Decisions

Russell James Bennett, et al. [Decision]

BCSECCOM #:
Document Type:
Decision
Published Date:
1996-08-30
Effective Date:
1996-08-28
Details:

COR#96/170

Bennett (Re)
IN THE MATTER OF The Securities Act, S.B.C. 1985, c. 83
AND IN THE MATTER OF Russell James Bennett, William Richards
Bennett and Harbanse Singh Doman
Decision
H.D. Browne, G.M. Clark, S.M. Davison, E.L. Lien
Heard:  August 23, 24, September 2, 8, 9, 12, 13, 1994,
January 23-25, February 1-3, 6-10, 13-17, 20-22, April 18-21,
24-28, May 1-4, 29-31, June 1, 2, 5, 6, 8, 9, 19-23, 26-28,
July 4, 6, August 8, 9, 11, 15, 30, 1995, and April 1-4, 1996
Decision:  August 28, 1996

Appearing:

Joseph Arvay, Q.C., John Finlay and Irene Faulkner, for Commission staff.
Peter W. Butler, Q.C., and Robert Anderson, for William Richards Bennett.
Marvin R. Storrow, Q.C., Randy Kaardal, and Wendy Morrison, for Harbanse Singh Bennett.
Leonard Doust, Q.C., and Bronson Toy, for Russell James Bennett.

DECISION OF THE COMMISSION

TABLE OF CONTENTS

1.INTRODUCTION
2.ALLEGATIONS AND RELEVANT STATUTORY PROVISIONS
3.HISTORY OF PROCEEDINGS
4.PRELIMINARY APPLICATIONS
5.BACKGROUND
5.1  Introduction
5.2  The Respondents
5.3  The Horse Racing Business of Doman
      and R.J.Bennett
5.4  Louisiana-Pacific's Purchases of
      Doman Shares
5.5  The Purchases of Doman Shares by the
      Bennetts and Others
      5.5.1  Introduction
      5.5.2  R.J.Bennett's Purchases
      5.5.3  W.R.Bennett's Purchases
      5.5.4  Mills' Purchases
5.6  The Proposed Take Over of Doman
      Industries by Louisiana-Pacific
5.7  Louisiana-Pacific's Decision not to
      Proceed with the Take Over
      5.7.1     When did Merlo call Doman
      5.7.2     What Doman told Others about when Merlo called him
      5.7.3     What Happened at Vancouver and Duncan after Merlo's call to Doman
5.8  The Sales of Doman Shares on November 4, 1988
      5.8.1     What Happened at Duncan and Kelowna after Merlo's call to Doman
      5.8.2     R.J.Bennett's Sales
      5.8.3     Evidence of Steed
      5.8.4     W.R.Bennett's Sales
      5.8.5     Duhamel's Sales
      5.8.6     Dunn's Sales
      5.8.7     Mills' Sales
      5.8.8     Evidence of Langford
6.ANALYSIS AND FINDINGS
6.1 Purchases of Doman Shares by the Bennetts
6.1.1     The Merger Discussions
6.1.2     The Bennetts' Purchases
6.1.3     Information Given by Doman to
             the Bennetts
6.1.4     The Purchases and Section 68 of
             the Act
6.2 Sales of Doman Shares
6.2.1     Doman's call to R.J.Bennett
             on November 4, 1988, at 10:09
6.2.2     The Ranch Meeting
6.2.3     R.J.Bennett's Sales
6.2.4     W.R.Bennett's Sales
6.2.5     Mills' Sales
6.2.6     The Horse Racing Business
6.2.7     The Bennetts' Sales and
             Section 68 of the Act
6.2.8     Other Matters
7.DECISION
1.INTRODUCTION
This is a hearing under section 144(1) of the Securities Act, S.B.C. 1985, c.83.  A notice of hearing was issued on January 27, 1989, and amended on October 26, 1990.

Under the amended notice, we are being asked to determine whether it is in the public interest:

1.to make orders under section 144(1)(c) of the Act that any or all of the exemptions described in sections 30 to 32, 55, 58, 80 or 81 [now sections 30 to 32.1, 55, 58, 80 or 81] of the Act do not apply to Russell James Bennett, William Richards Bennett and Harbanse Singh Doman (collectively referred to as the respondents);
2.to make orders under section 144(1)(d) of the Act that the respondents resign any position that any of them hold as directors or officers of a reporting issuer and be prohibited from becoming or acting as directors or officers of any reporting issuer;
3.to make orders under section 154.2 of the Act that the respondents pay prescribed fees or charges for the costs of or related to the hearing; and
4.to make such other orders as may be appropriate in the circumstances.
In making our determinations whether it is in the public interest to make orders, we are being asked to consider all the circumstances surrounding the purchases and sales of shares of Doman Industries Ltd. between October 1987 and November 4, 1988, and whether the conduct of the respondents was contrary to sections 67 and 68 of the Act, or otherwise contrary to the public interest, by reason of 53 allegations set out in the amended notice.

2.   ALLEGATIONS AND RELEVANT STATUTORY PROVISIONS

At the hearing, the essential allegation being made by Commission staff was that R.J.Bennett purchased and sold and W.R.Bennett sold the shares of Doman Industries on the basis of information (tips) received from Doman of material facts or material changes in the affairs of Doman Industries that had not been generally disclosed.

More particularly, Commission staff alleged that on November 4, 1988, Doman informed the Bennetts that the proposed take over of Doman Industries by Louisiana-Pacific would not proceed and that both the Bennetts acted on this information in the sale of shares of Doman Industries.

Further, Commission staff alleged that between August 25, 1988, and September 19, 1988, the shares of Doman Industries that R.J.Bennett purchased were purchased on the basis of information received from Doman of material facts or material changes in the affairs of Doman Industries that had not been generally disclosed.

Commission staff in their opening statement at the hearing, stated "we do not claim to be able to prove - and the emphasis is on the word `prove' - that there was insider trading on the purchases by either R.J.Bennett or W.R.Bennett up until August 24, 1988.  However, we hasten to add that neither do we concede that there was not."

Following are the relevant provisions of the Act during the period from October 1987 to November 1988.

Section 68 of the Act read as follows:

68.(1)  No person in a special relationship with a reporting issuer shall
(a)  purchase or sell securities of the reporting issuer with knowledge of a material fact or material change in the affairs of the reporting issuer that he knows or ought reasonably to know has not been generally disclosed, or (b)  inform, other than in the necessary course of business, another person about a fact or change which he knows or ought reasonably to know
(i)  is a material fact or material change in the affairs ofthe reporting issuer, and
(ii) has not been generally disclosed. (2)  A purchaser or seller has not breached subsection (1)(a) if he proves that he did not make use of knowledge of the material fact or material change in purchasing or selling the securities.
Commission staff say that subsection (1)(a) applies to the Bennetts and subsection (1)(b) applies to Doman.

Special relationship, which is referred to in section 68, was defined in section 3 of the Act as follows:

3. (1)    For the purposes of sections 68 ..., a person is in a special relationship with a reporting issuer where he
(a)  is an insider ... of the reporting issuer,
(b)  is a director, officer or employee of (i) the reporting issuer...
(d)  is an associate of the reporting issuer or of a person referred to in paragraph (a), (b) ...,or
(e)  has acquired knowledge of a material fact or material change from a person referred to in paragraph (a), (b) ... or (d) and knew or ought reasonably to have known that the person communicating the knowledge is a person referred to in paragraph (a), (b) ... or (d).
The definitions of "associate" and "insider", which are referred to in the definition of special relationship, and "material change" and "material fact", which are referred to in section 68, are relevant and were defined in section 1(1) of the Act as follows:

"associate" means, where used to indicate a relationship
with any person,
(a)  a partner, other than a limited partner, of that person, ...
"insider" means, where used in relation to an issuer, (a)  a director or senior officer of the issuer, ... (c)  a person whose control, or direct or indirect beneficial ownership, or a combination of control and ownership, over securities of the issuer extends ... to securities carrying more than 10% of the voting rights attached to all that issuer's outstanding voting securities, ...;
"material change" means, where used in relation to the affairs of an issuer, a change in the business, operations, assets or ownership of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer and includes a decision to implement that change
madeby
(a)senior management of the issuer who believe
that confirmation of the decision by the
directors is probable, or
(b)the directors of the issuer;
"material fact" means, where used in relation to securities issued or proposed to be issued, a fact that significantly affects, or could reasonably be expected to significantly affect, the market price or value of those securities.
Commission staff say that Doman is in a special relationship with Doman Industries because Doman Industries is a reporting issuer and under subsection (1)(a) of the definition, he is an insider of Doman Industries and under subsection (1)(b) of the definition, he is a director and officer of Doman Industries.

In connection with the sales of shares of Doman Industries on November 4 by R.J.Bennett and W.R.Bennett, Commission staff say that R.J.Bennett and W.R.Bennett were both in a special relationship with Doman Industries under

(1)(e) of the definition, as soon as they acquired information from Doman that the Louisiana-Pacific take over of Doman Industries was not to proceed.  Further, commission staff say that if W.R.Bennett acquired this information from R.J.Bennett, then W.R.Bennett is also in a special relationship with Doman Industries because he knew or ought to have known that Doman and his brother were associates under subsection (1)(d) of the definition by virtue of their partnership in the horse racing business.

3.   HISTORY OF PROCEEDINGS

The Bennetts, who reside in British Columbia, sold their shares in Doman Industries on November 4, 1988.  Doman Industries' shares were traded on The Toronto Stock Exchange and the Bennetts' brokers effected the sales through the exchange's Computer-Assisted Trading System (CATS). Commission staff suspected that the Bennetts had traded their shares on a tip from Doman, the chairman of the board, president, chief executive officer and controlling shareholder of Doman Industries, in contravention of section 68 of the Act.  On November 7, 1988, the Commission and the Ontario Securities Commission commenced a joint investigation.

On November 10, 1988, the Chair of the Commission, issued a direction under section 135(1) of the Act freezing funds of, inter alia, the Bennetts in the hands of Odlum Brown Limited and McDermid St. Lawrence Limited.  On the same day, the Commission issued the first of a number of investigation orders under section 126(1) of the Act.

The Commission's investigation led to both quasi-criminal and administrative proceedings in British Columbia.

On January 27, 1989, the Bennetts, Bennett Equities Ltd. and Doman were charged under the Offence Act with four counts of insider tipping or trading in the shares of Doman Industries that were alleged to have taken place on November 4, 1988, contrary to sections 68(1)(a) and (b) and 138(1)(c) of the Securities Act.  At the time, under section 138(1)(c) of the Securities Act, an individual found guilty of committing an offence was liable to a fine or to imprisonment.

On that same day, on the basis of those charges, the Superintendent of Brokers [now called the Executive Director] made a temporary order under what was then section 145(2) [now section 144(2)] of the Act denying exemptions in the Act to the Bennetts and Bennett Equities until February 10, 1989. The effect of the temporary order was to prohibit the Bennetts and Bennett Equities from trading in securities.  Doman was treated differently.  Also on January 27, 1989, in exchange for an undertaking that he would provide notice to the Commission in writing of all his trades in securities the Superintendent agreed not to institute the same administrative action against him in respect of trades as was instituted against the Bennetts and Bennett Equities.  This arrangement was confirmed by the Superintendent by letter on January 31, 1989.

Accompanying the temporary order was the notice that the hearing would be held under what was then section 145(1) [now section 144(1)] of the Act before the Commission on February 10, 1989, to determine whether it is in the public interest to make orders denying exemptions.

On February 10, the Chair of the Commission, acting under authority delegated to him under section 6 of the Act, with the consent of the Bennetts and Bennett Equities, adjourned the hearing generally and under what was then section 145(3) [now section 144(3)] of the Act extended the temporary order until the hearing was held and this decision is rendered.

The quasi criminal proceedings commenced in Provincial Court on April 17, 1989, before Judge Craig.  The trial lasted approximately two weeks.  Each of the Bennetts and Doman were represented by counsel.  None gave evidence at the trial.  On May 12, 1989, Judge Craig delivered his judgment (Provincial Court Registry No. B0647702) dismissing all charges against the Bennetts, Bennett Equities and Doman.  No appeal was taken by the Crown from this decision.

On October 26, 1990, the amended notice was issued. Doman was named as a respondent and Bennett Equities was dropped as a respondent.  Under the amended notice, the Commission was asked to determine whether it is also in the public interest to make orders against the respondents under sections 144(1)(d) and 154.2 of the Act.  The hearing was set down for February 18, 1991.

During this same period of time, quasi-criminal and administrative proceedings were also commenced in Ontario and civil actions were commenced in Ontario and British Columbia.

The quasi-criminal proceedings were commenced in Ontario on February 2, 1989, adjourned and then withdrawn on June 29, 1989.  The administrative proceedings before the Ontario Securities Commission were commenced and adjourned to June 29, 1989.  Then under a notice of hearing naming the Bennetts and Doman and issued on June 27, 1989, a hearing was set down  for October 30, 1989.  The Bennetts and Doman declined to attorn to the jurisdiction of the Ontario Securities Commission.  An application to the Ontario Supreme Court to compel the respondents to give evidence was dismissed and so was an appeal of that decision to the Ontario Court of Appeal. During the course of those proceedings, the hearing was adjourned, then following dismissal of the appeal, the Ontario Securities Commission adjourned the hearing generally.

A civil action was brought in the Supreme Court of Ontario (Court File No. 37340/89) by the Trustees of the CBC Pension Fund against the Bennetts, Bennett Equities, Doman and Doman Industries.  The statement of claim was dated May 1, 1989.  The action was settled on February 13, 1990, prior to examinations for discovery.  Under the settlement, the Bennetts bought back from the plaintiffs 86,600 Doman A shares and 265,000 Doman B shares for $12 per share and paid the plaintiffs $60,000 in legal fees.  At the time the shares were trading in the $11 range.  Generally speaking, if the terms of the settlement were disclosed by the plaintiffs, the plaintiffs agreed to pay the Bennetts, Doman and the other defendants $50,000 in damages.  A similar settlement was entered into with Rob Hartvikson, another purchaser, in a lawsuit in British Columbia under which Hartvikson was paid $25,000 and agreed to pay $15,000 in damages if he disclosed the terms of the settlement.  Following the settlements, on applications by the Bennetts, the Commission revoked the freeze orders.

In October 1990 and January 1991, the respondents filed petitions in the Supreme Court of British Columbia applying for judicial review under the Judicial Review Procedure Act. Mr. Justice Melnick heard the petitions commencing on January 21, 1991.  There were 15 days of argument.  The respondents asked to have the Commission prohibited from holding a hearing on the grounds that: (i) the Act, to the extent that it purports to regulate trading involving the CATS system, is ultra vires the province's power; (ii) the issues sought to be examined and determined by the Commission are res judicata and issue estoppel applies; (iii) the proceedings would deprive the petitioners of their rights to liberty and security of the person pursuant to section 7 of the Canadian Charter of Rights and Freedoms; and (iv) to proceed would be a breach of the principles of natural justice and an abuse of process.  In a 69 page judgment delivered on May 2, 1991, Mr. Justice Melnick denied the relief sought by the respondents (see Bennett v. British Columbia (Securities Commission) (1991) 82 D.L.R. (4th) 129).  Appeals and a cross-appeal were filed.

Following the filing of the petitions, on February 18, 1991, Commission member H. Dunstan Browne, adjourned the hearing to June 17, 1991.  Then again on June 14, 1991, Mr. Browne adjourned the hearing generally pending the outcome of the appeals.

The appeals and cross appeal were set down for June 1992, but when the respondents missed a deadline for filing materials, the Court of Appeal cancelled the June dates.  On February 7, 1992, Commission staff applied to have the hearing set down before a panel consisting of H. Dunstan Browne, David Devine and Edward L. Lien.  On March 4, 1992, the panel ruled that counsel set dates for the hearing so that the hearing would be held before the end of August 1992 (see In the Matter of Russell James Bennett, William Richards Bennett and Harbanse Singh Doman [1992] 10 BCSC Weekly Summary 81).  The hearing was subsequently set to commence on August 10, 1992.

Later in March, the respondents applied to Madame Justice Southin of the Court of Appeal of British Columbia for an order that the hearing be stayed until after the appeals of Mr. Justice Melnick's judgment were determined.  The appeals had been set for hearing in the latter part of October 1992. On March 23, 1992, Madame Justice Southin refused the respondents' applications (see [1992] 13 BCSC Weekly Summary 12).  Subsequently, the appeals were set down for a week in June.

The respondents appealed Madame Justice Southin's refusal to stay the hearing.  Those appeals were heard with the appeals of Mr. Justice Melnick's judgment at the end of June 1992.  On July 3, 1992, the Court of Appeal unanimously dismissed the appeals and cross-appeal with reasons to follow. Those reasons were issued in a 20 page judgment on July 22, 1992, (see Bennett v. British Columbia (Securities Commission) (1992) 69 B.C.L.R. (2d) 171).  The respondents alleged numerous errors by Mr. Justice Melnick and our Court of Appeal itemized them under seven subject matters: abuse of process - generally, bias, delay, multiplicity of proceedings and issue estoppel, section 7 of the Charter of Rights and Freedoms and constitutional validity - division of powers.

1.   Abuse of Power - Generally

In dealing with abuse of process - generally, Mr. Justice Melnick at page 196 concluded that "given the length of the delay and all the circumstances alleged by the petitioners, it would not be an abuse of process for the hearing to be held." He summarized his reasons as follows:

In answering this question, I must have in mind the balance between the interest of the petitioners, and indeed the community at large, in the speedy resolution of such processes, and the interest of the community in being assured that the trading of securities is carried out with the propriety which they have a right to expect under the Securities Act.  Having regard to this balance in light of the `fundamental principles of justice which underly [sic] the community's sense of fair play and decency', it is my judgment that, given the context of the specific regulatory nature of the proposed hearing, and even given the length of the delay and of all the other circumstances alleged by the petitioners, it would not be an abuse of process for the hearing to be held. To the extent that I must reflect in my judgment the community's sense of fair play and decency, I would think that the community would say to the commission: `Get on with your hearing and give us your decision.'  It is my judgment that to do so will allow essential justice to be done in all of these circumstances.
Our Court of Appeal found that Mr. Justice Melnick applied the right principles and reached the right conclusion.  Then the Court turned from the general principle to the specific allegations of abuse.

2.   Abuse of Power - Bias

Our Court of Appeal was unable to find any merit in the submissions of bias and did not find it necessary to call upon the Commission to reply.  The allegation of bias here arises from the activities of Commission staff associated with the Offence Act proceeding before Judge Craig.  The Court found that Mr. Justice Melnick put the relationship of the prosecutor, and commission staff, and the commission into the proper context in the following passages of his judgment.  At page 163, he stated:

There is no doubt but that the commission participated fully in the quasi-criminal prosecution, its employees attesting to those employees' beliefs that the Bennetts and Doman had breached s.68 of the Securities Act.  The Commission's investigators provided the evidence upon which Crown counsel proceeded with the trial.  That does not mean, however, that the Securities Commission was in control of the proceedings.  There is no evidence that it was their decision to lay the charges under the Offence Act nor, even had they wished to, that they had the authority  to direct that the prosecution be undertaken by the Crown.  I can take judicial notice of the fact that it has been the policy in this province for some time that the ultimate decision to lay criminal and quasi-criminal proceedings rests with Crown counsel or the Department of the Attorney General, not with individual policemen or, in this case, investigators of a commission.
Later, at pages 194 and 95, Mr. Justice Melnick returned to the subject, saying:

I have also indicated earlier in these reasons, as well, that the fact that employees of the commission swore the information used by the Crown to prosecute the Bennetts and Doman in the quasi-criminal trial and used their investigative capacity to provide the evidence, does not lead automatically to an inference of bias on the part of the commission, because of the very nature of the commission under the Securities Act.  Indeed, I do not take an inference of bias from their having done so.  Nor is there any other demonstrated evidence of bias in this case.
The Court was fully in accord with Mr. Justice Melnick's findings and went on to say at page 180.

In the absence of any evidence of bias we are unable to understand how it could be inferred that staff activities of the sort which occurred here could lead a reasonably informed person to apprehend that presently unknown hearing officers would not be able to act in an entirely impartial manner if the hearing proceeds.  For a closely analogous case where an allegation of reasonable apprehension of bias was rejected, see Brosseau v. Alberta (Securities Commission), [1989] 1 S.C.R. 301, ... and in particular this observation at p.310[S.C.R.]:
In assessing the activities of administrative tribunals, the courts must be sensitive to the nature of the body created by the legislator.  If a certain degree of overlapping of functions is authorized by statute, then, to the extent that it is authorized, it will not generally be subject to the doctrine of `reasonable apprehension of bias' per se.
We wish to add one further observation and that is as to the target of a bias allegation.  Bias is an attitude of mind unique to an individual. An allegation of bias must be directed against a particular individual alleged, because of the circumstances, to be unable to bring an impartial mind to bear.  No individual is identified here.  Rather, the effect of the submissions is that all of the members of the commission appointed pursuant to s.4 of the Securities Act, regardless of who they may be, are so tainted by staff conduct that none will be able to be an impartial judge.  Counsel were unable to refer us to a single reported case where an entire tribunal of unidentified members had been disqualified from carrying out statutory responsibilities by reason of real or apprehended bias.  We think that not to be surprising. The very proposition is so unlikely that it does not warrant serious consideration.
3.   Abuse of Process - Delay

Our Court of Appeal then considered the allegation of delay and found that there was not much substance in that allegation either.  At page 182, the Court concluded "Mr. Justice Melnick undertook a careful analysis of the decided cases on delay and applied the principles therefrom to the facts before him.  He concluded that in this case delay was not a factor weighing heavily in the balance of fair play and decency.  We agree."

4.   Abuse of Process - Multiplicity of Proceedings

The complaint of multiplicity of proceedings is directed primarily at the parallel proceedings in British Columbia and in Ontario.  Our Court of Appeal stated beginning at page 182:

The substantive question is whether the mere fact of the commencement of proceedings in another province, where British Columbia regulatory authorities have no power or control, is prejudicial to the conduct of a fair hearing, or amounts to a denial of natural justice, in respect of a prospective commission hearing in this province.  The answer to the question must be no.  It might be different if either or both Ontario proceedings had proceeded to judgment, but neither did.  There are therefore no grounds upon which to infer, and there is no evidence to this effect, that the traders will be prejudiced in the conduct of their case at the British Columbia Securities Commission hearing.  The only other aspect of the multiplicity of proceedings issue is the extent to which a conviction or acquittal in a criminal proceeding is a bar to a subsequent civil or regulatory proceeding.  That aspect is subsumed in the discussion on issue estopppel.
5.   Abuse of Power - Issue Estoppel

Our Court of Appeal found at page 183 that the allegation of issue estoppel was "the most serious and contentious element of the abuse of process ground.  It flows from assessments of credibility and probabilities made by Judge Craig in his judgment in the Offence Act proceeding.  It is concerned with whether, and to what extent, the commission is bound by the findings of Judge Craig in respect of the factual matrix surrounding the alleged offences.  It raises the question of whether issue estoppel applies as between tribunals in the same manner as between parties."

Mr. Justice Melnick held that the Commission was not estopped, on the basis of issue estoppel, from reaching a different conclusion than Judge Craig.  The following is from pages 169 and 170 of his judgment.

In the trial before him, Judge Craig was required to determine whether, on an assessment of all the evidence, the Crown had proved beyond a reasonable doubt that the Bennetts and/or Doman were guilty of violating s.68 of the Securities Act.
Thus when Judge Craig said, at p.50, that he was `obliged to go beyond [his] initial finding of fact of credibility and say whether [the witness's] evidence [was] in accordance with the preponderance of probabilities', he did not state the test laid down by Mr. Justice O'halloran in the sense I find it was intended, namely, an inquiry into the preponderance of probabilities being simply one step in the analysis of credibility.  It is not, with respect, a step subsequent to a finding of credibility as Judge Craig indicated.  This becomes apparent when one considers the above-quoted passages from Faryna.
One must also take note of the order in which Judge Craig arrived at his conclusions based on the balance of probabilities.  He clearly came to decisions as to guilt on all of the evidence using the test of reasonable doubt before going on to indicate that it had been established àt least on a balance of probabilities' that the Bennetts made the decisions to sell their shares and instruct their brokers before they could possibly have received any alleged tip.
Thus, given the placement of the decisions based on a balance of probabilities in his judgment, it is clear that they did not form fundamental bases of his decisions to acquit the Bennetts and Doman.  I am of the view that Judge Craig's findings based on a balance of probabilities, with respect to the fact that the Bennetts' respective orders to sell DIL shares must have been placed before any alleged tip could have been received should not be, and are not, binding on any subsequent forum, such as a civil court or a commission hearing.  That is, a hearing of the British Columbia Securities Commission is not estopped, on the basis of issue estoppel at least, from determining the issues of whether Doman gave, or whether the Bennetts acted upon, a tip in buying or selling shares in DIL on the basis of the standard of proof applicable in such a hearing.  I say that, of course, based upon the understanding that the commissioners conducting the hearing will not be required to come to their conclusion on the basis of reasonable doubt.
Our Court of Appeal beginning at page 184 stated "We detect no errors in Mr. Justice Melnick's reasoning or his conclusion. We wish, however, to emphasize the third element of issue estoppel.  In Carl Zeiss Stiftung [Carl Zeiss Stiftung v. Rayner & Keeler Ltd. [1967] 1 A.C. 853] Lord Guest described the three elements at p.935:

The requirements of issue estoppel still remain (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final, and (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.
"To state the obvious, the commission, which is the party sought to be estopped, was not a party to the Offence Act proceedings, and will not be a party to the hearing it conducts.  The third test is not therefore met.

"We are of the view that issue estoppel only applies as between parties and that it is an exclusionary rule of evidence which binds a party by way of preventing reliance upon or denying the existence of certain facts."

Our Court of Appeal then went on to deal with the confusion the Court felt had arisen on this aspect of the case through the use of imprecise terminology and that that had led to error in understanding the applicability of issue estoppel. The Court began at page 185,  "The word `commission' has been employed in an all-encompassing sense to refer to both commission and staff, whereas the Act draws a clear distinction between commissioners and employees.  It is clear from s.4 that the commissioners are the commission. Furthermore, confusion has arisen, as in Brosseau v. Alberta Securities Commission, supra, through failure to distinguish between the various functions of the commission vested or imposed by statute.  The court in Brosseau, at p.313[S.C.R.], referred to the various functions in the context of bias:

Securities commissions, by their nature, undertake several different functions.  They are involved in overseeing the filing of prospectuses, regulating the trade in securities, registering persons and companies who trade in securities, carrying out investigations and enforcing the provisions of the Act.  By their nature, they will have repeated dealings with the same parties. The dealings could be in an administrative or adjudicative capacity.  When a party is subjected to the enforcement proceedings contemplated by ss. 165 or 166 of the Act, that party is given an opportunity to present its case in a hearing before the Commission, as was done in this case.  The Commission both orders the hearing and decides the matter.  Given the circumstances, it is not enough for the appellant to merely claim bias because the Commission, in undertaking this preliminary internal review, did not act like a court.  It is clear from its empowering legislation that, in such circumstances, the Commission is not meant to act like a court, and that certain activities which might otherwise be considered `biased' form an integral part of its operations.
Our Court concluded at page 186.

By analogy, in our view, the fact that the commission authorized or allowed members of its staff to assist in and participate in the Offence Act prosecution does not operate to bar the commission from exercising its adjudicative functions through the medium of designated hearing officers.  It is our further view that the effect to be given to the findings of fact made by Judge Craig is a matter best left to be dealt with by the commission during the hearing.  We go no further than holding that those findings do not, at this stage, bar the commission from proceeding.
6.   Section 7 of the Charter of Rights and Freedoms

The respondents alleged that the proceedings before the Commission would deprive them of their rights to liberty and security of the person pursuant section 7 of the Charter of Rights and Freedoms.  Section 7 provides that:

7.  Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof expect in accordance with the principles of fundamental justice.
Our Court of Appeal came to this conclusion at page 187.

All that can safely be said at this point is that there has been no s. 7 deprivation and that there is no certainty that there will be.  As for the other branch, breach of the principles of fundamental justice, we have already found, under the abuse of process heads, that there is no fundamental breach which bars proceeding with the hearing.  Whether there will be grounds for alleging breach of fundamental justice after the hearing depends upon events which have not yet occurred.
7.   Constitutional Validity - Division of Powers

The allegation is that neither section 68 of the Act in particular, nor the entire Securities Act in more general terms, is within the constitutional powers of the British Columbia legislature.  Mr. Justice Melnick concluded, at page 152 of his judgment that section 68 "is concerned in pith and substance with the conduct of trading from an ethical not a mechanical point of view."

It is important then, at the outset, to characterize the essence of s. 68 of the Securities Act, the section that is central to the entire investigation undertaken by the commission, as well as the Act itself.  In this regard, I do not accept the characterization urged on me by the petitioners.  The aim and purpose of s. 68 is clearly to lay down specific ethical standards for those engaged in the trading of the securities of a reporting issuer.  It is to promote a level playing field for those engaged in the buying and selling of shares.  The Securities Act is concerned in pith and substance with the conduct of trading from an ethical not a mechanical point of view. I find those to be the `dominant aspects' of the Act in general and s. 68 in particular.
The objective of a division of powers inquiry is to determine the pith and substance of the impugned legislation, which is what our Court of Appeal found Mr. Justice Melnick did.  The Court stated at page 189, "We are in accord with his [Mr. Justice Melnick's] reasoning and his conclusion that the Securities Act and, more particularly, s. 68 are within the legislative competence of the province of British Columbia. We would not interfere."

8.   Other Matters

Our Court of Appeal also dealt with, inter alia, two other matters.  The first was the allegation that the agreement with Doman extended to and included an agreement not to subject him to a hearing process and that that agreement was breached by the issue of the amended notice of hearing. Mr. Justice Melnick examined the allegation and rejected it on the grounds that there was insufficient evidence to sustain it. The Court agreed.

The second matter dealt with the exception the respondents took to counsel for the Commission arguing on behalf of the Commission with respect to all the matters we have referred to.  Our Court of Appeal concluded at page 190, "We see no merit in this submission.  The commission has not held a hearing and therefore made no adjudicative determination.  In our opinion, the commission has standing in these proceedings to appear in support of its decision to proceed with a hearing."

These were the reasons why our Court of Appeal concluded that the appeals of the respondents from Mr. Justice Melnick's judgment should be dismissed.

The respondents applied for leave to appeal our Court of Appeal's judgment to the Supreme Court of Canada.  On July 24, 1992, the Court ordered that the hearing scheduled to commence on August 10, 1992, be stayed until such time as the application for leave to appeal was decided, and if leave was granted, until the matter was disposed of by the Court.  On August 27, 1992, the Court refused leave.

The hearing commenced on January 11, 1993, before a panel consisting of Messrs. Browne, Lien and Devine.  The respondents made a number of preliminary applications.  Then on January 18, 1993, Doman, joined by the other respondents, made an application that there was an abuse of process and that the panel should stay the proceedings against each of the respondents and should quash and dismiss the amended notice.

The respondents made the application on the grounds that there was an appearance of bias raised because David Devine was a director of Crestbrook Forest Industries Ltd., a company in the forest products industry.  The respondents alleged that Crestbrook and Doman Industries are competitors in the forest products industry.  The respondents argued that they could not receive a fair hearing under these circumstances.  On January 23, 1993, Messrs. Browne and Lien dismissed the respondents' application.

The respondents applied for leave to appeal the panel's ruling under section 149(1) of the Act.  On February 2, 1993, Mr. Justice Lambert of the Court of Appeal granted the respondents application for leave to appeal, ordered the public interest requires that all proceedings of the Commission, including but not limited to the proceedings of the panel of Messrs. Browne, Devine and Lien, in relation to the Bennetts and Doman, be stayed until the appeals are heard and determined and extended the stay to the delivery of any reasons for any ruling made by the panel on the hearing up to the present time (see [1993] 12 BCSC Weekly Summary 5).

The Court of Appeal heard the appeals early in November 1993 for 4 days ending on November 8.  At the request of the Court, Messrs. Browne and Lien issued their reasons for the ruling made on January 23, 1993 (see [1993] 43 BCSC Weekly Summary 4).  In the 33 page ruling, the panel made the following findings of fact.  On page 24:

We have found that there is no competition between Doman Industries and Crestbrook for kraft pulp, that the competition between Crestbrook and Doman Industries for sales of lumber shipped by rail into the United States is not significant to either company and that Crestbrook does not compete with Doman Industries for bank debt and equity capital.
And at pages 32 and 33:

The evidence produced shows Doman Industries and its directors and officers, its bankers and its investment counsel were unconcerned that the Commission following a hearing and after considering the public interest could issue an order prohibiting Doman from acting as an officer and director of Doman Industries.
The evidence produced provides no basis to conclude that, even if there is competition between Crestbrook and Doman Industries, it is more likely than not that Doman's removal as an officer or director of Doman Industries would adversely affect Doman Industries so significantly that it would be less competitive.
Further, even if there is competition between Crestbrook and Doman Industries and even if Doman Industries would be adversely affected so significantly that it would be less competitive where Doman is removed as a director and officer of Doman Industries, the evidence produced provides no basis to conclude that it is more likely than not Crestbrook would benefit from Doman Industries being less competitive.
These findings led the panel to conclude on page 33:

We find that a reasonably well informed person would not have a reasonable apprehension that David Devine would give a biased consideration and decision on whether an order should be made prohibiting Doman from being a director and officer of issuers, including Doman Industries.
The respondents asked the Court to grant an order quashing the amended notice of hearing.  In oral reasons delivered on November 8, 1993, by Madame Justice Southin, the Court unanimously refused to stop the proceedings before the Commission (see [1994] 1 BCSC Weekly Summary 33).  The Court altered Mr. Justice Lambert's stay of all proceedings of the Commission and substituted for it an order that further proceedings before the panel of Messrs. Browne, Devine and Lien be stayed pending the determination of the appeals of the panel's ruling.  Then on December 2, 1993, the Court delivered its judgment allowing the appeals but only to the extent of holding that Mr. Devine was disqualified (see (1993) 87 B.C.L.R. (2d) 22).  Madame Justice Southin writing for the Court stated at the end of the judgment:

In this case, acknowledging that the concept of apprehension of basis is being taken as far as it is rational for it to be taken, I come to the conclusion that it is not just that Mr. Devine should sit.
...
As this is a case about appearances and not about reality, I am also of the opinion that the other two commissioners are not "tainted" by Mr. Devine's participation in these proceedings to this point.
The respondents applied to the Supreme Court of Canada for leave to appeal the judgment of the Court of Appeal.  On June 2, 1994, the Court refused to grant leave.

The hearing commenced on August 23, 1994.  The respondents applied to have Messrs. Browne and Lien disqualified on the basis that they had previously heard and ruled against preliminary applications the respondents would be making to us.  We dismissed the applications.  The respondents applied to the Court of Appeal for leave to appeal our ruling.  The applications were heard by Mr. Justice Taylor on August 29, 1993.  In written reasons delivered on September 2, 1994, Mr. Justice Taylor denied the applications for leave. The respondents asked a three member panel of the Court of Appeal to review the denial.  The panel refused to grant leave.

The hearing resumed in September 1994 and we heard a number of preliminary applications by the respondents.  The hearing adjourned to January 23, 1995, to accommodate counsel. When the hearing resumed, we heard more preliminary applications.  On the 11th day of the hearing, counsel made their opening statements and Commission staff produced their first witness on February 2, 1995.  Following a further 50 days of hearing, Commission staff finished the production of their evidence on August 11, 1995.  Following a further two days, the respondents concluded their case on August 30, 1995. Written submissions were filed during the fall and early winter of 1995.  Oral arguments were heard for four days at the beginning of April 1996.  The hearing concluded after 67 days on April 4, 1996.

4.   PRELIMINARY APPLICATIONS

When the hearing commenced, the respondents made a number of preliminary applications, in addition to their application for the disqualification of Messrs. Browne and Lien, including applications:

1.to stay the proceedings on the ground of reasonable apprehension of bias flowing from the fact that the Commission is required to be self-financing and thus has an interest in imposing penalties and costs against those before it;
2.to stay the proceedings on the ground that counsel for the Commission have acted for it in its administrative as well as adjudicative capacity;
3.for subpoenas directed to certain officers of the Commission and others;
4.to stay the proceedings on the ground that the applicants have been prejudiced by unreasonable delay;
5.to stay the proceedings for failure of Commission staff to make timely disclosure;
6.to dismiss the complaint on the ground of "issue estoppel";
7.to bar the proceedings from being televised.
The applications were dismissed.

5.   BACKGROUND

5.1  Introduction

The relevant time period in this matter is October 1987 to November 1988.  Unless the context suggests otherwise, the facts are true during the relevant time period.  Times are Pacific Time.  Telephone calls are based on telephone company records prepared in the ordinary course of business, unless noted otherwise.

5.2  The Respondents

R.J.Bennett and W.R.Bennett are brothers.  They are the sons of a former Premier of British Columbia, the late W.A.C.Bennett.  The Bennetts reside at or near Kelowna, British Columbia and maintain offices at the business premises of McIntosh Centre Limited in Kelowna.  McIntosh Centre is a company incorporated under the laws of British Columbia. R.J.Bennett is president and a director of McIntosh Centre. The Bennetts own the majority of their assets jointly.  Those assets are mostly real estate and are held through McIntosh Centre.

W.R.Bennett was leader of the Social Credit Party of British Columbia and Premier of British Columbia from 1975 until August 1986.  During that time, R.J.Bennett managed their joint assets.  Since W.R.Bennett's retirement from politics, he and R.J.Bennett have managed their joint assets. R.J.Bennett has devoted most of his time over the years to managing his horse ranch and operating a horse racing business with Doman.

Doman lives at Duncan, British Columbia and is chairman of the board, president, chief executive officer and controlling shareholder of Doman Industries.  He founded Doman Industries in 1955 and it started in the forest products business in 1964 with sawmilling and logging operations.

Doman Industries is a company incorporated under the laws of British Columbia and is a reporting issuer under the Act. It operates a fully integrated forest products business and is engaged in sawmilling, pulp manufacturing, lumber remanufacturing, lumber marketing and logging in British Columbia.  It has five sawmills.  It had sales in 1987 of about $300 million (U.S.).  Its head office is at Duncan.

The issued and outstanding shares of Doman Industries include 6,457,514 class A common shares, Doman A shares, and 11,445,606 class B non-voting shares, Doman B shares, which we will refer to collectively as Doman shares, and 936,359 class A preferred shares.  Doman A shares are convertible on a one-for-one basis into Doman B shares.  Doman shares are listed for trading on The Toronto Stock Exchange and are traded only through CATS, the Exchange's computer assisted trading system.  Doman and his family own 3,363,148 class A shares, representing over 50% of the voting shares, and 3,324,531 class B shares.

Doman devotes most of his time to Doman Industries. Doman Industries is the most important thing in his life, besides his family.

R.J.Bennett and Doman have known each other for over 30 years.  Doman considers R.J.Bennett "one of my very close friends", my closest friend.  R.J.Bennett considers he and Doman are very good friends.  They speak to each other on the telephone two to three times a week and frequently dine together.  During the racing season they are at the track together and on those occasions always dine together.  Doman says they mainly talk about horses, at least during the racing season and in the Fall when the horse sales are held.  Doman says he never discusses the business of Doman Industries with R.J.Bennett.  R.J.Bennett says he never asks Doman about Doman Industries.

W.R.Bennett also knows Doman very well.  W.R.Bennett described Doman as a very strong supporter of the Social Credit Party.  During the time W.R.Bennett was Premier, he had contact with Doman as a forestry industry leader.  When W.R.Bennett was interviewed by Commission staff on November 18, his evidence was that they met with other leaders of the forest industry in W.R.Bennett's office at least 20 or 30 times.  In his testimony before us W.R.Bennett was asked on two occasions about the number of meetings.  Initially he testified "Well, I'm not sure if it would be that often." and he went on about where the meetings were held and with whom. When he was asked a second time, he answered "Well, I couldn't give you a number, but I'd know that at various times they would be at meetings, and I don't think those meetings would necessarily be in my office. ... So the number is not unrealistic, though.."  Finally, Commission staff put his evidence given on November 18 to him:

A    Yeah.  This is a special instance.  Because as premier of the province I knew all the forest companies, I knew every forest leader very well.  I mean, they were all in my office at least 20  or 30 times during those ten and two-thirds years.
W.R.Bennett's response was "Well, and that would be approximate during that particular interview when, quite frankly, it's not a question I would be expecting to answer or do any research on, but, you know, yes, the answer is generally correct."  W.R.Bennett and Doman talked on the telephone.  W.R.Bennett visited Doman at his office alone and with his brother.  Shortly after W.R.Bennett resigned as Premier, Doman was to be Lieutenant Governor of the province. A mutual friend of W.R.Bennett and Doman is Chester Johnson. Johnson is a strong supporter of the Social Credit Party.  In 1988, Johnson was President of Western Forest Products Limited.  Doman Industries was one of five shareholders, each having a 20% interest in Western.  Prior to that appointment, Johnson was a director of Doman Industries, a position he resigned when W.R.Bennett's government appointed him the chairman of B.C.Hydro.  W.R.Bennett's government also appointed him a trustee of the Whistler project when it was in trouble.  Johnson is presently a director of Doman Industries.

5.3  The Horse Racing Business of Doman and R.J.Bennett

For many years, Doman and R.J.Bennett have been operating a business of owning, managing, training, racing and breeding race horses.  The business occupied the time, attention and labour of both of R.J.Bennett and Doman.  R.J.Bennett breeds the horses and keeps them at his ranch and Doman races the horses.  When Doman was racing the horses, he would be involved making arrangements for their training and care, including veterinarian care, and R.J.Bennett testified that he was "quite involved there with the trainer and doing a lot of that work with the trainer for Herb" and that he "would advise and keep track in a day to day situation with the trainer."

Since the early 1970's, Doman and R.J.Bennett have been sharing the profits and losses of their horse racing business on a 50/50 basis.  Doman is not aware of ever giving his accountant instructions to prepare separate statements for horses that he owned alone and for which R.J.Bennett had no breeding responsibilities.

Monthly and annual financial statements for their horse racing business are prepared by Coopers & Lybrand, chartered accountants.  Profit and losses are allocated equally between Doman and R.J.Bennett in these statements.  Henning Norgaard, a chartered accountant, is Doman's accountant.  Norgaard testified that for the years 1987 and 1988, Doman's share of the profit or loss from the horse racing business was incorporated into Doman's tax returns under farm income. James Patrick Mills, a partner with Rutherford Bazett & Co., chartered accountants, in Kelowna, is R.J.Bennett's accountant.  He testified that each year R.J.Bennett's share of the profit or loss from the horse racing business is incorporated into R.J.Bennett's tax return.

Based on the horse inventories prepared by R.J.Bennett in November 1986 and March 1988, 17 horses are owned by "R.J.B." and "Doman", including Champers, two are owned by "Lois", R.J.Bennett's wife, and "Doman" and two others are owned by "R.J.B., Doman, Johnson and Merlo", that is Harry A. Merlo. In 1987, seven horses were re-evaluated for tax purposes. Five of the horses were co-owned by Doman and R.J.Bennett.  The re-evaluation for all the horses was included in the preparation of the financial statements for Doman's and R.J.Bennett's horse racing business in 1987.

Champers was owned by Doman and R.J.Bennett.  Champers was sold in the fall of 1988 for $500.  The cheque for the sale price was sent to Doman.  According to Doman's testimony "our trainer" sold Champers, and Doman "was just trying to confirm with [R.J.Bennett] if that was what he thought it would be...".

When interviewed on November 18, 1988, R.J.Bennett described his relationship with Doman as a partnership and at that time said that he and Doman shared ownership of horses.

Q    Mr. Bennett, if I can ask you to go back to the transcript of the interview that you had on November 18th, 1988, and I'll get the tab number.  Volume 13, sir. If you go to page 4, sir.  I'm sorry, it's Tab -- Tab 175.  It'll say 75 on the tab.  And sir, if you go to page 4, at the bottom of page 4.  The question put to you by Mr. Nesmith, at question 20 is:
QWhat's the nature of the syndicate?
AOh, it's not a syndicate.
QA partnership?
AWell, basically it's sort of a partnership.
QOkay.  So Mr. Doman is a partner or --
      A    I -- I have horses with other people, but with Mr. Doman it's straight.
      Q    And you have perhaps eight or nine  horses with Mr. Doman?
AUm-hum.
      Now, sir, you recall those questions and those answers given on that day?
AYes.
QAnd were those answers true when given?
A    Yes, in a -- as you say, you see me wandering all over the place, and I thought that was about the best way you could describe it.  I didn't -- how do you really describe a loose sort of an arrangement?  It's not like a --
QThank you.
A    Like a partnership in a store or a legal business. That was my thoughts that day.
Mr. Peter Butler, representing R.J.Bennett at the time, admitted that R.J.Bennett and Doman were partners in the horse business.

At the hearing W.R.Bennett was asked whether he was aware that R.J.Bennett and Doman owned horses together and are involved in the breeding and racing of horses.  He answered. "I'm not sure of the involvement.  I'm not even sure of the horse business.  It's not something I've ever been particularly interested in I know my brother has horses, I know that he with a -- he raises them and sells them and I'm sure he sells them to a host of people.  I've never been involved in the business."  When W.R.Bennett was interviewed by Commission staff on November 18, 1988, he was asked the following question and gave the following answer.

Q.You were aware of your brother's relationship with Mr. Doman obviously, through his horses?
A    Oh, sure, I know that.  Buying and selling and running horses for a long time.  Very good friends. Stayed friends even though I don't know how good the horse business is.  I don't know, I know my brother has, depending on what time, a very large investment in horses.
At the hearing he said he did give that answer, "but those would all be answers in which I was making estimates or responding without particular knowledge.  The answer I gave today would be probably as precise as I could be, given time to think it over."

5.4  Louisiana-Pacific's Purchases of Doman Shares

Louisiana-Pacific Corporation is a major U.S. forest products concern with annual sales of U.S. $1.92 billion in 1987.  It is based in Portland, Oregon, U.S.A.  Its shares trade on The New York Stock Exchange.  Merlo is the president and chief executive officer of Louisiana-Pacific.  In April 1988, Louisiana Pacific received U.S. $440 million from the U.S. Government for timberland taken in 1978.  Research Notes published by Pemberton Securities Inc. on September 21, 1988, stated "Needless to say, the Company is cash rich and searching for opportunities in the forest products industry."

Doman and Merlo have known each other for a long time. Kenneth Alvin Shields is in charge of the corporate finance activities in Western Canada for Richardson Greenshields of Canada Limited.  His evidence is that it was well known that Merlo and Doman had a relationship that went back a long period of time.  Merlo says until August 25, 1988, they saw each other socially maybe once, maybe twice, a quarter and spoke on the telephone maybe once every two weeks.  They were co-owners in at least one race horse with R.J.Bennett.

Merlo and other senior officers of Louisiana-Pacific and their U.S. legal counsel testified at the respondents' trial before Judge Craig.  They reside in the United States and refused to come voluntarily to Canada for the purpose of testifying at the hearing.  The transcripts of their evidence given at the trial were produced in the hearing.

Jack Robert Abercrombie is the chief financial officer of Doman Industries.  He has been with the company since 1964 as a senior officer and a director.  Doman had made him aware that Louisiana-Pacific had expressed an interest in taking over Doman Industries 8 to 10 years prior to November 1988. In the two years preceding November 1988, he was aware from conversations with Merlo and John Clinton Hart that Louisiana-Pacific would have an interest in putting Doman Industries into their orbit.  Hart is the chief financial officer of Louisiana-Pacific.  Doman would have been present during any discussions Abercrombie had with Merlo.  Those conversations occurred at a time when Louisiana-Pacific was providing Doman Industries with some technical advice regarding its Squamish pulp mill and the operation of a medium density fibreboard plant.  Abercrombie believed that Doman would never sell Doman Industries.

Shields' evidence is that Louisiana-Pacific was committed to investing in British Columbia forest products industry.

According to Merlo, he told Doman in September 1987 that Louisiana-Pacific was purchasing Doman shares and the purchases were made with Doman's permission.  Doman says he had no idea in September 1987 that Louisiana-Pacific was going to purchase significant numbers of Doman shares.  Doman testified, "in a passing conversation Mr. Merlo had stated that he was -- he told me to shape up or something to that effect, we're shareholders of your company".  Merlo's evidence at the trial before Judge Craig was:

Q    Prior to 1988 did you have any discussions with Mr. Doman concerning LP's purchase of stock in his company?
A    Yes.  All the stock we purchased had the permission of Herb Doman.  I told him that I would like to acquire stock in his company when we were interested in doing so and we did it with his permission.  We were not an unfriendly buyer.
Q    Did you have any discussions of a general nature with Mr. Doman, and I mean prior to 1988, about his plans, his personal plans and plans for Doman Industries?
A    Well, I think that we did discuss, first of all, that Louisiana-Pacific was anxious in expanding in British Columbia, and that his company would be a very attractive acquisition, if economics were all okay.  And Herb indicated to me on occasion, and I don't remember specifically the time, that he might be interested in converting his interest in Doman to Louisiana-Pacific stock at some time if everything worked out okay, so we did have a discussion about the synergisms of the two companies, that a merger could conceivably take place.
QAnd what were your feelings on the subject?
AI beg your pardon?
QWhat were your feelings on the subject?
A    Well, I expressed that same opinion, that by virtue of our wanting to expand in Canada and that basically there's a lot of good timber here and it was a good place for expansion for Louisiana-Pacific.
...
Q    Now, in the spring and early summer of 1988, did the interest of Louisiana-Pacific in Doman Industry shares increase somewhat?
A    Well, we bought -- we started buying stock in Doman Industry the second time in, as I recall, `87, around September of `87, and continued the acquiring of stock all through the period until we made an announcement of having owned ten per cent, which was late in `88.
In June 1988, Louisiana-Pacific retained a Vancouver law firm to provide legal advice concerning a possible take over of Doman Industries.  By September 19, 1988, Louisiana-Pacific had acquired 204,100 Doman A shares and 1,029,220 Doman B shares.

On September 19, 1988, Doman Industries issued a press release announcing that the board had authorized Doman to enter into discussions with the parties who have made overtures in respect of the acquisition of or merger with Doman Industries.  Louisiana-Pacific was not identified and Doman's intention was not disclosed.

On September 20, 1988, Louisiana-Pacific issued a press release announcing that, with purchases made on September 19, it had acquired 10.6% of Doman class B non-voting shares, when you take into account that its Doman A shares are convertible into Doman B shares on a one-for-one basis, and that it may seek to negotiate with Doman Industries and Doman the acquisition of all, or a controlling interest in, Doman shares.

5.5 The Purchases of Doman Shares by the Bennetts and Others
5.5.1 Introduction
In October 1987, the month following the commencement of Louisiana-Pacific's purchases of Doman shares, R.J.Bennett and W.R.Bennett began purchasing Doman shares.  During the period from October 1987 to September 1988, the Bennetts purchased 611,700 Doman shares.  R.J.Bennett purchased 282,400 Doman B shares for himself, for his family and for Bennett Equities. R.J.Bennett made his last purchases on September 19, 1988, the day Doman Industries issued its press release about merger discussions.  W.R.Bennett purchased 140,200 Doman A shares and 189,100 Doman B shares for himself and his family. W.R.Bennett's purchases were completed by September 6.  There were only three trading days when both Bennetts purchased Doman shares.  Up until July 27, W.R.Bennett purchased only Doman A shares.  W.R.Bennett purchased most of his Doman shares between July 27 and August 24, when R.J.Bennett purchased no Doman shares.  R.J.Bennett purchased most of his Doman shares between August 25 and September 19, when W.R.Bennett purchased no Doman shares, except on one day. That day was September 6, when W.R.Bennett purchased 10,000 Doman B shares.  That was the only trading day during the period from October 1987 to September 1988 that both Bennetts purchased Doman B shares the same day.

Doman's testimony was that he did not know that R.J.Bennett and W.R.Bennett owned Doman shares in 1988.

During the summer of 1988, Mills, Dunn and Stanley Steed purchased Doman shares.  Mills, the accountant for the Bennetts, purchased 28,500 Doman shares.  Dunn, a long time employee at McIntosh Centre, purchased 500 Doman shares. Steed, the broker for R.J.Bennett, Dunn and Leo Duhamel, purchased 2,000 Doman shares.  Duhamel was a long time employee at McIntosh Centre who purchased 1,000 Doman shares in 1986.

5.5.2 R.J.Bennett's Purchases
On October 13, 1987, R.J.Bennett commenced purchasing Doman shares.  19,000 Doman B shares were purchased between October 13, 1987, and January 1988.  11,800 Doman B shares were purchased during June and July 1988.  251,600 Doman B shares were purchased between August 25, 1988, and September 19, 1988.

Steed is a broker with McDermid St. Lawrence.  He joined that firm in 1971.  Based on R.J.Bennett's new client application form signed by Steed and approved on July 28, 1983, Steed has known R.J.Bennett since the late 1960's.  In addition to being his broker, they became friends in 1988. Steed did not recommend that R.J.Bennett purchase Doman shares.  The purchases were unsolicited.  He agreed that the purchases were very substantial even for a person of R.J.Bennett's means.  Steed's testimony was that R.J.Bennett must have been convinced the share price of Doman Industries would go up and that he did not have any information that would have caused him to be convinced to purchase that amount of Doman shares on behalf of any client.

The 19,000 Doman B shares purchased by R.J.Bennett between October and January 1988 were purchased at prices ranging from $5-3/8 to $7.00.  The aggregate purchase price was $111,125, before commissions.  Certificates representing the shares were delivered to R.J.Bennett's bank.

Around the middle of 1988, Richardson Greenshields was retained by Doman on behalf of Doman Industries to be their financial adviser.  Shields' evidence is that Doman had discussions with him about selling Doman Industries around mid-year 1988.  R.J.Bennett purchased 11,800 Doman B shares during June and July 1988, between June 9 and July 22.  On June 9, trading in Doman B shares opened at $5-7/8.  The purchases were made on five trading days at prices ranging from $5-5/8 to $5-7/8.  The aggregate purchase price was $68,100, before commissions.  Based on Doman Industries Trading Summary for 1988, 180,168 Doman B shares were traded in June and 77,769 Doman B shares were traded in July and 185,678 Doman B shares traded for the period from June 9 to July 22.  R.J.Bennett's purchases represented 6% of all the Doman B shares traded during that period.

In August 1988, Doman Industries retained Ladner Downs. William Miles is a partner at that firm.  His evidence was that the first retainer involved some tax matters for Doman, and within a very few days it turned into advice with respect to a potential merger.  This was no later than August 26, and probably no later than the 24th, in fact, probably a few days earlier than that.

In sworn testimony given to Commission staff on November 18, 1988, R.J.Bennett stated that at Long Acres racetrack at Seattle during August 1988, he informed Doman, "I'm a holder of your stock.  I hope you're doing well."  Doman "just laughed, and I didn't tell him in any depth whatever."  "I mentioned to him, I think, that Bill had some stock too." Doman said, `Oh I like my stock', just like he always says. He's always bullish on his stock."  When R.J.Bennett testified in the hearing, he recanted this testimony saying "reflecting back on it now, I don't think I did."  Doman testified, he does not recall the conversation.

A dinner meeting was arranged on August 24, 1988, for that night.  Merlo, Doman, Miles and Shields attended the meeting.  Merlo's evidence is that the purpose of the meeting was a general discussion about a possible merger.  Miles was invited an hour before the meeting.  His evidence is that there was no doubt the purpose of the meeting was to discuss some sort of business transaction that involved Doman Industries and Louisiana-Pacific, which would have encompassed the possibility of a merger.  Miles recalls that at the meeting, Doman made it clear that if there was to be a merger, it could not proceed beyond a very general discussion until he had discussions with his board.  Shields' evidence is that Doman told him that one of the subjects that could come up at the meeting was the possible take over of Doman Industries by Louisiana-Pacific.  Doman's evidence was that the possibility of a take over of Doman Industries by Louisiana-Pacific came up at the meeting and described the discussion as just an airy-fairy thing.

Commencing the next day, August 25, and continuing until September 19, 1988, R.J.Bennett purchased 251,600 Doman B shares.  On August 25, R.J.Bennett purchased 10,000 Doman B shares.  The same day, Doman, Merlo and Johnson flew to Toronto on a Louisiana-Pacific jet.

Merlo's evidence was that he presented a document entitled the Project Richco Term Sheet to Doman on the way down to Toronto with the explanation that Louisiana-Pacific lawyers had come up with the structure and if Louisiana-Pacific and Doman Industries proceeded with a merger the format in the Project Richco Term Sheet would be followed. The sheet was dated August 24, 1988, 11:00 a.m.  One of the provisions was that if there was to be a take over of Doman Industries it would be through a Canadian subsidiary.  Doman reluctantly admitted that he would have had a discussion with Merlo about using a Canadian subsidiary for the merger because of tax considerations.

Doman initially could not recall seeing the Project Richco Term Sheet.  Then after having his memory refreshed, he remembered seeing it on the way back from Toronto and then he conceded he could have received it on the way to Toronto. Doman's evidence was that he handed it to Johnson.  Johnson testified that he had never seen the Project Richco Term Sheet.

The purpose of the trip to Toronto was to meet with The Royal Bank of Canada.  The bank was a large shareholder in Doman Industries.  Merlo's evidence was that the purpose of the visit was to indicate Louisiana-Pacific's financial support to Doman in acquiring Western Forest Products and that during the meeting he asked if the bank would submit its shares in Doman Industries if the merger between Louisiana-Pacific and Doman Industries succeeded.  According to Merlo, he was told that of course that would be up to Doman because Doman had refusal on those shares but that if the transaction was satisfactory to Doman there was no reason why the bank would not go along with the deal.  Doman's explanation of the meeting was that it had to do with Western and only reluctantly conceded that a discussion did occur with respect to a potential merger of Louisiana-Pacific and Doman Industries and corroborated Merlo's evidence.

During the period August 25 to mid-September 1988, Merlo testified that he would speak to Doman at least once or twice a week and that on at least one occasion a conference occurred between Doman and Louisiana-Pacific personnel.

Neil Winchester of The Toronto Stock Exchange testified that the prices for Doman shares had been moving up considerably from the end of July 1988 and that the Exchange had heard rumours about a possible take over bid.  These matters were brought to the attention of Doman Industries through telephone discussions with Abercrombie and in a letter to Doman Industries dated August 26, 1988.  The letter read in part:

There have been rumors circulating which suggest a take over bid may be in the offing.  We in Market Surveillance have also been receiving calls from concerned Brokers and the investing public wondering if anything is happening with Doman Industries.
In that letter, the Exchange asked Doman Industries to issue a statement to the media to account for very active and high trading volumes in Doman shares.  Doman signed a letter dated August 29, 1988, to the Exchange stating that it is the policy of Doman Industries not to comment on rumours.  Doman's evidence was that the letter was drafted by Miles and Abercrombie.  While Miles had been at the meeting on August 24, he did not know about the Project Richco Term Sheet and the discussions with The Royal Bank.  Doman had told Abercrombie nothing about the discussions he was having with Louisiana-Pacific involving the take over of Doman Industries.

On the morning of August 31, 1988, a 13 minute telephone call was made from Doman Industries to the McIntosh Centre. Later that day and the next day, R.J.Bennett purchased 15,000 Doman B shares.

Late in the evening of September 1, 1988, a 40 minute telephone call was made from Doman's residence to R.J.Bennett's residence.  Beginning the next day and continuing through September 12, R.J.Bennett purchased 131,600 Doman B shares.  50,000 of the shares were purchased for Bennett Equities Ltd.  Bennett Equities is a company incorporated under the laws of British Columbia.  R.J.Bennett is president and a director.  Its assets are from the estate of R.J.Bennett's father.  It is managed for the benefit of R.J.Bennett's children, his nephews, including W.R.Bennett's sons, and his sister.

In September, the Exchange again contacted Doman Industries and was advised that there was nothing going on. On September 14, 1988, the Doman B shares closed at $8-7/8. As a consequence of continued pressure from the Exchange, following the close of the market that day, Doman Industries did issue a press release stating that merger overtures had been received and would be discussed at the regular meeting of the board on September 19, 1988.  The release did not name Louisiana-Pacific nor state what Doman's intentions were. Abercrombie's evidence is that he did not have any knowledge of what was contained in the press release, that Doman was being advised by counsel, that the impetus for the release came from counsel and that he did not know why counsel thought it was necessary to issue the press release.

By the middle of September, Miles was spending a lot of time on the Doman Industries file.  He would speak to Doman virtually on a daily basis, sometimes more than once.

On September 16, 1988, a 9 minute telephone call was made from the McIntosh Centre to Doman Industries' head office. The call ended at 9:54 a.m.  Minutes later at 9:58 a.m. a buy order for 10,000 Doman B shares was placed on behalf of R.J.Bennett by Steed.  The order was filled within minutes. Later that day, R.J.Bennett purchased a further 45,000 Doman B shares and on the morning of September 19, R.J.Bennett purchased a further 40,000 Doman B shares.

Following the close of trading on September 19, 1988, Doman Industries issued a press release announcing that the board had authorized Doman to enter into discussions with the parties who have made overtures in respect of the acquisition of or merger with Doman Industries.  Louisiana-Pacific was not identified and Doman's intention was not disclosed. Abercrombie's evidence is that he was absolutely amazed on September 19 when Doman indicated he would even consider giving up his company.  It was Abercrombie's evidence that Louisiana-Pacific was the only party that was discussed at the meeting.  It was obvious from Doman's evidence that the only overture he was entertaining seriously was that of Louisiana Pacific.

On September 20, 1988, Louisiana-Pacific made its announcement about purchasing Doman shares and negotiating a take over.  On September 21, the Doman B shares closed at $9-7/8.

Abercrombie testified that during September or October 1988, it came to his attention in reviewing the share records for Doman Industries that the Bennetts were shareholders.  In the hall at Doman Industries head office, he recalls saying to Doman "I see the Bennetts are shareholders, and he said, `Oh', or something to that effect, and didn't comment."  Doman testified, he does not remember Abercrombie saying anything to him.

251,600 Doman B shares were purchased during the period commencing on August 25 and ending on September 19.  On August 25, trading in Doman B shares opened at $7-1/4.  R.J.Bennett purchased his Doman B shares at prices ranging from $7.75 to $9.00.  The aggregate purchase price was $2,107,886, before commissions.  Certificates representing the shares were delivered to R.J.Bennett's bank.  The 50,000 Doman shares purchased by R.J.Bennett for Bennett Equities were purchased on September 6 and 7 for an aggregate purchase price of $407,500, before commissions.  R.J.Bennett also purchased 50,000 Doman shares for his family for an aggregate purchase price of $428,186, before commissions.

Based on Doman Industries Trading Summary for 1988, 2,122,143 Doman B shares traded for the period from August 25 to September 19.  R.J.Bennett's purchases represented 12% of all the Doman B shares traded during that period.  These purchases were made on 11 trading days.  Those trading days with R.J.Bennett's purchases, the volumes traded and the percentages R.J.Bennett's purchases represented of the volumes traded are shown below.

TradingR.J. Bennett'sVolumes% R.J. Bennett's
 days   PurchasesTradedPurchases of Volumes
     Traded
August
   25     10,000 165,655          6
   31      5,000  39,682         13
September
    1
10,000
39,823
25
    2
16,200
39,197
41
    6
35,000
55,133
63
    7
35,600
75,609
47
    8
23,000
55,416
42
    9
14,700
46,382
32
   12
7,100
67,304
11
   16
55,000
330,140
17
   19
40,000
519,018
8
During the whole period from October 13, 1987, when R.J.Bennett made his first purchases of Doman shares, to September 19, 1988, when R.J.Bennett made his last purchases of Doman shares, R.J.Bennett purchased 282,400 Doman B shares at an aggregate cost of $2,287,111, before commissions, including 182,400 shares for himself, 50,000 shares for his family and 50,000 shares for Bennett Equities.

R.J.Bennett testified that he bought because his brother bought and that his brother was the one with all the knowledge on the stock.  He explained that he had great faith in his brother's judgment.  His recollection was that his brother could have said that Doman may be a target in a take over bid. W.R.Bennett testified that he had not informed R.J.Bennett about his purchases of Doman shares "while I was doing my major acquiring".  "I went to see him, I think, in August and probably again -- talked to him a couple of times, that it's a good buy, that I thought it was a good buy, now that there's a takeover it reinforces that it may be even better, prices may be higher than I calculated, and I thought that the [sic] he and/or the estate, particularly the estate, which was the grandchildren, should buy some, and I think I talked to him two or three times on that."

R.J.Bennett testified that "I never called Mr. Doman about any of the stock purchases.  My transactions were with Stan Steed."  R.J.Bennett was asked these questions and gave these answers at the hearing:

Q    Mr. Bennett, rather than go through each one of these purchases, I take it, sir, that if I asked you the question with respect to every one of the purchases, or any one of the purchases, whether any or every of the purchases were influenced by information received from Mr. Herb Doman, you would deny that?
AThat's correct.
Q    Now, sir, is it fair to say that you and Mr. Doman would discuss the affairs of Doman Industries from time to time?
ANo.
QNot in any respect?
ANo.
Q    Not even the most innocuous, non-confidential information would pass from Herb Doman's lips to yourself?
ANothing that I -- no.
R.J.Bennett did testify that he would hear Doman being bullish on his stock, but "He wouldn't tell me.  I would hear that in the presence of others."  When asked who the others would be, he responded "Oh, I'm just saying in passing, at different times."  One of those times was in Seattle where he recalls in August 1988 Doman telling "others in the presence of me" when he was asked about his stock that if you keep milk out long enough, the cream will rise to the top, or words to that effect.

Doman gave this testimony at the hearing:
Q    You are saying that you do not discuss anything with R.J.Bennett about Doman Industries, including those things that are not confidential?
A    That's correct.  That has always been my policy, to stay away from discussions that reflect and involve Doman Industries.
The purchases of Doman shares were the first time R.J.Bennett had made major purchases in the stock market.  In the past, he had only dabbled in small amounts of stock, except when he was a director of the Bank of British Columbia and held a fairly significant number of the bank's shares.

R.J.Bennett financed the purchases of the 282,400 Doman shares with loans of $2,247,000 from the Hong Kong Bank.  In November 1987, R.J.Bennett owed the bank $666,280 under a line of credit established for his ranching and horse operations and other business ventures.  On November 13, 1987, he applied to increase his line of credit by $300,000.  $200,000 was for the purchase of Doman shares.  The application stated that:

R.J.Bennett is well associated with Doman's top management and believes that, at current prices, Doman shares represent an excellent investment.
In addition to the security already in place for the line of credit, the bank required a mortgage of property that included R.J.Bennett's residence and a pledge of the certificates representing the Doman shares purchased with the loan proceeds.  Bank policy was stocks purchased on major stock exchanges trading in excess of $5.00 would be fully margined, that is the bank would finance it to the extent of two for one.  In other words, the bank would finance 50% of the purchase price.  The bank's documentation stated "While it is recognized that 100% investment financing is outside of policy, taking into consideration Bennett's net worth and the customer's value, this risk is acceptable and recommendation is provided."  On September 7, 1987, Bennett Equities borrowed $400,000 from the Hong Kong Bank to purchase Doman shares. R.J.Bennett applied for further increases to his line of credit as more Doman shares were purchased - $400,000 on September 7, $400,000 on September 8 and $847,000 on September 22.  The increases were approved within a day.  Certificates representing all 282,400 Doman shares were lodged with the bank.  The rate of interest charged on R.J.Bennett's loans was the bank prime rate.  By the end of August 1988, the prime rate was at 11-3/4%.  Based on R.J.Bennett's loans of $1,847,000, which does not include the Bennett Equities loan of $400,000, and the prime rate at 11-3/4%, interest charges per day were $595 and for a year would be $217,175.  The interest charged by the bank on R.J.Bennett's loan for the purchase of Doman shares for October 1987 was $16,896.  Based on the bank documents, in 1988, R.J.Bennett's annual disposable income was $196,000.

R.B.Lindsay, manager of Hong Kong Bank of Canada in Kelowna, was R.J.Bennett's banker.  He estimated R.J.Bennett's net worth at around $8 million.  R.J.Bennett's 50% interest in McIntosh Centre represented $5.6 million or 70% of his net worth.  R.J.Bennett's assets were mostly real estate.  On the basis of the purchase price of $1,451,425 for the 182,400 Doman shares R.J.Bennett purchased for himself and the purchase price of $428,186 for the 50,000 Doman shares R.J.Bennett purchased for his family, which R.J.Bennett financed with the loans from the bank, the 232,400 Doman shares represented 23.5% of R.J.Bennett's net worth.

5.5.3 W.R.Bennett's Purchases
W.R.Bennett purchased 20,000 Doman shares on October 22, 1987.  W.R.Bennett purchased 299,300 Doman shares from June 23, 1988, to August 24, 1988.  Approximately 260,000 of those shares were purchased between July 27 and August 24.  W.R. Bennett purchased 13,800 Doman shares in September 1988.

John Richard McNaughton has been a broker with Odlum Brown in Kelowna since 1974 and a registered representative since 1954.  W.R.Bennett became a client in October 1986. They were friends for quite a period of time before the fall of 1986.  Their wives play bridge together and they play golf together and consider themselves close friends.  The new client application form showed that McNaughton had known W.R.Bennett since 1971, that W.R.Bennett was interested in investments offering "long term growth", that his net worth was over $100,000 and that his earnings per year were $100,000.  All W.R.Bennett's purchases of Doman shares were made through McNaughton.  McNaughton did not recommend that W.R.Bennett purchase Doman shares.  The purchases were unsolicited.

The 20,000 Doman A shares purchased on October 22, 1987 were purchased for $5.75 each.  The aggregate purchase price, before commission, was $115,000.  15,000 shares were for W.R.Bennett's RRSP.  Certificates representing 5,000 shares were delivered out of W.R.Bennett's account and were lodged with W.R.Bennett's bank as collateral for his loan. McNaughton's evidence is that he did not deliver them to the bank because we were not dealing with the bank at that time.

From June 23, 1988, until the end of the month, W.R.Bennett purchased a further 13,600 Doman A shares.  5,000 shares were purchased for $5.875 each and 8,600 shares were purchased for $5.625 each.  The aggregate purchase price was $77,750, before commissions.  Certificates representing the shares were delivered to W.R.Bennett's bank.

Based on Doman Industries Trading Summary for 1988, 185,099 Doman A shares traded in June and 124,200 Doman A shares traded for the period from June 23 until the end of the month.  W.R.Bennett's purchases represented 11% of all the Doman A shares traded during that period.  These purchases were made on four trading days.  Those trading days with W.R.Bennett's purchases, the volumes traded and the percentages W.R.Bennett's purchases represented of the volume traded are shown below:

TradingW.R.Bennett'sVolumes% W.R.Bennett's days
days   PurchasesTradedPurchases of Volumes
     Traded
June
 23
2,000
5,400
37
 24
3,000
10,600
28
 28
3,600
6,100
59
 30
5,000
89,600
6
In his testimony before us, McNaughton recalled that W.R.Bennett told him:

...he thought it was undervalued and thought the stock would move considerably higher.  He also mentioned that Mr. Doman was our age and that possibly he might be interested in selling the company and, if so, it would be at a considerably higher price.
W.R.Bennett also told McNaughton that he was going to acquire quite a few shares.

On the afternoon of November 4, 1988, McNaughton prepared notes of his recollections regarding W.R.Bennett's purchases and sales of Doman shares.  He testified that he prepared these notes as a consequence of a call from Bob Sutherland, vice president of compliance at Odlum Brown, and knowing that there would be an inquiry into the trading of Doman shares prior to the halt of trading in shares of Doman Industries on November 4.  He testified that these notes were his best recollection.  The notes were typed by Heather, the receptionist, on Monday, November 7, 1988.

In McNaughton's notes, he wrote "When Bennett first started buying Doman in June and early July I asked him if he knew something was going to happen to the company.  He replied that he knew nothing and had not talked to anyone.  He said he had a feeling that as Doman was our age and didn't want to go through another recession, he thought the company might be for sale."

In July 1988, W.R.Bennett purchased a further 36,500 Doman shares.  16,200 Doman A shares were purchased during the month.  20,300 Doman B shares were purchased from July 27 to the end of the month.  3,000 shares were purchased for $5.625 each and 33,500 shares were purchased for $6.00 each.  The aggregate purchase price was $217,875, before commissions.  By the end of July, the Doman B shares closed at $6-1/8. Certificates representing the shares were delivered to W.R.Bennett's bank.

Based on Doman Industries Trading Summary for 1988, 65,715 Doman A shares traded in July.  W.R.Bennett's purchases represented 25% of all the Doman A shares traded that month. These purchases were made on four trading days.  On those trading days, W.R.Bennett's purchases represented 93%, 80%, 93% and 96%, respectively, of the volumes traded.  Based on Doman Industries Trading Summary for 1988, 44,871 Doman B shares traded from July 27 to the end of the month. W.R.Bennett's purchases represented 45% of all the Doman B shares traded during that period.  These purchases were made on two trading days.  On those trading days, W.R.Bennett's purchases represented 73% and 16%, respectively, of the volumes traded.

McNaughton recalled in his testimony:

I asked him not once, probably two or three times, if he knew something that I didn't and was he acting on any kind of a tip or something like that, and he said no, that he thought the stock was undervalued, he just had a hunch, and that maybe Mr. Doman might step down, but he stated no, that he was -- just thought Doman was a good buy.
According to McNaughton's notes, at the beginning of August, he asked W.R.Bennett a second time whether he knew something was going to happen to Doman Industries and W.R.Bennett gave him the same response he had early in July, the first time McNaughton asked him.  In McNaughton's notes, he wrote, "Beginning of August he asked if we could find a block of 200 to 250 Doman (200,000 to 250,000 Doman shares).  I again asked and got the same reply."

From the beginning of August to August 24, 1988, on 10 trading days, W.R.Bennett purchased a further 249,200 Doman shares, including 90,400 Doman A shares and 158,800 Doman B shares.  The shares were purchased at prices ranging from $6.25 to $7.375 per share.  The aggregate purchase price for the shares was $1,721,325 before commissions.  Certificates representing the shares were delivered to W.R.Bennett's bank.

Based on Doman Industries Trading Summary for 1988, 434,125 Doman A shares traded in August for the period ending August 24.  W.R.Bennett's purchases represented 21% of all the Doman A shares traded from the beginning of August to August 24.  These purchases were made on eight trading days.  Those trading days with W.R.Bennett's purchases, the volumes traded and the percentages W.R.Bennett's purchases represented of the volumes traded are shown below:

TradingW.R.Bennett'sVolumes% W.R.Bennett's
days   PurchasesTradedPurchases of Volumes
     Traded
August
    3     20,900 35,125         60
    9     11,500 40,884         28
   10      5,600 50,402         11
   11      4,500 13,010         35
   12     35,600 41,610         86
   17      5,000  7,471         67
   18      4,900  6,800         72
   24      2,400  20,499         12
Based on Doman Industries Trading Summary for 1988, 794,553 Doman B shares traded in August for the period ending August 24.  W.R.Bennett's purchases represented 20% of all the Doman B shares traded from the beginning of August to August 24.  These purchases were made on ten trading days.  Those trading days with W.R.Bennett's purchases, the volumes traded and the percentages W.R.Bennett's purchases represented of the volumes traded are shown below:

TradingW.R.Bennett'sVolumes% W.R.Bennett's
days   PurchasesTradedPurchases of Volumes
     Traded
August
3 19,600 36,976 14
8 22,500 162,965 14
9 16,200 76,756 21
10 16,700 38,200 44
11 9,100 26,111 35
12 13,400 16,476 81
16 9,000 11,957 75
17 9,400 10,155 93
18 10,000 18,050 55
24 32,900 76,200 43
About August 18, McNaughton spoke to W.R.Bennett a third time because:

Bob Sutherland, who's our vice-president in charge of compliance, phoned and asked me if Mr. Bennett was acting on some kind of a tip or why he was accumulating all this stock, and I told Mr. Sutherland what Mr. Bennett had told me and I said, "Well, phone him up yourself," and I gave him the number, and I think he did phone.
McNaughton's wrote in his notes, "About August 18, Bob Sutherland called and expressed concern.  I called and he gave the same reason to buy and had not talked to anyone regarding Doman."  In the 14 years McNaughton had been with Odlum Brown, he had never been questioned by the compliance department and asked to speak to a client to find out if they had inside information.

From June 23 to August 24, W.R.Bennett purchased 299,300 Doman shares for which he paid $2,016,950.  During that period he purchased 120,200 Doman A shares.  The volume of Doman A shares traded was 624,040.  His purchases represented 19% of the volume of Doman A shares traded.  W.R.Bennett purchased 179,100 Doman B shares during the period from July 27 to August 24.  During that period the volume of Doman B shares traded was 839,424.  His purchases represented 21% of the volumes of Doman B shares traded.

W.R.Bennett testified that the family investment agreement was signed before he began purchasing Doman shares in June 1988.  The agreement was dated June 8, 1988. It was two pages and was very straightforward.  Under the agreement, each of W.R.Bennett's wife and four children were allocated 30,000 Doman shares and W.R.Bennett was allocated the balance.  There were no affidavits of execution attached to the agreement.  The agreement required the family to provide promissory notes.  No notes were delivered to the bank.  W.R.Bennett testified that he had guaranteed the loans at the bank.  W.R.Bennett could not answer whether there were any notes.

I may have sought to get them, and I can't recall, quite frankly.  I was dealing with my family.  And they may have been done, they may not, and they may be in existence, or some or all of them, but quite frankly, I cannot -- I have not considered it nor prepared myself to consider it since that time, nor since the transaction was completed.
W.R.Bennett testified that he consulted with Mills about the agreement and that he showed him the agreement, but that he can't say the times that was done.

Mills testified that in early September 1988, he was at the McIntosh Centre meeting with Dunn.  W.R.Bennett came in and interrupted and said, "Tell me about capital gains." W.R.Bennett testified that could be exactly right.

He [W.R.Bennett] informed me that he had purchased shares in his name and had arranged the bank loan, and I asked him who the bank loan's name was in, and he said in his name.  And he said, but he had purchased the shares for the benefit of himself, his wife and his children.  And I then told him that he needed to get this evidenced in writing and that the shares should be held in trust and the loan should be spread out amongst the family members, and if it's all in one than he should have signed promissory notes back and forth between himself and his children and his wife, and interest must be charged and they must be at risk.  Otherwise Revenue Canada will come back and say, if he had a gain on this transaction, all of the income would go -- capital gain, call it -- would go on his tax return.
Later in the meeting, W.R.Bennett brought in the agreement. There were no signatures.  After Mills scanned it, he advised W.R.Bennett to get legal advice.  Mills does not know whether promissory notes were ever created.  W.R.Bennett testified that Mills was incorrect.

On September 6, W.R.Bennett purchased 10,000 Doman B shares for his RRSP.  W.R.Bennett's statements of account for his RRSP were not produced.  Based on the trading of Doman B shares that day, the purchase price would have been $8.00 to $8.125 and the aggregate purchase price before commissions would have been $80,000 to $81,250.  W.R.Bennett left the country on a trip after September 6 for 15, 16 days, returning on September 22 or 23.

On September 29, W.R.Bennett purchased a further 3,800 Doman B shares.  These 3,800 shares were purchased for $9.375 each.  The aggregate purchase price was $35,625, before commissions.  The 3,800 shares were delivered to W.R.Bennett's bank.  Based on the evidence, it appears that W.R.Bennett transferred the 3,800 Doman B shares out of his RRSP, leaving 6,200 Doman B shares in his RRSP.

W.R.Bennett purchased 329,300 Doman shares for an aggregate purchase price of approximately $2,217,175.  308,100 Doman shares, including 125,200 Doman A shares and 182,900 Doman B shares, were purchased for an aggregate cost of $2,081,325, before commissions.  The remaining 21,200 Doman shares were purchased for W.R.Bennett's RRSP for an aggregate purchase price of approximately $135,850, before commissions.

W.R.Bennett testified that his Doman purchases reflected his business philosophy "that you buy -- you only make money when you buy right, and that's been my philosophy in the retail business and any other business.  You buy right, because the customer, the other buyer sets the selling price." He remembers his brother asking him about Doman Industries. "I just casually said that I know the forest industry, Doman is a good company, you should buy it."  His brother bought just before the 1987 stock market crash.

But afterwards, I told -- when we were talking, I said, `I'm going to buy some,' and he says, `I'm going to average out.'  And I invested what cash I had at the time.  It made it a very excellent investment.   And really that's what really got me interested in pursuing the investment field, is then once I'd bought it, because it was a buy, taking an even closer look.
In October 1987, W.R.Bennett had not formulated an objective with respect to the purchase of either forestry shares generally or Doman Industries specifically.

W.R.Bennett explained why he increased his line of credit by $1.8 million to $2 million in December 1987.  Now that he had retired from politics, and because he and his family, his sons, were going to develop some business investments on their own, it became important and the line would be used for any investments they might make.

In 1988, prior to June, W.R.Bennett was able through his analysis to determine that in his mind at least there was a good chance or a good prospect that Doman shares could rise as high as $10 a share.  "That analysis was based on the rising price of pulp."  "As a director of CP Forest, but also having attended pulp meeting -- a pulp meeting convention when it was held in Montreal, I was aware that there was a very buoyant mood and a very large rise in pulp prices ... and that a junior small cap company like Doman's, particularly with this event going to affect itself over time would be very strongly affected, in my view."  "There had been an air of optimism within the CIP company [Canadian Pacific] since I became a director -- first became a director in `87.  It was growing at every meeting."  As a result of that optimism, which carried throughout the whole industry, that assisted W.R.Bennett in coming to the view, and bolstered his view, that Doman shares could reach the $10 level.  "Yeah.  Mainly because most people would not yet have factored in, even though it was public knowledge that they were part of the group making the offer and the ownership of Western Pulp..."

In addition to the optimism that W.R.Bennett observed and heard from others, part of his analysis in 1988 was the fact that he considered Doman Industries to be a prime target for a takeover.  "That view was only informed when I was asked by my accountant -- my stockbroker, Dick McNaughton, a number of times why I was buying, and I said that one of the -- these are the things, you know, structurally it's very sound.  It's got good numbers, it's got good growth, the pulp factor.  I said the other factor is something that I can understand, that here's a company ... that may be, may be, taken over and that the type of person you look at is a person like Doman, who's about my age and starting to think about succession."  When Commission staff tried to get confirmation about when W.R.Bennett first discussed his view, he gave a different answer.

It could have been with Mr. McNaughton and it could have been that as the rumours started, because rumours were starting -- not rumours.  Different analysts were starting to write in their reports about then that Doman's might be a candidate for a take over.  That was the usual rumour mill.  That fed speculation.  I would get asked questions on that.  Might even have discussions, if it came up over coffee, with my brother, I don't know.  Would it be a take over candidate?  My view, if anybody asked me, was if you took a look at a lot of what was happening in the industry, almost anyone, you know, was a take over candidate.
W.R.Bennett testified that when he was purchasing Doman shares in July 1988, he asked McNaughton whether he knew who else was in the market.  W.R.Bennett testified that he never asked his brother whether he was purchasing Doman shares.  The reason he gave was "I'd made up my own mind on the research of the purchase.  It was something I was doing.  There was no reason for me to ask him anything."

W.R.Bennett was Premier of the Province for over a decade and did not deal with his assets.  He opened his account with McNaughton in the fall of 1986 to sell shares he held in Bank of British Columbia and B.C. Resources.  Apart from the purchase of 200 shares of Canadian Pacific Forest Products for about $9,000 at the end of June 1988, the only activity in the account at Oldum Brown related to Doman shares.  W.R.Bennett was a director of Canadian Pacific and the shares were purchased to meet a requirement under the articles of the company.  W.R.Bennett did not trade shares through another broker.

McNaughton had never handled purchases of this magnitude for a client.  He knew that the purchases were being financed through a bank loan, but he did not know to what extend the purchases were being financed.

Except for the 15,000 Doman A shares and the 6,200 Doman B shares purchased for W.R.Bennett's RRSP, W.R.Bennett financed the purchase price of the 308,100 Doman shares with a $2,000,000 loan from Canadian Imperial Bank of Commerce. Certificates representing 125,200 Doman A shares and 182,900 Doman B shares were lodged with the bank as collateral for the loan.  In December 1987, W.R.Bennett applied, and received approval, to increase his line of credit by $1.8 million to $2 million.  The line was to be used to invest in the stock market, and Larry Seiler at the bank recalls that W.R.Bennett told him he was looking at the forestry industry.  The approval required "dollar for dollar cover at market value, for outstanding loans".  Seiler explained that "the bank requires to securities which at all times would cover the amount of the outstanding loan, and if not, that Mr. Bennett would have to top it up.  It's similar to a margin requirement."  R.J.Bennett testified that his brother had told him what he had done.  The loan was fully drawn down by August 1988.  On November 9, 1988, the loan was $2,038,670 and interest per diem was $656.  On that basis interest for the month of October would have been $20,344 and for a year would have been $239,531.  W.R.Bennett's monthly draw from the McIntosh Centre was $10,000.  He claimed that "my outside income was much higher than that."  W.R.Bennett did not produce any documentary evidence to support his claim.

A statement of W.R.Bennett's net worth as of December 1, 1987, was prepared by Rutherford Bazett & Co. and filed with W.R.Bennett's bank.  His estimated net worth was $6.6 million. His 50% interest in McIntosh Centre represented $5.6 million or 85% of his estimated net worth.  Most of W.R.Bennett's assets were real estate.  On the basis of the purchase price of $2,217,175 for the 329,300 Doman shares W.R.Bennett purchased for himself and his family (all of which were financed with loans from the bank that W.R.Bennett was directly responsible for or in the case of his family guaranteed) the Doman shares represented 34% of W.R.Bennett's net worth.

5.5.4 Mills' Purchases
Mills' father had been a broker.  When Mills graduated from university, he thought about being a broker, but chose to be a chartered accountant.  Mills restricts his practice as a chartered accountant to matters involving taxation.  He has been a chartered accountant since 1974.  The Bennetts and their family and businesses, including McIntosh Centre, have been clients since 1983.  He prepares their tax returns.  He prepared the statement of net worth W.R.Bennett filed with his application to obtain a $2 million line of credit at the bank. Mills works with Dunn in connection with matters relating to the Bennetts and McIntosh Centre.  Dunn is an accountant at McIntosh Centre.  Mills is a good friend of R.J.Bennett.

In 1988, Mills purchased 28,500 Doman shares for himself and his wife.  The aggregate purchase price, without commission, was $213,500.  He used two brokers.  "I've usually used two brokers or three brokers at certain times, because they have different information that come from the research departments that they give me to look at securities." However, Mills purchases of Doman shares were unsolicited.

Mills purchased 26,500 Doman shares through Douglas Elmore at Wood Gundy Inc. in Kelowna.  They lived "two or three houses away" from each other.  Elmore testified that Mills was a "sophisticated financial gentleman".  The Mills were the only clients Elmore had that were holding Doman shares.  3,500 were purchased for Mills' wife who had been a client since 1983.  23,000 were purchased for Mills. Mills became a client on June 20, 1988, the settlement date for his initial purchase on June 13 of 2,000 Doman shares at a per share cost of $6-3/8.  On June 27, Mills purchased 4,000 Doman shares at a per share cost of $5.75.  On August 25, Mills purchased 10,500 Doman shares at a per share cost of $7-5/8. On September 15, Mills purchased a further 10,000 Doman shares at a per share cost of $9.00.  The aggregate cost of the purchases without commission was $202,000.  The only activity in the account related to Doman shares.

Mills purchased 2,000 Doman shares through Glenn Mowatt at Burns Fry in Vancouver.  Mills became a client at the end of March 1988.  In Mills brokerage account application, he stated his annual income was in excess of $100,000.  Mowatt had picked him up through cold calling.  Mills purchased 1,000 Nova shares.  The next activity in the account was on June 23, when he sold his Nova shares and purchased 2,000 Doman shares at a per share cost of $5.75.  The aggregate cost of the purchase without commission was $11,500.  Mowatt testified that he was not recommending Doman shares to his clients.

The following was Mills' testimony about his knowledge of the Bennetts' purchases of Doman shares.  Prior to June 13, Mills knew the Bennetts owned Doman shares as a consequence of preparing their tax returns.  And he had had a recent conversation with R.J.Bennett about Doman Industries.  On August 24, in a meeting with W.R.Bennett at the McIntosh Centre, W.R.Bennett told him he was using his line of credit to purchase Doman shares.  When Mills asked why, he was told "The market is not counting the pulp earnings."  Mills then said "Maybe I should purchase some," and W.R.Bennett told him "Go ahead, if you like.  Don't screw up the market and don't expect me to tell you when I'm selling."  In early September, Mills was at the McIntosh Centre working with Dunn.  At the time, W.R.Bennett came in and had a discussion with Mills about capital gains and an agreement W.R.Bennett and his family were going to enter into regarding the ownership of the Doman shares.  It was at this meeting that Mills learned that W.R.Bennett had purchased 300,000 Doman shares.  Following that meeting, Mills received an interim statement of R.J.Bennett's personal affairs from Dunn.  He asked Dunn about the increase in bank loans.  Dunn told him, "R.J.'s buying Doman stock, but you haven't seen the real loans yet".  Mills testified that prior to purchasing 10,000 Doman shares on September 15, he did not speak to R.J.Bennett to ask him why he was buying all the Doman shares and that he did not remember speaking to W.R.Bennett after he saw the draft family agreement in early September and before September 15 regarding Doman Industries.

In Dunn's testimony, he "does not think" he provided Mills with an interim statement, he does not recall the meeting, he does not recall the discussion about the increase in the bank loans and he does not recall the statement about the real loans.

Mills financed his purchases in part through loans from The Royal Bank of Canada at Kelowna.

His initial loan application was made by telephone on August 24 for $75,000 to purchase 10,000 Doman shares.  Under the terms of the application, the loan was to be repaid within two months.  At the time, according to the application, Mills had expressed the view that Doman shares would go to the $10 range in two months or so.  Mills does not recall saying that to the bank.  Subsequently, following bank practice, an Independent Business Credit Application dated September 7 was prepared.  This document is a formalization of the initial application.  The terms of the loan had been revised.  The amount was reduced to $65,000 and repayment of the $65,000 was December 16, 1988.  Attached to the document was another document "Credit Structure Account Management Amendment". That document contained the following statement:

Through Mr. Mills' contacts, he is quite confident the share value of Doman Industries will reach a figure of $10 per share within two months.
Mills testified "that was a rumour that I'd heard at that point" and he heard it from Elmore.  Mills testified that he had also had the meeting with W.R.Bennett on August 24.

Mills' second loan application was approved by the bank on September 21.  It was for $91,000 and was used to pay for the 10,000 Doman shares Mills purchased on September 15 for $9.50 per share.  The settlement date for the purchase was September 22.  Mills could not explain why the loan was not approved before he purchased the shares on September 15.  On his application, under comments was a note by the loans officer, "Told Jim to be very careful and not greedy.  His average price is now $8.00".  Mills could not remember the conversation.  Repayment was to be from the sale of the shares within 60 days.  Mills could not recall this term.  The application contained the following statement:

Mr. Mills has requested being provided with an additional $91,000 to purchase a further 10,000 of Doman Industries bringing his personal portfolio in his shares to 23,000. His contacts tell him that the price of these shares will increase to $12 and he intends to dispose of the stocks before it reaches this figure or conversely when the stock value starts decreasing.
Elmore's evidence given to Commission staff in August 1990 was that "Jim bought a final 10,000 shares from me without much comment or fanfare.  Seems to me that the rumour of a $12.00 offer was quite widespread even naming Louisiana-Pacific." and that he would have heard the rumour through Rob Duncan, his firm's forestry analyst, and that he would count himself as a contact.

On August 26, 1988, the prime rate charged by the banks was increased to 11-3/4%.  Mills was being charged prime plus 1% by the bank on his loans.  For the month of October 1988 interest on Mills' loans of $156,000 would have been $1,658.

5.6 The Proposed Take Over of Doman Industries by
Louisiana-Pacific
On October 6, 1988, Merlo and Doman reached a preliminary agreement for the take over of Doman Industries by Louisiana-Pacific on the basis of $12 for each Doman share and $38.46 for each preferred share.  Holders of Doman shares would also have the option of an offer consisting of cash and shares exchangeable for common stock of Louisiana-Pacific. That day Doman B shares closed at $10-5/8.  Trading was halted the next morning and the take over was announced.  The Doman Industries news release contained the following statement:

Mr. H.S.Doman commented that he is looking forward to his new role as C.E.O. of L.P.'s and Doman's combined operations in British Columbia.  "We intend to pursue other expansion opportunities, in addition to the new pulp mill project presently underway."
The Louisiana-Pacific news release contained the following statement:

"We're delighted to have an opportunity to further expand and complement Louisiana-Pacific's operations in British Columbia," said Harry A. Merlo, L-P's chairman and president.  "We are also pleased that Herb Doman is excited about becoming a key member of the L-P team and heading up all of our operations in the province," Merlo said.
Both news releases contained the following statement:

Louisiana-Pacific is a major U.S. forest products firm headquartered in Portland.  L-P has 110 plants and mills including a large Inner-Seal construction panel plant in Dawson Creek, British Columbia.  The company had sales in 1987 of $1.7 billion(U.S.).
Under the take over, Doman and his family would receive $80,252,148 for their Doman shares.

When trading resumed on October 11, 1988, the price of Doman shares increased by approximately $1.00.  The shares traded in a range between $11-1/2 and $11-3/4.

By October 14, the parties had signed a confidentiality agreement.

By mid-October, Louisiana Pacific was not completely pleased with the results of their pro forma work and the cash flow was not looking as well as they had hoped it would look. These concerns were relayed to Abercrombie and Doman at the time.  Merlo testified that he had discussions with Doman about Louisiana-Pacific needing to have more earnings.  Hart testified that he told Abercrombie that the pro forma material was not very attractive at the price offered.

On Sunday, October 16, 1988, R.J.Bennett was driving home from Calgary.  That night he arrived at Golden, British Columbia, where he slept in his truck.  On Monday morning, October 17, 1988, at 6:43, R.J.Bennett telephoned Steed.  Both testified that R.J.Bennett instructed Steed to sell 100,000 Doman shares at $11-5/8 but to try to get $11-3/4 if he could.  Steed did not place any sell order.  Steed was unable to provide any rational explanation why he would not have put a sell order in at $11-3/4.  At 7:40, Bennett telephoned Doman in Duncan and said they talked about horses for 20 minutes.  Within seconds of hanging up the telephone, R.J.Bennett telephoned Steed again.  R.J.Bennett says he "just wanted to see if he sold my stock yet".  When Steed told him it wasn't sold, he instructed him to sell at $11-5/8.  At 8:10, R.J.Bennett sold 100,000 Doman shares at $11-5/8.  Steed followed his practice of preparing the sell order and having it telexed to Toronto where the trader executed the order.

Between November 1 and 3, 1988, Merlo and other Louisiana-Pacific officials toured the Doman Industries plants and continued their due diligence investigation of Doman Industries.  On the evening of November 3, Merlo returned to Portland.

During the period from the announcement of the take over on October 6 to November 4, 1988, there were 18 trading days. During the period, 1,209,399 Doman A shares and 3,491,973 Doman B shares traded.  The Doman A shares traded represented 19% and the Doman B shares represented 31% of those issued and outstanding.  During the first nine of the 18 days, 62% of the Doman A shares and 82% of the Doman B shares that traded during the period were traded.  During the last nine trading days, 461,202 Doman A shares and 626,590 Doman B shares traded and in the final four trading days preceding November 4, 126,893 Doman A shares and 86,848 Doman B shares traded.

After October 11, Doman shares did not close above $11-5/8.  After October 19, the Doman A shares closed below $11-5/8, either at $11-1/2 or $11-3/8.  After October 19, the Doman B shares closed below $11-5/8, in a range between $11-1/2 and $11-1/4.  On November 3, the Doman A shares and the Doman B shares closed at $11-1/2.

On November 3, Miles was nervous about the deal.  He discussed his feelings with Doman late in the afternoon.  That evening he had dinner with the lawyers for Louisiana-Pacific. Following the dinner, he felt a little bit more comfortable about the deal.  The Ladner Downs telephone bill records a call from Miles telephone to Doman's home telephone at 8:43 p.m.  The call lasted for 23 minutes.  Miles, however, could not recall if he went back to his office after dinner or directly home.  Miles testified that he did not recall making the call, but "it is entirely possible that I made the call and that I don't recall it".  Miles agrees that at the end of his dinner, he had news which he considered important to convey to Doman.  Further, he testified that he was "the most likely person" to have made the call.

Shields testified that he spoke to Doman close to 8 a.m. on November 4, 1988, for a few minutes.  No telephone company bill recording this call was produced.  During the call Doman told him the dates for the closing and the shareholders meetings had been settled.  They discussed a press release and following the call, Shields had one of his people prepare a draft release and fax it to Abercrombie.  The shareholders meeting was to be held on December 21, 1988, and the closing was to be on December 31, 1988.  In subsequent testimony, Shields said that it may have been Doman or Miles he spoke to at 8 a.m.  Miles has no recollection of speaking to Shields from the time he arrived at the office in the morning and prior to speaking to Doman.

5.7 Louisiana-Pacific's Decision not to Proceed with the Take Over
5.7.1 When did Merlo call Doman
At 7:30 a.m. on November 4, 1988, in Portland, Merlo met with his management team of Hart, Lee Charles Simpson, vice-president of operations, and William Wesley Hebert, controller finance, to review the proposed take over of Doman Industries.  At about 9:30 a.m., the decision was made not to proceed with the take over.  Having made that decision, Merlo, with his management team present, participated in four telephone calls.  All the calls were on the morning of November 4, 1988, and on a speaker telephone, so that Merlo and his management team could all hear the telephone conversation.

The first call was made by Merlo at 9:35 to John DeMott, Louisiana-Pacific's U.S. counsel, at Ladner Downs.  The call lasted eight minutes, ending at 9:43.  Grant Sawiak and Geoff Myers, Canadian counsel for Louisiana-Pacific, were present with DeMott.  Merlo informed DeMott of the decision not to proceed with the take over.  Merlo testified that the purpose of the call was "to get his counsel and advice as how we should proceed for [sic] here".  DeMott advised Merlo to call Doman promptly and advise him of the decision and advise him to halt trading on The Toronto Stock Exchange pending issuance of a press release.  DeMott told Merlo that he wanted to check his advice with Canadian counsel and that he would telephone them right back.

Following a brief discussion with Sawiak and Myers, the second call was made by DeMott at 9:48 to Merlo.  The call lasted 2 minutes, ending at 9:50.  Sawiak and Myers were present with DeMott.  Merlo asked DeMott to prepare a press release and not to discuss the matter with Miles until he had had an opportunity to call Doman.

The third call was made by Merlo at 9:52 to Doman.  The call lasted 15 minutes, ending at 10:07.  Merlo advised Doman that Louisiana-Pacific would not be proceeding with the take over of Doman Industries and that Louisiana-Pacific counsel had advised that Doman should call The Toronto Stock Exchange. Doman said that he wanted to meet with his board before making a press release.

The fourth call was made by Merlo at 10:08 to DeMott. The call lasted 9 minutes, ending at 10:17.  Sawiak and Myers were present with DeMott.  Merlo advised DeMott that he told Doman that Louisiana-Pacific would not be proceeding with the take over of Doman Industries, that Doman was very disappointed, that he told Doman to halt trading and that Doman wanted to meet with his board before issuing a press release.

Doman claimed that he could not have been on the telephone with Merlo at 9:52 to 10:07 because he was on the telephone with Miles from 9:40 to 10:07 and that he called R.J.Bennett before Merlo called him.

Here was Doman's testimony of what he did on the morning of November 4, 1988.  He called Miles about 9:40 and talked to him until "between 10:05 and 10:07, in there somewhere".  Then he called R.J.Bennett at 10:09 and talked to him for 5 minutes.  The call ended at 10:14.  He ended the call because "Mrs. Maguire or the other girl" came in and said Merlo was on the phone.  He took Merlo's call.  Merlo said "I've just talked to John DeMott at Ladner Downs and we're terminating the deal.  We can't see our way clear at this time to proceed."  Merlo told Doman that DeMott was expecting to meet with Miles and would be telling him.  The call concluded at 10:20 or 10:22.  Doman was devastated, in a state of shock, angry and upset.  "When I hung up from Mr. Merlo, my next call was immediately to looking for Mr. Miles."  He called Miles at 10:25 and again at 10:40.  Miles was unavailable and he left messages for Miles to phone him.

There is no telephone company record of Doman's call to Miles at 9:40.  There is a telephone company record for the calls Doman made to Miles at 10:25 and at 10:40.  There was one telephone slip in Miles file and that related to Doman's call at 10:40.  In a memorandum Miles prepared on November 7, sent to Commission staff on November 9, Miles only refers to one telephone message from Doman at 10:40 a.m.

Fredericks, the switchboard operator at Doman Industries, Marion Maguire, executive secretary for Doman and Abercrombie, Charmaine Chandler, assistant to Maguire, and Heidi Smith, Fredericks' relief, gave their evidence.

Fredericks, is a long time employee of Doman Industries. She started on the switchboard in 1965.  Her testimony was that she came back from her break at 10:15 on the morning of November 4.  Doman was on the phone.  Momentarily, within one or two minutes, Merlo called.  Fredericks was not sure whether Doman hung up and took the call from Merlo or whether she had to tell Doman's secretary to get him off the phone.  She only remembered one call from Merlo that morning.  She agreed that if the call from Merlo came in at 9:52 then it is more likely that she was mistaken about the sequence of events on the morning of November 4, and that the call from Merlo came in before her break.

Fredericks testified that she kept a log of all calls going out of the office, that she logged Doman's call to Miles when he arrived at the office the morning of November 4th and that she threw the log out after the trial before Judge Craig. However, prior to the trial she had been interviewed, but not by Commission staff, and it was at that time she went to her desk and took out the log book, that she also had two or three others - "old ones" and that she kept them because "I'm just a pack rat.  I don't throw anything out."

Fredericks testified that she did not discuss with Doman what his recollection of the events of November 4 were. Doman's testimony is that he was told by Frederick's that "she said she put the call through, and I was on another phone, and she put it through to Mrs. Maguire or the other girl, and they came and knocked on my door and told me there was a call."

The testimony of none of Maguire, Chandler and Smith support Doman's claim that he was interrupted while he was on the telephone with R.J.Bennett to take a call from Merlo.

Miles testimony was that Doman called:

sometime after 9:30, I can't be exact on the time, but it was 9:30, 9:40 sometime around then.  My recollection is that I spoke with him on the telephone until 10:00 or very shortly after 10:00.  That I then met with three of my colleagues in my office -- Mr. Frydenlund, Mr. Belsher and Mr. Strother.  And we met for a period of time until about 10:30 when I was asked to join Louisiana Pacific lawyers, who were meeting in a boardroom two floors below my office.
Miles had no recollection of what was discussed except that he apprised Doman of the health of the transaction.  His testimony was:

At this point in time it's difficult to recall all the details, but I know that one item, and the most important item in the conversation so far as I was concerned, was to give Mr. Doman an appraisal of what I thought the health of the transaction, or the status of the transaction was at that point in time.
You see, the previous day ... I suggested it to both Mr. DeMott and Mr. Doman, that I thought the transaction was proceeding slower than I thought was appropriate, and I couldn't understand why, and I wanted Mr. DeMott to explain to me why it was proceeding so slowly....And it was to receive some assurances along that line, or at least explore it, that I accepted that social invitation to have a dinner with the Louisiana-Pacific lawyers that evening.
And so I was bringing Mr. Doman up to date on what my current assessment of the situation was on the morning of November 4.
Frydenlund testified that a telephone call took place on November 4, 1988, before 10 o'clock, between himself and Abercrombie regarding trucking.  Ladner Downs telephone company records identifies a call to Doman Industries that morning at 9:41 which lasted one minute.  There were no other calls before 10 o'clock in the telephone company records.

Frydenlund testified that he met Miles at 9:50 a.m., when Miles was outside his office for a short moment, and that Miles went back into his office, and closed the door.  In a memorandum prepared on November 14, 1988, Frydenlund says "I do seem to remember that at approximately 9:50 a.m. you said that we would be meeting in approximately 10 minutes."  Miles had no recollection of this meeting.  Miles testified "It's possible that I put the phone down and walked out to my secretary's office and walked back into my office."  But Miles had no present recollection of having done that.

Merlo and Doman only talked on the telephone once on November 4, 1988.  The telephone bill for Louisiana-Pacific recorded two calls that day from Louisiana-Pacific to Doman Industries.  The first call was made at 9:19 a.m. and was not the call Merlo made to Doman.  The other call was the call at 9:52 that ended 15 minutes later at 10:07.

Commission staff produced telephone company bills for Louisiana-Pacific, Doman Industries and Ladner Downs.  These were the records that the telephone companies produced in the ordinary course of business.  The telephone company bill for Doman Industries does not record details of Doman's call to Miles.  Except for that telephone call, these bills record details of the call from Miles' office telephone to Doman's home during the evening of November 3, 1988, and each of the calls referred to that took place on November 4, 1988, involving Merlo and DeMott and Merlo and Doman and Doman and R.J.Bennett.  Those details for each call include the date of the call, the time the call originated, the location of the receiving telephone and the duration of the call.

U.S. West Communications is the telephone company that produced the telephone bill for Louisiana-Pacific.  U.S. West is in a regulated industry.  It is regulated by the FCC and the state regulators where it carries on business.  Robert R. Postovit is the security manager of U.S. West.  He is the keeper of the records, the person responsible to testify to the accuracy of U.S. West's records.  Postovit testified before the panel of Messrs. Browne, Devine and Lien on January 11, 1993.  The transcript of his evidence was produced in this hearing.  Postovit gave a detailed explanation as to why the telephone bill is accurate and of the data from which it was produced.  This data was created in the ordinary course of business by the computer of U.S. West.  The data was recorded on the AMA tape that was produced.  The AMA tape gave even more precise details of the time and duration of each of the calls than the Louisiana-Pacific telephone bill.  The call from Merlo to Doman at 9:52 ended at 10:07:55.  The clock in the switch of U.S. West's telephone equipment is measured against the universal time system by several methods.  If any discrepancy is detected by any of these methods, that discrepancy would be noted on the AMA tape.  There is no discrepancy noted on the AMA tape.

The internal telephone records of Louisiana Pacific corroborated the details of the calls Merlo made on November 4, 1988, that are recorded in the bill Louisiana Pacific received from U.S. West.

The U.S. West records are entirely consistent with the evidence of Merlo, Hart, Simpson, Hebert, DeMott, Myers and Sawiak.

The U.S. West records are entirely consistent with the B.C. Tel records.  B.C. Tel is also in an industry regulated in Canada by the CRTC.  The B.C. Tel records are entirely consistent with the evidence of DeMott, Merlo, Simpson and Hebert.

We do not accept Fredericks' testimony that Merlo's call came after her break on November 4.  In that regard, her testimony is only consistent with Doman's testimony.  Doman's and Frederick's testimony of when Merlo's call came is inconsistent with the U.S. West records and the testimony of the management team of Louisiana-Pacific and the lawyers for Louisiana-Pacific. Her testimony that she did not discuss her recollection of the events on that day is at odds with Doman's testimony.  None of Maguire, Chandler and Smith support Doman's claim that he was interrupted to take Merlo's call.

We find that the call from Merlo to Doman on the morning of November 4, 1988, commenced at 9:52 and ended at 10:07 as set out in the U.S. West records.  Doman and R.J.Bennett have admitted that Doman called R.J.Bennett that same morning commencing at 10:09 and ending at 10:14 as set out in the B.C. Tel records.  We find that Doman could not have been mistaken about the sequence of those calls.  We find that Doman did not tell the truth in his testimony before us when he claimed that the call from Merlo came at 10:14 when he was talking to R.J.Bennett and that he hung up from his call with R.J.Bennett in order to take Merlo's call and that when he hung up from Merlo, his next call was immediately to Miles.

In making these findings, we are not finding that Doman did not call Miles on the morning of November 4, 1988.  Miles testified that the call ended at 10:00 o'clock or shortly after.  However, there is no record of the call in the telephone company records for Doman Industries.  Fredericks destroyed her telephone log which, according to her testimony, recorded Doman's call to Miles.  We find that if there was a call from Doman to Miles the call ended before Merlo called Doman at 9:52.  Frydenlund's testimony that he met Miles outside Miles' office at 9:50 that morning is consistent with Miles and Doman having ended their call, if indeed there was a call.  Further, Miles' testimony that he apprised Doman of the health of the transaction that morning is inconsistent with Miles having called Doman at his home at 8:43 on the evening before following his dinner with the Louisiana-Pacific lawyers.  This raises troubling questions about the accuracy of Miles' recollection of the events before and during November 4.

5.7.2 What Doman told Others about when Merlo called him
Abercrombie is the chief financial officer and a director of Doman Industries.  He has been with Doman Industries as a senior officer and a director since 1964.  On the afternoon of November 4, 1988, Doman told him that Merlo's call was at 10:20 or 10:25 that morning.  Doman did not tell him that he had been talking to R.J.Bennett and had ended the call to take Merlo's call.  Abercrombie found out when he was in Miles office with Doman on November 24, 1987.  It was that day that Abercrombie learned that the Bennetts were suspected of insider trading in Doman shares on November 4.  He testified a document dated November 14 from the Commission was put in front of him and "I was absolutely flabbergasted when I saw it", and Miles said to him "You know there was a phone call to Kelowna at 10:09 that morning" and he said "no" and at that point "Mr. Doman started rambling on about a horse."  If indeed Doman was being truthful that he was on the phone with R.J.Bennett and ended the call to take Merlo's call, we find that the fact Doman would not tell Abercrombie about both calls at the time very puzzling.  In fact, Doman did not tell the directors at their meeting on the following Monday, November 7, 1988, about his call with R.J.Bennett.

The board of Doman Industries met on November 7, 1988. Doman was chairman of the meeting.  Doman's testimony is that he told the board that he did not tip anyone.  The minutes for the meeting stated that:

The Chairman advised the Directors that at approximately 10:30 a.m. P.S.T. on November 4th, 1988, he received a telephone call from Mr. H. Merlo, Chairman of Louisiana-Pacific Corporation, and had been advised by Mr. Merlo that negotiations with Louisiana Pacific Corporation were being terminated immediately.
The minutes were dated November 7, 1988, and signed by Doman. When asked to explain the minutes, Doman testified "they asked me and I said it was before 10:30, approximately in that area, 10:20, because I called Mr. Miles at 10:25."

At the board meeting, the directors reviewed a draft letter to shareholders.  The draft was changed to include the following paragraph after the board meeting:

It has recently been reported that The Toronto Stock Exchange is investigating trading in the shares of the company immediately prior to the announcement that LP had terminated its discussion with our company.  I would like you to know that upon being advised of LP's decision we immediately consulted our lawyers and then requested a suspension of trading of our shares on the Stock Exchanges until we could prepare a press release.  The suspension of trading occurred within less than one hour of the time we were first informed of LP's decision and the press announcement was released later that day.  The Board of Directors has reviewed our actions and is completely satisfied that the company acted properly and that no officer of the company engaged in any improper trading in shares of the company, or was the source of any premature disclosure which would have given rise to any improper trading.
The letter was then signed by Doman and sent to the shareholders.

In a letter dated November 30, 1988, Ladner Downs wrote to the Commission enclosing:

a chronology which sets out the development of the Louisiana-Pacific transaction.  It is our client's position that the broad ranging inquiry upon which the investigators embarked during our meeting on November 24 is not authorized and is irrelevant.  The chronology is supplied to you without prejudice to the positions which have been taken and which may be taken in the future.  It is not a concession that the line of enquiry which you are pursuing is either authorized or relevant.
The chronology was entitled "Doman Industries Limited Summary Chronology", and was signed by Doman.  When he was asked whether the chronology "was accurate to the best of your knowledge", Doman answered "Yes, to the best of my knowledge." When dealing with November 4, 1988, the chronology stated with approximate times in the a.m.:

9:30 Mr. H.S.Doman arrives at his office,

9:40 H.S.Doman commences telephone call to W.R.Miles,

Between 10:00 and 10:07 H.S.Doman ends telephone call to W.R.Miles,
10:09 H.S.Doman commences five minute telephone call to R.J.Bennett,
Between 10:20 and 10:25, Harry Merlo calls H.S.Doman.
The chronology shows at least a 6 minute break, and as much as an 11 minute break, between Doman's call with R.J.Bennett and his call from Merlo.  Doman's testimony at the hearing was that he was taken off the call with R.J.Bennett to take the call from Merlo.  Doman was unable to explain why the chronology was not consistent with his testimony, except to say that what he said in his testimony is what he has always said.

5.7.3 What Happened at Vancouver and Duncan after Merlo's call to Doman
After Merlo's call to Doman ended, he called DeMott. After that call ended at 10:17, DeMott dictated the draft press release to his secretary.  Then he tried several times by telephone to reach Miles, but he was unavailable.

Just before 10:30 Miles and Frydenlund met with DeMott, Sawiak and Myers in the Ladner Downs boardroom where the Louisiana-Pacific lawyers were working.  The meeting only lasted a few minutes.  DeMott told them that Louisiana-Pacific would not be proceeding with the take over of Doman Industries, that Merlo had called Doman, that Doman wanted to meet with his board before issuing a press release, and that he (DeMott) thought trading should be halted now.  DeMott gave them a copy of the draft press release.

Following the meeting, Miles and Frydenlund met with Ed Chiasson at Ladner Downs in his office and they got back to Miles' office at about 10:50.  Miles testified that the purpose of their meeting with Chiasson was to "anticipate what might happen in a conversation with Mr. Doman and start the process for getting some advice on the possibility of legal remedies."

At 10:50, Doman buzzed Abercrombie on the intercom to come into his office.  When he got there, he opened the door and Doman "hit me cold that Harry Merlo had called and said the deal is off."  Doman "was in a state of shock." Abercrombie "immediately said to him we have to halt trading. And he said to me that Mr. Miles was the person to do this."

Aside from trying to call Miles at 10:25 and again at 10:40, there is no evidence of what Doman did between the end of his call with R.J.Bennett at 10:14:12 and when he buzzed Abercrombie at 10:50.  Abercrombie's testimony was that he "couldn't imagine" Doman not to be doing anything for 30-35 minutes.  There is a telephone company record of a call made at 10:15 from Doman Industries to the direct telephone number of Gary Singh at Merit Investments in Toronto.  Abercrombie testified that he did not make the call, that he had met Singh in late 1985 or early 1986, that when he and Doman were in Toronto, Singh took them to meet potential clients, and that Doman and Singh were in contact on a fairly regular basis certainly during the 1986/87 period, but he wasn't sure to what extent in 1988.  Records produced show that Singh was active during the Louisiana-Pacific negotiations with Doman Industries buying and selling Doman shares for his clients, many of whom worked for Doman Industries and resided in the Duncan area.  Doman gave his testimony at the hearing prior to Abercrombie's testimony regarding the call to Singh.  Doman was not recalled to give further testimony due to illness.

At 10:55, Miles and Frydenlund called Doman and Abercrombie.  Doman did not say when he received Merlo's call. During the call, Miles instructed Frydenlund to call The Toronto Stock Exchange.  At 11:19, the Exchange halted trading in the shares of Doman Industries pending an announcement. Doman shares last traded at $11-3/8.

That morning, 559,952 Doman shares traded.  148,900 Doman A shares traded, more than had traded in the previous four trading days.  411,052 Doman B shares traded, more than had traded in the previous six trading days.  All but 5,000 shares traded at $11-3/8.

At about 11:40, Shields returned to his office.  He saw that the shares of Doman Industries had been halted and that there had been heavy trading activity.  He tried unsuccessfully to call Miles and Doman.  He was able to reach Johnson.  Johnson was not aware of anything happening.

About 11:45, Miles and Frydenlund spoke with Winchester. Winchester told them that there had been heavy selling by Vancouver brokers just prior to the trading halt of Doman Industries.  He named the firms and the volumes of Doman shares each traded.  Winchester informed them that the "TSE would be looking into the trading".

At 12:25, there was a telephone call among Doman, Miles, Frydenlund and Shields.  They agreed on the draft press release.  According to Frydenlund, Shields said that they should encourage the Exchange to look into insider trading and Doman responded that they shouldn't encourage but shouldn't object to it.  Frydenlund's testimony is that Doman said "no leaks from the D.I.L. office".

Frydenlund's testimony was that Doman was resigned to the fact that Merlo had made up his mind.  This is Miles' recollection as well that Doman was more or less saying, let's accept what has happened and get on with life.  Miles accepted that Doman was resigned and deflated.

On November 4, 1988, at approximately 1:30 p.m., Doman Industries issued a press release disclosing that Louisiana-Pacific was no longer proceeding with the proposed acquisition of the shares of Doman Industries.

Johnson called Doman on the afternoon of November 4.  He testified that Doman was in a state of shock.

When trading resumed in Doman shares on Monday, November 7, 1988, it opened at $7.75 and closed at $7.25.  The close was down $4-1/8 from the price of $11-3/8 at the time of the halt.  That is a 36% decrease in the price of a Doman share. That day 307,756 Doman shares traded, 142,830 Doman A shares and 164,926 Doman B shares.  The trading in the days following fell off substantially.

5.8 The Sales of Doman Shares on November 4, 1988
5.8.1 What Happened at Duncan and Kelowna after Merlo's call to Doman
We found that Merlo called Doman at 9:52 a.m. on November 4, 1988, and advised him that Louisiana-Pacific would not be proceeding with the take over of Doman Industries.  The call ended at 10:07:55.  Doman testified that when he finished his call with Merlo, he was devastated, in shock, angry and upset. Within two minutes, Doman called R.J.Bennett.  That call commenced at 10:09:40.  We found that Doman could not have been mistaken about the sequence of those calls and that Doman did not tell the truth in his testimony before us when he claimed that the call from Merlo came at 10:14 when he was talking to R.J.Bennett and that he hung up from his call with R.J.Bennett in order to take Merlo's call.

At 10:17 that morning, within eight minutes of the commencement of Doman's call to R.J.Bennett at 10:09, the computer records of The Toronto Stock Exchange show that 190,000 Doman B shares were sold - 187,000 for R.J.Bennett, 2,000 for Bennett Equities and 1,000 for Duhamel.  1,696 Doman B shares held by R.J.Bennett were sold later that morning at 11:11.  That morning, R.J.Bennett oversold his holdings of Doman B shares by 5,116 shares.  That amount included 816 Doman A shares sold in error as Doman B shares.

At 10:21 that morning, within 12 minutes of the commencement of Doman's call to R.J.Bennett at 10:09, the computer records of The Toronto Stock Exchange show a sale of Doman shares for W.R.Bennett.  By 10:29, W.R.Bennett had sold 324,300 Doman shares, 135,200 Doman A shares and 189,100 Doman B shares.  A further 5,000 Doman A shares were sold at 10:35.

At 10:27 that morning, the computer records of The Toronto Stock Exchange show that 2,500 Doman B shares were sold by Steed's firm.  These shares represented the holdings of Steed and Dunn.

At 10:48 that morning, the computer records of The Toronto Stock Exchange show that Mills, for himself and his wife, sold 6,000 Doman shares.  By 11:10, Mills had sold 28,500 Doman shares.  These Doman shares represented all Mills' holdings.  These were the last trades before the shares of Doman Industries were halted at 11:19.

148,900 Doman A shares and 411,052 Doman B shares traded that day.  In the aggregate, 559,952 Doman shares traded.

Following the commencement of Doman's call to R.J.Bennett at 10:09, R.J.Bennett for himself and for Bennett Equities, W.R.Bennett for himself and his family, Mills for himself and his wife, Steed, Duhamel and Dunn sold all their Doman shares, except for R.J.Bennett who did not sell his 816 Doman A shares and who over sold his holdings of Doman B shares by 5,116. These sales aggregated 551,996 Doman shares and represented 99% of all the sales of Doman shares sold that day.  Only 7,956 other Doman shares were sold on November 4.

The Bennetts sold in the aggregate 519,996 Doman shares. The CBC Pension Fund purchased 86,600 Doman A shares and 265,000 Doman B shares.  In the aggregate, the Fund purchased 351,600 Doman shares.  Others purchased 168,396 Doman shares sold by the Bennetts.

Commission staff allege in the amended notice that when Doman called R.J.Bennett at 10:09, he informed R.J.Bennett and W.R.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries and that acting on that information, R.J.Bennett and W.R.Bennett instructed their brokers to sell all their Doman shares.

Doman claims in his testimony that he did not inform R.J.Bennett and W.R.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries when he called R.J.Bennett at 10:09 on the morning of November 4, 1988.  He testified that he called to talk about the fact that a horse by the name of Champers had been sold for $500 rather than $5,000 and that he ended the call because "Mrs. Maguire or the other girl" came in and said Merlo was on the phone. He described his conversation with R.J.Bennett as a normal conversation.  His evidence was:

And this is when I called Mr. Bennett.  I said, what is five -- we can get five for it.  To me that's $5,000, because I would have run it in a claiming race at -- for -- I could go down to $2,500 in a claiming race.  And that was our discussion.  We were talking in terms of that horse, you know, how I interpreted to be $5,000 when he said five, and I interpreted that on the basis that I could have run it in a race, and instead of getting 500 I could have got 5,000, or 2,500.
R.J.Bennett claims in his testimony that Doman and he did not discuss Doman Industries during their call at 10:09. R.J.Bennett testified that when Doman called at 10:09, he had a lighthearted conversation with Doman about Champers and that the call was cut short because Doman said he had to go.  Here is his evidence.

The call, in turn, was about a horse called Champers, which we had - he'd - we'd sold it, it had -- to him and it had been racing and I guess it didn't have that good of a summer and it was being sold as a saddle horse, and he didn't realize that when Roy Rawson said, "I have an offer of five for it" he thought the `five' was 5,000, not 500, and he had a cheque for 500, and I was in the midst - we were talking about - in the midst of explaining this some - I don't know how long this call went - and in turn I - he said, "I got to go" or something to that effect before I'd finished explaining, and I in turn got up - or - yeah, he ended there.
Both R.J.Bennett and W.R.Bennett claim in their testimony that they sold their Doman shares without any knowledge received from Doman that Louisiana-Pacific would not be proceeding with its take over of Doman Industries.

Doman testified that the first time he "got wind of" R.J.Bennett and W.R.Bennett selling their Doman shares on November 4 was when he was served with a summons by Commission staff around November 18, 1988.

R.J.Bennett, W.R.Bennett, Duhamel and Dunn were at the McIntosh Centre during the time between 9:52 and 11:19.  Based on the testimonies of Steed and Mills, they were at the McIntosh Centre for part of the time.  The offices of R.J.Bennett, W.R.Bennett, Dunn and Duhamel are at one end of the same floor in the McIntosh Centre.  A common hall runs down the centre of the floor at that end.  There is a file room at the end of the hall.  On one side are the offices of R.J.Bennett and Duhamel, a coffee room and a vacant office space.  On the other side of the file room is the board room, W.R.Bennett's office, a hall leading to an exit, Dunn's office and vacant office space. At the other end of the hall is the reception area which has a counter that provides a view down the hall to the file room.

The following was the testimony of R.J.Bennett and his broker Steed; W.R.Bennett, his broker McNaughton and the trader for Odlum Brown Hollingshead; Duhamel; Dunn; Mills; and Langford about what happened on November 4, 1988, at the McIntosh Centre and in connection with the sale of Doman shares.

5.8.2 R.J.Bennett's Sales
R.J.Bennett says early on the morning of November 4,
1988, he dropped his truck at the garage.  Duhamel drove him
to purchase an oil filter and two bolts and oil.  According to
the invoice of Jacobsen Motors, the oil filter and two bolts
were purchased for $8.91 at approximately 8:53 that morning.
According to a mastercard slip from
London Drugs, the oil was purchased for $14.46 at 9:10 that
morning.  R.J.Bennett and Duhamel returned to the garage and
dropped off the purchases.  According to the owner,

I am able to recall this occasion particularly because it struck me as unusual that a customer, and in particular R.J.Bennett would personally deliver to me oil and an oil filter for the purpose of the servicing work which was to be performed on his truck.
They arrived at the McIntosh Centre at approximately 9:30 in Duhamel's car.

R.J.Bennett called Thompson Horse Van Lines at 9:33 and talked to them for about four minutes.  The call ended at 9:37.  He does not recall the contents of the conversation, other than the call was about shipping horses.  No evidence was called to corroborate R.J.Bennett's evidence that he made the call.  Others at McIntosh Centre who worked for R.J.Bennett and his horse business were Helen Arneson and Dunn.  Both were at McIntosh Centre that morning, along with Duhamel.  These three persons are the only full time employees.

R.J.Bennett answered some local calls.  There is no evidence to corroborate R.J.Bennett's evidence that he made any of these local calls.

R.J.Bennett "went across the hall before 10 o'clock into my brother's office.  There's a board room there, I don't know, I think he came out and we sat around the board room." Asked to recount the details of this meeting, "Just basically that he was going to sell, and he recommended I do the same." R.J.Bennett testified that "My brother was selling.  I bought because my brother bought and told me.  I was selling because he is selling.  He is the one with all the knowledge on the stock."

R.J.Bennett went back to his office and called Fred Kwan regarding a car for his son.  The call commenced at 10:01:25 and lasted two minutes.

R.J.Bennett went down the hall to the coffee room and ran into Steed coming out of Duhamel's office.  He said, "I'm going to sell my stock" and asked Steed what he could get for it.  Steed told him that the price "was strong at 11-3/8 when I left my office."  They sat in the coffee room for about "four minutes ... something like that" and discussed how many Doman shares he had because he wasn't sure.  Steed said he needed to phone his office to get the number of the floor trader in Toronto.  Steed "said, `Where can I phone from?' and I said, `There's a phone at the end of the hall.'"  "I went down the hall ...and I showed him where the phone was."  "The phone was sitting on a chair" in the file room.  There was no desk in the file room, "everything had gone out" and "there is a few filing cabinets sitting on the wall".  In R.J.Bennett's testimony given to Commission staff on November 18,1988, he testified that the phone "had been brought around, the extension cord was around in that end office, which is a filing room, and it was sitting there on a chair."

"While I was there pointing out the phone to him I could hear it (the telephone) ringing in my office."  "I went in there and took a call, and it was a call from Herb Doman."

The call commenced at 10:09:40.  R.J.Bennett says that he had a lighthearted conversation with Doman about Champers and that they did not discuss Doman Industries.  The call ended at 10:14:12.

R.J.Bennett got up and went out into the hall.  He testified that it could have taken him a minute.  He heard part of Steed's conversation.  Steed's call with Shemilt in Toronto commenced at 10:14:17, five seconds after R.J.Bennett's call with Doman ended.  The call lasted just over three minutes, ending before 10:18.  R.J.Bennett says he was standing behind Steed "a minute maybe."  He cannot remember any of the contents of what Steed said on the phone except "it's done."  The computer records of The Toronto Stock Exchange showed at 10:17:32 that 190,000 Doman B shares had been sold at $11-3/8 per share.  Steed hung up, they talked and Steed left.

Shortly after 11:00, W.R.Bennett and Mills came into R.J.Bennett's office.  His brother got Dunn and he got Graeme Langford, an engineer with UMA Engineering.  The four met for a half hour to discuss donating ranch land for a school.  The meeting ended "11:30, quarter to twelve, somewhere in there, I don't know."  Everyone remained for the entire meeting.

"And I think shortly after twelve Steed phoned and said the stock had been suspended.  I remember that."  But, R.J.Bennett has no recollection how he felt when he heard this news.

That morning, R.J.Bennett sold 185,580 Doman shares at $11-3/8.  2,000 of those shares were for Bennett Equities. The aggregate purchase cost for the 182,400 Doman shares R.J.Bennett purchased during the period from October 13, 1987, to September 19, 1988, was $1,272,200.  The aggregate sale proceeds for the sale of the 182,400 shares was $2,074,800. R.J.Bennett's profit on the sale of the 182,400 shares was $802,600.  Most of his investment had been held for less than three months.  R.J.Bennett paid Steed $7,548 in commissions. His net profit before interest charges and dividends was about $796,000.  That profit represented a return of 63% on his investment.

R.J.Bennett went to lunch with Duhamel about 12:30. R.J.Bennett says he told Duhamel that he had sold his Doman shares.  Duhamel told Bennett he had sold.  According to R.J.Bennett, Duhamel had a standing order with Steed that when he sold, Steed was to sell Duhamel's stock.  R.J.Bennett does not recall how Duhamel knew that he had sold and how Duhamel knew that his Doman shares had sold.

Doman called while R.J.Bennett was at lunch.  R.J.Bennett returned the call when he got back and Doman was not there. Doman tried again at 3:08 and finally reached R.J.Bennett at 3:35 that afternoon.  They

finished the conversation on Champers, and I explained to him exactly that the horse had a broken sesamoid or cracked sesamoid, and he was through as a racehorse, so his only value would be as a saddle horse.  So that's why the $500, and so he seemed to be happy with that.
They arranged to have dinner on November 7th.  The call lasted for 20 minutes.  R.J.Bennett testified he had no discussion with Doman about Doman Industries.  However, Doman testified that Champers had a clean bill of health and that think my recollection of it mainly is to continue on with the disputed cheque and the horse, which was Champers, that I did not deposit and there was a question of whether it was $500 or 5,000."  Elsewhere in his testimony, Doman testified "Oh, we talked about many things, the horses, because that's what I was going to talk to him that morning on anyway."  Doman was asked whether he got another cheque for a further $4,500 and he responded "No.  No, we couldn't go back on it."

Before us, R.J.Bennett was told that Doman's testimony was that Champers had a clean bill of health and that Doman did not mention Champers being damaged and that further Doman was disappointed with the $500 because he could have done better if he'd have put Champers in a claim race.  R.J.Bennett responded "That might have been his opinion, but I'm telling you what mine was."  Then R.J.Bennett was told that that was Doman's testimony just two days earlier and he responded "Okay, well, I knew -- I thought he knew, I'm sorry." Following are further questions and answers.

Mr. Lien: Well, when you talked to him on November the 4th, did you explain to him at that time that the horse had a cracked sesamoid and
AI thought I had.
Mr. Lien: --you thought it would be reduced to a saddle horse?
A    I thought I had.  Maybe not in those words, but I thought I had.  How else would I justify the price drop? I knew all along that this was what was there.  Whether -- I'm just trying to wonder whether Roy had bothered to explain it.  You'd have to ask Roy Rawson, I guess, something like that, but I knew the problem.
Mr. Lien: Excuse me.  I asked Mr. Doman --
AYeah.
Mr. Lien  -- if he was -- I assumed that he recovered the other $4,500, so I asked him if he -- how he had managed to recover the other $4,500 and he said , "It was gone." It was explained in such a way it was gone because of a misunderstanding, not because the horse was damaged. This is what bothers me and puzzles me.  With all the explanations that took place on November the 4th, it seems to me he should have known.
AYou would think so, yes.
R.J.Bennett says he does not remember discussing the sale of his shares with Dunn that morning, but "I must have mentioned it later in the afternoon sometime.  I don't remember."

R.J.Bennett could not recall discussing the sale of his Doman shares with his brother later in the morning of November 4 or that afternoon.

R.J.Bennett and Doman had dinner on Monday, November 7 and again eight days later on Tuesday, November 15. R.J.Bennett testified that they did not discuss Doman Industries.  R.J.Bennett testified that "I don't remember ever having discussion with him (Doman) about the November 4th stuff."  Doman testified that they did not discuss the sale of Doman shares by R.J.Bennett and W.R.Bennett on November 4. With regard to the November 7 dinner, he testified "No, I wouldn't discuss it, firstly, with him anyway."  With regard to the November 15 dinner, Doman testified "I don't recall it because, as I said, I don't discuss those things with the Bennetts."

On November 18, 1988, two weeks following the events of November 4th and three days following his dinner with Doman on November 15, R.J.Bennett was examined by Commission staff.  He was represented by counsel.  At that time, he knew he was under investigation for insider trading and he testified before us that he took the matter seriously.  His testimony before us is that he did not know at that time that the telephone companies kept records of the times that calls were made.  Sometime prior to the trial in April 1989, he saw the telephone records.  Since then he has "had a chance to see some milestones, like the telephone calls, et cetera, and with them I'm able to bring it together a little better."

On November 18, 1988, R.J.Bennett did not mention the purchases of the oil and the oil filter and delivering them to the garage, driving to the McIntosh Centre with Duhamel and the telephone call to Thompson Horse Van Lines.

On November 18, R.J.Bennett's evidence was that when he left his office to get coffee, he was gone "under a half hour."  Following is R.J.Bennett's evidence on November 18 of what happened during that time.  He ran into Steed and told him he wanted to sell.

I said, `What can you get?'  And `Just a minute, I'll phone Toronto.'  So he went to a phone at the end of the hallway, there's a phone sitting in that one office at the very end of the hallway, and he dialed his office and asked for the Toronto number, and he then phoned Toronto. And he said, `How much is there on the bid?'  I think that was what he asked.  And then he said, he asked me again what I had, and I said, `I think it's 180 something,' I said, `You should know.'  And he said he didn't know.  And I said, `Is it 87 or something in there?'  And he said, `Okay,'  And then he said, `Do you want to sell it?'  He got the bid, and he said, `Do you want to sell?'  And I said yes.  And he said, he turned around and talked to the fellow for a while, and he said, `It's done.'
R.J.Bennett made no mention of the coffee room.

Following are some questions asked by Commission staff and answers given by R.J.Bennett at the examination when Steed was on the phone in the file room.

Q    Okay.  Then you stand beside Mr. Steed while he's making his calls?
AI stand near him, not beside him.
Q    Okay.  Close enough to hear his side of the conversation?
A    I think that's part of it, and then I might be looking -- see it's at the end of the hall, I might be looking down the hall at something else.  I can see the end of the hall.
QUm-hum?
A    There were counters and the main office, and there was something else attracted my attention, so I'm not -- I wasn't glued to him.
...
Q    It's -- you're standing close enough to understand that you'd he (sic) sold your stock?
A    Yeah.  Because he looked up at me, and then when he hung up he said, `It's done,' or something like that.
      Later in the examination, R.J.Bennett was asked to recall Steed's side of the conversation with the Toronto trader.

Well, I heard he was asking how much, `What was the bid, and how much was behind the bid,' I think maybe the words that he used, I'm not sure of that.  And he - and I think - I'd be guessing.  They said there was enough to cover. And then he asked me what I had, and I don't know if I asked before he phoned in or not, but anyhow that's what I said, 187, I think, somewhere in there.  And he then put in the bid, and he put in and 190, I remember him saying that.  He was selling at 190.
Despite having testified, two weeks after the event, that he heard Steed call his office and ask for the Toronto telephone number, that he heard Steed ask the Toronto trader how much the bid was and how much was behind the bid, that Steed then asked him how many shares he had, that Steed put in the bid at 190 ("I remember him saying that"), R.J.Bennett now retracts that testimony because:

I didn't have my phone calls, and this time I'm trying to put things together, and reflecting back on it, the conversation I had with Stan took place in the coffee counter ...
and

I would have to be (mistaken), wouldn't I?  Because I was -- I was on the phone, and this time he's telling me the various things I am now telling out, trying to piece my morning together.  But I was on the phone in that office, which you have a plan of somewhere, back in that corner talking to him at the very same time he was making these phone calls.  All my conversation must have taken place in the coffee room.
and
... looking back, as I say, I could not have been there. I was on the phone with Herb Doman.  You have that in front of you.  You know that.
and

I said that that morning, seeing that I was talking to Herb Doman, and you're putting all this stuff together, I could not have been out there talking to Steed.  It just moved the sequence together more fluently.  That's all.
R.J.Bennett's evidence on November 18 was that it was when Steed was on the phone with Shemilt that he asked him how many shares he had and whether he wanted to sell.  Before us he testified that "I'm telling you today that that took place in the coffee room."  and that "At that time I believed it to be right.  I did not have any benchmarks to construct my day by." Despite repeated questions from Commission seeking an explanation, R.J.Bennett was unable to explain how the telephone records assisted him in recollecting not when things occurred, but what was said, that is what he said to Steed and what Steed said to him, and where the discussion took place.

Before us, R.J.Bennett was asked whether three minutes was plenty of time to have the conversation he said he had in the coffee room.  R.J.Bennett's initial response was "I guess it could be, yeah."  When the question was repeated, R.J.Bennett's response was "I don't know.  Depending on how we talked, I think it took longer."

R.J.Bennett's first evidence on November 18 is that he went back to his office after he sold his shares, that "I talked to Mr. Doman later on that morning", that he could not recall the time and that Steed had gone by then.  Later, in the examination R.J.Bennett's evidence was that he had a conversation with Doman "but I'm not -- I'm hazy on that, and I'm not trying to be evasive on that, but it could have --." At that point he was interrupted by his counsel.  When he was asked again whether he knew when he had the conversation with Doman, the following exchange took place.

A    And as I -- I think it was after, but it could be before.  Maybe the telephone thing was --
Q    Okay?  So the best of your recollection was that you talked to him after you sold?
A    After.  After, but it could have been before, I don't know.  I haven't got -- I don't keep a phone diary.
In his testimony before us, R.J.Bennett was asked whether his first evidence was a fair statement.  At one point, he answered no and gave this explanation.

If you're going through this thing, it's wandering all over the place.  I had it earlier where it was.  And once you've got the benchmarks of where the things are, that is a fair statement.  I don't know when the calls are coming here or there.  They're even asking there, did you make the call or did he phone you.  I know I didn't phone him after I get my benchmarks.  He phoned me.
Later in his testimony, he was asked again whether he agreed with his first response and he answered "At that time that might have been my thoughts, but reflecting on it couldn't have been."

On November 18, R.J.Bennett's evidence was that he talked to Mills on the morning of November 4.  When asked what came up, he answered "I mean, there'd be the stock, you know, telling him that we'd sold because -- and how are we going to handle it, that would be it."  He couldn't recall whether he met Mills in his office or the boardroom.  He couldn't recall any specifics about Mills' advice on capital gains.  He was asked "And he gave sort of a verbal opinion of what you might want to do with these capital gains, they (sic) way you would spend them?"  His response was "Um-hum, basically, yeah."  He said this meeting took place after he'd sold.  Before us, when asked about this evidence, R.J.Bennett testified "I don't necessarily remember.  I see them written there.  I don't remember them being asked of me, though.  But I was very -- very vague."  Then he said, "since then you get a chance to reflect back on the meeting and what was basically happening. I can see it right now."  R.J.Bennett was unable to point to anything in the telephone records which assisted him in his recollection of the meeting with Mills and Langford.  He was unable to explain why he recollected that his meeting with Mills happened after he sold.

On November 18, R.J.Bennett stated that Steed called and told him that the stock had been halted, and "wanted to know if I knew it.  I said I didn't."  In his testimony before us, R.J.Bennett was unable to explain why Steed would have asked him if he knew that the stock had been halted.

On November 18, R.J.Bennett's evidence was:

When I came back from lunch, I think there was a call from Mr. Doman, and he in turn, we verified, he told me then it was halted and -- didn't know anything he said, and that was it.  That's about --  We were going to have dinner on Monday night, `Still on?'  And I said, `If it's going to be off I'll phone and let you know, because I'm going to stop over Monday night before I go to Seattle.'
Before us, R.J.Bennett does not "recall at this time him saying that, but I did say -- you're right, it's written there."  "I think at that time I might have thought he had said that.  Reflecting back on it now, I don't think he did."

Doman testified that he did not speak to R.J.Bennett about the fact that the trading in the shares of Doman Industries had been halted or anything about the cancellation of the deal by Merlo and that R.J.Bennett did not say anything to him.  When R.J.Bennett's evidence from November 18, 1988, was put to Doman, he testified "That could be possible.  I don't recall it, but if it was halted and everybody knew about it, he might have asked a question or I might have said, `Yeah, it's halted.'  I can't recall that."

On November 18, R.J.Bennett's evidence was that he told his brother later in the morning that he had sold.  "I talked to him later in the morning, I know that, and told him I'd sold, yeah."  This was not his evidence before us.

On November 18, R.J.Bennett was asked about his dinner conversation with Doman three nights earlier on November 15. He had been served with the freeze order and knew about the investigation.  When asked whether he discussed that with Doman, he replied that "I most likely mentioned to him that what happened in the stock", "I would have mentioned to him I guess", "I would have mentioned it to him", "...it would be mentioned, I guess it was", "it didn't dominate our conversation, because it's just like the weather", "I think he'd be aware that I had sold some stock at that time".  He could not remember the details of the conversation.  Further on he said:

I must have.  Must have mentioned it to him maybe or something.  I don't know.  That's pretty vague.  But I would have, I wouldn't have given him a detail of what I owned or anything, if that's what you mean.  As I said we sold our stock, there would be an investigation, you're right, and that would be about it.
and later:

Well, it would be one of those things , yeah.  Just brings -- if it had come up that I had that amount and the stock was frozen, and then he -- most likely that I have nothing to say, and that would be the end of it.
In his testimony before us, he says "If you read that over, I'm very vague.  They're pressing me on it, and thinking back on it, I don't think I did.  I might have, but I don't think I did."  "In my reflection today, I don't think it came up." When asked why at the hearing was he more certain that it didn't come up, he answered "Because I don't discuss those things with Herb on his business or anything else.  It's his business, and I don't discuss".  He was unable to explain why on November 18, three days after his dinner with Doman on November 15, he was so vague, except to say, "I'm just trying to cover my backside saying, well, you know -- how definite can you be?"

5.8.3 Evidence of Steed
Steed walked to the McIntosh Centre on November 4, 1988, and arrived "shortly before 10:00 a.m. ... somewhere in that area".  The McIntosh Centre was a five minute walk from his office.  He was delivering a cheque to Duhamel and hoped to see R.J.Bennett.  Before he left his office, he had checked the market for Doman shares.  He knew Doman shares were trading at $11-3/8 and there were large volumes of at least 100,000 wanted at that price. When he arrived at the McIntosh Centre, the first thing he did was look for R.J.Bennett, but he couldn't see him.  He went to his office, but the door was shut.  Steed then went and delivered the cheque to Duhamel. He said he chatted with Duhamel for a while in the range of two to four minutes.  Duhamel did not tell Steed in that meeting to sell his Doman shares.

Steed testified that when he walked out of Duhamel's office, he ran into R.J.Bennett.  That was also his testimony when he was interviewed by Commission staff on November 16. When he was interviewed by Commission on November 10, 1988, six days following November 4, his evidence was that R.J.Bennett came into Duhamel's office.  "Well, I gave Duhamel his cheque.  You know, Bennett comes wandering in, we start kibitzing him, and he says, `Well, I think -- what's the bid today,' or something, whatever he usually says."  Before us, Steed claimed that it didn't happen that way and that it was just an "off-hand remark".  When asked whether he failed to take an examination by the Commission staff seriously, he said that he didn't take it seriously.  Steed knew prior to the interview that there was a concern that at the very least R.J.Bennett may have engaged in insider trading.  Steed testified that he "probably" spoke to R.J.Bennett about that prior to his first interview on November 10 and that it was "most likely" he would have spoken to R.J.Bennett after his first interview and before his second interview on November 16.

Steed didn't know whether R.J.Bennett was looking for him.  "I don't know.  He may have been."  R.J.Bennett did not instruct him to sell his Doman shares.  They went into the coffee room and had a conversation that lasted "several minutes" - "Well, not very long.  We were just -- I don't know how many minutes.  We just discussed a few things.".  Steed was still "trying to persuade him" to sell and pointing out the options to him.  R.J.Bennett then instructed him to sell as many as he could at $11-3/8.  Steed was interviewed by Commission staff on two occasions, November 10, 1988, and again on November 16, 1988.  On neither occasion did Steed mention the meeting in the coffee room.  Steed told Commission staff on November 16, after he was told to think very carefully about his evidence, that even when he was on the phone with Shemilt, he still wasn't sure whether R.J.Bennett wanted to sell or how much or at what price until the very last second.  Steed admitted that what he told Commission staff on November 16 was inconsistent with his evidence before us, but claimed that what he told Commission staff was "totally inaccurate".

Steed then said that he was intending to go back to his office, but R.J.Bennett said that he could phone from the hall and that is what he did.

I went down the hall and I kind of thought that he was with me, but he wasn't.  I sorted out what accounts I should put them in and so it didn't really matter anyway, and he wasn't there, so I decided to phone our office and get the phone number for Toronto anyway, which I did.  I phoned our office and asked the lady who answered the phone if I could speak to Debbie.  I asked Debbie to go and find the Toronto phone number for me, which she did and she gave me the Toronto phone number.  Mr. Bennett still wasn't around.  I went and looked around for him, looked - he wasn't in the coffee room and I couldn't see him anywhere, so I went back and waited about a minute or two minutes.  So - while I phoned, I decided to phone Toronto which I did.  I phoned Toronto, I asked for Mr. - to be put through to Mr. - well, I think I said, put me through to the trading phone and I got Mr. Shemilt. Maybe I asked to get Mr. Shemilt, I am not sure.  I asked Mr. Shemilt if I could sell a substantial amount of Doman stock which I had at 11-3/8, since there seemed to be a large bid there when I left the office.  He checked the market, came back, and said there was something like, I don't know, 300,000 bid or something at that price.  So I promptly sold, gave him instructions to sell which I did.
Steed said that after he finished selling, he "went back out and met Mr. Bennett."  He doesn't know where he met him - "he was either in the hallway or coming out of his office or standing there, maybe."

In Steed's evidence given to Commission staff on November 10 and 16, he did not mention that R.J.Bennett had disappeared and that he couldn't find him.  His evidence was that R.J.Bennett was with him continuously from the time he met him in Duhamel's office to the time he was on the phone with Mr. Shemilt and completed the sale of his Doman shares.  Steed's explanation before us was "I just answered off the top of my head a lot of this stuff, that was inaccurate".  In his testimony before us, when asked why he was looking for R.J.Bennett, he said "It would have been nice", even though he had very clear instructions to sell all of R.J.Bennett's Doman shares at $11-3/8.

No where in Steed's testimony, or in his evidence given to Commission staff, did he mention hearing the telephone ringing while he was with R.J.Bennett on the way down the hall from the coffee room to the phone in the file room.  Duhamel's office is beside R.J.Bennett's office and the door into the coffee room is beside Duhamel's office.  The distance to the file room would be a matter of about twenty feet and the door to R.J.Bennett's office is on the immediate right, just outside the file room door.

Steed's usual practice was to prepare orders, that is tickets, and have an employee telex the orders to the trader from his office.  On November 4, he phoned the trader from the McIntosh Centre.  The sell orders were prepared when he went back to his office.  On November 10, 1988, his evidence given to Commission staff when asked whether he normally phones in orders, he answered "No.  No, hardly ever."  Before us, his testimony was that "It was probably true at the time."

Steed testified that a few days before November 4, he and R.J.Bennett discussed the number of Doman shares owned by R.J.Bennett.  Steed thinks they probably met at the McIntosh Centre.  At that meeting, Steed had calculated precisely what Doman shares were owned by R.J.Bennett.  The calculations were done in a book that Steed kept at his office.

When Steed called Shemilt on the phone at 10:14:17, he did not have his book with him.  In his testimony on April 20, 1995, Steed testified that during his call to Shemilt, he could not recall exactly, but he thought R.J.Bennett owned 191,000 or 192,000 Doman shares.  He gave Shemilt a sell order for 190,000 Doman B shares. When asked why he didn't sell 191,000 or 192,000, he responded:

Well, I could have done, but I thought a hundred and ninety was a much rounder and safer figure.  And when I -- I'd go back to the office, and if there was any left over, I would sell the rest.
and

The bulk of the shares are sold, so it's, you know, an odd amount of two or 3,000 is no big concern.
When Steed was asked about Duhamel's shares, Steed remembered that he had included Duhamel's 1,000 Doman B shares in the sell order for 190,000 Doman B shares.  Steed was asked to explain how he had calculated the 189,000 Doman B shares.  He responded "We had shares that I delivered to the bank.  We had shares that he told me he had in his safe."  The next day in his testimony before us, Steed testified "I think it was one hundred and eighty-seven, I'm not sure, but I had a figure in my mind at the time."  Steed arrived at 187,000 Doman B shares as follows.  Certificates for 182,000 shares were lodged at the bank.  Certificates for 3,000 shares were in R.J.Bennett's safe.  Certificates for 2,000 shares were also in R.J.Bennett's possession. Later in his testimony, Steed said that 2,000 Doman B shares held by Bennett Equities were also included in the sell order.  "I think that the Bennett Equities was part of the numbers that he gave me when we first added up the stock, together with the ones he said he had in his safe for himself."  These 2,000 Doman B shares for Bennett Equities and the 187,000 Doman B shares for R.J.Bennett totalled 189,00 shares.

His recollection of his discussion with R.J.Bennett on November 4 about R.J.Bennett's holdings of Doman shares was that "Oh, we talked -- we discussed it briefly." and that "Yes, I think he said a hundred and eighty-seven, but I am not sure."  Steed denied that R.J.Bennett was in a big rush to sell his shares that day.

On the morning of November 4, at the McIntosh Centre, when Steed was calling Shemilt, he was not certain how many Doman shares were held by R.J.Bennett.  Steed did not take the time to go back to his office to get the number from his records. When Steed phoned his office to get the telephone number for the trader, he did not take the time to ask Debbie to check his records.  Steed was asked why he hadn't asked Debbie to go to his book and he responded:

A    Well, I don't think she'd have been able to figure it out?
QWhy?
A    Well, it's, you know, it's -- I didn't know exactly where to look for it anyway, where to tell her to look for it.
He did not, and he did not have R.J.Bennett, call the bank to confirm what Doman shares the bank was holding for R.J.Bennett.  He did not have R.J.Bennett check his share certificates.  Steed sold the shares from a phone on a chair in a file room and oversold R.J.Bennett's holdings.

Steed went back to his office.

Steed looked through his records and telephoned Shemilt and told him where to put the stock.  Then he phoned Shemilt again to discuss the commission.  There are no telephone records for these calls.  Steed was asked whether he made the calls before he sold his stock.  Steed responded "Well, I'm not sure whether I sold it before or after, I can't be sure of that.  I think I made the call before I sold it, but I just don't know."

Steed sold 2,500 Doman B shares for himself.  Steed's testimony is that "I hadn't really made up my mind to sell them on that particular day."  "Well, I thought about it on the way back.  I'd sold everybody else that was my client, practically, those that wanted to sell.  I couldn't see any real reason for holding.  Bids were there.  Why not sell them? So I sold them."  By 10 minutes after the sell order for 190,000 Doman B shares was executed, Steed finished his conversation with Shemilt, spoke to R.J.Bennett, made the five minute walk back to his office, may have checked his records and had two telephone conversations with Shemilt, prepared a sell order, had the sell order telexed to the trader in Toronto and the sell order was executed.  The shares were sold at 10:27:35 according to the computer records of The Toronto Stock Exchange.  Steed was asked "That's pretty fast, right?" Steed responded, "Yes, it is pretty fast.  I mean, I find it difficult to believe that I could move that fast back to the office.  I don't recall moving that fast."  Steed testified that he did not phone his office from the McIntosh Centre and have them put in a sell order.  In fact, Steed owned only 2,000 shares.  He said the sell order for 2,500 was a mistake and wasn't sure how it occurred.  When asked whether it could have occurred because he was in a bit of a rush, Steed answered "I suppose that's possible."

Steed testified that he rectified the mistake "right
away".  "Because I think Mr. Dunn called in about that time
and I allocated them to him."  "I think at about that time the
lady came over and said -- explained it to me.  I think it was
roughly -- roughly about the same time, I think.".  He was
asked for an explanation.  Steed testified, Dunn phoned and
said "Sell my 500 shares".  This was a local call.  Steed
simply allocated the overage to his account, so when he filled
in the ticket he put 2,000 for himself and 500 for Dunn.  The
ticket appears to be stamped 10:28.  Steed testified that Dunn
did not tell him why
he wanted to sell his Doman shares.  Steed says they did not
discuss the sale of R.J.Bennett's Doman shares.

After Steed got back to the office, before Dunn called Steed, Duhamel called and asked Steed to sell his Doman shares.  This was a local call.  Steed testified that Duhamel did not tell him why he had decided to sell his Doman shares. "I told him I sold them at the same time that I had just sold Mr. Bennett's shares."  Steed does not recall what Duhamel said.  Steed testified that he sold Duhamel's shares "Because earlier on we had talked about it and he said, `Sell my shares when you sell yours or Mr. Bennett's.'  So he'd give me carte blanche on it."  Steed could not explain why he hadn't gone into Duhamel's office before he left the McIntosh Centre and told him that he had just sold his Doman shares.

Sometime after Steed arrived back at the office, he looked at his book.  At 11:11, Steed sold 1,696 Doman B shares for R.J.Bennett's account.  Steed testified that he sold these shares "to get what I considered to be the accurate figure." He testified that "I don't know how we arrived at that odd number.  I'm at a loss to understand that." On Monday, November 7, 1988, certificates for 183,280 Doman B shares and 816 Doman A shares were received by McDermid St. Lawrence. Steed's records showed that the bank held 182,400 Doman B shares, leaving a balance of 880 Doman B shares.  When you add 816 and 880, the amount is 1,696.  However, Steed had sold only 182,000 Doman B shares held by the bank in the sell order executed at the McIntosh Centre.  Steed did not include the additional 400 Doman B shares held by the bank in the sell order executed at 11:11.

Steed testified that he "probably" telephoned R.J.Bennett on the morning of November 4 to tell him that there was a halt trading in the shares of Doman Industries.  But he's not sure and can't remember any conversation with him.

By settlement day, five business days later, when the certificates had to be delivered for the 190,696 Doman B shares sold by R.J.Bennett and Bennett Equities on November 4, it became apparent that R.J.Bennett had sold 5,416 Doman B shares he did not own.  There were certificates for only 185,280 Doman B shares (2,000 registered to Bennett Equities and the following registered to R.J.Bennett: 182,400 for shares held by R.J.Bennett's bank and 880 for shares not held by the bank) and certificates for 816 Doman A shares. Although R.J.Bennett sold all his Doman B shares, he did not sell his 816 Doman A shares.  Steed's testimony before us was:

A    Well, it happened because some of the information that Mr. Bennett had given me turned out to be incorrect.
Q    And this was information that he gave you earlier in the week?
AYes.
On December 12, 1988, a certificate for 300 Doman B shares was received by McDermid St. Lawrence and so consequently, R.J.Bennett oversold his Doman B shares by 5,116 shares.  It appears that the 3,000 Doman B shares in R.J.Bennett's safe were only 300 Doman B shares and that the 2,000 Doman B shares also in R.J.Bennett's possession were not in his possession.  The 5,116 Doman B shares is calculated by adding the 3,000 Doman B shares R.J.Bennett thought were in a certificate placed in his safe, the 2,000 Doman B shares R.J.Bennett thought were in his possession and the 816 Doman A shares Steed sold as Doman B shares and the subtracting the 400 Doman B shares held by the bank that Steed did not include in either of the sell orders.

Steed provided no explanation why at 11:11, he sold 1,696 Doman B shares instead of 880 Doman B shares and 816 Doman A shares and why at 11:11 he did not sell the 400 Doman B shares held by the bank that he had not sold from the McIntosh Centre.  The sell order was executed when he got back to his office and had his book with the precise calculation of the holdings of R.J.Bennett in shares of Doman Industries and the firm's records for R.J.Bennett.

5.8.4 W.R.Bennett's Sales
McNaughton testified that "I'm sure towards the end of October I was suggesting that he (W.R.Bennett) sell his stock and lighten up his position..."  When the take over was announced, Doman shares traded as high as $11-3/4.  By October 20th, Doman shares were trading at $11-1/2 to $11-3/8 to $11-1/4.  "... I'd tell him that, you know, that he had a bank loan and it was costing him money, and probably to wait for it go to another half a point to $12 was really costing him money."  "He told me a couple of times that he'd think about it."

On Monday, October 31, 1988, the Doman A shares opened and closed at $11-1/2, with a high of $11-5/8 and a low of $11-3/8, on a volume of 34,658 shares, and the Doman B shares opened and closed at $11-1/2, with a high of $11-3/4, on a volume of 11,604 shares.

McNaughton testified that after the close of trading on Tuesday, November 1, 1988, "Bill phoned me and gave me an order to sell 100,000 Doman, 50 A and 50 B at 11-5/8."  "That was an open order."  The order would remain until such time as it was either canceled or filled.  That day Doman B shares opened and closed at $11-1/2, and the high was $11-5/8; however, the Doman A shares traded at $11-1/2 the entire trading session.  McNaughton testified that he would have "very likely" given that information to W.R.Bennett.  That day 67,674 Doman A shares and 52,674 Doman B shares traded.

W.R.Bennett testified that on November 1, he instructed McNaughton to sell 100,000 Doman shares at $11-5/8.  However, he claimed "It's my understanding that the buy on that day was $11-5/8 and I told him to sell 100,000 shares at that price. As I previously testified, I found out on November 4th that there'd been a mix-up in communication on what was a firm buy and a sell and the 100,000 shares hadn't been sold."

When W.R.Bennett was interviewed on November 18, 1988, his evidence was that he did not instruct McNaughton to get a certain price.

A    No.  I don't -- he says I did.  And that, you know, that I said eleven and five-eighths.  But I don't think I did.  I thought I was selling them, but I found out that the market had fallen away again and that's another thing that concerned me, that the market was falling away.
Q    So you're saying you didn't instruct him, you wanted it sold at market, a hundred thousand just unloaded?
AWell, I can't recall.
QOkay?
A    He obviously thought that's what I said, and if he thought it, I'll go along with it, I mean.  But I thought I was selling it at that price.  Because it was my intention to sell out.
When Commission staff questioned W.R.Bennett about whether he read the quotations in the Globe and Mail while he was away on November 2, he answered "No, that was a very, very, tough trip."  Then when he was asked by his counsel whether he read the financial papers, W.R.Bennett answered that he read all the financial publications, including "the Globe and Mail, which has an excellent business section" and "the Financial Post which is an excellent business newspaper".

You continually read, and those two newspapers in particular have -- keep any reader up to date on company reports, what's happening. Contained in their stories would be what current analysts are now circulating to -- about specific companies or specific industries.
So yes, it's an excellent opportunity to learn and keep up, and I would get all of that information that way.
W.R.Bennett was then asked further questions by Commission staff.  On Wednesday, November 2, 1988, W.R.Bennett was in Montreal and recalls that he would have read those papers early in the morning when he got up at 5 o'clock.  That day he traveled back home from Montreal and spent many hours on the airplane.  When he was asked whether he would look at the stock quotations for Doman shares, W.R.Bennett responded "sometimes, sometimes not.  But yes, usually you look through -- you look at points of interest, and if you have extra time you might take the time to read the stock tables."  When W.R.Bennett was reminded of all the time he would have had that day on the airplane and of his holdings of over 300,000 Doman shares, for which he had borrowed the full purchase price of $2 million and for which he was paying interest of $19,000 a month, and that under those circumstances surely he would have looked at the quotations for the Doman shares, W.R.Bennett said "I don't recall doing so, but it might not necessarily be my practice.  And while you might imply that, you have no knowledge otherwise."

On Thursday, November 3, 1988, W.R.Bennett did not check the quotations for Doman shares for November 2 in the papers. On Wednesday, November 2, the Doman A shares opened at $11-3/8 and closed at $11-3/8 with a high of $11-1/2 on a volume of 4,950 shares, and the Doman B shares opened at $11-1/2, which was the high, and closed at $11-3/8 on a volume of 16,285 shares.

On Thursday, November 3, 1988, W.R.Bennett did not telephone McNaughton.  "I had thought they'd sold.  It was my thought that they had sold at the buy and that they were sold, and it wasn't on my mind."  On November 3, the Doman A shares opened at $11-3/8 and closed at $11-1/2, the high for the day, on a volume of 19,611 shares, and the Doman B shares opened and closed at $11-1/2, which was the high, on a volume of 6,285 shares.

For the first four trading days of that week, only an average of 21,712 Doman B shares and 31,723 Doman A shares traded per day.

At about 8:45 on November 4th, McNaughton called W.R.Bennett regarding a golf game the next day.  W.R.Bennett had not arrived at the office and so he left a message for him to return the call.

Larry Seiler was the manager at W.R.Bennett's bank.  He testified that on November 4, 1988, there was no pressure on W.R.Bennett to repay his loan.

W.R.Bennett says that on the morning of November 4, 1988, he arrived at the McIntosh Centre after 9:00 and before 9:19. When he arrived he parked his car at the back.  He thinks he saw his brother's vehicle there.  It's his "impression that both he and Leo's (Duhamel) vehicles were there."

He placed a call to Jack Poole at 9:19.  He called Mills around "9:30 or later".  This was a local call.  He wanted to talk to Mills about the division of assets between R.J.Bennett and himself and capital gains on the sale of his Doman shares. He got a cup of coffee in the coffee room, picked up a telephone message from McNaughton.  Poole returned his call at 9:39.  The call ended at 9:45.  "May be a few minutes" later, he returned McNaughton's call.  This was a local call.

McNaughton and he talked about playing golf on Saturday. McNaughton informed him the 100,00 Doman shares he had instructed him to sell on November 1, 1988, at $11-5/8 had not sold.  W.R.Bennett says "that disturbed me and surprised me." "We discussed about selling it."  He does not remember the details.  He told McNaughton he wanted to think about it.  He doesn't recall telling McNaughton he wanted to phone the bank. He did not tell McNaughton to sell his Doman shares or to issue a change order with respect to the 100,000 Doman shares he told him to sell on November 1st.  McNaughton told him the market was at $11-3/8 and there seemed to be enough buyers to take his shares.  He told McNaughton he'd call him back.  The conversation was "very brief", he estimates "two, three minutes".

In the interview with Commission staff on November 18, 1988, W.R.Bennett's did not say that during his conversation with McNaughton he was "disturbed and surprised" when McNaughton told him that his Doman shares had not sold. Following is W.R.Bennett's testimony before us.

Q    And you can confirm for me, sir, can you not, that nowhere in your interview on November the 18th, 1988 did you ever make reference to the fact that you were disturbed by the fact that the 100,000 shares had not been sold by Mr. McNaughton pursuant to your instructions on November 1, 1988?
A    That was a very general interview in which I had two interviewers interrupting each other and myself, plus the lawyer, and it was also a very difficult time, because when the interviewers came, they couldn't make their tape -- they didn't know how to operate their tape recorder
and they couldn't make it work, so people had to scurry around and borrow one.  And from what I've seen, the transcript, the real transcript, the first one, without being changed or doctored in any way, had misspelled names and names that were wrong and everything else, but -- to show the type [sic] of what went on there, how disjointed it was, but I was very forthcoming in a general way of everything I knew at that time, quite frankly, not having had to plan a precise and detailed explanation because I hadn't done anything wrong, I didn't feel any need to.
Q    Well, yes, except, Mr. Bennett, this: Are you telling the members of this panel that you told the investigators on November 18, 1988 that you were disturbed by the fact that Mr. McNaughton had not sold 100,000 shares on November 1st, 1988?
A    I'm not telling them I said that.  I'm telling them that I answered, tried to answer questions that they asked.
This is McNaughton's testimony about the call.  W.R. Bennett called back "about ten to ten".  McNaughton's notes made later on November 4, 1988, state that he talked to Bill about 9:55 a.m.  W.R.Bennett confirmed the golf game.  He told W.R.Bennett that the 100,000 Doman shares had not sold. W.R.Bennett did not express any concern.  He asked him if he wanted to leave the order in at $11-5/8 and told him that the market was at $11-3/8 and W.R.Bennett said to leave the order in.  He suggested that he sell some of his Doman shares because interest charges at the bank were eating up profit. He does not think that he described how the market was, that is how many buyers there were out there and how many sellers. Rather, he "probably just quoted him and told him what we might get".  This information would be on his screen. W.R.Bennett said "he'd check with the bank and get back to me."  The conversation lasted "probably four minutes, something like that."

W.R.Bennett could not explain why he would have told McNaughton that he would phone the bank.  W.R.Bennett claimed that he had made a decision to sell his Doman shares the day he gave McNaughton the order to sell 100,000 shares; that he told McNaughton he would phone him back because he wanted to think about the disposal, whether to sell all at once or in increments of 100,000 shares, and when he did, he made a decision; that he did not instruct McNaughton to change the sell order for the 100,000 shares because it didn't cross his mind; and that he did not express his dismay or the fact that he was disturbed at all to McNaughton because "the conversation was very brief, not that long and, quite frankly, I was thinking in my own mind what we would do and that's why I wanted time to think about it."

After W.R.Bennett "thought about the situation" and decided it was time to sell all his Doman shares, he walked out of his office to go across the hall and R.J.Bennett was standing inside his doorway.  They met in the board room.  He told R.J.Bennett that he had decided to sell his Doman shares and that R.J.Bennett should sell the Doman shares held by Bennett Equities, that R.J.Bennett surprised him by telling him he had already sold them and that then he said "Well, I'm selling mine, and I think there's enough buying, you should sell yours."  R.J.Bennett said "Yes, I think I will."  He told R.J.Bennett that McNaughton had said there was substantial buying "because I had him look it up."  This meeting lasted "four minutes, five minutes".  W.R.Bennett testified "It was in my clear understanding when we parted that he [R.J.Bennett] has stated that he was going to sell his shares.  That was prior to ten o'clock -- just prior to ten o'clock, I believe, on November the 4th."

When he was asked "How did you know that there was enough buyers out there so that Mr. R.J.Bennett could sell his shares?, he responded by simply saying "Dick McNaughton had suggested to me that there was, as far as he could see, very good buying at $11-3/8."  W.R.Bennett testified that he did not know how many Doman shares were held by R.J.Bennett and Bennett Equities.  He was then asked "Well, then how were you able to tell Mr.R.J.Bennett that there appeared to be a sufficient market there to be able to take all -- not only your shares, but his shares?  W.R.Bennett responded:

That would be up to him to find out if and when he took the advice and if and when he phoned his broker.  I phoned mine.  Dick had to go back in the -- when I phoned back to sell and make sure that there was enough buying there.
After the meeting with his brother, he got another cup of coffee, went back to his office and in due course phoned McNaughton.  This was a local call.

W.R.Bennett testified that it was a coincidence that he instructed McNaughton to sell his Doman shares before Louisiana-Pacific and Doman Industries announced that the deal had collapsed.  W.R.Bennett denied that he met with R.J.Bennett after Doman had told R.J.Bennett that the deal had collapsed and that R.J.Bennett told him that the deal had collapsed and that an announcement would be made soon. W.R.Bennett denied that when he phoned McNaughton back and instructed him to sell his Doman shares, there was any urgency to sell his Doman shares and that when he phoned McNaughton back and instructed him to sell his Doman shares, he had not received information from R.J.Bennett, or anyone else, that the deal had collapsed.  Here was W.R.Bennett's testimony.

I've told you, I got no inside information from anyone on November the 4th.  I made my decision.  You have my testimony.  The testimony is correct, and I stand by my testimony, and that would include talking to anyone, and it would include all phone calls ever made, solicited or unsolicited, to McIntosh Centre business phone by anyone from anywhere in the world, because no telephone calls of that nature played any part in my decision.
W.R.Bennett said he called "shortly after ten, and I can't be too specific, but maybe three, four, five minutes after ten." to tell McNaughton to sell all his Doman shares. "McNaughton needed pretty precise instructions on how to sell the shares, how to put them in everyone's names."

So that conversation, naturally, required preciseness, not speed.  It was a very detailed conversation.  I'd taken some time amongst my papers to see if I had any of that on my desk which, quite naturally, I didn't, because it would have been in amongst my purchase file, which is held in the other office and, therefore, I'd asked Mr. McNaughton to look up the amounts of shares, et cetera, et cetera.
He does not remember McNaughton saying that he had a copy of the family investment agreement and that he would execute the trades in accordance with that agreement.  During the conversation, W.R.Bennett did not tell McNaughton to sell the Doman shares in his RRSP and he was unable to tell McNaughton how many Doman shares were lodged with the bank.  He did not tell McNaughton that the 5,000 Doman shares he purchased in October 1987 that had been delivered to him had been lodged with the bank.  The conversation took five or six or "maybe seven" minutes, "between five and eight minutes".

McNaughton received a copy of the family investment agreement before W.R.Bennett left on his trip.  He testified that it was before the end of August.  At the time, McNaughton did not open accounts for the Bennett family members.  There would be no need to if the shares would going to be tendered into the take over bid.  He did not have the agreement in front of him on November 4 when he sold W.R.Bennett's Doman shares.  Notwithstanding, that the agreement was only two pages and very straightforward, he did not make any apportionment until later on November 4 when the tickets were made up around 1:30.  Although at that time, McNaughton had got account numbers for the Bennett family members, the accounts were not opened until after the 4th of November.

This is McNaughton's testimony about the second call with W.R.Bennett.

In testimony before us, McNaughton said he heard from W.R.Bennett "about five or ten after ten".  McNaughton's notes place the call at "about 10:10 a.m."  McNaughton testified it "could have been a bit earlier" and it "could have been a bit later".

When W.R.Bennett's call came , McNaughton was with another client.  Heather, the receptionist, came to his door and asked if he'd take a call from W.R.Bennett.  With his other client present, he took the call and W.R.Bennett told him "to sell his stock.  And I said, `you mean the Doman stock, the A and the B?'  He said, `Yes.'"

And I said, "Just a minute, and I'll see what it's trading at."  So I checked, and I checked the CATS then, and I told him, "It's 11-3/8 to a half.  It looks like all the stock might go at 3/8.  Is that acceptable?"  He said, "Okay.  Sell it at 3/8."
His equipment told him at least 100,000 shares of each class could go at $11-3/8.

W.R.Bennett did not review the numbers with him. McNaughton testified:

Q    Specifically, sir Bill Bennett at no time on the morning of November the 4th, 1988, before you effected the trades, reviewed how many shares each of the children was going to get, right?
A    No.  When he told me to sell his stock, he also said to remember the agreement that the stock was to be apportioned.
QAnd that was the extent of it?
AYeah.  He didn't go through the numbers.
Q    No.  So the conversation that you had with Bill Bennett regarding that lasted, regarding the apportionment in accordance with the agreement, lasted a matter of seconds, right?
AWell, that part, I guess.
Q    I mean -- exactly.  Bill Bennett said to you, "Apportion these shares in accordance with the agreement, remember to do that," and you said, "yes, I will."  Have I got that correct?
AYes.
Q    And that was the only discussion with respect to that apportionment at all?
AWell, I presume so, yes.
QWell, when you say "presume so," sir --
A    Well, I don't see any other reason.  I had the document, I had the apportionment.  There wasn't any reason to carry on.
McNaughton does not recall how long his conversation with W.R.Bennett took.  Following is a question by Commission staff counsel and a response by McNaughton.

Q    ...In the presence of Mr. Maclean, you take this call, and I'm going to suggest to you, Mr. McNaughton, that the conversation that you  had with Bill Bennett, when he called you the second time, was very short, that he just said to you, "Sell all my Doman at 11-3/8." Isn't that right?
A    I really don't know how short it was, but that's pretty much what he said.  He wanted to sell all of his Doman, and I told him the market was 11-3/8.  And then he told me not to forget the agreement with the family, that the stock was to be apportioned.  And I -- really, I don't know how quick that was.
Later in his testimony, McNaughton suggests four minutes would probably be pretty close.

AI really don't know.  Three minutes, maybe.
QSure.
AFour.
QThat would be the very outside, wouldn't it?
A    Oh, might have been four or five.  I -- but I think we're -- that's probably pretty close.
McNaughton kept a book in his office with information on the purchases and sales for each client.  The book was updated by Heather, the receptionist.  On November 4, 1988, the book would have contained particulars of W.R.Bennett's purchases of Doman shares for his personal account and his RRSP.  In McNaughton's notes, he writes "Regarding sale of 125,200 Doman A and 182,900 Doman B by Bill Bennett on November 4th". McNaughton testified that he got these numbers from his book on November 4th.  There was no reference to the Doman shares in the RRSP.

When McNaughton hung up from his call with W.R.Bennett, he went out and asked Heather, the receptionist, who is just outside his office, to call the bank and confirm the numbers of Doman shares the bank held for W.R.Bennett.  He wanted to make sure the bank's numbers matched the numbers in his book in his office.  So "we're talking seconds" to get the receptionist to phone.  McNaughton did not cancel the sell orders put in on November 2 for 100,000 Doman shares and did not fill out sell orders.  He returned to his office and phoned Paul Hollingshead at Odlum Brown's trading desk in Vancouver.  There was no telephone company record kept for this call and the other calls McNaughton made to the traders. McNaughton said my friend wants to sell his Doman shares. Hollingshead asked "How much?"  McNaughton told him the amounts.  While he was on the phone, Heather, the receptionist, came in with the amounts from the bank. Hollingshead checked his CATS machine and said he would "probably get it out at 11-3/8", this "wouldn't take very long" and "Okay.  We'll start selling it."  Up to that point, McNaughton testified that "I spent about three minutes or so talking to him". Hollingshead told McNaughton as the orders were filled.  During the conversation, "it suddenly dawned on me that Mr. Bennett had stock, in his RRSP.  So I hung up on him."  McNaughton phoned W.R.Bennett and got instructions to sell the Doman shares in his RRSP.  There were 15,000 Doman A shares and 6,200 Doman B shares in W.R.Bennett's RRSP. McNaughton phoned Hollingshead back with the order to sell 15,000 Doman A shares and 6,200 Doman B shares in the RRSP. Those trades were completed at 10:29.  McNaughton hung up with Hollingshead.  "Then it dawned on me that the bank probably didn't have all that Doman because I'd bought some stock back in, when was it, 87 --".  "That was before we were dealing with the bank and I said, "I've got another 5,000 shares."  He phoned back Hollingshead or another trader and those shares were sold at 10:35.  These shares had been delivered out of W.R.Bennett's account and lodged with the bank.  The figures McNaughton received from the bank should have included these shares.  These shares were included with the certificates delivered with the letter sent from the bank to Odlum Brown on November 9, 1988.  That letter read in part, "We enclose 308,100 Doman Industries Limited Shares, of which 125,200 shares are Class A and 182,900 shares are Class B.".

In McNaughton's notes prepared on November 4, 1988, he wrote "Sales completed by 10:30 a.m."  In fact the last sale was completed at 10:35.

The sell orders were not prepared until around 1:30 on the afternoon of November 4th.  The practice followed is to prepare the sell orders and telex them to the trader. McNaughton testified "Well, I never had the impression the order was urgent.  It was urgent from my point of view, because I wanted to get it done, and I had to apportion the stock and I couldn't, you know, write out six tickets.  It would have taken some time."

McNaughton did not cancel the sell orders for the 50,000 Doman A shares and the 50,000 Doman B shares at $11-5/8 until 2:38 in the afternoon on November 4th.  If those sell orders had also sold that morning, W.R.Bennett would have oversold his Doman shares by 100,000 shares.

McNaughton's other client remained with McNaughton the entire time.  McNaughton usually does not do this for reasons of confidentiality.

Hollingshead's testimony of his call with McNaughton is as follows.

He received McNaughton's call at "approximately 10:15". "It was somewhere in the neighbourhood of four to five minutes" that elapsed from the time McNaughton called until he made the first trade at 10:21:41 a.m.  That would make the call at 10:16:41 to 10:17:41.  Hollingshead was interviewed by Commission staff on November 16, 1988, 12 days following November 4.  At that time, in response to being asked what time he got the phone call, his evidence was "Well the times basically would be. I would say about a minute before the trade times show on my printer. ... As he called, he (sic) the trades were taking place, a minute or so after he called." Hollingshead effected a trade for another client at 10:19 that morning.  He testified that it was "possible" that he could be effecting a trade at 10:19 and at the same time speaking to McNaughton, but that it is not possible to check the market while he is effecting a trade on his terminal.

When the call began they discussed market conditions regarding Doman shares, which would take "a second or two", strategy, which would take "about a minute", and numbers of Doman shares.

Well, I think he had an idea of what the total amount was, but I don't think he realized what the breakdown of A and B was.  As I recall, there was some confusion in his mind either about the total or about how much of each that he had to work with, and I recall him speaking to someone in the background, a lady, I think, who was trying to help him put the information together, is my recollection of it.
and

I think he totaled it up and he -- there was -- he had missed something somewhere along the line and had to add to one of them, but I think basically I knew how much it was going to be selling.  And he was sort of totaling them on the phone and said, `That looks like X of A, X of B'.
According to the computer records of The Toronto Stock Exchange, the first sale order for 120,200 Doman A shares was at 10:21:41.  The sell orders, including the times with the number of Doman shares opposite, went in as follows:

10:21 120,200 Doman A
10:22 5,000 Doman B
10:24 177,900 Doman B
10:28 15,000 Doman A
10:29 6,200 Doman B
10:35 5,000 Doman A
By 10:35, W.R.Bennett had sold 140,200 Doman A shares and 189,100 Doman B shares.  All the Doman shares were sold at $11-3/8, except for 5,000 Doman B shares that sold for $11-4/8.  The aggregate sales were $3,746,413.  The aggregate purchase cost for the 329,300 Doman shares was $2,217,175. W.R.Bennett's profit on the sale of his Doman shares was $1,529,238.  Most of his investment had been held for less than three months.  W.R.Bennett paid McNaughton $15,400 in commissions.  His net profit before interest charges and dividends was about $1,514,000.  That profit represented a return of 68% on his investment.

Hollingshead was asked to estimate the total time that transpired between when McNaughton first phoned and the time the sales were executed.  He testified "Hmm.  Well, I would guess about 15, 20 minutes I would think, but I'm guessing [indiscernible passage] for sure.  It seemed about 15, 20 minutes."  The 15, 20 minutes was from the time the first block of trading was completed.  His testimony before us was consistent with his testimony at the trial.  However, this testimony is inconsistent with his evidence given to Commission staff on November 16, 1988, when he testified it seemed like 15 to 20 minutes from the time McNaughton first phoned until he completed the execution of the trades at 10:35.

Hollingshead testified that when a broker phones him, the broker would normally be very sure of what he's selling and which accounts they're from.  In this case the "whole thing was unusual."

At 10:29, W.R.Bennett telephoned his son, Brad Bennett, in Vancouver and told Brad that he had sold the Doman shares. In addition, they had a discussion about a Winfield Ranch meeting that day and while Brad could not recall what ranch business was discussed, he was certain a meeting had taken place or was to take place and that Mills was present or was to be present at that meeting.

At about 10:45 on November 4th, McNaughton telephoned W.R.Bennett to tell him his Doman shares had sold and the price.

W.R.Bennett testified that Mills had arrived "sometime after I talked to Bradford" at 10:30.  The ranch meeting was not one of the reasons he asked Mills to come over.  However, he took Mills with him to the meeting "sometime after 10:30, before eleven".  W.R.Bennett testified that when Mills arrived at his office he said:

We're having a meeting on Winfield Ranch.  R.J.'s got something.  I promised you'd take a look at it and I'd go in and take a look too.  We went over there sometime before 11:00 a.m.
When W.R.Bennett was examined by Commission staff on November 18, 1988, his evidence was that he and R.J.Bennett had scheduled an "early meeting".  W.R.Bennett testified that "That's not my recollection."  This was his evidence.

And R.J. and I scheduled a meeting, early meeting, he was supposed to come in depending on when we got together first thing to go over a number of decisions that we had to make about the construction and to do with the company that we -- major development company, we had investments in on committing future money, and also on pricing the lots because -- so.
W.R.Bennett was asked whether he was referring to Winfield ranch?  and W.R.Bennett answered:

That was a general answer to a number of things that we had going.  Yes, we had a ranch meeting that day.  Yes, it was my recollection that the main thing was a school site.  Yes, we had other subdivisions going in which lot pricing could be talked about.  Yes, we had other things to talk about that we'd talk from time to time, and that was part of a general answer to a very long and rambling interview.
Given my recollection now, I can recollect it was about an engineer being there, it was about a school site, it was just a small part of the day.
There was no evidence produced by W.R.Bennett and R.J.Bennett to show that they had another meeting that day, apart from the meeting they claimed took place in the boardroom before 10 o'clock.

W.R.Bennett testified that the ranch meeting was "very brief"; he estimated he attended the meeting for "under ten minutes".  He and Mills returned to his office to have their meeting.  W.R.Bennett testified that he and Mills had just come back into his office from the ranch meeting, when McNaughton called.

McNaughton told W.R.Bennett that Doman shares were halted.  W.R.Bennett's testimony was that "I suggested that -- do you know why, is there another bidder, and they said, I don't know, but if it's something gone wrong, there'll be an investigation will be following.  And I said fine, hung up." Mills evidence was that during the call, he heard W.R.Bennett say "I haven't spoken to anybody."  McNaughton testified that he might also have asked W.R.Bennett whether he had talked to anyone about Doman Industries.  Mills testified that when W.R.Bennett got off the telephone, W.R.Bennett said to him "Doman shares have been halted and there may be an investigation."  McNaughton testified "I wouldn't have told him there would be an investigation.  The halt could have been for any reason, as far as I was concerned."

On the afternoon of November 4th, shortly after the news release from Doman Industries had gone across the wire, McNaughton received a telephone call from Sutherland telling him there would likely be an investigation into the heavy selling of Doman shares immediately before the shares were halted and that he should prepare some notes.  McNaughton then called W.R.Bennett to tell him that there would likely be an investigation.  W.R.Bennett said, "Well, I'd be surprised if there wasn't."

5.8.5 Duhamel's Sales
Duhamel was not called to testify because he was ill. R.J.Bennett tendered as evidence the statement that Duhamel gave to the Commission staff on November 17, 1988 and his testimony at the criminal trial in April 1989.

Duhamel had been the property manager for McIntosh Centre since 1971.  He had known Steed since 1983 and they were friends.

On the morning of November 4, he went to Rotary and arrived at the McIntosh Centre at approximately 9:00.  Shortly after he arrived, Steed arrived and gave him a cheque.

At the trial, Duhamel was very evasive in answering questions about when he spoke to R.J.Bennett that morning and what they talked about.  When asked if he could recall what R.J.Bennett had said to him about Doman Industries that day, he said "No, I think he mentioned that he had sold some shares."  Duhamel was not able to recall where his conversation with R.J.Bennett occurred and he "had no idea" when the conversation took place in relation to his call with Steed.  Then in response to whether the conversation took place before or after lunch, Duhamel said "I would have to think it was more than likely before lunch."  When finally presented with copies of his statement made to Commission staff on November 17, Duhamel admitted that he called Steed "to suggest to him that he sell my stock" after speaking with R.J.Bennett.  When Duhamel was asked how long after speaking with R.J.Bennett did he call Steed, he said "I really don't know, I went back to my office and I possibly took a phone call or two, did a couple of things and then I phoned Stan Steed."  When Duhamel called Steed, his Doman shares had already been sold because he had "a previous arrangement with him".  Dunn's testimony was that "I'm aware that he(Duhamel) had an arrangement with Stan Steed if that -- if Mr. R.J.Bennett's shares were sold, sell his.", that he knew about the arrangement prior to November 4, 1988, and that Duhamel talked about the arrangement around the office.

After Duhamel called Steed, he told Dunn that he had sold his Doman shares.

Duhamel had lunch with R.J.Bennett on November 4.  He says they may have discussed Doman Industries, but more than likely they discussed real estate.

5.8.6 Dunn's Sales
Dunn is a certified general accountant.  Dunn has been employed by the Bennett family since 1964.  In 1988, he was the office manager and accountant at McIntosh Centre.  At that time, he did the bookkeeping for R.J.Bennett's horse ranch. This work included looking after the payment of the invoices for the ranch, including feed, drugs, vet bills and transportation.  Dunn says he was aware that there was an arrangement between R.J.Bennett and Doman concerning horses, but that he didn't know what that arrangement was.  Dunn had known Steed since 1983.

Dunn was the first to arrive at McIntosh Centre on November 4, 1988.  Duhamel could have been there by about nine o'clock.  Duhamel told him shortly after 9:00 o'clock on the morning of November 4, 1988, that he had sold his Doman shares.  "Shortly after 9:00 a.m. could be 20 minutes, 30 minutes."  Dunn had an understanding with Duhamel that Duhamel would tell him when he sold his Doman shares.  Dunn did not ask Duhamel why he had sold his shares.  "I would have been aware that R.J.'s most likely were sold if Leo's sold."  Dunn thought about selling his Doman shares for five or ten minutes.  Dunn phoned Steed and told him to sell his Doman shares.  That call was a local call and was made well before Dunn took his lunch break at around 10 o'clock.  "I'd say -- when I say ten-ish it could be five or ten minutes before 10:00 and anywhere after 10:00 for about 20 minutes, you know."    When Dunn saw R.J.Bennett at around 10 o'clock, he was in the hall on his way to the coffee room and had already instructed Steed to sell his Doman shares.  He did not mention this fact to R.J.Bennett.

Dunn says that Steed telephoned him before around 11:00 o'clock to tell him that his Doman shares had been sold.  "I think probably after Stan Steed had phoned me and said that I was out.  I believe I went in and told Leo or Leo was out front, and I mentioned I was out."

"It was later in the morning, sometime after 11:00, when Mr. Bill Bennett came out and asked me to go to a meeting that was being held in R.J.Bennett's office."  Earlier in his testimony, Dunn was asked when he saw R.J.Bennett that morning and he responded, "I know I definitely saw him at the meeting at 11:20."  He did not know what the meeting was about until he got there.  He does not believe that the meeting had started.  "I don't believe it had been, from what I gathered -- from what I can recall we had -- we had sort of just gathered about that time, by the time I got there.  It's not that the -- from what I recall."  "The purpose of the meeting was to discuss a piece of property that the school district was acquiring in Winfield from them."  "At the meeting was R.J.Bennett, Jim Mills, Graeme(Langford), myself and Bill Bennett."  Dunn cannot remember if anyone left.  When Dunn was asked whether the other people left the meeting when he left, he responded: "I believe they did, yes.  What I recall of it, I left and everyone else, I believe, was breaking up and leaving also."  Dunn's best guess is that the meeting lasted "half an hour, 45 minutes" from the time he joined the meeting until he left.  "When it was over I left for the noon hour."

Before Dunn left for his noon hour swim, Helen Arneson had told him that W.R.Bennett sold his Doman shares.  Besides Dunn and Duhamel, Arneson was the only other full time employee at McIntosh Centre.  She was a "Girl Friday".  Her duties included working on matters related to R.J.Bennett's horse ranch.

When Dunn got back to the office, he believes Duhamel told him that trading in Doman shares had been halted and that he had heard it when he was out for lunch.

Before leaving to go home that day, knowing there were at least four people at McIntosh Centre who had sold Doman shares that morning, and knowing that trading in the shares of Doman Industries had been halted, he did not make any inquiries of anyone at the office about those circumstances.

Dunn says he did not know for sure that R.J.Bennett had sold his Doman shares until Monday, November 7, 1988, when Steed came to the McIntosh Centre.

5.8.7 Mills' Sales
On November 3, 1988, Mills applied to his bank for a further loan of $5,000.  The loan was to be used to pay the interest on the loans used to purchase his Doman shares. These loans now stood at $156,000.  The loan would allow Mills to continue to hold his Doman shares until the take over by Louisiana-Pacific was completed.  In a bank memorandum prepared in connection with the loan, Snow at the bank wrote "Client has requested an addition $5,000 under his personal line to cover personal expenses pending the sale of shares expected mid-December."  Mills could not recall saying that to Snow.  Mills testified he told Snow "maybe I should sell my shares and that Snow's response was "that wouldn't be good for us."  No one else was present at the meeting.

That evening Mills claims he had a conversation with his wife about borrowing a further $5,000, where he said "Maybe we should sell" and she said "something along, `Yes, I think we should'".

On the morning of November 4, 1988, Mills claims he was at the office working from approximately 8:30 until he left for the McIntosh Centre just before eleven o'clock.  Mills claims that at about 9:00, a client phoned and asked him to do a valuation that day.  This was a local call.  W.R.Bennett telephoned at 9:30 and asked him to come over to discuss capital gains and estate planning matters.  This was not something that W.R.Bennett wanted to discuss on the phone, "he was telling me he wanted me to come over" and "it's the nature of the beast, he makes it a command".  Mills testified that he told W.R.Bennett he "couldn't come until after 10:30."  Mills was asked whether there was a discussion about what he meant by estate planning.  Mills responded, "You don't have discussions with him.  He tells you, `I want you over here, here's what I want to talk about, what time are you going to get here, come now,' period.  That simple."    Around 10:30, he gave a draft of the valuation to Ward, one of his partners.

"At that point I went back to my office and I noticed a scribble on my desk and it said, `Toronto, capital gains,' and it had -- and it hit me that I should think about capital gains, and what struck me at that point is I sat down and analyzed where I was with my Doman stock."  Then Mills claims that he "thought through what was bothering me with respect to the Doman thing."  "Well, it's quite a few issues.  One is borrowing the money.  The second one was my wife's comment. The next one was, why was it taking so long, couldn't figure that out."  "Doman had not issued its third quarter report, and I thought that was kind of strange, so I didn't know whether the numbers were off.  And the one that bothered me the most was there was an article in the Globe and Mail on, I think it was the Wednesday or whatever, where Louisiana Pacific announced a mill in the Maritimes, and I couldn't figure out why they would be announcing doing something in the Maritimes in the midst of a take over bid.  It just didn't make any sense to me."  "Yes, I would be out of the office for the whole next week."

Mills was asked whether he discussed any of these concerns with the bank the previous day and he responded, no. "I think they were in the back of my mind as things coming forward.  This was the first time I met Mr. Snow.  It was just a very short meeting to sign a document, ask for five grand and leave."

Mills claimed that although he was borrowing the $5,000 to allow him to make the interest payments on his loans so he could continue to hold his Doman shares, he didn't need the money right then.  "I was looking ahead."  "But, you know, because I like to plan ahead."

Within "a couple of minutes, a few minutes," of seeing the scribble, Mills phoned Elmore.  This was a local call.  He spoke to a lady and she went and got Elmore.  "He told me that -- and I'm going from my original notes -- I asked him what I -- what he thought I should do, and he said, `It's like a puzzle, a Chinese puzzle.  I think you should get out,' and I told him I agreed, and I told him to sell the stock."  Mills says the call lasted "two minutes, three minutes."  Elmore's testimony was that the lady said "Doug, you're wanted on the phone right now." and that there was an urgency to take the call and that as soon as he got on the phone with Mills, Mills instructed him to sell all his, and his wife's, Doman shares - "... he didn't like what was going on and wanted to be out of the market.  He wanted to go cash."  Elmore was interviewed by Commission staff on September 15, 1988.  Based on his notes, Elmore's evidence was "So anyway I went, and Jim ... identified himself and simply said that ... `I don't like the way this thing is going, I'm going to go with cash, I want you to put me -- put my Doman out at market.'"  Elmore could not recall in the interview whether he quoted Doman shares to Mills or not.  Elmore testified that Mills had expressed urgency.  When Commission staff counsel put Elmore's evidence to Mills, Mills claimed "I was having a very busy day.  My whole day was booked and gone and that's the only time I had to deal with it."  Further on in the interview Elmore was asked "What did you take from the conversation, he wanted to be out of the stock."  Elmore responded:

He wanted to be out, whatever the price.  No.  No. There's a very strange subtlety in terms of the voice and the words that were used.  It was "Feed it to the market. I want to be done with it."  But I would still -- I'm still doing my job if not throwing it to the market in terms of the market price.  I don't want to be getting eleven and a quarter on it.  If I'd have written -- which I did, I put a limit price on it of three-eighths, because I could see that's where the market was, and I didn't want to trade or take it down to eleven and a quarter.  Because Jim's -- but if Jim knew how to phrase the statement or not, he didn't say, "Put it at market, sell it at market."
Elmore testified that when Mills spoke to him there was no doubt in his mind Mills wanted all his Doman shares sold.

Then Mills called Mowatt.  According to the telephone company records that call commenced at 10:38 and ended eight minutes later.  Mills simply told Mowatt to sell his Doman shares and the balance of the conversation was Mowatt trying to sell him other securities.  Mills says he talked to him because "he's made me money in the past on other things, and it probably caught my attention."  The only other activity in Mills account had been the Nova shares.  Mowatt asked him why he was selling, and Mills told Mowatt "that he thought he had ridden that horse far enough, something to that effect, and there seemed to be a nice profit in it and he was just going to move off of it."

Mills made the five minute drive from his office to the McIntosh Centre and arrived there around 11 o'clock.

When he arrived, he met Dunn and Dunn took him to W.R.Bennett who was in R.J.Bennett's office.  Mills claims that he did not know about the Winfield Ranch meeting and that when R.J.Bennett came in with Langford, R.J.Bennett said to him, "You're here, you should stay for the meeting".  The four met for about ten minutes about the school on the Winfield Ranch property.  When he was finished giving some tax advice, "I believe Bill said, `Let's get David in here.'  He brought David into the meeting."  Mills mentioned something about a letter of credit.  "And Bill said, `Let's leave, we're not needed here any more.'  So we went to Bill's office."

Langford's testimony that the Winfield Ranch meeting took place at approximately 9:30, although he can't  be exact, that the meeting was in three parts, initially, it was with R.J.Bennett, then it was with an outside accountant and Dunn, and then it was with W.R.Bennett for a brief period of time at the end of the meeting, and that the meeting ended shortly after 10 o'clock, was put to Mills.  Mills responded, "With all due respect to that gentleman, I do not believe he was correct."

Mills says he and W.R.Bennett met for "twenty minutes". During the meeting, Mills explained the capital gains rules and then asked him whether he'd sold his shares.  He recalls that W.R.Bennett  said, "he and his brother had sold shares"; but W.R.Bennett did not tell him when he sold, or the price he got for, his Doman shares.  W.R.Bennett said he sold because "He said he felt there was too much risk in it and he wanted to get onto other things."  W.R.Bennett asked if Mills had sold his Doman shares and he said he didn't know.  That was the end of the discussion.  "But my personal business, at that stage, is nothing to do with him at that point.  When you're in a meeting with Bill, Bill directs the meeting.  If he wants you to move onto a topic you go onto the next topic.  It's boom, boom, boom.  Immediately we go onto family planning, et cetera."  There were three telephone calls during the meeting. "The third one, all I heard him say was, `I haven't spoken to anybody,' and then when he hung up he said to me `Doman shares have been halted and there may be an investigation.'"  There was no discussion.  "He cut off the discussion, put it onto other things, and then dismissed me."

Mills claims that he left the McIntosh Centre about 11:35, 11:40 and went back to his office.  He was to have a lunch meeting that day with his partner Ward and the Remples. When he got back, "I believe he(Ward) was already gone."  The first time that Mills saw Ward after he returned to the office was when they met at lunch.  Ward's testified that he met with Mills sometime between 11:00 in the morning and 12 noon, and after that Mills left the office for a meeting.  Mills claims that he met with Ward around 10:30 and gave him the valuation assignment, and may have talked to him quickly about the Remples.

Meanwhile, following Mills instructions, Elmore and Mowatt sold his Doman shares.

Elmore prepared the sell tickets.  It took him a few minutes because "first I had to go looking through my bloody tickets to determine that I did not have the eleven and five eighths orders there to cancel."  The tickets were taken to the wire operator and sent off to Toronto.  According to the computer records of The Toronto Stock Exchange, all the sell orders were filled at $11-3/8 beginning at 10:48.3 a.m.  The last trades for 20,000 Doman shares was completed at 11:10.4. Mills for himself and his wife sold 26,500 Doman shares for sale proceeds before commission of $301,438.  Elmore received the confirmations that the sales had been completed; but before he could phone Mills to tell him, John Parrish, the firm's trader in Toronto phoned Elmore.  There is no telephone company record for this call.  Parrish said "Dougie, do you know that the stock's been halted?" and "he confirmed that I got mine out".  Elmore testified "Upon first receiving it I think I was very surprised, I just -- just replied to him that, `You're kidding', and this sort of a thing, and then got off the phone."  Then Elmore called Mills.  This was a local call.  Elmore could not recall how long after talking to Parrish that he called Mills.  His evidence given to Commission staff on August 9, 1990, was "... I don't know if it was two minutes later that I called Mills after talking to Parrish or five minutes or what."; but he goes on to say that that would be the range - I would have thought so.  You know what I am saying, sort of common sense what I would normally do."  Elmore continues his evidence that it was such a surprise to him that he thought it was going to be a surprise to others, specifically Mills.  Elmore described the news as "a shocking -- fairly shocking event".  On Elmore's call to Mills, he confirmed that Mills' Doman shares had been sold and told him that Doman Industries had been halted.  Elmore testified that it was evident to him that Mills was very surprised. Mills says he may have expressed surprise and that he "was surprised that my stock had sold."  Mills says he wasn't surprised by the halt because he had already heard about the halt.  That call was made before he went to lunch.

Mowatt prepared a sell ticket for Mills' Doman shares to be sold at market.  The ticket was delivered to the cage where it was stamped 11:00 o'clock.  The order was sent to Toronto where it was filled at 11-3/8.  The sale proceeds before commission were $22,750.  These proceeds stayed in the account until December when they were paid out to Mills.

On the sale of his Doman shares Mills received aggregate sale proceeds of $324,188.  Mills' aggregate purchase cost for those shares was $213,500.  Mills' profit was $110,688. Mills' profit represented a return of 52% on his investment. Most of his investment had been held for less than three months.  These figures do not take into consideration commissions, interest charges and dividends.

It is Mills testimony that before he instructed Elmore and Mowatt to sell he and his wife's Doman shares on November 4, 1988, he had no contact with anyone at McIntosh Centre, other than his 9:30 telephone call from W.R.Bennett and he had no knowledge of the collapse of the take over of Doman Industries by Louisiana Pacific.

5.8.8 Evidence of Langford
McIntosh Centre is a client of UMA Engineering.  Langford started with the firm in October 1988 as the District Manager of their Kelowna office.  UMA was doing the preliminary engineering for Winfield Developments.  In October 1988, Langford had met with R.J.Bennett at the McIntosh Centre on two occasions, and perhaps more.  He met with R.J.Bennett quite a number of times subsequent to November 4.

Langford attended a meeting on November 4, 1988, at the McIntosh Centre.  R.J.Bennett had phoned and arranged the meeting.  Langford made no note of the proposed meeting.  He relied on his memory at the time to remind him of the meeting. R.J.Bennett's counsel asked him whether he knew if the time of the meeting was set three or four days earlier?  Langford responded "Only the fact that I have recorded in my time sheet that I worked on the project the day before the meeting, and that we had the meeting."  The purpose of the meeting was to discuss a school site for Winfield Developments.  The following exchange took place between R.J.Bennett's counsel and Langford.

QWas the meeting scheduled for 9:30, or do you know?
A    Well, I presume it happened at 9:30, based on my notes, so I would presume that's why I went there at 9:30.
Q    So you're presuming that it happened at 9:30, and once you presume that it happened at 9:30, then you presume that it was arranged for 9:30, right?
AThat's right.
QYou don't remember, though, do you?
A no.I don't remember when  it was specifically arranged,
On the morning of November 4, Langford phoned the McIntosh Centre at 9:10.  This was a local call.  He wanted "just to ensure that the meeting was still on at the time it was arranged."  On the other occasions that he had met with R.J.Bennett he had been kept waiting and "I made the call just to make sure that the timing was still on, that we wouldn't waste time."  Langford was first interviewed by Commission staff in 1990.  His evidence on August 8, 1990, was

... Because I had found on two previous occasions that we went to visit him, that he was typically not there when we went down to see him.  He had other things that he preferred doing to business, I guess.  So I adopted that at the third meeting and at subsequent meetings, the approach of phoning first and talking to his secretary and making sure that he was, in fact, in residence before I went down.
At 9:10, he talked to one of the secretaries and at the time of the call, he made a notation of the call in a telephone diary he keeps beside the telephone.  He follows the practice of jotting down whoever he's talking to in his telephone diary.  The notation reads, "Friday, November 4th, 1988, 9:10, R.J.Bennett - message."  Langford explained that the notation "tells me that I didn't talk to Mr. Bennett, because it says, `message'."

When Langford was interviewed by Commission staff on August 8, 1990, his evidence was "On the morning of Friday, November 4, 1988, recorded in my telephone message book that at 9:10 I phoned R.J.Bennett and left a message." R.J.Bennett's counsel then had the following exchanges with Langford.

A    I believe I phoned to check whether he was in or not.  My practice in my telephone book is, if I speak directly to the person, I make notes.  If I speak to someone else then I note "message", because it relays to me the fact that I didn't speak with the individual that is noted in the telephone book.
Q    So when you don't speak to the individual you leave a message for the individual normally, don't you?
A    Yes, or you discuss with the person on the end of the phone.  In this case it was to determine whether or not they would be available at the time for a meeting.
...
Q    Okay.  And what you said was, "I phoned R.J.Bennett and left a message."  Now, my question is a simple one; did you leave a message, as you said there you did? Isn't it possible that what you did is phoned and left a message?
A    My memory suggests or tells me that I phoned to ascertain that he would be in fact there.
Q    Well, why would you have said, "I phoned R.J.Bennett and left a message" if that isn't what happened?  Is this just a mistake by you, or are you certain?
...
A    If I left a message I would think be that I confirmed that he was there and I left a message that I was on my way.
Q    So you think you did leave a message or you did not leave a message, or do you know?
AI don't really know.
Further on in Langford's testimony, R.J.Bennett's counsel asked him again about the message and again Langford's response was "I presume it was just that I was on my way to the meeting that was arranged," that he does not really remember that  and that it's strictly based on what he saw in his notebook.  He was then asked "...is it your evidence under oath today that in fact you were told Mr. Bennett was present in his office at 9:10 a.m.?  Langford responded "That's what I remember, yes, from my thought reconstruction of the two pieces of paper."  Langford does not have any memory of being told that, "It's too far back in time to have a specific memory."

Earlier in the proceeding, the following exchanges took place between W.R.Bennett's counsel and Langford.

Q    So, Mr. Langford, if I can go back, if I ask you to accept for the moment that at 9:10 on November 4th, 1988, Mr. R.J.Bennett was not at the McIntosh Centre, that doesn't accord with either your recollection or what you understood you were told when you called at 9:10?
AThat is different than what I understood, yes.
....
Q    And if I suggest to you, sir, that it may well be that November 4th, 1988, was a day where, in fact, your call to McIntosh Centre wasn't to confirm that Mr. R.J.Bennett was there but in fact you showed up and found out he wasn't there, and you were kept waiting for some period of time, I suggest to you that's a possibility that you can't say is not true, or is true, at this point in time?
A    Well, my memory is certainly, I guess, not in fallible [sic], but my best recollection is that I called first to confirm and that I had a meeting around 9:30.
Following the call at 9:10, Langford gathered up his files for the meeting and walked down to the McIntosh Centre. "I would guess that it's about ten minutes" to walk.  In his interview with Commission staff on August 8, 1990, Langford was asked these questions and gave these answers.

Q    Now, that would get you there sometime, if you left immediately after 9:10, it would get you there sometime prior to 9:30?
A    I would think by the time I collected everything and, you know, discussed with the other people in the office, the secretary on the way out, things that are going on, that I would have been there approximately 9:30.
Q    Is that your best estimate as we sit here today, as to when you arrived at the McIntosh Centre?
AThat is right, 9:30.
QAbout 9:30?
AYes.
He guessed the meeting started about 9:30 in the morning. "I don't believe I waited on the couch but --" ... "It's possible, for a short period."  Langford keeps a daytimer for billing purposes.  The entry for November 4, 1988, shows at approximately 9:30 "Meet R.J., Bill Bennett re Winfield, one hour."  "The one hour refers to the amount of time that would have been expended on the project."  "Typically, it would be -- probably involve the time walking to and from the office and the time spent at McIntosh."  The entry would have been made following the meeting, "sometime after I got back to the office, during that same day."  This is Langford's practice. In a telephone interview with Commission staff on July 4, 1990, Langford was asked: "Is it likely at all, Mr. Langford, in your mind, that the meeting started as late as 11 o'clock in the morning?"  Langford responded: "No.  Certainly I am not infallible but having two references, I feel confident that it did occur as I have shown it."  The following exchange took place between W.R.Bennett's counsel and Langford.

Q    Well, the 9:10 book doesn't tell you what time the meeting is to start, does it?
A    No, but I would phone just prior to leaving, you know, was kind of the established procedure that I followed then and subsequently.
Later, the following exchange took place between R.J.Bennett's counsel and Langford.

Q    Okay.  Now I also understand that you don't know whether 9:30 is an indication of the commencement of the meeting or is the indication of the time you left your office; that's correct, isn't it?
A    My -- I guess my best recollection is that that's when the meeting would start, but it could be plus or minus."
...
Q    ...So do you know -- you don't know, I take it, whether 9:30 is the time that you left and when the hour started running, or is the time when you arrived at the centre, or is the time when the meeting started, do you?
A    No, with 10 minutes one way or the other, it could be any one of those. ... Q    Okay.  So the meeting might have started at 9:40, if we give it the ten minute plus or minus, and that would be presumably if the 9:30 was a recording of when you left, not when the meeting started, right?
AIf that was the case, yes.
Q    But on the other hand, if you waited for a few minutes when you got there too, I suppose that would make the meeting even later than 9:40, wouldn't it?
AI suppose so, yes.
      ...

QAnd it could have started at 9:45 even?
A    I think that's beginning to stretch it, but it's a possibility.
The meeting took place in R.J.Bennett's office.  Langford was able to describe the office.  As you come in the door, in the left-hand corner there is a table and chairs.  In the furthest corner from the entrance way R.J.Bennett's desk sat facing the entrance way.  He remembers R.J.Bennett "seemed very much on that day as he did on any other day."  "I recall the meeting being essentially in three parts.  Initially, I met with Mr. R.J.Bennett and discussed the subdivision development with him and the cost implications and servicing implications.  Following that, I believe two gentlemen came in, one of which was Mr. Dunn, the company accountant.  And we went through it again, discussed it again.  And the third part of the meeting, Mr. Bill Bennett attended and we went through the numbers again."  He recalls that R.J.Bennett "was there during the whole period" and that the other gentleman in the second part of the meeting was an accountant.  "We basically went through the figures three different times, the same figures three different times with three different parties.". "I would think the meeting with him(W.R.Bennett) was the shortest.  I remember him being very quick to pick up on what we were talking about, very decisive."  "I have a vague recollection that R.J. may have taken a call, but I can't say for certain."  He does not remember R.J.Bennett interrupting, stopping or leaving the meeting.

It was the first time he had met W.R.Bennett who he knew to have been the former Premier of the Province.  Langford recalls that "the only thing unique (about November 4) was, I suppose, meeting Mr. Bill Bennett."

Langford could not recall how long the meeting took.  "I have marked an hour for the meeting, and I would think that it's -- with walking to and from that it's something inside of an hour."  Langford's time sheet for UMA which he prepared showed "McIntosh - Winfield, one hour on Friday, the 4th of November.  R.J.Bennett's counsel asked Langford whether he charges for travel time or just for the meeting time. Langford's response and a further exchange follow.

A    Normally travel time, if it is significant, if it rounds out, the hour is charged.  If it was an hour plus walking, we would probably charge an hour.  If it was 40 minutes time plus 20 minutes walking, then we would probably charge them an hour.
Q    So this could have been an hour plus walking, I take it, because you charged an hour, is that right?
AThat's correct.
Langford did not notice anything out of the ordinary occurring that day at the McIntosh Centre.  Langford has never owned shares of Doman Industries.  Apart from Langford's business relationship through UMA Engineering, he had no ongoing relationship with the Bennetts.  Langford now resides and works in Alberta.

6.   ANALYSIS AND FINDINGS

In the Background, we have set out evidence produced at the hearing about the purchases and sales of Doman shares between October 1987 and November 4, 1988.  In the Analysis and Findings, we will analyze the evidence and make our findings of fact and then, considering all the evidence and our findings of fact, we will make further findings:

1.whether R.J.Bennett and Doman contravened section 68(1) of the Act in connection with purchases of Doman shares by R.J.Bennett and
2.whether R.J.Bennett, W.R.Bennett and Doman contravened section 68(1) of the Act in connection with the sales of Doman shares by R.J.Bennett and W.R.Bennett on November 4, 1988.
6.1 Purchases of Doman Shares by the Bennetts
6.1.1 The Merger Discussions
Doman's decision to sell control of his company would likely have been a difficult one.  We expect it could have been the most difficult one he had been faced with in his business life.  He would be selling his controlling interest in Doman Industries, a company he started on his own in 1955 and ran as a forest products business since 1964 and which was the most important thing in his life, besides his family. Abercrombie believed that Doman would never sell Doman Industries.  Nevertheless, prior to 1988, Doman and Merlo were discussing the merger of their companies.  Here is Merlo's testimony, when he was asked whether he had had any discussions of a general nature with Mr. Doman prior to 1988 about his personal plans for Doman Industries.

Well, I think that we did discuss, first of all, that Louisiana-Pacific was anxious in expanding in British Columbia, and that his company would be a very attractive acquisition, if economics were all okay.  And Herb indicated to me on occasion, and I don't remember specifically the time, that he might be interested in converting his interest in Doman to Louisiana-Pacific stock at some time if everything worked out okay, so we did have a discussion about the synergisms of the two companies, that a merger could conceivably take place.
This was not the first time that Merlo had expressed an interest in Louisiana-Pacific acquiring Doman Industries. Based on Abercrombie's testimony, it was the third time in ten years.

Louisiana-Pacific commenced purchasing Doman shares in September 1987.  Merlo's evidence is that "All the stock we purchased had the permission of Herb Doman."  Doman's testimony is that he had no idea in September 1987 that Louisiana-Pacific was going to purchase significant numbers of Doman shares.  Doman testified "in a passing conversation Mr. Merlo had stated that he was -- he told me to shape up or something to that effect, `we're shareholders of your company.'"  Merlo was CEO of Louisiana-Pacific and was having discussions with Doman with a view to expanding Louisiana-Pacific's operations in the province.  In all probability, those discussions occurred before Louisiana-Pacific commenced purchasing Doman shares.  Merlo knew that if Louisiana-Pacific was going to acquire Doman Industries, Doman would have to agree to sell his Doman shares.  Doman controlled more than 50% of the voting shares of Doman Industries.  If Doman decided to sell his Doman shares, then control of Doman Industries would pass to Louisiana-Pacific.  That would be a personal decision for Doman.  A hostile take over of Doman Industries could not possibly succeed.  Where Merlo's only hope of taking control of Doman Industries was through a friendly take over and where Merlo would have known what a difficult decision it would be for Doman to sell Doman Industries, we would be surprised if he would have acted without Doman's permission and encouragement when Louisiana-Pacific purchased Doman shares. We find that Merlo acted as we would expect in these circumstances.  Louisiana-Pacific purchased Doman shares because Merlo was encouraged by the discussions he had had with Doman and as he testified it was done with "the permission of Herb Doman".  We prefer Merlo's evidence to Doman's evidence.

Louisiana-Pacific continued its purchases of Doman shares and in June 1988, Louisiana-Pacific retained a Vancouver law firm to provide legal advice concerning a possible take over of Doman Industries.  Shields testimony was that around mid year 1988, his firm was retained by Doman Industries to be its financial adviser and that at that time, Doman had discussions with him about selling Doman Industries.

In August 1988, Doman Industries retained Ladner Downs as
legal counsel.  Miles' evidence is that the first retainer
involved some tax matters for Doman, and within a very few
days it turned into advice with respect to a potential merger.
This was no later than August 26, and probably no later than
the 24th, in fact, probably a few days
earlier than that.  Based on the Project Richco Term Sheet
that was dated August 24, 1988, 11:00 a.m. and that was
prepared taking into consideration tax concerns raised by
Doman in the context of a merger, we find that it would have
been a few days earlier than the 24th.

On August 24, there was the dinner meeting in Vancouver attended by Merlo, Doman, Miles and Shields.  Merlo's evidence is that the purpose of the meeting was a general discussion about a possible merger involving Louisiana-Pacific and Doman Industries.  Both Miles and Shields knew before the meeting that the possibility of a merger would be a topic of conversation.  Doman passed the discussion off "as just an airy-fairy thing".

The next day, Merlo flew to Toronto in a Louisiana-Pacific jet with Doman and Johnson to meet with The Royal Bank, a major shareholder in Doman Industries.  Merlo's evidence was that the purpose of the visit was to indicate Louisiana-Pacific's financial support to Doman in acquiring Western Forest Products and that during the meeting he asked if the bank would submit its shares in Doman Industries if the merger between Louisiana-Pacific and Doman Industries succeeded.  Doman's explanation of the meeting was that it had to do with Western and only reluctantly conceded that a discussion did occur with respect to a potential merger of Louisiana-Pacific and Doman Industries and corroborated Merlo's evidence.

Merlo's evidence is that he presented a document entitled the Project Richco Term Sheet to Doman on the way down to Toronto with the explanation that Louisiana-Pacific lawyers had come up with the structure and if Louisiana-Pacific and Doman Industries proceeded with a merger the format in the Project Richco Term Sheet would be followed.  Doman initially could not recall seeing the term sheet.  Finally, he conceded he could have received it on the way to Toronto.  His testimony suggests, he really paid no attention to the sheet and what Merlo had to say.

Merlo is the chief executive officer of Louisiana-Pacific, a major forest products company with 110 plants and mills and sales in 1987 of $1.7 billion (U.S.).  By contrast, Doman Industries is a company with only five mills and sales in 1987 of about $300 million (U.S.).  Merlo has significant responsibilities in running an operation as big as Louisiana-Pacific.  In our view, Merlo was devoting time to Doman and Doman Industries because Louisiana-Pacific was serious about a merger.  In our view, Merlo would not have been spending his time with Doman, unless he was satisfied Doman was serious too.  Merlo had the term sheet prepared for August 24th.  It had been prepared taking into consideration tax concerns raised by Doman in the context of a merger.  We found that Miles' firm was retained a few days earlier than the 24th to provide legal advice with respect to a potential merger.  On August 24th, Merlo had a dinner meeting with Doman and the legal and financial advisers for Doman Industries.  We cannot imagine that Merlo would have discussed the merger of Louisiana-Pacific with Doman Industries at that meeting without Doman's permission.  The next day, on August 25, Merlo flew Doman to Toronto in the Louisiana-Pacific jet to meet with a major shareholder of Doman Industries.  We cannot imagine that Merlo would have spoken to the bank about the merger of Louisiana-Pacific and Doman Industries without Doman's permission and that he would have had that discussion unless Doman Industries and Louisiana-Pacific were serious about a merger.  By this time, Louisiana-Pacific had significantly increased its purchases of Doman shares.  Doman in his testimony would have us believe that he was not serious about his discussions with Merlo and the merger of Louisiana-Pacific and Doman Industries.  We do not believe him.  Based on the conduct of Merlo and Doman, we find that they were having serious discussions about the merger of their companies.

Further, we find that there had been rumors in the market about a possible take over bid since the end of July.  By the end of July, Doman B shares closed at $6-1/8.  By August 25, Doman B shares opened at $7-2/8.  The volume of Doman B shares traded during this period had increased ten fold over the Doman B shares traded in July.  Neil Winchester of The Toronto Stock Exchange testified that the prices for Doman shares had been moving up considerably from the end of July 1988 and that the Exchange had heard rumours about a possible take over bid.

The merger discussions continued and during the period August 25 to mid-September 1988, Merlo testified that he would speak to Doman at least once or twice a week and that on at least one occasion a conference occurred between Doman and Louisiana-Pacific personnel.

By the middle of September, Miles was spending a lot of time on the Doman Industries file.  He would speak to Doman virtually on a daily basis, sometimes more than one time a day.

Although there were positive reports being issued about Doman Industries at the time, the rumors of a take over continued and on September 14, as a result of pressure from the Exchange, Doman Industries announced that merger overtures had been received and would be discussed at the board meeting on the 19th.  On September 19, Doman Industries announced that it would enter into merger discussions with those who had made overtures.  In both announcements, there was nothing about Doman's intentions to sell and nothing about Louisiana-Pacific.  Abercrombie's evidence was that Louisiana-Pacific was the only company discussed at the directors meeting.

On September 20, less than a month  after Merlo's dinner meeting on August 24th, Louisiana-Pacific announced that it had purchased 10.6% of Doman shares and that it may seek to negotiate with Doman Industries and Doman the acquisition of all, or a controlling interest in, Doman shares.

On October 6, Louisiana-Pacific and Doman Industries announced the take over.

6.1.2 The Bennetts' Purchases
R.J.Bennett and Doman have known each other for over 30 years.  Doman's only interest apart from Doman Industries is horses.  R.J.Bennett and Doman have been in the horse business together since the early 1970's.  Doman considers R.J.Bennett one of his very close friends, his closest friend. R.J.Bennett considers he and Doman are very good friends. They speak to each other on the telephone two to three times a week and frequently dine together.  During the racing season they are at the track together and on those occasions always dine together.  W.R.Bennett is R.J.Bennett's brother, former head of the Social Credit Party and Premier of the province. Doman is a strong supporter of the Social Credit Party.  When W.R.Bennett was Premier, he and Doman met on a number of occasions over the years on matters relating to the forest industry.

Both Doman and R.J.Bennett testified that they never discussed Doman Industries.  R.J.Bennett testified that he bought because his brother bought and that his brother was the one with all the knowledge on the stock.  His recollection was that his brother could have said that Doman may be a target in a take over bid.  W.R.Bennett testified that he had done research and analysis of Doman Industries, and thought that Doman shares were undervalued and would move considerably higher and that Doman possibly might be interested in selling his Doman shares.

The Bennetts and Doman would have us believe that it was a coincidence that W.R.Bennett and R.J.Bennett commenced purchasing Doman shares in October 1987, the month following the first purchases made by Louisiana-Pacific.

The bank documents prepared in connection with R.J.Bennett's loan application in November 1987 stated that "R.J.Bennett is well associated with Doman's top management and believes that, at current prices, Doman shares represent an excellent investment."  These words leave us with the impression that R.J.Bennett was getting the inside track on Doman Industries because of his relationship with Doman. There was nothing about R.J.Bennett's brother, the one with all the knowledge on the stock.

In December 1987, W.R.Bennett increased his line of credit at his bank by $1.8 million to $2 million, according to Seiler, for investments in the stock market and specifically, the forestry industry.  W.R.Bennett's testimony suggested the line could be used for any investments.  We find that is not the discussion he had with the bank.  At that point, he had purchased 20,000 Doman shares.  It was not until June 1988 that he commenced purchasing more Doman shares.

The Bennetts and Doman would have us believe that it was a coincidence that W.R.Bennett and R.J.Bennett commenced purchasing Doman shares again in June 1988, around the time when Doman had retained a financial adviser for Doman Industries and had discussions about selling Doman Industries.

Beginning in June, R.J.Bennett held 19,000 Doman shares and W.R.Bennett held 20,000 Doman shares.  At this point, each of the Bennetts began purchasing more Doman shares. W.R.Bennett purchased 309,300 Doman shares and R.J.Bennett purchased 263,400 Doman shares.  For the first period until August 24, W.R.Bennett did most of buying.  During the period from August 25 to September 19, R.J.Bennett did most of the buying.  The Bennetts purchased 572,700 Doman shares from June to September 19.  The cost was over $4.2 million.

R.J.Bennett purchased Doman B shares on five trading days during the period from June 9 to July 22.  His purchases represented 6% of all the Doman B shares traded during the period.

W.R.Bennett purchased most of his Doman shares in June, July and August.  He purchased Doman A shares on four trading days from June 23 to the end of the month.  His purchases represented 11% of all the Doman A shares traded during the period.  On three of the four trading days, his purchases represented 28%, 37% and 59% of the market.

In July, W.R.Bennett purchased Doman A shares and Doman B shares.  His purchases of Doman A shares were made on four trading days and represented 25% of all the Doman A shares traded in July.  His purchases represented over 90% of the market on three trading days, and on the fourth day they represented 80%.  W.R.Bennett's purchases of Doman B shares were made from July 27 to the end of the month.  His purchases represented 45% of all Doman B shares traded during the period.

In August, for the period to August 24, W.R.Bennett purchases of Doman A shares represented 21% of all the Doman A shares traded, and his purchases of Doman B shares represented 20% of all Doman B shares traded.  On the eight trading days he purchased Doman A shares, his purchases represented more than 10% of the market on two days, over 25% of the market on another two days and 60% to 86% of the market on another four days.  On the ten trading days he purchased Doman B shares, his purchases represented 14% to 21% of the market on three days, 35% to 55% of the market on another four days, and 75% to 93% of the market on another three days.

From August 25 to September 19, R.J.Bennett's purchases of Doman B shares represented 12% of all Doman B shares traded.  On the eleven trading days he purchased Doman B shares, his purchases represented 6% to 8% of the market on two days, 11% to 17% of the market on another three days, 25% to 47% of the market on another five days and 63% of the market on another day.  Doman and R.J.Bennett would have us believe that it was coincidence that R.J.Bennett purchased significant amounts of Doman shares during the period that we found Doman was having serious merger discussions with Merlo. During the period, there were at least three telephone calls between Doman and R.J.Bennett.  These calls were made on August 31 and September 1 and 16 and lasted 13, 40 and 9 minutes, respectively.  Commencing the day of the call or, on one occasion where the call was made in the evening, the next day, R.J.Bennett purchased significant amounts of Doman shares.  R.J.Bennett and Doman would have us believe that it was coincidence that R.J.Bennett purchased significant amounts of Doman shares following his telephone calls with Doman.

By September 19, the Bennetts had finished their purchases.  The Bennetts and Doman would have us believe that it was coincidence that the Bennetts finished purchasing all their Doman shares by September 19, the day Doman Industries made their announcement that Doman would be entering into merger discussions with the parties that had made overtures.

We find that when R.J.Bennett and W.R.Bennett were purchasing Doman shares from June to September 19, they were significant players in the market for the Doman A shares and the Doman B shares, not only during the periods they were purchasing Doman shares, but especially on the days they were purchasing Doman shares.  On the basis of the percentage of Doman shares purchased by the Bennetts compared to the total Doman shares traded, we find that for many of those days, one or other of the Bennetts was the dominant purchaser in the market.  We find that R.J.Bennett was the dominant purchaser on at least five of the 16 days he purchased Doman shares.  We find that W.R.Bennett was the dominant purchaser on at least 19 of the 28 days he purchased Doman shares.

We are not surprised that W.R.Bennett's broker, McNaughton, asked W.R.Bennett three times during June, July and August, whether he knew something was going to happen to Doman Industries.  On each occasion, W.R.Bennett replied that he knew nothing and had not talked to anyone.  On the third occasion, McNaughton's call was at the request of Sutherland, his firm's head of compliance.  Nor are we surprised that R.J.Bennett's broker, Steed, had the same feelings as McNaughton.  Steed's testimony was that R.J.Bennett must have been convinced the share price of Doman Industries would go up and that Steed did not have any information that would have caused him to be convinced to purchase that amount of Doman shares on behalf of any client.

When we consider that Louisiana-Pacific, which was negotiating with Doman for the take over of Doman Industries, was also making significant purchases of Doman B shares during the period the Bennetts were purchasing, we find that the Bennetts purchases become even more significant.

The Bennetts both commenced purchasing Doman shares in October 1987 and again in June 1988.  During the period they purchased Doman shares, there were only three trading days when both Bennetts purchased Doman shares.  R.J.Bennett only purchased Doman B shares.  Up until July 27, W.R.Bennett purchased only Doman A shares.  W.R.Bennett purchased most of his Doman shares between July 27 and August 24, when R.J.Bennett purchased no Doman shares.  R.J.Bennett purchased most of his Doman shares between August 25 and September 19, when W.R.Bennett purchased no Doman shares, except on one day. That was the only trading day during the period from October 1987 to September 1988 that they both Bennetts purchased Doman B shares the same day.  The Bennetts would have us believe that these circumstances were all coincidences because they did not discuss their purchases.  The Bennetts both live in Kelowna.  Most of their assets are joint assets.  They both work in the McIntosh Centre across the hall from one another. We have found that each of the Bennetts were significant players in the market for Doman shares.  The Bennetts would have us believe that apart from some casual conversation, they did not discuss their purchases.  We do not believe them.  We find that the Bennetts must have discussed and planned their purchases of Doman shares.

During the whole period from October 13, 1987, when R.J.Bennett made his first purchases of Doman shares, to September 19, 1988, when R.J.Bennett made his last purchases of Doman shares, R.J.Bennett purchased 282,400 Doman B shares at an aggregate cost of $2,287,111, before commissions, including 232,400 shares for himself and his family and 50,000 shares for Bennett Equities.  The Bennett Equities purchases were $407,500.

During the whole period from October 22, 1987, when W.R.Bennett made his first purchases of Doman shares, to September 29, when W.R.Bennett made his last purchases of Doman shares, W.R.Bennett purchased for himself and his family 329,300 Doman shares for an aggregate purchase price of approximately $2,217,175.  308,100 Doman shares, including 125,200 Doman A shares and 182,900 Doman B shares, were purchased for an aggregate cost of $2,081,325, before commissions.  The remaining 21,200 Doman shares were purchased for W.R.Bennett's RRSP for an aggregate purchase price of approximately $135,850, before commissions.

These were circumstances around the purchases of Doman shares by the Bennetts:

-Until the purchases of the Doman shares, most of the assets of R.J.Bennett and W.R.Bennett were real estate.
-Neither of the Bennetts were familiar with the stock market.  The purchases of Doman shares made by each of W.R.Bennett and R.J.Bennett were the first time that each had made major purchases of shares in the stock market.
-The purchases of the Doman shares represented 23.5% of R.J.Bennett's net worth and 34% of W.R.Bennett's net worth.
-The purchases made by R.J.Bennett and W.R.Bennett were unsolicited and made without the recommendation of their brokers.  Steed agreed that the purchases were very substantial even for a person of R.J.Bennett's means.  McNaughton had never handled purchases of the magnitude of W.R.Bennett's purchases for a client in his 41 years as a broker. McNaughton and Steed suspected that their clients knew something.
-With the exception of W.R.Bennett's purchases for his RRSP, the purchases of both R.J.Bennett and W.R.Bennett were financed entirely with bank loans. On the basis of the bank documents, R.J.Bennett's loan was outside bank policy.  We find it surprising and not in keeping with banking industry practice that that was not also the case for W.R.Bennett's loan, where the only security for the loan was the pledge of Doman shares. (Mr. Davison is a former Vice Chair of a major Canadian chartered bank and was in the bank for over 43 years.)  When R.J.Bennett completed his purchases, his bank loan was $1,847,000 (which excludes the Bennett Equities loan).  The daily interest charge was $595.  Annual interest charges would have been $217,175. R.J.Bennett's disposable income was $196,000 and his 50% interest in McIntosh Centre represented 70% of his net worth.  We find that it would not have been long, certainly well within a year, before he would have had to sell assets, including the Doman shares, in order to meet the interest charges.  When W.R.Bennett completed his purchases, his bank loan was $2,038,670.  The daily interest charge was $656. Annual interest charges would have been $239,531. We do not have W.R.Bennett's disposable income, but we have considered W.R.Bennett's new client application form in McNaughton's file, his monthly draw from the McIntosh Centre, his net worth being less than his brother's net worth, his 50% interest in McIntosh Centre representing 85% of his net worth and his unsubstantiated claim that his outside income was much more than his monthly draw.  Based on the evidence before us, we find it would not have been long, certainly well within a year, before he would have had to sell assets, including the Doman shares, in order to meet the interest charges.
Here we have two brothers whose assets were mostly in real estate and who were unfamiliar with the stock market, each make an unsolicited investment in Doman shares, not recommended by their brokers, that was substantial in absolute terms, that represented a significant part of each of their net worths, that one broker thought was "very substantial" and the other had never handled purchases of this magnitude in his 41 years in the business, that both brokers thought were made with knowledge of something, and where both brothers borrowed the money to make the purchases on terms we found outside banking industry practice, with annual interest charges that neither could meet beyond a few months without selling assets, including the Doman shares.  We find that there was nothing ordinary about these circumstances, in fact, we find that taken together these circumstances were most unusual, and, especially so, when we consider these circumstances were the same for both R.J.Bennett and W.R.Bennett.

W.R.Bennett and R.J.Bennett decided that R.J.Bennett should purchase the 50,000 Doman shares for Bennett Equities. This was done at a cost of over $400,000 before commissions on September 6 and 7.  There had been rumours in the market since the end of July, since that time volumes had increased substantially and the price had increased from $6-1/8 to $8. There had been no announcements about a take over. Speculation appeared to be driving the market for Doman shares.  The purchase price was borrowed from the bank on the same terms as R.J.Bennett borrowed over $1.8 million.  Those terms we have found to be outside banking industry practice. Bennett Equities was the company established out of the estate of the father of W.R.Bennett and R.J.Bennett for the benefit of their sister and all their children.  We ask ourselves, would the Bennetts risk the assets of the estate of their late father that were left for the benefit of their sister and all their children.  We say, no.  We find that the Bennetts would not have purchased the 50,000 Doman shares for Bennett Equities unless they were satisfied there was no risk involved in making the investment.

R.J.Bennett sleeps in his truck when he travels. R.J.Bennett buys an oil filter and oil worth less than $24 and delivered them to the garage where his truck was being serviced.  The impression we have is that R.J.Bennett watches his money very closely.

Mills is the Bennett family tax accountant.  He is a good friend of R.J.Bennett.  Mills purchased 28,500 Doman shares. He purchased 8,000 in June, 10,500 on August 25 and 10,000 on September 15.  Most of his purchases were financed by the bank.  The bank documents prepared in connection with his August 24 loan, included the following statement:

Through Mr. Mills' contacts, he is quite confident the share value of Doman Industries will reach a figure of $10 per share within two months.
Mills testified that he does not recall saying that to the bank and that "that was a rumour I'd heard at that point" from Elmore.  The bank documents prepared in connection with his loan application for his September 15 purchases included two statements.  The first statement was "Told Jim to be very careful and not greedy.  His average price is now $8.00." Mills could not recall the conversation and further, could not recall that the loan was to be repaid within 60 days.  The second statement follows.

Mr. Mills has requested being provided with an additional $91,000 to purchase a further 10,000 of Doman Industries bringing his personal portfolio in his shares to 23,000. His contacts tell him that the price of these shares will increase to $12 and he intends to dispose of the stocks before it reaches this figure or conversely when the stock value starts decreasing.
Elmore's evidence given to Commission staff in August 1990 was that "Jim bought a final 10,000 shares from me without much comment or fanfare.  Seems to me that the rumour of a $12.00 offer was quite widespread even naming Louisiana-Pacific." and that he would have heard the rumour through Rob Duncan, his firm's forestry analyst, and that he would count himself as a contact.

During the period of his purchases, according to Mills' testimony, he had met with both R.J.Bennett and W.R.Bennett. Mills' testimony was that W.R.Bennett told him "Go ahead, if you like.  Don't screw up the market".  Mills and the Bennetts would have us believe that Mills purchased Doman shares in June because he had access to their tax returns, and it was just a coincidence that Mills commenced his purchases in June when the Bennetts commenced purchasing Doman shares again. Mills and the Bennetts would have us believe that Mills purchased Doman shares again on August 25 because W.R.Bennett told Mills that he was using his line of credit to purchase Doman shares, and it was just a coincidence that Mills purchased Doman shares again on August 25, the day after W.R.Bennett completed his purchases and the same day, R.J.Bennett commenced his purchases.  Mills and the Bennetts would have us believe that Mills purchased Doman shares on September 15 because he saw W.R.Bennett's family investment agreement at a meeting he was having with Dunn and talked to and received documents from Dunn.  Dunn recalls nothing. Mills' purchase was made before he applied for his bank loan, which he did not do until September 21st.  Here is Mills testimony about the arrangements for the $5,000 loan even though he did not need the money right then.  "I was looking ahead."  "But, you know, because I like to plan ahead."  It doesn't appear to us Mills was planning ahead on September 21st.  Mills' purchase was made Thursday the 15th and Doman Industries' announcement was made on Monday, the 19th.  Mills and the Bennetts would have us believe that was a coincidence. In his bank loans, Mills refers to his contacts and uses language that as far as we are concerned suggests he had the inside track on what was happening to Doman Industries. Elmore's testimony was that he received information on Doman from his firm's forestry analyst and that he passed the information onto Mills.  However, Mills purchases were unsolicited and Elmore testified that "Jim bought a final 10,000 shares from me without much comment or fanfare."  None of Elmore's other clients purchased or held Doman shares. Elmore  counted himself a contact of Mills.  We cannot understand that if Elmore was Mills contact why Mills would not have told the bank.  Not only that, both bank statements taken at different times refers to "contacts". Further Mills could not recall any of these conversations with the bank.  Considering all the evidence and the coincidences, we do not believe Mills.     Based on the evidence before us, we find that Mill's contacts were the Bennetts and that the information in the bank documents came from the Bennetts.

Finally, we have Doman's testimony that he did not know that R.J.Bennett and W.R.Bennett owned Doman shares in 1988. In the evidence, there was testimony from both R.J.Bennett and Abercrombie regarding conversations each had had with Doman.

R.J.Bennett was interviewed by Commission  staff on November 18, 1988, two weeks after November 4, when he was represented by counsel and he knew the seriousness of the allegations made against him and his brother.  His evidence was that in August, he had told Doman in Seattle that "I'm a holder of your stock." and "I mentioned to him, I think that Bill had some stock too."  Doman does not recall the conversation.  At the hearing, R.J.Bennett recanted his evidence saying "reflecting back on it now, I don't think I did.  He gives no reason for recanting his earlier evidence. He would have us believe that he would be mistaken on November 18, 1988, whether in August 1988, he had told his very good friend Doman that he and his brother owned shares in the company that was the most important thing in his very good friend's life.  We do not believe R.J.Bennett when he says "reflecting back on it now, I don't think I did".

Abercrombie testified that he had told Doman in September or October and before November 4, 1988, that the Bennetts were shareholders of Doman Industries.  Doman said "Oh, or something to that effect, and didn't comment."  Doman testified that he does not remember Abercrombie saying anything to him.  Abercrombie is the chief financial officer of Doman Industries.  One of his responsibilities is to review the shareholder register.  He tells Doman that Doman's closest friend and his brother, the former Premier of the province, are shareholders.  Doman appears to pay no attention to that news.  As far as we are concerned that makes no sense to us, unless Doman already knew that the Bennetts were holders of Doman shares.

Doman would have us believe that he could not recall or remember his conversations with Abercrombie and R.J.Bennett. Well, we suppose that could be so; but only if he already knew the Bennetts were purchasing Doman shares.  We simply do not believe Doman's testimony that he did not know that R.J.Bennett and W.R.Bennett owned Doman shares in 1988. Doman's closest friend was R.J.Bennett.  They have been in the horse business together since the early 1970's.  They speak to each other on the telephone two or three times a week and frequently dine together.  During the racing season, they are at the track together.  Doman is a strong supporter of the Social Credit Party and so is Johnson, who headed up Western Forest Products, and who is now a director of Doman Industries.  Johnson had been a director of Doman Industries but left to accept an appointment by W.R.Bennett to head up B.C.Hydro.  Doman was asked by the Social Credit Government just after W.R.Bennett resigned as Premier to be the Lieutenant Governor of the province.  Both Bennetts commenced their purchases of Doman shares at the same time in October 1987 and commenced their purchases again in June 1988.  We found that the Bennetts were significant purchasers in the market for Doman shares.  We found that the Bennetts discussed their purchases.  W.R.Bennett made most of his purchases in June, July and August prior to R.J.Bennett making most of his purchases.  Both Bennetts made substantial purchases, in circumstances we found unusual, especially considering for both Bennetts the circumstances were the same.  Based on all the evidence and our findings and these conversations, we find that Doman must have known that the Bennetts were shareholders of Doman Industries in 1988, and that they had made substantial purchases of Doman shares.

We have considered all the evidence and our findings, including the substantial purchases of Doman shares made by each of R.J.Bennett and W.R.Bennett, the very close and long friendship between R.J.Bennett and Doman, Doman's decision to sell Doman Industries, the most important thing in his life, besides his family, the bank documents with respect to the loans for R.J.Bennett, W.R.Bennett and Mills, our finding that the Bennetts were significant market players in Doman shares, not only during the periods the Bennetts purchased Doman shares, but especially on the days they purchased where for many of those days, one or the other was the dominant purchaser of Doman shares, our finding that the Bennetts must have discussed and planned their purchases of Doman shares, our findings regarding the circumstances around the purchases of Doman shares by each of the Bennetts, all the coincidences that occurred during the period the Bennetts and Mills were purchasing Doman shares, and our finding that Doman must have known the Bennetts were holders of Doman shares and had made substantial purchases of Doman shares.  We do not believe the testimony of Doman and R.J.Bennett that they never discussed Doman Industries.  We do not believe R.J.Bennett's testimony that he bought because his brother bought.  We do not believe W.R.Bennett's testimony that he bought because of his research and analysis. We find that the purchases of Doman shares made by each of the Bennetts must have been made on information received from Doman about his decision to sell Doman Industries that had not been generally disclosed.  Further, we find that the purchases of Doman shares made by Mills must have been made on information received from the Bennetts about the sale of Doman Industries that had not been generally disclosed.

6.1.3 Information Given by Doman to the Bennetts
We found that the purchases of Doman shares made by W.R.Bennett and R.J.Bennett must have been made on the basis of information received from Doman about his decision to sell Doman Industries that had not been generally disclosed.  When the Bennetts purchased Doman shares, the Bennetts knew what the market did not know, initially in October 1987 that Doman had decided to sell Doman Industries and then in June 1988 that Doman had decided to sell Doman Industries and that whatever the deal it would be done in a matter of months and then in August and September 1988 about the merger discussions and the negotiations, including price and timing and other matters.

We are not prepared to accept as a coincidence that R.J.Bennett and W.R.Bennett commenced purchasing Doman shares in October 1987, the month following the first purchases by Louisiana-Pacific.  Nor do we believe R.J.Bennett's testimony that he bought at that time because his brother bought.  If that was so, why do the bank documents prepared in connection with his loan in November 1987 contain the statement that he "is well associated with Doman's top management and believes that, at current prices, Doman shares represent an excellent investment." and make no reference to his brother.  As we have already said, the words suggest to us that R.J.Bennett was getting the inside track on Doman Industries because of his relationship with Doman.  Nor do we find a satisfactory explanation for why W.R.Bennett would apply to increase his line of credit to $2 million for stock market investments in December 1987 and not commence his purchases until June 1988, at the time Doman was having discussions with his financial adviser about the sale of Doman Industries, unless he knew that Doman was going to sell Doman Industries and it was a matter of waiting until Doman was about to commence merger discussions.  Neither of the Bennetts were familiar with the stock market.  Most of their assets were real estate. R.J.Bennett and Doman had known each other since the 1960s and had been in the horse racing business together since the early 1970s.  Except for the small number of Doman shares, R.J.Bennett owned prior to 1987, R.J.Bennett had never owned Doman shares.  Why all of a sudden would the Bennetts purchase Doman shares.  R.J.Bennett's conduct suggests that he watches his money very closely and strikes us as a person who would want a sure thing if he was going to put a significant amount of his money down.  He sleeps in his truck when he is on the road.  He buys the oil filter and oil for his truck.  Two items that together cost less than $24 and caused the garage owner to find it unusual that a person such as R.J.Bennett would do that.  R.J.Bennett was Doman's closest friend.  Doman Industries was the most important thing in Doman's life, besides his family.  Doman's decision whether to sell Doman Industries was probably the most difficult and important decision he had to deal with in his business life.  Doman and R.J.Bennett spoke frequently on the telephone and saw each other often.  We have found that the purchases of Doman shares made by each of the Bennetts must have been made on information received from Doman about his decision to sell Doman Industries that had not been generally disclosed.  We have considered all the evidence and our findings.  We find that Doman must have discussed his decision to sell Doman Industries with R.J.Bennett prior to R.J.Bennett commencing his first purchases of Doman shares in October 1987 and that R.J.Bennett made use of that knowledge in purchasing his Doman shares in late 1987 and early 1988.  We find that R.J.Bennett must have discussed Doman's decision to sell Doman Industries with W.R.Bennett before W.R.Bennett made his first purchases of Doman shares in October 1987 and that W.R.Bennett made use of that knowledge in purchasing his Doman shares in October 1987.

We are not prepared to accept as a coincidence that R.J.Bennett and W.R.Bennett commenced purchasing Doman shares again in June 1988, around the time Doman had retained a financial adviser for Doman Industries and they were discussing the sale of Doman Industries.  We have found that R.J.Bennett was a significant market player in Doman B shares during the period he traded in June and July.  We have found that W.R.Bennett was a significant market player in both Doman A and Doman B shares during the periods he traded in June and in July.

We have found that the Bennetts must have discussed and planned their purchases.  In June and July, we find that it became apparent to the Bennetts that it was difficult to pick up significant amounts of Doman shares, simply because there were not a lot of shares traded.  This is clear when you review the evidence of the trading and the extent to which the Bennetts dominated the trading in June and July on the days they traded.  In June, there were 185,099 Doman A shares traded and 180,168 Doman B shares traded.  In July, the volumes decreased dramatically.  Only 65,715 Doman A shares and 77,769 Doman B shares traded.  This explains W.R.Bennett's remark to Mills "Go ahead, if you like.  Don't screw up the market."  Mills testified that W.R.Bennett told him that on August 24 when W.R.Bennett had completed his purchases and when there were significant volumes of Doman shares trading. We do not believe him.  As far as we are concerned, W.R.Bennett had that conversation with Mills in July and that is why Mills stayed out of the market until August 25.  This explains why at the beginning of August, W.R.Bennett asked McNaughton if he could find him a block of 200,000 to 250,000 Doman shares.  Also, W.R.Bennett was going away early in September and he needed to have his purchases completed before he went away.  We find that the Bennetts made the decision that under the circumstances, W.R.Bennett should make his purchases and then R.J.Bennett would make his purchases and that is exactly how it worked.  From July 27 to August 24 only W.R.Bennett purchased Doman shares and for the first time, he purchased both Doman A shares and Doman B shares.

After the end of July, the market for Doman shares started to heat up on rumor of a take over.  The price for Doman B shares increased from $6-1/8 at the end of July to $7-2/8 by August 25.  The volume of Doman B shares traded increased dramatically over the volume traded in July, from 77,769 to 794,553 by August 25, more than a ten fold increase.

By August 24th, W.R.Bennett had purchased 299,300 Doman shares, all but the 10,000 Doman shares he purchased on September 6 for his RRSP.  His purchases of the 299,300 Doman shares were made on 28 trading days during the period, June, July and August to the 24th.  We have found that W.R.Bennett was a significant market player and that on 19 of the 28 trading days, W.R.Bennett was the dominant purchaser of the Doman A and Doman B shares.

R.J.Bennett commenced most of his purchases on August 25th.  By this time we have found that Merlo and Doman were having serious discussions about a merger.  We are not prepared to accept that R.J.Bennett's purchases were just a coincidence.  There was a lot more trading in the market now and so in a matter of 11 trading days, R.J.Bennett was able to purchase 251,600 Doman B shares.  We have found that R.J.Bennett was a significant market player in Doman B shares during this period.  We have found that on five of those trading days he was probably the dominant purchaser of Doman B shares.  During the period there were at least three calls between Doman and R.J.Bennett.  Following each of the calls he made significant purchases of Doman B shares.  Doman and R.J.Bennett would have us believe that these purchases were coincidences.  We do not accept that the purchases were coincidences.  The Exchange continued to pressure Doman and so Doman Industries made its announcement on September 14 that merger overtures had been received and would be considered by the directors on September 19.  By September 19, R.J.Bennett had finished his purchases of Doman shares.  Following the close of the market that day, Doman Industries made its announcement that Doman would be negotiating with the parties who had made overtures.  Neither of the news releases included a statement about Doman's intentions to sell Doman Industries. Doman and R.J.Bennett would have us believe that it was a coincidence that R.J.Bennett finished his purchases on September 19, the day of the announcement, and that W.R.Bennett had finished his purchases.  We find that was no coincidence.

We have found that the purchases of Doman shares made by each of the Bennetts must have been made on information received from Doman about his decision to sell Doman Industries that had not been generally disclosed.  We have considered all the evidence and our findings.

We find that in June 1988, Doman decided to sell Doman Industries, and that whatever the deal was it would be done in a matter of months, which we sometimes refer to as Doman's June decision to sell Doman Industries.  We find that Doman must have discussed his June decision to sell Doman Industries with R.J.Bennett before R.J.Bennett commenced his purchases of Doman shares in June 1988.  We find that Doman must have had discussions with R.J.Bennett during August and September 1988 about the merger discussions and negotiations, including price and timing and other matters, which we sometimes refer to as the August and September merger discussions.  We find that R.J.Bennett must have made use of his knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions in purchasing the 11,800 Doman shares in June and July and the 251,600 Doman shares from August 25 to September 1988.

Based on our finding that Doman must have known that the Bennetts were shareholders of Doman Industries in 1988, and that they had made substantial purchases of Doman shares and the evidence and our findings that we based that finding on, we find that when Doman had discussions with R.J.Bennett about his June decision to sell Doman Industries and about the August and September merger discussions, he did so knowing that R.J.Bennett would give that information to W.R.Bennett. We find that R.J.Bennett must have passed the information about Doman's June decision to sell Doman Industries along to W.R.Bennett before W.R.Bennett made his first purchases of Doman shares in June 1988.  We find that R.J.Bennett must have discussed the August and September merger discussions with W.R.Bennett during August and September 1988.  We find that W.R.Bennett must have made use of his knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions in purchasing 299,300 Doman shares in June, July, August and September 1988.

6.1.4 The Purchases and Section 68 of the Act
The amended notice of hearing was very broadly worded. We were asked to consider all the circumstances surrounding the purchases and sales of Doman shares between October 1987 and November 4, 1988, in making our determination whether it is in the public interest to make any orders under section 144(1)(c) and (d) of the Act.

At the hearing, Commission staff only alleged that between August 25, 1988, and September 19, 1988, the Doman shares that R.J.Bennett purchased were purchased on the basis of information received from Doman of material facts or material changes in the affairs of Doman Industries that had not been generally disclosed.

The relevant sections of the Act have been set out under Allegations and Relevant Statutory Provisions.  There is section 68 that sets out the prohibition against what we refer to as insider trading.  Special relationship, insider, material fact and material change are words and terms that are relevant.  These are defined in sections 1 and 3 of the Act.

Section 68(1)(a) of the Act provides that "no person in a special relationship with a reporting issuer shall ... purchase ... securities of the reporting issuer with knowledge of a material fact or material change in the affairs of the reporting issuer that he knows or ought reasonably to know has not been generally disclosed".  This is the section that Commission staff allege R.J.Bennett contravened.

Section 68(1)(b) of the Act provides that "no person in a special relationship with a reporting issuer shall ... inform, other than in the necessary course of business, another person about a fact or change which he knows or ought reasonably to know ... is a material fact or material change in the affairs of the reporting issuer, and ... has not been generally disclosed".  This is the section that Commission staff allege Doman contravened.

We will first consider whether Doman has contravened section 68(1)(b).

Doman Industries is a reporting issuer under the Act. Reporting issuer is defined under section 1 of the Act.  We have not set out the definition here because we do not consider there to be an issue regarding whether Doman Industries is a reporting issuer.

We find that Doman is in a special relationship with Doman Industries under section 3(1)(a) and (b).  A person in a special relationship includes an insider and a director, officer or employee of the reporting issuer.  Insider includes a director or senior officer of the issuer and also includes a person who owns securities of the issuer carrying more than 10% of the voting rights attached to all of the issuer's voting securities.  Definitions of issuer, securities and senior officer are included in section 1(1) of the Act.  We have not set out the definitions here because we do not consider there to be an issue regarding whether Doman was in a special relationship with Doman Industries and whether securities include Doman shares.  Doman was the chairman, president and chief executive officer, a director and an employee of Doman Industries and held Doman shares that carried more than 52% of the voting rights attached to all the outstanding Doman shares.

Under section 68(1)(b), Doman is prohibited from informing another person about a material fact or material change in the affairs of Doman Industries that he knows has not been generally disclosed.  There is an exception for persons where it is in the necessary course of business.  No one suggests for a moment that R.J.Bennett was such a person. Following are our findings with respect to the purchases by W.R.Bennett and R.J.Bennett.

We have found that the purchases of Doman shares made by each of the Bennetts must have been made on information received from Doman about his decision to sell Doman Industries that had not been generally disclosed.  We have considered all the evidence and our findings.
We find that in June 1988, Doman decided to sell Doman Industries, and that whatever the deal was it would be done in a matter of months, which we sometimes refer to as Doman's June decision to sell Doman Industries.  We find that Doman must have discussed his June decision to sell Doman Industries with R.J.Bennett before R.J.Bennett commenced his purchases of Doman shares in June 1988.  We find that Doman must have had discussions with R.J.Bennett during August and September 1988 about the merger discussions and negotiations, including price and timing and other matters, which we sometimes refer to as the August and September merger discussions.  We find that R.J.Bennett must have made use of his knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions in purchasing the 11,800 Doman shares in June and July and the 251,600 Doman shares from August 25 to September 1988.
Based on our finding that Doman must have known that the Bennetts were shareholders of Doman Industries in 1988, and that they had made substantial purchases of Doman shares and the evidence and our findings that we based that finding on, we find that when Doman had discussions with R.J.Bennett about his June decision to sell Doman Industries and about the August and September merger discussions, he did so knowing that R.J.Bennett would give that information to W.R.Bennett.  We find that R.J.Bennett must have passed the information about Doman's June decision to sell Doman Industries along to W.R.Bennett before W.R.Bennett made his first purchases of Doman shares in June 1988.  We find that R.J.Bennett must have discussed the August and September merger discussions with W.R.Bennett during August and September 1988.  We find that W.R.Bennett must have made use of his knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions in purchasing 299,300 Doman shares in June, July, August and September 1988.
Was this information that we have found Doman must have given to R.J.Bennett a material fact or material change in the affairs of Doman Industries?

If the information is a material fact in the affairs of Doman Industries, it must be used in relation to the Doman shares and it must significantly affect, or could reasonably be expected to significantly affect, the market price of the Doman shares.  Doman controlled Doman Industries.  If he decided to sell Doman Industries, Doman Industries would be sold.  It would be irrelevant what the directors had to say. The decision to sell Doman Industries was his alone to make. The market always expects a premium to be paid for shares to be bought under a take over bid.  The question is how much of a premium will the offeror have to pay in order to acquire the shares.  The market would always expect that the premium would significantly affect the price of the shares.  We find that Doman's June decision to sell Doman Industries was a fact that not only could, but would, reasonably be expected to significantly affect the market price of Doman shares and, therefore, was a material fact within the definition of material fact in section 1(1) and was a material fact in the affairs of Doman Industries under section 68(1)(b).

We also know what in fact did happen in the market based on rumors of a take over, when the take over was announced and when the deal collapsed.  When R.J.Bennett made his first purchases on June 9, Doman B shares opened at $5-7/8.  By the end of July, Doman B shares closed up 25 cents at $6-1/8. By August 25, Doman B shares opened up $1.12 at $7-2/8.  The volume of Doman B shares traded during this period had increased ten fold over the Doman B shares traded in July. Neil Winchester of The Toronto Stock Exchange testified that the prices for Doman shares had been moving up considerably from the end of July 1988 and that the Exchange had heard rumours about a possible take over bid.  Abercrombie testified that there were no undisclosed corporate developments. Although there were positive reports being issued about Doman Industries at the time, the rumors of a take over continued and by September 14, Doman Industries made an announcement following the close of the market as a result of pressure from the Exchange.  The Doman B shares closed that day at $8-7/8, up $1.625 from the open on August 25.  Following the announcements on September 19 and September 20, Doman B shares closed up another $1.00 at $9-7/8 on September 21.  Neither of the Doman Industries news releases disclosed Doman's intention to sell Doman Industries.  Anticipation of whether there would be a take over continued to put upward pressure on the price of Doman B shares.  On October 6, the Doman B shares closed at $10-5/8, up 75 cents from the close on September 21.  That day, the take over was announced at $12.  On October 11, the next trading day, of course, the Doman B shares closed up at $11-5/8 reflecting the take over.  There were no other offers made for the shares.  On November 4, the day the deal collapsed, Doman B shares were trading as high as $11-1/2. Louisiana-Pacific was not prepared to buy at any price and the Doman shares closed the day following the announcement at $7.25.  That was a decrease of $4-1/8 or 36%.  Assuming that price of $7.25 reflected the market without the prospect of a bid, then on the Louisiana-Pacific bid of $12, the premium was $4.75 would have represented a substantial premium of 66%. We, therefore, find that Doman's decision to sell Doman Industries did significantly affect the market price of Doman shares.

A change in the ownership of Doman Industries that would reasonably be expected to have a significant effect on the market price of the Doman shares is a material change in the affairs of Doman Industries.  On the basis of the discussion above with regard to our finding that Doman's June decision to sell Doman Industries was a material fact, we find that the material fact was also a material change within the definition of material change in section 1(1), notwithstanding Doman had not entered into an agreement with a purchaser or even knew who the purchaser would be, and was a material change in the affairs of Doman Industries under section 68(1)(b).

During August and September 1988, the fact Merlo and Doman were having serious discussions about a merger and the facts regarding the negotiations, including price and timing and other matters, were all facts that could reasonably be expected to significantly affect the market price of the Doman shares and, therefore, were material facts within the definition of material fact in section 1(1) and were material facts in the affairs of Doman Industries under section 68(1)(b).  We already know the effect that the rumors of a take over had on the market price for Doman shares.  It is a reality that information related to take over negotiations very often could significantly affect the market price of the shares if disclosed to the market.  As a consequence, responsible market participants go to great lengths to ensure confidentiality about negotiations until they are able to announce a deal.  They will keep the group who have access to information as small as possible.  They will watch the trading in the shares affected, so that they will know immediately of any unusual trading.  If there is unusual trading, and it appears to be related to the negotiations, they then deal with the unfortunate situation where an announcement may need to be made, notwithstanding that a deal has not been made between the parties.  They will watch who trades the shares affected. Most certainly they would have alerted all those involved in the negotiations to the provisions of section 68.  Sadly, it appears to us that these negotiations were conducted without these matters in mind.

While we have found that during August and September 1988 the merger discussions and negotiations, including price and timing and other matters, were material facts, these facts would not necessarily be material changes in the affairs of Doman Industries.  In the context of a take over and section 68, it is recognized that facts can often be material facts and not material changes.  However, in certain circumstances, what is a material fact in the affairs of an issuer may very well become a material change in the affairs of the issuer requiring disclosure under section 67.  Here, we have these circumstances: Doman was the controlling shareholder of Doman Industries, there had been no disclosure of Doman's June decision to sell Doman Industries and the market was being affected by rumors of a take over.  We find, in these circumstances, that the fact Merlo and Doman were having serious discussions about a merger is also a material change in the business and ownership of Doman Industries that would reasonably be expected to have a significant effect on the market price of the Doman shares and that, therefore, a material change within the definition of material change in section 1(1), notwithstanding Doman had not entered into any agreement with Merlo, and was a material change in the affairs of Doman Industries under section 68(1)(b).  The trading in Doman shares during the period which we have already reviewed above provides clear evidence that rumors of a take over had a significant effect on the market price of Doman shares.

We have found that Doman's June decision to sell Doman Industries was a material fact and a material change under section 68(1)(b).  We have also found that the fact that Merlo and Doman were having serious discussions about a merger was a material fact and a material change and the facts regarding the negotiations, including price and timing and other matters, were material facts, all under section 68(1)(b).  Are these facts and changes that Doman knew or ought reasonably to have known were material facts and material changes in the affairs of Doman Industries which he knew had not been generally disclosed.  Doman was the controlling shareholder and the chief executive officer of Doman Industries.  We find that these were facts and changes that Doman knew or ought reasonably to have known were material facts and material changes in the affairs of Doman Industries which he knew had not been generally disclosed.

We therefore find that Doman contravened section 68(1)(b) of the Act when, as we have found, Doman must have informed R.J.Bennett in June 1988 that he had decided to sell Doman Industries and that whatever the deal was it would be done in a matter of months, and when, as we have found, Doman must have informed R.J.Bennett during August and September 1988 about the merger discussions and the merger negotiations, including price and the timing and other matters.

Now, we will consider whether R.J.Bennett has contravened section 68(1)(a).

We find that when, as we have found, Doman must have informed R.J.Bennett in June 1988 that he had decided to sell Doman Industries and that whatever the deal was it would be done in a matter of months, and when, as we have found, Doman must have informed R.J.Bennett during August and September 1988 that he and Merlo were having serious discussions about a merger and about the merger negotiations, including price and timing and other matters, R.J.Bennett acquired knowledge of material facts or material changes in the affairs of Doman Industries from Doman who he knew was an insider and a director, officer and employee of Doman Industries. Therefore, we find that R.J.Bennett was in a special relationship with Doman Industries under the definition of special relationship in section 3(1)(e) when he acquired the knowledge of those material facts and material changes.

We have found that R.J.Bennett purchased 251,600 Doman shares with knowledge of these material facts and material changes.  Based on the evidence, we find that he knew or ought reasonably to have known that these material facts and material changes had not been generally disclosed.

We therefore find that R.J.Bennett contravened section 68(1)(a) of the Act when R.J.Bennett purchased 251,600 Doman shares with knowledge of the following material facts or material changes in the affairs of Doman Industries: when, as we have found, Doman must have informed R.J.Bennett in June 1988 that he had decided to sell Doman Industries and that whatever the deal was it would be done in a matter of months, and when, as we have found, Doman must have informed R.J.Bennett during August and September 1988 that he and Merlo were having serious discussions about a merger and about the merger negotiations, including price and timing and other matters.

In conclusion, we have found that the 251,600 Doman B shares that R.J.Bennett purchased between August 25 and September 19, 1988, were purchased on the basis of information received from Doman of material facts or material changes in the affairs of Doman Industries that Doman knew, or ought reasonably to have known, were material facts or material changes in the affairs of Doman Industries and that Doman and R.J.Bennett knew, or ought reasonably to have known, had not been generally disclosed, and, that, therefore, Doman contravened section 68(1)(b) and R.J.Bennett contravened section 68(1)(a) of the Act.

6.2  Sales of Doman Shares

6.2.1 Doman's call to R.J.Bennett on November 4, 1988 at 10:09
We found that Merlo called Doman at 9:52 a.m. on November 4, 1988, and advised him that Louisiana-Pacific would not be proceeding with the take over of Doman Industries.  The call ended at 10:07.  Within two minutes, at 10:09, Doman called R.J.Bennett.  That call ended at 10:14.  Doman testified that he called to talk about the fact that a horse by the name of Champers had been sold for $500 rather than $5,000, that it was a normal conversation and that he did not inform R.J.Bennett and W.R.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries.

148,900 Doman A shares and 411,052 Doman B shares traded that day.  In the aggregate, 559,952 Doman shares traded. Following the commencement of Doman's call to R.J.Bennett at 10:09, R.J.Bennett for himself and for Bennett Equities, W.R.Bennett for himself and his family, Mills for himself and his wife, Steed, Duhamel and Dunn sold all their Doman shares, except for R.J.Bennett who did not sell his 816 Doman A shares and who over sold his holdings of Doman B shares by 5,116. These sales aggregated 551,996 Doman shares and represented 99% of all the sales of Doman shares sold that day.  Only 7,956 other Doman shares were sold on November 4.

Doman testified that Merlo's call came when he was on the call to R.J.Bennett at 10:09 and that he ended the call at 10:14 because "Mrs. Maguire or the other girl" came in and said Merlo was on the phone.  We have found that Doman could not have been mistaken about the sequence of those calls and that Doman did not tell the truth in his testimony before us when he claimed that the call from Merlo came at 10:14 when he was talking to R.J.Bennett.  We find that there is no explanation why Doman would have given his testimony about the sequence of those calls, except that he wanted to give himself and the Bennetts a basis for being able to defend the allegations of insider trading in contravention of section 68 made against them.

Merlo testified that Doman was very disappointed when he told him that Louisiana-Pacific would not be proceeding with the take over.  They talked for 15 minutes.  Doman testified that when he finished his call with Merlo, he was devastated, in shock, angry and upset.  Under the take over, Doman and his family were to receive over $80 million.  Doman was going to be working with Merlo, his long time business friend. Doman was going to continue doing the job he had been doing since 1964, when he founded Doman Industries as a forest products business.  Doman Industries press release announcing the take over stated Doman

is looking forward to his new role as C.E.O. of L.P's and Doman's combined operations in British Columbia.
Louisiana-Pacific's news release included statements attributed to Merlo that Louisiana-Pacific was delighted about the opportunity to expand and complement their operations in the province and

also pleased that Herb Doman is excited about becoming a key member of the L-P team and heading up all of our operations in the province.
Merlo had over the years expressed an interest in taking over Doman Industries on two occasions and the current discussions that culminated in the announcement of the take over had started, according to Merlo's evidence, prior to 1988.  We find that when Doman made his June decision to sell Doman Industries and informed R.J.Bennett, he had no idea the deal would collapse and that the only issue for Doman was what the terms of the deal would be and that he was certain he would be able to work out acceptable terms.  Abercrombie testified that Doman was in a state of shock when he saw him at 10:50 that morning.  Johnson testified that Doman was in a state of shock when he called him in the afternoon.

We have found that Doman must have known that not only were the Bennetts holders of Doman shares, but that they had made significant purchases of Doman shares.  Based on that finding and the evidence and our findings that we based that finding on, we found that when Doman had discussions with R.J.Bennett about his June decision to sell Doman Industries and about the August and September merger discussions, he did so knowing that R.J.Bennett would give that information to W.R.Bennett.  We have found that R.J.Bennett and Doman contravened section 68(1) of the Act when R.J.Bennett purchased 251,600 Doman shares with knowledge received from Doman of material changes and material facts relating to the merger of Doman Industries and Louisiana-Pacific that had not been generally disclosed and that W.R.Bennett purchased 299,300 Doman shares with knowledge received from R.J.Bennett of those same material changes and material facts.

Doman testified that on November 4, 1988, at 10:09 in the morning, within two minutes of ending his call with Merlo, he called R.J.Bennett to talk about the fact that a horse by the name of Champers had been sold for $500 rather than $5,000, that it was a normal conversation and that he did not inform R.J.Bennett and W.R.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries.  Doman asks us to believe him.  Here is a man who we expect had probably made the most difficult decision in his business life when he decided to give up control of his company.  It was a company he founded and to which he devoted his whole life.  Having made that decision, he negotiated the take over of his company where Louisiana-Pacific had agreed to pay a substantial premium of about 100% for Doman shares (based on the opening of $5-7/8 for Doman B shares on June 9, the day R.J.Bennett commenced his purchases, and the closing price of $6-1/8 for Doman B shares at the end of July, when rumors of a take over started circulating in the market), where he and his family would be receiving over $80 million and where he would be continuing to be the CEO of his companies' operations and those of Louisiana-Pacific in the province.  Then he is told "the deal is off", something we have found he really did not seriously contemplate.  As Doman testified he was devastated, in shock, angry and upset.  He was in a state of shock hours later.  We cannot imagine that Doman could have talked about anything other than the collapse of the deal when he called his closest friend R.J.Bennett less than two minutes later, much less have had a normal conversation for five minutes about a horse worth at most $5,000.  Further, Doman's testimony about Champers is inconsistent with R.J.Bennett's testimony.  Doman testified that Champers had a clean bill of health and couldn't understand why they only got $500 for the horse. R.J.Bennett's testified that Champers had a broken or cracked sesamoid and wasn't worth more than $500.  Not only was there testimony inconsistent, but we cannot imagine that the conversation about Champers could have taken one minute, let alone five minutes.  We have considered all the evidence and our findings.  We do not believe Doman's testimony.  We find that during the call, Doman did inform R.J.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries, which we will sometimes refer to as the collapse of the deal, and that he provided that information to R.J.Bennett knowing that R.J.Bennett would pass the information onto W.R.Bennett.

Further, Doman's call with R.J.Bennett ended at 10:14 and, according to his testimony, the first person he spoke to about the collapse of the deal was Abercrombie at 10:50, 35 minutes later.  Doman waited until 10:25 to call Miles.  Doman testified that he left a message.  But, there is no evidence he left a message for Miles.  Miles is a senior partner at Ladner Downs and Doman was an important client at the time, it would have been no problem to have a number of people trying to find Miles, so that he could talk to Doman.  We cannot understand why in these circumstances, Doman did explain the urgency and have someone look for Miles, so that he could speak to him immediately, unless of course, he really was not intending to speak to Miles.  Doman testified that Merlo told him that DeMott was expecting to meet with Miles and would be telling him that the deal had collapsed.  When Doman called at 10:40, again, he did not have someone look for Miles.  All he left was a message for Miles to call him.  There was nothing to indicate urgency.  Abercrombie knew the urgency of the circumstances.  At 10:50, as soon as Doman told him that the deal had collapsed, the first words out of his mouth were "we have to halt trading".  Doman did not tell Abercrombie when Merlo called.  If Abercrombie had known that Doman's call with Merlo had ended at 10:14, we can only imagine what his reaction would have been.  Twenty days later, on November 24, when Abercrombie learned for the first time in Miles' office that Doman had called R.J.Bennett that morning, Abercrombie testified that "I was absolutely flabbergasted".  We find that when Doman made the 10:25 call to Miles, he did not expect to reach Miles.  At 10:50 when Doman spoke to Abercrombie, it was almost 45 minutes after Merlo ended his call to Doman and 35 minutes after Doman ended his call to R.J.Bennett. Abercrombie's testimony was that he could not imagine Doman not doing anything for 30 to 35 minutes.  Based on the evidence, and our finding that when Doman made the 10:25 call to Miles, he did not expect to reach Miles, we find that Doman intentionally waited in his office after he ended his call with R.J.Bennett at 10:14 and did not try to contact anyone until he phoned and left a message for Miles at 10:40, so that R.J.Bennett and W.R.Bennett would have the opportunity to sell their Doman shares, and further, that R.J.Bennett would have known Doman's intention and that Doman would have told R.J.Bennett his intention knowing R.J.Bennett would tell W.R.Bennett.  At 10:17 that morning, within eight minutes of the commencement of Doman's call to R.J.Bennett at 10:09, R.J.Bennett sold 189,000 Doman shares.  By 10:29 that morning, within 20 minutes of the commencement of Doman's call to R.J.Bennett at 10:09, W.R.Bennett had sold 324,300 Doman shares.  These sales represented almost all their holdings.

We do not believe Doman's testimony about his call to R.J.Bennett at 10:09, therefore, we do not believe R.J.Bennett when he testified that on November 4, 1988, at 10:09 in the morning, Doman called and they had a lighthearted conversation about Champers and that they did not discuss Doman Industries.

We do not believe both Doman's and R.J.Bennett's testimony about their telephone conversation at 10:09 in the morning on November 4, 1988, and we have found that Doman did inform R.J.Bennett and W.R.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries.  We find that the only reason Doman and R.J.Bennett gave their testimony about their conversation at 10:09 in the morning of November 4, 1988, is so that they would be able to defend the allegations of insider trading in contravention of section 68 made against them.

6.2.2 The Ranch Meeting
Langford, R.J.Bennett, W.R.Bennett, Mills and Dunn all agreed they met on the morning of November 4, 1988, to discuss the school for the Winfield Ranch.  Langford testified the meeting commenced approximately 9:30.  The others testified the meeting commenced either sometime after 10:30 and before 11 o'clock or shortly after 11 o'clock.  Langford testified about who attended the meeting and when and for how long.  The testimony of the others in this regard is for the most part inconsistent with Langford's.

Langford testified that R.J.Bennett had arranged a meeting at the McIntosh Centre for November 4, 1988.  On November 3, he had done work on the project in preparation for the meeting.  The time was recorded on his time sheet.  On November 4, Langford kept contemporaneous notes in a telephone diary and a daytimer.  This is his practice.  These notes assisted him in his recollection of what happened that day.

The notation in Langford's telephone diary reads, "Friday, November 4th, 1988, 9:10, R.J.Bennett - message." Langford explained that he telephoned the McIntosh Centre at 9:10 that morning "just to ensure that the meeting was still on at the time it was arranged."  He explained that on other occasions he had met with R.J.Bennett he had been kept waiting and "I made the call just to make sure that the timing was still on, that we wouldn't waste time."  He talked to one of the secretaries and at the time of the call, he made a notation of the call in the telephone diary he keeps beside the telephone.  This is his practice.  "My practice in my telephone book is, if I speak directly to the person, I make notes.  If I speak to someone else then I note `message', because it relays to me the fact that I didn't speak with the individual that is noted in the telephone book.  Langford testified that "I would phone just prior to leaving, you know, was kind of the established procedure that I followed then and subsequently."  Following the call at 9:10, Langford gathered up his files for the meeting and walked down to the McIntosh Centre.

Respondents' counsel cross-examined Langford and made much of the fact that according to R.J.Bennett's testimony, he could not have been at the McIntosh Centre at 9:10 that morning and further, what exactly did Langford mean when he wrote "message".  Notwithstanding, R.J.Bennett may not have been there and notwithstanding, Langford's recollection may have been that he was there, we find that there is no doubt that whatever discussion he had with the secretary, Langford was satisfied R.J.Bennett would be there for their meeting and that is why he gathered up his material and walked to the McIntosh Centre.

It is a ten minute walk to the McIntosh Centre from Langford's office.  His recollection when he was interviewed by Commission staff on August 8, 1990, was that "I would think by the time I collected everything and, you know, discussed with the other people in the office, the secretary on the way out, things that are going on, that I would have been there approximately 9:30."  Langford keeps a daytimer for billing purposes.  The entry for November 4, 1988, shows at approximately 9:30 "Meet R.J., Bill Bennett re Winfield, one hour."  "The one hour refers to the amount of time that would have been expended on the project."  "Typically, it would be -- probably involve the time walking to and from the office and the time spent at McIntosh."  The entry would have been made following the meeting, "sometime after I got back to the office, during that same day."  This is Langford's practice. Langford guessed the meeting started about 9:30 in the morning.  "I don't believe I waited on the couch but --" ... "It's possible, for a short period."

Respondents' counsel again cross-examined Langford regarding when the meeting took place.  Langford was asked a number of questions about his daytimer entry and finally, whether the meeting could have started at 9:45 and he answered, "I think that's beginning to stretch it, but it's a possibility."  Langford was asked whether it was a possibility that he showed up and R.J.Bennett was not there and he was kept waiting for some time.  Langford answered "Well, my memory is certainly, I guess, not in fallible [sic], but my best recollection is that I called first to confirm and that I had a meeting around 9:30".  In a telephone interview with Commission staff on July 4, 1990, Langford was asked: "Is it likely at all, Mr. Langford, in your mind, that the meeting started as late as 11 o'clock in the morning?"  Langford responded: "No.  Certainly I am not infallible but having two references, I feel confident that it did occur as I have shown it."

Langford did not notice anything out of the ordinary occurring that day at the McIntosh Centre.  The meeting took place in R.J.Bennett's office.  Langford remembers R.J.Bennett "seemed very much on that day as he did on any other day."  "I recall the meeting being essentially in three parts. Initially, I met with Mr. R.J.Bennett and discussed the subdivision development with him and the cost implications and servicing implications.  Following that, I believe two gentlemen came in, one of which was Mr. Dunn, the company accountant.  And we went through it again, discussed it again. And the third part of the meeting, Mr. Bill Bennett attended and we went through the numbers again."  He recalls that R.J.Bennett "was there during the whole period" and that the other gentleman in the second part of the meeting was an accountant.  In fact, we know that the person was Mills.  "We basically went through the figures three different times, the same figures three different times with three different parties.".  "I would think the meeting with him(W.R.Bennett) was the shortest.  I remember him being very quick to pick up on what we were talking about, very decisive." That day was the first time Langford had met the former premier of the province.  "I have a vague recollection that R.J. may have taken a call, but I can't say for certain."  He does not remember R.J.Bennett interrupting, stopping or leaving the meeting.

Each of R.J.Bennett, W.R.Bennett, Dunn and Mills told a different story about their meeting with Langford.

R.J.Bennett testified that shortly after 11:00, W.R.Bennett and Mills came into his office, that his brother got Dunn and he got Langford, that they met with Langford for a half hour, and that the meeting ended at about 11:30, 11:45, and that everyone remained for the entire meeting.  Dunn testimony is consistent with R.J.Bennett's testimony. W.R.Bennett's testimony is inconsistent with R.J.Bennett's, in that W.R.Bennett testified that the meeting started sometime after 10:30, before 11 o'clock, and that he attended the meeting for "under ten minutes" when he and Mills left the meeting together.  Mills testimony is inconsistent with R.J.Bennett's testimony, in that Mills testified that he did not go into R.J.Bennett's office with W.R.Bennett, that W.R.Bennett was in the office alone when he came in, that then R.J.Bennett came in with Langford, that the four of them met for about 10 minutes, that then W.R.Bennett went and got Dunn and that very shortly after Dunn joined the meeting, he and W.R.Bennett left the meeting.

Further, Mills testimony is inconsistent with W.R.Bennett's testimony.  W.R.Bennett testified that Mills arrived at his office, that they had a discussion and he said to Mills "R.J.'S got something.  I promised you'd take a look at it and I'd go in and take a look too.  We went over there sometime before eleven a.m.".  Based on Mills testimony, Mills could not have arrived at the McIntosh Centre before 11 o'clock, he did not meet with W.R.Bennett in his office before the meeting, W.R.Bennett did not take him to the meeting and R.J.Bennett was not expecting him at the meeting.  Here is R.J.Bennett's testimony according to Mills "You're here, you should stay for the meeting."

Who is telling the truth?  Is it possible that the parties could be mistaken about when the meeting took place? Where the parties cannot agree whether the meeting commenced shortly before 11 o'clock or shortly after 11 o'clock is one thing; but where there is at least one and a half hours difference, that is quite another matter.  We are satisfied that there can be no mistake here.  Either Langford is not telling the truth or R.J.Bennett, W.R.Bennett, Dunn and Mills are not telling the truth.  Considering all the evidence and our findings, we prefer Langford's testimony.  We do not believe the testimony of R.J.Bennett, W.R.Bennett, Dunn and Mills.  We find that the ranch meeting held on November 4, 1988, with Langford and R.J.Bennett, W.R.Bennett, Dunn and Mills commenced approximately 9:30 and ended before Doman called R.J.Bennett at 10:09, that whether the ranch meeting started after 9:30 and even as late as 9:40 or 9:45, the meeting ended before R.J.Bennett took Doman's call at 10:09 and that R.J.Bennett was present for the entire meeting and therefore R.J.Bennett and W.R.Bennett could not have met about 9:50 that morning to discuss the sale of their Doman shares. We do so for these many reasons.

-Langford kept contemporaneous notes in a telephone diary and a daytimer relating to the ranch meeting.  This is consistent with his practice.
-While Langford's notes assisted him in his recollection of what happened that day, his explanations of his notes clearly had the ring of truth about them.
-R.J.Bennett would have us believe that he called Thompson Horse Van Lines at 9:33 and the call ended at 9:37. While there is a telephone company record of the call, R.J.Bennett produced no evidence to corroborate his evidence that he made the call.  He did not mention the call when he was interviewed by Commission staff on November 18, 1988, two weeks following November 4.  He was represented by counsel.  At that time, he knew he was under investigation for insider trading and he testified before us that he took the matter seriously.  His testimony before us is that he did not know at that time that the telephone companies kept records of the times that calls were made.  R.J.Bennett produced no evidence to corroborate his testimony.  We find R.J.Bennett's testimony simply unbelievable.  Here is a businessman who runs a horse ranch, was a director of a Canadian chartered bank and who we know made long distance telephone calls as part of his business, let alone as the head of a household.  He would know as well as any businessman that businesses have to be able to make an accounting to their customers for charges billed to customers.  Further this is someone who sleeps in his truck when he travels and buys his own oil and oil filter.  We asked ourselves, how many people do that today who are in R.J.Bennett's financial position? Certainly, the garage owner found it out of the ordinary and so do we.  We find that R.J.Bennett must have known that telephone companies keep records of telephone calls, including particulars such as dates, times and duration of calls and telephone numbers so as to be able to make an accounting to clients.  Further, we find that R.J.Bennett did not make the call to Thompson Van Lines, that by November 18 the telephone company bill had not come to the McIntosh Centre and that when it did come he became aware of the call to Thompson Van Lines for the first time.  In any event, our finding regarding when the ranch meeting took place does not preclude that call from having been made.  Langford's testimony is that the meeting could have commenced at 9:40.
-W.R. Bennett ended a call with Poole at 9:45.  Shortly after 9:45 in the morning, W.R.Bennett returned McNaughton's call.  They talked for about four minutes. Langford's testimony is consistent with this call having taken place.  Langford testified that W.R.Bennett was the last person to come into the meeting and that the meeting with him was the shortest.  It is also consistent with W.R.Bennett's testimony that he was in the meeting for less than ten minutes, although we realize that that is where the consistency between many aspects of their testimony ends.
-Following W.R.Bennett's call with McNaughton, R.J.Bennett and W.R.Bennett would have us believe that they had a four or five minute meeting in the boardroom before 10 o'clock, that W.R.Bennett told R.J.Bennett he had decided to sell his Doman shares and that he recommended that R.J.Bennett sell his Doman shares.  R.J.Bennett's testimony of how they met was inconsistent with W.R.Bennett's testimony.  There was no evidence produced to corroborate their testimony.  Their testimony is entirely self serving.  It allows them to say that they made their decisions to sell their Doman shares before Doman's call from Merlo ended and, of course, before Doman's call to R.J.Bennett at 10:09.  It is convenient, because W.R.Bennett had just finished his call with McNaughton.  W.R.Bennett could not have made his decision before McNaughton's call that ended at the earliest about 9:50.  Otherwise, his discussion with McNaughton would have made no sense.  R.J.Bennett had the call at 10:01 regarding the car.  Under the circumstances, it was impossible for W.R.Bennett and R.J.Bennett to have had any meeting and for R.J.Bennett to be in the ranch meeting with Langford for half an hour, when that meeting started before 9:45, and before W.R.Bennett's call to McNaughton, and ended just before Doman's call.  Langford testified that R.J.Bennett "was there during the whole period."  R.J.Bennett testified that he remained for the entire meeting.  We do not believe the testimony of W.R.Bennett and R.J.Bennett that they met that morning following W.R.Bennett's call to McNaughton to discuss the sale of their Doman shares.
-At 10:29, when W.R.Bennett telephoned his son, Brad Bennett, in Vancouver, they had a discussion about a Winfield Ranch meeting that day and while Brad could not recall what ranch business was discussed, he was certain a meeting had taken place or was to take place and that Mills was present or was to be present at that meeting. W.R.Bennett's testimony was that the ranch meeting was not one of the reasons he asked Mills to come over to the McIntosh Centre that morning.  Mills' testimony was that he knew nothing about the ranch meeting until after he arrived at the McIntosh Centre about 11 o'clock. R.J.Bennett's testimony is that he was not expecting Mills at the ranch meeting.  However, R.J.Bennett's testimony was inconsistent with W.R.Bennett's testimony that when Mills got there they met in his office and he told Mills "R.J.'s got something.  I promised you'd take a look at it and I'd go in and take a look too.  We went over there sometime before eleven a.m."  Further, W.R.Bennett's testimony about what happened before the ranch meeting is completely inconsistent with the testimony of Mills.  We prefer the testimony of R.J.Bennett and Mills.  If that is so, then the ranch meeting must have taken place before W.R.Bennett telephoned Brad Bennett at 10:29.
-When W.R.Bennett was examined by Commission staff on December 18, 1988, he testified that he and R.J.Bennett had scheduled an "early meeting".  In his testimony before us, he testified that that was not his recollection.  After further questioning, he gave a vague response that at least suggested that the meeting he was referring to was the ranch meeting.  He and his brother produced no evidence to show that they had any other meetings that day, other than of course there meeting in the boardroom to discuss the sale of their Doman shares. We find that that "early meeting' was the ranch meeting. Our finding is consistent with Langford's testimony that the meeting commenced approximately 9:30.
-Steed arrived at the McIntosh Centre that morning, shortly before 10 o'clock.  He went to R.J.Bennett's office but the door was shut.  His testimony is consistent with the ranch meeting taking place.
-At the interview with Commission staff on November 18, 1988, R.J.Bennett's evidence was that he talked to Mills on the morning of November 4, but  he mentions nothing about his meeting with Langford, and talks only about the tax implications for him and his brother on the sale of their Doman shares and he cannot remember where he met Mills, in his office or the boardroom.  Before us, he testified that he could not remember his evidence and that "I was very -- very vague."  He recants his previous evidence and says "since then you get a chance to reflect back on the meeting and what was basically happening.  I can see it right now."  We find that R.J.Bennett was deliberately vague in his interview about his meeting with Mills.
-Langford's testimony is that R.J.Bennett appeared normal that morning.  This is consistent with Langford's testimony that the ranch meeting took place approximately 9:30.  We cannot imagine that R.J.Bennett would have been normal after receiving Doman's call at 10:09 and hearing about the collapse of the deal.  That morning he sold his Doman shares for over $2 million, making him over $800,000 profit, a return of 63% on his investment, an investment he had held for less than three months.
-R.J. Bennett made a call at 10:01 that morning and the call lasted for two minutes.  We find that if the ranch meeting was still in progress, this call was made towards the end of the ranch meeting after W.R.Bennett came into the meeting.  At that point, R.J.Bennett had already heard the presentation twice.  Although Langford does not recall R.J.Bennett making a call, he had a vague recollection that he may have taken a call.  The fact is Langford was meeting with the former premier of the province for the first time.  It was a special day for him.  We find that we would expect him to be focused on his presentation to W.R.Bennett, as opposed to what R.J.Bennett may or may not have been doing at that point in the meeting.  R.J.Bennett's office was large enough for R.J.Bennett to be making the call without interrupting the meeting.
-Langford's testimony of what happened in the meeting is completely different from the testimony of R.J.Bennett, W.R.Bennett, Dunn and Mills, apart from the length of time W.R.Bennett testifies he spent in the meeting.  We find the inconsistencies in the testimonies of R.J.Bennett, W.R.Bennett, Dunn and Mills impossible to reconcile.  R.J.Bennett and Dunn say they were all there for the entire meeting which lasted a half an hour. W.R.Bennett and Mills say they were there for no more than the first ten minutes of the meeting and Mills says W.R.Bennett got Dunn and brought him into the meeting just before they left.  Further, Mills' testimony about what happened before the ranch meeting is completely inconsistent with W.R.Bennett's testimony.  Langford was conducting the meeting in that he was going through the material he had prepared the day before.  His testimony is that he met with R.J.Bennett, then Dunn and Mills came into R.J.Bennett's office and finally W.R.Bennett joined the meeting.  He reviewed his material three times.  As people joined the meeting, he would review the material again.  We prefer Lanford's testimony.  It had the ring of truthfulness about it.
-Langford had no continuing relationship with the Bennetts, no interest in these proceedings and there is no reason to suggest that he would have any reason not to have recorded his notes accurately that day and not to tell the truth in this hearing.
Dunn is a long time employee of the Bennett family, having worked for them since 1964.  He brought Doman shares in July 1988 and sold them on the morning of November 4, according to his testimony, just before the time of the ranch meeting.  We know from Steed's testimony that Dunn called Steed just after Steed returned to his office from the McIntosh Centre about the time Steed's sell order was about to be sent to Toronto. That order was executed at 10:27:35, ten minutes after R.J.Bennett sold his Doman shares.
-Mills is the Bennett's family tax accountant and a good friend of R.J.Bennett.  We have found that his purchases of 28,500 Doman shares must have been made on information received from the Bennetts about the sale of Doman Industries that had not been generally disclosed.  On the morning of November 4, Mills sold all the Doman shares for himself and his wife, according to his testimony just before the time of the ranch meeting.  Mills called Elmore before 10:38 that morning, within 30 minutes of the commencement of Doman's call to R.J.Bennett, within 21 minutes of the sale of almost all R.J.Bennett's Doman shares and within 23 minutes (probably less) of W.R.Bennett's call to McNaughton.
6.2.3 R.J.Bennett's Sales
R.J.Bennett testified before us that he instructed Steed to sell his Doman shares before Doman telephoned him at 10:09 on the morning of November 4, 1988.

When R.J.Bennett was asked about why he sold, he testified that "My brother was selling.  I bought because my brother bought and told me.  I was selling because he is selling.  He is the one with all the knowledge on the stock." R.J.Bennett and W.R.Bennett testified that they had a four or five minute meeting in the boardroom after 9:50 and before 10 o'clock, that W.R.Bennett told R.J.Bennett he had decided to sell his Doman shares and that he recommended that R.J.Bennett his Doman shares.  We did not believe their testimony.  We have found that R.J.Bennett and W.R.Bennett could not have met about 9:50 that morning to discuss the sale of their Doman shares because R.J.Bennett was attending the ranch meeting that we have found commenced approximately 9:30 and ended before Doman called R.J.Bennett at 10:09.  Therefore, we do not believe R.J.Bennett testimony that he was selling because his brother was selling.

R.J.Bennett would have us believe that it was just a coincidence that he sold all his Doman shares following the commencement of his call from Doman at 10:09 on the morning of November 4, two minutes after Doman and Merlo ended their call during which Doman learned the deal had collapsed.  That morning , R.J.Bennett sold 185,580 Doman shares at $11-3/8. Most of his shares were sold at 10:17, within eight minutes of the commencement of Doman's call.  The aggregate purchase cost for the 182,400 Doman shares R.J.Bennett purchased during the period from October 13, 1987, to September 19, 1988, was $1,272,200.  The aggregate sale proceeds for the sale of the 182,400 shares was $2,074,800.  R.J.Bennett's profit on the sale of the 182,400 shares was $802,600.  R.J.Bennett paid Steed $7,548 in commissions.  His net profit before interest and dividends was about $796,000.  That profit represented a return of 62% on his investment.

The trading volumes and prices for the Doman shares confirm that the market was not anticipating that there were any problems with the deal.  The take over was announced in October.  There was nothing in the announcements to suggest lengthy approvals were required.  As it turned out, indeed the meeting required to approve the merger was being scheduled for December 21, 1988, and the closing was to take place before the end of the year.  We find that the market would have expected that the bid would be completed certainly by the end of the year.

On November 4, 148,900 Doman A shares and 411,052 Doman B shares traded.  Of course, the sales of the Bennetts and Mills represented most of those shares sold.  According to the trading records, there had not been that many Doman A shares traded in the aggregate in the previous four trading days and that many Doman B shares traded in the aggregate in the previous six trading days.  There had been very little trading in Doman shares since the beginning of that week.  We find that by Monday, October 31, the beginning of that week, most of those holders of Doman shares who had wanted to sell had already sold.  Those continuing to hold Doman shares were doing so with the expectation that they would be getting $12 and it was just a matter of waiting until the merger closed.

Why would R.J.Bennett have sold all his Doman shares on November 4 and not waited and tendered into the bid at $12 per share, which is what most shareholders were doing?  Based on the 182,400 Doman shares, R.J.Bennett would have received $2,188,800 for the shares.  After deducting the purchase cost of $1,272,200, R.J.Bennett would have received a profit of $916,600, $114,000 more than he received on November 4, 1998, and he would not have paid any commissions.  His interest cost to hold the shares from settlement date, which was November 14, to the end of the year, would have been approximately $27,965, calculated by multiplying 47 days by the per diem rate of interest of $595.  After deducting the interest and adding back the commission of $7,548, R.J.Bennett would have made $93,583 more by tendering into the bid, and that figure does not take into consideration dividends.  The return on his investment would have increased from 62% to 70%.  We cannot imagine R.J.Bennett selling his Doman shares that morning, unless he knew information that others in the market did not know.

R.J.Bennett would have us believe that it was just a coincidence that 99% of the Doman shares sold on November 4 were sold by he and his brother and Mills, Steed, Duhamel and Dunn after the commencement of Doman's call to R.J.Bennett and before the shares of Doman Industries were halted by The Toronto Stock Exchange.

We have found that during Doman's call to R.J.Bennett at 10:09, Doman did inform R.J.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries and that he provided that information to R.J.Bennett knowing that R.J.Bennett would pass the information onto W.R.Bennett. We did not believe the testimony of Doman and R.J.Bennett that during the call they talked about a horse called Champers.  We have found that Doman intentionally waited in his office after he ended his call with R.J.Bennett at 10:14 and did not try to contact anyone until he phoned and left a message for Miles at 10:40, so that R.J.Bennett and W.R.Bennett would have the opportunity to sell their Doman shares, and further, that R.J.Bennett would have known Doman's intention.

R.J.Bennett testified before us that after he made his call to Kwan, he left his office and walked toward the coffee room, that he ran into Steed coming out of Duhamel's office, that he told Steed "I'm going to sell my stock." and asked him what he could get, that Steed told him the price "was strong at $11-3/8 when I left my office, that he and Steed sat in the coffee room for about four minutes discussing how many Doman shares R.J.Bennett had to sell, that Steed said "Where can I phone from?", that R.J.Bennett was taking him to the phone at the end of the hall, when he heard the phone ringing in his office, that he answered the phone and it was Doman and they talked about Champers for five minutes, that when the call ended at 10:14:12, R.J.Bennett walked out and stood behind Steed for about a minute before Steed finished his call to Shemilt that started at 10:14:17 and lasted over three minutes and that all R.J.Bennett remembers hearing is Steed saying "It's done." to him when he hung up.

R.J.Bennett was interviewed by Commission staff on November 18, 1988, two weeks following November 4, when he was represented by counsel and he knew he was under investigation for insider trading and he testified before us that he took the matter seriously at the time.  Steed was interviewed by Commission staff twice, first on November 10, 1988, and a second time on November 16, 1988.  Steed knew prior to his first interview that there was a concern that at the very least R.J.Bennett may have engaged in insider trading.  Steed testified that he "probably" spoke to R.J.Bennett about that prior to his first interview on November 10 and that it was "most likely" he would have spoken to R.J.Bennett after his first interview and before his second interview on November 16.  Much of the testimony of each of R.J.Bennett and Steed is either inconsistent with the evidence given to Commission staff or inconsistent with the testimony or evidence of the other.  Both recanted their previous evidence more than once. We do not believe most of R.J.Bennett's testimony and evidence.  We are going to take the time to closely examine the testimony and evidence of R.J.Bennett and Steed.

R.J.Bennett testified that he ran into Steed coming out of Duhamel's office.  That was also Steed's testimony before us and the evidence he gave to Commission staff at his second interview.  However, the evidence of R.J.Bennett and Steed is inconsistent with the evidence Steed gave at his first interview.  Six days following the events of November 4, Steed's evidence was that R.J.Bennett came wandering into Duhamel's office "We start kibitzing him", and he says, "Well, I think -- what's the bid today, or something, whatever he usually says."  Before us, Steed recanted his evidence claiming that it didn't happen that way and that it was just an "off-hand remark" and that he didn't take the interview seriously.  We cannot accept Steed's explanation why we should not believe his evidence given within days of the events of November 4.  Further, we find that his testimony that it was an "off-hand remark" and that he did not take the interview seriously absurd.  Steed is a broker, on November 10, he is being interviewed because his client is suspected of insider trading.  Notwithstanding what his testimony is before us today, we find that he most certainly would have taken the interview seriously.  Further, we find there was no suggestion during the interview that he was not taking the interview seriously and was making off hand remarks.  So, was Steed not telling the truth at his first interview?  We have found that the ranch meeting took place before Doman's call.  Steed's evidence given on November 10 is consistent with the ranch meeting having finished and R.J.Bennett "wandering" around, being normal as Langford found him during the ranch meeting. Steed's evidence does not suggest to us that R.J.Bennett was in any rush whatsoever.  Steed testified that he spoke to R.J.Bennett after his first interview and before his second interview.  After considering the evidence, we find that R.J.Bennett must have had two meetings with Steed that morning, that Steed's evidence given on November 10 must have described the first meeting before Doman's call, and that R.J.Bennett's testimony and Steed's subsequent evidence must have described their second meeting a few minutes later.

R.J.Bennett testified before us that when he ran into Steed, he told Steed "I'm going to sell my stock." and he and Steed sat in the coffee room for about four minutes discussing how many Doman shares R.J.Bennett had to sell.  Steed's testimony is inconsistent with R.J.Bennett's testimony.  Steed testified that R.J.Bennett did not instruct him to sell his Doman shares.  They went into the coffee room and had a conversation that lasted "several minutes" - "Well, not very long.  We were just -- I don't know how many minutes.  We just discussed a few things.".  Steed was still "trying to persuade him" to sell and pointing out the options to him.  R.J.Bennett then instructed him to sell as many as he could at $11-3/8. Further, Steed's testimony is inconsistent with the evidence he gave Commission staff on November 16, which is also inconsistent with R.J.Bennett's testimony.  At the interview, after Steed was told to think very carefully about his evidence, his evidence was that even when he was on the phone with Shemilt, he still wasn't sure whether R.J.Bennett wanted to sell or how much or at what price until the very last second.  Steed recanted his evidence in his testimony before us.  Steed admitted that what he told Commission staff on November 16 was inconsistent with his testimony before us, but claimed that what he told Commission staff was "totally inaccurate".  We find that preposterous.  The interview took place within two weeks of the events of November 4. R.J.Bennett was no doubt one of Steed's most prestigious clients, if not his most prestigious client.  Based on the evidence of the amount of time they spent together during the three month period preceding November 4, R.J.Bennett was no doubt also Steed's most important client.  R.J.Bennett was selling what Steed thought were more than 189,000 Doman B shares, no doubt one of the largest orders, if not the largest order, Steed had ever handled.  And Steed would have us accept that his evidence on November 16 was "totally inaccurate". Well, we don't believe that Steed was mistaken on November 16. With regard to when R.J.Bennett decided to sell, we prefer Steed's evidence given to Commission staff on November 16 and we do not believe R.J.Bennett's testimony and Steed's testimony before us.  We find that whatever instructions R.J.Bennett gave Steed when he ran into him the second time, his language was not clear in Steed's mind, and that is why Steed still wasn't sure whether R.J.Bennett wanted to sell or how much or at what price until the very last second.

Further, neither R.J.Bennett or Steed mentioned the coffee room in their interviews with Commission staff. R.J.Bennett's evidence on November 18 was that it was when Steed was on the phone with Shemilt that he asked him how many shares he had and whether he wanted to sell.  Before us he recanted his evidence and testified that "I'm telling you today that that took place in the coffee room." and that "At that time I believed it to be right.  I did not have any benchmarks to construct my day by."  First, R.J.Bennett's interview took place two weeks following the events of November 4 when he knew he was under investigation for insider trading.  We do not believe he needed any benchmarks to remember the time he spent with Steed that morning when he sold 187,000 Doman shares for over $2.1 million.  Second, we do not understand how the telephone records assist R.J.Bennett in determining where he had the conversation with Steed.  On November 18, R.J.Bennett's evidence was that the conversation took place when Steed was on the phone with Shemilt.  Before us, R.J.Bennett's testimony was that the conversation took place in the coffee room.  His testimony before us is completely inconsistent with his evidence given to Commission staff on November 18.  Third, if R.J.Bennett and Steed did meet in the coffee room on November 4, we find it impossible to believe that they would not have mentioned the meeting when they were interviewed days later.  Not only that, neither one of them mentioned the meeting in the coffee room.  We prefer their evidence given at the interviews.  We do not believe their testimony before us in this regard.  We find that R.J.Bennett and Steed had no conversation in the coffee room and that whatever conversation they had was when Steed was on the phone with the trader.

R.J.Bennett testified before us that Steed said "Where can I phone from?"  R.J.Bennett testimony is inconsistent with Steed's testimony.  Steed testified that he was intending to go back to his office, but R.J.Bennett said he could phone from the hall and that is what he did.  Steed's testimony about intending to go back to the office is consistent with the manner in which he would normally handle trades on behalf clients.  First, the trades would be done from his office. His office was only a five minute walk away from the McIntosh Centre.  Second, Steed's evidence given to Commission staff at his first interview was that he would "hardly ever" phone in orders.  His normal practice is to prepare sell orders and have an employee telex them to the trader in Toronto.  This is what Steed did when he sold 100,000 Doman shares for R.J.Bennett on October 17, 1988.  In addition, we cannot understand why Steed would not be truthful.  We prefer Steed's testimony.  We do not believe R.J.Bennett's testimony before us.  We find that R.J.Bennett told Steed to use the phone and to call his trader in Toronto and the reason why he did was because he was in a rush and the reason why he testified that Steed asked where the phone was is because he did not want it to appear that he was in a rush.  Further, R.J.Bennett had Steed make the calls from a phone on a chair in a file room where there was no desk, only a few filing cabinets and not in his office, or another office for that matter.  If Steed did not already know, by the time Steed was in the file room using the phone on the chair, instead of returning to his office or even using the phone in R.J.Bennett's office, we find that Steed must have known R.J.Bennett was in a rush.  Finally, we find that R.J.Bennett must have just received Doman's call when he ran into Steed and that is why he was in a rush and the reason why he had Steed use the phone in the file room where it had been brought around from R.J.Bennett's office, where it was on a chair, and where was no desk, only some filing cabinets, was because Doman was still on the phone in R.J.Bennett's office.  Further, we suspect that R.J.Bennett may well have dragged the phone out of his office and put it on the chair when he received Doman's call, knowing that Steed was at the McIntosh Centre and intending that he would have Steed use that phone.

R.J.Bennett testified before us that he was taking Steed to the phone at the end of the hall, when he heard the phone ringing in his office, that he answered the phone and it was Doman and they talked about Champers for five minutes, that when the call ended at 10:14:12, R.J.Bennett walked out and stood behind Steed for about a minute before Steed finished his call to Shemilt that started at 10:14:17 and lasted over three minutes and that all R.J.Bennett remembers hearing is Steed saying "It's done." to him when he hung up.

We have found that we do not believe the testimony of Doman and R.J.Bennett that during the call they talked about a horse called Champers.

Steed's testimony is inconsistent with R.J.Bennett's testimony.  Steed testified before us was that he started down the hall and R.J.Bennett disappeared, that he phoned his office and got the Toronto number, that R.J.Bennett still wasn't around and he went to look for him and couldn't find him, that he phoned Toronto and made the trades and when he was through, he "went back out and met Mr. Bennett", but he doesn't know where he met him - "he was either in the hallway or coming out of his office or standing there, maybe."

Nowhere in Steed's testimony does he mention the phone ringing while R.J.Bennett was taking him to the phone. Duhamel's office is beside R.J.Bennett's office.  The distance to the file room at the end of the hall would be a matter of twenty feet and the door to R.J.Bennett's office is on the immediate right, just outside the file room door.  No evidence was produced to show that Steed was hard of hearing.  Having regard to the area in the hall, we cannot imagine that Steed would not have heard the phone ringing and that Steed would not have known exactly where R.J.Bennett was and noticed R.J.Bennett disappearing.  Further, R.J.Bennett testified he was on the phone with Doman in his office and Steed testified that he looked for R.J.Bennett in his office and he wasn't there.

R.J.Bennett's testimony is inconsistent with the evidence he gave to Commission staff on November 18.  In that evidence, R.J.Bennett did not mention the phone ringing or his five minute call with Doman.  He gave his evidence as if he was with Steed the entire time from when he ran into him and told him he wanted to sell to when Steed hung up the phone and said "It's done."  His evidence is quite detailed about what happened, especially, Steed's call to Shemilt and the discussion during that call, including that he heard Steed ask Shemilt how much the bid was and how much was behind the bid, that Steed then asked him how many shares he had and whether he wanted to sell, that Steed put in the bid at 190 ("I remember him saying that") and talked to Shemilt for a while, and he said, "It's done."  In R.J.Bennett s testimony before us, he recanted that evidence.  "I didn't have my phone calls ... and reflecting back on it, the conversation I had with Stan took place in the coffee counter ..." and "... looking back, as I say, I could not have been there.  I was on the phone with Herb Doman."  We find it impossible to understand how the telephone records assist R.J.Bennett in being able to remember what happened.  His evidence with regard to this matter on November 18, two weeks after the events of November 4 is clear - there was no conversation in the coffee room and there was no phone ringing when he was taking Steed to the phone and there was no five minute call with Doman and he described in some detail Steed's conversation with Shemilt and with him.  If indeed the call from Doman came as he was taking Steed to the phone, we find it simply unbelievable that R.J.Bennett would not have remembered the call on November 18. It is even more unbelievable when you consider of course that the reason for the interview was to investigate insider trading by R.J.Bennett in Doman shares.

Further, on November 18, R.J.Bennett's evidence when he was first asked about the call from Doman, was that he talked to Doman later after Steed left, then upon further questioning about when the call took place, he became evasive and despite being asked a number of times, he never did answer the question again.  We find it impossible to believe that on November 18 in the circumstances we have described already many times, that R.J.Bennett would not have remembered what happened that morning and where Doman's call fit in those events, particularly, when we consider R.J.Bennett's detailed evidence on November 18 of the telephone call Steed made to Shemilt.

Steed's evidence given to Commission staff on November 10 and 16 is consistent with R.J.Bennett's evidence he gave to Commission staff and, of course, it is inconsistent with Steed's testimony before us.  In that evidence, he did not mention that R.J.Bennett had disappeared and that he couldn't find him.  Steed gave his evidence in his interviews as if R.J.Bennett was with him continuously from the time he met him to the time he was on the phone with Shemilt and completed the sale of his Doman shares.  Steed recanted his evidence testifying before us that "I just answered off the top of my head a lot of this stuff, that was inaccurate".  We again find that absurd.  We are not talking about minor inconsistencies here.  Steed's testimony before us is completely different from the evidence he gave Commission staff during his interviews that took place within days of the events on November 4.

We are left wondering who told the truth when and was it the whole truth!  When we consider the testimony and evidence of R.J.Bennett and Steed about what happened as they went down the hall to when Steed finished his call with Shemilt, taking into consideration the inconsistencies, the evidence each recanted and all the evidence and our findings, we make the following findings.

-We find that the phone was not ringing as R.J.Bennett took Steed down the hall to the phone and therefore we do not believe R.J.Bennett's testimony before us.  This finding is consistent with our finding that R.J.Bennett must have just received Doman's call when he ran into Steed and that is why he was in a rush and the reason why he had Steed use the phone in the file room where it had been brought around from R.J.Bennett's office, where it was on a chair, and where was no desk, only some filing cabinets, was because Doman was still on the phone in R.J.Bennett's office.
-We find that after R.J.Bennett directed Steed to the phone, the phone we suspect he put on the chair, R.J.Bennett went into W.R.Bennett's office to tell him about the collapse of the deal and then went back into his office to end his call with Doman.  This would explain why when Steed looked for R.J.Bennett he could not find him.  By this time, R.J.Bennett had spoken to W.R.Bennett and found Steed and as there was no reason for Doman to stay on the phone and R.J.Bennett wanted to get back to Steed to make sure his Doman shares were sold.  We have found that Doman intentionally did not contact anyone until 10:40 and that R.J.Bennett knew his intention and that Doman would have told R.J.Bennett his intention knowing R.J.Bennett would tell W.R.Bennett.
-We find that R.J.Bennett was back out of his office and with Steed very shortly after Steed reached Shemilt.  We do not believe R.J.Bennett's testimony that he stood behind Steed for about a minute before Steed finished his call to Shemilt that started at 10:14:17 and lasted over three minutes and that all R.J.Bennett remembers hearing is Steed saying "It's done." to him when he hung up. R.J.Bennett ended the call with Doman at 10:14:12.  He testified it took him about a minute to get from his office to the file room.  We find that might have been so if he was crawling.  Considering the distance from R.J.Bennett's desk to the file room and the anxiety we find he must have been experiencing at that point - would he be able to sell all his Doman shares and the detailed description of that call and his conversation with Steed he gave in his November 18 interview, we find it took him seconds, well under a minute to get from his desk to the file room where we find R.J.Bennett heard almost all of Steed's call with Shemilt, a call that commenced at 10:14:17, five seconds after R.J.Bennett ended his call with Doman, and ended over three minutes later.  Our finding is consistent with our finding that whatever instructions R.J.Bennett gave Steed when he ran into him, his language was not clear in Steed's mind, and that is why Steed still wasn't sure whether R.J.Bennett wanted to sell or how much or at what price until the very last second.
-We have found that R.J.Bennett must have just received Doman's call when he ran into Steed and that is why he was in a rush and the reason why he had Steed use the phone in the file room where it had been brought around from R.J.Bennett's office, where it was on a chair, and where there was no desk, only some filing cabinets, was because Doman was still on the phone in R.J.Bennett's office.  Just how much of a rush was there to sell R.J.Bennett's Doman shares?  Notwithstanding, Steed's testimony that he and R.J.Bennett had just met a few days earlier and calculated precisely the Doman shares owned by R.J.Bennett and that the calculations were in a book Steed kept at his office, Steed could not remember what Doman shares R.J.Bennett held when he phoned Shemilt. Further, when Steed called Debbie at his office for Shemilt's telephone number, he did not even take the time to have Debbie check his book and his explanation left us wondering whether indeed there was a book, let alone a meeting.  No one took the time to call the bank to confirm what Doman shares were held by the bank for R.J.Bennett.  R.J.Bennett's evidence given on November 18 shows that when Steed was on the phone with Shemilt, R.J.Bennett was uncertain what Doman shares he held, which again is surprising based on Steed's testimony about their meeting a few days earlier.  Finally, R.J.Bennett had not checked the certificates in his possession, which we would have thought he would have done for his meeting with Steed.  This had consequences for both R.J.Bennett and Steed.  R.J.Bennett made undeclared short sales that morning and he contravened the securities legislation.  Steed contravened the requirements of The Toronto Stock Exchange.  We find their conduct inexcusable in light of the testimony that they met a few days earlier to calculate R.J.Bennett's holdings of Doman shares, if indeed they did have that meeting.  We find that there can be no doubt that Steed and R.J.Bennett were in a great rush to sell R.J.Bennett's Doman shares on the morning of November 4, 1988.
There is one further matter regarding Steed.  According to Steed's testimony, he sold Duhamel's Doman shares on November 4, 1988, at the same time as he sold R.J.Bennett's Doman shares.  Duhamel and Steed had an arrangement that if Steed sold R.J.Bennett's Doman shares, Steed would sell Duhamel's Doman shares.  So far as we know R.J.Bennett was not a party to the arrangement.  We find that Steed's conduct violated R.J.Bennett's confidentiality and contravened the standard for confidentiality of client information.  That is a standard all brokers and their firm's are required to meet.

We have considered all the evidence and our findings.  We do not believe R.J.Bennett's testimony before us that he instructed Steed to sell his Doman shares before Doman telephoned him at 10:09 in the morning of November 4, 1988. We find that when R.J.Bennett instructed Steed to sell his Doman shares on the morning of November 4, he did so with information received from Doman about the collapse of the deal that had not been generally disclosed.

6.2.4 W.R.Bennett's Sales
Towards the end of October, McNaughton testified that he had been telling W.R.Bennett to sell some Doman shares because the bank loan was costing him money and that W.R.Bennett told him a couple of times he would think about it.  On November 1, Doman B shares opened and closed at $11-1/2 and the high was $11-5/8; however, the Doman A shares traded that day at $11-1/2.  McNaughton's testimony is clear, W.R.Bennett instructed him after the close of trading that day to sell 50,000 Doman A shares and 50,000 Doman B shares at $11-5/8. McNaughton testified that he would have "very likely" given the trading information to W.R.Bennett.  We find that, considering the size of the order and McNaughton's testimony that he was trying to persuade W.R.Bennett to sell some of his Doman shares, McNaughton would have discussed the trading information with W.R.Bennett prior to W.R.Bennett giving him instructions.

W.R.Bennett's testimony before us was that yes he did give McNaughton those instructions, but "it's my understanding that the buy on that day was $11-5/8 and I told him to sell 100,000 shares at that price."  However, when we look at W.R.Bennett's evidence given to Commission staff on November 18, 1988, he was very evasive and our view of his evidence is that he said he did not instruct McNaughton to get a certain price.

Not only is W.R.Bennett's testimony before us inconsistent with his evidence given to Commission staff, but he now suggests that it was his understanding that the buy was at $11-5/8 and in doing so leaves the impression as far as we are concerned that McNaughton would not have been able to accurately describe the market to him on November 1. McNaughton had been a broker for decades.  The market for the Doman shares could not have been simpler to describe.  There was very little volume and the price for both Doman A shares and Doman B shares had been $11-1/2, except for some trading in Doman B shares at $11-5/8.  Further, in W.R.Bennett's testimony before us, he tries to suggest he did not understand market terminology.  First, we find that McNaughton would have had a discussion with him where it would have been clear what was happening with Doman shares.  And as we have said the market could not have been simpler to describe.  Second, W.R.Bennett is a man who prepares his family investment agreement to obtain some tax benefits for his family, and, according to his testimony, has the agreement signed in June 1988, but does not, according to Mills testimony, consult with his tax adviser until September 1988, three months later. Mills tells him to seek legal advice.  There was no evidence he did.  Langford remembered W.R.Bennett as being "very quick to pick up on what we were talking about, very decisive."  We prefer McNaughton's testimony and we do not believe W.R.Bennett's testimony before us that his understanding was that the buy was $11-5/8.

W.R.Bennett purchased 329,300 Doman shares.  308,100 shares were financed at the bank.  Based on the loan outstanding on November 9, 1988, interest per day on the loan was $656.  We found that the market was expecting the take over would be completed by the end of 1988.  By tendering into the bid, W.R.Bennett would receive $12 per share.  By selling all 329,300 shares at $11-5/8 on November 1, W.R.Bennett would forgo $0.375 for each share and pay commission, but would not pay interest from settlement day, November 8 to the end of the year.  The commission would be $15,400, based on the commission paid on November 4.  Interest at $656 per day for 53 days would be $34,781.  W.R.Bennett would therefore forgo profit of $104,000, calculated by multiplying 329,300 by $0.375 and deducting interest of $34,781 and adding the commission of $15,400.  This is a simple calculation.  We have no doubt that W.R.Bennett, with all the information about his banking arrangements, could have determined very easily that the bank loan was not costing him money if he tendered into the bid at $12.

On November 1, knowing the market for Doman shares that day was $11-1/2, except for some trades in Doman B shares at $11-5/8, on volumes that were just above 50,000 Doman A shares and 50,000 Doman B shares, W.R.Bennett put an open order in to sell 50,000 Doman A shares at $11-5/8, and an open order in sell 50,000 Doman B shares at $11-5/8.

McNaughton did not communicate with W.R.Bennett until November 4.  We find that McNaughton was not concerned about the sell orders, otherwise, McNaughton would have most certainly have communicated with W.R.Bennett.  We find that W.R.Bennett gave McNaughton the sell order for his 100,000 Doman shares at $11-5/8 on the basis that if he could sell them at that price, he was prepared to forego the 37-1/2 cents per share he would get by tendering into the bid, and that he indicated no intention to McNaughton that if he could not get that price, McNaughton should get back to him so that they could discuss the sale at a lower price.

McNaughton called W.R.Bennett on the morning of November 4 to confirm their golf game the next day.  McNaughton would have known that there had been very little trading in Doman shares that week.  Since Tuesday, November 1, when W.R.Bennett put his open orders in, Doman shares had not traded above $11-1/2 and there was trading at $11-3/8 and the trading was on very little volume, less than 25,000 Doman A shares and less than 23,000 Doman B shares.  That trading information would have been in the papers, including the Globe and Mail and the Financial Post.  Notwithstanding, that W.R.Bennett's testified that he read those financial papers continually, he did not remember looking at the trading information for Doman shares on Wednesday and Thursday that week.  We find that strange indeed, if he intended to sell his 100,000 Doman shares.  However, W.R.Bennett did not telephone McNaughton on Thursday because he thought the shares had sold at the buy and it wasn't on his mind.  Why would he have thought his 100,000 shares had sold at the buy price?  We do not believe his testimony that his understanding was that the buy was $11-5/8. There was no basis whatsoever for W.R.Bennett to think that his shares had sold.  Quite the opposite, based on the trading information we found McNaughton gave him on Tuesday, November 1, he would have known at that time that there was very little trading in Doman shares and that trading was at $11-1/2.  We do not believe W.R.Bennett's testimony that he thought the shares had sold at the buy and it wasn't on his mind.  We find it wasn't on his mind because he had no real intention to sell his Doman shares below $11-5/8 and he would have known from the financial papers that clearly that was not going to happen.  Those are the financial papers he reads continually.

W.R.Bennett returned McNaughton's call shortly after he ended his call with Poole at 9:45 that morning.  They confirmed their golf game for the next day.  McNaughton informed W.R.Bennett the 100,000 Doman shares he had instructed him to sell on November 1, 1988, at $11-5/8 had not sold.  W.R.Bennett testified that "that disturbed me and surprised me".  McNaughton testified that W.R.Bennett did not express any concern. W.R.Bennett testified that "We discussed about selling it."; however, he does not remember the details. McNaughton testified that he asked him if he wanted to leave the order in at $11-5/8 and told him that the market was at $11-3/8 and W.R.Bennett said to leave the order in. McNaughton suggested that W.R.Bennett sell some of his Doman shares because interest charges at the bank were eating up profit.  W.R.Bennett told McNaughton he wanted to think about it and that he'd call him back.  McNaughton testified that W.R.Bennett said "he'd check with the bank and get back to me."

If W.R.Bennett was disturbed and surprised, we find that he did not express any concern to McNaughton.  If he had, we are certain McNaughton would have remembered.  W.R.Bennett was probably McNaughton's most prestigious client.  McNaughton had never handled purchases of the magnitude of W.R.Bennett's purchases for a client in his 41 years as a broker.  There is no doubt that McNaughton would be anxious to keep W.R.Bennett happy.

In W.R.Bennett s evidence given to Commission staff on November 18, 1988, W.R.Bennett said that when he was told that the 100,00 Doman shares had not sold, he "found out that the market had fallen away again and that's another thing that concerned me, that the market was falling away."  After October 11, Doman shares did not close above $11-5/8.  After October 19, the Doman A shares closed below $11-5/8, either at $11-1/2 or $11-3/8.  After October 19, the Doman B shares closed below $11-5/8, in a range between $11-1/2 and $11-1/4. For some time, and certainly since October 19, the prices of Doman shares had been stable.  During the period from the announcement of the take over on October 6 to November 4, 1988, there were 18 trading days.  During the period, 1,209,399 Doman A shares and 3,491,973 Doman B shares traded. The Doman A shares traded represented 19% and the Doman B shares represented 31% of those issued and outstanding. During the first nine of the 18 days, 62% of the Doman A shares and 82% of the Doman B shares that traded during the period were traded.  During the last nine trading days, 461,202 Doman A shares and 626,590 Doman B shares traded and in the final four trading days preceding November 4, 126,893 Doman A shares and 86,848 Doman B shares traded.  With the passage of time, those holders of Doman shares who wanted to sell and not wait to tender into the bid had sold their shares.  Consequently, trading volumes were decreasing.  Those buying Doman shares in the market would include for the most part persons speculating on whether there might be another bid that would drive the price up or when the merger would close. We find that McNaughton who had been a broker for decades would have been able to describe what was happening in the market for Doman shares when W.R.Bennett gave him his sell orders on November 1.  If he was concerned on November 4, he would have been concerned on November 1.  We find that his conduct on November 1 in putting in the sell orders for 50,000 Doman A shares and 50,000 Doman B shares at $11-5/8 showed he had no concerns whatsoever.

It is clear that McNaughton was anxious to have W.R.Bennett sell at least some of his Doman shares, so he would make a commission.  He kept telling W.R.Bennett how much it was costing him to hold the shares and he recalls doing so again in this conversation.  W.R.Bennett's response was that he would call the bank, although he does not recall telling McNaughton that and did not call the bank.  We find that on November 4 during their first call, whatever discussion W.R.Bennett had with McNaughton about selling the 100,000 Doman shares resulted in W.R.Bennett telling McNaughton to leave the order in at $11-5/8, notwithstanding that McNaughton told him the market was $11-3/8.  We find that W.R.Bennett's conduct in leaving the order in at $11-5/8 shows that he had no real intention of selling his Doman shares and that he was not disturbed or surprised when McNaughton told him that his sell orders had not been filled.  The market for the Doman shares had been declining in price and volume.  Since November 1, there had been no trades in Doman shares above $11-1/2.  As well, there had been very little volume.  To the extent that W.R.Bennett's testimony is inconsistent with McNaughton's testimony, we prefer McNaughton's testimony.

On November 1, knowing the market for Doman shares that day was $11-1/2, except for some trades in Doman B shares at $11-5/8, on volumes that were just above 50,000 Doman A shares and 50,000 Doman B shares, W.R.Bennett put open orders in to sell 50,000 Doman A shares at $11-5/8 and 50,000 Doman B shares at $11-5/8.  On November 4, about 9:55 according to McNaughton's notes, W.R.Bennett speaks to McNaughton and knowing that the market was at $11-3/8 to $11-1/2, instructs him to leave the sell order in.  About 10:10 according to McNaughton's notes,  W.R.Bennett calls again, interrupts McNaughton who is with another client, and instructs McNaughton to sell not just the 100,000 Doman shares, but all his Doman shares at $11-3/8.  Within 20 minutes based on McNaughton's notes, W.R.Bennett had decided to sell not only the 100,000 Doman shares, but all his Doman shares and was prepared to accept 25 cents less for each share than the $11-5/8 and 62-1/2 cents less for each share than he would have received if he had waited and tendered into the bid, which was what the other shareholders were doing.

W.R.Bennett's testified before us that he instructed McNaughton to sell his Doman shares "just around or shortly after ten o'clock on November the 4th" and he did so without any information about the collapse of the deal.

Notwithstanding, we found that W.R.Bennett had no real intention of selling his Doman shares, W.R.Bennett would have us believe that after he ended his call with McNaughton, in a matter of a few minutes, he simply "thought about the situation" and decided it was time to sell all his Doman shares and that he then went to find R.J.Bennett and to meet with him.  R.J.Bennett and W.R.Bennett testified that they had a four or five minute meeting in the boardroom after 9:50 and before 10 o'clock, that W.R.Bennett told R.J.Bennett he had decided to sell his Doman shares and that he recommended that R.J.Bennett his Doman shares.  We did not believe their testimony.  We found that R.J.Bennett and W.R.Bennett could not have met about 9:50 that morning to discuss the sale of their Doman shares because R.J.Bennett was attending the ranch meeting that we have found commenced approximately 9:30 and ended before Doman called R.J.Bennett at 10:09.  Based on the evidence and our findings, we find that after W.R.Bennett ended his call with McNaughton, he went into the ranch meeting and he was there for about ten minutes and when the meeting ended he and Mills went back to his office.  We do not believe W.R.Bennett's testimony that after his call with McNaughton ended, he thought about the situation and decided to sell all his Doman shares.

W.R.Bennett would have us believe that it was just a coincidence that he sold all his Doman shares following the commencement of R.J.Bennett's call from Doman at 10:09 on the morning of November 4, two minutes after Doman and Merlo ended their call during which Doman learned the deal had collapsed. Beginning at 10:21 that morning, within twelve minutes of the commencement of Doman's call, and ending at 10:35, W.R.Bennett sold 140,200 Doman A shares and 189,100 Doman B shares.  All the Doman shares were sold at $11-3/8, except for 5,000 Doman B shares that sold for $11-4/8.  The aggregate sales were $3,746,413.  The aggregate purchase cost for the 329,300 Doman shares was $2,217,175.  W.R.Bennett paid McNaughton $15,400 in commissions.  His net profit before interest charges and dividends was about $1,514,000.  That profit represented a return of 68% on his investment.

On November 4, 148,900 Doman A shares and 411,052 Doman B shares traded.  Of course, the sales of the Bennetts and Mills represented most of those shares sold.  According to the trading records, there had not been that many Doman A shares traded in the aggregate in the previous four trading days and that many Doman B shares traded in the aggregate in the previous six trading days.  There had been very little trading in Doman shares since the beginning of that week.  We found that certainly, by Monday, October 31, the beginning of that week, most of those holders of Doman shares who had wanted to sell had already sold.  Those continuing to hold Doman shares were doing so with the expectation that they would be getting $12 and it was just a matter of waiting until the merger closed.

Why would W.R.Bennett have sold all his Doman shares on November 4 and not waited to tender into the bid at $12 per share, which is what most other shareholders were doing?  We found that the market would have expected the take over would be completed by the end of 1988.  Based on the 329,300 Doman shares, W.R.Bennett would have received $3,951,600 for the shares.  After deducting the purchase cost of $2,217,175, W.R.Bennett would have received a profit of $1,734,425, $205,187 more than he received on November 4, 1998, and he would not have paid any commissions.  His interest cost to hold the shares from settlement date, which was November 14, to the end of the year, would have been approximately $30,832, calculated by multiplying 47 days by the per diem rate of interest of $656.  After deducting the interest and adding back the commission of $15,400, R.J.Bennett would have made $189,755 more by tendering into the bid, and that figure does not take into consideration dividends.  By waiting, W.R.Bennett would have made a net profit of at least $1,718,993 and increased the return on his investment from 68% to 78%.  We find it impossible to believe that he simply thought about the situation and decided to sell, unless he knew information that others in the market did not know.

W.R.Bennett would have us believe that it was just a coincidence that 99% of the Doman shares sold on November 4 were sold by he and his brother and Mills, Steed, Duhamel and Dunn after the commencement of Doman's call to R.J.Bennett and before the shares of Doman Industries were halted by The Toronto Stock Exchange.

We have found that during Doman's call to R.J.Bennett at 10:09, Doman did inform R.J.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries and that he provided that information to R.J.Bennett knowing that R.J.Bennett would pass the information onto W.R.Bennett. We did not believe the testimony of Doman and R.J.Bennett that during the call they talked about a horse called Champers.  We have found that Doman intentionally waited in his office after he ended his call with R.J.Bennett at 10:14 and did not try to contact anyone until he phoned and left a message for Miles at 10:40, so that R.J.Bennett and W.R.Bennett would have the opportunity to sell their Doman shares, and further, that R.J.Bennett would have known Doman's intention and that Doman would have told R.J.Bennett his intention knowing R.J.Bennett would tell W.R.Bennett.  We have found that R.J.Bennett did go into W.R.Bennett's office shortly after Doman called at 10:09 and while Doman was waiting on the phone and told W.R.Bennett that the deal had collapsed and that Doman would wait in his office to allow them to sell their Doman shares.

We are going to examine the testimony of W.R.Bennett and McNaughton and Hollingshead.  Much of W.R.Bennett's testimony is inconsistent with McNaughton's or Hollingshead's testimony and much of it we do not believe.

W.R.Bennett testified that he called McNaughton to tell him to sell his Doman shares "shortly after ten, and I can't be too specific, but maybe three, four, five minutes after ten."  In testimony before us, McNaughton says he heard from W.R.Bennett "about five or ten after ten".  McNaughton's notes place the call at "about 10:10 a.m."  McNaughton testified it "could have been a bit earlier" and it "could have been a bit later".  McNaughton testified that he talked to W.R.Bennett for about four minutes and when he ended the call, he almost immediately called Hollingshead.  McNaughton testified that about three minutes elapsed from the time he called Hollingshead until the first trade at 10:21:41.  That would make McNaughton's call at just before 10:19.  Hollingshead testified that he received McNaughton's call at "approximately 10:15."  "It was somewhere in the neighbourhood of four to five minutes" that elapsed from the time McNaughton called until he made the first trade at 10:21:41.  That would make McNaughton's call at almost 10:17 or 10:18.  On November 16, 1988, twelve days following November 4, Hollingshead was interviewed by Commission staff.  At that time, in response to being asked what time he got the phone call, his evidence was "Well the times basically would be.  I would say about a minute before the trade times show on my printer. ... As he called, he the trades were taking place, a minute or so after he called."  Hollingshead effected a trade for another client at 10:19 that morning.  He testified that it was "possible" that he could be effecting a trade at 10:19 and at the same time speaking to McNaughton, but that it is not possible to check the market while he is effecting a trade on his terminal.  When Hollingshead gave his evidence on November 16, he knew this was an insider trading investigation involving McNaughton's client, W.R.Bennett, and he knew this from November 4th.  We cannot imagine that Hollingshead would not have thought about his evidence very carefully and that the evidence he gave was his best recollection of when he received McNaughton's call and that under the circumstances, Hollingshead would have remembered if he was completing another trade either when McNaughton called or during their conversation.  We prefer Hollingshead's evidence given to Commission staff on November 16 to his testimony before us. As far as Hollingshead's evidence not being consistent with McNaughton's testimony, we realize that times here have to be approximate.  We find that whether it was a minute or so according to Hollingshead's evidence, or about three minutes according to McNaughton's testimony, the conversation before the first trade at 10:21:41 was brief.  Even if about three minutes elapsed, that would mean McNaughton's call came at about 10:19 just at the time Hollingshead was putting the other trade through.  We find that McNaughton phoned Hollingshead after the trade at 10:19 and before 10:21:41. Therefore, we find that if McNaughton talked to W.R.Bennett for four minutes, then he received W.R.Bennett's call no earlier than 10:15, after R.J.Bennett ended his call with Doman, and probably later.  We do not believe W.R.Bennett's testimony that he called McNaughton at the latest at five after ten.  Of course, that would be very convenient because the call would have been made before Doman's call to R.J.Bennett at 10:09.  As far as McNaughton's recollection of the time of the call, he had no records to go by and at the time he recorded the time in his notes, he would not have known about Doman's call at about that time.  The fact is McNaughton's times could be nothing more than approximate.  In fact, we know that his notes showed that the trades were completed at 10:30, when the trades were completed at 10:35, five minutes later.  If McNaughton was also five minutes out on his call from W.R.Bennett, that would mean W.R.Bennett called at 10:15 according to his notes.

W.R.Bennett testified that when he called McNaughton to tell him to sell all his Doman shares, "McNaughton needed pretty precise instructions on how to sell the shares, how to put them in everyone's names."  "So that conversation, naturally, required preciseness, not speed.  It was a very detailed conversation."  The conversation took five or six or "maybe seven" minutes, "between five and eight minutes". W.R.Bennett was unable to provide any details of his conversation.  McNaughton's testimony is that W.R.Bennett phoned and told him, "He wanted to sell all of his Doman, and I told him the market was 11-3/8.  And then he told me not to forget the agreement with the family, that the stock was to be apportioned."  That was the extent of the conversation. McNaughton testified that the call took about four minutes. McNaughton's testimony is that W.R.Bennett did not go through the numbers in the agreement.  The fact is the agreement was straight forward, McNaughton had a copy and each family member was to get 30,000 shares and W.R.Bennett was to get the balance.  It is clear from McNaughton's testimony that there was no preciseness to W.R.Bennett's instructions on how to sell the shares and that the conversation was not detailed at all.  McNaughton is a broker, he is used to taking instructions from clients and understands the importance of being precise in following those instructions.  As far as we are concerned, we are satisfied that McNaughton would have remembered his conversation with W.R.Bennett that morning. First, he knew that day there would be an investigation into the trading done by W.R.Bennett that morning.  Second, at the request of the head of compliance for his firm, he had sat down that day and prepared notes about the events of the day, which he finalized the following Monday.  Finally, notwithstanding the above, W.R.Bennett must have been his most important client and he would have made sure he remembered exactly what his instructions were regarding the sale of his shares.  We prefer McNaughton's testimony with regard to the content of the conversation.  We do not believe W.R.Bennett's testimony.

W.R.Bennett testified that the conversation took as long as five to eight minutes.  McNaughton testified it took four minutes and when asked if that would be the very outside, he answered "Oh, might have been four or five.  I -- but I think we're -- that's probably pretty close."  McNaughton testified that W.R.Bennett called and told him he wanted to sell, that he immediately looked at his screen and told W.R.Bennett that it might all go at $11-3/8, that W.R.Bennett said sell it at $11-3/8, that W.R.Bennett said "to remember the agreement that the stock was to be apportioned" and that was the extent of the call.  McNaughton had his book with the numbers of Doman shares held by W.R.Bennett and so there was no need to discuss what W.R.Bennett's holdings were.  The agreement was simple and only a couple of pages.  In any event, McNaughton had no intention of writing up the tickets until after the trades were done.  Finally, McNaughton had another client in his office at the time.  Based on McNaughton's testimony about the content of the call, we cannot imagine that the call took anywhere close to four minutes.  In his testimony, McNaughton was not even sure.  He testified that "I really don't know. Three minutes, maybe."  Then when he was asked whether he was sure, he testified "four".  We find that W.R.Bennett's call to McNaughton could not possibly have taken four minutes and we doubt that it took more than a couple of minutes.  We do not believe W.R.Bennett's testimony.

When W.R.Bennett's call came, McNaughton was with another client.  Heather, the receptionist, came to his door and asked if he'd take a call from W.R.Bennett.  With his other client present, he took the call and W.R.Bennett told him "to sell his stock."  During the conversation, the one that W.R.Bennett testified "needed pretty precise instructions" and "naturally, required preciseness, not speed" and was "very detailed", W.R.Bennett did not tell McNaughton to sell the Doman shares in his RRSP, he was unable to tell McNaughton how many Doman shares were lodged with the bank and he did not tell McNaughton that the 5,000 Doman shares he purchased in October 1987 that had been delivered to him had been lodged with the bank.  Further, W.R.Bennett had talked to McNaughton about 9:50 and told him to leave his sell order for 100,000 Doman shares in at $11-5/8, knowing that the market was at $11-3/8, and then he calls back we have found no earlier than 10:15 and told McNaughton that he wanted to sell.  Our impression is that W.R.Bennett didn't care what the price was.  We find that there is no doubt that at the time W.R.Bennett called McNaughton, he was in a great rush to give McNaughton instructions to sell and to have the trades effected as soon as possible.

Further, we find that McNaughton knew W.R. Bennett was in a great rush and we do so for the following reasons.

-McNaughton in the presence of another client took a call with W.R.Bennett.  Not only that, the other client remained in his office while McNaughton called Hollingshead, spoke to Heather when she gave him the information from the bank, called W.R.Bennett back for further instructions and then called Hollingshead back and finally called another trader to complete the last trade at 10:35.  Certainly, it was not long before the client would have known that McNaughton was dealing with W.R.Bennett and the details of his personal business.  We find that McNaughton's conduct violated W.R.Bennett's confidentiality and contravened the standard for confidentiality of client information.  That is a standard all brokers and their firms are required to meet.
-McNaughton did not cancel the sell orders for the 50,000 Doman A shares and the 50,000 Doman B shares at $11-5/8 until the afternoon.  Did McNaughton know what was going to happen in the market?  He finished W.R.Bennett's trades at 10:35 and the Doman shares continued to trade until they were halted at 11:19, 45 minutes later. McNaughton's conduct leaves us wondering whether he realized once he had the conversation with W.R.Bennett that something was happening with the Doman shares and it was not good news.  If those orders had been filled, then McNaughton would have sold 100,000 Doman shares that W.R.Bennett no longer owned.  Those sales would have not been declared as short sales and would have been in contravention of the requirements of The Toronto Stock Exchange and the securities legislation.  We find McNaughton's conduct questionable.
-McNaughton does not call the bank, he has Heather call, so that he can call Hollingshead immediately. Notwithstanding, that Heather brought in the information from the bank very quickly, McNaughton could not have looked at it.  If he had he would have realized immediately about the 5,000 Doman shares that W.R.Bennett delivered to the bank.  It could not have been until after the trades were completed at 10:29 that McNaughton looked at Heather notes and realized about the 5,000 shares and called back the trader again and they were sold at 10:35.  McNaughton sold W.R.Bennett's Doman shares based on his book showing W.R.Bennett's purchases of Doman shares but that information did not include the October 1987 purchase of 5,000 Doman shares. Notwithstanding, there may have been some confusion, the information in the book was clear and the trades reflect that.
-On November 1, McNaughton prepared sell orders for the 50,000 Doman A shares and the 50,000 Doman B shares and telexed them to Toronto.  On November 4, McNaughton did not fill out sell orders and he was not even sure what Doman shares he had to sell.  Nevertheless, he simply called Hollingshead.  McNaughton figured out while he was on the phone what shares he wanted to sell.  The sell orders were not prepared until around 1:30 in the afternoon.  McNaughton testified "Well, I never had the impression the order was urgent.  It was urgent from my point of view, because I wanted to get it done, and I had to apportion the stock and I couldn't, you know, write out six tickets.  It would have taken some time."  While we appreciate that McNaughton would have been anxious to get it done, we would have expected that McNaughton would have at least had the information in front of him about what shares he was selling before he telephoned Hollingshead.  Hollingshead was of the same view.  He testified that when a broker phones him, the broker would normally be very sure of what he's selling and which accounts they're from.  In this case the "whole thing was unusual."  We do not believe McNaughton that he "never had the impression the order was urgent."
-McNaughton's book did not record the purchases W.R.Bennett made for his RRSP.  While it is understandable that McNaughton might not have remembered about the purchases W.R.Bennett made in October 1987, we cannot believe he would not have remembered the Doman shares purchased for his RRSP early in September 1988. Yet, he did not recall these shares during his initial conversation with W.R.Bennett.
We have considered all the evidence and our findings.  We do not believe W.R.Bennett's testimony before us that he instructed McNaughton to sell his Doman shares "just around or shortly after ten o'clock on November the 4th" and he did so without any information about the collapse of the deal.  We find that when W.R.Bennett instructed McNaughton to sell his Doman shares on the morning of November 4, he did so with information received from Doman through his brother R.J.Bennett about the collapse of the deal that had not been generally disclosed.

6.2.5 Mills' Sales
It is Mills testimony that before he instructed Elmore and Mowatt to sell he and his wife's Doman shares on November 4, 1988, he had no contact with anyone at McIntosh Centre, other than his 9:30 telephone call from W.R.Bennett and he had no knowledge of the collapse of the take over of Doman Industries by Louisiana Pacific.

We have found that the ranch meeting held on November 4, 1988, with Langford and R.J.Bennett, W.R.Bennett, Dunn and Mills commenced approximately 9:30 and ended before Doman called R.J.Bennett at 10:09 and that whether the ranch meeting started after 9:30 and even as late as 9:40 or 9:45, the meeting ended before R.J.Bennett took Doman's call at 10:09. In making our finding, we did not believe the testimony of R.J.Bennett, W.R.Bennett, Dunn and Mills.  Each of them testified that the ranch meeting commenced shortly before or shortly after 11 o'clock.

We have preferred Langford's testimony about what happened at the meeting.  Initially, Langford met with R.J.Bennett.  Then Dunn and Mills joined the meeting.  Finally W.R.Bennett came into the meeting.  The testimony of W.R.Bennett, R.J.Bennett, Mills and Dunn was completely different and we have found the inconsistencies in their testimony impossible to reconcile.

We have found that during Doman's call to R.J.Bennett at 10:09, Doman did inform R.J.Bennett that Louisiana-Pacific would not be proceeding with the take over of Doman Industries and that he provided that information to R.J.Bennett knowing that R.J.Bennett would pass the information onto W.R.Bennett. We did not believe the testimony of Doman and R.J.Bennett that during the call they talked about a horse called Champers.  We have found that Doman intentionally waited in his office after he ended his call with R.J.Bennett at 10:14 and did not try to contact anyone until he phoned and left a message for Miles at 10:40, so that R.J.Bennett and W.R.Bennett would have the opportunity to sell their Doman shares, and further, that R.J.Bennett would have known Doman's intention.

Both W.R.Bennett and Mills testified that they left the ranch meeting together.  Mills testified that they met for "twenty minutes".  We find that they were meeting in W.R.Bennett's office when R.J.Bennett received Doman's call at 10:09.  We have found, after the commencement of Doman's call to R.J.Bennett at 10:09 and before the call ended five minutes later, that R.J.Bennett went into W.R.Bennett's office to tell him about the collapse of the deal.

Mills would have us believe that it was just a coincidence that he sold all his and his wife's Doman shares following the commencement of R.J.Bennett's call from Doman at 10:09 on the morning of November 4, two minutes after Doman and Merlo ended their call during which Doman learned the deal had collapsed.  The instructions to sell his shares were given by Mills from his office.  Beginning at 10:48 that morning and ending at 11:10, Mills, for himself and his wife, had sold 28,500 Doman shares.  His trades were the last trades before the shares of Doman Industries were halted at 11:19.  Mills would have us believe that it was just a coincidence that he phoned his broker, Elmore, about 10:35, less than twenty minutes after McNaughton received W.R.Bennett's call.

On the sale of the 28,500 Doman shares Mills received aggregate sale proceeds of $324,188.  Mills' aggregate purchase cost for those shares was $213,500.  Mills' profit was $110,688.  Mills' profit represented a return of 52% on his investment.  These figures do not take into consideration commissions paid, interest charges and dividends. Why would Mills have sold all the Doman shares for himself and his wife on November 4 and not waited and tendered into the bid at $12 per share.  By selling on November 4th, Mills gave up a profit of $0.625 per share and $17,813 for the 28,500 shares.  That figure does not take into consideration interest
charges and dividends.  In other words, by waiting and not selling on November 4, which is what most shareholders were
doing, Mills would have made a profit of $128,500, a return of 60% on his investment.  We cannot not imagine Mills selling
the Doman shares for himself and his wife that morning, unless he knew information that others in the market did not know.

Mills would have us believe that it was just a coincidence that 99% of the Doman shares sold on November 4 were sold by R.J.Bennett, and his brother and Mills, Steed, Duhamel and Dunn after the commencement of Doman's call to R.J.Bennett and before the shares of Doman Industries were halted by The Toronto Stock Exchange.  All were present at the McIntosh Centre at the time of Doman's call.

On November 4, 148,900 Doman A shares and 411,052 Doman B shares traded.  Of course, the sales of the Bennetts and Mills represented most of those shares sold.  According to the trading records, there had not been that many Doman A shares traded in the aggregate in the previous four trading days and that many Doman B shares traded in the aggregate in the previous six trading days.  There had been very little trading in Doman shares since the beginning of that week.  We find that by Monday, October 31, the beginning of that week, most of those holders of Doman shares who had wanted to sell had already sold.  Those continuing to hold Doman shares were doing so with the expectation that they would be getting $12 and it was just a matter of waiting until the merger closed.

We are going to examine the testimony of Mills, Elmore, his broker, and his partner Ward.

Mills' would have us believe that he saw a scribble on his desk and that caused him to think and within a couple of minutes, a few minutes, he phoned Elmore to sell his Doman shares.  Here is what he thought about.  It hit him that he should think about capital gains.  Well, at this stage, we are talking about holding the Doman shares, tendering into the bid and making another $0.625 for doing nothing.  Tax implications would not change during that period if he was taking cash, which of course he elected to do by selling on the 4th of November.  However, they would most certainly would have been different if Mills had held the Doman shares and exchanged them in part for other securities.  In those circumstances, he would have paid less tax.

Then, Mills thought through what was bothering him about the Doman thing.  Borrowing the money, his wife's comment that maybe we should sell and why was the deal taking so long headed his list.  The deal was announced on October 6 and the shares resumed trading on October 11 and there was no market activity to suggest that others were concerned.  In fact, there had been very little market activity in Doman shares that week.  Why would you sell and pay back the loan when all you had to do was wait and make another $0.625 per share?  We say based on the market activity in Doman shares, the market considered this deal a sure thing, just like we have found that Doman thought it was a sure thing.  A call by Mills to his broker would have told him what was happening in the market.

Then Mills said that Doman had not issued its third quarter report, and he thought that was kind of strange, so he didn't know whether the numbers were off.  That being so, we find it very strange that he would not have discussed his concern with his broker, or should we say brokers because he always had a couple to provide him with information.  We find that the market certainly did not share Mills' thoughts.

"And the one that bothered me the most was there was an article in the Globe and Mail on, I think it was the Wednesday or whatever, where Louisiana Pacific announced a mill in the Maritimes, and I couldn't figure out why they would be announcing doing something in the Maritimes in the midst of a take over bid.  It just didn't make any sense to me."  We find it impossible to imagine why this bothered Mills.  If it is true, then it is consistent with our finding that his unsolicited purchases were made simply on the basis of information he received from the Bennetts about the sale of Doman Industries that had not been generally disclosed.  Both the press releases issued by Doman Industries and Louisiana-Pacific on October 6 announcing the deal referred to the fact that Louisiana-Pacific was a major U.S. forest products firm with 110 plants and mills and sales of $1.7 billion.  Well, we would have thought that if Mills had seen anything he would have seen the reports written about the announcement of the deal.  And he is concerned about one plant in the Maritimes.  We do not find his testimony credible.  Of course, if this article had concerned him, we cannot understand why he would not have had a discussion with his broker.  His testimony was he usually uses two brokers and sometimes even three because of the research.  Perhaps one of his brokers would have told him about the Research Notes published by Pemberton on September 21, 1988.  Those Notes stated "Needless to say, the Company (Louisiana-Pacific) is cash rich and searching for opportunities in the forest products industry."

Finally, Mills said "Yes, I would be out of the office for the whole next week."  Well, we fail to understand why that is significant.  Perhaps, if Mills was going to the wilderness where it would not be possible for him to communicate with his broker that would be a concern.  But Mills was going to Toronto.  Even in 1988, we understand there were phones there.  Of course, there is no question, it would not have been as convenient for him to keep in touch with the Bennetts.

Having all those thoughts in his mind over a period of time, Mills suddenly decided to sell his Doman shares.  The strange thing is he had never discussed any of his concerns with his banker who he had just seen on November 3 when he increased his loan to cover interest payments.  We know he never discussed his concerns with his brokers.  Then, he sold his shares just before the shares of Doman Industries are halted.  Mills would have us believe that this was just a coincidence.

Mills testimony is that he called Elmore and Elmore told him to get out.  Elmore was supposed to have said "It's like a puzzle, a Chinese puzzle.  I think you should get out." Elmore's testimony is that when he was asked to come to the phone the lady said "Doug, you're wanted on the phone right now." and there was an urgency to take the call, that as soon as he got on the phone Mills told him to sell the Doman shares and that Mills expressed urgency.  There are two matters here. First, we do not believe Mills when he testified that Elmore told him he thought he should sell the Doman shares.  As far as we are concerned, Elmore would have most certainty remembered whether he gave that advice.  Second, why was there an obvious urgency to sell the Doman shares.  Mills testified that "I was having a very busy day.  My whole day was booked and gone and that's the only time I had to deal with it." When Mills called Elmore it was to instruct him to sell 26,500 Doman shares.  Then, Mills called his other broker to instruct him to sell the remaining 2,000 Doman shares and talks to him for eight minutes.  We do not believe Mills' explanation.

Mills' testimony is that he met his partner Ward at about 10:30 and gave him the valuation assignment and may have talked to him quickly about the Remples, that he went to the McIntosh Centre at about 11 o'clock, that he left the McIntosh Centre about 11:35, 11:40 and went back to his office and that when he got back Ward had gone to the lunch meeting they were having with the Remples.  Ward's testimony is that he met with Mills sometime between 11:00 in the morning and 12 noon, and that Mills left the office for a meeting.  Mills' testimony of course fits with his testimony about going over to the McIntosh Centre, attending the ranch meeting and then meeting with W.R.Bennett.  However, we have found that the ranch meeting commenced at approximately 9:30.  We find that Mills was at his office before he called Elmore at 10:35 and until after 11 o'clock when he met with Ward and then he returned to the McIntosh Centre for a second time that morning and was there with W.R.Bennett when McNaughton called to tell W.R.Bennett that the Doman shares were halted.  We prefer Ward's testimony.  We do not believe Mills.

Based on all the evidence and our findings, we find that Mills was in W.R.Bennett's office when R.J.Bennett came in to tell his brother that the deal had collapsed and that when Mills received the information, he returned to his office and instructed his brokers to sell the Doman shares he and his wife owned.  We therefore do not believe his testimony that before he instructed Elmore and Mowatt to sell he and his wife's Doman shares on November 4, 1988, he had no contact with anyone at McIntosh Centre, other than his 9:30 telephone call from W.R.Bennett and he had no knowledge of the collapse of the take over of Doman Industries by Louisiana Pacific. 6.2.6     The Horse Racing Business

Under section 3(1)(d) of the Act, for purposes of section 68 of the Act, a person is in a special relationship with a reporting issuer where he is an associate of a person who is an insider of the reporting issuer or a director, officer or employee of the reporting issuer.  Doman Industries is a reporting issuer under the Act.  Doman is an insider and a director, officer and an employee of Doman Industries.

Under section 1(1) of the Act, associate means, where used to indicate a relationship with any person, inter alia, a partner, other than a limited partner of that person.

Commission staff have alleged that R.J.Bennett and Doman are associates because they are partners in the horse racing business and that consequently, they are in a special relationship under section 3(1)(d) of the Act.

Partner is not defined under the Securities Act.  There is the Partnership Act, R.S.B.C. 1979, c. 312.  Under the Act, there are at least three elements to every partnership.  These are described under section 2(1), "Partnership is the relation which subsists between persons carrying on business in common with a view to profit."  Lindley on Partnership, (15th ed., 1984) at page 11 describes them as:

1.a business,
2.two or more persons carrying on the business in common, and
3.a view to profit.
Under the Partnership Act, there are rules for determining partnership.  One is found under section 3(c):

the receipt by a person of a share of the profits of a business is proof in the absence of evidence to the contrary that he is a partner in the business, but the receipt of a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him a partner in the business;...
These rules are not exhaustive for determining a partnership under the Act.  The rules and indicia governing the determination of whether a partnership exists for purposes of the Partnership Act have been specified in the common law and that statute (see Northern Sales (1963) Ltd. v. M.N.R., [1973] C.T.C. 239; 73 D.T.C. 5200 at page 5204, cited in Woodlin Developments Ltd. v. M.N.R., [1986] 1 C.T.C. 2188 at 2195.)

Lindley on Partnership (supra, cited in Woodlin Developments Ltd., supra, at page 2194) describes the main common law rule to be observed in determining the existence of a partnership, a rule that has been recognized since the case of Cox v. Hickman (1860), 8 H.L.C. 268.  Regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case.  In examining the whole of the facts of a particular case in order to determine whether a relation of partnership exists at law, the courts rely on a number of indicia of partnership, including:

1.an agreement to share in the net profits of the business,
2.an agreement to share in the losses of the business,
3.the capacity to bind the other members of the partnership,
4.part or co-ownership of the capital or stock of the business or of an interest in the business, and
5.representations by the parties that a partnership exists and their reputation with third parties.
First, we will look at the definition of partnership under the Partnership Act.  It is clear to us that the owning, managing, training, racing and breeding of race horses, that we have referred to as the horse racing business, occupied the time, attention and labour of both Doman and R.J.Bennett and was carried on with a view to profit.  Each of Doman and R.J.Bennett claimed a profit or loss from the business each year on his income tax return.  In doing so, each of Doman and R.J.Bennett was representing to Revenue Canada that they operated the horse racing business with a reasonable expectation of profit, a pre-requisite for there to be "income" or "loss" for purposes of the Income Tax Act.  We find that the horse racing business carried on by Doman and R.J.Bennett with a view of profit fits within the definition of partnership under section 2(1) of the Partnership Act.

Second, we will examine the indicia of partnership that the courts have relied on in determining whether a relation of partnership exists at law.

Doman and R.J.Bennett have been sharing on an equal basis the profits and losses from the horse racing business since the early 1970's.  Financial statements prepared monthly and annually reflect that agreement.  Lindley on Partnership, supra at page 92, states an agreement to share profits and losses may be said to be characteristic -- if not to be the essence -- of a partnership agreement.  Whatever difference of opinion there may be as to other matters, persons engaged in any trade, business or adventure upon the terms of sharing the profits and making good all losses arising therefrom, are necessarily to some extent partners in that trade, business or adventure.

The horse inventories prepared by R.J.Bennett in November 1986 and March 1988 showed that 17 horses were owned by Doman and R.J.Bennett.  When some of those horses were re-evaluated for tax purposes in 1987, that re-evaluation was included in the preparation of the financial statements for the horse racing business in 1987.  In R.J.Bennett's evidence given to Commission staff on November 18, he said he owned horses with Doman.  We find that Doman and R.J.Bennett co-owned those 17 horses and those horses were assets of the horse racing business.

The conduct of Doman and R.J.Bennett in connection with the sale of Champers is evidence they were both involved in the business of operating the horse racing business together. According to Doman "our" trainer arranged the sale of Champers.  Obviously, Doman played no role in the sale. However, Doman did not phone the trainer, he called R.J.Bennett.  It was R.J.Bennett who had the information about the sale.  Doman was checking with R.J.Bennett to find out if $500 was the appropriate sale price.  R.J.Bennett knew exactly why the horse was sold for $500.  It had a broken or cracked sesamoid.  Champers was sold for $500 because R.J.Bennett was satisfied that that was the appropriate price.

When R.J.Bennett was interviewed by Commission staff on November 18, 1988, he described his relationship with Doman in the horse racing business as a partnership.  In testimony before us he tried to recant his evidence.  His counsel at the time, Peter Butler, admitted that R.J.Bennett and Doman were partners in the horse racing business.

We have examined all the circumstances and we find that the relation that subsists between Doman and R.J.Bennett in their horse racing business exhibits the indications of a partnership, including that Doman and R.J.Bennett shared on an equal basis all profits and losses, that Doman and R.J.Bennett co-owned part of the capital or stock, that each of Doman and R.J.Bennett had the capacity to bind the other in the operation of the business and that through their conduct and their evidence each of Doman and R.J.Bennett considered themselves partners and third parties considered them partners.  We find that Doman and R.J.Bennett were partners under the Partnership Act.  We therefore find that Doman and R.J.Bennett were partners under the definition of associate in section 1(1) of the Securities Act.  Consequently, we find that R.J.Bennett was in a special relationship with Doman Industries under section 3(1)(d) of the Securities Act.

6.2.7 The Bennetts' Sales and Section 68 of the Act
Under the amended notice of hearing we were asked to consider, among other things, all the circumstances surrounding the sales of Doman shares between October 1987 and November 4, 1988, in making our determination whether it is in the public interest to make any orders under section 144(1)(c) and (d) of the Act.

At the hearing, one of the essential allegations being made by Commission staff was that R.J.Bennett and W.R.Bennett sold the shares of Doman Industries on the basis of information (tips) received from Doman of material facts or material changes in the affairs of Doman Industries that had not been generally disclosed.

More particularly, Commission staff alleged that on November 4, 1988, Doman informed the Bennetts that the proposed take over of Doman Industries by Louisiana-Pacific would not proceed and that both the Bennetts acted on this information in the sale of shares of Doman Industries.

The relevant sections of the Act have been set out under Allegations and Relevant Statutory Provisions.  There is section 68 that sets out the prohibition against what we have referred to as insider trading.  Special relationship, insider, material fact and material change are words and terms that are relevant.  These are defined in sections 1 and 3 of the Act.

Section 68(1)(a) of the Act provides that "no person in a special relationship with a reporting issuer shall ... sell ... securities of the reporting issuer with knowledge of a material fact or material change in the affairs of the reporting issuer that he knows or ought reasonably to know has not been generally disclosed".  This is the section that Commission staff allege R.J.Bennett  and W.R.Bennett contravened.

Section 68(1)(b) of the Act provides that "no person in a special relationship with a reporting issuer shall ... inform, other than in the necessary course of business, another person about a fact or change which he knows or ought reasonably to know ... is a material fact or material change in the affairs of the reporting issuer, and ... has not been generally disclosed".  This is the section that Commission staff allege Doman contravened.

We will first consider whether Doman has contravened section 68(1)(b).

Doman Industries is a reporting issuer under the Act and Doman is in a special relationship with Doman Industries under section 3(1)(a) and (b) of the Act.

Under section 68(1)(b), Doman is prohibited from informing another person about a material fact or material change in the affairs of Doman Industries that he knows has not been generally disclosed.  There is an exception for persons where it is in the necessary course of business.  No one suggests for a moment that R.J.Bennett and W.R.Bennett were such persons.  Following are our findings with respect to the sales by R.J.Bennett and W.R.Bennett.

We have considered all the evidence and our findings.  We do not believe R.J.Bennett's testimony before us that he instructed Steed to sell his Doman shares before Doman telephoned him at 10:09 in the morning of November 4, 1988.  We find that when R.J.Bennett instructed Steed to sell his Doman shares on the morning of November 4, he did so with information received from Doman about the collapse of the deal that had not been generally disclosed.
We have considered all the evidence and our findings.  We do not believe W.R.Bennett's testimony before us that he instructed McNaughton to sell his Doman shares "just around or shortly after ten o'clock on November the 4th" and he did so without any information about the collapse of the deal.  We find that when W.R.Bennett instructed McNaughton to sell his Doman shares on the morning of November 4, he did so with information received from Doman through his brother R.J.Bennett about the collapse of the deal that had not been generally disclosed.
Was this information that we have found Doman must have given to the Bennetts a material fact or material change in the affairs of Doman Industries?

If the information is a material fact in the affairs of Doman Industries, it must be used in relation to the Doman shares and it must significantly affect, or could reasonably be expected to significantly affect, the market price of the Doman shares.  We have found that Doman's June decision to sell Doman Industries was a fact that not only could, but would, reasonably be expected to significantly affect the market price of Doman shares and, therefore, was a material fact within the definition of material fact in section 1(1) and was a material fact in the affairs of Doman Industries under section 68(1)(b).  Consequently, we find that Louisiana-Pacific's decision not to proceed with the take over of Doman Industries was a fact that not only could, but would, reasonably be expected to significantly affect the market price of Doman shares and, therefore, was a material fact within the definition of material fact in section 1(1) and was a material fact in the affairs of Doman Industries under section 68(1)(b).

We also know what in fact did happen in the market price of Doman shares when the deal collapsed.  On November 4, the day the deal collapsed, Doman B shares were trading as high as $11-1/2.  Louisiana-Pacific was not prepared to buy at any price and the Doman shares closed the day following the announcement at $7.25.  That was a decrease of $4-1/8 or 36%. We, therefore, find that Louisiana-Pacific's decision not to proceed with the take over of Doman Industries did significantly affect the market price of Doman shares.

A change in the ownership of Doman Industries that would reasonably be expected to have a significant effect on the market price of the Doman shares is a material change in the affairs of Doman Industries.  On the basis of the discussion above with regard to our finding that Louisiana-Pacific's decision not to proceed with the take over of Doman Industries was a material fact, we find that the material fact was also a material change within the definition of material change in section 1(1) and was a material change in the affairs of Doman Industries under section 68(1)(b).

We have found that Louisiana-Pacific's decision not to proceed with the take over of Doman Industries was a material fact and a material change under section 68(1)(b).  Is this a fact and change that Doman knew or ought reasonably to have known were a material fact and a material change in the affairs of Doman Industries which he knew had not been generally disclosed?  Doman was the controlling shareholder and the chief executive officer of Doman Industries.  We find that this was a fact and a change that Doman knew or ought reasonably to have known was a material fact and a material change in the affairs of Doman Industries which he knew had not been generally disclosed.

We therefore find that Doman contravened section 68(1)(b) of the Act when, as we have found, Doman must have informed the Bennetts that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries.

Now, we will consider whether R.J.Bennett and W.R.Bennett contravened section 68(1)(a).

We find that when, as we have found, Doman must have informed R.J.Bennett that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries, R.J.Bennett acquired knowledge of a material fact and a material change in the affairs of Doman Industries from Doman who he knew was an insider and a director, officer and employee of Doman Industries.  Therefore, we find that R.J.Bennett was in a special relationship with Doman Industries under the definition of special relationship in section 3(1)(e) when he acquired the knowledge of the material fact and material change in the affairs of Doman Industries.

We find that when, as we have found, Doman must have informed R.J.Bennett that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries with the intention that R.J.Bennett would pass that information on to W.R.Bennett and R.J.Bennett passed that information on to W.R.Bennett, W.R.Bennett acquired knowledge of a material fact and a material change in the affairs of Doman Industries from Doman who he knew was an insider and a director, officer and employee of Doman Industries.  Therefore, we find that W.R.Bennett was in a special relationship with Doman Industries under the definition of special relationship in section 3(1)(e) when he acquired the knowledge of the material fact and material change in the affairs of Doman Industries.

We have found that R.J.Bennett sold 183,580 Doman shares and W.R.Bennett sold 140,200 Doman A shares and 189,100 Doman B shares on November 4, 1988, with knowledge of the material fact and the material change in the affairs of Doman Industries that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries.  Based on the evidence, we find that each of R.J.Bennett and W.R.Bennett knew or ought reasonably to have known that the material fact and the material change in the affairs of Doman Industries had not been generally disclosed.

We therefore find that R.J.Bennett and W.R.Bennett contravened section 68(1)(a) of the Act when R.J.Bennett sold 183,580 Doman shares and W.R.Bennett sold 140,200 Doman A shares and 189,100 Doman B shares with knowledge of the material fact and material change in the affairs of Doman Industries that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries that each of R.J.Bennett and W.R.Bennett knew or ought reasonably to have known had not been generally disclosed.

In conclusion, we have found that the 183,580 Doman shares that R.J.Bennett sold on November 4, 1988, and the 140,200 Doman A shares and the 189,100 Doman B shares that W.R.Bennett sold on November 4, 1988, were sold on the basis of information received from Doman of a material fact and material change in the affairs of Doman Industries that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries that Doman knew, or ought reasonably to have known, was a material fact and material change in the affairs of Doman Industries and that Doman and R.J.Bennett and W.R.Bennett knew, or ought reasonably to have known, had not been generally disclosed, and, that, therefore, Doman contravened section 68(1)(b) and R.J.Bennett and W.R.Bennett contravened section 68(1)(a) of the Act.

We now turn to Commission staff's allegation that if W.R.Bennett acquired the information from R.J.Bennett that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries, then W.R.Bennett was in a special relationship with Doman Industries under section 3(1)(e) because he knew or ought reasonably to have known that R.J.Bennett was an associate of Doman under section 3(1)(d) by virtue of their partnership in the horse racing business.

We will first consider whether R.J.Bennett contravened section 68(1)(b) of the Act.

Doman Industries is a reporting issuer under the Act.  We have found that R.J.Bennett and Doman were partners under the definition of associate in section 1(1) of the Act and, consequently, R.J.Bennett was in a special relationship with Doman Industries under section 3(1)(d) of the Act.  Based on the evidence and our findings, we find that Louisiana-Pacific's decision not to proceed with the take over of Doman Industries was a fact and a change which R.J.Bennett knew or ought reasonably to have known was a material fact and a material change in the affairs of Doman Industries that had not been generally disclosed.  We have found that R.J.Bennett informed W.R.Bennett that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries.  We, therefore, find that R.J.Bennett contravened section  68(1)(b) of the Act.

W.R.Bennett knew that Doman and R.J.Bennett carried on the horse racing business together and had for a long time, that "my brother has, depending on what time, a very large investment in horses" and that the business had not been all that good - "Very good friends (referring to Doman and R.J.Bennett).  Stayed friends even though I don't know how good the horse business is."  W.R.Bennett and R.J.Bennett lived in the same small community.  They both had offices in the McIntosh Centre across the hall from one another.  In addition to the Bennetts, the McIntosh Centre had only three full time employees.  At least two of whom did work for McIntosh Centre and also work for R.J.Bennett and his ranch and certainly one did work for W.R.Bennett.  We have made a number of findings in connection with the purchase of Doman shares by W.R.Bennett and R.J.Bennett.  W.R.Bennett  knew that Doman was chief executive officer, a director and the controlling shareholder of Doman Industries.  We have found that W.R.Bennett acquired knowledge of the material fact and material change in the affairs of Doman Industries that the deal had collapsed.  Based on the evidence and our findings, we find that W.R.Bennett knew or ought reasonably to have known that Doman and R.J.Bennett were partners in the horse racing business.

We have found that W.R.Bennett sold 140,200 Doman A shares and 189,100 Doman B shares on November 4, 1988, with knowledge acquired from Doman through R.J.Bennett of the material fact and material change in the affairs of Doman Industries that Louisiana-Pacific had decided not to proceed with the take over of Doman Industries that he knew or ought reasonably to have known had not been generally disclosed.  On the basis of the evidence and our findings, if W.R.Bennett acquired knowledge of the material fact and material change from R.J.Bennett, we find that W.R.Bennett was in a special relationship with Doman Industries under section 3(1)(e) when he acquired knowledge of the material fact and material change from R.J.Bennett and as we have found knew or ought reasonably to have known that R.J.Bennett was an associate of Doman by virtue of their partnership in the horse racing business.  On the basis of our findings, we find that W.R.Bennett contravened section 68(1)(a) of the Act.

6.2.8
Other Matters
We have two further matters.  One relates to W.R.Bennett's purchases of Doman shares in light of our finding that R.J.Bennett and Doman were partners in the horse racing business and therefore associates under section 1(1) of the Act.  The other deals with Judge Craig's judgment.

W.R.Bennett's purchases of Doman Shares

We made the following findings with respect to W.R.Bennett's purchases of 299,300 Doman shares in June, July, August and September 1988.

Based on our finding that Doman must have known that the Bennetts were shareholders of Doman Industries in 1988, and that they had made substantial purchases of Doman shares and the evidence and our findings that we based that finding on, we find that when Doman had discussions with R.J.Bennett about his June decision to sell Doman Industries and about the August and September merger discussions, he did so knowing that R.J.Bennett would give that information to W.R.Bennett.  We find that R.J.Bennett must have passed the information about Doman's June decision to sell Doman Industries along to W.R.Bennett before W.R.Bennett made his first purchases of Doman shares in June 1988.  We find that R.J.Bennett must have discussed the August and September merger discussions with W.R.Bennett during August and September 1988.  We find that W.R.Bennett must have made use of his knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions in purchasing 299,300 Doman shares in June, July, August and September 1988.
Commission staff did not allege that W.R.Bennett contravened section 68(1)(a) when he made these purchases and we have made no finding in that regard.  However, we do make the following findings.

When W.R.Bennett purchased the 299,300 Doman shares, we find that W.R.Bennett was in a special relationship with Doman Industries under the definition of special relationship in section 3(1)(e) when he acquired the knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions, being material facts and material changes in the affairs of Doman Industries, from Doman who he knew was a director, officer and controlling shareholder of Doman Industries.

Further, when W.R.Bennett purchased the 299,300 Doman shares, we find that W.R.Bennett was in a special relationship with Doman Industries under the definition of special relationship in section 3(1)(e) if he acquired the knowledge of Doman's June decision to sell Doman Industries and the August and September merger discussions, being material facts and material changes in the affairs of Doman Industries, from R.J.Bennett, and not Doman, on the basis of our findings that R.J.Bennett was an associate of Doman under section 3(1)(d) by virtue of their partnership in the horse racing business and W.R.Bennett knew or ought reasonably to have known that.

Judge Craig's Judgment

This hearing is a regulatory proceeding carried on under the Securities Act.  Following this hearing, orders may only be issued under the Act where we consider it to be in the public interest.  There are very few procedural requirements we are required to follow.   Based on the judgment of the Supreme Court of Canada in  Prassad v. Canada (Minister of Employment and Immigration), (1989), 57 D.L.R. (4th) 663, we are of the view that in the absence of specific rules laid down by the Act, the Regulation or the Rules, we control our procedures in holding a hearing under section 144(1), subject only to the proviso that we exercise our discretion in accordance with the rules of natural justice.  These rules must be considered having in mind our mandate under the Act to regulate trading in securities so that we have fair and efficient markets in which the public has confidence and the powers given to the Commission under the Act to carry out that mandate.

-The Commission may subpoena witnesses and compel them to give evidence, including producing records, under the same power as the Supreme Court has for the trail of civil actions where failure or refusal to comply makes the witness liable to be committed for contempt (see section 154.1(a)).
-The Commission is not bound by the rules of evidence (see section 154.1(c)).
-Our view is that in a hearing, the Commission should have as much relevant evidence produced as possible so that all the relevant evidence is considered by the Commission when it is considering the public interest.  Our view is underscored by our obligation that we shall receive all relevant evidence submitted by a person to whom notice has been given and may receive relevant evidence submitted by any person (see section 154.1(b)).
In the trial before Judge Craig, none of the respondents gave evidence and none of the witnesses called to give evidence by the Crown were subject to cross-examination.  In this hearing, each of the respondents was compelled to give evidence.  The respondents and many other witnesses were cross-examined by all counsel.  Not only did we have this viva voce evidence, but we had documentary evidence produced that was gathered under the Act following procedures that would have made certain of the documentary evidence inadmissible in the trial before Judge Craig.

The trial before Judge Craig lasted two weeks.  This hearing lasted 67 days.  After taking into consideration the days taken up with preliminary applications and final submissions, there were more than 50 days of hearing where evidence was produced.  In addition, the following evidence was produced:

-sworn evidence from the trial for Merlo and his management team from Louisiana-Pacific and their U.S. counsel, all of whom refused to attend this hearing voluntarily,
-sworn evidence from the trial and from the interview with Commission staff for Duhamel who was ill,
-sworn evidence from the earlier Commission hearing, and
-evidence from other witnesses, who did not attend to give viva voce evidence, some of which was sworn.
Consequently, this hearing was a very different proceeding than the trial before Judge Craig, where we have had produced before us much more relevant evidence relating to the circumstances of the purchases and sales of Doman shares during the period October 1987 to November 4, 1988.  We have considered what evidence was relevant.  We have determined what weight we should give to the relevant evidence.  We have made our findings of fact.  Based on the relevant evidence and our findings of fact, we have made our findings that the respondents have contravened section 68(1) of the Act.

Judge Craig came to certain conclusions based on the evidence before him.  Judge Craig said that Doman was in a state of shock at 10:07 a.m. on the morning of November 4, 1988.  His Honour went on to state:

There is no doubt that the Merlo call to Herb Doman began at approximately 9:52 a.m. on November 4, 1988 and ended at approximately 10:07 a.m.  With respect to the call at 10:08 a.m. from DIL (Doman Industries) to McIntosh Centre, there is no direct evidence of who made the call or who received the call...
...
It would be speculation at best and cynicism at least to infer that Doman immediately placed the call to McIntosh Centre.  To speculate on Doman's activities between 10:07 and 10:14 a.m. on November 4, 1988 and give only a sinister connotation to such speculation would lead to conviction based on suspicion.
Well, there is no longer any speculation about the call.  In this hearing, Doman and R.J.Bennett admitted that Doman made the call from Doman Industries to R.J.Bennett at McIntosh Centre beginning at 10:09 and ending at 10:14 that morning as is set out in the telephone company records.

7.   DECISION

Mr. Justice Melnick in Bennett supra concluded at page 152 of his judgment that:

The aim and purpose of s. 68 is clearly to lay down specific ethical standards for those engaged in the trading of securities of a reporting issuer.  It is to promote a level playing field for those engaged in the buying and selling of shares.
This is a case about insider trading.  Insider trading is often characterized by deceit and greed and sometimes by conspiracy.  All these elements were present in this case involving R.J.Bennett, W.R.Bennett and Doman.

We have found that Doman contravened section 68(1)(b) and R.J.Bennett contravened section 68(1)(a) of the Act when R.J.Bennett purchased 251,600 Doman B shares between August 25 and September 19, 1988.

We have found that Doman contravened section 68(1)(b) and R.J.Bennett contravened section 68(1)(a) of the Act when on November 4, 1988, R.J.Bennett sold 183,580 Doman B shares.

We have found that Doman and R.J.Bennett contravened section 68(1)(b) and W.R.Bennett contravened section 68(1)(a) of the Act when on November 4, 1988, W.R.Bennett sold 140,200 Doman A shares and 189,100 Doman B shares.

Doman is the chairman of the board, chief executive officer and controlling shareholder of Doman Industries.  It is a successful forest products company which Doman founded in the 1960s.  In his testimony before us, we have found that he did not tell the truth, that we simply could not believe some of his testimony when we considered it with the other evidence, that we were unable to understand how he could not recall certain occurrences and that his testimony was inconsistent with other testimony before us where we preferred that other testimony.  We find that Doman misled

-Abercrombie, the chief financial officer of Doman Industries, when he told him on November 4, 1988, that Merlo called at 10:20 or 10:25 that morning,
-the board of directors of Doman Industries, when he told them on November 7, 1988, that the call from Merlo came at approximately 10:30 on November 4, 1988, and that he did not tip anyone,
-the shareholders of Doman Industries, the public and The Toronto Stock Exchange, when following the directors meeting on November 7, 1988, he sent a letter to the shareholders that contained statements that were not true, some of which were attributed to the board of directors, who were not aware of what happened because Doman had not told them the truth,
-the legal counsel for Doman Industries, when he directed them to send their letter dated November 30, 1988, which contained allegations that the Commission investigation was unauthorized,
-Commission staff when Doman signed and delivered, under the cover of the Ladner Downs letter, a chronology which stated that Merlo's call was between 10:20 and 10:25 on November 4, 1988.
Doman's testimony before us was that the call from Merlo came when he was on the phone with R.J.Bennett and that he ended the call to take Merlo's call.  His call with R.J.Bennett ended at 10:14.

R.J.Bennett is a son of the late W.A.C.Bennett, a former premier of the province.  R.J.Bennett was interviewed by Commission staff on November 18, 1988, two weeks following November 4, when he was represented by counsel and he knew he was under investigation for insider trading and he testified before us that he took the matter seriously at the time.  Much of the testimony of R.J.Bennett before us was inconsistent with evidence given to Commission staff and inconsistent with the testimony of others where we preferred others' testimony. R.J.Bennett recanted his previous evidence given to Commission staff a number of times, where often he gave no rational explanation and where his responses included statements such as "I'm just trying to cover my backside saying, well, you know -- how definite can you be?"  In his testimony before us and in his evidence before Commission staff he was evasive or could not recall.  In his testimony before us, we simply could not believe some of his testimony when we considered it with the other evidence.

Based on all the evidence and our findings, we find that Doman and R.J.Bennett conspired to give their evidence to Commission staff and their testimony before us which we did not believe.  Some examples follow.  They testified that they talked about Champers, that broken down horse, for five minutes at 10:09 and again for 20 minutes in the afternoon, when we have found that their conversation dealing with the sale of that horse need not have taken more than a minute.  We did not believe them.  They testified that they do not discuss Doman Industries and the collapse of the deal at 10:09.  We did not believe them.  They testified that they never discussed Doman Industries.  We did not believe them.

W.R.Bennett is a former premier of the province, the son of the late W.A.C.Bennett also a former premier of the province.  W.R.Bennett was interviewed by Commission staff on November 18, 1988, two weeks following November 4, when he was represented by counsel and he knew he was under investigation for insider trading.  Some of his testimony before us is inconsistent with that evidence, where his explanation for evidence that was very clear when given on November 18 is "It's not a question I would be expecting to answer or do any research on..." and "but those would all be answers in which I was making estimates or responding without particular knowledge."  Some of his testimony we did not believe when we considered it with the other evidence. Some of his testimony was inconsistent with testimony given by others where we preferred the testimony of the others.

Based on all the evidence and our findings, we find that R.J.Bennett and W.R.Bennett conspired together and with Mills and Dunn to give their evidence to Commission staff and their testimony before us which we did not believe.  Some examples follow.  They testified that, apart from casual conversation, they never discussed their purchases of Doman shares.  We did not believe them.  They testified that they met in the boardroom on the morning of November 4 following W.R.Bennett's call to McNaughton to discuss the sale of their Doman shares. We did not believe them.  They and Mills and Dunn testified that the ranch meeting commenced around 11 o'clock on November 4, 1988.  We did not believe them.

R.J.Bennett made his purchases of 251,600 Doman shares when he had knowledge acquired from Doman about the sale of Doman Industries.  All those holders of Doman shares that sold their Doman shares to R.J.Bennett did not have that information.  If Doman had disclosed his intention to sell Doman Industries, the prices of Doman shares would have increased following the announcement and all those holders would have made substantially more money than they did.  Of course, R.J.Bennett would not have been the purchaser.

During the period R.J.Bennett was purchasing his 251,600 Doman shares, we have found that he was a significant player in the market for Doman shares.

R.J.Bennett and W.R.Bennett sold in the aggregate 517,996 Doman shares on November 4, 1988.  The CBC Pension Fund purchased 351,600 Doman shares.  The Bennetts settled with the Fund and another holder who had an insignificant number of Doman shares.  However, there were purchasers on November 4 who purchased approximately 166,396 Doman shares sold by the Bennetts.  The sales were at $11-3/8 and the price for Doman shares closed the following trading day at $7-1/4, a decrease of $4-1/8 per share.  On that basis, the purchasers lost in the aggregate $686,384.  The Bennetts of course made very near that amount because of the prices they had paid for their Doman shares.

On November 4, 1988, except for the sales of 8,000 Doman shares by others and the sales of 33,500 by Dunn, Duhamel, Mills and Steed, the Bennetts sales of Doman shares represented all the sales of Doman shares that day.  The Bennetts were the market for Doman shares on November 4, 1988.

The contraventions of section 68(1) of the Act by Doman, R.J.Bennett and W.R.Bennett have caused serious prejudice to the public interest. How can the public have confidence in our markets and buy and sell securities satisfied that there is a level playing field for both buyers and sellers?  This is especially so when we consider who the respondents are in this hearing.  Doman runs a successful forest products firm in an industry that is one of the mainstays to our province's economy and was considered for the appointment of Lieutenant Governor of our province.  R.J.Bennett is well known certainly because he is the son of the late W.A.C.Bennett a former premier of our province.  W.R.Bennett is well known because he was premier of our province for over a decade.  The Bennett family ran our province for many years.  The public entrusted their futures to them.  The conduct of Doman and the Bennetts that we have considered in making our findings that they contravened section 68(1) of the Act calls for significant orders under section 144(1) of the Act removing them from trading in the market and from managing the business and affairs of reporting issuers.  We have provided Doman with an alternative that would substantially shorten the time we have removed him from the management of Doman Industries, but only if conditions are fulfilled and only because we have considered the public who have invested in Doman Industries. The conditions are intended to provide the public with assurance that Doman Industries will be managed in the future in compliance with the continuous disclosure rules that are a corner stone to securities regulation of reporting issuers, so that the public can expect a level playing field when they buy and sell Doman shares.

On the basis of the contraventions of section 68(1) of the Act and after considering the public interest, we make the following orders:

1.Under section 144(1)(c) of the Act, we order that the exemptions described in sections 30 to 32.1, 55, 58, 80 and 81 of the Act do not apply to each of Russell James Bennett, William Richards Bennett and Harbanse Singh Doman for a period of 10 years that commences the date of this decision, August 28, 1996, and expires August 27, 2006.
2.Under section 144(1)(d) of the Act, we order that each of Russell James Bennett and William Richards Bennett resign any position that each of them holds as a director or officer of a reporting issuer by August 31, 1996, and that each of Russell James Bennett and William Richards Bennett is prohibited from becoming or acting as a director or officer of any reporting issuer for a period of 10 years to commence September 1, 1996, and to expire August 31, 2006.
3.Under section 144(1)(d) of the Act, we order with respect to all reporting issuers, other than Doman Industries Ltd., that Harbanse Singh Doman resign any position that he holds as a director or officer by August 31, 1996, and that Harbanse Singh Doman is prohibited from becoming or acting as a director or officer for a period of 10 years to commence September 1, 1996, and to expire on August 31, 2006.
4.Under section 144(1)(d) of the Act, we order with respect to Doman Industries Ltd. that Harbanse Singh Doman either:
a)resign as a director and officer by September 30, 1996, and is prohibited from becoming or acting as a director or officer for a period of 10 years to commence October 1, 1996, and expire on September 30, 2006; or
b)resign as a director and officer by September 30, 1996, and is prohibited from becoming or acting as a director or officer for a period of one year to commence October 1, 1996, and expire on September 30, 1997, provided that the following conditions are fulfilled before September 30, 1997, and remain fulfilled so long as Harbanse Singh Doman is a director or officer:
i)an independent director is appointed chair of the board of directors,
ii)the directors adopt a Governance Policy that is consistent with recommendations made by The Toronto Stock Exchange,
iii)independent directors are appointed to chair all committees of the board,
iv)the directors have a committee of independent directors to approve all purchases and sales of shares of Doman Industries by employees, officers and directors, and
v)annually, within 90 days of the end of its financial year, the independent directors of Doman Industries provide the Executive Director of the Commission with a report outlining the procedures they followed during the preceding financial year to satisfy these conditions.
5.Under section 154.2 of the Act, we order that Russell James Bennett, William Richards Bennett and Harbanse Singh Doman pay prescribed fees and charges for the costs of or related to the hearing incurred by the Commission and the Executor Director, the amounts to be determined following further submissions from the parties and in this regard we ask the Secretary of the Commission to have this matter set down if need be on a date before the end of September 1996.
Mills

Based on the evidence and our findings of fact, we have made a number of findings regarding Mills conduct in connection with his purchase and sale of Doman shares during the period June 1988 and November 4, 1988.  Mills was not a respondent.  If Mills had been a respondent, based on the evidence and our findings, we would have found that he contravened section 68(1) of the Act with respect to certain of his purchases of Doman shares and his sales of Doman shares on November 4, 1988.  We are troubled by his testimony before us.  Mills is a chartered accountant.  Mills could not recall statements made to his bank on three separate occasions.  On two occasions those statements referred to his contacts. Mills' testimony was that his purchases were based on factors that did not include information about the sale of Doman Industries received from the Bennetts.  We found that his contacts were the Bennetts. Mills gave testimony that we found was inconsistent with testimony given by others or inconsistent with other testimony given by him.  In one case, his testimony was inconsistent with his broker's testimony and we did not believe Mills.  In another case, his testimony was inconsistent with the testimony of a partner in his firm and we preferred his partner's testimony.  We have found that Mills conspired with W.R.Bennett, R.J.Bennett and Dunn to give their testimony about the commencement of the ranch meeting. We did not believe them.  We did not believe Mills' testimony that before he instructed Elmore and Mowatt to sell his and his wife's Doman shares on November 4, 1988, he had no contact with anyone at McIntosh Centre, other than his 9:30 telephone call from W.R.Bennett and he had no knowledge of the collapse of the take over of Doman Industries by Louisiana Pacific.  We are the view that Mills conduct before this hearing should be brought to the attention of the Institute of Chartered Accountants.  We direct the Executive Director to do so and to report to the Commission.

The Brokers

We cannot let the conduct of Steed and McNaughton go without further comment.  While we recognize of course that Steed and McNaughton are not respondents and the circumstances being considered in the hearing occurred in 1988, nevertheless, we have made findings regarding the conduct of Steed and McNaughton.

First, we will deal with McNaughton's conduct.  We have found that McNaughton's conduct violated W.R.Bennett's confidentiality and contravened the standard for confidentiality of client information.  That is a standard all brokers and their firms are required to meet.  We found McNaughton's conduct questionable when he left the sell orders in for W.R.Bennett's 50,000 Doman A shares and 50,000 Doman B shares.  If those orders had been filled, then McNaughton would have sold 100,000 Doman shares that W.R.Bennett no longer owned.  Those sales would have not been declared as short sales and would have been in contravention of the requirements of The Toronto Stock Exchange and the securities legislation.

Under the circumstances, we direct our Executive Director to bring McNaughton's conduct to the attention of the SRO through which McNaughton is registered under the Act.  We expect the Executive Director to report to the Commission.

We should add that we were impressed with the supervision of Odlum Brown during the period W.R.Bennett was purchasing Doman shares and with the manner in which the firm handled the investigation insofar as they required McNaughton to immediately prepare notes of what happened during W.R. Bennett's purchases and sales of Doman shares.  However, since McNaughton spoke to Hollingshead directly in connection with the sale of W.R.Bennett's Doman shares, the firm should have also required Hollingshead to prepare notes of what happened.

Now, we will deal with Steed's conduct.  We found that Steed contravened the requirements of The Toronto Stock Exchange when R.J.Bennett made undeclared short sales of 5,116 Doman B shares on November 4, 1988.  We found their conduct inexcusable in light of the testimony that they met a few days earlier to calculate R.J.Bennett's holdings of Doman shares, if indeed they did have that meeting.  As a consequence of the arrangement between Steed and Duhamel under which Steed sold Duhamel's Doman shares when he sold R.J.Bennett's Doman shares on November 4, 1988, we found that Steed's conduct violated R.J.Bennett's confidentiality and contravened the standard for confidentiality of client information.  As we have already noted that is a standard all brokers and their firms are required to meet.

More serious than the contraventions are the concerns we have about Steed's testimony before us.  Steed was interviewed by Commission staff twice, first on November 10, 1988, and a second time on November 16, 1988.  Steed knew prior to his first interview that there was a concern that at the very least R.J.Bennett may have engaged in insider trading.  Steed testified that he "probably" spoke to R.J.Bennett about that prior to his first interview on November 10 and that it was "most likely" he would have spoken to R.J.Bennett after his first interview and before his second interview on November 16.  Much of the testimony of Steed is inconsistent with the evidence given to Commission staff.  Steed recanted his previous evidence more than once.  Steed offered excuses for why he kept changing his evidence.  We were not persuaded by any of them.  We find that Steed did not tell the truth before us and before Commission staff.

Further, we have concerns about supervision by the compliance group in Steed's firm during the period R.J.Bennett was making his major purchases and when the shares of Doman Industries were halted.

Under the circumstances, we direct the Executive Director to bring Steed's conduct to the attention of the SRO through which Steed is registered under the Act and to have the SRO inquire into the compliance program followed in Steed's firm. We expect the Executive Director to report to the Commission.

Some Comments

We wish to mention several matters.

We made findings of fact with respect to the purchases by R.J.Bennett of Doman shares in June and July 1988 and the purchases of Doman shares by W.R.Bennett in the months of June to September 1988.  While the amended notice was very broad and extended to these purchases, in the hearing, Commission staff did not allege that R.J.Bennett and W.R.Bennett contravened section 68(1) when they made these purchases. Under the circumstances, we have not made any findings under the Act with respect to these purchases.

We have made findings of fact with respect to material changes in the affairs of Doman Industries.  Doman is the chief executive officer of Doman Industries and therefore he is responsible for ensuring that Doman Industries complies with the Act.  While the amended notice was very broad and included reference to section 67 of the Act, that requires a reporting issuer to make timely disclosure of material changes, Commission staff did not deal with this matter. Under the circumstances, we have not made any findings with respect to Doman's conduct in this regard.

Section 68(1) of the Act has been amended and broadened. If that amendment had been in force in 1988, based on the evidence and our findings of fact, we would have found that Dunn and Duhamel contravened the amended section on November 4, 1988, when they sold their Doman shares.

H.D. BROWNE, Member
G.M. CLARK, Member
S.M. DAVISON, Member
E.L. LIEN, Member