The SCC issues a landmark ruling on the territorial jurisdiction of Québec’s administrative tribunals
The recent ruling of the Supreme Court of Canada in Sharp v. Autorité des marchés financiers1 will have far reaching implications in the fields of administrative law, international private law, and securities law in Québec.
Québec’s securities regulator, the Autorité des marchés financiers (“AMF”), brought proceedings before Québec’s Financial Markets Administrative Tribunal (“FMAT”) against four British Columbia residents, alleging that they had contravened the Québec Securities Act by engaging in a transnational “pump‑and‑dump” securities manipulation scheme. The defendants filed motions challenging the FMAT’s territorial jurisdiction.
The FMAT dismissed these motions, ruling that there was a “sufficient” or “real and substantial” connection between Québec and the defendants. The Superior Court of Québec denied the defendants’ applications for judicial review, holding that the FMAT properly took jurisdiction. The Court of Appeal of Québec dismissed the appeals of the defendants, with the majority concluding that the private international law rules in Book Ten of the Civil Code of Québec (“C.C.Q.”) do not apply to administrative proceedings when no private rights are at issue. The majority instead applied the real and substantial connection test in Unifund Assurance Co. v. Insurance Corp. of British Columbia2 which addresses the constitutional applicability of the Québec securities scheme to non‑residents. In a concurring opinion, Mainville, J.A. held that the FMAT has jurisdiction over the defendants, but under the rules of private international law of the C.C.Q., either applying art. 3148 para. 1 (3) C.C.Q. by analogy, or, alternatively, under the “forum of necessity doctrine” codified by art. 3136 C.C.Q.
In a seven-to-one ruling, the Supreme Court of Canada held that the FMAT properly asserted jurisdiction over the defendants, albeit for different reasons than those espoused by the Court of Appeal and in the instances below. The SCC set out a novel interpretative methodology for the assertion of territorial jurisdiction by administrative tribunals in Québec. In so doing, the SCC has clarified several related issues in Québec law. These are the key takeaways:
1. The C.C.Q. applies in matters of public and administrative law. Contrary to the majority opinion of the Québec Court of Appeal, the SCC held that the C.C.Q.– including its rules governing private international law – applies in matters of public and administrative law, even where no issue of private rights is at play. The SCC concluded that “insofar as this approach creates a divide between public and private law not reflected in the letter, spirit, or object of the C.C.Q., it is incorrect in law”.3 In adopting this rationale, the SCC effectively overruled contrary elements of the prior decision of the Court of Appeal of Québec in Donaldson.4 The SCC confirmed that the “C.C.Q. is an important source of administrative law in Québec.”5 Accordingly, the jurisdictional rules of the C.C.Q. were found to apply to administrative tribunals unless otherwise provided by law.6
2. Unifund’s “sufficient connection” test for the constitutional applicability of legislation applies in determining the adjudicatory jurisdiction of the FMAT. The SCC ultimately found that Québec’s securities regime both complements and derogates from the C.C.Q.7 The majority opinion held that Québec’s securities regime accordingly gives the FMAT jurisdiction over out-of-province defendants who have a “sufficient connection” to Québec. This test provides that a “sufficient” connection notably “depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it”.8 The SCC further held that “[b]ecause contemporary securities manipulation and fraud are often transnational and extend across provincial and national borders, courts and tribunals must take a flexible and purposive approach when applying the principles of order and fairness in the securities context.”9 While the majority recognized that “prescriptive legislative jurisdiction” and the FMAT’s adjudicatory jurisdiction are distinct concepts, it found that FMAT’s adjudicatory jurisdiction flowed from the province’s legislative jurisdiction with regards to securities. Côté J., dissenting, “disagree[d] completely” with the majority on this point, ruling that “Unifund cannot serve as a safety net where the C.C.Q. does not establish the territorial jurisdiction of a court or tribunal and the legislature has not otherwise conferred territorial jurisdiction on it through special legislation. In short, when there is no jurisdiction, that must be the end of the analysis. This means that recourse should not be had to Unifund, which concerns an entirely different situation.”10
3. The jurisdictional rules governing “personal actions of a patrimonial nature” cannot be applied “by analogy” to regulatory matters. The Québec Superior Court and the concurring opinion of Mainville J.A. proposed that the FMAT could assert jurisdiction on the basis of art. 3148, para. 1(3) C.C.Q. applied by analogy. That provision confers jurisdiction on Québec courts and tribunals where “a fault was committed in Québec, injury was suffered in Québec, an injurious act or omission occurred in Québec or one of the obligations arising from a contract was to be performed in Québec.” The SCC invalidated this approach, holding that “there is no tenable analogy between a personal action of a patrimonial nature, which seeks the enforcement of a debt under private law, and a regulatory prosecution by the state, which seeks public interest remedies rather than simply private reparation. Such proceedings are of a fundamentally different legal character. To apply art. 3148 para. 1(3) C.C.Q. to a regulatory prosecution by the state would stretch the provision well beyond its letter, spirit, and object.”11
4. The forum of necessity doctrine (art. 3136 C.C.Q.) cannot be applied by a tribunal “of its own motion”. The SCC confirmed a three-pronged test applicable to the application of the forum of necessity doctrine, as codified by art. 3136 C.C.Q. For this doctrine to apply: (1) the Québec authority must lack jurisdiction; (2) the institution of an action abroad is impossible or cannot be required; and (3) the dispute must have a sufficient connection with Québec. Significantly, the SCC affirmed that this provision cannot be raised proprio motu, as proposed by Mainville J.A. In other words, the SCC held that this doctrine cannot be invoked by a court on its own volition, and can only be applied at the express request of a party.
5. The standard of review of correctness applies to questions involving the territorial jurisdiction of administrative tribunals. The SCC found that the FMAT’s jurisdiction over out-of-province defendants raises a constitutional issue regarding the territorial reach of provincial legislation, as well as a general question of law of central importance to the legal system as a whole. Accordingly, the presumptive standard of review of reasonableness as set out in Vavilov12 is rebutted in these circumstances.13
The SCC’s ruling in Sharp will provide significant clarity to jurisdictional rules for out-province litigants in Québec, in the securities field and beyond.
1 2023 SCC 29
2 2003 SCC 40 (“Unifund”)
3 Sharp at para. 57
4 Donaldson v. Autorité des marchés financiers, 2020 QCCA 401 (“Donaldson”)
5 Sharp at para. 63
6 Sharp at para. 62
7 Sharp at para. 125
8 Sharp at para. 126
9 Sharp at para. 135
10 Sharp at paras. 153 to 155
11 Sharp at para. 84
12 Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.
13 Sharp at paras. 36 to 39.