2020 QCCA 401, 2020 QCCA 401

Unofficial English Translation of the Judgment of the Court Donaldson c. Autorité des marchés financiers 2020 QCCA 401 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL Nos.: 500-09-027170-174 , 500-09-027174-176 500-09-027406-180, 500-09-027424-183 (500-80-033851-164) DATE: March 11, 2020 CORAM: THE HONOURABLE YVES-MARIE MORISSETTE, J.A. JOCELYN F. RANCOURT, J.A. MICHEL BEAUPRÉ, J.A. 500-09-027170-174 and 500-09-027174-176 PIERRE DONALDSON APPELLANT – Appellant And LUC FILIATREAULT BRUNO MARTEL STÉPHANIE BENOIT RAINER BUSCH ANDRÉ COURTEMANCHE A.

MICHEL LAVIGNE MICHEL LOZEAU COLETTE ROY APPELLANTS – Appellants v. AUTORITÉ DES MARCHÉS FINANCIERS RESPONDENT – Respondent And PIERRE LÉGARÉ IMPLEADED PARTY – Impleaded party 500-09-027406-180 and 500-09-027424-183

LUC FILIATREAULT BRUNO MARTEL STÉPHANIE BENOIT RAINER BUSCH ANDRÉ COURTEMANCHE A. MICHEL LAVIGNE MICHEL LOZEAU COLETTE ROY APPELLANTS – Appellants And PIERRE DONALDSON APPELLANT – Appellant v.

AUTORITÉ DES MARCHÉS FINANCIERS RESPONDENT – Respondent And PIERRE LÉGARÉ IMPLEADED PARTY – Impleaded party JUDGMENT [ 1 ] At all times relevant to our purposes, the appellants were members of the board of directors [1] and/or officers [2] of Nstein Technologies Inc. (“Nstein”), a reporting issuer within the meaning of the Securities Act [3] (the “ QSA ”). [ 2 ] They appeal from two judgments rendered on October 19, 2017, and February 26, 2018, respectively, by the Court of Québec, District of Montreal (the Honourable Marie Michelle Lavigne). - The October 19, 2017 judgment [ 3 ] The first judgment dismissed appellant Donaldson’s [ translation ] “peremptory exception based on prescription”. [4] Donaldson had invoked the three-year prescriptive period under

article 2925 of the Civil Code of Québec (“ C.C.Q. ”) against the application brought by the respondent, the Autorité des marchés financiers (“AMF”), on September 24, 2014, before the Financial Markets Administrative Tribunal (“FMAT”), asking the FMAT to impose an administrative penalty on him pursuant to

section 273.1 of the QSA . [ 4 ] Donaldson submits that the judge erred in law by deciding that the application was a matter of administrative law and therefore subject to the criterion of “reasonable delay” as established by the Supreme Court in Blencoe . [5] Before this Court, he reiterated that the AMF’s application was subject to the prescriptive period set out in

article 2925 C.C.Q. because, first,

section 273.1 of the QSA does not provide a prescriptive period, and second, in such a case,

article 2925 C.C.Q. plays a suppletive role in accordance with the preliminary provision of the Civil Code .

Donaldson submits that the AMF was aware of all the facts that could support its application for an administrative penalty for insider trading since the report prepared by one of its investigators was filed in March 2011, that is, over three years before the AMF filed its application before the FMAT. [ 5 ] The other appellants, who were also granted leave to appeal that judgment, [6] stated at the hearing that they adopted the arguments and submissions raised by Donaldson in support of his appeal. - The February 26, 2018 judgment [ 6 ] The second judgment of the Court of Québec [7] dismissed the appeal of the judgment rendered on the merits by the FMAT on August 16, 2016. [8] That was the decision that imposed administrative penalties on the appellants and the impleaded party Légaré under

section 273.1 of the QSA . [ 7 ] The appellants submit that the judge, who was exercising appellate jurisdiction under the law, [9] made reviewable errors justifying the Court’s intervention by not finding that the FMAT itself made errors of law and palpable and overriding errors in the assessment of the evidence by deciding: - with respect to all the appellants , that they committed insider trading within the meaning of sections 187 and 189.1 of the QSA ; - with respect to appellant Filiatreault alone , that he committed the offence of “tipping” within the meaning of sections 188 and 189.1 of the QSA by disclosing privileged information to impleaded party Légaré, his long-standing personal accountant at the time of the offence. [10] [ 8 ] Donaldson, who was also granted leave to appeal this judgment, [11] adopts the grounds of appeal on the merits proposed by Filiatreault and the other appellants, as well as the submissions they made during the hearing. 1.

APPEAL FROM THE OCTOBER 19, 2017 JUDGMENT: PRESCRIPTION 1.1 Facts

[ 9 ] The facts useful to the analysis of this appeal are quite simple. [ 10 ] On January 5, 2010, an AMF investigator became aware of a press release published by Nstein announcing that on January 4, 2010, its board of directors had adopted a resolution authorizing the issuance of 1,200,000 options on the corporation’s publicly traded securities at an exercise price of $0.29. [ 11 ] Barely one month later, on February 24, 2010, the investigator requested that an investigation be opened into Nstein following its publication of a joint press release with a third party, Open Text Corporation (“Open Text”), publicly announcing Open Text’s acquisition of Nstein’s securities at a unit price of $0.65. [ 12 ] An investigation report was prepared in spring 2011 concerning the insider trading [12] and a second was prepared [ translation ] “in 2013” [13] concerning the offence of tipping.

The two files were closely connected. [ 13 ] The appellants did not require that these reports be filed during the hearing before the FMAT. [ 14 ] On September 24, 2014, over three years after the investigation report on the insider trading was filed [ translation ] “in spring 2011”, the AMF filed the application with the FMAT asking it to impose the impugned administrative penalties on all the appellants and the impleaded party Légaré. It should be noted that the appellants were not kept in the dark about the AMF’s investigation between the filing of the reports and the filing of the application concerning them.

In fact, it is not contested that during this period, they were contacted, even in person in some cases, and that they provided certain details and information to the respondent. [ 15 ] The hearing of the application before the FMAT lasted nine days, from December 4, 2015 to January 15, 2016. On the first day, the respondent and the impleaded party Légaré informed the FMAT that they had reached an agreement. Légaré admitted to having obtained privileged information from appellant Filiatreault in February 2010 and having used it to profitably trade Nstein’s securities in the days that followed.

The agreement between the parties and Légaré’s affidavit were filed in support of a joint recommendation for an administrative penalty, and Légaré testified for the respondent at the hearing. [ 16 ] On August 16, 2016, the FMAT rendered its decision, finding that the AMF’s application was well founded and imposing administrative penalties on the appellants. [ 17 ] On September 14, 2016, the appellants filed an appeal as of right from the FMAT’s decision before the Court of Québec, as permitted by

section 115.6 of the Act respecting the regulation of the financial sector . [14] [ 18 ] As a preliminary matter, on September 13, 2017, Lavigne, J. heard the prescription argument submitted at the time by appellant Donaldson alone. [15] [ 19 ] On October 19, 2017, she rejected that argument. [ 20 ] On December 5, 2017, our colleague Hilton, J.A. granted the appellants leave to appeal that judgment. 1.2 The judgment under appeal dismissing the prescription argument [ 21 ] It is important to note at the outset that the prescription argument was raised for the first time before the Court of Québec.

No specific evidence was adduced before the FMAT concerning the date on which the respondent allegedly acquired sufficient knowledge of the facts to justify filing its application in September 2014. In support of his argument before the judge, Donaldson invoked the [ translation ] “date” of the first investigation report obtained by the AMF, that is, [ translation ] “spring 2011” or [ translation ] “March 2011”. [ 22 ] The judge immediately noted that the possibility of imposing administrative penalties set out in

section 273.1 of the QSA does not provide for any prescriptive period. [16] [ 23 ] She first questioned the nature of the power exercised by the AMF in bringing such an application before the FMAT and concluded that it was performing an administrative act. [17] [ 24 ] Next, she considered in turn the questions of whether that administrative act was subject to a prescriptive period, if the three-year prescriptive period set out in

article 2925 C.C.Q . could apply on a suppletive basis, and if so, whether the AMF’s application was the exercise of a “personal right” within the meaning of that provision . [ 25 ] The judge answered those questions in a well-reasoned judgment. Her answers may be summarized as follows: - the rules governing prescription set out in the Civil Code of Québec do not apply on a suppletive basis in this case, in view of the administrative nature of the act performed by the AMF in seeking an administrative penalty before the FMAT under

section 273.1 QSA . ; - since it is an administrative act performed in the context of its mission to protect the financial market and to maintain investors’ confidence in the system, the AMF is not exercising a “personal right” of a patrimonial nature within the meaning of

article 2925 C.C.Q . ; and, - in view of the administrative nature of the act performed by the AMF, it is rather the criterion of “reasonable delay” developed by the Supreme Court in Blencoe that applies. [18] [ 26 ] Then, at paragraph 57 of her judgment, the judge noted that she could not possibly analyze whether the AMF filed its application within a “reasonable delay” in accordance with the analytical framework established in Blencoe : [ translation ]

[57] In this case, because appellant Donaldson raised the issue of prescription of the action only in the appeal of the FMAT’s decision to the Court of Québec, no evidence was adduced regarding the prejudice caused by the delay between the filing of the investigator’s report and the filing of the AMF’s proceedings before the FMAT for the imposition of administrative penalties. 1.3 Analysis [ 27 ] The QSA sets out certain prescriptive periods. For example,

section 211 states that penal proceedings concerning the imposition of fines are subject to a prescriptive period of five years from the date on which the investigation record was opened. [ 28 ] However, the QSA does not set out any extinctive prescription period for applications seeking administrative penalties under

section 273.1, which provides: 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.

The amount of the penalty may in no case exceed $2,000,000 for each contravention . [ 29 ] In their brief and at the hearing, the appellants emphasized the [ translation ] “very significant scope of the inclusive statement of principle in the preliminary provision of the Civil Code ” and the case law of the Supreme Court [19] and this Court, [20] in support of the argument that the AMF’s application for an administrative penalty was subject to the three-year prescription set out in

article 2925 C.C.Q . Accordingly, they conclude, the AMF’s application, served in September 2014, was prescribed. The appellants submit that the investigation report obtained by the AMF in spring 2011 provided it with knowledge of all the essential facts to conclude that the offences in dispute had been committed and, consequently, to consider bringing an application for an administrative penalty before the FMAT. [ 30 ] They are wrong on all points. [ 31 ] The issue of the rules governing extinctive prescription applicable to the AMF’s application to impose administrative penalties brought before the FMAT under

section 273.1 QSA is a question of law.

The standard of review with respect to the judge’s conclusions on this issue is therefore the standard of correctness. [21] [ 32 ] Once the applicable rules of prescription have been established, however, the determination of the starting point of extinctive prescription is a question of fact, or at most a mixed question, and is thus reviewable in accordance with the standard of palpable and overriding error. [22] [ 33 ] In this case, the judge properly directed herself in law and rendered a correct decision by finding that the AMF’s application for an administrative penalty presented before the FMAT was not subject to the three-year prescriptive period set out in

article 2925 C.C.Q., but rather to the criterion of “reasonable delay” established by the Supreme Court in Blencoe . [ 34 ] Let us consider this. [ 35 ] The preliminary provision of the Civil Code of Québec states: The Civil Code of Québec , in harmony with the Charter of human rights and freedoms (chapter C-12 ) and the general principles of law, governs persons, relations between persons, and property. The Civil Code comprises a body of rules which, in all matters within the letter, spirit or object of its provisions, lays down the jus commune , expressly or by implication.

In these matters, the Code is the foundation of all other laws, although other laws may complement the Code or make exceptions to it . [ 36 ] An application to impose an administrative penalty brought by the AMF before the FMAT pursuant to

section 273.1 QSA does not fall under the jus commune governing “persons, relations between persons, and property” within the meaning of the preliminary provision. [ 37 ] Most importantly, such an application cannot be characterized as the exercise by the AMF of a “personal right” within the meaning of

article 2925 C.C.Q . : 2 925. An action to enforce a personal right or movable real right is prescribed by three years, if the prescriptive period is not otherwise determined . [Emphasis added.] [ 38 ] This Court has confirmed that a personal right is a [ translation ] “claim”, in particular in Anglo Pacific Group PLC c.

Ernst & Young . [23] [ 39 ] The Dictionnaire de droit québécois et canadien provides the following definition of “ droit personnel ”: “ [d]roit pour un créancier d'exiger du débiteur l'exécution de son obligation ” [24] ([ translation] “personal right: the right of a creditor to require the debtor to perform his or her obligation ”). [ 40 ] Authors Baudouin, Jobin, and Vézina define personal rights as follows:

[ translation ] Also referred to as claims , personal rights are patrimonial rights that allow their holder (the creditor) to require a prestation from another person (the debtor), subject to legal compulsion .

When a personal right is viewed from the perspective of the passive subject (the debtor), it is referred to as an obligation . [25] [Emphasis added.] [ 41 ] The terminology and the legal nature of a “claim”, which carry as corollaries the notions of “debt”, “obligation”, and especially “patrimonial rights”, are inconsistent with the administrative act performed by the AMF in bringing an application before the FMAT to impose an administrative penalty on a person if the FMAT “becomes aware of facts” establishing that this person “by

an act or omission, contravened, or aided in the contravention of, a provision under this Act or a regulation made under its authority”. [26] [ 42 ] In bringing an application for an administrative penalty before the FMAT under

section 273.1 of the QSA , the AMF is not exercising a private law right or seeking the acknowledgment of a personal patrimonial right within the meaning of

article 2925 C.C.Q . Rather, it is assuming the [ translation ] “role of supervising the financial markets, protecting investors and the public, and regulating securities trading” [27] that the legislature has conferred upon it [28] in the public interest. [29] [ 43 ] The appellants are wrong to rely on the case law of the Supreme Court in Prud’homme v. Prud’homme [30] and Doré v. Verdun [31] to contend that the jus commune rules set out in the Civil Code , in particular the rules governing extinctive prescription, should apply in this case on a suppletive basis on the ground that the QSA does not specify any prescriptive period in

section 273.1 . [ 44 ] Indeed, they fail to distinguish the fact that those judgments concerned matters falling precisely within the “relations between persons” for which the Civil Code establishes the jus commune . Prud’homme concerned the civil liability of an elected municipal officer, while Doré concerned the prescription applicable to an action for reparation for bodily injury for which a municipality was allegedly liable.

It was because of these contexts that the Supreme Court stated in Doré that “ the Civil Code of Québec also applies to municipalities where such Acts ‘require to be complemented’ with regard to matters falling under private law ”. [32] [ 45 ] In fact, the Supreme Court recently summarized the grounds for applying the general C.C.Q. rules to municipalities, noting that the Code sets out a number of guiding principles of Quebec civil law and that its preliminary provision indicates that it is the foundation of all other laws that apply or rely “on civil law concepts”.

The Court also noted, referring specifically to Prud’homme and Doré, that “ where obligations are concerned ” the C.C.Q. represents the general law applicable to legal persons established in the public interest. [33] [ 46 ] The appellants also rely on the Supreme Court’s judgment in Markevich [34] and this Court’s judgment in Morin . [35] However, those judgments are of no assistance to them. [ 47 ] First, they wrongly claim that the issue in Markevich was [translation ] “very similar, if not identical, to the issue under review”. [36]

Section 222 of the Income Tax Act , [37] analyzed by the Supreme Court in that case, expressly provides that every “tax debt is a debt due to Her Majesty”.

Section 273.1 of the QSA in no way characterizes an administrative penalty as a “debt due” to the AMF, and, it should be added, there is no basis for characterizing it as such here. [ 48 ] As for Morin , the respondent is correct in noting that the issue in that case concerned the possibility of having recourse to the provisions of the Civil Code with respect to the calculation of the prescriptive period to complement a statutory provision in disciplinary law. [38] In that case, the prescriptive period set out in the Police Act [39] was one year.

There was therefore no question of importing an extinctive prescription period set out in the Civil Code into a specific statute, which is what the appellants are proposing in this case. [ 49 ] For all these reasons, the Court rejects the ground of appeal based on the extinctive prescription period set out in

article 2925 C.C.Q.

The judge did not err in law in considering it inapplicable in this case. [ 50 ] What about her conclusion that the criterion of “reasonable delay” from Blencoe [40] applies? [ 51 ] This Court has summarized the AMF’s mission in the following terms: [ translation ] [28] The AMF is the specialized body to which the Quebec legislator has entrusted the application of the SA and the AAMF , in the public interest and subject to the powers that the legislator has conferred on the Bureau de décision et de revision. [29] On more than one occasion, the Supreme Court has had an opportunity to specify that securities legislation is aimed, above all, at protecting the investor, but also at ensuring, inter alia , capital market efficiency and public confidence in the system . [41] [Emphasis added; references omitted.] [ 52 ] Author Patrice Garant has defined the notion of administrative act as follows: [ translation ] Generally speaking, an administrative act is a decision made by an administrative authority as part of its mission to manage, regulate, supervise and control various economic and social sectors , investigate, grant permits, authorizations, or economic or social benefits. [42] [Emphasis added; references omitted.]

[ 53 ] When involved in administrative proceedings, as in this case, citizens may benefit from certain administrative law remedies if subjected to unreasonable delays that are attributable to the state and that cause a significant prejudice.

That is what was established in Blencoe . [ 54 ] In that case, the Supreme Court had to determine, inter alia , whether the respondent Blencoe was entitled to a remedy pursuant to principles of administrative law due to a state-caused delay in human rights proceedings against him, notwithstanding that the length of the delay, approximately 32 months, had not prejudiced his ability to respond to the complaints against him. [43] [ 55 ] In his judgment rendered on behalf of the five majority judges, Bastarache, J., after concluding that Blencoe was not entitled to a remedy under the Charter , wrote the following: [101] In my view, there are appropriate remedies available in the administrative law context to deal with state-caused delay in human rights proceedings.

However, delay, without more, will not warrant a stay of proceedings as an abuse of process at common law. Staying proceedings for the mere passage of time would be tantamount to imposing a judicially created limitation period […]. In the administrative law context, there must be proof of significant prejudice which results from an unacceptable delay. [102] There is no doubt that the principles of natural justice and the duty of fairness are part of every administrative proceeding .

Where delay impairs a party’s ability to answer the complaint against him or her, because, for example, memories have faded, essential witnesses have died or are unavailable, or evidence has been lost, then administrative delay may be invoked to impugn the validity of the administrative proceedings and provide a remedy [ … ]. [ … ] [115] I would be prepared to recognize that unacceptable delay may amount to an abuse of process in certain circumstances even where the fairness of the hearing has not been compromised.

Where inordinate delay has directly caused significant psychological harm to a person, or attached a stigma to a person’s reputation, such that the human rights system would be brought into disrepute, such prejudice may be sufficient to constitute an abuse of process. The doctrine of abuse of process is not limited to acts giving rise to an unfair hearing; there may be cases of abuse of process for other than evidentiary reasons brought about by delay.

It must however be emphasized that few lengthy delays will meet this threshold . [ … ] [Emphasis added; references omitted.] [ 56 ] After setting down these principles, Bastarache, J. confirmed that the issue of whether a delay has become unacceptable is a question of fact and therefore dependent on the evidence: [122] The determination of whether a delay has become inordinate depends on the nature of the case and its complexity, the facts and issues, the purpose and nature of the proceedings, whether the respondent contributed to the delay or waived the delay, and other circumstances of the case . [ … ] the determination of whether a delay is inordinate is not based on the length of the delay alone, but on contextual factors , [ … ] in the attempt to determine whether the community’s sense of fairness would be offended by the delay. [Emphasis added.] [ 57 ] That being said, although Blencoe concerned the delay between the filing of the administrative complaint with the appellant commission and the hearing it held, the principles established may also be applied to other stages in administrative proceedings, for example, as is the case here, with respect to the delay between the time the regulatory administrative body obtains an investigation report and the filing of a complaint or application before the competent administrative tribunal. [ 58 ] That is in fact what emerges from certain excerpts of LeBel, J.’s reasons on behalf of the four judges dissenting in

part in Blencoe , which excerpts, set out below, were not contradicted by the majority: [138] […] The important and determinative issue should have been the role of judicial review and administrative law principles in the control of undue delay in administrative tribunal proceedings.

Given that human rights commissions are administrative law creations, the first place we should look for solutions to problems in their processes is in the realm of administrative law. […] […] [140] […] The tools for this task are not to be found only in the Canadian Charter of Rights and Freedoms , but also in the principles of a flexible and evolving administrative law system . […] […] [144] […] Administrative law abuse of process doctrine is fundamentally about protecting people from unfair treatment by administrative agencies . […] When we ask whether there has been an administrative law abuse of process, we ask the same fundamental question: has an administrative agency treated people inordinately badly? [ 59 ] Then, after referring in particular to the example of inordinate delay in administrative law in a judgment of the English Court of Appeal that applied this principle to the delay, after investigation, before notifying police officers of disciplinary charges against them, [44] in paragraph 178, LeBel, J. confirmed the application of administrative law principles regarding inordinate delay not only to delays concerning the hearing itself, as was precisely the case in Blencoe , but also to administrative delays leading to the hearing, as is the case here: [178] […] As we have seen above, the courts must also consider the stage of the proceedings which has been affected by the delay.

A distinction must be drawn between the process leading to the hearing and the hearing itself. A different balance between conflicting interests may have to be found at different stages of the administrative process .

[Emphasis added.] [ 60 ] In fact, the FMAT applied this principle in a case where the respondents argued that the five-year delay between the date of the events alleged against them and the date they received service of the AMF’s application for an administrative penalty amounted to an abuse of procedure inconsistent with the standard of care required in matters of administrative justice.

The FMAT rejected the argument in the following terms: [ translation ] [45] In view of the circumstances surrounding this case and the nature of the investigation conducted by the AMF , the Bureau does not consider these delays undue or clearly unacceptable . [46] In addition, the Bureau notes that the Securities Act contains no prescriptive period for administrative proceedings brought before the Bureau. [47] The Act does provide a five-year prescriptive period for penal proceedings, which runs from the date on which the investigation record is opened until proceedings are instituted.

However, this case is not a penal proceeding instituted by the AMF before the Court of Québec pursuant to the Securities Act but an administrative proceeding before the Bureau under

section 273.1 of the Act .

In this regard, the Bureau notes that, even in the context of this administrative proceeding, a delay of five years from the start of the investigation to the filing of the AMF’s application has not elapsed. [48] In addition, as the Supreme Court of Canada noted in Blencoe , “delay, without more, will not warrant a stay of proceedings as an abuse of process at common law”. “In the administrative law context, there must be proof of significant prejudice which results from an unacceptable delay”. “Staying proceedings for the mere passage of time would be tantamount to imposing a judicially created limitation period”, which in the Bureau’s opinion, is not desirable in administrative law, especially in securities market regulation. [49] The Bureau is of the view that apart from vague assertions that fall short of establishing an inability to respond to the allegations set out in the AMF’s application, the applicant-respondents presented no specific – much less preponderant – evidence of prejudice, stigmatization, or abuse of process by the AMF during the investigation or otherwise . [45] [Emphasis added; references omitted.] [ 61 ] These remarks are in keeping with the teachings and principles established in Blencoe and reflect the consistent case law of the FMAT and its predecessor, the Bureau de révision et de décision, on the issue. [46] [ 62 ] In Huot c.

Pigeon , [47] this Court dismissed the appeal of a judgment rendered by the Superior Court dismissing the appellant Huot’s motion in evocation for an order staying the disciplinary proceedings instituted against him by the syndic of the Association des courtiers et agents immobiliers du Québec before that Association’s disciplinary committee seven years after the start of its investigation.

Rather than the Civil Code of Québec rules governing prescription, the Superior Court judge applied the administrative law criterion of “reasonable delay” established in Blencoe and dismissed the motion essentially for the reason that establishing unreasonable delay is not sufficient to order a stay of proceedings.

Huot would have also had to establish that the delay was unacceptable and had caused him significant prejudice. [ 63 ] After analyzing the circumstances as a whole, Doyon, J.A. confirmed these conclusions and found that while the seven-year delay might seem unreasonable or unacceptable at first glance, the specific circumstances of the case did not support that conclusion, and moreover, the appellant had failed to establish that he had genuinely suffered as a result of the passage of time. [48] [ 64 ] Doyon, J.A.’s reasoning in that case, based on the teachings of the Supreme Court in Blencoe , is applicable here. [49] [ 65 ] In view of the nature of the AMF’s mission and the notion of [ translation ] “administrative act”, the judge did not err in law in finding that in the absence of any prescriptive period in

section 273.1 of the QSA , the criterion of reasonable delay as defined in Blencoe should apply to the administrative complaint filed with the FMAT. [ 66 ] What is more, considering that the appellants presented their prescription argument for the first time only before the Court of Québec, without having adduced relevant supporting evidence before the FMAT, the reasonableness of the delay could not have been analyzed by the judge, nor can it be on appeal, for the reasons provided by the judge in paragraph 57 of her judgment.

It should be added that, even assuming that the delay was “unreasonable”, on which we are in no way ruling, the lack of evidence also prevents us from considering whether “significant prejudice”, the second requirement of the criterion established in Blencoe , was caused to each of the appellants. [ 67 ] In view of the foregoing, there is no basis for referring the parties back to the FMAT so that the appellants may adduce evidence relevant to the analysis of the Blencoe criterion, and if applicable, obtain redress before that administrative tribunal.

The appellants made their bed on that issue during the hearing before the FMAT and must live with their strategic decisions. Catch-up justice has its limits, and the circumstances of this case do not justify going beyond those limits. 2. APPEAL FROM THE JUDGMENT OF FEBRUARY 26, 2018, DISMISSING THE APPEAL OF THE FMAT’S DECISION ON THE MERITS

2.1 Facts [ 68 ] In paragraph 75 of its judgment, the FMAT thoroughly described the relevant factual background and, in particular, included numerous excerpts from the testimony and exhibits filed before it. [ 69 ] For the purposes of this appeal, the facts may be summarized as follows. [ 70 ] In 2009, Nstein was experiencing certain financial difficulties and looking for solutions.

Open Text was among a list of potential acquirers with whom preliminary discussions were being considered. [ 71 ] On November 9, 2009, appellant Filiatreault contacted the Open Text representative who usually handled acquisitions, Jane Mowat. [ 72 ] On November 12, 2009, a meeting of Nstein’s human resources and corporate governance committee was held. All the appellants attended. That meeting was followed by a meeting of the board of directors, which appellant officers Martel and Benoit also attended.

It is noted in the minutes of the board meeting that the members of the human resources and corporate governance committee [ translation ] “ discussed a proposal to grant stock options to management and to certain employees, and it was agreed that the president and chief executive officer would submit a new proposal for the Board’s approval …” [Emphasis added]. [ 73 ] At the hearing before the FMAT, appellant Donaldson claimed that [ translation ] “on November 12, we had … the Board had agreed to the stock options, …”.

When questioned by the administrative decision-maker on the contradiction between his statement and the wording of the minutes of that meeting, he responded as follows: [ translation ] Q. The board of directors meeting held on November 12, 2009. A. Yes. Q. I just heard you; did I understand correctly – you said that the board of directors approved the issue, the granting of stock options to employees? A. Yes. Q. Look at item 7, paragraph 2. I’m reading what’s written, and there’s no mention of approval.

It states, [ translation ] “It was agreed…”; it was agreed that the president and chief executive officer would submit a new proposal for the board’s approval in view of the comments made by the members of the committee. That’s what I read. So I don’t see here; it doesn’t say that Nstein’s board of directors approved any option whatsoever. A. Yes, yes, but on the 12th, we approved the amounts. O.K.? Well, according to, I’m saying, according to my … Q. Your understanding? A. My understanding of the facts. Q. But you admit that’s not exactly what’s written here? A.

If I read it like you do, I’m forced to agree with you . But that’s it. [Emphasis added.] [ 74 ] Appellant Filiatreault testified as follows in regards to this note in the minutes of the board meeting: [ translation ] Mr.

Lozeau said there were discussions; there was a proposal and I had to modify that proposal and submit it to the board for final approval once it was ready. [Emphasis added.] [ 75 ] On November 27, 2009, Jenkins, Open Text’s senior officer , during a telephone call with Filiatreault, proposed the potential acquisition of Nstein and mentioned a possible premium of 80% to 100% of the security price . [ 76 ] On December 4, 2009, Nstein’s board members held a telephone conference, called by Filiatreault, to review the discussions held with Open Text and other possible third-party buyers.

No minutes or notes were kept concerning what was said during that telephone conference, although, at the FMAT hearing, appellant Roy likened it to a meeting of the board of directors. [ 77 ] After that, discussions continued between Filiatreault and Open Text.

The documentary evidence also established that in late December 2009, some members of the board and certain officers discussed granting stock options. [ 78 ] On January 4, 2010, appellant Benoit sent to each board member, for their signature, a resolution providing for the granting of stock options to certain officers and employees, including herself, Filiatreault and Martel, at market price. The next day, all the signatures were affixed, and the grant was announced in a press release.

[ 79 ] On January 27, 2010, Open Text sent Nstein a letter of intent regarding the acquisition of all the issued and outstanding common shares at the price of $0.65 per share, which represented a premium of 106% on the market price of Nstein’s shares. [ 80 ] On January 29, 2010, the appellant members of the board of directors of Nstein adopted a resolution approving Open Text’s January 27, 2010 letter of intent. [ 81 ] On February 21, 2010, the board met and approved the purchase agreement and the press release that was to be published the next day to publicly announce Open Text’s acquisition of Nstein.

Appellants Martel and Benoit were also present at that meeting . [ 82 ] At a special general meeting held on April 1, 2010, Nstein’s shareholders approved Open Text’s acquisition of the corporation. [ 83 ] On or about April 1, 2010, in accordance with the purchase agreement negotiated by appellant Filiatreault and approved by Nstein’s board, the corporation’s stock options at the exercise price of $0.29 granted by the board to appellants Filiatreault, Martel and Benoit on January 4, 2010 were redeemed at the unit price of $0.65.

Filiatreault made a gross profit of $72,000, Martel of $36,000, and Benoit of $18,000. 2.2 Analysis [ 84 ] When she dismissed the appeal of the FMAT’s decision on the merits, the judge did not have the benefit of Vavilov , [50] rendered by the Supreme Court on December 19, 2019, which reconsidered the standard of review applicable to an appeal of an administrative decision brought before a court of justice pursuant to a statutory provision, as is the case here. [51] Nor did she have the benefit of Bell Canada , [52] rendered on the same day and in which the Supreme Court applied the new standard. [ 85 ] Applying those teachings to the case at hand, we must conclude that the appellate standard of review to which the judge should have been held is the standard applicable to questions of law, questions of fact, and questions of mixed fact and law, [53] as defined by the Supreme Court on more than one occasion, in particular in Housen [54] and in St-Jean . [55] [ 86 ] While the judge applied the judicial review standard of deference set out in Dunsmuir [56] to the issues before her and in rendering her judgment, the Court will instead analyze the appeal in this case according to the new standard of review established by Vavilov , while focussing on the FMAT’s decision. 2.2.1 The standards of review [ 87 ] The applicable appellate standards of review are well known. [ 88 ] The Court reiterated them as follows in Gercotech inc. : [57] [ translation ] [7] First, with respect to pure questions of law, this Court will intervene only if the appellant successfully establishes that such an error exists and that this error affected the outcome of the case. [8] Moreover, let us recall what a “ palpable and overriding error” means, that is, the standard of review applicable to questions of fact or questions of mixed fact and law: (

a) an error is “ palpable ” where the litigant is able to identify it [ translation ] “with great economy-of-means, without it provoking a long semantic debate, and without it being necessary to review large parts of documentary and testimonial evidence that is divided and contradictory ”; it is an error [ original english ] “ that is obvious”, that one can [ translation ] “ put one’s finger on ” and that is “not of a needle in a haystack, but of a beam in the eye”; (

b) a palpable error is “ overriding ” where it has a “critical” impact on a finding of fact or a finding of mixed fact and law, where it [ translation ] “overwhelmingly precludes the judge’s finding on a question of fact and is likely to affect the outcome of the case”; to demonstrate such an error, it is not sufficient for the litigant to [ original english ] “pull at leaves and branches and leave the tree standing.

The entire tree must fall ”. [Emphasis added; references omitted.] [ 89 ] As the Supreme Court recently reiterated, the fact that an alternative factual finding could be reached based on a different ascription of weight does not mean that a palpable and overriding error has been made. [58] [ 90 ] The standard of review of palpable and overriding error therefore implies the fundamental principle that an appellate court owes [ translation ] “particular deference […] to the trial judge’s findings of fact drawn from contradictory evidence and to his or her assessment of the credibility of the witnesses (ordinary and expert), because it is the trial judge who heard and saw them, an advantage that appellate courts do not have”. [59] As Kasirer, J.A., as he then was, noted in his reasons in Francoeur c. 4417186 Canada inc. : [60] [55] It is often said, and quite rightly so, that a court of appeal should tread cautiously before disturbing the findings of fact by a trial judge, especially when those findings are comforted by determinations bearing on the credibility of witnesses. […] [Emphasis added.] [ 91 ] It is not the task of an appellate court to retry a case. [61] Iacobucci and Major, JJ. reiterated this on behalf of the majority in Housen v.

Nikolaisen :

18. The trial judge is better situated to make factual findings owing to his or her extensive exposure to the evidence, the advantage of hearing testimony viva voce , and the judge’s familiarity with the case as a whole.

Because the primary role of the trial judge is to weigh and assess voluminous quantities of evidence, the expertise and insight of the trial judge in this area should be respected. [62] [ 92 ] Finally, need we repeat that it is the appellant who bears the heavy burden of establishing a reviewable error? [63] 2.2.2 Application of the standard [ 93 ] As the trial judge correctly summarized, [ translation ] “the issues raised [by the appellants] are essentially related to the decision- maker’s assessment of the evidence”. [64] [ 94 ] The issues before us that the appellants characterize as questions of law are not so. [ 95 ] First, they are wrong in claiming that the FMAT committed an error of law because it refused to consider the evidence that would have clarified the content of the minutes of Nstein’s board meeting held on November 12, 2009.

They submit that this evidence would confirm that the decision to grant stock options to the appellants was made during that meeting, that is, a few weeks before the first discussions between appellant Filiatreault and the representatives of Open Text, and almost two months before the January 4, 2010 resolution in which the options were granted. [ 96 ] The appellants cannot disregard the excerpts from the FMAT’s decision that establish, on the contrary, that it considered various pieces of evidence they adduced, although unsuccessfully, for the purpose of convincing it of the content of the decision they claim was actually made at the November 2009 board meeting. [ 97 ] Second, the appellants are wrong to minutely dissect the expression “necessary in the course of the issuer’s business” in the second paragraph of

section 187 of the QSA to isolate the term “necessary” and turn its

interpretation into a question of law. First, the word “necessary” means what it means, without requiring

interpretation, and the FMAT clearly did not commit a reviewable error in concluding that it is definitely not a synonym of [ translation ] “desirable” or [ translation ] “useful”.

Moreover, as emerges from National Policy 51-201 with respect to disclosure standards to which the appellants themselves refer the Court, although drawing our attention to another passage, the question of what is in the “necessary course of business” for the issuer is a mixed question of fact and law. [65] [ 98 ] Although this document, prepared by the Canadian securities administrators, including the AMF, for investors and other persons involved in the financial markets has no precedential value, it nevertheless has significant persuasive value for our purposes.

This is particularly so since the doctrine also confirms that the equivalent English expression “made in the necessary course of business” is a mixed question of law and fact. [66] [ 99 ] Finally, the appellants are also wrong to claim that the FMAT erred in law by failing to consider whether the mere receipt of Nstein stock options by appellants Martel and Benoit, who were not members of the corporation’s board of directors when the decision was made to grant those options, can be considered a “trade” within the meaning of the second paragraph of

section 187 of the QSA because, in their view, [ translation ] “there is no evidence establishing that the officers participated in the board’s discussions or decision concerning the granting of the stock options”. [67] [ 100 ] The argument as expressed by the appellants is flawed at its core insofar as the evidence establishes, to the contrary, that Martel and Benoit were involved in certain board discussions and in email exchanges among certain board members concerning the granting of the stock options, which, incidentally, would ultimately benefit both of them. [ 101 ] Moreover, the appellants fail to consider that

section 189.1 of the QSA expressly provides that “[n]o person prohibited from trading in securities of a reporting issuer or from changing an economic interest in a related financial instrument by the effect of

section 187 or 189 may use the privileged information in any other manner unless he is justified in believing that the information is generally known to the public” . As confirmed by the doctrine,

section 189.1 extends the prohibition against “trading” set out in

section 187 to trading in stock options because one may not use privileged information [ translation ] “in any manner, even indirectly” and the acceptance of stock options by the beneficiary may be considered a “trade” in securities of the reporting issuer within the meaning of

section 187. [68] A decision of the Alberta Securities Commission to which the parties referred the Court also confirms that in that jurisdiction the mere receipt of stock options by officers does not preclude a finding of insider trading. [69] [ 102 ] Finally, this Court cannot consider as a question of law the appellants’ argument that the administrative decision-maker analyzed all the evidence with a [ translation ] “preconceived” idea in mind, engaged in “cherry picking” to achieve his end, and in so doing, they assert in a thinly veiled manner, showed bias. [ 103 ] There is nothing in the FMAT’s decision in this case, nor in the transcripts of the debates before it, to support such an argument.

Moreover, even more fatal to the appellants is the fact that they did not seek leave to appeal the judgment of the Court of Québec dismissing their ground of appeal that [ translation ] “the decision-maker erred in law by ignoring, in a systematic and biased manner, almost all of the written and testimonial evidence presented by the appellants”. [70] [ 104 ] Having clarified these points, it should be noted that the issues raised by the appellants on appeal are in reality solely questions of fact, or, at best, questions of mixed fact and law, and amount to nothing short of an attempt to retry the case.

That is not the role of this Court. [ 105 ] The appellants had to meet the heavy burden incumbent upon them to establish that the FMAT’s factual findings or inferences were the result of a palpable and overriding error in the assessment of the evidence. They have failed. [ 106 ] First, the FMAT’s decision is 51 pages long and its drafting is impeccable. The decision-maker’s analysis of the evidence adduced before him over the nine days required for the hearing, which also comprised the testimony of ten witnesses, including two AMF investigators and the impleaded party Légaré, is meticulous.

His findings of fact are supported, and his analysis of the defences

presented by the appellants is clear. [ 107 ] His chronological and methodical analysis of the events, of the discussions among some of the appellants by telephone and email, and of certain key exhibits, especially in lengthy paragraph 75 of the decision, is supported by the evidence. [ 108 ] The FMAT’s conclusions are therefore factually and substantially justified, and in addition to being supported by the testimony of other witnesses and certain exhibits, are based at least in part on the affidavit and testimony of Légaré, who had been the personal accountant of Nstein’s president and chief executive officer, appellant Filiatreault, and of Filiatreault’s management company for the past 22 years at the time the offences were committed. [ 109 ] Finally, the assessment of the witnesses’ credibility fell within the decision-maker’s jurisdiction, and he based his conclusion concerning the material date on which the stock options were granted, that is January 4, 2010—thus after the start of discussions with Open Text with a view to selling Nstein’s shares to that corporation—on the lack of credibility of the testimony of appellant Donaldson, chair of the board of directors, concerning certain excerpts from the minutes of the board meeting held on November 12, 2009, further to a question that he himself asked Donaldson. [71] The decision-maker also noted the lack of credibility of appellant Filiatreault, and conversely, the candour and credibility of the impleaded party Légaré. [72] [ 110 ] The appellants have failed to establish that the assessment of the credibility of these witnesses by the FMAT is the result of a palpable and overriding error in view of the evidence as a whole.

FOR THESE REASONS, THE COURT: [ 111 ] DISMISSES the appeals in each of the files; [ 112 ] With legal costs. YVES-MARIE MORISSETTE, J.A. JOCELYN F. RANCOURT, J.A. MICHEL BEAUPRÉ, J.A. Mtre Bernard Moreau Mtre Catherine Dufresne DUFRESNE HÉBERT COMEAU For appellant Pierre Donaldson Mtre Stéphanie Lapierre Mtre Charles Ouimet STIKEMAN ELLIOTT For the appellants Mtre Stéphanie Jolin Mtre Valentin Jay AUTORITÉ DES MARCHÉS FINANCIERS For the respondent Date of hearing: January 27, 2020