No abuse of process in ban of securities officer involved in market manipulation: BC Court of Appeal

A decision to ban a litigant from acting as officer of an exchange-listed company was made to protect public interest and was not an abuse of process, the British Columbia Court of Appeal has ruled.

In Lower v. Investment Industry Regulatory Organization of Canada, 2022 BCCA 285, Scott Lower was working as a registered representative in the securities industry with a Vancouver-based brokerage firm when the Investment Industry Regulatory Organization of Canada (IIROC) began an investigation of his alleged involvement in market manipulation and the payment of secret commissions. At the time of the investigation in 2008, Lower was subject to the regulatory supervision of IIROC.

IIROC required Lower to attend an interview with the investigators, but he refused to attend. As a result, IIROC initiated disciplinary proceedings against him. Lower likewise failed to attend the disciplinary hearing. The hearing panel ruled that Lower’s deliberate refusal to comply with IIROC’s orders obstructed and compromised IIROC’s ability to conduct the investigation and perform its regulatory function. Lower was ultimately banned from being registered with IIROC and he was fined $50,000.

Five years after the disciplinary decision, Lower was offered a directorship with a public company but he was refused regulatory approval and was required to resign. Lower applied to the BC Securities Commission for a review of IIROC’s disciplinary decision, which the commission dismissed.

In 2018, Lower elevated the matter to the BC Supreme Court, alleging that IIROC breached its contract with him by acting in a procedurally unfair manner and in bad faith when it investigated him in 2008 and disciplined him in 2009. His action was dismissed through summary trial on the grounds that Lower’s claim was barred by statute and by estoppel, and that the claim was an abuse of process. Lower filed an appeal, seeking a declaration that the discipline decision was ultra vires and invalid.

Abuse of process

The appeal court said that in applying the abuse of process doctrine, judges exercise a discretion generally entitled to deference. The way in which the discretion is exercised will often be the product of a fact-intensive inquiry in respect of which the “palpable and overriding error” standard of review applies.

The court emphasized that appellate intervention is proper only where the judge proceeded on a wrong principle or failed to give sufficient weight to relevant considerations. Citing case authorities, the court further said that the abuse of process doctrine focuses less on the interests of the parties and more on the integrity of the administration of justice. Excessive delay and promoting the public interest in finality may be factors to be considered in applying the doctrine.

Protecting public interest

The appeal court rejected Lower’s argument that the trial judge committed an error in her abuse-of-process analysis by concluding, among other things, that the “threshold” for an abuse-of-process finding was met. Lower’s arguments ignored the discretionary nature of the remedy and the deferential standard of review that generally applies, and he failed to establish that the judge “erred in principle, failed to consider or weigh all relevant circumstances, clearly and demonstrably misconceived the evidence, or made an order resulting in a clear injustice,” said the court.

The court pointed out that Lower attempted to access the courts to obtain the same or similar relief that could have been sought almost a decade ago, had he engaged in the regulatory process that governed his status as an approved member of IIROC, including exercising his statutory remedies. The court noted that the sanction permanently banning him from being registered in any capacity with IIROC was made to protect public interest.

The court ultimately ruled that due to Lower’s inaction and delay, and absent a reapplication with IIROC, there was nothing that IIROC could do to remedy any procedural unfairness arising from its investigative conduct or enforcement action. Given the relevant circumstances, the court found that it was open to the judge to conclude that permitting Lower to proceed with his civil claim at such a late stage would bring the administration of justice into disrepute.