B.C. couple can't use bankruptcy to get out of paying $19M to regulator, appeal court rules

The B.C. Supreme Court and Court of Appeal is seen in this image from Wednesday, Feb. 7, 2018.

For the second time in a year, British Columbia's highest court has dismissed an appeal from a couple attempting to use bankruptcy to rid themselves of millions of dollars in penalties imposed by the province's financial markets regulator.

Thalbinder Singh Poonian and Shailu Poonian owe the B.C. Securities Commission a combined $19 million for market manipulation that a panel of the commission found them to have committed.

The total includes $13.5 million in administrative penalties and $5.5 million in "disgorgement of their ill-gotten gains," according to a statement from the BCSC. 

In November, the B.C. Court of Appeal dismissed an appeal from the couple in which they argued that the master who handled their application for discharge from bankruptcy had erred in various ways when deciding not to release them from their BCSC debt.

That appeal was dismissed, with the trio of appeal judges agreeing there was "no merit in any of the grounds of appeal identified by the appellants." 

The couple brought their most recent appeal against an order from the B.C. Supreme Court that declared their BCSC debts could not be released through the bankruptcy process.

In a decision issued earlier this month, the appeal court again rejected the couple's arguments. 

This time, the Poonians argued that the supreme court judge had erred in relying on an Alberta court decision that was later reversed by that province's appeal court.

While the B.C. appeal judges did find that the supreme court judge had erred in this regard, they concluded that the lower court's decision was still correct. The couple's debts "arise from obtaining property or services by false pretenses or fraudulent misrepresentation," and are therefore valid exceptions to the list of debts that can be discharged through bankruptcy, the appeal judges wrote in their decision.

The BCSC sanctioned the Poonians in 2015 for manipulating the share price of OSE Corp., an Ontario company listed on the TSX Venture Exchange. The market manipulation occurred between 2007 and 2009.

"The panel concluded that the Poonians inflated the share price through trading among themselves, relatives, friends and acquaintances, and then illegally obtained approximately $7 million by selling OSE shares to unsuspecting buyers," the BCSC said in its statement.

So far, the Poonians have not paid any portion of the $19 million they owe the BCSC. Any part of the $5.5 million disgorgement that is recovered will be returned to investors, the commission said.