SA Capital Growth Corp. v. Mander Estate dealt with the thorny issue of whether a court-appointed officer, in this case a Receiver appointed to sell the assets of an insolvent entity, had a legal obligation to disclose information that it had obtained to an individual who was facing serious allegations under Ontario’s Securities Act. Justice Pattillo of the Ontario Superior Court decided that a receiver is generally not required to produce the details of its investigations or the documents in its possession to parties that are inside or outside of the receivership. However, since the accused has the right under s. 7 of the Charter of Rights and Freedoms, to make full answer and defence to a criminal allegation, this right entitled him solely to information that is “likely relevant” to the criminal charges against him.

The Ontario Court of Appeal found that it was inappropriate for the Superior Court to make what amounted to an interim procedural order in relation to a proceeding pending before the Ontario Securities Commission (OSC). As a result, it was left for the OSC to decide whether third party production was appropriate.

The details are as follows:

On March 17, 2010, the Ontario Superior Court of Justice appointed a Receiver over the assets of Robert Mander and his investment company. That same day, Mander committed suicide. It appeared that Mander had been running a Ponzi scheme that resulted in the misappropriation of tens of millions of dollars. After investigating those familiar with the affairs of Mander and his company, the Receiver began to investigate Peter Sbaraglia, who had worked with Mander.

On July 14, 2010, the Court issued an order authorizing and directing the Receiver to investigate Sbaraglia and his investment company, CO Group. Over the course of its investigation, the Receiver communicated with and reviewed documents from former partners, associates, employees, accountants, lawyers and clients of Mander and Sbaraglia’s companies. Following its investigation, the Receiver recommended in a report to the Court that another receiver be appointed over the CO Group, which the Court did on December 23, 2010.

On February 24, 2011, the OSC commenced a proceedings against Sbaraglia, alleging that he had misled and deceived investors and had also misled the OSC. Sbaraglia sought an order that the Receiver be required to provide documents, notes and transcripts relating to its investigations of Mander, Mander’s company, and Sbaraglia’s company.

On March 4, 2013, the OSC reached a settlement with Sbaraglia where he admitted to engaging in acts that perpetrated a fraud and making statements which misled the OSC.  Sbaraglia was permanently barred from the investment advisory industry . See the consent settlement here.

by Michael Nowina and Jonathan Tam (articling student).