Duty of procedural fairness that would be owed to witnesses in issuing summonses under the Securities Act is minimal

The ability to seek scrutiny of a regulators’ investigation and discretionary decisions, while the investigation remains ongoing, has always been limited under various provincial securities statutes in Canada. Determining the appropriate procedural offramp for a sober ‘second thought’ on these decisions is often an illusive and unfulfilling exercise and, in such cases, individuals who are not party to an investigation can often be caught in its crosshairs with little means to challenge these decisions.

The 2023 case of Brar v. British Columbia (Securities Commission), 2023 BCCA 432, has determined that the decision of a British Columbia Securities Commission (the Commission) investigator to summons possible witnesses in connection with an investigation order is not the type of decision that is subject to judicial review. Further, having determined that it was not subject to judicial review, and that British Columbia’s Securities Act’s privative clause would not have otherwise shielded the impugned decision from judicial review otherwise, it gratuitously opined that a duty of procedural fairness owed to a summons recipient would be minimal.

Background

This case stemmed from the issuance of summonses by a Commission investigator, as part of an ongoing investigation, to two proposed witnesses in 2020 and 2021. The proposed witnesses failed — twice each — to attend their scheduled interviews, and the Commission initiated contempt proceedings against them.

Subsequently, the proposed witnesses filed a petition in the British Columbia Supreme Court seeking judicial review of the investigator’s initial decision to compel their interviews. In their petition, they contended that the summonses were issued without affording the witnesses due procedural fairness. They argued, among other things, that the summonses failed to specify the legal test or evidence, if any, considered in issuing the summonses.

The British Columbia Supreme Court dismissed the applications, and the proposed witnesses appealed to the Court of Appeal.

The Court of Appeal decision

The Court of Appeal found that the investigator’s decision is not of the type intended to be the subject of judicial review, considering the definitions of “statutory power of decision” and “record of proceeding” under British Columbia’s Judicial Review Procedure Act. The Court of Appeal indicated that while the Commission’s investigators possess broad investigative authority, they do not possess decision-making authority. Their role is limited to conducting investigations and presenting their findings to the Commission. Therefore, when a summons is issued to a non-party witness as part of an investigation, it does not determine any existing rights, powers, or privileges of the summoned individual, and therefore does not fall within the category of decisions subject to judicial review.

Having found that the impugned decision was not subject to judicial review given its nature, the Court of Appeal considered the privative clause in the Securities Act purporting to restrict judicial interference with the decisions of the Commission and related parties. In doing so, the Court noted that the consensus among modern legal authorities suggests that privative clauses are no longer an absolute barrier to judicial review. Ultimately, it is the responsibility of courts, constitutionally independent from the Executive, to ensure that governmental actions comply with the law. Therefore, the presence of a privative clause in the Securities Act does not serve as an absolute bar to judicial review on the grounds of procedural unfairness.

All of this notwithstanding, the Court continued to decide the appeal on the broader issues of the principles raised. In doing so, it found that in a scenario where the investigator’s decision was subject to judicial review, the content of any duty of procedural fairness owed to the proposed witnesses was “minimal” in the case before it and had been fulfilled. The Court reasoned that the decision to seek and issue a summons to a witness in connection with an investigation order did not resemble judicial-like decision-making, and that much more detailed provisions would apply at subsequent stages (once the investigator has completed their report, and at the hearing). Further, the consequence of the decision to summons a witness to the affected party would normally be low, as the witnesses are not themselves the subjects of the investigation. The Court of Appeal commented that the witnesses in this case have been given prior notice of the interviews, have been informed of the identity of the investigation’s subjects, and have the right to counsel before and at the interviews. Practically speaking, the consequences if the Commission had to disclose further information at this early stage (or provide a “record”) might be to compromise the investigation or raise concerns regarding privacy.

The Court of Appeal therefore stated that there would not have been a breach of procedural fairness in this case if one were reviewing the decision, and the staff and the investigator would not have been required to disclose the basis for issuing the summonses or their relevance to the “subject and scope” of the investigation.

Takeaways

Regulatory investigations can be lengthy and challenging to navigate both for those who are the subject of such investigations, as well as witnesses. Responding to information requests can be costly, cumbersome and time consuming. The British Columbia Court of Appeal confirmed that amongst the very limited avenues that witnesses have to challenge a regulatory investigative summons, judicial review is not practically one of them in British Columbia. The Court’s hesitancy to intrude upon regulatory investigations leaves regulators with significant responsibility to be scrupulous as to how their extensive investigative tools are used. The public interest requires that in the absence of mechanisms to challenge or oversee actions taken in the course of an investigation, regulators have a particular responsibility to exercise good judgment and self-restraint when using their increasingly broadening investigative tools, and thoughtful self-scrutiny to resort to the least intrusive means to obtain sought information.