In a previous post, we discussed the new standard of appellate review of tribunal decisions described in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (Vavilov) and its implications for the Ontario Securities Commission (the OSC). In Quadrexx Hedge Capital Management Ltd. v. Ontario Securities Commission, 2020 ONSC 4392, the Divisional Court considered for the first time the application of Vavilov to a decision of an OSC Hearing Panel.


After a contested hearing, a Hearing Panel of the OSC (the Panel) found that Miklos Nagy and Tony Sanfelice, the directing minds of Quadrexx Hedge Capital Management Inc., Quadrexx Asset Management Inc., and Quadrexx Secured Assets Inc. (the Quadrexx entities) engaged in fraudulent conduct in connection with three distributions of securities contrary to section 126.1(1)(b) of the Ontario Securities Act (the Act), resulting in investor losses totaling over $3 million. In respect of the same distributions, the Quadrexx entities were similarly found to have engaged in fraudulent conduct.  The Panel also found that Messrs. Nagy and Sanfelice (the Appellants), and Quadrexx Asset Management, committed other contraventions of the Act, including:

  • failing to report a working capital deficiency contrary to section 12.1 of NI 31-103;
  • failing to deal fairly, honestly and in good faith with clients contrary to section 2.1(1) of OSC Rule 31-505; and
  • with respect to the Appellants, breaching their obligations as Ultimate Designated Person and Chief Compliance Officer contrary to NI 31-103.

The Panel ordered, among other things, that the Appellants be permanently prohibited from trading or acquiring securities and acting as directors or officers of any issuer or registrant. They were also ordered to pay administrative penalties and to disgorge almost $2.5 million.

In their appeal to the Divisional Court, the Appellants submitted that the Panel had made twenty-three errors warranting appellate intervention, including numerous factual errors, errors of mixed fact and law, failures to afford procedural fairness, and that the Panel’s reasons were inadequate.

The Applicable Standard of Review

Applying the Supreme Court’s decision in Vavilov, the Court confirmed that as the Legislature had provided a statutory right of appeal from decisions of OSC Hearing Panels, the Divisional Court was required to apply appellate standards of review, namely:

  • Where the ground of appeal raises solely an issue of law alone, the standard of review of a Panel decision is correctness.
  • Where the ground of appeal is an issue of fact, the appellate court must pay substantial deference to the Panel. Before it may interfere, the appellate court must conclude that the alleged error made by the Panel amounts to a “palpable and overriding error”, an error that is clear to the mind or plain to see.
  • Issues of mixed fact and law lie on a spectrum. If the error of the Panel can be traced to a clear error in principle, it may be characterized as an error of law and evaluated using the standard of correctness. However, if the legal principle in question cannot be easily extracted, then the matter must be addressed on the standard of palpable and overriding error.
  • Where the ground of appeal is an issue of procedural fairness, the court must use the factors set out in Baker v. Canada (Minister of Citizenship & Immigration), [1999] 2 SCR 817.

The Appeal Fails

All twenty-three grounds of appeal were dismissed.

None of the alleged errors of fact amounted to palpable and overriding error. In particular, “[t]he [OSC] did not ignore or misapprehend Mr. Nagy’s and Mr. Sanfelice’s version of the facts. It rejected their evidence on key points and explained why it did so.” It was not for the Court to “retry the case, reweigh the evidence, and substitute for the reasonable inference of the Commission another inference of its own.”

The Panel also made no errors of mixed fact and law. There was no error of fact and no error in the application of the law with respect to the grounds asserted by the Appellants.

The submission that the Panel had failed to afford procedural fairness to the Appellants in the manner in which it had used hearsay evidence and made credibility findings also was rejected. The Panel cautioned that care must be taken in determining the weight of hearsay evidence to avoid placing undue reliance on uncorroborated hearsay evidence lacking indicia of reliability. The fact that the Panel rejected the evidence of the Appellants on certain issues was not a denial of procedural fairness.

Finally, the Panel’s decisions were adequate. According to the Court, the critical question was whether, “in the context of the record, the issues, and the submissions of the parties, the judgement is sufficiently intelligible to show that the tribunal understood the substance of the matter and addressed the necessary and critical issues.” Simply failing to refer to a piece of evidence does not equate to a failure to consider the matter. Rather, the party must point to something in the record to justify the conclusion that the tribunal failed to consider evidence. As well, there is no obligation on a tribunal to record every argument or aspect of their deliberation process, provided the decision provides insight into how the legal conclusion was reached and what facts were relied upon in reaching that conclusion. The fact that the Appellants posited twenty-three errors that could meaningfully be reviewed by the court undermined their submission that the reasons were inadequate. The Panel “engaged in analysis at every step of its decisions, within a coherent and logical framework.” The reasoning was clear and sufficient: the Appellants knew precisely how and why they were found to have contravened the Act.

The Appellants’ appeal of the sanctions also failed.


This decision provides a useful summary of the standard of review applicable to decisions of OSC Hearing Panels under the Vavilov test.

Further, it suggests that even under Vavilov, the courts will avoid second guessing well reasoned OSC decisions based upon factual determinations grounded in at least some evidence in the record.

The author would like to thank Bryant Oakes for his contributions.