Canada: The Limited Role Of Lawyers In Investigations By Quebec’s Securities Regulator

On June 22, 2012, the Quebec Court of Appeal (QCA) issued a decision confirming the significant powers of compulsion that are available to Quebec's securities regulator, the Autorité des marchés financiers (AMF), in investigations. In Autorité des marchés financiers c. Fournier,¹ the QCA overturned two previous judgments and declared the respondent, Gilbert Fournier, guilty of an offence under Section 195(4) of the Quebec Securities Act² (QSA) for refusing to answer an AMF investigator's questions on the advice of his attorney.

Facts

On January 26, 2006, the AMF launched an investigation into the activities of Martin Tremblay, Dominion Investments Ltd., Dominion Investments (Nassau) Ltd. and companies related to Dominion Investments (Nassau) Ltd. pursuant to Sections 239 and following QSA. On January 14, 2008, Fournier was served a summons by Gaétan Paul, one of the AMF investigators assigned to the case, compelling him to appear for examination and to bring documents relating to an account identified in the summons. The summons did not otherwise specify the scope of the AMF's investigation or the identities of the individuals or entities targeted by the summons. On February 14, 2008, Fournier came to the AMF's offices with his lawyer to be examined by the investigator.

The investigator began by informing Fournier that the investigation concerned Dominion Investments Ltd., and by providing Fournier's attorney with a redacted copy of the AMF decision that had launched the investigation. When Paul asked his first question—whether Fournier held a brokerage account—Fournier's attorney objected on grounds of irrelevancy. The investigator told Fournier's attorney that he could not object to the questions, and that Fournier had to answer them. Fournier's attorney told the investigator that he intended to submit his objections to a justice of the Superior Court. The investigator refused to suspend the examination and the examination went ahead despite the attorney's protest. Fournier continued to refuse to answer the investigator's questions, and the investigator, unable to get answers to his questions because of the lawyer's instructions to Fournier, terminated the examination. On March 12, 2008, Fournier was served a statement of offence for refusing to testify, in contravention of Section 195(4) QSA.³ 

Prior judgments

On October 28, 2009, Claude Millette, J.C.Q., acquitted Fournier, finding no evidence of the actus reus – i.e. the material elements of the offence – as the investigator had not disclosed the purpose of his investigation and Fournier could not assess the relevancy of the questions that he was being asked.⁴

The AMF appealed this initial decision and, on June 16, 2010, Réjean Paul, J.S.C., confirmed Fournier's acquittal.⁵ He determined that the summons, because it did not indicate the purpose of the investigation, was deficient, and objections could be made to the questions. Justice Paul insisted on the right, if not duty, of the lawyer to intervene during his client's examination to object to the investigator's questions when warranted.

Analysis

First, Jacques Dufresne, J.C.A., giving the reasons for the Court of Appeal, reiterated the AMF's mission. Relying on Supreme Court of Canada case law relating to provincial securities authorities, he pointed out that, in view of the AMF's objective of protecting the public, the lawmakers gave the regulator broad investigative powers.

As to the matter of knowing whether the lawyer of the person examined by the AMF investigator can object to the questions that are asked and demand a ruling on such objections, Justice Dufresne stated from the outset that the right to the presence of a lawyer was not being challenged. However, he concluded that a lawyer accompanying a person summoned to appear cannot formulate objections because Section 241 QSA states that no person called upon to testify in the course of an investigation or being examined under oath may refuse to answer or to produce any document on the ground that he might thereby be incriminated or exposed to a penalty or civil proceedings. According to Justice Dufresne, the lawyer may, if he deems it in his client's interests, recommend that the client refuse to answer certain questions asked by the investigator; however, in doing so, he exposes the client to the possibility of being served a notice of offence. Justice Dufresne also explained that it would not be possible to have a justice of the Superior Court rule on the objections because the type of examination involved is not usually related to any proceeding pending before the courts.

The Court of Appeal nonetheless identified two possible remedies for a person examined by an AMF investigator. First, if the person examined feels that the investigator went beyond his or her mandate or jurisdiction or that there is a breach of the rules of natural justice or procedural fairness, he or she could institute an action before the Superior Court pursuant to the general principles of administrative law and apply to have the examination suspended. This avenue may however be complicated in practice because of the criteria established by case law for this type of remedy.

The second option corresponds to the remedy used by Fournier, i.e. go before the Court of Quebec to contest the notice of offence arising from the refusal to testify. It is difficult to consider this remedy an attractive option because, the lawyer in such a case exposes his or her client to penal proceedings. While it is true that to defend him- or herself with respect to a charge, the witness may establish that his or her refusal to testify was based on a just cause or excuse, i.e. on reasonable diligence, it is not enough, as in the case of Fournier, to argue that a refusal to answer on the grounds that an objection was made by the attorney constitutes such a valid excuse. In fact, the Court of Appeal found that such an error of law did not constitute a just excuse.

This Court of Appeal decision has sparked a great deal of discussion in legal circles and will, no doubt, change the way lawyers proceed in AMF investigations.

Footnotes

1 2012 QCCA 1179, Duval Hesler, Pelletier and Dufresne JJ.

2 RSQ, c. V-1.1.

3 195. It is an offence [...] (4) to fail to appear after summons, to refuse to testify or to refuse to send or remit any document or thing required by the Authority or an agent appointed by it in the course of an investigation.

4 Unreported decision

5 2010 QCCS 4830, Paul J.

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