The Court of Appeal for British Columbia ruled that a judge erred in rejecting a former rep’s challenge to an investigation by the B.C. Securities Commission on the basis that it may have violated solicitor-client privilege. While the ex-rep may get a chance to prove that the regulator acted improperly, the court also ruled that the regulator’s enforcement proceedings should be allowed to play out before that challenge can be heard.
In 2022, the BCSC launched enforcement proceedings against a former rep, Jean Andre Lamarche, alleging that he violated securities law by engaging in unregistered trading and advising. Those allegations have not been proven.
In mid-2023, Lamarche brought a legal action against the BCSC, challenging aspects of the regulator’s investigation and arguing, among other things, that the investigation violated solicitor-client privilege when it sought to collect his emails from an internet provider (Shaw Communications Inc.), that certain provisions of securities law are unconstitutional, and that his rights under the Charter of Rights and Freedoms were violated by the investigation.
Last June, the Supreme Court of B.C. sided with the BCSC, when it stayed the constitutional claims, saying that the enforcement proceeding should be allowed to play out first, and striking out Lamarche’s claim for damages under privacy legislation.
Now, on appeal, the courts have partly overturned that ruling, finding that the Supreme Court was wrong to strike out the potential privacy claims on the basis that they were doomed to fail.
In general, regulators have immunity from liability for conduct that’s carried out in “good faith,” and the lower court said that allegations that a regulator was acting in “bad faith” requires “pleading specific material facts,” not just a general assertion of bad faith.
In this case, while the lower court judge found that Lamarche failed to present facts that could result in a court finding that the regulator acted in bad faith — the appeal court disagreed.
“In my view, Mr. Lamarche has pleaded material facts that, if true, could be capable in law of grounding a finding of bad faith,” the appeal court said.
It noted that he argued that the BCSC failed to take several specific actions to protect solicitor-client privilege, and the this “this failure, as a matter of law, amounted to a reckless disregard for the relevant legal standards and the importance of solicitor-client privilege.”
These allegations haven’t been proven, but the appeal court concluded that these claims, if true, may be enough to sustain claim of bad faith.
“Given the legal — and indeed cultural — significance that attaches to solicitor-client privilege, I cannot say that this argument is ‘bound to fail’; it seems that there is, at least, an argument to be made on this point,” the appeal court said, in overturning the order striking Lamarche’s claims under the Privacy Act and his claims for punitive damages.
However, the appeal court also found that those privacy claims should be stayed — alongside the constitutional claims — until after the regulator’s enforcement proceeding has been allowed to play out.
“In my view, given the elevated costs, both to the parties and the legal system more generally, that inevitably result where proceedings are duplicated and the fact that Mr. Lamarche’s claims under the Privacy Act are so closely related to the issues that will be adjudicated by the commission, it would be in the interests of justice to stay Mr. Lamarche’s claims under the Privacy Act until the commission’s process is complete,” the appeal court said.