BC Allows SEC Easier Enforcement of Fraud Judgments

The BC Supreme Court handed down a decision on March 29, 2000 that will make it easier for American securities regulators to enforce US fraud judgments in Canada. United States Securities and Exchange Commission (SEC) v. Robert Cosby and Global Action Investments Limited involved a US citizen (Cosby) who arrived in Canada with over $160,000 that he claimed he was carrying on behalf of a Canadian company, Global Action Investments. Canadian customs agents ran a check on Cosby and found that he had a US court judgment against him for almost $800,000 dollars that had been brought by the SEC for alleged securities fraud, and which had been obtained in default.

The RCMP seized the cash from Cosby, and the SEC subsequently filed a suit asking the RCMP to hand over the cash to assist in settling the US judgment. Global Action, however, claimed that the money belonged to it. Global argued that the US court order was not valid in Canada as punitive orders of foreign courts are not generally recognized in Canadian courts. The SEC, argued that, while the US ruling contained punitive measures, part of the judgment was also aimed at reimbursing individuals who suffered loss as a result of the fraud. The SEC claimed that it was only for this latter aspect of the judgment that it was seeking the funds. The BC Supreme Court found in favour of the SEC’s argument, holding that it could enforce that part of the US judgment that related to reimbursing parties who suffered from the fraud, however the court also held that the penal aspect of the US judgment was not enforceable in Canada.

Malcolm Ruby (Toronto) and Geoffrey Howard (Vancouver) of Gowling, Strathy & Henderson acted for the SEC. Gordon Plottel of Swinton & Company in Vancouver acted for Global Action.