In Re Mountainstar Gold Inc., 2019 BCSECCOM 123, the British Columbia Securities Commission gave short shrift to a request by the respondents for a stay of the Commission's imposition of sanctions against them until after certain legal proceedings in Chile.
At the conclusion of the Commission's hearing on the merits, it determined that over a 3-year period, Mountainstar Gold Inc. had repeatedly contravened section 168.1(1)(b) of the British Columbia Securities Act by making disclosure in its public filings concerning certain Chilean mining claims and related legal proceedings that was false or misleading in a material respect, and that Brent Hugo Johnson, an officer and director of Mountainstar, authorized, permitted or acquiesced in those contraventions.
According to the Commission, "the false or misleading disclosure in issue fundamentally misrepresented ownership of the mining interests comprising Mountainstar's principal asset and key project". The Company's MD&A represented that a party identified as "L" in the Commission's decision was the registered holder of title to certain mining concessions which were the subject of an option agreement. In fact, L had simply filed petitions with respect to those concessions. L had not acquired any mineral or exploration rights to the areas subject to the petitions. Accordingly, the Company's MD&A "fundamentally misrepresented the status of L's legal proceedings challenging title to the underlying mining interests".
In denying the motion for a stay, the Commission indicated that the respondents had not demonstrated that the Chilean legal proceedings could have a determinative or substantial impact on the sanctions decision.
Further, the Commission found that even if it had accepted that the Chilean legal proceedings were relevant and that there was potential prejudice to the respondents if a sanctions decision was rendered and the Chilean legal proceedings were subsequently decided in L's favour, it would not consider a stay to be in the public interest. The contraventions were serious. The time required to conclude the Chilean legal proceedings could result in indeterminate and potentially substantial delay. The respondents' continued participation in the capital markets posed a serious risk to investors and the markets.
Takeaway
This decision confirms the difficulties that respondents face when seeking a stay of securities regulatory proceedings. In reaching its decision, the Commission referred to its prior decision in Starflick.com(Re), 2014 BCSECCOM 25, in which it noted with approval the comments made by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, that where a public authority is charged with the duty to promote and protect the public interest and its activities are undertaken pursuant to that responsibility, it should be assumed "that irreparable harm to the public interest would result from the restraint of that action".
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