COURT FILE NO.: 75381/05

DATE: 20070705

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CUNNINGHAM A.C.J.S.C.J., Taliano and Swinton JJ.

B E T W E E N:

BEN VANDERBURG and DANIEL VANDERBURG

Applicants

• and -

REAL ESTATE COUNCIL OF ONTARIO, REAL ESTATE COUNCIL OF ONTARIO, DISCIPLINE COMMITTEE and REAL ESTATE COUNCIL OF ONTARIO, MEMBERSHIP APPEALS COMMITTEE

Respondents

Wallace A. W. Scott, Q.C., for the Applicants

Robert Maxwell, for the Respondents

HEARD at Newmarket: March 5, 2007

REASONS FOR JUDGMENT

CUNNINGHAM A.C.J.S.C.:

Overview

1The applicants, Mr. Ben Vanderburg (“BV”) and Mr. Daniel Vanderburg (“DV”), are real estate brokers. They apply for judicial review of the decisions of the respondents Real Estate Council of Ontario (“RECO”) Discipline Committee and Membership Appeals Committee, which concluded they had acted unprofessionally in the sale of two properties owned by one Katherine Warenycia (the “complainant”). Both applicants were required to pay a penalty. The applicants ask this court for an order in the nature of certiorari quashing these decisions.

2For the reasons that follow, the application for judicial review is dismissed.

Background

3The applicant BV is the broker of record, officer, director and majority shareholder of Century 21 Success Inc. (“Century 21”). His son, the applicant DV, is an associate broker with Century 21.

4The complainant owned two parcels of land referred to as Parcels 7 and 8 in the Township of Mariposa. In July 2000, she entered into a listing agreement with Century 21 to sell the land. DV was the listing agent and BV was the supervising broker. Parcel 7 was approximately 10 acres and was listed at a price of $69,900.00. Parcel 8 was approximately 20 acres and was listed at a price of $79,900.00.

5Three months later, Century 21 offered to purchase the land. The complainant and Century 21 entered into an agreement of purchase and sale (the “APS”). The purchase price for Parcels 7 and 8 were $33,000.00 and $38,000.00 respectively.

6The APS was amended one month later. Century 21 remained the purchaser for Parcel 7, but the purchase price was reduced to $5,000.00. DV became the purchaser of Parcel 8 for a reduced price of $7,000.00.

7The reason for the drastic reduction in price was that Parcels 7 and 8 were zoned as agricultural lands, which prevented the owner from obtaining a building permit to construct a home on the lands. The applicants advised the complainant that she could apply for a zoning change but it was unlikely that Mariposa Township Council would agree. The complainant indicated that she did not wish to apply for rezoning, and agreed to sell the lands for the reduced price. The deal closed at the end of November 2000.

8Century 21 and DV then applied for a rezoning of the two parcels and were successful. On January 13, 2002 (approximately 13 months after the complainant sold the lands to the applicants), Century 21 sold Parcel 7 for $60,000.00.

9The complainant thereafter learned that Century 21 made substantial gains from the sale of Parcel 7. With the help of her son, she wrote a letter to RECO complaining about the applicants’ conduct in representing her.

10Based on this letter, RECO made a number of allegations of unprofessional conduct against the applicants, some of them serious, and a hearing was held before the Discipline Committee. Most of the allegations were dismissed for lack of evidence. However the Discipline Committee did conclude that both BV and DV acted unprofessionally.

11The Discipline Committee held that DV had breached Rules 1, 2, 3, 5, 7, 23 and 46 of RECO’s Code of Ethics because he:

1. Failed to explain to the complainant both his role in the transaction and the concepts of agency and dual agency, and that he failed to obtain an acknowledgment from the complainant that these issues were explained at the earliest practical opportunity;

2. Failed to use a Confirmation of Representation form or similar document with respect to the transaction prior to the APS being submitted to the complainant;

3. Presented an offer to the complainant without providing her with written information on his position and interest in the transaction and failing to obtain an acknowledgment of same;

4. Failed to advise the complainant to seek independent legal advice (because of the potential conflicts arising in the dual agency situation).

12The Discipline Committee held that BV had breached Rules 1, 2, 3, 43 and 46 of RECO’s Code of Ethics because he:

1. Failed to obtain an acknowledgment from the complainant that agency had been explained, failed to obtain a Confirmation of Representation form from the complainant, and failed to have a dual agency agreement on file;

2. Failed to use a Confirmation of Representation form or similar document with respect to the transaction.

13The Discipline Committee ordered both BV and DV to each pay a penalty in the amount of $8,000.00.

14The applicants applied to have RECO pay their costs of the hearing. Since most of the allegations were dismissed due to insufficient evidence, the applicants said the decision to proceed to a discipline hearing was flawed. In the alternative, they submitted that the hearing could have been much shorter if RECO had done a proper investigation. The Discipline Committee refused to award costs, saying that it could not critique the investigative process and that there were sufficient reasons to proceed to a hearing.

15The applicants appealed to the Membership Appeals Committee. It substantially upheld the Discipline Committee’s decision, except that it lowered the penalties to $5,000.00 for DV and $3,000.00 for BV. On the issue of costs, the Membership Appeals Committee held that the applicants were not entitled to costs under s. 51 of By-law No. 10 because it could not be said that the referral to a hearing was “unwarranted”. Nor were the applicants entitled to costs pursuant to s. 17.1 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 (the “SPPA”) because neither the Discipline Committee nor the Membership Appeals Committee had established rules regarding cost awards under s. 25.1 of the SPPA.

16The applicants then brought their application for judicial review to this Court. In Luzak v. Real Estate Council of Ontario (2004), 2003 25437 (ON SCDC), 67 O.R. (3d) 530 (Div. Ct.) [Luzak], the Divisional Court held the Discipline Committee and the Membership Appeals Committee both exercise a statutory power of decision. Therefore this Court has the necessary jurisdiction under the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 to judicially review the decision in this case.

Legal Issues

17The following issues are relevant to this application for judicial review:

1. What is the appropriate standard of review?

2. Did the Membership Appeals Committee err in upholding the Discipline Committee’s finding that the applicants acted in an unprofessional manner?

3. Did the Membership Appeals Committee err in upholding the Discipline Committee’s decision that the applicants were not entitled to an award for costs?

Statutory Framework

18Before proceeding, it is appropriate to set out the statutory framework in which RECO, the Discipline Committee and the Membership Appeals Committee operate, as this will be important for determining the appropriate standard of review.

19Pursuant to ss. 3 (2) and 4 of the Safety and Consumer Statutes Administration Act, 1996, S.O. 1996, c. 19 (the “SCSAA”), the Lieutenant Governor in Council is empowered to designate, by regulation, an entity to be the administrative authority over designated legislation where that entity has entered into an administrative agreement with the Minister responsible for the SCSAA. Clause 4 (2) (a) of the SCSAA requires the administrative agreement to make “provision for the resources that an administrative authority requires to carry out the administration delegated to it and to comply with this Act”.

20RECO is a not-for-profit corporation without share capital incorporated January 27, 1997, whose members comprise all persons trading in real estate in Ontario. RECO entered into an administrative agreement with the Minister of Consumer and Commercial Relations on March 1, 1997. The Lieutenant Governor in Council designated RECO as the administrative authority over what is now the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C (the “REBBA”) and its regulations, which govern the real estate profession in Ontario. This devolution of power to RECO led McRae J. in Luzak, supra at para. 8 to conclude that the real estate profession “became in many respects self-governing.”

21Subsection 7 (1) of the SCSAA requires RECO to carry out the administration of the REBBA “having regard to the intent and purpose of this Act and [the REBBA]”. The purpose of the SCSAA is set out in s. 1, which says,

The purpose of this Act is to facilitate the administration of designated Acts named in the Schedule by delegating to designated administrative authorities certain powers and duties relating to the administration of those Acts.

The purpose of the REBBA was explained by Somers J. in Enterprise Property Group Ltd. v. Key Property Management Corp., [1998] O.J. No. 3309 at para. 13 (Gen. Div.) [Enterprise Property Group]:

This court has held that the purpose behind the passing of the Real Estate and Business Brokers Act was to protect the public in its dealings in a relationship of trust of [sic] confidence where the average member of the public is at a disadvantage in dealing with a professional, thereby creating an imbalance which the legislation saw fit to even. [Citations omitted.]

22The administrative agreement between the Minister and RECO empowers RECO to pass by-laws respecting, among other things, the terms and conditions of registration and membership. At the time relevant to the case at bar, RECO had enacted a Code of Ethics as “Schedule B” to By-law No. 10. By-law No. 10 also created the Discipline Committee and Membership Appeals Committee to enforce compliance with the Code of Ethics.

23Breach of the rules in the Code of Ethics may lead to a discipline hearing before the Discipline Committee. Section 59 of By-law No. 10 provides a true right of appeal to the Membership Appeals Committee. The only evidence put before the Membership Appeals Committee is the record of the discipline hearing and it may “confirm, reverse or vary the disposition of the Discipline Committee and may make any disposition that the Discipline Committee has the power to make.”

24The relevant rules from RECO’s Code of Ethics are as follows:

Rule 1 – Ethical Behaviour

A Member shall:

(1) endeavour to protect and promote the best interests of the Member’s Client,

(2) endeavour to protect the public against fraud, misrepresentation or unethical practice in connection with real estate transactions,

(3) maintain and enhance the Member’s degree of skill and competence,

(4) render services, including giving advice and opinions, based on the Member’s knowledge, training, qualifications and expertise,

(5) deal fairly, honestly and with integrity with the public, other Members and third parties,

(6) cooperate with the Council in fulfilling its duty to serve and protect the public interest,

(7) comply with the [REBBA] and the regulations under it and the by-laws of the Council.

Rule 2 – Primary Duty to Client

A Member shall endeavour to protect and promote the best interests of the Member’s Client. This primary obligation does not relieve the Member of the responsibility of dealing fairly, honestly and with integrity with others involved in each Transaction.

Rule 3 – Disclosure of Role

At the earliest practical opportunity, but no later than when the Member Accepts an Agency, a Member shall fully disclose in writing the role and nature of the service that the Member shall be providing to the person. The Member shall also disclose the Member’s role to others involved in the Transaction when appropriate

Rule 5 – Financial Disclosure

A Member shall disclose the financial aspects of a Transaction and any personal interest of the Member in a matter to the Parties sufficient to enable them to make an informed decision.

Rule 7 – Outside Professional Advice

A Member shall not discourage the Parties to a Transaction from seeking outside professional advice.

Rule 23 – Obedience to Law

A Member shall practice in accordance with all federal, territorial or provincial law or municipal by-law relevant to the Member’s fitness to practice.

Rule 43 – Broker Responsibility

A broker shall be responsible for the professional conduct and professional actions of those Members registered with that broker.

Rule 46 – Unprofessional Conduct

A Member shall not engage in an act or omission relevant to the practice of the profession that, having regard to all the circumstances, would reasonably be regarded by Members or the public as disgraceful, dishonourable or unprofessional.

Standard of Review

25This is the first time this Court has been required to determine the standard of review to be applied to a disciplinary decision of RECO’s Membership Appeals Committee.

26To determine the appropriate standard of review, the court must engage in the pragmatic and functional approach (Pushpanathan v. Canada (Minister of Citizenship and Immigration), 1998 778 (SCC), [1998] 1 S.C.R. 982 at paras. 29-38 [Pushpanathan] and Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226 at 238 [Dr. Q.]). The pragmatic and functional approach requires consideration of four contextual factors: the presence or absence of a privative clause or statutory right of appeal; the purposes of the legislation and the provision in particular; the nature of the question - law, fact or mixed law and fact; and the expertise of the tribunal relative to that of the reviewing court on the issue in question.

27There is no privative clause protecting the decisions of the Membership Appeals Committee. Nor is there a right of appeal from decisions of the Membership Appeals Committee. However, as the Supreme Court of Canada said in Dr. Q., supra at para. 27, “silence [regarding a right of appeal] is neutral and does not imply a high standard of scrutiny.” This contextual factor suggests less curial deference is owed.

28As noted above, s. 7 (1) of the SCSAA requires RECO to administer the REBBA in accordance with its purpose and with the purpose of the SCSAA. As Somers J. said in Enterprise Property Group, supra, the purpose of the REBBA is to protect the public in its dealings with the real estate profession. Through the SCSAA, the Legislature has decided to make RECO entirely responsible for the administration of the REBBA. Through the SCSAA, the Legislature has required the creation of an administrative agreement between RECO and the Minister, the content of which provides RECO with the necessary powers to regulate the real estate profession in the public interest, including the power to create a Code of Ethics and enforce it through the Discipline Committee and the Membership Appeals Committee. This contextual factor therefore suggests this Court should defer to the decisions of these bodies.

29There are two questions at issue in this application for judicial review: whether the applicants have breached the rules in the Code of Ethics and whether the applicants are entitled to an award for costs. Both are questions of mixed fact and law, which suggests somewhat less deference is owed.

30Lastly, the Membership Appeals Committee has greater relative expertise than this Court in determining whether the applicants have violated any of the professional rules in the Code of Ethics and whether the applicants are entitled to recover their costs of the discipline hearing and the appeal to the Membership Appeals Committee. This final contextual factor suggests greater curial deference is owed.

31Overall, two contextual factors suggest that deference is owed while the remaining two contextual factors suggest less deference is owed. In my opinion, the Legislature intended disciplinary decisions of RECO’s Membership Appeals Committee to be reviewed on a standard of reasonableness simpliciter. The decision should only be overturned if it was unreasonable.

32In Ryan v. The Law Society of New Brunswick, 2003 SCC 20, [2003] 1 S.C.R. 247 at paras. 55-56, the Supreme Court described what is meant by an unreasonable decision:

A decision will be unreasonable only if there is no line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at which it arrived. If any of the reasons that are sufficient to support the conclusion are tenable in the sense that they can stand up to a somewhat probing examination, then the decision will not be unreasonable and a reviewing court must not interfere (see Southam, at para. 56). This means that a decision may satisfy the reasonableness standard if it is supported by a tenable explanation even if this explanation is not one that the reviewing court finds compelling.

This does not mean that every element of the reasoning given must independently pass a test for reasonableness. The question is rather whether the reasons, taken as a whole, are tenable as support for the decision. At all times, a court applying a standard of reasonableness must assess the basic adequacy of a reasoned decision remembering that the issue under review does not compel one specific result. Moreover, a reviewing court should not seize on one or more mistakes or elements of the decision which do not affect the decision as a whole.

Analysis

i. It was not unreasonable for the Membership Appeals Committee to uphold the Discipline Committee’s finding that the applicants acted unprofessionally

33The applicants submitted that Rule 46 of the Code of Ethics is only violated where conduct is “disgraceful” or “dishonourable”, and that the Discipline Committee and Membership Appeals Committee erred by finding the applicants violated Rule 46 by engaging in “unprofessional” conduct. I disagree. Rule 46 clearly states that the rule is breached by conduct that is considered “disgraceful, dishonourable or unprofessional” (emphasis added).

34Both the Discipline Committee and the Membership Appeals Committee provided thorough reasons for their decisions. In my view those reasons as a whole provide a tenable explanation that supports the conclusion that the applicants acted unprofessionally in their dealings with the complainant, contrary to the Code of Ethics.

35There is no reason for this Court to interfere with the finding that the applicants breached the Code of Ethics by (a) failing to explain to the complainant the role and nature of the service they were providing (including agency and dual agency) and failing to obtain a written acknowledgment of same, (b) failing to obtain a written confirmation of representation, and (c) in DV’s case, his failure to provide information on his position and interest in the transaction and obtaining written acknowledgment of same.

36The Discipline Committee held, and the Membership Appeals Committee affirmed, that in a situation where a registrant or related person is actually purchasing real property from a seller that is also a client, the registrant must complete both a Registrant’s Statement as Purchaser and a Confirmation of Representation (or like document) to satisfy his or her duties under the Code of Ethics. As the Membership Appeals Committee explained in its reasons at pp. 4-6, the purpose of the former is to make it clear to the seller/client that the registrant or related person may be taking an interest in the property as part of the transaction, while the purpose of the latter is to both inform the seller/client of the role and nature of the service being provided and to explain agency and dual agency.

37DV acknowledged that he had no written confirmation or acknowledgment from the complainant. DV did provide to the complainant a Registrant’s Statement as Purchaser signed by BV, but no Confirmation of Representation or similar document was provided to the complainant prior to the execution of the APS even though this or similar written documents were in general use in late 2000. In light of this, both the Discipline Committee and the Membership Appeals Committee concluded that the applicants breached the Code of Ethics. This is a tenable and thus reasonable analysis, and I will not disturb it.

38The Discipline Committee and the Membership Appeals Committee also present a tenable analysis relating to their finding that DV breached the Code of Ethics by failing to advise the complainant to seek independent legal advice. Both tribunals noted that the applicants and Century 21, acting both as representatives of the complainant and purchasers of her land, were in a dual agency situation that was “fraught with potential conflicts of interest”. In these particular circumstances the tribunals held that the principle underlying Rule 7 of the Code of Ethics (“A Member shall not discourage the Parties to a Transaction from seeking outside professional advice”) required DV to urge the complainant to seek independent legal advice. Whether she acted on such advice was another matter. DV’s failure to do so resulted in a breach of the Code of Ethics. I find that this conclusion is also reasonable.

ii. It was not unreasonable for the Membership Appeals Committee to uphold the Discipline Committee’s refusal to award costs to the applicants

39The Membership Appeals Committee provided a tenable analysis for upholding (for different reasons) the Discipline Committee’s refusal to award costs to the applicants. Section 51 of By-law No. 10 gives the Discipline Committee the discretion to award costs only where it “is of the opinion that the referral to discipline was unwarranted”. The Membership Appeals Committee concluded that it was not “unwarranted” to refer the applicants to discipline because the applicants were found to have breached the Code of Ethics. This is a reasonable conclusion given the wording of s. 51.

40The Membership Appeals Committee also held that there was no jurisdiction to award costs under s. 17.1 of the SPPA. This provision requires the tribunal to make rules regarding costs pursuant to s. 25.1 of the SPPA. The Membership Appeals Committee noted that the Rules of Practice did not provide for the awarding of costs, and in any case the Rules of Practice were not made by the tribunal pursuant to s. 25.1 of the SPPA but were rather created through a by-law passed by RECO’s Board of Directors. This, too, is a tenable and therefore reasonable conclusion given the plain wording of s. 17.1 of the SPPA.

Disposition

41For the reasons outlined above, the application for judicial review is dismissed.

42The respondent shall have its costs fixed at $3,000 all inclusive to be payable forthwith.

CUNNINGHAM A.C.J.S.C.J.

I agree. ___________________________

TALIANO J.

I agree. ___________________________

SWINTON J.

Date of Release: July 5, 2007

COURT FILE NO.: 75381/05

DATE: 20070705

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CUNNINGHAM A.C.J.S.C.j., taliano and swinton JJ.