Baxter v. Registrar (REBBA), 2011 ONSC 2497

CITATION: Baxter v. Registrar (REBBA), 2011 ONSC 2497

DIVISIONAL COURT FILE NO.: DC-00001818-000

DATE: 20110712

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Matlow, Kent and Aston JJ.

BETWEEN:

TIMOTHY BAXTER AND T. BAXTER REAL ESTATE LTD

Applicants (Respondents in Appeal)

• and -

REGISTRAR, REAL ESTATE AND BUSINESS BROKERS ACT, 2002

Respondent (Appellant)

C. Brandow, for the Applicants (Respondent in Appeal)

R. A. Maxwell, for the Respondent (Appellant)

HEARD: April 13, 2011 at London

ASTON AND KENT, J.J.

Introduction:

[1] The Registrar appeals the January 25, 2010 order of the Licence Appeal Tribunal. The Tribunal ordered the Registrar not to carry out his proposal to revoke the registration of Timothy Baxter as a real estate broker. The Tribunal did order that Mr. Baxter’s registration be subject to certain terms and conditions. It also approved the Registrar’s proposal to revoke the registration of T. Baxter Real Estate Ltd. as a real estate brokerage. There is no cross appeal by Timothy Baxter or T. Baxter Real Estate Ltd.

Background:

[2] The Registrar is responsible for regulating real estate brokers and brokerages under the Real Estate and Business Brokers Act, 2002. Section 10 of that Act details the circumstances under which an application for registration or renewal of registration may be refused. The relevant provisions of s.10 are as follows:

10(1) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the Registrar unless, ...

(ii) The past conduct of the applicant ... affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty.

[3] If the Registrar proposes to revoke or refuse registration on the basis of this section of the Act, an applicant has a right of appeal to the Tribunal under s.14 of the Act, which provides:

14(5) If a hearing is requested, the Tribunal shall hold the hearing and may by order direct the Registrar to carry out the Registrar’s proposal or substitute its opinion for that of the Registrar and the Tribunal may attach conditions to its order or to a registration.

[4] The Tribunal conducts a de novo hearing. The appellant agrees the Tribunal does not question whether the Registrar acted reasonably, but rather applies the test delineated in s.10 without deference to the Registrar’s opinion.

[5] The fact that there are no cross appeals in this case is significant. There is an unresolved question of law that we would otherwise have to address. If the Tribunal finds a person is “entitled” to be registered under s.10(1) of the Act, (on the basis that past conduct fails to establish reasonable grounds to believe that person will not carry on business in accordance with law and with integrity and honesty) does the Tribunal have any jurisdiction or authority to nevertheless impose conditions on the person’s license? Does “entitled to registration or renewal” mean “unconditionally entitled to registration or renewal”? There are two apparently irreconcilable and conflicting decisions of this court on that question. A panel of this court will be asked to resolve those conflicting decisions next Fall in a case called Nagy v. Registrar, Real Estate and Business Brokers Act. We canvassed this issue with counsel before hearing this appeal and proceeded on the understanding that we would not need to address the conflicting authorities because neither Mr. Baxter nor T. Baxter Real Estate Ltd. were challenging the Tribunal’s authority to attach conditions to Mr. Baxter’s registration.

[6] In this case, an investigation by the Real Estate Council of Ontario into potential mortgage fraud revealed that in 9 or l0 instances, following a similar pattern, properties were purchased by one Josh Alton, or an associate of his, at low prices and “flipped” at substantially higher prices in a very short period of time. Timothy Baxter represented all parties in the transactions, prepared the paper work and took all his instructions from Alton by telephone, fax or email. More specific factual findings will be addressed later in the course of these reasons.

Decision of the Tribunal:

[7] The Tribunal considered s.10 of the Act in specifically identifying the core issue of whether Baxter’s conduct afforded reasonable grounds for belief that he would not carry on business in accordance with law and with integrity and honesty. The Tribunal found that Baxter should have been suspicious and even could be said to have been “willfully blind” to the fraudulently criminal conduct of Alton and his associates. The Tribunal found that he listed properties at what he knew to be inflated prices and prepared agreements for purchase and sale that did not represent the true value of the properties and which could be used to misrepresent their value to potential mortgage lenders. On the other hand, the Tribunal found no evidence of falsified documents or false testimony and noted Baxter’s co-operation with the Real Estate Council of Ontario in its investigation.

[8] The Tribunal found that Baxter demonstrated “a serious lack of understanding and, arguably, willful indifference to his duties and obligations”. Other, more particular findings of misconduct are noted below. Although Baxter’s past and recent past conduct raised serious concerns with the Tribunal, it ultimately found that his past conduct, in its entirety, did “not provide sufficient grounds to conclude that Mr. Baxter will not carry on business with honesty and integrity and in accordance with the law”.

[9] However, the Tribunal also concluded, that because of Baxter’s misconduct, conditions needed to be placed on his registration and it directed that:

1. The Applicant Baxter shall register and attend the “Ethics and Business Practices” course, scheduled by the Ontario Real Estate Institute of Canada, within 6 months of the date of this Order. Baxter shall provide proof to the Registrar of successful completion of this course no later than August 16, 2010.

2. For a period of five (5) years from the date of this order Baxter shall have his activities in trading in real estate closely monitored by his Broker of Record. Baxter shall provide proof, satisfactory to the Registrar, that his Broker of Record is willing to comply with this condition.

3. For a period of five (5) years from the date of this Order Baxter will immediately notify the Registrar in writing of any complaints made against him by members of the public or other registrants under the Act, and he shall provide details of all such complaints and any documentation that the Registrar may require.

4. For a period of five (5) years from the date of this Order Baxter shall not apply for registration as a Broker of Record nor shall he be permitted to be designated as an alternate broker to exercise and perform the powers and duties of any broker of record in the absence of the broker of record of a brokerage.

5. For a period of five (5) years from the date of this Order Baxter shall not be a sole proprietor, partner, an officer or director or manager of a real estate brokerage.

Standard of Review:

[10] On questions of general law that are not an aspect of the core functions of the Tribunal, the standard of review is correctness. This would apply to the appellant’s contention that the Tribunal erred in applying an incorrect standard of proof. Questions of mixed fact and law, discretion, policy and the interpretation of sections 10, 13 and 14 of the Real Estate and Business Brokers Act engage a standard of reasonableness. Those issues engage the expertise of the Tribunal and its public protection responsibilities. This standard applies to all the other grounds of appeal with one exception. The appellant submits the Tribunal’s reasons are so inadequate that no curial deference should be afforded to the Tribunal’s ultimate disposition.

Standard of Proof:

[11] The appellant acknowledges the onus is on the Registrar to establish on a balance of probabilities that the past conduct of Baxter provides reasonable grounds for belief that he will not carry on business in accordance with law and with integrity and honesty. He is entitled to be registered unless the Registrar satisfies that burden of proof.

[12] However, the Appellant submits that by using the words “benefit of any doubt” in the second paragraph on page 13 and the first paragraph of page 14 of its decision the Tribunal held the appellant Registrar to a higher, quasi criminal standard of proof. We disagree. In context, those words appear to have been used only in reference to a credibility consideration rather than a standard of proof consideration. The “benefit of the doubt” references are linked to Mr. Baxter’s evidence that he did not actually know he was assisting or participating in a fraudulent activity. The Tribunal did not specifically articulate any standard of proof. In such an instance it is to be presumed that the correct standard was applied. See: F.H. v. McDougall (2008) S.C.C. 53, [2008] [3] S.C.R. 41 at para. 54. The references to “benefit of the doubt”, in the context of the reasons as a whole, do not displace that presumption. We are not persuaded the Tribunal incorrectly elevated the balance of probabilities test to a higher standard.

Baxter’s Knowledge, Wilfull Blindness and Reckless Disregard:

[13] Counsel for the Appellant contends that, given the findings and observations as to Baxter’s credibility and knowledge, it was unreasonable for the Tribunal to fail to find that Baxter knowingly participated in a mortgage fraud scheme. The appellant submits this finding is critical to any prediction or conclusion about Baxter’s future conduct, the key focus of s.10, and also to whether license revocation is called for. The appellant concedes that knowingly participating in fraudulent real estate transactions does not necessarily or automatically dictate license revocation, but submits that is almost always the result.

[14] The Registrar’s proposal to revoke Baxter’s registration did not allege any actual knowledge on his part. Baxter’s evidence was that it was only in hindsight that he came to appreciate the nature of Alton’s fraudulent activity. As a matter of law, willful blindness or recklessness can constitute constructive knowledge or imputed knowledge. In our view it was unnecessary for the Tribunal label or categorize Baxter’s state of mind. The germane issue was how to assess and weigh his culpability or misconduct in drawing any conclusion about how he would conduct himself in the future.

[15] The Tribunal took some pains in coming to its findings on what Baxter knew or ought to have known. It found (1) “it is difficult to understand how an experienced real estate agent would not be suspicious…” (2) “He ought to have known that this was unethical and should have been able to foresee the consequences of such a transaction.” (3) After being contacted by the police with respect to a fraud allegation against his client “he should have had no doubt...that continuing to deal with him was a risk. Mr.Baxter chose to take the risk and ignore these warnings…If he was blind the Tribunal is of the opinion it was willful blindness, motivated by the desire to continue to be paid commissions by Mr. A. simply to do paperwork.” (4) “Clearly Mr. Baxter would have known that the listing prices were a gross exaggeration.” (5) “He had early warnings…that should have raised his suspicions but he chose to ignore them all”, and (6) “Mr. Baxter’s failure to perform the duties expected of a registrant, in the series of transactions focused on, demonstrates a serious lack of understanding of, and in some instances arguably willful indifference to, the duties and obligations of a registrant.”

[16] In our view these findings adequately address the question of Mr. Baxter’s state of mind at the relevant time. In challenging the adequacy of the Tribunal’s reasons concerning the state of mind or mental intention of Mr. Baxter the appellant is effectively asking this court to substitute its analysis of the evidence on this point for that of the Tribunal. That is not our role. We are not persuaded the Tribunal misapprehended the evidence in this regard or ignored relevant evidence. It went as far as it needed to go in its conclusions.

Mitigating Circumstances:

[17] Counsel for the appellant argues that it was improper for the Tribunal to have regard to mitigating circumstances in its s.10 analysis. While it is correct to say that extraneous circumstances should not be considered in determining whether a registration should be revoked, the mitigating circumstances considered by the Tribunal in this case were not “extraneous”. They are part of the “past conduct” that the Tribunal is required to consider under s.10 of the Act. Past misconduct is not the only indicator of future conduct. It must be weighed against prior conduct that is positive or exemplary. How else can the Tribunal fairly come to a “reasonable belief” about future conduct?

[18] Mr. Baxter was licensed or registered as a real estate agent or broker for 31 years without any blemish on his record. He properly documented every transaction and properly deposited and handled all monies paid to him in trust. He was completely co-operative during the investigations of the police and the complaints officer. He voluntarily disassociated himself from Mr. Alton before knowing of the Registrar’s decision not to renew his license. On the nine transactions in issue his paid commissions total only $13,305. The Tribunal made no adverse finding on Mr. Baxter’s honesty or integrity. He did not falsify any document or provide false information to investigators and he admitted that he should have been more vigilant.

Adequacy of Reasons and Conclusion:

[19] Counsel for the appellant submitted that the reasons of the Tribunal were inadequate for meaningful appellate review. We disagree. The Tribunal gave adequate reasons and arrived at a decision that was within a reasonable range of outcomes. Those reasons adequately explain how it arrived at its conclusions and do stand up to a probing analysis. Both counsel and this court were able to review the decision in a meaningful manner.

[20] There is an apparent evidentiary and factual basis for the conclusions reached by the Tribunal. No inappropriate matters were considered by the Tribunal.

[21] The Tribunal examined the whole of Baxter’s past conduct. It included his recent and serious misconduct but also positive aspects of his history in the business. Such an examination is in accordance with the statutory requirement of s.10 and recent jurisprudence. See: Re Grant [2008] O.L.A.T.D. No. 462.

[22] The Tribunal was aware of its role in protecting the public, but found the conditions it imposed would adequately address those considerations. A regulatory Tribunal is entitled to decide not to be too hard on an individual. See: Arnold et al v. Registrar [1977] O.J. No. 2293 (Ont. Div. Ct.). In this case the Tribunal concluded Mr. Baxter ought to be afforded a second chance. That discretionary decision is to be reviewed with a degree of deference by the court.

[23] The reasons of the Tribunal indicate an awareness of the correct law, as set out at page 9 of its decision. It is clear that the Tribunal was applying that law at page 14 of its decision and understood the finding that s.10 required. Section 13(2) and 14 provide authority for the imposition of conditions and the conditions imposed are appropriate and reasonable.

[24] In our view this appeal must be dismissed.

KENT J.

ASTON J.

MATLOW, J.: (Dissenting)

[25] I respectfully disagree with the judgment of the majority. I would allow the appeal and set aside that part of the Tribunal’s decision relating to Timothy Baxter (“Baxter”) and I would remit Baxter’s request for a hearing before the Tribunal to the Tribunal, differently constituted, for a new hearing. As well, I would invite written submissions with respect to costs. What follows are my reasons.

[26] The Registrar appeals from a decision of the Licence Appeal Tribunal (“Tribunal”) made on January 25, 2010. By the decision in appeal, the Tribunal ordered the Registrar to carry out his proposal to revoke the registration of the T. Baxter Real Estate Ltd. (“Baxter RE”).

[27] As well, the Tribunal ordered the Registrar not to carry out his proposal to revoke Baxter’s registration and, instead, imposed conditions on him requiring him to complete a course in ethics and business practices, to have his activities in trading in real estate closely monitored by his broker of record for a period of five years, to notify the Registrar of any complaints made against him by members of the public or other registrants and to provide details and documentation that the Registrar may require for a period of five years, not to apply for registration as a broker of record or to be designated as an alternative broker for a period of five years and not to be a sole proprietor, partner, officer, director or manager of a real estate brokerage for a period of five years.

[28] The appeal of the Registrar is only with respect to that part of the Tribunal’s decision relating to Baxter that would permit him to continue to be registered to trade in real estate.

[29] The Director’s proposal, made pursuant to the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C., (“the Act”), to revoke the registration of Baxter as a broker was made pursuant to sections 13 (1) and 10 (1) of the Act which read, in part, as follows;

s. 13 (1) Subject to section 14, the registrar may refuse to register an applicant or may suspend or revoke a registration or refuse to renew a registration if, in his or her opinion, the applicant or registrant is not entitled to registration under section 10.

s. 10 (1) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,

(a) the applicant is not a corporation and,

(ii) the past conduct of the applicant or an interested person in respect of the applicant affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and, with integrity and honesty…

[30] Section 14 (5) of the Act, which provides for a hearing before the Tribunal at the request of the registrant affected reads as follows;

14 (5) If a hearing is requested, the Tribunal shall hold the hearing and may by order direct the registrar to carry out the registrar’s proposal or substitute its opinion for that of the registrar and the Tribunal may attach conditions to its order or to a registration.

[31] The Tribunal described the grounds for the Registrar’s proposal in its Reasons For Decision And Order (“Reasons”) as follows;

The grounds for the Proposal are, in summation;

1. That past conduct of Mr. Baxter affords reasonable grounds for belief that he will not carry on business in accordance with law and with integrity and honesty.

2. That the past conduct of Mr. Baxter, the sole officer and director of Baxter Realty affords reasonable ground for the belief that Baxter Realty will not carry on business in accordance with the law and with integrity and honesty.

It is alleged that Mr. Baxter, knowingly and with full participation, acted in the purchase of several properties on behalf of several business associates, and then knowingly assisted in the re-listing of these properties at greatly inflated prices. As a result, at least two consumers complained that they were harmed and various mortgage lenders subsequently suffered losses.

[32] The underlying history leading to the Registrar’s proposal is as follows. In April 2004, Baxter was contacted by an individual, Josh Alton, who presented himself as an investor who wished to buy and resell properties in the Chatham area serviced by Baxter but without the usual services provided by a broker. Alton wished to find suitable properties on his own and have the right to determine the listing prices without any analysis of market values from Baxter.

[33] From April, 2004 to November, 2007, approximately fifty transactions of purchase and sale in which Alton and Baxter were involved were closed. Of those, the Registrar raised concerns about twenty-two transactions. Of those, approximately nine transactions involved properties that were bought by Alton or his associates at prices considerably lower than the prices at which they were subsequently sold by Alton to non-arm’s length purchasers. Baxter acted as broker for both the vendors and the purchasers in these transactions. The artificially inflated values attributed to those properties were then used to obtain mortgage financing from financial institutions in amounts that would not have otherwise been advanced.

[34] Baxter admitted in his evidence to the Tribunal that he acted entirely on instructions given to him by Alton and did not meet or show any of these properties to the persons who bought them. Alton told Baxter who the purchaser was, the address of the property, the amount of the deposit, the date of the acceptance of the offer, the closing date and that the property was to be relisted at a much higher price. Nevertheless, his arrangement with Alton provided that Baxter would be paid a commission of 3% of the sale price.

[35] The Tribunal, in its review of the “evidence and facts”, stated, in part, as follows;

The following is a summary of the relevant evidence:

Mr. Baxter has been in the real estate business for 31 years. Baxter Realty has been registered as a Brokerage since May of 1995 and has been operated by Mr. Baxter as a sole proprietorship. In the spring of 2004, Mr. Baxter was contacted by email by a Mr. ‘A’ with respect to a property listed by Baxter Realty. Mr. A indicated he has been keeping an eye on this property over the internet and wanted to make an offer on it. Mr. Baxter took instructions from Mr. A. via email with respect to the offer to be presented to his vendor client, a financial institution. Mr. Baxter prepared the necessary documents and faxed them to Mr. A to be signed. Mr. A declined to inspect the property. The offer was accepted with a sale price of approximately $68,100. Mr. Baxter did not meet Mr. A until after the offer had been accepted.

After Mr. A purchased this property pursuant to the offer Mr. Baxter prepared, the title for this property was registered to another individual, ‘T’, on May 32, 2004, for the consideration of $68,100. On the instructions of Mr. A., Baxter Realty relisted this property for sale on July 6, 2004 for $123,900. Mr. Baxter was told that the seller at that time was an individual ‘P’. According to the title registry, P did not actually get title until July 8, 2004, (no consideration was indicated for that transfer). Mr. Baxter then received instructions for an agreement of purchase and sale, by email, from Mr. A. The agreement was to be between P, as seller and a Mr. ‘C’ (an associate of Mr. A’s) as buyer, for $120,500. Mr. A provided the instructions although he was not a party to the agreement. Mr. Baxter did not inspect the property before he listed it. He was not aware of what work, if any, had been done on the property. He did not meet with the purchaser or show the property. He simply prepared the documentation and sent it to Mr. A to be signed by the parties. Mr. Baxter knew that the vendor was an associate of Mr. A’s but did not inquire as to the connection, if any, with the purchaser. The transaction closed and Mr. Baxter did not, apparently, suspect that anything was amiss. Something was amiss and ultimately in September of 2007, title of this property was transferred to Canada Mortgage and Housing Corporation (CMHC) for $2.

This property was the first of a number of properties Mr. Baxter and Baxter Realty assisted Mr. A acquire and/or sell. Inspector Swain of RECO, in reviewing the trade registry for Baxter Realty, found there were at least nine properties which Mr. Baxter assisted Mr. A in buying and re-listing for sale between April of 2004 and November of 2007. According to documents found in the files of Baxter Realty and the evidence provided by Mr. Baxter, the transactions followed a similar pattern. Mr. Baxter received instructions by email from Mr. A with respect to properties he wanted to make an offer on. Usually Mr. Baxter did not view these properties with Mr. A. After the property was acquired, Mr. A provided instructions by email, first regarding the re-listing price, and then regarding the purchaser and the sale price. In all cases the properties were to be re-listed for amounts substantially more than they were purchased for, more than double in a number of cases, within a very short period of time. Baxter Realty represented all parties in these transactions but no representative met with them, provided any market analysis nor inspected the properties. Mr. Baxter was also instructed to not put signage on the properties or show them to any buyer found by Mr. A – which all the buyers appear to have been. Mr. Baxter merely prepared the paper work and provided in to Mr. A for the parties to sign.

In a letter written to his counsel, and admitted as Exhibit 12, Mr. Baxter provides a written explanation and/or response to all the facts relied upon by the Registrar and set out in the letter of Proposal. He suggests, by a number of comments, that he should not be viewed as solely responsible for the harm suffered by any of the parties. All the resales were conditional upon financing and the appraisers should have done their job. He disclosed in each case that he had not physically shown the property to the buyer. He also believed that the mortgage on one complainant’s property was CMHC insured and that he had believed that CMHC always checked the previous selling price.

Mr. Baxter continued to do work for Mr. A, of one form or another, for over three years notwithstanding there were events along the way that should have raised concern.

On January 18, 2006, Mr. Baxter was contacted by the police and again in April of 2006, to enquire into his involvement with the transaction with consumer J. He was advised by the police that they were investigating potential mortgage fraud. Notwithstanding these two interactions with the police Mr. Baxter continued to work with Mr. A and has maintained that he did not suspect any fraud was taking place.

[36] The Registrar raises numerous issues in this appeal some of which which are the following;

1. The Tribunal was required to apply the standard of proof of “on a balance of probabilities” but failed to do so;

2. The Tribunal was required to make threshold findings regarding the application of section 10 of the Act and then, after determination, to move to the issue of remedies. The Tribunal, however, made no attempt to actually find that Mr. Baxter had attempted to breach or actually breached section 10. In particular, it failed to make a finding as to whether he engaged as a knowing participant in the real estate mortgage fraud (including whether he was wilfully blind or reckless) or whether he was negligent;

3. Alternatively, the Tribunal was required to make findings of fact regarding Baxter’s past conduct that were reasonably supported by the evidence. The Tribunal, however, made palpable and overriding errors of fact by holding (if that is the holding) that Mr. Baxter did not knowingly participate in fraudulent transactions (including that he was wilfully blind or reckless).

4. The Tribunal was required to provide reasons for its decision that allow for meaningful appellate review. The Tribunal, however, failed to give comprehensible reasons for its decision and thereby deprived this court of the ability to determine whether its decision is vitiated by error.

[37] It is difficult to interpret and reconcile some of the apparently conflicting provisions of sections 10 to 14, inclusive, of the Act. The following are two examples.

[38] In addressing the connection between “past conduct” and “affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty”, s. 10 (1) (a) (ii) requires that the determination be based on evidence of past conduct without any requirement that there be any actual belief by anyone. Although I agree with the view of the majority (at par. 16) that “Past misconduct is not the only indicator of future conduct”, in this context it is the sole criterion stipulated by the Act for making this threshold decision. It does not require the Registrar to make any actual prediction of the applicant’s conduct at this initial part of the process. At this point the only issue requiring determination is “affords reasonable grounds for belief”.

[39] Section 13 (1) then provides that the Registrar may refuse to register or suspend or revoke a registration if, in his or her opinion, “the applicant or registrant is not entitled to registration under section 10”. This would appear to require the Registrar to consider the “affords reasonable grounds” provision in s. 10 (1) (a) (ii) and formulate his or her opinion, on the same basis as set out above, whether or not the applicant or registrant “is entitled”. This, too, does not require any actual belief by the Registrar.

[40] As to whether an applicant or registrant in respect of whom past conduct “affords reasonable grounds for belief” is nevertheless eligible for registration or renewal, s. 10 (1) (a) (ii) provides only that there is no “entitlement” to either. The section does not address eligibility.

[41] However, s. 13 (1) provides that the Registrar, in cases where there is no “entitlement” because “affords reasonable grounds for belief” is proven, may refuse registration and may suspend or revoke registration with or without conditions. I would interpret the insertion of “may” in s. 13 (1) to mean that any action by the Registrar under that provision is permissive rather than mandatory. In other words, it means that the Registrar may, but is not required to take, any of the draconian measures set out in s. 13 (1) but only if in his or her opinion, there is no “entitlement” under s. 10. It in this second part of the process, when the Registrar is to consider whether to impose one or more of the stipulated sanctions, that he or she may properly consider indicators of future conduct other than just past conduct.

[42] To complicate matters even further, if the Registrar “may” refuse to register an applicant or renew a registration, it may be that he or she may also decide not to refuse to do so and it may be that he or she may still register an applicant or renew a registrant who is not “entitled” under s. 10. This means that an applicant or registrant who is not “entitled” is, nevertheless, still eligible to receive the Registrar’s blessings. In this part of the process as well, the Registrar may properly consider indicators of future conduct other than only past conduct.

[43] This interpretation of the legislation is supported by s. 13 (2) of the Act which reads as follows:

s.13 (2) Subject to section 14, the registrar may approve the registration or renewal of a registration on such conditions as he or she considers appropriate, and at any time apply to a registration such conditions as he or she considers appropriate.

[44] I now turn to the issue of whether or not this was a proper case in which the Tribunal was entitled to make the decision that it made. In my view it was not.

[45] As stated above, the first question that the Tribunal was required to consider was whether Baxter’s past conduct “affords reasonable grounds for belief” that he would “not carry on business in accordance with law and with integrity and honesty”. The answer that the Tribunal gave was as follows (at pages 13-14);

As stated above, the Tribunal finds that Mr. Baxter’s failure to perform the duties expected of a registrant, the series of transactions focused on, demonstrates a serious lack of understanding of, and in some instances arguably wilful indifference to the duties and obligations of a registrant. In coming to this conclusion the Tribunal has given Mr. Baxter the benefit of any doubt. Although his conduct raises serious concern in the Tribunal’s opinion it is not sufficient grounds to conclude that Mr. Baxter will not carry on business with honesty and integrity and in accordance with the law.

[46] It then went on to say;

However, given his conduct in the recent events it is clear that he requires further education and guidance regarding the roles and responsibilities of a registrant and the changing issues facing the real estate industry. Registration as a broker subject to the conditions below, including supervision and educational requirements would therefore be appropriate in the Tribunal’s opinion.

[47] It is clear from the answer that the Tribunal gave that it failed to understand the various requirements of the Act. The question it purported to answer was one significantly different from the question it was required to answer. In particular, it was not asked whether Baxter’s conduct was “sufficient grounds to conclude that Mr. Baxter will not carry on business with honesty and integrity and in accordance with the law. The Tribunal was not required to “conclude” anything about how Baxter would conduct business in the future. Rather, the only threshold question that required an answer from the Tribunal was about “affords reasonable belief”.

[48] Moreover, the Tribunal’s answer does not show what its answer would have been if it had answered the proper question. Considered in the context of the balance of the Tribunal’s Reasons reciting the wrongdoings by Baxter, the “serious concerns” that the Tribunal referred to and the conditions imposed on him, the words used by the Tribunal may reasonably be seen as an indication that the Tribunal did conclude that the requirement of “affords reasonable grounds for belief” had been proven. However, that mere possibility is not sufficient. The Tribunal failed to carry out its function as it was required to do and its answer is, regrettably, of no value in the determination of this case. This abdication of jurisdiction, albeit unintentional, is an error of law that has destroyed the entire foundation on which the balance of the hearing before the Tribunal and the Tribunal’s Reasons rested.

[49] At pages 13-14 of its Reasons, the Tribunal stated as follows:

Having considered all the evidence the Tribunal finds Mr. Baxter’s conduct has fallen well short of the standard expected of a broker. Even if he is given every benefit of the doubt and his claim of ignorance is accepted, his demonstrated level of understanding on an agent’s duties and responsibilities to the parties of a trade in real estate has caused the Tribunal to have serious doubt as to whether Baxter Realty, under Mr. Baxter’s direction, would carry on business with honesty and integrity in accordance with the law. (emphasis added)

As stated above, the Tribunal finds that Mr. Baxter’s failure to perform the duties expected of a registrant, in the series of transactions focused on, demonstrates a serious lack of understanding of, and in some instances arguably willful indifference to, the duties and obligations of a registrant. In coming to this conclusion the Tribunal has given Mr. Baxter the benefit of any doubt. Although his conduct raises serious concern in the Tribunal’s opinion it is not sufficient grounds to conclude that Mr. Baxter will not carry on business with honesty and integrity and in accordance with the law. (emphasis added)

[50] In my view, the highlighted words in these excerpts, taken in context, reveal that the Tribunal, in considering Baxter’s past conduct, applied one or more standards of proof other than that of on a balance of probabilities. Giving Baxter “every benefit of the doubt” or “the benefit of any doubt” and then stating that the evidence was “not sufficient grounds to conclude” was totally incompatible and inconsistent with the application of the correct standard of proof on a balance of probabilities

[51] These errors of law are also fatal to the decision of the Tribunal.

At pages 10-14 of its Reasons, the Tribunal made numerous findings of wrongdoing and what I prefer to call “near-findings” of wrongdoing on Baxter’s part. Some of them are described, in part, by the Tribunal as follows; (I have tried to be faithful to the text and have maintained even obvious slips)

1. Mr. Baxter has maintained that he did not know that he was doing anything wrong regarding his dealings with Mr. A and that he did not suspect at any time that he was helping anyone perpetrate any fraud or unethical dealings. Based on the facts, it is difficult to understand how an experienced broker would not be suspicious of a client who, in one instance in particular, insists of listing a property for price known to be double the market value, provides the name of the buyer who the agent knows is a family friend, indicates an acceptance day for the next day, and closing date the day after, then suggests the property be listed and resold again the following week at a higher price. These were the instructions contained in the email from Mr. A to Mr. Baxter on December 8, 2004. Normal real estate trades do not proceed this way and Mr. Baxter should have known it. One would expect a trained broker to ask a questions – why is this being done? The reason should have been obvious – to create an inflated value. The suggestion to Mr. Baxter, in the December 8 email, that that the process be repeated in a week’s time is evidence, in the Tribunal’s opinion, that Mr. Baxter was being included in a scheme to carry out bogus transactions at artificially inflated values. He ought to have known that this was unethical and should have been able to foresee the consequences of such a transaction: the impact on market values and the potential for mortgage fraud.

2. Finally, being contacted by the police, twice, with respect to a fraud investigation involving his client should have left no doubt in the mind of an experiences broker that the business of his client should be questioned and that continuing to do deal with him was a risk. Mr. Baxter apparently chose to take this risk and ignore these warnings. Baxter Realty continued to do work for Mr. A for at least a further year with full knowledge that Mr. A’s conduct was in question. Mr. Baxter has stated that he “was blind until the evidence was presented to me in the format it has been”. If he was blind, the Tribunal is of the opinion it was wilful blindness, motivated to be paid commissions by Mr. A to simply do paperwork.

3. The Tribunal finds that Mr. Baxter knew when he listed properties for Mr. A that they were at grossly inflated prices. He had acted for Mr. A on the purchase of the properties. Assuming the market value of a property is the price a buyer is willing to and the seller is willing to accept, the prices Mr. A purchased the properties would represent the market value at that time. Mr. Baxter relisted some properties for Mr. A the same day were acquired, or immediately thereafter, with no knowledge of work being done, for twice the purchased price or more. Clearly Mr. Baxter would have known that the listing pricess were a gross exaggeration. The fact that the deals kept closing should not be viewed as affirmation, as Mr. Baxter did, that everything was fine. The fact that his client seemed to have an endless supply of buyers who were willing to buy overpriced properties without question, should have sent up a warning flag.

4. If Mr. Baxter truly believed that every buyer involved was a legitimate, unrelated individual, the fact that he did not think he was doing anything wrong in assisting his client to sell properties at grossly inflated prices to unrepresented individuals shows a total lack of understanding of the role of registrants in the real estate industry and what constitutes fair and honest conduct. Real estate agents play an important role in ensuring that trades in real estate are carried out fairly and lawfully, that there is a fair exchange of correct information on which the parties base their decisions. All that can truly be said about Mr. Baxter’s role in the transactions reviewed is that he filled out paperwork that gave legitimacy to illegitimate or unethical transactions. They were illegitimate because they were either sales to known parties at inflated prices or unethical as they were sales to unrepresented, uninformed consumers at inflated prices. His responsibility for this is not lessened because some of the parties harmed could have avoided their loss had they been more diligent in discovering the true values of the properties on their own.

5. In summary, the Tribunal finds that Mr. Baxter knew that all of the properties (reviewed in these proceedings) that he helped Mr. A sell were sold at inflated prices. He knew that sometimes they were being transferred to related and should have known that the MLS listings and agreements of purchase and sale he was producing did not accurately represent the value of the properties involved and they could be used to misrepresent the value of the properties to mortgage lenders. The Tribunal also finds that in some instances Mr. Baxter did not know whether the purchasers were related. Yet he did not alter his conduct and provide them with services notwithstanding Baxter Realty’s representations to do so. He had early warnings by his own client’s conduct and by other parties that should have raised his suspicions but he chose to ignore them all. In view of this, should he and Baxter Realty be allowed to continue as registrants?

6. Having considered all of the evidence the Tribunal finds that that Mr. Baxter’s conduct has fallen well short of the standard expected of a broker. Even if he is given every benefit of the doubt and his claim of ignorance is accepted, his demonstrated level of understanding of an agent’s duties and responsibilities to the parties of a trade in real estate has caused the Tribunal to have serious doubt as to whether Baxter Realty, under Mr. Baxter’s direction, would carry on business with honesty and integrity in accordance with the law.

7. It was suggested by Counsel for the Applicants that consumers could be adequately protected if the operations of the brokerage itself were to be supervised by another responsible experienced registrant. The Tribunal does not agree. The brokerage is the agent and a separate legal entity, responsible for the conduct of its brokers and salespersons, supervision does not change this. There must be clarity as to who consumers can hold accountable and there must be certainty that the brokerage is being directed by a knowledgeable, competent, diligent, honest individual. The Tribunal concludes that Mr. Baxter’s conduct has demonstrated, if not a lack of honesty and integrity, then such a lack of understanding, or indifference, as to how Baxter Realty, as an agent should conduct itself so as to provide reasonable grounds for the belief that Baxter Realty will not carry on business with honesty and integrity and in accordance with law. Therefore its licence should be revoked at this time.

8. With respect to Mr. Baxter’s registration, it was argued by Counsel for the Registrar that the facts of the case are similar to those in Re Khetani [2006] O.L.T.D. No. 473, in which the registrant’s licence was revoked. In that case the Tribunal found that the respondent “knew she was involving herself in a series of questionable transactions, even if she might not have understood the full extent of the fraud, and by not performing the essential services that a realtor provides she played a role in the fraudulent transactions”. Where the facts differ from the present case is that the registrant Khetani bore false witness to signatures and her testimony was not found to be credible. The Tribunal found this to be evidence of her honesty and integrity. Notwithstanding that Mr. Baxter has significantly failed to properly carry out his duties as a registrant over a series of transactions, there is no evidence, as in the Khetani case, of falsified documents or false testimony.

9. As stated above, the Tribunal finds that Mr. Baxter’s failure to perform the duties of a registrant, in the series of transaction focused on, demonstrates a serious lack of understanding of, and in some instances arguably wilful indifference to, the duties and obligations of a registrant. In coming to this conclusion the Tribunal has given Mr. Baxter the benefit of any doubt. Although his conduct raises serious concern, in the Tribunal’s opinion it is not sufficient grounds to conclude that Mr. Baxter will not carry on business with honesty and integrity and in accordance with law. Mr. Baxter has operated in the industry for many years. However, given his conduct in the recent events it is clear that he requires further education and guidance regarding the roles and responsibilities of a registrant and the changing issues facing the real estate industry. Registration as a broker subject to the conditions below, including supervision and educational requirements would therefore be appropriate in the Tribunal’s opinion.

[52] Based on what the Tribunal stated, it can reasonably be inferred that the Tribunal made the following findings regarding Baxter’s past conduct;

1. Even though Baxter testified that he did not know that he was doing anything wrong in connection with his dealings with Alton and did not suspect that he was helping anyone perpetrate any fraud or carry out any unethical transactions, it is hard to understand, in light of his years of experience, how he would not have been suspicious of what Alton was doing.

2. Normal real estate transactions are not carried out as Alton’s were and Baxter should have known that.

3. A trained broker should have known that Alton’s objective was to create artificially inflated values in the properties he traded.

4. Baxter was included in this kind of scheme and should have known that it was unethical.

5. Baxter should have been able to foresee the consequences of such transactions, the impact on market values and the potential for mortgage fraud.

6. After being contacted twice by the police in the course of their investigation, Baxter, as an experienced broker, ought to have had no doubt that Alton’s business should be questioned and that it was risky to continue to deal with him. Baxter decided to take the risk and ignore these warnings and he continued working for Alton for at least a further year with full knowledge that Alton’s conduct was in question.

7. If Baxter was blind about the true nature of his dealings with Alton, his blindness was wilful, motivated by the desire to be paid commissions by Alton only for doing paperwork.

8. Baxter clearly would have known that the relisting prices of the properties were a gross exaggeration.

9. If Baxter truly believed that every buyer of the properties was a legitimate unrelated buyer and that he was not doing anything wrong revealed a total lack of understanding of the role of registrants.

10. Baxter knew that all of the properties that he helped Alton sell were sold at inflated prices.

11. Baxter knew that sometimes the properties were being transferred to related parties and he should have known that the listings and agreements of purchase and sale that he was producing did not accurately reflect the real value of the properties and could be used to misrepresent their value to mortgage lenders.

12. Baxter had early warnings from Alton’s conduct and that of others that should have raised his suspicions but he chose to ignore them.

13. Baxter’s conduct fell well short of the standard expected of a broker.

14. Baxter’s conduct, even if he is given “every benefit of the doubt” and his claim of ignorance is accepted, has caused the Tribunal to have serious doubt as to whether Baxter RE, under Baxter’s direction, would carry on business with honesty and integrity in accordance with the law.

15. Baxter’s conduct demonstrates a serious lack of understanding of, “and in some instances arguably wilful indifference to, the duties and obligations of a registrant”.

[53] If the Tribunal had correctly carried out the s. 10 analysis that it was required to perform and had asked itself the proper threshold question, it is my view that the only reasonable answer would have been that the requirement of “affords reasonable grounds for belief” had been proven. Having regard to the overwhelming evidence in this case, most of which was uncontested, any other answer would have been unreasonable and would have constituted palpable and overriding error. Even based on the Tribunal’s flawed analysis and Reasons, it would also have been the only reasonable answer.

[54] In cases where “affords reasonable ground for belief” is established, it would be only in rare and unusual circumstances that a disposition other than refusal to grant registration, refusal to grant renewal or, as in a case such as this, revoke registration, could be reasonable. However, there is no rational explanation in the Tribunal’s Reasons for why this case could fall into that category. One might even understandably be forgiven for asking why the Act would ever permit an applicant or registrant to carry on business in the real estate industry under any conditions after such a finding is made.

[55] I conclude by acknowledging that decisions of tribunals made within the scope of their expertise, including decisions interpreting their “home” statutes, should be given deference by an appeal court on an appeal. This means that such decisions should be considered with great care and with appropriate recognition that they were made by a tribunal that is expert in the field and should not lightly be set aside. I have carried out my duties in relation to deference and have come to the conclusion that the errors made by the Tribunal are so readily apparent to me despite my lesser expertise in the same field and that this court, in such circumstances, is not only entitled to interfere with the decisions made but is required to do so.

MATLOW, J.

Released; July 12, 2011.

CITATION: Baxter v. Registrar (REBBA), 2011 ONSC 2497

DIVISIONAL COURT FILE NO.: DC-00001818-000

DATE: 20110712

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Matlow, Kent and Aston JJ.

BETWEEN:

TIMOTHY BAXTER AND T. BAXTER REAL ESTATE LTD

Applicants (Respondents in Appeal)

• and -

REGISTRAR, REAL ESTATE AND BUSINESS BROKERS ACT, 2002

Respondent (Appellant)

REASONS FOR JUDGMENT

ASTON AND KENT JJ.

MATLOW J. (DISSENTING)

Released: July 12, 2011