CITATION: Presta v. Institute of Chartered Accountants of Ontario, 2010 ONSC 1877

DIVISIONAL COURT FILE NO.: 533/09

DATE: 20100415

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

JENNINGS, FERRIER and DAMBROT JJ.

B E T W E E N :

FRANK PRESTA

Applicant

– and –

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF ONTARIO

Respondent

Michael Girard

for the Applicant

Brian B. Bellmore and Alexandra E. Hersak

for the Respondent

HEARD at Toronto: March 18, 2010

DAMBROT J.:

NATURE OF PROCEEDING:

1Frank Presta brings an application for judicial review of the decision of the Institute of the Chartered Accountants of Ontario (“ICAO”) Discipline Committee (‘DC”), dated December 3, 2008, as well as from the decision of the ICAO Appeal Committee (“AC”), dated October 27, 2009.

2The DC found the applicant guilty of misconduct for failing to cooperate in the investigation of the Professional Conduct Committee (“PCC”). The DC dismissed his appeal from that decision.

BACKGROUND:

3A complaint was made to the complaints committee of the ICAO alleging, among other things, that the applicant helped a client who was engaged in a matrimonial dispute to conceal his income. The complainant asserted that the applicant’s firm provided the client with invoices for work that had not actually been performed. These invoices were recorded as accounting expenses of the client’s company. Later, amounts in excess of the value of the actual work ultimately done were refunded to the client.

4Ms. Wolkoff, who was appointed by the PCC to investigate the matter, met with the applicant, received certain documents from him, and drafted a report dated November 11, 2007. The applicant was directed to attend a meeting with the PCC on December 4, 2007. He did not attend, but instead, sent a letter from his doctor explaining the absence and suggesting that the PCC reschedule the meeting for sometime in the early New Year. The PCC directed Wolkoff to obtain more information from the Applicant, including certain financial records of his firm.

5On December 5, 2007, the applicant’s counsel was advised in writing that the PCC had determined that further investigative steps were necessary and that the investigator would contact him to arrange an interview. On December 10, 2007, the applicant was advised that his attendance at the PCC meeting had been rescheduled to February 5, 2008.

6Ms. Wolkoff met with the applicant on January 4, 2008, and then wrote to him to summarize the additional information she required arising out of that meeting. Although he did provide some of the requested information by letter of January 18, 2008, he did not provide all the requested documents. In his e-mail of January 31, 2008, he advised the investigator:

With respect to our meeting on January 4, 2008, you requested information pertaining to the complaint issue by Mr. Ken Froese. I have supplied information pursuant to our meeting which strictly relates to the issues raised in the complaint.

7The applicant, without explanation, did not attend the February 5 meeting of the PCC, but was represented at the meeting by counsel. Counsel advised the PCC that his client had agreed to provide the documents requested. By letter dated February 12, 2008, the investigator advised the applicant that she still required the following documents with respect to the allegation in the complaint that he had used his firm to assist his client to conceal income from his wife in matrimonial proceedings:

(i) Presta Capparotta LLP’s (PCLLP) complete financial statements for years ended December 31, 2003 to 2005, including any notice to reader reports and notes to the financial statements;

(ii) A reconciliation of Mr. Presta’s partnership draws for the period January to December 2003 of $903,960 to the withdrawals reported in PCLLP’s financial statements for the year ended December 31, 2003 of $65,845;

(iii) Explanations for all reconciling items noted in (ii) above;

(iv) PCLLP’s complete detailed general ledger for the years 2003 to 2005; and

(v) A detailed breakdown of the amount reported as “Outside services” of $242,884 on PCLLP’s financial statements for the year ended December 31, 2003.

8The applicant did not provide the information and documents requested in the investigator’s February 12, 2008 letter. The investigator sent further written requests to the applicant on February 26 and 28, 2008. On March 4, 2008, a Notice to Member to Attend Before the Professional Conduct Committee pursuant to Bylaw 510(9) was served on the applicant requiring him to personally attend the PCC meeting on June 3, 2008.

9On March 7, 2008, Mr. Presta advised the investigator by e-mail that he would be returning to his office on March 17 “…and I intend to provide all the requested information in full upon my return.” He did not do so.

10On April 2, Ms. Wolkoff sent another request for the documents to the applicant. On April 9, the applicant replied:

In response to your latest e-mail, please note that the chair of the professional conduct committee has requested that I appear before the committee on June 3, 2008. At that time, as requested, I will provide the committee information related to the complaint, which has been previously provided. As such, please do not forward any further requests for additional information as the committee is requesting information related to the complaint.

11The applicant did not attend the PCC meeting on June 3, 2008, again without explanation. On June 11, 2008, he was charged with failure to cooperate with the investigator contrary to Rule 203.2 of the Rules of Professional Conduct.

12With the agreement of Mr. Presta’s counsel, the hearing of the charge by the DC was scheduled for December 3, 2008. Disclosure was made to the applicant of the documents and evidence to be relied upon by the PCC in support of the charge of failure to cooperate on July 10, 2008. The member did not attend the hearing of the charge before the DC on December 3, 2008. He was represented at the hearing by counsel who filed a letter from the member. No other evidence was led on behalf of the applicant. There was no suggestion at any point in the hearing before the DC that the PCC had not made full disclosure of the case the applicant had to meet in respect of the charge. In argument, counsel for the applicant submitted that the requested documents were not relevant to the complaint and did not have to be provided.

13After hearing the evidence of the investigator, the exhibits filed and counsel’s submissions, the DC found the applicant guilty of the charge. The DC stated:

26. The panel concluded that Mr. Presta ceased to cooperate with the Professional Conduct Committee and its investigator after January 18, 2008. He did not provide the documents and explanations requested and he did not attend the Professional Conduct Committee meeting on either February 5, 2008, or June 3, 2008. Mr. Presta presented no evidence to explain his absence from either of the meetings.

14In addition to reprimanding the applicant and fining him $3,500, the DC made the following order:

3. THAT Mr. Presta cooperate in the Professional Conduct Committee investigation within ten (10) days from the date this Decision and Order becomes final under the bylaws, by providing to the Director of Standards Enforcement the documents requested in the letter to Mr. Presta dated February 12, 2008 contained at Tab 7 of Exhibit 7 filed at this hearing.

4. THAT Mr. Presta provide full and active co-operation as required by the Professional Conduct Committee in its investigation.

15The applicant appealed this decision to the AC. His appeal was dismissed on October 27, 2009.

16This application for judicial review followed.

ISSUES

17In his submissions, the applicant made the following three arguments:

1. The PCC breached its duty of fairness by failing to give the applicant notice when the matter under investigation by the PCC changed after the report of the investigator was delivered to it.

2. The PCC’s failure to provide him with the preliminary investigative report relating to the 2007 complaint, the engagement letter of the investigator of that complaint and any information the investigator had obtained in respect of the complaint at the discipline hearing concerning his failure to cooperate, was a breach of the PCC’s disclosure obligations and handcuffed his ability to defend himself on the basis that the documents sought from him were not relevant.

3. The DCC had no jurisdiction to award costs against him.

Breach of the duty of fairness

18With respect to the first argument, we note that the applicant did not appear at the DC hearing, did not lead any evidence to support his suggestion that the investigation had changed direction, nor did his counsel raise this argument. Before the AC, and again before us, the applicant could do no more than point to the fact that after reviewing a report prepared by the investigator, the PCC instructed her to make further inquiries. The AC concluded that there was no evidence that the investigation had changed direction or was expanded beyond the complaint. The AC stated, at paragraph 14 of its reasons:

While it was not raised as a ground of appeal in its factum, in oral arguments the appellant submitted that the expansion of the investigation without notice to Mr. Presta breached the principles of natural justice. As indicated above, the mere instruction by the Professional Conduct Committee to make further inquiries does not constitute an expansion of the investigation.

19We agree.

20In his argument, the applicant urged us to find that a duty of fairness is owed to a target of an investigation at the investigative stage. The respondent urged us to conclude that no such duty is owed. This is not the occasion to resolve that issue, having regard to what we have already said. Assuming without deciding that that such a duty was owed to the applicant, on the facts of this case there is no basis to conclude that it was breached.

Breach of disclosure obligation and handcuffing the defence

21With respect to the second argument, the Respondent acknowledges that it is required by its own by-laws to make disclosure when a charge is laid. It submits, however, that it is not obliged to make disclosure before a charge is laid, and while a complaint is under investigation. We agree. The investigative report and associated documents sought by the applicant related to an on-going investigation. No general obligation to disclose it had yet arisen, and no special obligation to do so arose when the failure to cooperate complaint was instituted. Nor was disclosure of the report and associated documents necessary to permit the applicant to defend himself at the discipline hearing into the complaint of failing to cooperate with the investigation.

22More particularly, we do not accept the applicant’s submission that he needed the report and associated documents in order to advance his argument that the documents sought by the investigator were not relevant to the investigation. The question of relevance is readily determined on the basis of the content of the complaint and the nature of the documents demanded. The applicant had no need of the documents sought to make an argument respecting this issue, and the DC did not require them to resolve the issue. This is well-illustrated by the treatment of this issue by the DC and the AC.

23In its reasons, the DC identified the part of the complaint that was relevant to the charge against the applicant as follows, at paragraph 17:

The part of the complaint which is relevant to the charge alleges that Mr. Presta’s accounting firm had a role in concealing the income of a client who was engaged in a matrimonial dispute. The complaint asserted that Mr. Presta had acknowledged that the invoices of the accounting firm had been recorded as “accounting expenses” of the client’s company but the invoices were for “retainers,” that the work described in the invoices had not been carried out, and that later the amounts in excess of the actual work done were refunded to the client, or as directed by the client.

24After reviewing the requested documents, the DC concluded, at paragraph 27:

… the issue is not whether Mr. Presta thinks the documents and explanations are related to the complaint or relevant to the investigation. This is not a case where the question of relevance is difficult to decide. The panel readily concluded that the documents and explanations requested could well be relevant to the complaint.

25With respect to this issue, the AC stated, at paragraphs 11 and 12:

11. The allegation was that Mr. Presta had used his firm to help conceal assets of a client in a matrimonial dispute. The documents requested were the financial records of the firm. The Discipline Committee “concluded that the documents and explanations requested could well be relevant to the complaint.” That conclusion is reasonable on the facts. Indeed, the conclusion is inescapable. The complaint included allegations that the firm had invoiced and recorded client services and payments falsely, and that the firm had later refunded monies to the client. It is reasonable to believe that the financial records of the firm would contain evidence to confirm or refute these allegations.

12. The Discipline Committee found that the test for relevance in these circumstances was not whether the member under investigation decided the information was relevant, but whether, viewed objectively, the information could be relevant. That is a correct statement. An investigation by the Professional conduct Committee is not driven or shaped by the will of the person under investigation. Were it so, the concept of self-regulation would be a sham. …

26We agree with this analysis. It is apparent that the DC was able to correctly determine the issue of relevance without the need for disclosure of the documents sought by the applicant. The applicant’s argument to the contrary is further undermined by the fact that he never asked the DC to require disclosure of the documents to him. There was no breach of the applicant’s right to disclosure, and there is no merit to the argument that the absence of disclosure handcuffed him in the presentation of his defence.

Jurisdiction to award costs

27Part of the disposition of the complaint by the DC was an award of costs against the applicant in the amount of $5,500. The applicant submits that the DC has no authority to award costs. When this application was argued, the costs issue was under reserve in this Court in another case. In the circumstances, the parties agreed that we should await the release of the decision in that case before disposing of this issue, and then invite such other submissions as the parties may wish to make.

DISPOSITION

28The application for judicial review is dismissed, except with respect to the power of the DC to award costs. We note that this Court has now determined that the DC does not have jurisdiction to award costs. (See Barrington v. Institute of Chartered Accountants; Power and Russo v. Institute of Chartered Accountants, [2010] O.J. No. 2036.) The parties should notify the court forthwith if there is any further submissions to be made before us on this issue.

29The parties were invited to make submissions with respect to the costs of the judicial review application. They agreed that the costs of this application should follow the event. Having had the advantage of the submissions of the parties as to quantum, we order costs to the respondent in the amount of $17,500 all in, payable forthwith.