British Columbia Securities Commission v. Branch  2 S.C.R. 3: Self-incrimination -- Right to silence -- Unreasonable search and seizure -- Securities commission investigation -- Company's officers ordered to testify under oath and to produce documents
Present: Lamer C.J. and La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA
Constitutional law -- Charter of Rights -- Fundamental justice -- Self-incrimination -- Right to silence -- Securities commission investigation -- Company's officers ordered to testify under oath and to produce documents pursuant to s. 128(1) of Securities Act -- Whether s. 128(1) infringes s. 7 of Canadian Charter of Rights and Freedoms -- Securities Act, S.B.C. 1985, c. 83, s. 128(1).
Constitutional law -- Charter of Rights -- Unreasonable search and seizure -- Securities commission investigation -- Company's officers ordered to produce documents pursuant to s. 128(1) of Securities Act -- Whether s. 128(1) infringes s. 8 of Canadian Charter of Rights and Freedoms Securities Act, S.B.C. 1985, c. 83, s. 128(1).
The British Columbia Securities Commission commenced an investigation into a company following a report by the company's auditors disclosing questionable expenditures. The appellants, two of the officers of the company, were served with summonses compelling their attendance for examination under oath and requiring them to produce all information and records in their possession relating to the company. The summonses were issued pursuant to s. 128(1) of the province's Securities Act. When the appellants failed to appear, the Commission petitioned the British Columbia Supreme Court for an order committing the appellants in contempt. In response, they applied for a declaration to the effect that s. 128(1) violates ss. 7 and 8 of the Canadian Charter of Rights and Freedoms. The application was dismissed. The superior court judge rejected the appellants' claims in respect of privilege against self-incrimination and of a right to remain silent under s. 7. He also concluded that the seizure authorized by s. 128(1)(c) of the Securities Act is not "unreasonable" within the meaning of s. 8. The appellants were ordered to comply with the summonses, or, in default, to show cause or be held in contempt. An appeal to the British Columbia Court of Appeal was dismissed.
Held: The appeal should be dismissed.
(1) Section 7
Per Lamer C.J. and La Forest, Sopinka, Cory, McLachlin, Iacobucci and Major JJ.: In R. v. S. (R.J.),  1 S.C.R. 451, it was decided that the principle against self-incrimination, one of the principles of fundamental justice protected by s. 7 of the Charter, requires that persons compelled to testify be provided with subsequent "derivative use immunity" in addition to the "use immunity" guaranteed by s. 13 of the
Charter. The accused has the evidentiary burden of showing a plausible connection between the compelled testimony and the evidence sought to be adduced. Once this is established, in order to have the evidence admitted the Crown will have to satisfy the court on a balance of probabilities that the authorities would have discovered the impugned derivative evidence absent the compelled testimony. In order to trigger the derivative use immunity, the witness may only claim such protection in a subsequent proceeding where he is an accused subject to penal sanctions or in any proceeding which engages s. 7.
In S. (R.J.), it was also decided that courts could, in certain circumstances, grant exemptions from compulsion to testify. The crucial question is whether the predominant purpose for seeking the evidence is to obtain incriminating evidence against the person compelled to testify or rather some legitimate public purpose. To qualify as a valid public purpose, compelled testimony in a criminal prosecution or prosecution under a provincial statute must be for the purpose of obtaining evidence in furtherance of that prosecution. It would be rare indeed that the evidence sought cannot be shown to have some relevance other than to incriminate the witness. If it is established that the predominant purpose is not to obtain the relevant evidence for the purpose of the proceeding, but rather to incriminate the witness, the party seeking to compel the witness must justify the potential prejudice to the right of the witness against self-incrimination. If it is shown that the only potential prejudice is the possible subsequent derivative use of the testimony, then the compulsion to testify will occasion no prejudice for that witness since he will be protected against such use. If the witness can show any other significant prejudice that may arise from the testimony such that his right to a fair trial will be jeopardized, then the witness should not be compellable. The purpose of calling a particular witness will not be readily apparent and such purpose must be inferred in many cases from the overall effect of the evidence proposed to be called. If the overall effect is that it is of slight importance to the proceeding in which it is compelled but of great importance in a subsequent proceeding against the witness in which the witness is incriminated, then an inference may be drawn as to the real purpose of the compelled evidence. The issue of compellability may arise at the time when the witness is called to testify (subpoena stage) and at a subsequent penal proceeding against the witness (trial stage). The burden of proof with respect to the predominant purpose of the compelled testimony will be on the witness who asserts that it is not sought for a legitimate purpose. If this is established, the witness should not be compelled unless the party seeking to compel the witness justifies the compulsion.
The liberty interest under s. 7 of the Charter is engaged at the point of testimonial compulsion. Once it is engaged, the question is whether there has been a deprivation of this interest in accordance with the principles of fundamental justice. Here, s. 128(1) of the Securities Act does not violate s. 7. The purpose of the Act, which is to protect our economy and the public from unscrupulous trading practices, justifies inquiries of limited scope. An inquiry such as the one at hand legitimately compels testimony as the Act is concerned with the furtherance of a goal which is of substantial public importance -- namely, obtaining evidence to regulate the securities industry. The inquiry is of the type permitted by our law as it serves an obvious social utility. The predominant purpose of the Commission's inquiry in this case is to obtain the relevant evidence for the purpose of the instant proceedings, and not to incriminate the appellants, and there is nothing in the record at this stage to suggest otherwise. The proposed testimony thus falls to be governed by the general rule applicable under the Charter, pursuant to which a witness is compelled to testify, yet receives evidentiary immunity in return. The appellants are also entitled to claim the protection of subsequent derivative use immunity. This is a protection that is afforded to witnesses notwithstanding that the source of their evidence may derive from corporate activity.
Documentary compulsion may also entail jeopardy in so far as it engages the appellants' liberty interest under s. 7. The appellants, as representatives of the corporation, may receive the benefit of that protection in so far as they are personally implicated by their own evidence. At the stage of compellability, like the oral testimony, the documents are compellable subject to a possible claim against their subsequent use under the "but for" test. That test is not applicable to determining their compellability. The documents are properly compellable unless they are excluded on the basis of the principles applicable to testimonial compulsion. The rationale both at common law and under s. 7 for these principles is that in certain circumstances compellability would impinge on the right to silence. This right, however, attaches to communications that are brought into existence by the exercise of compulsion by the state and not to documents that contain communications made before such compulsion and independently thereof. If, as in this case, the person subpoenaed is compelled to testify, then all communications including those arising from the production of documents will be compelled. If not compelled, the communications arising from production of documents would also not be admissible. The communicative aspects of the production of documents may, however, be of significance at the derivative evidence stage at which the witness seeks to exclude all evidence which would not have been obtained but for the compelled testimony.
Per Gonthier J.: The reasons of Sopinka and Iacobucci JJ., and the additional comments of L'Heureux-Dubé J. relating to evidence in a regulatory context, were agreed with.
Per L'Heureux-Dubé J.: As expressed in the concurring reasons given in R. v. S. (R.J.),  1 S.C.R. 451, the possibility of imprisonment flowing from a failure to testify is sufficient to trigger s. 7 protection at the subpoena stage. Where the witness can demonstrate at that stage that, under the circumstances, it would be fundamentally unfair to require that he testify, then the principles of fundamental justice under s. 7 of the Charter require that he not be compellable. Where, however, there is no possibility that the individual may be deprived of liberty at the subsequent proceeding, he cannot claim that it would be fundamentally unfair to compel his testimony. As a corollary, the less proximate the possibility of a deprivation of liberty in the subsequent proceeding, the less likely it is that the fact of testimonial compulsion will, itself, be fundamentally unfair. A subpoena will only be quashed at the subpoena stage in the clearest of cases.
It is generally a satisfactory proxy for the existence of fundamentally unfair conduct on the part of the Crown, in violation of s. 7, to inquire into whether the predominant purpose for seeking the evidence is to obtain incriminating evidence against the witness, rather than to further some legitimate public purpose. The regulatory context of the present appeal, however, requires that this test be applied with somewhat greater deference than might otherwise be the case. Conduct which may be fundamentally unfair in a traditional criminal context may not be so in the context of administrative proceedings in a highly complex and tightly regulated field, such as the securities industry. Activity in that industry is of immense economic value to society generally and, in order to safeguard the public welfare and trust, securities market participants, who are engaged in this licensed activity of their own volition, must conform with the extensive requirements set out by the provincial securities commissions and should expect to be questioned occasionally by regulators as to their market activities. Further, in view of the complex nature of the securities industry, the investigatory powers in s. 128(1) are the primary vehicle, and often the only tool, for the effective investigation and deterrence of trading practices contrary to the public interest. Finally, consideration must be given to the other Charter rights at stake. It would be ironic to conclude that a proceeding involving testimonial compulsion is contrary to the principles of fundamental justice if the only equally effective alternative, reasonably available to the state to pursue a pressing and substantial objective, would constitute a far more dramatic intrusion into individual rights. Here, notwithstanding that one of the primary purposes of an investigation under s. 128(1) is to engage in a form of civil discovery of the witness as well as of the company to illuminate or investigate irregularities, the appellants have not demonstrated that, in the present context and under the circumstances, it would violate their s. 7 rights to be compelled to testify at the Commission's inquiry. Courts must differentiate between unlicensed fishing expeditions that are intended to unearth and prosecute criminal conduct, and actions undertaken by a regulatory agency, legitimately within its powers and jurisdiction and in furtherance of important public purposes that cannot realistically be achieved in a less intrusive manner. Whereas the former may run afoul of s. 7, the latter do not.
A person compelled to testify in a s. 128 inquiry shall enjoy, under s. 13 of the Charter, full testimonial immunity in any subsequent proceedings undertaken by the state. Even if the "but for" standard is an appropriate level of s. 7 protection in a purely criminal context, it may not be equally suited for use in predominantly regulatory contexts. Many of the interests underlying the principle against self-incrimination are simply not engaged as dramatically in situations in which an individual voluntarily participates, for his own profit, in a licensed activity, the effective regulation of which is essential to pressing and substantial societal interests. The existence of derivative evidence immunity could significantly undermine the Commission's ability to administer and enforce securities regulations effectively. Without the benefit of a closer examination of the specific contexts in which imprisonment may arise as a possible eventual consequence under the Securities Act, it is inappropriate for this Court, at the subpoena stage, to define the exact parameters of appropriate derivative evidence immunity to come into effect at the trial stage. Although Sopinka and Iacobucci JJ. recognize some derivative evidence immunity at the trial stage, their reasons are taken to leave open the possibility that this protection may vary according to context.
As a practical matter, particularly in the regulatory context, authorities often seek a substantial fine rather than imprisonment upon conviction, notwithstanding that the legislation provides for the possibility of imprisonment. In such cases, agreement between all parties and the trial judge at the outset of the trial proceedings that imprisonment will not be sought as a sanction upon conviction will negate the need for a s. 7-based derivative evidence immunity, since the individual accused will not face the possibility of a deprivation of liberty.
The compulsion to produce pre-existing documents in s. 128(1)(c) does not violate s. 7 if it is found that the person subpoenaed is compellable to testify. The compelled production of pre-existing documents does not engage self-incriminatory concerns since they have not been generated subject to state compulsion. There is thus nothing fundamentally unfair in requiring the production of such documents and in the possibility that they may subsequently be relied upon by the state in a proceeding against the individual who has been compelled to produce them. The "but for" standard does not apply at the trial stage to pre-existing documents.
(2) Section 8
Section 128(1) of the Securities Act does not violate s. 8 of the Charter. The Act is essentially regulatory legislation designed to protect the public, including the investors, and discourage detrimental forms of commercial behaviour. Persons involved in the securities market, a highly regulated industry, do not have a high expectation of privacy with respect to regulatory needs that have been generally expressed in securities legislation. They know or are deemed to know the rules of the game. The effective implementation of securities legislation, which has obvious implications for the nation's material prosperity, depends on the willingness of those who choose to engage in the securities trade to comply with the defined standards of conduct. The provisions of the Act are pragmatic sanctions designed to induce such compliance. The Act thus serves an important social purpose and the social utility of such legislation justifies the minimal intrusion that the appellants may face. The demand for the production of documents contained in the summonses is one of the least intrusive of the possible methods which might be employed to obtain documentary evidence. Moreover, documents produced in the course of a business which is regulated have a lesser privacy right attaching to them than do documents that are, strictly speaking, personal. Those who are ordered under s. 128(1) "to produce records and things" can claim only a limited expectation of privacy in respect of business records. Section 128(1) does not unreasonably infringe on this limited expectation of privacy. The Hunter criteria were not appropriate in the present context to determine the applicable standard of reasonableness.
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