A British Columbia court has found in favour of the B.C. Securities Commission in a dispute over whether it had the power to negotiate a voluntary settlement for an amount that was larger than it could have imposed as a penalty.

The BCSC brought the case against Michael Lee Seifert alleging that he still owes it $225,000 as part of a $450,000 settlement it negotiated with him. As part of the settlement, he executed a promissory note for $450,000 to the commission to be paid in instalments.

The commission issued an invoice to Seifert for $450,000. The invoice stated that $200,000 was “investigating costs” and $250,000 was “administration penalty costs”.

Seifert paid a total of $225,000 in instalments. The court said he then took the position that the settlement agreement was not enforceable and refused to make further payments. He has continued to abide by the other terms of the order pending the outcome of this action.

The court was asked whether the executive director of the commission had jurisdiction to resolve allegations prior to a hearing by entering into a settlement agreement which requires a payment to the commission, where no order was issued by the commission requiring that the money is paid. And, if so, could it agree to a settlement for $250,000 when a subsequent, unrelated court case determined that the maximum penalty the BCSC could impose is just $100,000.

The court found in favour of the BCSC and awarded a judgment for its entire claim. “The fact that the commission could, perhaps, not order the payment of these costs does not mean the executive director and the commission could not agree to them as a compromise,” it said.