CITATION: Joshi v. Ontario (Superintendent of Financial Services), 2016 ONSC 4477

DIVISIONAL COURT FILE NO.: 305/15 DATE: 20160630

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Then, Sachs and Lococo JJ.

BETWEEN:

Kapil Joshi Appellant

– and –

Ontario (Superintendent of Financial Services) Respondent

Wayne Cunningham, for the Appellant Deborah McPhail and Jessica Spence, for the Respondent

HEARD at Toronto: June 30, 2016

LOCOCO J. (ORALLY)

[1] Kapil Joshi appeals from the decision of the Financial Services Tribunal that found Mr. Joshi to be unsuitable to remain licensed as a mortgage broker and revoked his mortgage broker licence. Mr. Joshi asks that the finding of misconduct and the penalty be set aside, and a new hearing ordered before a differently constituted panel.

[2] The legal basis that the Tribunal relied on for revoking Mr. Joshi’s licence was that Mr. Joshi’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.” That is one of the criteria set out in section 10 of Ontario Regulation 409/07 (entitled Mortgage Brokers and Agents: Licensing) for determining whether an individual is unsuitable to be licensed or continue to be licensed as a mortgage broker or agent under the Mortgage Brokerages, Lenders and Administrators Act, 2006.

[3] As set out in the Tribunal’s decision, on two separate occasions, Mr. Joshi registered a mortgage against the matrimonial home of a client and his wife, at the request of the client. The client was himself a registered mortgage broker. On each occasion, Mr. Joshi did not speak directly to Ms. B., the client’s wife, and did not witness her signature on the required documents, accepting the client’s assurance that Ms. B had signed the documents. In fact, the signatures were forgeries. The Tribunal found that by failing to take steps to ensure that Ms. B had signed the mortgage documents and consented to the transactions, Mr. Joshi played a material role in implementing a fraudulent scheme. Based on that conduct, and after considering the factors set out in the Tribunal’s decision in Henderson v. Ontario (Superintendent of Financial Services), 2008 ONFST 7, the Tribunal concluded that Mr. Joshi was unsuitable to remain licensed and revoked his mortgage broker licence. The Tribunal also noted in its decision that the case was unique in that Mr. Joshi had no previous or pending disciplinary, criminal or quasi-criminal proceedings, and there was no allegation he had failed to comply with any specific requirement under the Mortgage Brokerages, Lenders and Administrators Act.

[4] As agreed by the parties, the applicable standard of review for this appeal is reasonableness (see Alves v. Superintendent of Financial Services, 2009 36993 (ON SCDC), [2009] O.J. No. 2950 (Div, Ct.)).

[5] Mr. Joshi argues that in reaching its decision, the Tribunal erred in the following respects:

(1) The Tribunal misapplied the Henderson criteria;

(2) The Tribunal mischaracterized Mr. Joshi’s unwitting participation in his client’s fraudulent scheme as advertent conduct that indicated a lack of honesty and integrity;

(3) The Tribunal failed to consider as a mitigating factor the fact that the client’s wife did not in fact suffer any loss as a result of her husband’s fraud, instead construing it as a lack of remorse;

(4) The Tribunal failed to consider as a mitigating factor Mr. Joshi’s lack of previous disciplinary record; and

(5) The Tribunal failed to consider lesser penalties than revocation.

[6] Applying the reasonableness review standard, we do not agree that any of these grounds of appeal except for the last justifies interfering with the Tribunal’s decision.

[7] With respect to the Henderson analysis, the Tribunal acknowledged that the criteria in that case are meant to be a framework only, and were not intended to be exhaustive. The Tribunal considered those the criteria in light of the evidence at the hearing. Taken as a whole rather than focusing on consideration of individual criteria, we consider the Tribunal’s analysis to provide a reasonable basis for its conclusions.

[8] In essence, the Tribunal found that on two separate occasions, Mr. Joshi failed to meet even a minimal standard of care in order to protect the economic interests of one of his clients, and he continues to fail to acknowledge and appreciate the nature and seriousness of his conduct. In his view, his only mistake was in trusting a fellow mortgage broker.

[9] As well, we consider the Tribunal’s conclusions as to the extent of Mr. Joshi’s involvement and responsibility with respect to his client’s fraudulent scheme (including the finding that Mr. Joshi’s conduct was negligent and reckless) to be within the realm of reasonableness. The Tribunal had the benefit of hearing Mr. Joshi’s testimony, allowing the panel members to draw conclusions about his credibility. The Tribunal’s findings of fact are entitled to deference.

[10] The same considerations also applies to the Tribunal’s conclusion that Mr. Joshi indicated a lack of remorse in his comments about Ms. B’s not ultimately suffering any loss, rather than considering the fact that she did not suffer any loss to be a mitigating factor. Once again, the Tribunal reached these conclusions based on Mr. Joshi’s testimony at the hearing. Those conclusions are entitled to deference and should not be interfered with.

[11] As well, while the Tribunal did not cite Mr. Joshi’s lack of previous infractions as a mitigating factor, the Tribunal was aware of and specifically noted his lack of previous record as being a distinguishing factor in the context of a disciplinary decision. Taking that consideration into account together with the Tribunal’s conclusions about the serious nature of Mr. Joshi’s conduct from a public protection standpoint, we are satisfied, reading the Tribunal’s decision as a whole, that it was within the realm of reasonableness for the Tribunal to find that Mr. Joshi’s past conduct affords reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.

[12] With respect to the final ground of appeal, Appellant’s counsel argued that the Tribunal erred in failing to consider lesser penalties when the panel decided to revoke Mr. Joshi’s licence. Tribunal’s counsel referred us to the last paragraph of the decision, in which the Tribunal refers to the fact that revocation is one of the most serious enforcement measures available under the Mortgage Brokerages, Lenders and Administrators Act, but goes on to state that it considered the conduct in this case to be so serious that revocation of Mr. Joshi’s licence was necessary to protect the public.

[13] While the Tribunal is owed considerable deference with respect to the penalty imposed, we have concluded that the Tribunal’s reasons do not indicate that it gave sufficient consideration to lesser penalties in this case, such as licence suspension or imposition of conditions. While the hearing record indicates that Mr. Joshi was asked to make submissions as to penalty, he ultimately left the decision to the panel without providing clear alternatives to revocation, a not unexpected response from a self-represented party. Consistent with the decision of this court in Strazzeri v. Superintendent of Financial Institutions, [2015] ONSC 255, the Tribunal should have been more explicit in its reasons with respect to consideration of a lesser penalty than the most serious disposition of licence revocation. This is especially so given that Mr. Joshi had no previous discipline record and was not found to have contravened any applicable laws.

[14] We were also concerned about how the issues before the Tribunal were framed. In particular, once the issues relating to Mr. Joshi’s conduct were determined, the next issue was whether the conduct justified revocation of his licence. If the Tribunal decided revocation was not justified, the final issue was whether suspension or some other consequence should follow. We consider the framing of the issues in this way to be inconsistent with the decision of this court in Strazzeri, which contemplates consideration of a range of penalties taking into account the seriousness of the misconduct and other relevant factors. In our view, separating consideration of revocation from other lesser penalties subverts this process. The fact that a self-represented party such as Mr. Joshi agreed to frame the issues in this way does not assist the Respondent in this case.

[15] Accordingly, the matter is remitted back to the same panel of the Tribunal to reconsider the issue of penalty. The Tribunal may exercise it discretion as to whether to hear further evidence or submissions from the parties on this issue. Mr. Joshi’s appeal is otherwise dismissed.

THEN J.

costs

[16] I have endorsed the Appeal Book and Compendium as follows: “This appeal is dismissed on all grounds save for the imposition of penalty for oral reasons delivered on behalf of the Court by Lococo J. The matter is accordingly remitted to the same Tribunal to reconsider the matter of penalty in accordance with the reasons of the Court.”

___________________________ Lococo J.

Then J.

Sachs J.

Date of Reasons for Judgment: June 30, 2016

Date of Release: July 12, 2016

CITATION: Joshi v. Ontario (Superintendent of Financial Services), 2016 ONSC 4477

DIVISIONAL COURT FILE NO.: 305/15 DATE: 20160630

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

THEN, SACHS and LOCOCO JJ

BETWEEN:

Kapil Joshi Appellant

– and –

Ontario (Superintendent of Financial Services) Respondent

REASONS FOR JUDGMENT

LOCOCO J.

Date of Reasons for Judgment: June 30, 2016

Date of Release: July 12, 2016