Court allows BCSC to test new collection powers

The British Columbia Securities Commission (BCSC) can put its new powers to the test and pursue the collection of sanctions ordered in a large fraud case, a B.C. court ruled.

The Supreme Court of British Columbia gave the green light to the BCSC to amend its pleadings in a long-running enforcement case. The ruling enables the regulator to use amendments to securities legislation that took effect in 2020 to pursue collection of an enforcement order that was handed down in 2015.

The new provisions allow the regulator to collect against the relatives of securities law violators who received property from a fraudster for less than market value, including transfers that took place before the misconduct.

“This remarkable provision seeks to address the reality that fraudsters and others operating on the margins of market probity will structure their affairs in advance of precarious transactions, promotions, and other activities, often transferring assets to family members or other third parties, in order to protect themselves from future judgments and sanctions,” the court stated in its decision.

This kind of power is novel in Canada, and has no direct precedent to guide the court, it said.

The court has now given the regulator the go ahead to pursue collection under this theory in a large fraud case that dates back to activity that took place in 2008 and resulted in $21.7 million in sanctions ordered in 2015.

Back in 2014, a hearing panel of the BCSC ruled that Earle Pasquill and Michael Lathigee, who jointly directed the FIC Group of companies, defrauded investors in connection with a real estate development scheme that raised over $35 million from investors.

In 2015, the panel ordered Pasquill, Lathigee and three corporate respondents to pay $21.7 million in disgorgement and that Pasquill and Lathigee pay a $15-million penalty.

In 2018, the regulator launched a collection action against Earle Pasquill, his wife, Vicki Pasquill, and her company, Vicker Holdings Ltd. (the Vicker defendants).

That action was paused in 2019 as legislative amendments designed to beef up the BCSC’s collection powers were in the works. Legislative changes came into force in 2020, and the BCSC subsequently sought to amend its pleadings in light of those amendments, namely the provisions covering below market-value transfers.

According to the court’s decision, the proposed changes to the regulator’s claim seek to hold the Vicker defendants “jointly and severally liable to the commission with Earle Pasquill,” and argue that they must pay the equivalent of any undervalued property that they received from Pasquill to satisfy the enforcement order against him.

In this latest bit of litigation, the Vicker defendants sought to have the BCSC’s claims against them summarily dismissed, alleging that those claims have been abandoned, and that the limitation period for bringing claims under the new legislative provisions has expired.

The court sided with the BCSC, ruling that it can amend its claim. It rejected the defendants’ application for summary dismissal.

“This complicated and novel proceeding should be determined at trial rather than on a summary application,” the court said, adding that it’s not surprising the case has been delayed, given the legislative changes and the pandemic.

“The ultimate reason for this delay, and for the initiation of these ancillary proceedings against the Vicker defendants, is the ongoing failure of Earle Pasquill (or his business associate Michael Lathigee) to pay the $21.7 million judgment,” the court said.

“It was reasonable for the commission to focus its efforts on pursuing Pasquill and Lathigee, the primary targets, and responding to their various appeals and applications. The present proceeding against the Vicker defendants is a secondary collections action that would be rendered unnecessary if the commission is able to collect from any of the primary targets,” it said.