r v. AUTORIT, 2021 QCCA 1364

Langford Sharp c. Autorité des marchés financiers 2021 QCCA 1364 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL Nos. : 500-09-028096-196 , 500-09-028123-198 (500-11-054667-189) DATE: September 15, 2021 CORAM: THE HONOURABLE GENEVIÈVE MARCOTTE, J.A. ROBERT M. MAINVILLE, J.A. BENOÎT MOORE, J.A. No. 500-09-028096-196 FREDERICK LANGFORD SHARP APPELLANT – Petitioner v. AUTORITÉ DES MARCHÉS FINANCIERS RESPONDENT – Impleaded party and SHAWN VAN DAMME VINCENZO ANTONIO CARNOVALE PASQUALE ANTONIO ROCCA IMPLEADED PARTIES – Petitioners and SOLO INTERNATIONAL INC.

MICHEL PLANTE IMPLEADED PARTIES – Impleaded parties and FINANCIAL MARKETS ADMINISTRATIVE TRIBUNAL IMPLEADED PARTY – Respondent ____________________________________________________________________ No. 500-09-028123-198 SHAWN VAN DAMME VINCENZO ANTONIO CARNOVALE PASQUALE ANTONIO ROCCA APPELLANTS – Petitioners v. AUTORITÉS DES MARCHÉS FINANCIERS RESPONDENT – Impleaded party and FREDERICK LANGFORD SHARP IMPLEADED PARTY – Petitioner and SOLO INTERNATIONAL INC.

MICHEL PLANTE IMPLEADED PARTIES– Impleaded parties and FINANCIAL MARKETS ADMINISTRATIVE TRIBUNAL IMPLEADED PARTY – Respondent JUDGMENT [ 1 ] On appeal from a judgment of the Superior Court, District of Montreal, rendered on January 9, 2019, by the Honourable Justice David R. Collier, which dismissed an application for judicial review of a decision of the Financial Markets Administrative Tribunal.

[ 2 ] For the reasons of Justice Marcotte, J.A., with which Justice Moore, J.A., agrees, and for the concurring reasons of Justice Mainville, J.A., THE COURT : [ 3 ] DISMISSES the appeals, with legal costs. GENEVIÈVE MARCOTTE, J.A. ROBERT M. MAINVILLE, J.A. BENOÎT MOORE, J.A. Mtre Daniel Baum Mtre Sean Griffin LANGLOIS AVOCATS For Frederick Langford Sharp Mtre Stéphanie Jolin Mtre Jean Nicolas B. Wilkins CONTENTIEUX DE L’AUTORITÉ DES MARCHÉS FINANCIERS For Autorité des Marchés Financiers Mtre Patrick Ferland Mtre Sébastien Caron LCM AVOCATS For Shawn Van Damme, Vincenzo Antonio Carnovale, Pasquale Antonio Rocca Date of hearing: December 16, 2020

REASONS OF MARCOTTE, J.A.

THE CONTEXT [ 4 ] The judgment under appeal [1] dismissed an application for judicial review of a decision of the Financial Markets Administrative Tribunal (the “FMAT”) [2] that denied the Appellant’s motion for a declinatory exception and confirmed the FMAT’s jurisdiction to hear an action brought against them by the Autorité des marchés financiers (the “AMF”) under the Quebec Securities Act . [3] [ 5 ] In its introductory motion, the AMF alleged that the Appellants , Van Damme, Carnovale, Rocca and Sharp, participated in a transnational “pump and dump” [4] scheme whereby they improperly influenced or manipulated the price of a stock in contravention of sections 195.2 and 199.1 of the Quebec Securities Act . [ 6 ] According to the AMF, the Appellants , who reside in British Columbia, made financial transactions through offshore companies incorporated in several countries (e.g., the Marshall Islands, Belize and Antilles, among others) and with bank accounts in Europe (namely Switzerland and the United Kingdom).

They allegedly acted in concert to (1) acquire the shares of Solo International Inc. (“Solo” ) ; (2) give Solo a legitimate “face”; (3) promote Solo’s business (to increase its shares’ value fraudulently); (4) sell its shares for a profit; and (5) distribute this profit among themselves. [ 7 ] Solo was incorporated in Nevada in April 2010 to do business in interior design and became a “shell” available for purchase in the early months of 2011. [ 8 ] On October 10, 2011, Michel Plante (“Plante”), a Quebec resident, acquired 3,000,000 shares in Solo and became its majority shareholder, taking control of both the company and its subsidiary, 9252-4768 Québec Inc. [ 9 ] While Plante had no previous experience in the mining industry, in the course of the fall of 2011, Solo purchased mining claims in Quebec through its subsidiary. [ 10 ] Offshore entities linked to the Appellants financed this venture .

Between September 2011 and March 2012, most of Solo’s original shares were transferred to offshore entities linked to the Appellants . [ 11 ] The first “pump” operation happened during the months of January and February 2012. To promote its mining venture, Solo published six press releases, some of which were issued in Montreal.

These press releases [5] touted Solo’s development and mining exploration activities in Quebec and represented that “the province of Quebec, where Solo International is based, offers some of the best infrastructure and mineral exploration incentives of any state or province in North America”. They also referred to Quebec’s “favourable policy environment to go along with the mineral potential” with “stable policies provid[ing] companies with the certainty that reduces risk for long-term projects” and insisted on the fact that “[a]ll of the Company’s properties are currently at the exploration stage in Quebec”.

Several websites also advertised Solo’s shares in a stock market publicity campaign. [ 12 ] Appellant Van Damme took an active

part in writing these press releases and allegedly financed, at least in part, the publicity campaign via one of his offshore entities. Despite these promotional efforts, there were no substantial developments at Solo. The value of its shares nonetheless increased during this period: 2,784,508 shares were sold (“dumped”) for a profit of $390,249. All transactions were allegedly made by or to the benefit of offshore entities linked to Appellants Sharp, Van Damme and Rocca. [ 13 ] The second “pump” operation occurred on a single day, November 14, 2012, at which time eight promoters marketed Solo’s shares.

Van Damme and Rocca allegedly financed this promotional effort via their offshore entities. [ 14 ] Again, despite this promotion, Solo remained inoperative. However, between November and December 2012, 43,405,400 of Solo’s shares were sold for a profit of $2,241,726. All transactions were allegedly made by or to the benefit of offshore entities linked to the Appellants .

Transfers were made between the Appellants ’ offshore entities to distribute the profits resulting from the first and second “pump” operations. [ 15 ] Moreover, the AMF alleges that, at all material times, Solo was under the direction of Michel Plante, a Quebec resident, and was a reporting issuer in Quebec with a business address at 1155 René-Lévesque Blvd. W., suite 2500, in Montreal.

Additionally, the promotional efforts described earlier (some of which originated from Montreal) were accessible to Quebec residents and a number of Quebec investors suffered losses (approximately 15 investors lost a total of $5,000). PROCEDURAL HISTORY [ 16 ] On February 28, 2017, the AMF brought an action before the FMAT seeking conclusions to:

• Order the Appellants to cease any activity in respect of a transaction in securities pursuant to

section 265 of the Securities Act ; and • Prohibit the Appellants, for five years, from acting as directors or officers of an issuer, dealer, adviser or investment fund manager pursuant to

section 273.3 of the Securities Act ; and, pursuant to sections 195.2 , 199.1(1) and 273.1 of the Securities Act to: • Impose an administrative penalty of $2,000,000 on Sharp; • Impose an administrative penalty of $500,000 on Van Damme; • Impose an administrative penalty of $300,000 on Carnovale; and • Impose an administrative penalty of $630,000 on Rocca. [ 17 ] On June 7, 2017, Rocca, Van Damme and Carnovale filed a motion for a declinatory exception. [ 18 ] On June 26, 2017, Sharp also filed a separate motion for a declinatory exception. [ 19 ] On November 22, 2017, the FMAT dismissed both motions. [ 20 ] On December 21, 2017, the Appellants sought the judicial review of the FMAT decision before the Superior Court. [ 21 ] On January 9, 2019, the Superior Court dismissed the Appellants ’ applications for judicial review [6] .

On February 11 and 19, 2019, the Appellants filed their respective motions for leave to appeal the Superior Court decision. These motions were granted by a judge of this Court on March 15, 2019. [7] The FMAT decision [ 22 ] In its decision, the FMAT acknowledged the transnational character of the alleged infractions, but nevertheless confirmed that it had jurisdiction over the matter, after finding a real and substantial connection between these infractions and the province of Quebec. [ 23 ] In coming to this conclusion, the FMAT relied on three cases: (1) the Supreme Court decision in Libman v.

The Queen , [8] which applied the real and substantial connection test in a transnational transactional fraud context; (2) the Supreme Court decision in Global Securities Corp. v. British-Columbia Securities Commission, [9] which confirmed that the province’s authority over securities regulation is not limited to “purely intraprovincial matters”; and (3) the British Columbia Court of Appeal decision in McCabe v.

British Columbia Securities Commission , [10] which defined the real and substantial connection test as being one where “[t]he question is whether there is a real and substantial connection, not whether a particular connection is the most real and substantial” and further highlighted that “[t]he analysis of whether a real and substantial connection exists must reflect the realities of modern securities regulation”. [ 24 ] In its decision, the FMAT described the Appellants ’ central role in the pump and dump scheme via their offshore entities and underlined the five key allegations of the AMF proceedings which served to establish a real and substantial connection with the province of Quebec:

(1) Solo was a reporting issuer in Quebec;

(2) Solo had a business address in Montreal;

(3) Solo was under the direction of a Quebec resident at all material times; (4) the promotion of Solo’s activities was available to Quebec residents; and (5) some Quebec residents ultimately were defrauded by the Appellants ’ scheme. [ 25 ] The FMAT also emphasized that the existence of global and interconnected markets increases the opportunity for market manipulation while making detection and enforcement more difficult.

It held that the discretionary powers provided under sections 93 and 94 of the Act respecting the regulation of the financial sector [11] must be used in the public interest to maintain the integrity of Quebec’s securities market and to protect local investors, and that this public interest weighed in favour of the recognition of its jurisdiction over the matter. [ 26 ] Finally, the FMAT dismissed the Appellants ’ forum non conveniens argument, as codified under

article 3135 of the Civil Code of Québec ( C.C.Q. ), in the absence of evidence that another province or state would be in a better position to decide the matter. The FMAT concluded that it would not be in the public interest to decline jurisdiction and therefore declared itself competent by virtue of

section 93 of the ARRFS . The Superior Court decision [ 27 ] The Superior Court dismissed the Appellants ’ application for judicial review. [ 28 ] Following a short overview of the FMAT decision and its factual context, the judge addressed the determination of the applicable standard of review. Having found no conclusive answer in the case law and although he found an “arguable basis” for the application of the reasonableness standard, he followed the approach of the British Columbia Court of Appeal in Torudag v.

British Columbia (Securities Commission) [12] and held that it was “unnecessary to decide the [applicable standard of review] since the Tribunal’s conclusions were both reasonable and correct”. [ 29 ] Relying on the Supreme Court decision in Global Securities, [13] the judge also confirmed that the scope of the FMAT’s jurisdiction should not be limi ted to intraprovincial matters. [ 30 ] Moreover, he referred to the “contours” of the real and substantial connection test as laid out by the Supreme Court in Club Resorts Ltd. v.

Van Breda , [14] insisting on the purpose of this test, which is to limit the reach of provincial conflict rules or the

assumption of jurisdiction by provincial courts. [ 31 ] Upon reviewing the key allegations of the proceedings, the Superior Court judge found that they contained sufficient objective connecting factors to this province . Citing the Supreme Court in Unifund [15] (as referred to in the McCabe decision cited by the FMAT), he underlined that “what constitutes a ‘sufficient’ connection depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it”. [ 32 ] Referring to Torudag v.

British Columbia (Securities Commission) , [16] he added: [40] In a world of global financial transactions the relationship between the forum, the individual and the relevant legislation may be of greater significance in determining a real and substantial connection, than the physical location of the actors or their trading activities. [17] [ 33 ] He then reviewed the factual elements of the case establishing a real and substantial connection, prior to concluding that the FMAT “was correct to consider that the connecting factors, including public interest, were sufficient to establish jurisdiction”. [18] [ 34 ] While he acknowledged the six (6) factors listed by the FMAT in its decision, [19] the Superior Court judge underlined that the conspiracy alleged by the AMF weighed heavily in the FMAT’s decision to assert jurisdiction and held that the FMAT’s inference that the Appellants acted in concert to manipulate the market price of Solo shares was reasonable “given the highly coordinated timing of their share purchases, and the large volume of coordinated share sales at a time when at least three of the petitioners (and Plante) were involved in touting a shell company with no real business or income”. [20] The judge also insisted on the fact that the indirect participation of a single person could result in liability for each of the petitioners for the alleged infraction under

section 199.1 of the Securities Act . [21] [ 35 ] As part of an obiter, he noted that, although the FMAT had not referred to the provisions of Book Ten of the C.C.Q. entitled “Private international law”, the Appellants ’ actions through misleading press releases could amount to a fault committed in the province and that the allegations of injury suffered by Quebec investors and of possible harm to the Quebec securities market through the undermining of investor confidence could be factors attributing jurisdiction to Quebec courts in actions of a personal patrimonial nature under

article 3148 para. 1(3) C.C.Q . He concluded that this only served to reinforce his opinion regarding the existence of a real and substantial connection with the province. ISSUES IN APPEAL [ 36 ] The issues raised in the appeal can be broken down into two main questions: 1. Did the Superior Court judge fail to properly identify the standard of review and to apply it to the FMAT decision? 2.

Did the Superior Court misconstrue the applicable rules limiting the FMAT’s extraterritorial jurisdiction, by failing to apply the private international law rules of the C.C.Q . or, in the alternative, by finding a real and substantial connection with the province of Quebec? ANALYSIS 1.

Did the Superior Court judge fail to properly identify the standard of review and to apply it to the FMAT decision? [ 37 ] Faced with opposing views from the parties as to the applicable standard of review, and with no determinative authorities having been submitted on the issue, the Superior Court judge examined various factors in an effort to identify the applicable standard. [ 38 ] He found no clear indication of the legislature’s intent to protect the FMAT decision by the application of a reasonableness standard.

He noted that FMAT decisions are only partially protected by a privative clause, given that its decisions may be appealed to the Court of Québec, [22] save for questions of jurisdiction, which are subject to judicial review. [23] [ 39 ] He did, however, point to various other factors that could weigh in favour of applying a deferential standard of review. For one, the FMAT is invested with broad statutory discretion to be exercised in the public interest .

Also, its members have an expertise in financial regulatory matters that is well recognized by the courts, including expertise in determining what could constitute an infraction under the Securities Act , a statute closely associated with the functions of the FMAT. [ 40 ] The Superior Court judge also emphasized that the real and substantial connection test is not entirely an issue of jurisdiction that would command a standard of review of correctness because it relies on the particular facts of the case and involves questions of mixed fact and law that would command deference.

He also underlined that decisions that are based on discretion and policy considerations would also be subject to deference. [ 41 ] In the end, however, although he recognized an “arguable basis” for the application of a reasonableness standard when reviewing conclusions reached under the real and substantial connection test, he concluded, as the British Columbia Court of Appeal had done in Torudag , [24] that it was unnecessary to decide the issue, since the FMAT’s conclusions were both reasonable and correct. [ 42 ] Given that the Superior Court judgment was rendered prior to the Supreme Court decision in Vavilov , [25] which introduced a new framework for determining the applicable standard of review, the analysis must now be carried out in appeal from this new perspective: reasonableness is now presumed unless otherwise indicated by legislative intent (such as a statutory appeal) or unless the rule of law requires that the correctness standard be applied “for certain categories of questions, namely constitutional questions, general questions of law of central importance to the legal system as a whole and questions related to the jurisdictional boundaries between two or more administrative bodies” . [26]

[ 43 ] In light of this new framework, the Appellants argue that the applicable standard is correctness given that the application of private international law rules “inevitably raises constitutional issues”, as the Supreme Court stated in Van Breda . [27] They also submit that the FMAT’s choice of these rules between the common law and the C.C.Q. constitutes a “general [question] of law of central importance to the legal system as a whole”, as it concerns all administrative tribunals in a similar situation.

In their view, it requires a “uniform and consistent” [28] answer for a coherent application of jurisdictional rules in cases involving administrative sanctions as they apply to out-of-province defendants, with “implications [that go] beyond the decision at hand”. [29] According to the Appellants , reviewing this question under reasonableness would lead to uncertainty, regardless of the fact that determination of a sufficient connection is factually driven and could otherwise be reviewed under reasonableness. [ 44 ] The Respondent, AMF, answers that the Appellants have not challenged the constitutional validity of the Securities Act and that they erroneously seek the application of private international law rules of the C.C.Q.

Moreover, it claims that the lack of a substantial and real connection with Quebec courts is an issue that depends on the facts of the case and requires the application of the reasonableness standard. [ 45 ] Both parties bring forward arguments that deserve comments. For one, the Appellants are right in seeking the application of the correctness standard, as the issue is indeed a constitutional one, but not so much by reason of the fact that it is a jurisdictional issue. Rather, the issue relates to the constitutional applicability of a provincial law to foreigners or to matters with extraterritorial aspects.

Here, the FMAT had to apply the real and substantial connection test within its constitutional law dimension and determine “whether or not the sections of the ARRFS and the Securities Act are constitutionally applicable to the Appellants in this case’s particular circumstances”. [ 46 ] Since it involves a constitutional issue which calls for the application of the correctness standard, as the Supreme Court recognized in Vavilov , [30] the FMAT’s determination is subject to the correctness standard, despite the fact that the determination may give rise to questions of mixed fact and of law.

As the Supreme Court outlined in Westcoast Energy v. Canada, the focus must be on the question to be answered : [31] 39 Although at first glance it may appear that the finding on which this controversy centres is one of fact, modest examination reveals that it is one of mixed law and fact. The key to this determination is to consider the purpose for which the finding was made, that is, what question it was intended to answer . (…) 40 As stated above, even questions of mixed law and fact are to be accorded some measure of deference, but this is not so in every case.

It would be particularly inappropriate to defer to a tribunal like the Board, the expertise of which lies completely outside the realm of legal analysis, on a question of constitutional

interpretation. Questions of this type must be answered correctly and are subject to overriding by the courts . It seems reasonable to accept the proposition that courts are in a better position than administrative tribunals to adjudicate constitutional questions. It is interesting to note that this particular panel’s professional training was not in law. So, although the question here was one of mixed law and fact, it follows that the Board was not entitled to deference because of the nature of the legal question to be answered. 39 Bien que, à première vue, la conclusion sur laquelle porte la controverse puisse sembler une conclusion de fait, il ressort d’un examen

sommaire de celle - ci qu’il s’agit plutôt d’une question de droit et de fait. La cl é de cette constatation consiste à se demander dans quel but on a tir é cette conclusion, c ’ est - à - dire à quelle question on voulait r é pondre . […] 40 Comme je l’ai déjà dit, même les questions mixtes de droit et de fait doivent faire l’objet d’une certaine retenue, mais ce n’est pas le cas dans tous les cas.

Il serait particulièrement inapproprié de s’en remettre à un tribunal comme la Commission, dont l’expertise se situe complètement en dehors du domaine de l’analyse juridique, sur une question d’interprétation constitutionnelle. Les questions de ce type doivent recevoir une réponse correcte et peuvent être soumises à l’annulation des tribunaux . Il semble raisonnable d’accepter la proposition selon laquelle les cours de justice sont mieux à même que les tribunaux administratifs de trancher des questions constitutionnelles.

Il est intéressant de noter que la formation professionnelle de ce groupe n’était pas en droit. Ainsi, bien qu’il s’agissait en l’espèce d’une question mixte de droit et de fait, il s’ensuit que la Commission n’avait pas droit à la retenue en raison de la nature de la question juridique à laquelle il fallait répondre. (Emphasis added) [ 47 ] Here, the question to be answered is the constitutional applicability of the Securities Act to the Appellants ’ alleged scheme.

While expertise (or lack thereof) no longer plays a role in determining the applicable standard of review, the rule of law requires the FMAT to correctly apply the Securities Act within the Constitution’s boundaries, even where the real and substantial connection analysis involves factual determinations.

Moreover, in the context of a motion for a declinatory exception where the facts at play are those alleged in the proceedings, which facts are deemed to be true, there is little concern for deference towards factual determinations. [ 48 ] In any event, insofar as the Appellants claim that the FMAT failed to consider the private international law rules of the C.C.Q., the issue of the applicability these rules in the context of this matter also warrants the application of the correctness standard, given the central importance of the issue to the legal system. [ 49 ] This brings us to an examination of the second issue that must be decided in order to provide an answer to the question of

whether the Superior Court judge properly applied the correctness standard. 2. Did the Superior Court misconstrue the applicable rules limiting the FMAT’s extraterritorial jurisdiction, by failing to apply the private international law rules of the C.C.Q . or, in the alternative, by finding a real and substantial connection with Quebec? [ 50 ] This issue can be divided into two sub-issues as follows: i. Do the private international law rules of the C.C.Q. apply to the case at hand? ii.

Was the Superior Court correct in finding that the FMAT’s finding of a real and substantial connection with the province of Quebec was correct? [ 51 ] Prior to addressing the first sub-issue dealing with the applicability of the private international law rules of the C.C.Q ., it is appropriate to refer to the relevant provisions that establish the FMAT’s jurisdiction in relation to the allegations of the AMF proceedings and to determine whether

section 93 of the ARRFS and sections 265 , 273.1 and 273.3 of the Securities Act are constitutionally applicable to the particular circumstances of the case. Relevant legislative provisions and their constitutional applicability to the case [ 52 ]

Section 93 of the ARRFS provides that the function of the FMAT is to make determinations with respect to matters brought under the Act or the Acts listed in

Schedule I, as follows: 93. The function of the Tribunal is to make determinations with respect to matters brought under this Act , the Money-Services Businesses Act (chapter E-12.000001 ) and the Acts listed in

Schedule I. Except where otherwise provided by law, the Tribunal shall exercise its jurisdiction to the exclusion of any other tribunal or adjudicative body . The Tribunal shall exercise its discretion in the public interest . (…) 93. Le Tribunal a pour fonction de statuer sur les questions portées en vertu de la présente loi , de la

Loi sur les entreprises de services monétaires (chapitre E-12.000001 ) et des lois énumérées à l’annexe I. Sauf disposition contraire de la loi, le Tribunal exerce sa compétence à l’exclusion de tout autre tribunal ou organisme juridictionnel . Le Tribunal exerce son pouvoir discrétionnaire dans l’intérêt public . […] (Emphasis added) [ 53 ] The Securities Act is listed in

Schedule I and forms part of the legislation over which the FMAT has the authority to make determinations “to the exclusion of any other tribunal or adjudicative body”. [ 54 ] Sections 265 , 273.1 and 273.3 of the Securities Act empower the FMAT to order a person to cease any activity in respect of securities transactions, to impose an administrative penalty and to prohibit a person from acting as a director or officer of an issuer, dealer, adviser or investment fund manager:

265. The Financial Markets Administrative Tribunal may order a person to cease any activity in respect of a transaction in securities . (… ) 273.1. Where the Financial Markets Administrative Tribunal becomes aware of facts establishing that a person has, by

an act or omission, contravened, or aided in the contravention of, a provision under this Act or a regulation made under its authority, the Tribunal may impose an administrative penalty on the offender and have it collected by the Authority . (…) 273.3. The Financial Markets Administrative Tribunal may prohibit a person from acting as a director or officer of an issuer, dealer, adviser or investment fund manager on the grounds set out in

article 329 of the Civil Code , or where a penalty has been imposed on the person under this Act , the Act respecting the distribution of financial products and services (chapter D-9.2 ) or the Derivatives Act (chapter I-14.01 ). 265. Le Tribunal administratif des marchés financiers peut ordonner à une personne de cesser toute activité relative à une opération sur valeurs mobilières . […] 273.1.

Lorsque le Tribunal administratif des marchés financiers prend connaissance de faits établissant qu’une personne a, par un acte ou une omission, contrevenu ou aidé à contrevenir à une disposition de la présente loi ou d’un règlement pris en vertu de son autorité, il peut imposer une sanction administrative au contrevenant et la faire recueillir par l’Autorité . […] 273.3. Le Tribunal administratif des marchés financiers peut interdire à une personne d’agir à

titre d’administrateur ou de dirigeant d’un émetteur, d’un courtier, d’un conseiller ou d’un gestionnaire de fonds d’investissement pour les motifs prévus à l’

article 329 du Code civil ou lorsqu’une pénalité lui a été imposée en vertu de la présente loi , de la

Loi sur la distribution de produits et services financiers (chapitre D-9.2 ) ou de la

Loi sur les instruments dérivés (chapitre I-14.01 ). (Emphasis added) [ 55 ] Such power is discretionary and, according to

section 93 of the ARRFS , must be exercised in the public interest. [32] While the public interest appears to be the only requirement under

section 265 , sections 273.1 and 273.3 further require a demonstration that the Securities Act has been contravened. In this case, the Respondent alleges that the Appellants violated sections 195.2 and 199.1 of this Act: [33] 195.2. Influencing or attempting to influence the market price or the value of securities by means of unfair, improper or fraudulent practices is an offence . (…) 199.1.

A person who directly or indirectly engages or participates in any transaction or series of transactions in securities or any trading method relating to a transaction in securities, or in any act, practice or course of conduct is guilty of an offence if the person knows, or ought reasonably to know, that the transaction, series of transactions, trading method, act, practice or course of conduct (1) creates or contributes to a misleading appearance of trading activity in, or an artificial price for, a security ; 195.2.

L e fait d’influencer ou de tenter d’influencer le prix du marché ou la valeur des valeurs mobilières au moyen de pratiques déloyales, irrégulières ou frauduleuses constitue une infraction . […] 199.1.

Commet une infraction toute personne qui, même indirectement, se livre ou participe à une opération ou à une série d’opérations sur des titres ou à une méthode de négociation relative à une opération sur des titres, à un acte, à une pratique ou à une conduite si elle sait, ou devrait raisonnablement savoir, que l’opération, la série d’opérations, la méthode de négociation, l’acte, la pratique ou la conduite: 1° crée ou contribue à créer une apparence trompeuse d’activité de négociation d’un titre, ou un cours artificiel pour un

titre ; (Emphasis added) [ 56 ] None of these sections provide any indication regarding their territorial reach. However, they are presumed to apply within the boundaries of the province. [34] [ 57 ] Here, contrary to the Appellants ’ submission, there is no extraterritorial jurisdiction of the FMAT at issue. We are only concerned with the FMAT’s territorial jurisdiction over out-of-province defendants for alleged actions that have a connection with the province of Quebec. [ 58 ] The FMAT and the Superior Court judge did not explicitly refer to the “constitutional applicability” of the Securities Act .

However, the FMAT reproduced sections 93 and 94 of the ARRFS , which give it the authority to make the required determination in the public interest, and it referred to the real and substantial connection test as developed in the context of constitutional applicability determinations in order to assert it s jurisdiction over the matter.

[ 59 ] The FMAT referred to the McCabe decision, in which a resident of British Columbia, who had carried on his business from his home, challenged the applicability of British Columbia laws with respect to his alleged misrepresentations regarding an American company whose shares traded exclusively on the Over-the-Counter Bulletin Board (“OTCBB”) in the United States. The fact that the British Columbia Securities Commission had a presence-based jurisdiction over him was not in debate.

The British Columbia Court of Appeal relied on the Supreme Court decision in Unifund , which established a framework using the real and substantial connection concept, and examined the constitutional applicability of the provincial regulatory regime imposing administrative sanctions without referring to private international law rules. Goepel, J.A., wrote: [35] [32] Modern securities markets are complex and multi-jurisdictional.

The Act is regulatory in nature and the Commission is part of a network of administrative bodies that regulate securities markets throughout Canada and other jurisdictions. [33] The Commission plays the central role in the regulation of securities markets in British Columbia and has been granted a wide mandate to do so under the Act . The primary goal of the Act is to serve the public interest in British Columbia by protecting investors, fostering capital market efficiency, and promoting public confidence in the system.

The Commission is a highly specialized regulatory tribunal that provides expertise in interpreting and applying the Act , and has broad discretion to determine what is in the public interest with respect to the securities industry. [34] In Unifund , the Supreme Court of Canada held that consideration of a provincial statute’s constitutional applicability can be conveniently organized around the following propositions (at para. 56): 1. The territorial limits on the scope of provincial legislative authority prevent the application of the law of a province to matters not sufficiently connected to it; 2.

What constitutes a “sufficient” connection depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it; 3. The applicability of an otherwise competent provincial legislation to out-of-province defendants is conditioned by the requirements of order and fairness that underlie our federal arrangements; 4.

The principles of order and fairness, being purposive, are applied flexibly according to the subject matter of the legislation. [35] The question is whether there is a real and substantial connection, not whether a particular connection is the most real and substantial.

This question is to be answered with reference to the regulatory regime at issue, the particular provision being applied, the impugned conduct, and the individual or entity who is subject to the regulatory body. [36] In the context of securities regulation, the Commission’s jurisdiction depends on whether the impugned conduct has a sufficient connection to British Columbia, or, as recently expressed by this Court, there is “a state of facts demonstrating circumstances in which it would be appropriate for a tribunal to take jurisdiction over a legal issue or controversy”: Torudag v.

British Columbia (Securities Commission) , 2011 BCCA 458 at para. 19 . Whether this connection is termed a “meaningful” one or a “real and substantial” one, the concept is the same: Torudag at para. 19 . [37] The analysis of whether a real and substantial connection exists must reflect the realities of modern securities regulation.

For instance, conduct involving securities will often be transnational in nature, crossing provincial and state borders. [ 60 ] The Superior Court judge, in turn, relied on the real and substantial connection factors elaborated in Van Breda prior to concluding that there were sufficient connecting factors to establish jurisdiction according to the Unifund case, [36] which defined the “sufficient” connection test for asserting jurisdiction as one that “depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it”. [ 61 ] He also cited the Torudag case, [37] which concerned the constitutional applicability of British Columbia securities legislation to trading activities carried outside the province, in support of the proposition that the factors listed in Unifund “may be of greater significance in determining a real and substantial connection, than the physical location of the actors or their trading activities” in the context of global financial transactions.

In that case, the British Columbia Court of Appeal had also dismissed the argument of jurisdictional overreach, based on the fact that the securities traded were those of a British Columbia reporting issuer and that a large proportion of the shares had been sold by British Columbia residents.

It held, as a result, that there was a real and substantial connection to the jurisdiction, which permitted the British Columbia Securities Commission to properly take jurisdiction over the matter. [ 62 ] The Superior Court judge noted that the FMAT had not referred to the private international law rules of the C.C.Q. , but he stopped short of determining whether these provisions would apply to the determination of the FMAT’s jurisdiction. However, he wrote as an obiter that the criteria of

article 3148 para. 1(3) C.C.Q. could otherwise be satisfied in the case at hand. [ 63 ] This last comment may have led to the arguments submitted in appeal regarding the applicability of the private international law rules of the C.C.Q. , which had not been raised earlier in the Appellants ’ proceedings. In my view, however, and as will be addressed in the following section, the issue is one of constitutional applicability of Quebec securities legislation rather than one of private international law calling for the application of these provisions . i.

Do the private international law rules of the C.C.Q . apply to the jurisdictional question? [ 64 ] Both the FMAT and the Superior Court ultimately recognized that the FMAT had authority over the subject matter of the alleged violations of the Securities Act and the issuance of administrative sanctions. [ 65 ] The Appellants argue that the FMAT (and the Superior Court) failed to apply the private international law rules of the C.C.Q . This argument appears to have been officially raised for the first time in appeal and, as previously stated, is not found in the lower court

proceedings (be it in the motions for a declinatory exception or the applications for judicial review), although it may have been pleaded at the time of the hearing before the FMAT. [38] [ 66 ] The Appellants now argue that, in the absence of explicit provisions in the Securities Act defining the FMAT’s jurisdiction over extraterritorial offences, the private international law rules of the C.C.Q. provide an exhaustive set of rules for all matters regarding the assumption of jurisdiction by Quebec authorities over out-of-province defendants, including public law matters and administrative tribunals in the province.

Relying on the Supreme Court decisions in Van Breda and Uashaunnuat , they submit that these rules apply where the issue of jurisdiction over out-of-province defendants in Quebec is at play, including where administrative sanctions are being sought under a securities regulatory regime.

They claim that, by virtue of those rules, the FMAT has no jurisdiction. [ 67 ] Relying, among other sources, on this Court’s recent judgment in Donaldson , [39] the Respondent answers that the private international law rules of the C.C.Q. do not apply in matters of administrative law such as the matter at hand, which involves administrative sanction proceedings by the AMF before the FMAT. [ 68 ] In Van Breda , in the context of a tort action, the Supreme Court defined conflicts rules within the constitutional structure and, in doing so, referred to the Quebec private international law rules of the C.C.Q .: [40] [21] Conflicts rules must fit within Canada’s constitutional structure.

Given the nature of private international law, its application inevitably raises constitutional issues. This branch of the law is concerned with the jurisdiction of courts of the Canadian provinces, with whether that jurisdiction should be exercised, with what law should apply to a dispute, and with whether a court should recognize and enforce a judgment rendered by a court of another province or country.

The rules of private international law can be found, in the common law provinces, in the common law and in statute law and, in Quebec, in the Civil Code of Québec , S.Q. 1991, c. 64 , which contains a well-developed set of rules and principles in this area (see Civil Code of Québec , Book Ten, arts. 3076 to 3168). The interplay between provincial jurisdiction and external legal situations takes place within a constitutional framework which limits the external reach of provincial laws and of a province’s courts. The Constitution assigns powers to the provinces.

But these powers are subject to the restriction that they be exercised within the province in question (see P. W. Hogg, Constitutional Law of Canada (5th ed. 2007), vol. 1, at pp. 364-65 and 376-77; H. Brun, G. Tremblay and E. Brouillet, Droit constitutionnel (5th ed. 2008), at p. 569; British Columbia v. Imperial Tobacco Canada Ltd. , 2005 SCC 49 , [2005] 2 S.C.R. 473, at paras. 26-28 , per Major J.), and they must be exercised in a manner consistent with the territorial restrictions created by the Constitution (see Castillo v.

Castillo , 2005 SCC 83 , [2005] 3 S.C.R. 870, at para. 5 , per Major J.; Unifund Assurance Co. v. Insurance Corp. of British Columbia , 2003 SCC 40 , [2003] 2 S.C.R. 63, at para. 51 , per Binnie J.). [ 69 ] Also, in Uashaunnuat , the minority judges stated that the C.C.Q. rules also apply to “certain aspects of public law”: [T]he C.C.Q. is not limited to “private law” rules; rather, it is the “ jus commune ” of Quebec, as is expressly stated in its preliminary provision.

Therefore, in the matters to which it relates – including the jurisdiction of Quebec authorities, which is the subject of Title Three of Book Ten – the C.C.Q. encompasses certain aspects of public law (… ). [41] (Emphasis added) [ 70 ] It must be emphasized that in Uashaunnuat , the rights claimed were personal rights and a sui generis right (an aboriginal title right under

section 35 of the Constitution ) [42] and, as such, would qualify as private rights. However, it is undeniable that the C.C.Q. acts as suppletive law for a large number of matters, including certain aspects of public law. In fact, the preliminary provision of the C.C.Q. specifically refers to the jus commune, which does not only encompass private law. [43] Moreover, it is obvious that the C.C.Q . rules, including Book Ten entitled “Private international law”, apply to administrative tribunals.

The comments of the Minister of Justice are clear in that they specify that the private international law rules apply equally to all Quebec authorities, including judicial and administrative tribunals. [44] However, in my view, these comments should not be interpreted as meaning that these rules will be held to apply systematically to all matters dealing with property and civil rights contemplated by Section 92 (13) of the Constitutional Act of 1867, regardless of whether there are any private rights at issue. [ 71 ] In my view, the scope of Book Ten cannot be broadened to the point of determining jurisdiction in matters of public or criminal law that do not call for private international law rules, where the primary basis of jurisdiction is not personal or real but is territorial , [45] such as in the present case. [ 72 ] As Laforest, J. stated in Libman v.

The Queen : [46] The primary basis of criminal jurisdiction is territorial. The reasons for this are obvious. States ordinarily have little interest in prohibiting activities that occur abroad and they are, as well, hesitant to incur the displeasure of other states by indiscriminate attempts to control activities that take place wholly within the boundaries of those other countries ; see R. v. Martin , [1956] 2 All E.R. 86, at p. 92 . It is, however, permissible under international law to exercise jurisdiction on other bases.

For example, states have long exercised jurisdiction over ships that fly their flags and over their nationals abroad. As well, along with other types of protective measures, states increasingly exercise jurisdiction over criminal behaviour in other states that has harmful consequences within their own territory or jurisdiction; see The Lotus (1927), P.C.I.J., Ser. A., No. 10.

It follows from this that the same criminal act may occasionally be subject to prosecution in more than one country, a matter to which I shall refer from time to time. (Emphasis added) [ 73 ] While I recognize that the case at hand is not a criminal matter and that it deals with administrative sanctions, I take the view that this matter is not one of private international law, and that the primary basis of the FMAT’s jurisdiction is territorial in a public law context.

I also wish to emphasize that, under the common law, the distinction between private and public international law rules is seldom addressed, as it bears little consequence because the applicable test is the same under both regimes, namely, the real and substantial connection test.

[ 74 ] Furthermore, the Van Breda and Uashaunnuat cases dealt with matters of “relations between persons”, which fall under private international law, and the Supreme Court’s statements were made in relation to the application of private international law rules. [ 75 ] Finally, it is also worth noting that the minority judges in Uashaunnuat laid out a definition of the private international law rules that limits their application to situations where there is a conflict of jurisdictions or of legal systems: [101] Private international law “is designed to resolve conflicts between different jurisdictions, the legal systems or rules of different jurisdictions and decisions of courts of different jurisdictions”; this area of the law “consists of legal principles that apply in situations in which more than one court might claim jurisdiction, to which the law of more than one jurisdiction might apply or in which a court must determine whether it will recognize and enforce a foreign judgment or, in Canada, a judgment from another province”: Van Breda , at para. 15 ; S.

G. A. Pitel and N. S. Rafferty, Conflict of Laws (2nd ed. 2016), at p. 1.

In other words, private international law is the branch of the law that “is concerned with the jurisdiction of courts of the Canadian provinces, with whether that jurisdiction should be exercised, with what law should apply to a dispute, and with whether a court should recognize and enforce a judgment rendered by a court of another province or country”: Van Breda , at para. 21 . (Emphasis added) [ 76 ] Professor Alain Prujner highlights the distinction between private and public international law, by emphasizing the territorial nature of public international law: [47] Pourquoi existe-t-il un droit international privé ?

À quel besoin répond-il ? Pour le comprendre, il faut mettre l’accent sur la nature privée des droits en question. Ceux-ci sont liés à des systèmes ou des ordres juridiques, le plus souvent étatiques. Les relations de droit public sont étroitement liées aux États et au principe de territorialité , contrairement aux relations privées, interindividuelles, lesquelles échappent en

partie à cette limitation. Un exemple permet d’illustrer cette différence : une personne passe la frontière entre le Québec et le Maine. Au Québec, elle est mariée, a deux enfants et est aussi propriétaire de la voiture qu’elle conduit. Son métier est d’être policier à la Sûreté du Québec, avec tous les pouvoirs liés à ce statut.

Le passage de la frontière va agir différemment sur les divers éléments juridiques liés à cette personne. Ceux qui sont reliés à l’autorité publique (pouvoirs de police en particulier) seront profondément modifiés par le changement de souveraineté étatique; néanmoins, ceux qui sont relatifs au statut matrimonial et familial, ou aux liens de propriété sur divers biens, résisteront mieux. Elle est encore mariée et propriétaire, même si cela est lié à un autre système juridique que celui de l’État où elle se trouve.

Cette personne sera aussi désormais soumise à l’autorité des tribunaux des États-Unis, en cas d’infraction au code de la route par exemple, mais elle ne pourra pas nécessairement leur soumettre tout litige, comme une demande en divorce. Ces différences proviennent de la nature des droits en cause. Il n’est pas question de maintenir l’exercice d’une autorité publique hors du territoire de cette autorité sans un accord préalable avec les autorités de l’autre territoire . La protection de la souveraineté d’un État sur son territoire empêche toute intervention policière d’origine étrangère.

Par conséquent, franchir une frontière est souvent l’objectif d’un fuyard, ce qui a été abondamment illustré au cinéma. La souveraineté des États exige qu’aucune règle de droit public d’un autre État ne puisse avoir d’effet sur son territoire sans son consentement préalable. Le droit public est donc très territorialisé. Il relève d’une organisation étatique qui est limitée à un territoire.

Les relations entre ces ordres étatiques relèvent du droit international public, qui découle de la volonté des États et de la coutume internationale . (Emphasis added) [ 77 ] In the case at hand, it may be more accurate to refer to international public law rather than public international law, as we are concerned with the relationship between a state and private individuals and not with relations between states. [48] [ 78 ] In my view, in this case, there is no conflict of jurisdiction nor any conflict of laws that would call for the application of private international law rules.

The FMAT seeks to apply a single provincial statute, the Securities Act , over which it has the exclusive jurisdiction to make determinations pursuant to

section 93 of the ARRFS . [ 79 ] That is not to say that other provinces or states may not also seek to prohibit or sanction the Appellants ’ conduct on their own territory under their own securities legislation. The situation may lead to the application of more than one set of laws and may trigger the need to examine the principle of international comity or courtesy.

However, it does not bring about any conflict of laws or jurisdiction regarding the alleged violations of the Securities Act which are connected to this province. [ 80 ] In my opinion, the FMAT remains the only competent authority empowered to apply administrative sanctions within the limits of the province and it is tasked with doing so for the purpose of protecting Quebec investors and ensuring the efficiency of Quebec’s securities market and public confidence therein. [49] [ 81 ] Hence, I cannot agree with the Appellants ’ contention that the case is an attempt to apply provincial legislation outside the limits of the province and that it constitutes an extraterritorial reach of provincial courts. [ 82 ] The matter is strictly one concerned with the constitutional applicability of a provincial law, being the Securities Act , to acts committed by persons who reside outside the limits of the province but whose actions were allegedly performed both inside and outside the province , given the transnational nature of their alleged wrongdoings. [ 83 ] Professeur Pierre-André Côté acknowledges that certain difficulties may arise in ascertaining the territorial limits of a state’s legislation and underlines that such difficulties are resolved by determining whether or not the law has a real and substantial connection with the state in question.

He points out that, in doing so, courts may be guided (although not exclusively so) by the connecting factors that apply in private international law: [50]

782. Il est difficile d’établir avec certitude le champ d’application spatiale d’un texte législatif en raison des problèmes que suscite la localisation des personnes, des biens, des actes ou des faits que la loi prétend régir. D’une part, le lieu physique où se trouve une personne ou un bien, où se conclut un acte, où se produit un fait ne coïncide pas nécessairement avec le situs , le lieu, que lui assigne le droit. D’autre part, des considérations liées aux exigences de la courtoisie entre États influent sur la qualification de l’effet territorial d’un texte. 783.

Un État peut juger inopportun ou contraire à la courtoisie entre États (un principe de droit international public) de régir des personnes ou des biens qui, matériellement situés à l’intérieur de ses frontières, n’entretiennent cependant avec lui que des liens superficiels ou accidentels . [...] 785. […] une loi n’a pas d’effet extraterritorial simplement parce qu’elle prétend régir une personne, un bien, un acte ou un fait physiquement situés à l’étranger. C’est le situs aux yeux du droit qui doit être pris en considération. 786.

En résumé, et en simplifiant, on peut dire que la loi d’un État a un effet extraterritorial lorsqu’elle entend régir des personnes, des biens, des actes ou des faits juridiques qui n’ont pas un « lien réel et important » avec cet État. 787. Quand peut-on dire qu’un tel lien existe ? Pour répondre à cette question, les tribunaux feront appel, pour les guider, principalement ( mais non exclusivement ) aux méthodes de rattachement développées en droit international privé.

La localisation d’une personne, d’un bien, d’un acte ou d’un fait juridiques exigera la qualification du problème juridique et l’application des diverses règles de rattachement qui indiquent le système juridique qui doit régir la situation . (Emphasis added) [ 84 ] While private international law rules (and the corresponding connecting factors) may serve to guide the courts in resolving issues of jurisdiction, they will not apply automatically nor serve as an obstacle to them asserting jurisdiction over persons who reside outside the province in matters of public law where there is no private international law issue at play and where there is a real and substantial connection between the matter and the province. [ 85 ] There is in fact nothing precluding a provincial law from applying to persons who do not reside on its territory for actions that occur on its territory.

The provincial taxation powers are a good example of the principle that foreigners are not exempted from provincial laws, as the Supreme Court outlined in Dunne v. Quebec (Deputy Minister of Revenue) : [51] Section 92(2) of the Constitution Act, 1867 limits a province’s taxing authority to the imposition of direct taxes within the province. The courts have construed this power broadly and flexibly. It certainly includes the power to tax residents of the province, but the provincial legislature may also tax property, businesses and transactions within the province.

Its taxing power can thus reach non-residents in this respect (…). (Emphasis added) [ 86 ] In the case at hand, as the Respondent argues, the constitutional validity of the ARRFS and Securities Act is not challenged.

Both acts serve to regulate the Quebec securities market for the protection of investors, for capital market efficiency and for ensuring public confidence in the system [52] and they fall within the exclusive provincial jurisdiction over property and civil rights pursuant to section 92(13) of the Constitution Act, 1867 . [53] [ 87 ] The only question is whether the FMAT has jurisdiction over the action instituted by the AMF against the Appellants , despite the foreign elements raised on their behalf to support the dismissal of the action at this stage. [ 88 ] There is nothing restraining the Quebec securities market regulator from seeking to impose administrative sanctions on persons despite the fact that they do not reside in the province, provided these sanctions relate to actions bearing a sufficient connection with this province. [ 89 ] It should also be pointed out that

section 236.1 of the Securities Act [54] specifically provides, in dealing with civil sanctions, that “in matters pertaining to the distribution of a security, the laws of Québec are applicable where the subscriber or purchaser resides in Québec, regardless of the place of the contract” and that any action may be brought before the court of the plaintiff’s residence. Also, “[a]ny contrary stipulation as to the jurisdiction of the courts or the applicable legislation is without effect”. This provision confers upon the Securities Act the status of a law of immediate application (“ loi d’application immédiate ”, also known as “ loi police ”) by virtue of

article 3076 C.C.Q ., “by reason of its particular object”. [55] In my view, in this context, it would defy logic to submit the administrative sanctions to the private international law rules of the C.C.Q . restricting the FMAT’s jurisdiction or the application of the Securities Act , when said Act stipulates that these rules are without effect with respect to civil sanctions. [ 90 ] In the international public law context of the matter, where the issue is one of constitutional applicability, there is no need to rely on the private international law rules of the C.C.Q.

This may explain why the Securities Act does not specifically provide the same protection to administrative sanctions regarding the FMAT’s jurisdiction that it affords to civil sanctions.

The FMAT’s authority should be determined by relying on the real and substantial connection as developed in Unifund , where Binnie, J. pointed out that this “real and substantial connection test” must be applied in the particular context of the applicability of a provincial regulatory scheme to an out-of- province defendant, bearing in mind that this connection must be “sufficient” to support the application of this regulatory regime. [ 91 ] My colleague Mainville proposes to confirm the FMAT’s jurisdiction through the application of private international law rules, by resorting to

article 3136 C.C.Q. [56] and the two-step analysis which requires the demonstration of a sufficient connection of the matter with the province of Quebec and the impossibility or the unreasonableness of requiring the institution of proceedings abroad. It is obvious that the AMF has no authority to institute proceedings abroad, which brings us back to the only relevant criterion for assessing the FMAT’s jurisdiction in the case at hand, namely the “sufficient connection” test which, incidentally, is the same test developed under

the constitutional applicability doctrine in Unifund , [57] and applied in Libman . [58] [ 92 ] For these reasons, I am of the opinion that the FMAT correctly relied on the real and substantial connection test rather than on the C.C.Q. rules of private international law to assert jurisdiction over the matter. Hence, the Superior Court judge was correct in concluding that its decision regarding the applicable test was both correct and reasonable. ii.

Was the Superior Court correct in finding that the FMAT’s finding of a real and substantial connection with the province of Quebec was correct? [ 93 ] The Appellants argue alternatively that the FMAT misapplied the real and substantial connection test by relying on “open- ended” factors, such as public interest, and that the FMAT’s rationale allows for an improper broadening of securities regulators’ territorial reach: from their perspective, the FMAT is looking to apply the Securities Act to transactions that occurred outside the province, in the USA where the shares were traded in the over-the-counter market, through the OTCBB, despite the fact that none of the profits were collected or channelled through this province.

Moreover, the Appellants claim that the allegations are not sufficiently substantiated to provide a connection with each Appellant individually. Finally, they also invoke the principle of comity to convince this Court that “international courtesy” commands that such territorial overreach on the part of the FMAT towards foreigners for actions committed outside Quebec’s territory be set aside. [ 94 ] Both the FMAT and the Superior Court correctly referred to the framework laid out by the Supreme Court in Unifund to ascertain the existence of a real and substantial connecting factor with the province.

The FMAT did so indirectly by citing the McCabe decision which relied on Unifund , as appears from the extracts of its decisions reproduced at paragraph [58] of this judgment.

As noted by the Superior Court and emphasized earlier, the sufficient connection test developed in Unifund “depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it”. [ 95 ] The FMAT recognized that there was a real and substantial connection with the province based on the key allegations of the proceedings, while taking into account the modern reality of the global and interconnected securities market and the increased opportunities for market manipulation in such a context, as well as the public interest. [ 96 ] The key allegations retained by the FMAT to assert its jurisdiction over the matter were not related to the sale and purchase of the Solo shares through the OTCBB or to the channelling of profits abroad.

They had to do with the market manipulation actions, being the “pump and dump” scheme, a large portion of which occurred in Quebec through misleading press releases that enabled the stock manipulation of a Quebec-based corporation holding mining claims in the province. [ 97 ] As previously mentioned, the FMAT has jurisdiction to make determinations on alleged infractions and to impose sanctions within the boundaries of Quebec.

Solo’s presence in Quebec pointed to a strong relationship between the FMAT’s territorial jurisdiction and the subject matter of the litigation, being the Appellants ’ alleged violations of sections 195.2 and 199.1 of the Securities Act . [ 98 ] The AMF alleged that the Appellants were part of that pump and dump scheme in contravention of sections 195.2 and 199.1 of the Securities Act .

The “pump” aspect of the violation consisted in collectively “influencing the value of securities by means of fraudulent practices” [59] and “engaging in a series of transactions in securities knowing it contributes to a misleading appearance of trading activity in, and an artificial price for, a security”. [60] [ 99 ] The “pump” aspect of the violation was highly dependent upon the business carried on in Quebec by Solo.

This business was essential for creating an appearance of profitability and for luring investors into buying its shares. [ 100 ] The connection to this province was apparent in the multiple references to Quebec in the press releases (two of which bear the mention “Montreal” at the beginning [61] ), which claim that “the company is taking this opportunity to highlight the significance of focusing its mining efforts on Quebec”. [62] Solo’s business in the field of mining exploration in Quebec, through the acquisition of mining claims by its subsidiary, played a central role in the pump part of the scheme.

Solo stated that it carried on a business in the province, that it was a reporting issuer in Quebec, that it had a business address in Montreal and that it was under the direction of a Quebec resident. [ 101 ] As far as the connection between the infractions and the Appellants is concerned, the Respondent alleged that all the Appellants contributed to the financing of Solo’s acquisition of mining claims.

As a result, they were no strangers to the business carried on in the province and they allegedly participated at one point or another in the pump and dump scheme, although they were not all operating from within the province since modern financial schemes can operate from multiple locations at a given time through the internet and offshore entities. [ 102 ] The Appellants argue that the allegations of the proceedings do not sufficiently single out their actions to justify asserting jurisdiction over each of the Appellants individually.

They argue that a real and substantial connection would require that their situs , or at least one of the alleged infractions’ components, be within the province of Quebec. [ 103 ] Appellants Van Damme, Carnovale and Rocca argue more specifically that all the components of the scheme happened outside Quebec and that the connection between the scheme and Quebec is too weak to comply with constitutional limitations. [ 104 ] Appellant Sharp focuses on the fact that he did not participate in the promotion of Solo’s activities, which was the only tangible part of the scheme in Quebec.

Given that all the acquisitions and transfers of Solo’s shares occurred outside Quebec, in foreign countries and via offshore entities allegedly linked to him, and given his domicile in British Colombia, Sharp argues that there is no real and substantial connection between him and the FMAT or Quebec. [ 105 ] An individual connection was not required in order to establish a real and substantial connection with each of the Appellants . It was sufficient to show a connection between the subject matter of the litigation (the infractions) and the forum, as Laforest, J. proposed

in Libman.[63] [106] As the Superior Court judge mentioned, an infraction under 199.1 of the Securities Act could be demonstrated against the personswho participated in the infraction as part of a conspiracy. [107] Moreover, as the FMAT correctly pointed out, whether the infractions are demonstrated with respect to all or part of theAppellants will depend on the evidence adduced at trial and need not be determined at this early stage, where the facts are taken asalleged. [108] With respect to the principle of comity, the Appellants claim that the principle would be violated if the FMAT were allowed toassert jurisdiction in a case such as this one. [109] I disagree.

The situation is no different from that described by Laforest, J. in Libman,[64] where the Supreme Court resorted tothe real and substantial link test and, in doing so, addressed the issue of comity in the particular circumstances of transnational fraudulenttransactions which also involved a conspiracy: I might summarize my approach to the limits of territoriality in this way. As I see it, all that is necessary to make an offence subject to thejurisdiction of our courts is that a significant portion of the activities constituting that offence took place in Canada.

As it is put bymodern academics, it is sufficient that there be a “real and substantial link” between an offence and this country, a test well-known inpublic and private international law; see Williams and Castel, supra; Hall, supra. As Professor Hall notes (p. 277), this does not requirelegislation. It was the courts after all that defined the manner in which the doctrine of territoriality applied, and the test proposed simplyamounts to a revival of the earlier way of formulating the principle. It is in fact the test that best reconciles all the cases.

The only onesthat do not fall within it are those like Harden and Rush which, in my view, should no longer be followed.

That this approach is attuned to modern times is evident from the fact that some variant of it has been recommended by numerous lawreform bodies or adopted in legislation; see, inter alia, the English Law Commission’s Report on the Territorial and ExtraterritorialExtent of the Criminal Law (Law Com. 91, 1978); the American Law Institute’s Model Penal Code (Proposed Official Draft, 1962) §1.03; the New Zealand Crimes Act, 1961, 1961 (N.Z.), No. 43, s. 7, and the recent Law Reform Commission of Canada Working Paper37, Extraterritorial Jurisdiction,

Part III. Just what may constitute a real and substantial link in a particular case, I need not explore. There were ample links here. The outer limitsof the test may, however, well be coterminous with the requirements of international comity. As I have already noted, in some of the early cases the English courts tended to express a narrow view of the territorial application ofEnglish law so as to ensure that they did not unduly infringe on the jurisdiction of other states.

However, even as early as the late 19thcentury, following the invention and development of modern means of communication, they began to exercise criminal jurisdiction overtransnational transactions as long as a significant part of the chain of action occurred in England. Since then means of communicationshave proliferated at an accelerating pace and the common interests of states have grown proportionately. Under these circumstances, thenotion of comity, which means no more nor less than “kindly and considerate behaviour towards others”, has also evolved.

Howconsiderate is it of the interests of the United States in this case to permit criminals based in this country to prey on its citizens? Howdoes it conform to its interests or to ours for us to permit such activities when law enforcement agencies in both countries have developedcooperative schemes to prevent and prosecute those engaged in such activities? To ask these questions is to answer them. No issue ofcomity is involved here. In this regard, I make mine the words of Lord Diplock in Treacy v.

Director of Public Prosecutions cited earlier.I also agree with the sentiments expressed by Lord Salmon in Director of Public Prosecutions v. Doot, supra, that we should not beindifferent to the protection of the public in other countries. In a shrinking world, we are all our brother’s keepers. In the criminal arenathis is underlined by the international cooperative schemes that have been developed among national law enforcement bodies.

For these reasons, I have no difficulty in holding on the facts agreed upon for the purpose of this appeal, that the counts of fraud withwhich the appellant is charged may properly be prosecuted in Canada, and I see nothing in the requirements of international comity thatwould dictate that this country refrain from exercising its jurisdiction. Since these fraudulent activities took place in Canada, it followsfor the reasons set forth in the Chapman case that the conspiracy count may also be proceeded with in Canada.

Under these circumstances, I need not enter into a discussion of the apparent conflict between the English case of Board of Trade v.Owen and the Canadian cases such as Bachrack, Ecrement and Shulman regarding the situation where substantially the only overt actthat takes place in Canada is the agreement, the substantive offence taking place abroad. There may be a danger, particularly in relationto common law conspiracy, for this country in essence to engage in punishing acts that take place wholly in another country that are notcriminal there.

This appears to be the major consideration underlying the judgment of the House of Lords in Owen. There is cogency inthe argument but there are countervailing arguments that have found favour in the Canadian cases. Since those cases were decidedParliament has provided in s. 423(3) of the Criminal Code that a person who conspires to do anything referred to in subss. 423(1) and (2)in a place outside Canada that is an offence there shall be deemed to have conspired to do that thing in Canada.

In establishing an offenceunder that provision it is necessary not only to prove that the accused violated foreign law outside Canada, but also that that act wouldhave constituted a crime in Canada; see Bolduc v. Attorney General of Quebec, (SCC), [1982] 1 S.C.R. 573. However,s. 423(3) has no application here; the substantive offence in this case took place in Canada. (Emphasis added) [110] Much in the same way here, there is no issue of comity involved insofar as the U.S., where the trading took place, or the provinceof B.C., where the Appellants reside, are concerned.

These other states or provinces could hardly voice disagreement with the sanctionsor preventive or deterrent measures sought by the AMF in the circumstances, provided that the violations do indeed show a sufficientreal and substantial connection with the province of Quebec. [111] Deterrence is only useful if “individual jurisdictions take action wherever possible”, and it is desirable that “other jurisdictions take a similar approach.”[65] “As a practical issue, it may be necessary to wait until someone comes from offshore (…) before effective

enforcement can be taken”. [66] There is a need for collective repressive actions, as opposed to actions coming strictly from the source (as the source is often difficult to determine), to dissuade unlawful securities practices. The geographical origin of the scheme may prove difficult to pinpoint and may result from the concerted efforts of multiple participants, thus weighing in favour of a flexible approach to the real and substantial connection test.

Unlawful securities practices can only be efficiently and collectively repressed, and the mission of securities regulators fulfilled, where financial schemes aimed at benefiting from assets in a given territory are discouraged. [ 112 ] Looking at the decision as a whole, it is clear that the FMAT relied mainly on objective facts (the key allegations) prior to concluding that there was such a real and substantial connection with the province. [ 113 ] By carrying on a business in the province, even indirectly, the Appellants chose to use Quebec as the “face” of their alleged pump and dump scheme.

In doing so, they established a real and substantial connection between the FMAT’s authority and the alleged “pump” infractions to enable the FMAT to decide whether it should take preventive and punitive measures against them following a hearing on the merits of the case. [ 114 ] I am satisfied that the FMAT could consider that the fraudulent promotion to Quebec residents in which the Appellants participated through either promotional or financing efforts at one point or another, together with the fact that Solo had a business address in Montreal and was under the direction of a Quebec resident, Michel Plante, established at this stage a real and substantial connection with the alleged pump and dump scheme. [ 115 ] Finally, the FMAT also concluded that it had jurisdiction over the Appellants as a matter of public interest, given its role as defined under the ARRFS and the Securities Act and the purpose of regulating the securities market in its modern reality and protecting consumers from fraudulent practices. [ 116 ] The public interest factor also supports a flexible approach to the determination of the sufficiency of the real and substantial connection test under such circumstances.

There is indeed here a real and substantial connection between this objective, the FMAT’s role, the Appellants and the province. The sanctions sought by the Respondent aim to punish the Appellants ’ alleged participation in a pump and dump scheme and, more precisely, their fraudulent manipulation and misrepresentation of securities.

As previously stated, the “pump” part (i.e., the manipulation and misrepresentation of securities) was inextricably linked to buying mining claims in Quebec and, therefore, fell within the province. [ 117 ] In my view, the decision rendered by the FMAT, which considered the key allegations as well as the public interest in asserting jurisdiction, the whole within the constitutional applicability of the Securities Act , was correct and the Superior Court was also correct in concluding as it did. [ 118 ] That being said, my conclusion would not have been any different had I opted to apply the reasonableness standard instead of the correctness standard.

The FMAT decision was also reasonable. Its reasons demonstrate a transparent, intelligible, decision [67] providing coherent reasoning and justification in light of the legal and factual constraints bearing on the decision. [68] [ 119 ] For these reasons, I suggest that this Court dismiss the appeals with legal costs. GENEVIÈVE MARCOTTE, J.A.

MOTIFS DU JUGE MAINVILLE [ 120 ] Je souscris à la conclusion proposée par la juge Marcotte, soit le rejet des appels. Par contre, je ne puis souscrire à la thèse de ma collègue voulant que les règles du

titre troisième du livre dixième du Code civil du Québec (« C.c.Q. ») portant sur la compétence internationale des autorités du Québec ne soient ni applicables ni pertinentes à la question dont nous sommes saisis. [ 121 ] La question qui se pose en l’instance est celle de l’applicabilité des articles 195.2 , 199.1 , 265 , 273.1 et 273.3 de la

Loi sur les valeurs mobilières [69] du Québec à des défendeurs domiciliés à l’extérieur du Québec et de la compétence du Tribunal administratif des marchés financiers pour imposer des sanctions administratives à ceux-ci en vertu de ces dispositions. [ 122 ] Aucun doute que cette question soulève des réflexions d’ordre constitutionnel puisqu’elle concerne l’applicabilité d’une loi provinciale de nature réglementaire à des non-résidents du Québec pour des activités menées en grande

partie hors Québec. Cette question est similaire – mais non identique – à celle traitée par la Cour d’appel de la Colombie-Britannique dans l’affaire McCabe [70] . [ 123 ] Dans cette affaire, M. McCabe, un résident de la Colombie-Britannique, contestait la compétence de la Securities Commission de cette province de lui ordonner de restituer environ 2,78 millions de dollars et de lui imposer une pénalité administrative de 1,5 million de dollars en lien avec des pratiques déloyales portant sur des actions d’une société du Nevada exclusivement transigées aux États-Unis.

La Securities Commission de la Colombie-Britannique soutenait sa compétence sur le fait que les pratiques déloyales avaient été commises par M. McCabe à même son domicile situé dans la province. [ 124 ] La Cour d’appel de la Colombie-Britannique a confirmé l’applicabilité de la législation provinciale en cause au cas de M. McCabe en faisant appel aux critères de l’arrêt Unifund [71] de la Cour suprême du Canada portant sur l’applicabilité extraterritoriale d’une loi provinciale de nature réglementaire [72] , lesquels critères s’articulent autour des propositions suivantes [73] : 1.

La limitation territoriale de la portée du pouvoir de légiférer des provinces empêche les lois d’une province de s’appliquer aux affaires qui ne présentent pas de lien suffisant avec cette dernière. 2. Le caractère « suffisant » du lien dépend du rapport qui existe entre le ressort ayant légiféré, l’ob

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