To keep alive an appeal of regulatory enforcement rulings against them by the Ontario Securities Commission (OSC), a couple of brothers will have to post $100,000 against a potential costs orders, a court ruled.
In 2013, the OSC found that Flavio Arconti and Luigino Arconti breached securities rules in connection with efforts to raise capital from investors to finance their used car leasing business, North American Financial Group.
After finding that they misled investors among other violations, an OSC panel permanently banned them, and ordered over $2 million in disgorgement, a $600,000 penalty and $200,000 in costs against them.
They appealed the OSC’s findings and sanctions against them to the Ontario Divisional Court, challenging the commission’s findings against them, asking for the rulings to be set aside, alleging that the panel was biased against them, and claiming that their counsel had an undisclosed conflict of interest.
In 2018, the court dismissed the appeal.
Since then, they “unsuccessfully sought leave to appeal to the Court of Appeal and then to the Supreme Court of Canada,” the Ontario Superior Court of Justice noted — and they also filed several civil actions, including a lawsuit against the OSC that has since been discontinued.
Then, in December 2023/January 2024, they moved to set aside the Divisional Court decision against them under a provision of the civil procedure rules, based on facts that, they say, were discovered since the Divisional Court decision denying their appeal — and they filed seven expert reports in support of their claim.
In response, the OSC brought motions seeking to strike out the expert reports and asking the court to order that the appellants post security for a potential costs award against them.
Now, the court is siding with the regulator, granting its motions to strike the expert reports and for the appellants to post security for costs.
According to the decision, the brothers argued that they shouldn’t have to post security for costs for several reasons, including that their motions raise issues of public importance, arguing that the OSC is overreaching, and that they have a prima facie case that should be heard, among other things.
Ultimately, the court concluded that they will have to post security for costs, as it was “not persuaded that the appellants should be sheltered from a security for costs order because of the nature of the issues or because the… motions involve a regulator,” it said.
It also noted that they have $240,000 in unpaid costs orders in other legal proceedings connected to the case.
As a result, it ordered that they must pay $100,000 within 60 days.
If the security isn’t posted, the OSC will be able to bring a motion having the action dismissed for failing to comply with the order.
The court also granted the OSC’s motion ordering that seven expert reports — including reports from a retired police investigator, three law professors, a couple of former regulators, and the former Ombudsman for Ontario — should be struck, as they all deal with issues of law, which the court doesn’t need help on.
“Expert evidence is not admissible just because it might be helpful to a court. Rather, the evidence must be necessary in the sense that it provides information that is outside the experience and knowledge of the court,” it said. “Judges are presumed to know the law and therefore, the assistance of an expert on domestic law is not necessary.”
On this issue, the court ordered $15,000 in costs against the appellants.