Decisions

Calpine Resources Inc., et al. [Decision]

BCSECCOM #:
Document Type:
Decision
Published Date:
1990-06-11
Effective Date:
1990-06-11
Details:

Calpine Resources Inc. and Pezim, Page and Ivany (Re)
IN THE MATTER OF the Securities Act, S.B.C. 1985, c. 83
AND IN THE MATTER OF Calpine Resources Inc.
AND IN THE MATTER OF Prime Resources Corporation, now known
as Prime Resources Group Inc., Murray Pezim, Lawrence Page
and John Ivany
Hearing
D.M. Hyndman, D. Devine, M.S. Jawl, E.L. Lien
Heard:  June 5, 1990
Decision:  June 11, 1990

COUNSEL:

   Catharine Esson, for the Superintendent of Brokers.

   D.M.M. Goldie, Q.C., for Prime Resources Group Inc.

   Winton K. Derby, Q.C., for Murray Pezim.

   Peter W. Butler, Q.C., for Lawrence Page.

   Leon Getz, for John Ivany.

   T.R. Braidwood, Q.C., of The Vancouver Stock Exchange.

   Robert W. Taylor, for Canwest Pacific Television Inc.

   H.J. Wruck, for the Canadian Broadcasting Corporation.

   Daniel W. Burnett, for British Columbia Broadcasting System Ltd. and CKNW Radio.

DECISION AND REASONS:-- This decision relates to two preliminary applications that came before the Commission in connection with a hearing scheduled to begin on July 9, 1990. The first is an application by the Vancouver Stock Exchange for standing as a party at the hearing. The second is an application by three television stations and one radio station to record and broadcast the hearing.

The hearing in question was initiated by a notice of hearing issued by the Superintendent of Brokers on March 30, 1990. An amended notice of hearing (the "Notice") was issued by the Superintendent on April 9, 1990. The Notice indicates that the Commission will be asked to consider whether it is in the public interest to make certain orders under sections 144 and 154.2 of the Securities Act affecting Prime Resources Group Inc. ("Prime"), Murray Pezim, Lawrence Page and John Ivany (collectively, the "Respondents").

VANCOUVER STOCK EXCHANGE APPLICATION FOR STANDING

The Exchange has applied for standing as a party at the hearing on the following bases:

1.It is and will be directly affected by the hearing.
2.The allegations set out in the Notice pertain directly to two companies whose shares are listed on the Exchange and to matters that are within the specific business and regulatory purview of the Exchange.
3.Most of the allegations relate to transactions that are governed by listings policies of the Exchange, and the Exchange has an interest in the consistent interpretation and application of these policies by the Commission.
4.The actions of the Exchange will be scrutinized at the hearing because it has been alleged that the Respondents misled the Exchange and because it has been represented publicly by or on behalf of the Respondents that their actions were undertaken with the knowledge and approval of the Exchange.
5.The Exchange is responsible for governing and regulating the conduct of its members, one of which was named in the Notice as having been involved in certain conduct which the Respondents allegedly failed to disclose; evidence presented at the hearing and findings made by the Commission could affect the actions of the Exchange in furtherance of its regulatory jurisdiction.
6.The Exchange has a public obligation to foster and protect the integrity of the securities market; it is vital to the interests of the Exchange and the public that the Exchange be a party at the hearing, which will be the focus of considerable public attention.
Mr. Braidwood, appearing for the Exchange, cited two cases in support of his argument. The first was a decision of this Commission, In the Matter of O.E.X. Electromagnetic Inc. et al., in which standing was granted to a consultant who had prepared a technical report. The second was a decision of the Ontario Securities Commission, In the Matter of Canada Malting Co. Ltd., in which minority shareholders of an issuer were found to be persons directly affected by a decision of The Toronto Stock Exchange concerning the issuer and were therefore entitled to apply for a hearing and review of that decision.

Mr. Braidwood argued that the Commission will be making determinations regarding the Exchange's policies and its conduct and that the Exchange has a right to be heard. He also argued that the participation of the Exchange would help the Commission to obtain the best possible evidence and would serve the public interest by ensuring a correct public perception of the Exchange's actions and testing the adequacy of the Exchange's policies.

Ms. Esson, appearing for the Superintendent, did not oppose the Exchange's application for standing, provided there were certain limits on the scope of the participation. These limits were agreed to by the Exchange.

The Respondents opposed the application. Their argument, in summary, was as follows:

1.The Exchange does not have the capacity under its enabling statute to intervene in these proceedings and, therefore, the Commission does not have jurisdiction to grant the Exchange standing as a party.
2.Alternatively, it would be inappropriate to grant the Exchange standing as a party because it would be unfair to the Respondents, whose conduct is the subject of the hearing.
The first part of the argument is based on the decision of the Supreme Court of Canada in Re Newfoundland Telephone Co. Ltd. and TAS Communications Systems Ltd. et al. (1987) 45 D.L.R. (4th) 570 (S.C.C.). In that case, the Court held that a public officer requires statutory authority, express or implied, to intervene in his official capacity in proceedings before an administrative tribunal. The Court concluded that the Director of Investigation and Research under the former Combines Investigation Act lacked such authority in respect of provincial tribunals.

The Respondents suggested that the Exchange, as a creature of statute, is in a similar position to a public officer and therefore cannot be granted standing unless its participation is authorized by statute. They further argued that the Vancouver Stock Exchange Act ("VSE Act") provides no such authority. They noted that section 3.2 of the VSE Act gives the Exchange standing at a hearing and review under the Securities Act of a decision of the Exchange, and argued that this provision represents the Exchange's only authority to be a party at a Commission proceeding.

With respect, we disagree. Section 3.2 is, in our view, intended to give the Exchange the right, rather than the capacity, to be a party to a hearing and review of its decision. This provision removes any common law restriction on the standing of the Exchange in a hearing and review. The fact that the Exchange has been given standing as of right only at a hearing and review, however, does not necessarily mean that it does not have the capacity to have standing at a Commission hearing.

The relevant sections of the VSE Act for determining whether the Exchange has the capacity to be a party at a hearing are section 2(1) and section 10.1. Section 2(1) sets out the objects of the Exchange, which include "(a) to carry on the business of an exchange in securities ...". Section 10.1 provides that the Company Act applies to the Exchange except to the extent that the provisions of the Company Act are inconsistent with the VSE Act.

We consider that the object of carrying on the business of an exchange in securities, provided by section 2(1), necessarily includes the capacity to appear before the body that regulates trading in securities, that is, the Commission. In addition, section 21 of the Company Act, which provides that "a company has the power and capacity of a natural person of full capacity", applies to the Exchange by virtue of section 10.1 of the VSE Act and clearly gives the Exchange capacity to appear before the Commission.

Counsel for the Respondents argued that section 21 of the Company Act does not apply to the Exchange because it is broader than, and therefore inconsistent with, the powers granted to the Exchange in section 1 of the VSE Act. We disagree with that interpretation. In our view, section 21 does apply to the Exchange except to the extent that provisions of the VSE Act are inconsistent with it. Nothing in the VSE Act is inconsistent with the Exchange having the capacity to appear as a party at the hearing.

We therefore find that the Exchange does have the capacity to be granted standing in this hearing.

The second part of the Respondents' argument was that the Exchange should not be granted standing because it would be unfair to the Respondents. They noted that the hearing would be adversarial in nature, rather than an "issues hearing" into the policies of the Exchange, and argued that the Exchange would become, in effect, a "second prosecutor", colluding with the Superintendent and causing prejudice to the Respondents' right to a fair hearing.

The Respondents challenged the Exchange's suggestion that its participation in the hearing would help ensure that the Commission receives the best possible evidence. They pointed out that at least one employee of the Exchange had been served with a subpoena to appear as a witness at the hearing and that it was unnecessary for the Exchange to have standing in order to have evidence provided by its employees.

The Superintendent has the responsibility to present the evidence to support his allegations and to make submissions in support of the orders we are asked to make. This is the case the Respondents will be required to meet. Adding another party with interests at least potentially adverse to those of the Respondents, will complicate the hearing and make the Respondents' task more difficult. Before taking this step, we must have a strong justification.

In our view, the points cited by the Exchange in support of its application do not present a compelling argument to outweigh the concerns of the Respondents. Only three of the six points are substantive. These are points 3 to 5, listed above, relating to the interpretation of Exchange policies, the suggestion that the actions of the Exchange might be under scrutiny in the hearing, and the interest of the Exchange in the conduct of a member firm that may have been involved in certain activities with the Respondents.

With respect to the interpretation of Exchange policies, it might be useful for the Commission to receive submissions from the Exchange, but there seems little to be gained from having the Exchange participate as a party, leading evidence and cross examining witnesses.

The fact that actions by or involving the Exchange might come under scrutiny during the hearing is a legitimate concern but does not necessarily qualify the Exchange as a party. In virtually any legal or regulatory proceeding, evidence is presented that pertains in part to persons not party to the proceeding. It would make these proceedings unmanageable if every such person were given standing.

The Exchange could easily satisfy its interest in evidence concerning a member firm by having a representative attend the hearing and by reviewing the transcripts. It would not be appropriate to use the hearing to investigate the actions of a person that is not a respondent, and the Exchange has specifically indicated that it would not intend to do so. Therefore, this interest would not appear to require that the Exchange have standing at the hearing.

The Exchange cannot be considered to be a person directly affected by this hearing. Although there may be indirect effects on the Exchange, its rights and economic interests would not be directly affected by the orders being sought by the Superintendent.

Any indirect interest of the Exchange in the hearing is insufficient to overcome the concerns of the Respondents. This is not to say that there will be no case in which a person not directly affected will be granted standing as a party. However, in the current case, we consider the fact that the Exchange is not a person directly affected by the hearing to be fatal to the application.

Accordingly, we reject the application of the Exchange for standing as a party at the hearing. We reserve our discretion to accept submissions from the Exchange, prior to the conclusion of the hearing, concerning the interpretation and application of its policies.

APPLICATION TO RECORD AND BROADCAST HEARING

The Commission has received applications from three television stations and one radio station to record and broadcast the hearing. The application is opposed by Lawrence Page, John Ivany and Prime. Murray Pezim consents to the application. The Superintendent takes no position.

The Commission has no formal policy on this issue but has not permitted cameras or recording equipment, other than hand held tape recorders, to be brought into the hearing room. The applicants argued that the Commission should allow recording and broadcasting of the proceedings for both legal and policy reasons. Their argument can be summarized as follows:

1.Section 178(1) of the Securities Regulation requires that the hearing be open to the public. Section 178(2) permits hearings to be held in camera only in very limited circumstances.
2.Section 2(b) of the Canadian Charter of Rights and Freedoms, which provides "freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication", gives the media a prima facie right of access to the hearing, including the right to record the proceeding.
3.This right may be limited only under section 1 of the Charter, which provides that the rights and freedoms in the Charter are guaranteed, "subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society".
4.Before deciding to limit media access to the hearing, the Commission must have sufficient evidence to satisfy it that an infringement of section 2(b) of the Charter is justified under section 1.
5.The parties opposed to the application have provided no evidence to support such an infringement.
6.Securities markets and regulation depend fundamentally on disclosure and public confidence, which would be promoted by the wider public access to the hearing that would be provided by broadcasting.
7.The Ontario Securities Commission has had a policy (OSC Policy 2.12) permitting televising of hearings since 1986.
8.Experience in televising court proceedings in the United States and quasi-judicial proceedings in Canada has been positive. With modern technology, recording need not be disruptive.
The applicants made a specific proposal for recording the hearing by means of a single camera, with no extra lighting, and with sound picked up from the system in the hearing room. Tapes of the hearing would be shared by the stations.

Mr. Butler spoke on behalf of those opposed to the application. He argued as follows:

1.The paramount interest is for the Respondents to be given a fair hearing.
2.The electronic media can cover the hearing adequately without recording it by taking notes and interviewing witnesses outside.
3.The camera would be disruptive in light of the size of the hearing room and the probable warm weather during the hearing.
4.The presence of the camera would have an adverse effect on witnesses, jeopardizing the fairness of the hearing. This can not be proven but, even if there is a chance it would happen, we must choose in favour of a fair hearing. The recording equipment would also intrude on communication between counsel and clients, jeopardizing solicitor-client privilege and impeding the fact finding process.
5.Recording would erode the dignity of the hearing as high profile witnesses concern themselves with their appearance on television rather than telling the truth.
6.Television will not cover the whole hearing but will only run 30 second clips on the evening news.
In our assessment, the assertions of Mr. Butler do not overcome the arguments made by the applicants. The proposal by the applicants appears to provide adequate safeguards to avoid disrupting the hearing or jeopardizing solicitor-client privilege. The concerns about the effect on witnesses are mere speculation, unsupported by evidence. The fact that television stations will broadcast only short segments of the hearing is consistent with the approach of other media, which report only highlights of Commission hearings.

While we have some concerns about the potential impact of television coverage on the decorum of the hearing, there is no evidence to suggest that the fairness of the hearing would be affected and no reason to believe that appropriate arrangements could not address our concerns.

Accordingly, we will permit the applicant television and radio stations, and any other stations, to record and broadcast the hearing, subject to the following conditions:

- The recording must be undertaken substantially in the manner proposed by the applicant television stations (single camera, tripod mounted and battery powered, with no special lighting, a single operator, pick-up of sound from the system in the hearing room or a single microphone, pooling of system, and set up and shut down procedures established in consultation with the Commission).
- Any additional radio or television stations wishing to participate must be included in the pooling arrangement.
- The Commission retains the right to require recording to cease at any time it becomes disruptive to the hearing or adversely affects a witness.
- No other recording will be permitted in or around the hearing room. Any other recording or interviews of witnesses will be restricted to the ground floor lobby of the building or outside.
- In all other respects, Policy 2.12 of the Ontario Securities Commission will apply.
This decision will be varied if necessary during the course of the hearing to ensure that the fairness, order and decorum of the hearing are maintained.

D.M. HYNDMAN, Chairman
D. DEVINE, Member
M.S. JAWL, Member
E.L. LIEN, Member