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Securities - Securities Act - Disclosure. Sharpe v. Ontario Securities Commission
In Sharpe v. Ontario Securities Commission (Ont Div Ct, 2026) the Ontario Divisional Court (mostly) dismissed two related Securities Act appeals, these brought against "decisions of the Capital Markets Tribunal" relating to the dismissal of "stay motions and related requests to produce documents for use in their stay motions".
The court considers issues of unlawful disclosure (by the Commission) within stay motion proceedings, these grounded in 'abuse of process' where a threshold (apparently a standard) of 'tenable case' was applied:[5] In their stay motions, the appellants alleged that the Commission proceedings against them were an abuse of process because of the Commission’s unlawful disclosure of their compelled evidence, which was given in examinations during an investigation under s. 11 of the Securities Act. The compelled testimony was disclosed in the Commission’s application for a receivership in the Superior Court in 2021, arising from the s. 11 investigation. The Tribunal later found that a disclosure order was required, which had not been obtained. The appellants rely on these grounds to request a stay of the Commission proceedings altogether, including the sanctions against them.
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[30] At the hearing, the moving parties accepted that they had to show a “tenable case” for their abuse of process motions before disclosure would be ordered, referring to R. v. Ahmad, (2008), 2008 CanLII 27470 (ON SC), 59 C.R. (6th) 308 (Ont. SC). The moving parties had to demonstrate that there was both a legal and factual basis for the argument sought to be advanced: Ahmad, at para. 42. On the legal basis, the Tribunal found that it had to consider whether the moving parties had a tenable case in light of what abuse of process is and when a proceeding will be permanently stayed as an abuse of process.
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[83] The appellants submit that the Tribunal should not have required that they meet any threshold before receiving the requested disclosure from the Commission. They submit that the Tribunal ought to have applied the criminal disclosure standard from R. v. Stinchcombe, 1995 CanLII 130 (SCC), [1995] 1 S.C.R. 754, as adopted in the rules of the Capital Markets Tribunal Rules of Procedure. However, that principle, as it appears in the Tribunal’s rules, applies to the disclosure of documents regarding allegations against a party for breaches of the Securities Act, not disclosure for a party’s abuse of process motion.
[84] The appellants accept that even in the criminal context, the defence must first lay a proper evidentiary foundation for a claim for abuse of process, at least in some situations. Specifically, the appellants accept that there must be a foundation before a court will order disclosure for a claim of the improper exercise of prosecutorial discretion because there is a presumption of good faith: R. v. Nixon, 2011 SCC 34, [2011] 2 S.C.R. 566, at para. 27. The appellants submit that the issue they rely on, the unlawful disclosure of their compelled testimony by Commission Staff, is not a matter of prosecutorial discretion.
[85] The appellants did not make these submissions on the disclosure motions. At that time, the appellants conceded that they had to show a “tenable case” of abuse of process. The respondent therefore objects to this change of position and submits that we should not permit this new argument on appeal. However, even if we permit the argument, the appellants have not shown that the Tribunal erred. Cases cited by both sides show that the use of a threshold for disclosure is not restricted to cases involving the exercise of Crown discretion in the criminal context – it applies in a variety of circumstances including where there have been allegations of abuse of process: Ahmad, at paras. 16, 42; R. v. Nowack, 2019 ONSC 5345, at paras. 72-73; R. v Christhurajah, 2016 BCSC 2393, at paras. 52, 70; R. v. Georgiou, 2025 ONSC 1477, at paras. 40-41.
[86] I am not persuaded that the Tribunal erred in applying a threshold in the context of these abuse of process motions, in which the appellants rely on the unlawful disclosure by Commission Staff in the receivership proceedings.
[87] Moving to the applicable threshold, the Tribunal used the then agreed threshold that required showing a “tenable case,” also called the “reasonable prospect of success” threshold.[11] The appellants submit that the Tribunal erred when it declined to use the then new “manifestly frivolous” threshold from Haevischer. The appellants submit that the “no reasonable prospect of success” threshold came from the criminal law and so too should this threshold.
[88] I agree with the appellants that proceedings against registrants under the Securities Act may involve serious allegations and consequences (as was the case here). However, the Tribunal correctly declined to adopt the Haevischer threshold in this case because of the following:(i) Haevischer is a criminal case, and the reasons speak to that setting – the Supreme Court expressly characterized the issue at para. 1 as “the standard to be applied in criminal cases”;
(ii) R. v. Haevischer addressed requests by the Crown for summary dismissal of applications to stay criminal proceedings – the Supreme Court saw its task as determining the appropriate threshold for those summary dismissals;
(iii) the summary dismissal issue is different from the issue that was before the Tribunal – a disclosure request in abuse of process motions – with the related difference with respect to onus; and,
(iv) the Supreme Court acknowledged, at para. 77, that the standard of “no reasonable prospect of success” (which the Tribunal considered synonymous with the “no tenable case” standard) is still a “useful standard” in other areas of law. [89] There remains the issue of whether the applicable threshold for disclosure was met, specifically a tenable case for abuse of process. The appellants submit that the Unlawful Disclosure Decision is enough to meet the threshold given the assurances of confidentiality given to the Sharpes and their privacy interests. However, these submissions do not take into account the context of the Unlawful Disclosure Decision or the legal principles that apply when determining whether there is a tenable case of abuse of process.
[90] The full context of the Unlawful Disclosure Decision is set out in lengthy reasons. The issue before the Tribunal was whether to revoke its s. 11 investigation order. Despite acknowledging David Sharpe’s reasonable expectations of a high degree of confidentiality and finding they were wrongly defeated, the Tribunal held that Sharpe had not met his burden to show why the Tribunal should exercise its discretion to revoke that order.
[91] Among other reasons for declining to revoke the order, the Tribunal held that that revocation in response to the unauthorized public disclosure was not an appropriate remedy in this case. Nor do the reasons for decision condemn the Commission for its course of conduct, albeit wrong in law once the issue had been determined. On the contrary, the Unlawful Disclosure Decision held that the issue was novel.
[92] Moving to the applicable principles when applying the threshold for disclosure, the Tribunal discussed those principles without error.
[93] The Tribunal followed cases from Law Society discipline proceedings, which are apt given the similar regulatory context. At para. 14 of the First Disclosure Decision, the Tribunal held that “a party seeking further disclosure is required to first lay a foundation to establish the materials sought might be relevant.” A “request for disclosure cannot be allowed to encourage ‘fishing expeditions’ or unduly prolix proceedings.”
[94] The Tribunal, at para. 14, adopted the rationale from Law Society of Upper Canada v. Natale, 2011 ONLSHP 192, that there are serious implications in a motion for disclosure brought in the context of an allegation of abuse of process. If any respondent could make an allegation of abuse of process and require the prosecuting or professional authorities to turn over its counsel’s brief and its confidential files, which would not otherwise be producible, serious harm would be done to the prosecution of the professional charges: Tribunal reasons at para. 15, citing Natale at para. 9, which quotes from Law Society of Upper Canada v. Matthew Joseal Igbinosun, 2010 ONLSHP 134, at para. 52.
[95] The Tribunal held that a party bringing an abuse of process motion must be able to “demonstrate that there is both a legal and a factual basis for the argument sought to be advanced. This demonstration must be rooted in the record, or be established by an offer of proof such as affidavit evidence, that can be dealt with expeditiously by the court”: Tribunal decision at para. 16, quoting from Ahmad, at para. 42.
[96] Applying these principles to the motion materials before it, the Tribunal found that the appellants had not shown a “tenable case” or reasonable prospect of succeeding on their abuse of process motions. As noted by the Tribunal, a stay for an abuse of process is an extraordinary remedy that is only available in the clearest of cases.
[97] The Tribunal found that there were several reasons why there was no tenable case of abuse of process, which I have summarized above. Among them, s. 17 of the Securities Act permitted disclosure in enforcement proceedings. Further, at the time of the disclosure the Legislature had chosen to amend s. 17 to permit that category of disclosure, which undermined the Sharpes’ submission that it would violate the community’s sense of fair play. The Tribunal also relied on the reasoning from the Unlawful Disclosure Decision showing that the receivership was separate, noted that any impact on witness testimony could be tested in cross-examination, and noted that the moving parties had conceded that there was no evidence of bad faith by Staff in their motion records.
[98] The appellants continue to submit that they need production of the sought-after documents to explore the question of bad faith. This disregards the legal principles correctly relied on by the Tribunal that properly require more than the allegation of abuse of process based on the Unlawful Disclosure Decision.
[99] I conclude that the appellants have not shown an appealable error in the First or Second Disclosure Decisions.
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