Giuseppe Strazzeri v. Superintendent of Financial Services, 2013 ONSC 255

1The appellant (“Strazzeri”) appeals from a decision of the Financial Services Tribunal (“the Tribunal”) dated March 29, 2012, pursuant to s. 21(5) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006 c. 29 (“the Act”).

2The Tribunal ordered the revocation of Mr. Strazzeri’s licence as a mortgage agent, having determined that his “past conduct afforded reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.”

3We agree with the submissions of both parties that the standard of review for this appeal is reasonableness (see Alves v. Superintendent of Financial Services (2009), 2009 36993 (ON SCDC), 251 O.A.C. 276 (Div. Ct.). Further, we are of the view that the decision of the Tribunal meets that standard.

4In determining whether an individual is not suitable to be licensed as a mortgage broker or agent, the Superintendent, and thereafter the Tribunal, is required by s. 14(1) and 16(4) of the Act to have regard to whether an individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgages in accordance with the law and with integrity and honesty. Further, it is relevant to consider whether the individual has made a false statement or has provided false information to the Superintendent with respect to the application for licence.

5Both parties rely upon the well known Tribunal’s decision in Henderson v. Superintendant of Financial Services (Decision No. M0319-2008-1) as establishing the appropriate factors to take into account in cases of this nature. The Tribunal in this case cited Henderson and went through each of the relevant factors applying those factors to the facts of this case. On each issue the Tribunal considered proper evidence that was before it and reached reasonable and supportable conclusions as to the role of that factor on the ultimate question it had to decide.

6One of the factors enumerated in Henderson is the advertent or inadvertent nature of the conduct. In dealing with this point, the Tribunal held at para. 77(c) of its Reasons as follows:

“The advertent or inadvertent nature of the conduct: But for the Applicant’s conflict of interest, his recklessness in investing the funds entrusted to him by A.G., J.D.W. and A.D.W. could be reviewed as a serious but unintentional mistake in judgment. However, the fact that he personally benefited from the investments made with David Braganza, and the fact that he did not disclose this matter, suggest that his conduct was more than reckless vis-a-vis his clients: it was intentional and dishonest. At best he was wilfully blind to the fraudulent nature of the investments made with the funds entrusted to him; at worst he participated with full knowledge.”

7The applicant points to the concluding sentence of this paragraph as being an unreasonable finding by the Tribunal. Counsel for the applicant argues that given that Mr. Strazzeri invested funds of his own and of his family members with David Braganza, it is not reasonable to infer that he knew about, or was wilfully blind to, the fraud.

8We accept that actual knowledge of fraud may be unlikely. However, wilful blindness as to a fraudulent underpinning is not necessarily inconsistent with personal investments, given the return that was being obtained on the investment initially and the fees being paid directly to Mr. Strazzeri. However, it is clear that the Tribunal’s point in this paragraph, is that Mr. Strazzeri’s conduct was not merely inadvertent. Rather, he was in a conflict of interest which he did not disclose and he was reckless with the funds entrusted to him. Even if the last sentence of this paragraph is struck, we do not see this as having any impact on the result reached by the Tribunal.

9We note as well, the Tribunal’s concern that Mr. Strazzeri had shown ongoing contempt for the licensing process by continuing to hold himself out as a mortgage broker, despite the fact that he was not licensed as such and his failure to recognize the seriousness of his past conduct.

10Having weighed all of these relevant factors and appropriately reminded itself of its responsibility to protect the public as well as the impact on the applicant, the Tribunal concluded at para. 78 that:

“There is clear, convincing and cogent evidence that the Applicant’s past conduct affords reasonable grounds for a belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.”

11That is an outcome that is within the range of possible reasonable outcomes on the evidence before the Tribunal. There is no basis for this Court to interfere.

12With respect to the penalty imposed, the Tribunal is owed considerable deference. We agree with counsel for the respondent that the precedents cited by the appellant are distinguishable and that the Tribunal was not necessarily bound to follow them. We accept that the penalty imposed in this case is not outside the range of what was open to the Tribunal in all of the circumstances.

13The question is not what penalty we would impose or how we would weigh the various factors in determining what is appropriate. The question is whether the result reached by the Tribunal is reasonable. However, the penalty imposed in this case was the most draconian one available to the Tribunal. The Tribunal gave no indication in its Reasons as to whether it had considered the possibility of a lesser penalty, such as suspension of licence, limitations on the licence or the imposition of conditions, such as supervision.

14We understand that there were no submissions made to the Tribunal with respect to these options. Nevertheless, we consider it was incumbent on the Tribunal to address its mind to the issue and, if it was of the view that revocation was necessary, to provide some reasons, even if brief, as to why it reached that conclusion.

15In the result, this matter is remitted back to the same Panel to reconsider the issue of penalty. The Tribunal may exercise its own discretion as to whether it will hear further evidence or submissions from the parties on this point.

COSTS

16For oral reasons delivered today, this matter is remitted back to the Panel that heard the application solely on the issue of remedy with a direction to the Panel to reconsider that issue. The Panel may exercise its own discretion as to whether it will hear further evidence or submissions from the parties on this issue. In other respects, the appeal is dismissed. Costs to the appellant fixed at $7,500 inclusive.