By NEIL HARTNELL
Tribune Business Editor
A Bahamas resident has defeated a Canadian regulator's bid to impose a $20m-plus sanction on him after the Supreme Court ruled it cannot be enforced in this jurisdiction.
Justice Ian Winder, in a January 29, 2020, verdict, ruled that the Ontario Securities Commission could not enforce Canadian court-ordered penalties against Wayne Pushka because the funds would go to the regulator rather than compensating investors allegedly harmed by his actions.
As a result, Justice Winder said the regulator's claim ran afoul of the "exclusionary rule", which - in English law jurisdictions such as The Bahamas - means the courts have no ability to enforce orders mandating the payment of fines and penalties to agencies of foreign governments.
Gail Lockhart-Charles, Mr Pushka's Bahamian attorney, in a statement issued yesterday argued that Justice Winder's ruling "clarifies the legal position in The Bahamas" as to what types of foreign judgments will be enforced or rejected by this nation's judicial system.
She said the verdict reinforces that the Bahamian courts will aid foreign receivers seeking to recover funds on behalf of defrauded or harmed investors, and added of Justice Winder's ruling: "His decision clarifies the legal position in The Bahamas, and will be a guide that informs foreign administrative agencies and governments as to what types of judgments can and cannot be enforced.
"His decision demonstrates that the Bahamian court will not shy away from looking at the substance of the matter rather than the form...... Justice Winder rejected the Ontario Securities Commission's submission that the purpose of the proceedings was to facilitate the return of funds to harmed investors, and he noted that this case did not involve the recovery of defrauded monies."
The Ontario Securities Commission, represented by now-Chief Justice Brian Moree QC before he took his current position, initiated legal proceedings in The Bahamas after Mr Pushka exhausted all appeal avenues against the case brought against him.
A sanctions order, filed with the Ontario Superior Court, mandated that he pay a $1.875m (CAD) Canadian dollar administrative fine in addition to a CAD$18.237m "disgorgement" as a result of breaching the state's securities laws. Both sanctions were to be paid to the regulator.
"The Ontario Securities Commission claims that in the period between the initial finding against Puhska in August 2013, and the determination of the appropriate sanction in August 2014, he removed from the Canadian jurisdiction over CAD$13.5m," Justice Winder's ruling recorded.
"CAD$4.55m of these funds, they allege, were transferred to The Bahamas and the balance to a trust company in Liechtenstein. It is alleged that property in Lyford Cay, Bahamas, in the name of Bonnieblue Inc was purchased by Pushka with the funds removed from Canada."
Mr Pushka is the former "indirect owner" and chief executive of Crown Hill Capital Corporation, a Canadian investment management firm. An Ontario Securities Commission panel, after a two-week hearing, found he and the company breached their "fiduciary duty" to the investment funds they managed - and the investors in them - through a series of deals undertaken during 2008-2009.
The panel upheld the regulator's allegations that Mr Pushka and Crown Hill had "acted primarily in their own interest" in taking over the management of several other investment funds, violating Ontario securities laws by changing investor rights, not properly addressing "conflicts of interest" and providing misleading information to clients.
While these charges were vigorously disputed by Mr Pushka, he was defeated at every stage of the Ontario Securities Commission's disciplinary process. However, Justice Winder noted he was not accused of defrauding investors, running an illegal securities scheme or causing harm to clients in any other way.
And he criticised the Ontario Securities Commission for creating "a moving goalpost" by changing the basis of its action some three years after first initiating proceedings in The Bahamas against Mr Pushka.
He noted that two of its vice-chairmen approved a September 2018 recommendation for the sanctions/penalties to be paid to "harmed investors" even though the Ontario court's order specifically said the CAD$20m-plus was to go to the regulator.
Justice Winder also noted that the Ontario Securities Commission "did not provide an adequate response" to the argument that the CAD$18.237m "disgorgement" was more than any funds that should be returned to investors. He added that "at best" the true sum was CAD$14.501m, as some CAD$3.736m had been paid by another entity.
"There is no reference to restoring any person or company who may have been harmed by Pushka, only about punishing him for transgressing Ontario Securities laws and ensuring he is not enriched thereby," the Bahamian Supreme Court justice found.
"Under the [Canadian] order the Ontario Securities Commission had a right to recover these sums and utilise them as they saw fit.... It could not be said that this was a claim about the recovery of ill-gotten gain by Pushka which belongs to harmed investors so as to restore them."
Turning to the regulator's recommendation that the CAD$20m-plus be used to compensate investors, Justice Winder said this altered the nature of proceedings since it was "not the state of play" when the case was launched in The Bahamas.
Doing so, he blasted, created "uncertainties" and the chance "to change the facts to suit specific goals and outcomes". He argued that case pleadings cannot "be a moving goalpost adjustable to suit the vagaries of the jurisdiction in which enforcement is sought". As a result, he dismissed the Ontario Securities Commission's claim.
Mr Pushka, in a statement, said: "The process in The Bahamas was balanced and fair. In Ontario, the original proceedings were in the Commission's tribunal system, where the plaintiff, prosecutor and judge are all from the same organisation. It was refreshing to have my case heard in The Bahamas where I was before an independent judge, as opposed to Ontario."