Where The Charter Ends: Supreme Court Will Not Hear Appeal On International Cooperation By Securities Regulators

If there's one thing that most non-lawyers know about being questioned by the authorities, it's that "anything said can and will be used against [you] in court".1 And, if you're already in court, then you can "take the Fifth" and refuse to answer a question whose answer may incriminate you.

Right? Not quite.

The privilege against self-incrimination operates differently in Canada than it does in the United States. Here, there is no "Fifth" for a witness to "take". Unlike the Fifth Amendment to the U.S. Constitution, the Canadian Charter of Rights and Freedoms does not permit a witness to answer some questions but not others. Instead, it protects the accused from being compelled to testify in a criminal proceeding and prevents a witness' evidence in one proceeding from being used to incriminate him in another.2

But what about when compelled testimony in a Canadian proceeding could potentially be used against the witness in a criminal prosecution in another country? Must the witness testify?

The Supreme Court of Canada might have addressed that question in Beaudette v. Alberta (Securities Commission).3 Instead, it denied leave to appeal. The result is that, in Alberta at least, securities regulators may compel a witness to give evidence in a Canadian investigation without providing assurances that the compelled testimony will not be handed over to the authorities in the United States without notice or an opportunity to object.

Because of the distinctions between the Fifth Amendment and the Charter, the Alberta Court of Appeal decision leaves an inter-jurisdictional grey area between our countries' respective constitutions. As the Court of Appeal for Ontario has stated:

[I]n Canada, a witness cannot refuse to answer a question on the grounds of self- incrimination, but receives full evidentiary immunity in return. In the United States, a witness can claim the protection of the Fifth Amendment and refuse to answer an incriminating question. Once the answer is given, however, there is no protection.4

In the context of cross-border securities regulation, these two variations on the privilege against self-incrimination do not fit neatly together. Between them lies the possibility that American investigators will attempt to do an end-run around the Fifth Amendment by relying on their Canadian colleagues to compel answers to questions that, if asked in the United States, would be greeted with constitutionally protected silence.

With leave to appeal denied, it will now be for U.S. courts, in U.S. proceedings, applying U.S. law, to decide whether and how the privilege against self-incrimination applies in that scenario. For the time being, that determination is beyond the reach of the Charter.

The facts

From June 2009 until February 2012, Scott Beaudette was the sole director and officer of Sunpeaks Ventures, Inc. ("Sunpeaks"), a Nevada corporation and a reporting issuer in the United States. Beaudette owned nearly two-thirds of Sunpeaks' issued and outstanding shares. He listed his home address in Calgary as Sunpeaks' business address.

In February 2012, pursuant to a share exchange transaction between Sunpeaks and a Delaware corporation, Beaudette cancelled 200,000,000 of his common shares of Sunpeaks and resigned as a director and officer.

Sunpeaks shares began to trade in the United States on March 8, 2012. Their price reached a high of US$2.28 per share on April 17. On April 19, the Alberta Securities Commission (the "ASC") issued an order launching an investigation into Sunpeaks and Beaudette for possible violations of the Alberta Securities Act (the "Act"). By May 17, Sunpeaks' share price had fallen to $0.10 per share.

The ASC subsequently served Beaudette with a Summons to a Witness, pursuant to s. 42 of the Act. The Summons required Beaudette to attend to give evidence and to produce documents relating to his involvement with Sunpeaks, among other things.

Beaudette refused to attend unless the ASC provided him with written assurances that the ASC would not share any evidence compelled from him with U.S. law enforcement agencies without notice and an opportunity to challenge the disclosure. The ASC refused. On the date he was summonsed to testify, Beaudette was a no-show. The ASC commenced proceedings in the Court of Queen's Bench seeking various orders against Beaudette, who in turn brought an application challenging the constitutionality of ss. 42 and 46 of the Act.

Section 42 of the Act empowers the ASC to compel the attendance of witnesses, the giving of evidence, and the production of information and documents in an investigation. Section 46 allows the ASC's Executive Director to share information obtained in an investigation with other agencies and authorities, "in Canada and elsewhere", where "it would not be prejudicial to the public interest to do so". Unlike similar statutes in other provinces, the Act does not require the Executive Director to provide notice to the witness before information is shared.5

Madam Justice Anderson of the Court of Queen's Bench dismissed Beaudette's Charter application at first instance.6 Beaudette appealed.

On appeal

A unanimous panel of the Alberta Court of Appeal dismissed...