The Supreme Court of Canada has rejected a leave application arising from a decision of the Alberta Court of Appeal that upheld sections 42 and 46 of the Alberta Securities Act (“SA”). The appellant, Scott Beaudette, alleged that s. 42 of the SA compelled him to provide evidence to the Alberta Securities Commission (“ASC”), which then had authority under s. 46 of the SA to provide that evidence to authorities in foreign jurisdictions. He alleged that this infringed his right against self-incrimination. The Court of Appeal found that these provisions did not violate the s. 7 Charter right to life, liberty, and security of the person as there was insufficient evidence to find a Charter infringement in the particular circumstances. Furthermore, the Court characterized the intent of the SA as the valid regulation of the securities industry, rather than as a statute intended to secure evidence for criminal prosecutions.
Mr. Beaudette was a Calgary resident and the former majority shareholder, and sole director and officer of Sunpeaks, a Nevada corporation that operated as a reporting issuer in the U.S. In 2012, Sunpeaks announced a Share Exchange Agreement with another company in the U.S., Healthcare Distribution Specialists LLC. As a result of this agreement, Sunpeaks became its sole owner. Soon after, the shares began trading on a U.S. exchange, the OTC Bulletin Board. The price per share rose to a peak of $2.28 USD, before falling to $0.10 USD.
The ASC ordered an investigation into Sunpeaks and Mr. Beaudette for potential contraventions of the SA for allegedly making misleading or untrue statements. Pursuant to that investigation, Mr. Beaudette was served with a summons issued under s. 42 of the SA, requiring him to produce certain documents and information, and to attend for an examination. When Mr. Beaudette failed to attend for the examination, the ASC sought an order that he be found in contempt. Mr. Beaudette then brought an application claiming that s. 42 of the SA, in combination with s. 46 (which permits the ASC to share its findings with law enforcement agencies and other authorities in foreign countries), compelled him to incriminate himself in proceedings that might potentially take place in the U.S. He complained that without some sort of derivative use immunity protecting him from its use in the U.S., such provisions were unconstitutional.
The Alberta Court of Queen’s Bench found that ss. 42 and 46 of the SA, along with the issued summons, did not violate s. 7 of the Charter. The Court of Appeal agreed with this finding. Mr. Beaudette sought leave to appeal this decision to the Supreme Court of Canada, but his application was rejected.
The Court of Appeal focused on the dearth of evidence in support of Mr. Beaudette’s contention that his compelled testimony would be shared with the U.S. in a Charter-abusive manner. Although it was possible that the ASC would share information with the U.S. Securities and Exchange Commission pursuant to s. 46 of the SA, there was no clear evidence that such sharing would be subsequently extended to the U.S. Department of Justice for a criminal prosecution. The Court stated that “mere allegations of possible foreign state actions associated with Canadian state actions are not proof that those events are likely to happen”. Mr. Beaudette’s contention that criminal prosecution authorities in the U.S. may, at some point in the future, seek access to his compelled evidence is not a sufficient reason to declare the impugned provisions of the SA void ab initio for infringing s. 7 of the Charter. Rather, his liberty would need to be actually threatened before s. 7 of the Charter is triggered. The Court went on to note that:
The fact that evidence that might be useful in the courts of a foreign rule of law democracy with which Canada has friendly relations may become easier for that foreign state’s authorities to locate or acquire because of the operation of a Canadian law does not make the Canadian law per se the author or sponsor of an infringement of s. 7 of the Charter.
Although reference to hypothetical Charter infringements has been used as an analytical tool in previous Charter decisions, the Court of Appeal held that hypotheticals of the law being applied in an unconstitutional manner are only effective if they are reasonably foreseeable. Mere speculation is insufficient for such an analytical exercise.
The Court of Appeal emphasized that the summons was issued by a regulator and that the requirements of fundamental justice vary with context. The objective of the SA was characterized as furthering the legitimate goal of regulating the securities industry. The Court contrasted this with the interpretation urged by Mr. Beaudette, who tried to characterize the intent of the SA as the conscription of criminal evidence. Additionally, the Court held that the ASC’s exercise of its powers under the SA was legitimate and was not in the nature of a criminal investigation. The ASC had authority under the SA to investigate contraventions of the SA, but the substance of the SA was not designed to provide the ASC with investigative powers of a criminal nature. Finally, the Court determined that the legitimate objectives of the SA were not achievable without the powers under examination in the appeal.
While Mr. Beaudette’s Charter challenge was unsuccessful, the Court of Appeal left the door open to a future Charter challenge grounded in a proper evidentiary record. The Court’s emphasis on the lack of information as to whether Mr. Beaudette’s compelled evidence would, in fact, incriminate him in a U.S. criminal proceeding suggests that his failure to include stronger evidence on that issue was fatal to his challenge. This implies that a different ruling may result if there is stronger evidence that such compelled self-incriminating evidence is likely to be used in a foreign criminal proceeding.