OSC orders hearing to proceed by videoconference over objections of respondents

In striving to keep matters moving in the face of the many challenges presented by the COVID-19 pandemic, the Ontario Securities Commission (the “OSC”, or, when referring to the tribunal, the “Commission”) has adopted a standard practice of proceeding by way of electronic hearing (either by videoconference or teleconference). In Re First Global Data Ltd, 2020 ONSEC 23, a decision released on September 11, 2020, the Commission made clear that it will not lightly depart from this standard practice.

In First Global, the Commission rejected respondents’ requests that their merits hearing – to involve approximately 25 witnesses and span 40 hearing days – be heard in-person rather than by videoconference. In its decision, the Commission emphasized the importance of conducting proceedings expeditiously, even during a pandemic, and made clear that a respondent seeking to avoid proceeding electronically will be required to prove, on persuasive evidence, a likelihood of “significant prejudice”.

This case is consistent with the approach taken by other forums, which have expressed a clear preference for continuing to adjudicate matters even though the pandemic has made in-person hearings impossible. A common thread in these cases is that arguments in favour of in-person hearings are being rejected, not merely because tribunals are making the best of a bad situation, but because tribunals appear generally unconvinced that in-person hearings are necessarily preferable to electronic ones. This raises the question of whether electronic hearings are going to assume increasing prominence, even after the pandemic has abated.

Background

Staff of the OSC allege that the respondents in First Global (the “Respondents”), among other things, defrauded investors, made prohibited representations and filed misleading financial statements. The merits hearing for this matter was scheduled to commence on October 5, 2020 and to last until January 2021, spanning approximately 40 hearing days. On July 31, 2020, the Office of the Secretary of the OSC published a Notice providing that, as a result of the COVID-19 pandemic, the OSC would not be holding in-person hearings until further notice but that parties with upcoming hearings would be contacted to determine whether their hearing may proceed by videoconference, teleconference or in writing.

The Respondents would not agree with Staff that their merits hearing should proceed by videoconference, taking the position that the hearing should be delayed until it could be conducted in-person. In light of the parties’ disagreement, the Commission invited submissions on the issue of whether the matter should proceed by videoconference.

The Commission’s decision

In the result, the Commission rejected the Respondents’ arguments and ordered that the hearing proceed by videoconference.

The Commission found that it clearly had express authority under the Ontario Statutory Powers Procedure Act (the “SPPA”) and the OSC Rules of Procedures and Forms (the “OSC Rules”) to hold videoconference hearings. Accordingly, the central question before the Commission was whether the exception to electronic hearings set out at section 5.2(2) of the SPPA was triggered in the circumstances. Section 5.2(2) states that a tribunal “shall not hold an electronic hearing if a party satisfies the tribunal that holding an electronic rather than an oral hearing is likely to cause the party significant prejudice”.

At the outset, the Commission rejected the proposition that no harm would arise in delaying the merits hearing until it could be conducted in-person. The Commission held that delaying the merits hearing would contravene its mandate under the OSC Rules to conduct proceedings expeditiously and cost-effectively and stressed the risks and costs associated with witnesses’ memories fading over time. In addition, the Commission noted that it was unknown how long it might be before a hearing could be conducted in-person.

The Commission went on to echo recent statements from Ontario courts regarding the importance of judicial bodies leveraging technology in response to the challenges raised by the pandemic. It expressly adopted the Divisional Court’s statement in Association of Professional Engineers v Rew that “[t]he court is faced with an unprecedented challenge maintaining the institutions essential for the continuation of the Rule of Law in the face of the COVID-19 crisis, and recourse to electronic hearings is a key aspect of the court’s response.” The Commission also took “administrative notice” of the fact that it had already conducted videoconference hearings with relative success over the preceding months. 

Having made its findings about the importance of leveraging technology to ensure enforcement matters continue to be advanced expediently during the pandemic, the Commission proceeded to reject each of the particularized concerns about proceeding electronically raised by the Respondents:

  • Seriousness: The Commission disagreed that only an in-person hearing would suffice, even though serious allegations were at issue.
  • Complexity: Though the merits hearing was scheduled to be months long and involve numerous witnesses, the Commission was not persuaded that it could not be conducted electronically. 
  • Credibility: The Commission emphatically rejected the argument that proceeding electronically would hinder the Commission’s ability to assess the credibility of witnesses, citing the Superior Court’s recent rejections of the submission that hearing testimony by videoconference could affect a court’s ability to make credibility findings in Chandra v CBC and Davies v The Corporation of the Municipality of Clarington.
  • Efficiency: The Commission was unconvinced that proceeding electronically would be too inefficient, slow or costly to be appropriate in the circumstances.
  • Consistency: The Respondents argued that consistency favoured an in-person hearing. They submitted that few Canadian courts were conducing trials by videoconference, that other Canadian securities commissions were resuming some in-person hearings, and that, in the past, the Commission had always held merits hearings in-person. The Commission was not persuaded.
  • Self-Represented Respondents: Though one of the Respondents was self-represented, he did not argue that he could not participate in a videoconference. The Commission found that the other, represented, Respondents who did raise this argument had made “unsupported and arguably demeaning assertions” that self-represented litigants should not be presumed to have the necessary technical skills or equipment to participate in a videoconference.
  • Translation Services: Finally, the Commission rejected the argument that the potential need for an interpreter rendered a videoconference inappropriate.

Implications

As the comprehensive rejection of the Respondents’ arguments in First Global demonstrates, the Commission is intent on continuing to advance enforcement proceedings even as the COVID-19 pandemic has forced it to move away from in-person hearings. Absent persuasive evidence of a likelihood of significant prejudice, respondents, including those facing serious allegations giving rise to complex issues, will be expected to adapt to alternative hearing formats. Given the uncertainty around when the OSC might reinstate in-person hearings, parties scheduled to go before the Commission in the coming months should expect to be heard by videoconference or teleconference, and should be prepared to present their cases in those manners.    

Adjudicative bodies around the world continue to grapple with issues of judicial economy and procedural fairness in the context of a global pandemic. The Commission’s decision in First Global is just one of a number of recent decisions, both from within and outside [PDF] Canada, signaling that litigation by technological means is the “new normal”. Moreover, given that tribunals have been fairly emphatic in the view that justice can be done, and seen to be done, in an electronic hearing, it may be that electronic hearings will continue to have greater prominence even after the pandemic has passed.

We continue to monitor developments regarding the impacts of the COVID-19 pandemic on advocacy and dispute resolution. For further information on these issues and on navigating other legal and business implications of the pandemic, please see our resource page here.

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Editors

Lawrence E. Ritchie

Partner, Litigation

Alexander Cobb

Partner, Litigation

Shawn Irving

Partner, Litigation

Kevin O’Brien

Partner, Litigation

Lauren Tomasich

Partner, Litigation

Malcolm Aboud

Associate, Litigation