Appeal could mean significant changes for securities enforcement

Trial by jury is not provided for under the ASA, a deliberate choice by Alberta lawmakers. However, the Canadian Charter of Rights and Freedoms grants a constitutional right to trial by jury in instances in which “the maximum punishment for the offence is imprisonment for five years or a more severe punishment.”

The appellants have argued that the penalties they’re facing under the ASA — five years in prison, less a day, or a $5 million fine, or both — amount to “a more severe punishment” as described by the Charter.

The hearings before the SCC, as well as the result, are likely to be watched carefully by the investment industry and those who regulate it. Says Andrew Pozzobon, an associate in the Calgary office of law firm Borden Ladner Gervais LLP in a comment on the case: “A decision from the Supreme Court could conceivably have a broader impact on the investigations and sanctions regimes of the Alberta Securities Commission and other provincial regulators.”

The cases have been winding through the courts for many years, with the most recent decision being released by the Alberta Court of Appeal (ACA) in late 2015.

In declining to grant a trial by jury, the ACA concluded in its decision that Canada’s legal system does not recognize “any equivalency between money and deprivation of liberty. For example, a wealthy convict cannot buy his way out of prison.”

Furthermore, the decision adds that the result the appellants sought would be unworkable in terms of enforcing securities legislation. It’s a subjective decision in any particular case as to the impact of a fine or a jail term on an individual, the decision notes. For example, although a large fine may be meaningless to a wealthy businessperson, even a short jail term may be catastrophic to the same person.

As a result, the addition of a fine, even a large one, together with a jail term, does not amount to a “more severe punishment,” under the Charter, the ACA concluded.

Despite this conclusion, the court accepted the strength of a point raised in Robert Peers’ factum, which seems to capture the core of the case: “How much is a night in jail worth to a reasonable Canadian? If a night in jail is worth $5 million or less then the appeal must succeed.”

The appellants face a range of serious allegations. Aitkens, a former pastor in Lethbridge, Alta., faces charges under the ASA, including fraud, arising from the sale of securities through his firm, Legacy Communities Inc. Investors have alleged that Aitkens raised $500 million from them for a series of real estate ventures, but that little of the money went into the investments.

The ASA charges against the other two appellants include allegations that Jeremy Peers engaged in fraud by using investor funds to pay returns to earlier investors. He is also charged with failing to file a prospectus and register as a dealer.

In a comment on the case and the possible outcome of the appeal, Drew Yewhuck, a student at the faculty of law at the University of Calgary, noted that the ACA conclusion that a price cannot be put on liberty seems to suggest that the Charter cannot be used to address the effect of economic penalties, such as being driven into bankruptcy or poverty by a large fine.

If the SCC places the same priority on certainty as the ACA did, such a decision will come at the price of not recognizing the “immense impact of economic penalties on [the Charter right to] life, liberty and security of the person,” Yewchuk’s comment says.

On the other hand, if the SCC decides that the Charter can address the impact of economic penalties, new and uncertain litigation terrain will be opened up, the comment says, concluding: “So, the question that is going before the [SCC] is effectively: can the Charter fathom why people would prefer one extra night in jail to a $5 million fine?”

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