COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:	Poonian v. British Columbia (Securities Commission),
	2022 BCCA 274

Date: 20220805

Docket: CA47364

Between:

Thalbinder Singh Poonian and Shailu Poonian

Appellants

And

British Columbia Securities Commission

Respondent

Before:

The Honourable Mr. Justice Harris The Honourable Mr. Justice Willcock The Honourable Madam Justice Fenlon

On appeal from:  An order of the Supreme Court of British Columbia, dated
March 26, 2021 (Poonian (Re), 2021 BCSC 555, Vancouver Docket B180757).

Counsel for the Appellant:	C.G. Reedman F. Merritt‑Neill, Articled Student F. Ahmed, Articled Student
Counsel for the Respondent:	W.L. Roberts L.L. Bevan S.B. Hannigan
Place and Date of Hearing:	Vancouver, British Columbia May 2, 2022
Place and Date of Judgment:	Vancouver, British Columbia August 5, 2022

 

Written Reasons by:

The Honourable Mr. Justice Willcock

Concurred in by:

The Honourable Mr. Justice Harris The Honourable Madam Justice Fenlon

 

Summary:

The British Columbia Securities Commission obtained an order declaring that the amounts owed by the appellants pursuant to a Commission decision are debts that will not be released by an order of discharge under the Bankruptcy and Insolvency Act. The appellants challenge the judge’s interpretation of the Bankruptcy and Insolvency Act. The appellants argue that the judge erred in adopting Alberta Securities Commission v. Hennig, 2020 ABQB 48, which was reversed by the Alberta Court of Appeal after the trial judgment was issued. Held: Appeal dismissed. The jurisprudence does not support the view of the chambers judge or the Court in Hennig QB that a decision of a tribunal registered as a judgment of a superior court may be a fine, penalty or restitution order imposed by a court under s. 178(1)(a) of the Securities Act. However, the chambers judge did not err in finding that both the fines and disgorgement orders in this case fell within the exemption defined in s. 178(1)(e) of the Securities Act. The debts arise from obtaining property or services by false pretenses or fraudulent misrepresentation. The fact the misrepresentation was not made to the creditor—in this case, the Commission—does not preclude the Commission from relying on the exemption.

Table of Contents	Paragraph Range
Introduction	[1] - [3]
Background	[4] - [13]
The Judgment Under Appeal	[14] - [26]
Grounds of Appeal	[27] - [29]
Discussion and Analysis	[30] - [90]
Section 178(1)(a): Fines, Penalties and Restitution Orders Imposed by a Court	[33] - [49]
Section 178(1)(e) Obtaining Property by Fraudulent Misrepresentation	[50] - [82]
The Finding of Fraudulent Misrepresentation	[57] - [60]
Obtaining Property	[61] - [62]
Consideration of the Pleadings	[63] - [66]
Direct Link Between the Debt and the Fraudulent Conduct	[68] - [82]
Morally Reprehensible Conduct and Res Judicata	[83] - [86]
Breaches of Natural Justice	[87] - [87]
Arbitrariness	[88] - [90]
Disposition	[91] - [91]

 

Reasons for Judgment of the Honourable Mr. Justice Willcock:

Introduction

[1]         The British Columbia Securities Commission (the “Commission”) has obtained an order declaring that the amounts owing by Thalbinder Singh Poonian and Shailu Poonian (the “Poonians”) pursuant to a Commission decision are debts falling within s. 178 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B‑3 [BIA] and, for that reason, will not be released by an order of discharge. The order was granted for reasons indexed at 2021 BCSC 555. The Poonians appeal, challenging the judge’s interpretation of the BIA.

[15]      Whether an administrative penalty and costs order imposed by a securities commission and registered as a judgment with a superior court can survive discharge of a bankrupt debtor has not been addressed by a Canadian appellate court.

[Footnote omitted.]

Background

a)   Thalbinder Singh Poonian and Shailu Poonian, along with three others, were found jointly and severally liable to pay a disgorgement order of $7,332,936 to the Commission;

b)   Thalbinder Singh Poonian was ordered to pay an administrative penalty of $10 million; and

c)   Shailu Poonian was ordered to pay an administrative penalty of $3.5 million.

(1)   If the commission has made a decision under section 161 [an enforcement order, including a disgorgement order] or 162 [an administrative penalty], or if the executive director has made a decision under section 161, the commission or the executive director, as applicable, may file the decision at any time in a Supreme Court registry by filing a certified copy of the decision.

…

(2)   On being filed under subsection (1) …, the decision has the same force and effect, and all proceedings may be taken on it, as if it were a judgment of the Supreme Court.

a)   the Poonians, jointly and severally, to pay the Commission $1,126,260;

b)   Shailu Poonian to pay the Commission $3,149,935; and

c)   Thalbinder Singh Poonian to pay the Commission $1,319,167.

(a) any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, …;

...

(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity, ...; or

(e) any debt or liability arising from obtaining property or services by false pretenses or fraudulent misrepresentation, ....

[88]        When a creditor takes judgment, the cause of action arising from its claims is merged in the judgment. To determine whether s.178 of the BIA applies, the court characterizes the judgment. It does so based on the pleadings and proceedings that resulted in the judgment. When they include a claim that property was obtained by false pretences, the judgment may be characterized as within s. 178. …

[10]      I agree with the general proposition … to the effect that, considering the “new start” object ingrained in the Act, (the discharge provides the “new start” to the bankrupt) the logical interpretation of sections 178(1) and (2) is that the latter creates the general principle (being a release of all debts) with subsection (1) being an exception to that general principle. I also agree that section 178(1) must be viewed in that light.

[11]      But even viewed as an exception to the general principle, and thus as a legislative provision to be interpreted restrictively, the object and clear purpose of the exceptions set out in s. 178 must be respected. The exceptions … are based on an overriding social policy that certain claims should be protected against the general discharge obtained by a bankrupt because of the class of claimants involved, in the present case, the victim of an assault causing bodily harm, and because of the reprehensible nature of the bankrupt’s conduct. … [T]he types of debt which survive bankruptcy are any debts arising out of fraud, dishonesty, or misconduct while acting in a fiduciary capacity. Parliament has clearly made a policy decision that a bankrupt should not be allowed to raise the shield of his or her general discharge against judgment creditors who hold judgments grounded on such reprehensible conduct. As the court in [Simone v. Daley (1999), 1999 CanLII 3208 (ON CA), 170 D.L.R. (4th) 215 (Ont. C.A.)] stated, “[t]hose kinds of conduct are unacceptable to society and a bankrupt will not be rewarded for such conduct by a release of liability.”

[Emphasis added.]

The Judgment Under Appeal

[2]        … [T]he Panel found that the Poonians engaged in market manipulation of OSE Corp., which traded on the TSX Venture Exchange. Through a complex series of trades, using pseudonyms and multiple nominee accounts, they artificially inflated the share price from $0.10 to $0.17 per share to a high of near $2.00. As part of the scheme, the Poonians paid commissions to the Phoenix Group, which in turn encouraged its clients, generally unsophisticated investors seeking to escape personal debt through investment in more high-yield vehicles, to purchase OSE shares at the artificially inflated prices. The Commission described the scheme as “serious misconduct” and as “elaborate, involving layers of deception to conceal the respondents’ participation in the manipulation”: Re Poonian, 2015 BCSECCOM 96 at para. 17 (the “Sanctions Decision”). As a result of the Poonians’ market manipulation scheme, the Phoenix clients alone lost $7,102,902: paras. 19, 57.

[Emphasis original.]

•         the Poonians had engaged multiple deceptive strategies to manipulate the market and artificially drive up share prices (at para. 18);

•         Mr. Poonian had directly, or indirectly through companies he controlled, engaged in deliberate and wrongful conduct relating to OSE shares (at para. 19), and was the “mastermind” orchestrating the scheme (at para. 20);

•         Ms. Poonian was “an experienced and sophisticated investor who was deeply involved in the market manipulation” (at para. 22); and

•         the Poonians’ actions were to be “appropriately compared to cases based in fraud” (at para. 25).

57  (1)   A person must not, directly or indirectly, engage in or participate in conduct relating to a security, derivative or underlying interest of a derivative if the person knows, or reasonably should know, that the conduct

(a)  results in or contributes to a misleading appearance of trading activity in, or an artificial price for, a security,

(b)  contributes to a fraud perpetrated by another person, or contributes to another person's attempt to commit a fraud, relating to a security, derivative or underlying interest, or

(c)  results in or contributes to a misleading appearance of trading activity in, or an artificial price for, a derivative or an underlying interest of a derivative.

[60]      The Poonians object to the use of fraud cases because they do not concern a contravention of section 57(a) of the Act dealing with market manipulation, but rather fraud under section 57(b). However, we agree with the executive director that contraventions of either of sections 57(a) or (b) of the Act can be similarly serious. Each involves some form of deception, which in the case of market manipulation is the misleading appearance of trading activity in, or an artificial price for, a security. Consideration of previous orders in fraud cases is therefore appropriate.

[95]      … [T]he Commission orders, based on expansive and detailed findings of repeated, elaborate, dishonest, and deliberate conduct, through the Poonians’ scheme to mislead investors, manipulate the market, and exploit vulnerable investors, fall solidly within the purposive core of s 178(1). The debts flowing from those orders are exempted under s 178(1)(a).

[96]      … [I]t is not necessary for a superior court to separately scrutinize and adjudicate the merits of the case against the debtor that was before the tribunal. That said, I am satisfied that both in theory and in practice, the merits of the Poonians’ position was in fact scrutinized, and rejected, by a superior court, at the leave application: the Court of Appeal considered whether the Poonians’ substantive grounds of appeal presented arguable cases of sufficient merit, and declined leave. Further, as set out above, the Poonians have argued their case now three times before this Court; one further appeal to the Court of Appeal is pending, and these present reasons will no doubt soon join the queue. Each time the Poonians have failed to convince the Court that the Panel's conclusions were unsupported or unwarranted.

[111]   As a final measure of culpability, speaking to both s 178(1)(a) and (e), the Poonians' actions could have been prosecuted as a violation of the Criminal Code of Canada, RSC 1985, c C-46 …

Grounds of Appeal

a)   in law by misapplying the principles and law pertaining to s. 178(1)(a);

b)   in law by misapplying the principles and law pertaining to s. 178(1)(e);

c)   in fact by disregarding the evidence tendered by the appellants contesting the allegation of morally reprehensible conduct;

d)   in law by finding that the doctrine of res judicata precluded the appellants from contesting certain of the Commission’s findings;

e)   in fact by failing to consider the breaches of the principles of natural justice and procedural fairness in the underlying proceedings; the factum does not elaborate on this bare assertion and it was not mentioned in oral submissions. I consider it to have been abandoned. As I note briefly below, however, it is closely tied up with the res judicata arguments; and

f)     in law by making an order that was “arbitrary, oppressive, overly broad, disproportionate and contrary to section 7 and 12 of the Charter, not in the public interest and contrary to the principles of fundamental justice”.

Discussion and Analysis

[25]      … [T]he proper approach to interpreting the exemptions in s 178(1) starts from the position that every debt is released on a discharge of the bankrupt unless one or more of s 178(1)'s subsections clearly exempts the debt from release. The exemptions should be construed narrowly and applied only in clear cases: [Korea Data Systems (USA), Inc. v. Aamazing Technologies Inc., 2015 ONCA 465]at paras. 62-63; Ruth Sullivan, Halsbury's Laws of Canada (online), HLG, Legislation “Determining Legislative Intent, Presumed Intent, Strict and Liberal Construction” (VIII.4.(2).(d)) at HLG-97. That approach is justified because the more debts that survive discharge by falling within s 178(1) the more difficult it becomes for a bankrupt debtor to be rehabilitated: [Moloney] SCC at para. 79.

[26]      … Section 178(1) does not specifically exempt all debts arising from reprehensible or dishonest conduct, only those identified in that section. ...

Section 178(1)(a): Fines, Penalties and Restitution Orders Imposed by a Court

a)   He failed to apply the “modern approach” to statutory interpretation when interpreting s. 178(1)(a). The appellants say that approach compels a restrictive, rather than broad and purposive, approach to the interpretation of s. 178(1)(a).

b)   He failed to consider relevant jurisprudence applicable to s. 178(1)(a) because of his reliance on Hennig QB and Smylski rather than a line of cases that restrictively interpret s. 178(1)(a): Bankruptcy of Kenneth Reginald Chaytor, 2006 BCSC 1742; Sidhu (Re), 2008 BCSC 90; Martin v. Martin; B. (S.M.A.) v. H. (J.N.) (1993), 1993 CanLII 14745 (BC SC), [1994] 4 W.W.R. 281 (B.C.S.C.), aff’d 1994 CanLII 8698 (BC CA), [1995] 2 W.W.R. 744 (B.C.C.A.); Economical Mutual Insurance v. Guilbert, 2020 MBQB 179; and now the appellate decision in Hennig CA.

c)   He failed to consider the operational conflict between the federal BIA and provincial Securities Act.

[29]        There is no requirement in the plain language of subsection 178(1)(a) that reprehensible conduct be established, but, as discussed, various courts have implied that condition by interpreting the subsection in a manner that requires criminal or quasi-criminal proceedings, presumably given the policy considerations that underline the purpose of the section 178 exceptions. It is noteworthy that in this case, the Commission panel was well-aware of an enhanced responsibility arising from the serious consequences of findings of misrepresentation in public documents, and the sanctions decision reflects that awareness. The sanctions principles emphasize the preventative and protective aspects of a proper sanction. There appears to be no good policy reason to restrict the exception to cases involving the standard of proof in a criminal case, which exists because of the risk to an accused's liberty, to the issue of discharge from bankruptcy arising from a finding of a dishonest or reprehensible conduct in civil proceedings.

[30]        Expanding the interpretation of the subsection in such a way that would encompass any decision of a regulatory authority that involves the public interest, as suggested by the Commission, would give the exception too broad a scope. However, the issue is whether the exception should apply to a penalty imposed by a securities commission arising from fraudulent and dishonest conduct, scrutinized by the Court of Appeal which made its own finding of misrepresentation, and filed with the Court with the result that it “has the same force and effect” as if it were a judgment of the Court.

[31]        In the circumstances, it is not necessary that I find that an administrative penalty levied in the circumstances of this case falls within the requirements that the penalty must be imposed by a court in respect of an offence, but, if I am incorrect in finding that subsection 178(1)(e) applies, I would find that subsection 178(1)(a) applies in this case in the specific circumstances of a penalty imposed for reprehensible conduct involving fraud, dishonesty and misrepresentation, filed in a timely manner with a court under provisions that give it the same effect as a judgment, scrutinized by the Court of Appeal, and under circumstances where the regulatory authority responded appropriately to the bankruptcy with an indication of its position on the issue.

[90]        First, neither the plain wording of the registration provisions in the security acts of British Columbia (s 163(2)) or Alberta (s 200), nor the BIA (s 178(1)(a)), impose a requirement of judicial scrutiny.

[91]        Second, provincial securities acts, among many other statutes, expressly provide for the registration of fines, penalties, restitution orders, and other orders, in the court registry of the superior court of the province, to permit enforcement of those orders as a practical matter. The BIA correspondingly anticipates such registrations, and indeed exempts s 178(1) from application of the BIA definition of “court”. The process of registration does not involve scrutiny or judicial discretion: it is a matter of right. In this, I agree with the Smylski analysis of Neufeld J, quoted above.

[92]      Third, given the purpose of s 178(1) -- to avoid rewarding dishonest behaviour -- there is no principled basis to refuse to exempt debts imposed after a hearing before an administrative tribunal such as the Commission Panel. As discussed in the next section, a debt arising from a judgment may be exempted regardless of the strict cause of action in the original pleading: a court will consider whether the bankrupt seeking exemption was an honest but unfortunate debtor, or, rather, fell into liability through reprehensible behaviour. A debt, based in reprehensible behavior, imposed by an administrative body statutorily entrusted to make findings and impose penalties and to which courts grant deference, should be treated equally in our administrative state to a debt arising from a judgment.

[93]        Finally, the Poonians’ position [that registration alone without scrutiny does not make a judgment one imposed by a court] would lead to an absurdity. By declining to appeal the decision of a securities commission or other tribunal, a party could immunize himself or herself against the application of s 178(1)(a), and stymie execution proceedings by commission or tribunal through bankruptcy.

[49]      … [T]he main rationale for exempting criminal fines or penalties is respecting the division of labour (and authority) within the legal system. This is what Master Funduk meant when he called s 178(1)(a) an “administration of justice concept”: Jerrard v. Peacock at para. 42. Exempting criminal fines and penalties from the ordinary operation of bankruptcy proceedings is justified because “as a matter of principle, criminal courts should not be subjected to the control of the civil courts”: R v. Fitzgibbon, 1990 CanLII 102 (SCC), [1990] 1 SCR 1005 at 1117-1118. 75 OR (3d) 673. This section helps maintain the balance between criminal monetary sanctions and the objectives of bankruptcy law. It reflects a policy choice that those subjected to criminal sanction should not be allowed to escape the burden of that sanction through bankruptcy proceedings. It has long been established that courts should avoid generating “the sort of clash between civil and criminal law that is apt to bring the law into disrepute”: British Columbia v. Zastowny 2008 SCC 4 at para. 25.

[52]      … Section 2 of the BIA defines “court” for most purposes as the superior courts of the Provinces but that definition does not apply to s 178(1). “Court” as it appears in s 178(1) is undefined. … When the ASC filed the Decisions with the Court of Queen's Bench, the Court did not take any action apart from putting them on file. Rather, the act of filing enabled the ASC to use civil enforcement methods to enforce the Decisions that it (not the Court of Queen's Bench) had already made. The involvement of the Court of Queen's Bench was passive — by accepting a filing, a string of collection possibilities opened up to the ASC. Giving the word “impose” its ordinary meaning is consistent with the interpretive approach to s 178(1) urged in these reasons.

[53]      Nor does the dismissal of Mr. Hennig's appeals of the Merits Decision and the Sanctions Decision to this Court bolster the ASC's argument. The dismissal of the appeals confirmed that Mr. Hennig owed a debt to the ASC comprising the administrative penalty and the costs order. It does not mean that this Court “imposed” them. Rather, it upheld the ASC's decision to do so.

[37]        Contextually, section 7 of the Limitation Act is all about enforcement. It refers specifically to the time for commencing “a court proceeding … to enforce … a judgment for the payment of money” (emphasis added). In this way, it differs from section 6, which sets out the basic limitation period of two years for commencing “a court proceeding in respect of a claim”.

[38]        What the judge did not consider is this: the legislature’s intention when it used the words “judgment” and “local judgment” in section 7 of the Limitation Act must be construed in the context of the enforcement process and its clear intention that, upon filing, a determination is to be enforced in the same manner as a judgment of the Supreme Court.

[39]        This approach gives proper weight to the legislative context of enforceability, and the legislative intent and objects of both statutes, all as informed by the principle of coherence among statutes and the dictates of the Interpretation Act.

Section 178(1)(e) Obtaining Property by Fraudulent Misrepresentation

[62]      With respect to s 178(1)(e) specifically, if there is a prior judicial finding of fraud in underlying litigation related to the debt then the task for the application judge under the BIA will likely be straightforward. If it is not clear what a court determined in the prior judicial proceedings, courts in Alberta and elsewhere have long recognized that the application judge can look to the judgment recognizing the debt (if any), the pleadings and context to determine if there were fraudulent statements for the purpose of 178(1)(e). The early cases adopted this approach when it was not clear from the record whether a debtor had made fraudulent statements. In Morgan v Demers, 1986 ABCA 100, all this Court had to go on was the formal judgment. There were no written reasons and no transcript of the oral reasons. So, this Court assessed the preamble of the formal judgment, which referred to an affidavit and questioning on the affidavit, to determine if there had been an admission of fraudulent misrepresentation for the purpose of s 178(1)(e). Similarly, in Berthold v. McLellan, 1994 ABCA 122, this Court had to look to pleadings and evidence to make sense of a brief bench judgment to decide whether the judgment debt fell within s 178(1)(d); see also Covey (Re), 2012 ABQB 565 at para. 11; HY Louie Co Limited v Bowick, 2015 BCCA 256 at paras. 57, 60-61, 88.

[63]      In the case of a debt resulting from a finding by an administrative tribunal, even if there is a finding of fraudulent statements, an application judge must make his or her own determination based on a review of the record whether the debt falls within the exemption: Canada (Attorney General) v Bourassa (Trustees of), 2002 ABCA 205 at paras. 5-9.

[37]      … [T]here is no merit to the submission that a Commission decision is nothing more than an internal administrative review which lacks the force of law. Although Commission decisions are made within the scope of the statutory scheme mandated by Parliament, and do not require subsequent court affirmation, this does not mean that they are bereft of any legitimacy in law. To the contrary. The EI Act speaks for itself on this point. Despite the gravity with which courts approach allegations of civil fraud, a Commission decision based on a finding of fraudulent conduct, if not appealed and reversed, can be enforced as if it were a judgment of the Federal Court of Canada on registration of the required certificate under s.126(2). In this regard, Commission decisions are comparable to those made by other administrative tribunals whose decisions may be enforced as judgments of a superior trial court, such as a labour relations board: see for example Canada Labour Code R.S.C. 1985, c. L-2, ss. 23(3) and 23.1.

[38]      Further, given the provisions of the EI Act, if a Commission decision is not successfully appealed in the manner prescribed by statute, it follows that the Commission findings under s. 38 are res judicata as between the debtor and the Commission. There is no rational legal or policy basis for requiring that these issues be litigated afresh as between the claimant debtor and the Commission either in the course of the bankruptcy proceedings or thereafter. Had the subject Commission decision been registered in the Federal Court of Canada, there could be no argument that this decision did not bind the parties. Does the absence of registration undercut the binding effect of the decision for purposes of the Bankruptcy Act? In my view, it does not.

[39]      Parliament intended that a Commission decision under s. 38 have binding effect in law, subject of course to appeal rights. The fact that any such decision (not appealed or not reversed on appeal) can be enforced as if it were a judgment of the Federal Court confirms that intention. The law is clear that in a bankruptcy, a debtor is not relieved of any finding already made by a court of competent jurisdiction that the debtor has obtained property from a creditor by false pretences or by fraudulent misrepresentation. The judgment is conclusive on this point: Re Smith (1985) 1985 CanLII 2627 (SK KB), 43 Sask. R. 27 (Q.B.), aff’d (1986) 1986 CanLII 2921 (SK CA), 45 Sask. R. 240 (C.A.); and see also Berthold v. McLellan, 1994 Alta. L.R. (3d) 28 (C.A.). The same result follows where an admission of fraud can be inferred from a consent judgment: Demitor (Re) (1993) 1993 CanLII 16346 (AB KB), 137 A.R. 381 (Q.B.). A Commission decision not appealed by a claimant debtor is therefore analogous to a decision of a court of competent jurisdiction and should be treated as such.

[30]      My review of the majority decision in Bourassa leads me to conclude that they did not really turn their minds to the effect of a finding of fraud by a properly constituted independent board or commission. That is because in Bourassa, they found that the employment insurance commission was not functioning in an independent fashion. It was in essence both creditor and adjudicator. Consequently, they did not have to decide the effect of a ruling by an independent statutory tribunal.

See also: Coyle (Re), 2011 NSSC 238.

a)   in reaching a conclusion on the scope of s. 178, the court is to consider the pleadings and the evidentiary proceedings;

b)   the onus is on the creditor who seeks to have the debt or liability survive the discharge to bring it within one of the provisions of s. 178(1);

c)   section 178(1)(e) uses the expressions “false pretences” and “fraudulent misrepresentation” disjunctively; only one basis of liability must be proven to engage this subsection;

d)   the core content of the phrases “false pretences” and “fraudulent misrepresentation” is deceitful statements;

e)   the essential test for both “false pretences” and “fraudulent misrepresentation” is whether the bankrupt was “deceitful” in obtaining the property;

f)     reliance on any representation need not be shown; it must be demonstrated that the debtor obtained its property by pretences which they knew to be false; and

g)   a causal connection between the bankrupt’s wrongdoing and the creation of the debt or liability is required.

The Finding of Fraudulent Misrepresentation

a)   the Commission’s adoption (at para. 1142) of a passage from its prior decision in Re Podorieszach, 2004 LNABASC 151, [2004] A.S.C.D. No. 360:

... An individual's trading activity may have the intended effect of raising or lowering the price of a security to a level different than it would be under normal market conditions. Alternatively, the trading activity may maintain a price when it would otherwise have risen or fallen. In our view, both situations create an artificial price because the price is not reflective of the market's unimpeded judgment of the value of the security being traded. Such conduct that is designed to affect artificially the prices on the market is contrary to the public interest because it misleads other buyers and sellers. …

[Italic emphasis original; emphasis by underlining added by Crerar J.]

b)   the Commission’s own conclusion, at para. 1143:

Thus, the fact that trading changes a price does not by itself mean that the price is artificial. The test is whether the trading itself was an expression of bona fide investment decisions by both parties to the trade - that is, genuine market demand and supply. If so (and absent some other factor), then the resulting price is not artificial. Artificiality is, rather, essentially the product of intentional misrepresentation of genuine demand or supply.

[Emphasis added by Crerar J.]

Obtaining Property

Consideration of the Pleadings

[60]      The Poonians object to the use of fraud cases because they do not concern a contravention of section 57(a) of the Act dealing with market manipulation, but rather fraud under section 57(b). However, we agree with the executive director that contraventions of either of sections 57(a) or (b) of the Act can be similarly serious. Each involves some form of deception, which in the case of market manipulation is the misleading appearance of trading activity in, or an artificial price for, a security. Consideration of previous orders in fraud cases is therefore appropriate.

[112]   This returns us to the purpose and essence of s 178(1) generally, and s 178(1)(e) specifically. The Court is satisfied that the Poonians’ actions were morally unacceptable and harmful to society, such that they should not be rewarded with a release of those debts through the statutory discharge under the BIA. Their orchestrated market manipulation and knowing exploitation of vulnerable investors, with corrosion of public confidence in the securities markets, all evidence the deceit lying at the heart of s 178(1)(e).

Direct Link Between the Debt and the Fraudulent Conduct

[19]      … [Section] 178(1) reflects a number of disparate policy choices by Parliament reflecting different considerations. There is no master-rationale for all the exceptions. Courts have recognized this for some time: Jerrard v. Peacock at paras. 41-46; Lloyd W Houlden, Geoffrey B Morawetz & Dr Janis P Sarra, Bankruptcy and Insolvency Law of Canada, 4th ed (Toronto: Thomson Reuters Canada, 2009) (update 2021-3), Part VI, H§63(1), Online.

[Emphasis added.]

Considering the new start object ingrained in the Act, the logical interpretation of the two subsections in question [ss. 178(1) and (2)] is that subs. (2) creates the general principle (being a release of all debts) with subs. (1) being an exception to the general principle. Subsection (2) establishes exceptions, not the principle, and must be viewed in that light.

It is as if the section literally reads that the order of discharge releases the bankrupt from all claims provable in bankruptcy “except the following” and then lists the seven [now six] categories in subs. (1).

…

All of the exceptions in the section are based on what might be classed as an overriding social policy. In other words, they are the kinds of claims which society (through the legislators) considers to be of a quality which outweighs any possible benefit to society in the bankrupt being released of these obligations.

…

Paragraphs (d) and (e) are morality concepts which look at conduct. Those kinds of conduct are unacceptable to society and a bankrupt will not be rewarded for such conduct by a release of liability.

[Emphasis added.]

[15]        The Bankruptcy and Insolvency Act provides in s. 178(2) that “an order of discharge releases the bankrupt from all claims provable in bankruptcy”. The section provides a few exceptions: family support judgments, judgments arising from fiduciary misappropriations, some student loans, etc. The classes of debt that are not discharged by bankruptcy are those that Parliament has concluded fall outside the legitimate objectives of the bankruptcy regime.

[Emphasis added.]

[79]        In furthering financial rehabilitation, Parliament expressly selected which debts survive bankruptcy and which are discharged: s. 178(1) and (2). It did so having regard to competing policy objectives. This is a delicate exercise, because the more claims that survive bankruptcy, the more difficult it becomes for a debtor to rehabilitate: AbitibiBowater, at para. 35; Schreyer, at para. 19. …

[2]        … s. 178(1) of the BIA creates limited exceptions to this general rule [that an order of discharge releases the bankrupt from all claims provable in bankruptcy]. These exceptions are designed to ensure that purposeful wrongdoers cannot take unjustified advantage of the bankruptcy regime's protections. ...

[Emphasis added.]

[52]      … I am not persuaded that the exception to a release of liability upon a bankruptcy discharge which is provided for in paragraph 178(1)(d) of the BIA should be extended to conduct which does not display at least some element of wrongdoing or improper conduct on the part of the fiduciary in question in the sense of a failure to account properly for monies or property entrusted to the fiduciary in that capacity or inappropriate dealing with such trust property. Had Parliament intended that any innocent breach of an obligation on the part of a fiduciary would give rise to a debt that would not be released by a discharge from bankruptcy it could very easily have said so, by providing that an order of discharge does not release the bankrupt from any debt or liability arising from a breach of fiduciary obligation. It did not do so. It chose to couch the types of debts or liabilities “while acting in a fiduciary capacity” which would attract the exceptions of s. 178(1), in the context of debts or liabilities arising from fraud, embezzlement or misappropriation, as well as defalcation. While these notions may have slightly different shades or gradations of meaning, I can only conclude that Parliament intended the words “misappropriation” and “defalcation” to bear their plain and ordinary meaning, as the context in which they are used suggests.

[Emphasis added.]

Morally Reprehensible Conduct and Res Judicata

[117]   These arguments have been considered and these issues have been decided, first by the Commission Panel, in multiple decisions, and then by the Court of Appeal. The substantive issues raised again by the Poonians have been squarely decided by the Commission Panel on multiple occasions in the decisions surveyed above. …

The appellants had a full and fair opportunity to advance these arguments at the panel hearing. The Findings and Sanctions Decisions were reviewable by the Court of Appeal. Madam Justice Fenlon refused the appellants’ applications for leave to appeal the Findings on the basis of procedural and natural justice concerns. The Findings were therefore left undisturbed and have been recited by this Court in both the leave to appeal decisions and the Sanctions Appeal.

Breaches of Natural Justice

Arbitrariness

Disposition

“The Honourable Mr. Justice Willcock”

I agree:

“The Honourable Mr. Justice Harris”

I agree:

“The Honourable Madam Justice Fenlon”