Sep 28, 2020

When regulators impose a fine or administrative penalty, do they have an obligation to try to collect it? In British Columbia (Securities Commission) v Thow, 2018 BCSC 1823, http://canlii.ca/t/hvn8g the Court said no. Mr. Thow misappropriated a large amount of money from his clients. He was found criminally responsible and a large restitution order was issued. The Securities Commission also prosecuted him and obtained an administrative penalty in the amount of $250,000. The Commission did not take steps to collect the administrative penalty so that Mr. Thow could continue to make payments on the restitution order. Mr. Thow argued that, because of this inaction, any attempt to now collect the administrative penalty would be an abuse of process. The Court disagreed:

On [the] basis of the record, the most compelling conclusion is that the plaintiff’s decision to refrain from actively pursuing collection was based on a recognition that money paid in satisfaction of the restitution order was the preferable outcome because funds would find their way to the benefit of the victims, rather than to government coffers, as would result from payments on the penalty. If that is the case, as it seems to be, in my view it is eminently commendable, and quite the opposite of an abuse of the court’s process or action taken for some ulterior motive.

The Court deferred dealing with the second argument (that the Commission had promised not to collect the administrative penalty) until better evidence could be obtained.

This case confirms that regulators are not compelled to make immediate collection efforts on a fine or administrative penalty in order to preserve their claim.