pursuant to ss. 16(

g) of the FSCO Act , was issued certifying that the facts underlying the charge first came to the Superintendent’s knowledge on October 15, 2012. [ 52 ]

Section 17 of the FSCO Act prescribes that a certificate “that purports to be signed by or on behalf of the Superintendent shall be received in evidence in any proceedings as proof, in the absence of evidence to the contrary, of the facts stated” in the certificate. (

c) DICO’s Response to the

Section 184 “Facts” [ 53 ] John Hutton, who did not testify at this hearing, was tasked with the administration of the CCU on behalf of DICO on July 7, 2009. DICO first learned of the three mortgages about a week later, upon receipt of Troster’s letter of July 15, 2009. Foster was not directly involved with the CCU until he took on the duties of winding up the CCU upon DICO’s appointment as liquidator on October 18, 2010. He had, however, familiarized himself with the file and had discussed the matter with Hutton following the appointment of DICO as liquidator.

Foster agreed that the documentation provided by Troster in mid-July 2009 “enable[d DICO’s] lawyers to see that entire [mortgage] transaction as … reduced to writing at the end of the negotiation”. He agreed that the lawyers who consistently characterized the impugned mortgages as a violation of s. 184 in their correspondence with Troster and pleadings in various forums, were retained by and acting on the instructions of DICO in its capacity as administrator. Foster also agreed that it was “one of [DICO’s] beliefs” in July 2009 that “the mortgages were contrary to the [ CUCP ] Act ”.

However, in Foster’s understanding DICO viewed the mortgages as nothing more than a “technical mistake” at that time. The Troster mortgages were not then considered pressing concern in comparison to the other fraud and liquidity problems besetting the CCU, and it was thought that the mortgages “could be discharged quickly” as they were fraudulent instruments rather than an enforceable CCU obligation.

As explained by Foster, the mortgages only became a serious issue when DICO, as liquidator, was unable to realize on them, and the question of their validity was directed to trial by Justice Newbould in February 2011.

In Foster’s words: It was only when the fact that this mortgage stayed there and impeded the ability of the liquidator to do his job that suddenly this became rather than an inconvenient issue that had to be addressed, a very serious issue [that] has caused tremendous problems with [the CCU] liquidation. [ 54 ] Even then, and despite the reciprocal notice requirement triggered in such “serious” circumstances by s. 4.3.8 of the MOU, DICO did not notify the Superintendent of any breach of s. 184 of the CUCP Act .

Nor did Foster believe that the MOU – which he characterized as an “operational understanding” rather than a “legal commitment” – obliged DICO to do so. This, according to Foster, was because “there is really no sense in delegating the response or the activity to someone else when it’s totally within your statutory mandate” – meaning, here, DICO’s mandate as liquidator.

Monid, testifying as FSCO’s institutional memory, confirmed that although FSCO had earlier laid charges against Vinski under the CUCP Act , it made no further inquiries of DICO respecting any other breaches of the Act once the CCU was placed under DICO’s administration. According to Monid, and as noted earlier, FSCO would not expect to be informed of every “serious breach” of the Act by DICO, but only those that focused on systemic risk to the industry as opposed to that to which an individual credit union might be exposed. [ 55 ] Foster served as liquidator of the CCU on behalf of DICO.

He was, however, not personally aware that any prosecution of an offence under the Act required compliance with a limitation period pivoting on the Superintendent’s knowledge until he first contemplated laying charges against the defendants. This prospect occurred, he said, “basically about the time of the Justice Newbould order” of February 25, 2011. The purpose of prosecuting the defendants was, in lay-speak, “to send a message”.

Or, as Foster more fully explained: It was then determined that this was such a serious matter that it warranted a provincial offences charge as a deterrent to send a signal to anyone else that ever considered this, that this would not be tolerated. … [I]t’s intended to be a very clear message to the credit union system that talks, that communicates by rumour all the time, that this type of behaviour does have consequences and will not be tolerated.

Later, during the course of a cross-examination intended to lay a foundation for an abuse of process motion, Foster was asked whether he agreed that DICO “knew all the facts that give rise to these charges … from the middle of July ‘09”. Foster replied: We knew the facts you’re talking about.

We did not know their importance, we did not appreciate until this transaction that these mortgages could not be dealt with as easily as we anticipated, and in fact they were a serious impediment to the liquidation, and for that reason, which has got nothing to do with collecting these funds (because, as you see we’re not going to even have a chance at those funds

for another year or so), [we laid the charge]. The reason this was done was solely on public policy purposes. In any event, Foster did not swear the Information charging the defendants with a breach of s. 184 of the Act until October 16, 2012, wellmore than a year and a half after Justice Newbould’s Order was formally entered. There is no explanation for the duration of this delayon the record before me. E. ANALYSIS (

a) Introduction [56] The analysis that follows is directed to the meaning and application of s. 331 of the CUCP Act and to answering the basequestion of whether the charge faced by the defendants was laid within the statutory limitation period prescribed by that provision. Again, s. 331 reads: No proceedings for an offence under this Act shall be started more than two years after the facts on which the proceedings are based firstcame to the knowledge of the Superintendent.

As more fully developed below, I find that the “facts on which the proceedings are based” first came to the knowledge of DICO in mid-2009, in excess of three years before the “proceedings” at issue were “started” on October 16, 2012. I also find that the Superintendent(and, more generally but to the same legal effect, FSCO) had no direct or actual knowledge of these “facts” until apprised by DICO onOctober 15, 2012.

What then remains at issue is whether FSCO, as urged by the defendants, can be fixed in law with knowledge of thematerial facts at any point before October 16, 2010, as a result of the doctrine of constructive or imputed knowledge, the Commission’sown failure to diligently pursue the issue, or on any other basis.

If so, the Certificate issued by FSCO and certifying that theSuperintendent had no knowledge of “the facts on which the proceedings are based” until October 15, 2012 must be disregarded in theface of “evidence to the contrary” – that is, evidence that raises a reasonable doubt about the validity, in law, of the critical assertion inthe Certificate. Absent reliance on the Certificate and in the face of contrary evidence, DICO would then fail to meet its legal burden toestablish to the requisite criminal standard that the terms of the statutory limitation period were here honoured.

As a result, theInformation before me would be quashed as statute-barred. If, however, the requisite knowledge cannot be assumed by or ascribed to theSuperintendent prior to October 16, 2010, the prosecution remains viable, and failing the defendants’ establishment of an abuse ofprocess their trial on the merits must advance. (

b) Statutory Limitation Periods [57] A statutory limitation period is very different from the constitutional protection afforded accused persons against“unreasonable delay”. So long as the statutory conditions are met, a limitation period, unlike the right enshrined in s. 11(

b) of theCharter, is of fixed rather than an elastic duration determined by case-specific circumstances. Absent positive hindrance of factualdiscovery, the calculation of a statutory limitation period is not affected by the interim conduct of the accused. Nor do societal factors,including the gravity of the charges or the public’s interest in their prosecution, factor into the assessment. Most importantly, theprotection afforded by s. 11(

b) is not engaged until a charge is laid unlike, as here, upon expiration of a two-year period commencingwith the particularized regulator’s knowledge of the facts on which that charge is predicated. Put otherwise, s. 11(

b) is concerned withpost-charge delay while the limitation period that forms the subject of the current inquiry is concerned solely with pre-charge delay. That said, statutory limitation periods and s. 11(

b) address overlapping concerns: prosecutorial laches, evidentiary fairness and thesecurity interests of defendants. [58] There are no reported cases expressly interpreting s. 331 of the CUCP Act. However, statutes of limitation are routine in civiland regulatory proceedings. Their purposes and the interests they protect are long settled. Three rationales are conventionally identified:certainty, evidentiary concerns and diligence. As set out by the Supreme Court in M.(K.) v. M.(H.), (SCC), [1992] 3S.C.R. 6, at paras. 22-24: Statutes of limitations have long been said to be statutes of repose. . . .

The reasoning is straightforward enough. There comes a time, it issaid, when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations.. . . The second rationale is evidentiary and concerns the desire to foreclose claims based on stale evidence. Once the limitation period haslapsed, the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim. . . .

Finally, plaintiffs are expected to act diligently and not “sleep on their rights”; statutes of limitation are an incentive for plaintiffs to bringsuit in a timely fashion. The Supreme Court has reaffirmed these passages on several occasions. See, for example, Peixeiro v. Haberman, (SCC), [1997] 3 S.C.R. 549, at para. 32; Novak v. Bond, (SCC), [1999] 1 S.C.R. 808, at para. 64; and McLean v.British Columbia (Securities Commission), 2013 SCC 67 , [2013] 3 S.C.R. 895, at para. 63.

There is no suggestion that thesesame rationales do not animate s. 331 of the CUCP Act. [59] The application of these principles in the context of regulatory offences was addressed in R. v. Fingold, [1996] O.J. No. 3464(C.J.), an Ontario Securities Act prosecution involving a statutory limitation period near-identically worded to s. 331 of the CUCP Act. As said by Babe J. at para. 58: The obvious intent of this

section was to provide some measure of protection for potential defendants from having to face charges arisingout of transactions from the distant past without barring prosecutions for matters that the [Securities] Commission was unaware of, andproviding the Commission a reasonable opportunity to investigate once it had been made aware of a matter, in order to make aconsidered decision on whether to prosecute, based on the usual considerations in exercising prosecutorial discretion such as the strength

of the case and whether the matter is serious enough to warrant the allocation of resources necessary to prosecute it. [60] The rationales underlying limitations statutes generally preference the security of potential defendants over those seeking tosue or charge them. However, jurisprudential construction of these provisions has increasingly endeavoured to balance the interests ofdefendants with those of the plaintiffs or regulators bound by a limitation rule.

The Supreme Court summarized these “modernizing”developments in Novak and Bond, supra, at para. 65: Arbitrary limitation dates have been discouraged in favour of a more contextual view of the parties’ actual circumstances. To take justone example, it has been well-recognized that it is unfair for the limitation period to begin running until the plaintiff could reasonablyhave discovered that he or she had a cause of action: [citations omitted]. Even on this new approach, however, limitation periods are notpostponed on the plaintiff’s whim.

There is a burden on the plaintiff to act reasonably. [61] Put otherwise, and subject to the important “burden” flagged in Novak, there is a principle of discoverability that obtains withrespect to limitation periods. One cannot prosecute that of which one is ignorant. Or, in the language of Peixeiro v. Haberman, supra, atpara. 36: “discoverability is a general rule applied to avoid the injustice of precluding an action before the person is able to raise it”. TheSupreme Court unanimously expressed the “general rule” in Central Trust Co. v.

Rafuse, (SCC), [1986] 2 S.C.R. 147, atpara. 77: [A] cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or oughtto have been discovered by the plaintiff by the exercise of reasonable diligence.

While most of the relevant authorities address civil actions, the same principle, for reasons of public policy and fairness, applies to theassessment of pre-charge delay in the case of regulatory authorities as it does to a plaintiff’s commencement of a cause of action. [62] As with many similar regulatory statutes, the limitation period at issue is engaged not by the occasion of an event ortransaction but by when the relevant “facts … first came to the knowledge” of the named regulator – here, the Superintendent.

Inconstruing closely comparable provisions, courts unsurprisingly have had cause to address both the meaning of the word “facts” and thestandard by which to determine their occurrence and when they come within a regulator’s knowledge. [63] The standard is an objective one. And the “facts” are simply those that make out the elements of the offence. The seminal,frequently quoted and most succinct expression of these propositions appears in Ontario (Securities Commission) v.

InternationalContainers Inc., [1989] O.J. 1007 (H.C.), where Carruthers J. wrote: The yardstick by which … to measure the nature of the facts for purpose of [a limitation period] is that which constitutes the essential ormaterial averments required by law. This is to be determined on an objective view of that which was available to the Commission.

Carruthers J. further made clear that the correct approach to assessing the “facts” is austere: the facts “are not that which [theCommission] thinks is necessary or all that which may be admitted into evidence at the trial or the subject of the granting of particulars”(emphasis added). [64] Keenan J., expanded on these themes in dismissing an appeal brought by the same Securities Commission in the earlier-notedcase of R. v. Fingold, [1999] O.J. No. 369 (C.J.(G.D.)), at para. 61: The process of evidence gathering, verification and analysis is to take place during the limitation period.

That process is not to be usedas any ground for delaying the commencement of the limitation period which is to be objectively viewed as the point at which informationof sufficient cogency to amount to the facts upon which the prosecution is based, first came to the knowledge of the Commission. Whenthe point of commencement is in issue, it is for the Court to determine on an objective standard when those facts first came to theknowledge of the Commission.

It is not the prerogative of the Commission to decide when the limitation period commenced by assertinga need to investigate or verify the original information. [Emphasis added.] “Facts”, as Keenan J. observed at paras. 56, “must mean more than mere rumour or gossip”, but the requisite standard of“sufficient cogency” falls well short of independent validation or persuasive proof.

As said at paras. 56 and 59: It must be information obtained from an identifiable source which might reasonably be expected to have such information andobtained in circumstances which would tend to support the accuracy and reliability of the information given. Similarly, “knowledge”does not require proof or verification to constitute knowledge. … In order to trigger the commencement of the limitation period, it is not necessary that the [regulator] have acquired all the detailsof evidence and the particulars that are to be introduced in evidence at trial. (See also, Romashenko v.

Real Estate Council of British Columbia, [2000] B.C.J. 1292 (C.A.), at para. 17; Theriault v. Canada (Royal Canadian Mounted Police) (2006), 2006 FCA 61 , 267 D.L.R. (4th) 169 (Fed. C.A.), at paras. 31-32, 45, 50 and 69.) [65] To be clear: it is the apprehension of the salient facts and not an appreciation of their potential legal implications thatinstigates a limitation period. A regulator’s assessment of whether these facts amount to an offence or warrant a prosecution, let aloneone likely to result in a conviction, is factored into the interval prescribed by a statutory limitation period.

It does not suspend or extendit. Nor do most limitation periods, including that here at issue, prescribe a standard of persuasion that must be met to trigger itsoperation.

Section 331 speaks only of when “the facts on which the proceedings are based first came to the knowledge of theSuperintendent”. The clock does not begin to run only when the Superintendent determines that a violation of the Act impedes hisoffice’s execution of its regulatory or solvency management functions or interferes with the discharge of other statutory duties. Nor isthe provision effective only once the Superintendent forms “reasonable” or “probable” “grounds to believe” that a CUCP Act offence hasbeen committed. As said in Theriault v. Canada (Royal Canadian Mounted Police), supra, at para. 69:

To start a limitation period running, it is not necessary to have available all the evidence or information required to carry out a prosecution. It is not necessary to have reasonable grounds for prosecution. Nor, finally, is s. 331 restricted only to those facts that underlie a “serious breach” of the Act ; that language is a purely administrative gloss added by FSCO and DICO to their MOU and the predecessor LOU.

As plainly set out in the former agreement: “In the event of a conflict between the provisions of this MOU and the law, the law will govern”. [ 66 ] Absent a contrary provision in an individual statute, the conventional limitation period for provincial offences in Ontario is six months: Provincial Offences Act , s. 76(1).

It is reasonable to infer that the Legislature, bearing in mind the complex and sometime arcane transactions that occur within the financial sector, intended to grant FSCO a generous two years to investigate the forensic implications, if any, of “facts” within its knowledge on the basis that the Superintendent would thereby have adequate time to determine whether those facts give rise to an offence and, if so, justify an exercise of its discretion to prosecute. Any longer period is conclusively deemed to trespass on the interests protected by the limitation period. (

c) The Parties’ Positions [ 67 ] The key question, then, is when were the facts apprehended – whether or not forensically comprehended – by the Superintendent? Unlike most inquiries into the application of statutory limitation periods, the instant case is complicated by the requisite knowledge clearly resting in one Crown body, DICO, and well more than two years before the charge was laid, while the limitation period, on its face, is only activated when that knowledge reposes in a second, here the Superintendent (or, more broadly, the agency, FSCO, for which the Superintendent serves as the CEO).

The core inquiry is further complicated by virtue of the two Crown agencies operating within a single regulatory regime in which they both share and partition superintendence of one sector of the financial service industry. [ 68 ] The defendants say that the institutional distinction between DICO and FSCO is of no legal moment for purposes of determining compliance with the limitation period in the circumstances of this case.

FSCO, it is said, effectively delegated its regulatory powers to DICO upon the occasion of the CCU’s solvency crisis and, accordingly, DICO’s knowledge of the facts is properly imputed to its principal, FSCO. In the alternative, the defendants allege that FSCO had a duty – given the information of which it was aware about the CCU’s financial difficulties and history of legal improprieties and, as well, as primary regulator – to make timely inquiries about facts respecting the CCU that might give rise to charges under the CUCP Act .

Its failure to do so, the argument continues, was so negligent or unreasonable as to negative any claim of non-discoverability. [ 69 ] DICO repudiates both defence theories vesting the Superintendent with “knowledge” prior to FSCO learning on October 15, 2012 that DICO intended to lay the s. 184 charge against the defendants. Through its prosecutor, DICO effectively allows that it, DICO, had knowledge of the predicate facts more than two years before the Information was sworn on October 16, 2012.

If somewhat more gingerly, DICO is also prepared to acknowledge that it might have acted with greater diligence in discovering the legal consequences of those facts, at least those invoking a charge under s. 184 of the CUCP Act . [ 70 ] However, says the prosecution, DICO’s knowledge and any dilatoriness on its part are not to be visited on the Superintendent. What, says DICO, the defendants characterize as a delegation of FSCO’s powers was actually a statutory transfer of responsibilities from one independent body, FSCO, to another, DICO, upon the introduction of the October 2009 amendments to the Act .

DICO, in short, was not acting at the behest or as an agent of FSCO but, rather, as a legally autonomous entity exercising those duties assigned it, and not FSCO, by the Legislature. [ 71 ] Nor, says the prosecution, did FSCO fail to pursue the factual foundation for the s. 184 charge that is the subject of this prosecution. Given the statutory division of powers occasioned by a credit union’s insolvency, there is no basis to infer that FSCO (and perforce, the Superintendent) did not act diligently within its own sphere of responsibility.

In view of the structure of the amended CUCP Act and the information sharing regime grounded in the distribution of powers prescribed in the amended Act , the Superintendent’s Certificate is an accurate statement of when he and FSCO were fastened with the requisite knowledge of the material facts and, further, there is no reasonable basis to infer that these facts were discoverable any earlier by FSCO. [ 72 ] I turn now to resolving the dispute as to the basis and timing of the Superintendent’s awareness of the “facts” underlying the prosecution pursuant to s. 184 of the CUCP Act .

I begin with the timing of DICO’s knowledge of these facts. I then address the questions pertaining to the legal foundation, if any , for FSCO having knowledge – by imputation, constructively or otherwise – of these same facts more than two years prior to the “start” of the proceedings before me. (

d) DICO’s Knowledge of the Facts [ 73 ] The impugned transactions date from March 2009. However, it was Troster’s letter of July 15, 2009 that clearly alerted DICO to the facts underpinning the current prosecution. DICO was then acting as the CCU’s administrator. It quickly confirmed that three mortgages had indeed been registered on properties owned by the CCU and that cautions attached to two of them. At the request of the CCU’s counsel, GR, Troster promptly provided documentation setting out the legal and financial bases for the encumbrances or, in Troster’s words, “the structure of the transaction”.

Knowing that Vinski had no authority to endorse the agreement on behalf of the CCU and that the impugned mortgages had neither been “authorized by [the CCU’s] by-laws” nor “approved, in writing, by the Superintendent”, GR, acting on DICO’s instructions, immediately cautioned Troster about a violation of s. 184 of the CUCP Act . As said in its letter of July 16, 2009, [I]t is illegal to create a security interest in any property owned by the Credit Union pursuant to s. 184 of the [ CUCP Act ].

As a lawyer, you … ought to have known that the purported mortgages were prohibited by statute. [They] are accordingly unlawful and accordingly void. [ 74 ] I infer from this exchange, and the correspondence that soon followed, not only that DICO, acting as administrator, knew of the predicate “facts” by mid-July 2009 but, as well, that it swiftly recognized that they amounted to a breach of s. 184 of the Act . DICO’s further investigations only reinforced its early assessment. Through Vinski’s statutory declaration and (if to lesser degree)

Evans’ contribution, by late-August 2009 DICO had confirmed the elements of the transaction disclosed by Troster and, further, haddeciphered the mechanics of its execution. Not only had its own lawyers identified a violation of s. 184 in its July 2009 letters to Trosterand Evans but, in its February 2010 pleadings (more than two and a half years before it notified the Superintendent), DICO effectivelyacknowledged that the mortgages might be “valid” and sought alternative relief to simply having them set aside.

Further, the “facts”recited in Poprawa’s letter of October 15, 2012 to the Superintendent and said to amount to “reasonable and probable grounds” for the s.184 offence are materially no different than those “facts” available to and investigated and confirmed by DICO in mid-2009. [75] The prosecutor argues that until Justice Newbould’s Order of February 2011, DICO was still trying to decide whether theTroster mortgages created a debt obligation on behalf of the CCU, and therefore remained uncertain until then as to whether a s. 184offence was made out. I have considerable difficulty with this submission.

It is inconsistent with the unqualified position taken bycounsel for DICO in its correspondence and pleadings as to a violation of s. 184. Further, Justice Newbould’s Order did not decide thevalidity or enforceability of the mortgages, but only that a trial – now scheduled for April 2015 – was the appropriate venue to determinethese issues. Put otherwise, the uncertainty said to earlier plague DICO’s resolution of the question of whether an offence had occurredhas not changed. Its determination has merely been delayed.

Further, Poprawa’s letter to the Superintendent discloses no hint ofequivocation as to the integrity of the charge facing the defendants; rather, the very “facts” disclosed to and confirmed by DICO morethan three years prior are there characterized as “an egregious violation of the Act”. [76] In my view, the “facts” known to DICO in mid-2009 were not materially amplified or diluted by any intermediate eventsduring the more than three years that then passed before the defendants were finally charged.

What did change in this interregnum wasDICO’s appreciation of the impact of the “facts” on its efforts to liquidate the CCU and its consequent decision to pursue the defendants,by way of the instant prosecution, as a lesson to other like-minded miscreants in the same financial sector.

Assuming DICO’sknowledge alone was determinative of the issue before me, the earlier-cited authorities make patent that neither of these latterdevelopments (that is, neither the mortgages’ impediment to the CCU’s efficient liquidation nor the general deterrence purpose of layinga charge under s. 184 of the Act) has any role in assessing the application of or compliance with the limitation period. Determinedobjectively, “the facts on which the proceedings are based first came to the knowledge” of DICO while serving as administrator of theCCU in the summer of 2009.

DICO then knew that a security interest, the mortgages, had been created in the credit union’s property,that the encumbrances were unauthorized, and the names of parties responsible for the impugned transactions. Further (althoughunnecessary for a strict limitation period analysis), DICO appreciated as fully in August 2009 as it did when it swore the Information inOctober 2012 that these facts legally supported the charge now faced by the defendants. [77] DICO was appointed liquidator of the CCU on October 18, 2010. It then assumed the power to lay charges under the Act.

Itwas not, however, until it digested the potential impact of Justice Newbould’s Order of February 25, 2011 that DICO first contemplatedcharging the defendants with an offence under s. 184. While Foster, as the personal representative of DICO as liquidator, might wellhave been expected (and is certainly presumed) to know the provisions of DICO’s enabling legislation, he testified that he only thenlearned of the existence of a statutory limitation period predicated on the Superintendent’s kn

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