Law Society of Upper Canada v. Abbott, 2016 ONSC 641

CITATION: Law Society of Upper Canada v. Abbott, 2016 ONSC 641

DIVISIONAL COURT FILE NO.: 495/15

DATE: 20160210

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

H. SACHS, THORBURN and ABRAMS JJ.

BETWEEN:

THE LAW SOCIETY of UPPER CANADA

Respondent (Appellant by Cross-Appeal)

– and –

JOHN PAUL ABBOTT

Appellant (Respondent by Cross-Appeal)

James Morton, for the Appellant (Respondent by Cross-Appeal)

Sean Dewart and Chris Donovan, for the Respondent (Appellant by Cross-Appeal)

HEARD at Toronto: January 5, 2016

H. Sachs J.:

Introduction

[1] The Appellant was the subject of disciplinary proceedings before the Hearing Division of the Law Society Tribunal. He filed a motion to stay the proceedings on the basis of delay. The Hearing Division dismissed that motion and found that the Appellant had knowingly assisted his clients in committing mortgage fraud. The panel reconvened to consider penalty and revoked his licence.

[2] The Appellant appealed to the Appeal Division of the Law Society Tribunal. The appeal was dismissed with respect to the motion to stay and with respect to knowing assistance, but it did succeed on the issue of penalty. The majority of the appeal panel set aside the order revoking the appellant’s licence and substituted a penalty of a two-year suspension.

[3] The Appellant appeals the Appeal Division’s decision with respect to the dismissal of his motion to stay and its finding of knowing assistance. The Respondent cross-appeals on the issue of penalty.

[4] For the reasons that follow, I would dismiss both the appeal and the cross-appeal.

Factual Background

[5] The Appellant was called to the Bar in 1989. By 2006, he was practising on his own as a real estate solicitor. The eight transactions that are the subject of the finding of knowing assistance were completed between September of 2006 and January of 2007.

[6] The Law Society investigation against the Appellant was authorized in March of 2007, after a complaint was received in February of 2007 about two of the eight transactions in issue.

[7] Six years and two months after the initiation of the investigation against the Appellant, a notice of Application was issued against the Appellant on April 10, 2013. The main reason for the delay appears to have been changing staff and a lack of resources at the Law Society. Once the investigation was finally referred to a lawyer retained by the Law Society, it took that lawyer about three to four months to review the documentation and provide his report.

[8] After the Notice of Application was issued in April of 2013, the hearing did not commence until August of 2014. Again, the Law Society delayed matters by not meeting procedural timetables.

[9] It is accepted that none of the almost seven and half year delay in this matter is the Appellant’s fault. At all times, he responded promptly to the Law Society’s requests for information, which frequently involved providing material that he had already provided.

[10] Both prior to and subsequent to the eight transactions in issue, the Appellant has practised law without incident.

The Hearing Division’s Decision

[11] The Hearing Division dismissed the Appellant’s motion for a stay based on abuse of process. While acknowledging that significant delay can result in a stay, the Hearing Division found that in order to justify such a serious remedy, the Appellant had the onus of demonstrating that he had suffered significant prejudice that resulted from the unacceptable delay. The Hearing Division examined the Appellant’s evidence as to prejudice and found that the high threshold required had not been established. Given its finding on this issue, the Hearing Division concluded that it did not have to decide whether the delay in this case was inordinate or unacceptable.

[12] The Hearing Division examined the evidence respecting the eight transactions at issue and found that there was fraud in each of these transactions. In particular, in each transaction the mortgage lender was given to understand that deposits were being made that had not actually been made. The Hearing Division also found that in a number of these transactions, false credits were given to the purchasers.

[13] The Hearing Division then went on to consider whether the Appellant knowingly participated or assisted in the frauds. It found that in seven of the eight transactions, the Appellant, although not actually involved in the scheme, had knowingly participated or assisted in mortgage fraud through recklessness or wilful blindness: he was aware of the “red flags” of mortgage fraud, he was aware that they existed in the transactions at issue, and he either made no inquiries or insufficient inquiries to address them.

[14] With respect to penalty, the Hearing Division accepted that, absent extraordinary or exceptional circumstances, the presumptive penalty for knowing participation or assistance in mortgage fraud is revocation. The Hearing Division found that “exceptional circumstances” are circumstances that “obviate the need to reassure the public of the integrity of the profession by revocation”.

[15] The Hearing Division considered whether the delay in this case could be a circumstance that would justify imposing a lengthy suspension rather than revocation. It found that it did not for three reasons: the prejudice that the Appellant experienced from the delay was not substantial and much of it arose from the issuance of the Notice of Application in the spring of 2013; the goals of general deterrence and maintenance of public confidence in the legal profession would not be served by reducing the penalty to a lengthy suspension because of investigative delay; and the Appellant benefited from the delay because faced with a choice between earlier revocation and a later revocation coupled with the stress that might involve, most respondents would likely choose the latter.

[16] The Hearing Division ordered that the Appellant’s licence to practice law be revoked.

The Appeal Division’s Decision

[17] The Appeal Division upheld the Hearing Division’s refusal to dismiss the application for delay. In doing so, it accepted that where the fairness of the hearing has not been compromised by the delay, the lawyer must demonstrate significant prejudice caused by the delay in order to succeed on an application for a stay based on that delay. The Appeal Division found that the Hearing Division’s ruling on the issue of significant prejudice was largely factual and that its factual findings were reasonable.

[18] The Appeal Division also upheld the Hearing Division’s findings of professional misconduct. In its view, the Hearing Division was entitled to make findings based on circumstantial rather than direct evidence. Further, the following conclusions of the Hearing Division were reasonable and supported by the evidence: the Appellant was aware of the “red flags” of mortgage fraud, he was aware there were red flags in these transactions, yet he persisted in completing the transactions despite his knowledge of the risks.

[19] On the issue of penalty, the majority of the Appeal Division held that the Hearing Division committed a number of errors of law.

[20] First, while it purported to accept that an “exceptional circumstance” justifying a penalty other than revocation was not restricted to evidence that explained why the misconduct occurred, its reasons for dismissing the Appellant’s 12 points of mitigating evidence demonstrated that its ultimate conclusion on the issue of “exceptional circumstances” was driven by a focus on the need to demonstrate a causal link between the mitigating factor and the misconduct committed. This was important since the most prominent mitigating factor cited by the Appellant in this case; namely, the fact and impact of the Law Society’s unexplained delay, “fell outside the realm of ‘credible explanations for his conduct’.”

[21] Second, the Law Society erred in law in its consideration of delay as a mitigating factor in this case: it erred in failing to make a finding as to whether the delay was “inordinate and unacceptable”, it erred in finding that only delay that causes prejudice can be a mitigating factor in penalty, and it employed an improper test in evaluating prejudice to the Appellant as after finding that there was no doubt “some” prejudice to the Appellant, it went on to dismiss that prejudice because it was not “significant”. According to the majority of the Appeal Division, “[t]he requirement of prejudice as a mitigating factor on penalty is different and much less onerous than the Supreme Court demanded in Blencoe to justify a complete stay of proceedings”.

[22] The Appeal Division also found that the Hearing Division erred in giving precedence to general deterrence and maintenance of public confidence in the legal profession as the penalty objectives in this case, while minimizing the importance of specific deterrence. In its view, all of the objectives were important and mitigating evidence and “exceptional circumstances” could not be properly assessed without considering the Appellant’s individual circumstances and the risk of further misconduct by him.

[23] The Appeal Division found that the Hearing Division’s reasoning that the delay in this case benefited the Appellant was “not persuasive” and focused only on the individual rather than the institutional and public consequences of delayed proceedings. In this regard, the Appeal Division also found that the Hearing Division erred when it found that “reducing a penalty because of prejudice is most relevant where specific deterrence is the principal penalty goal”. According to the majority of the Appeal Division, this statement ignores the fact that in addition to the prejudice to the licensee, any considerations of penalty that are driven by the need to maintain the integrity and reputation of the legal profession must take into account the harm to public confidence in the legal profession’s ability to regulate itself that can be caused by delays in investigation and prosecution.

[24] In essence, the Appeal Division found that the Hearing Division erred in law in its consideration of penalty by failing to recognize the many aspects of the public interest that may justify the imposition of a penalty short of revocation based on delay. In this regard, its failure to make a finding of inordinate and unacceptable delay caused it to fail to adequately take into account the fact that “[d]elay in investigation and prosecution may be as harmful to public confidence in the legal profession’s ability to regulate itself as [the Appellant’s] continued right to practice law.”

[25] Having found that the Hearing Division erred in law in its consideration as to penalty, the Appeal Division decided that rather than sending the matter back to the Hearing Division to reconsider, it would decide the issue of penalty itself. In doing so, it considered a number of factors, including the inordinate delay that occurred in this case, and decided that the appropriate remedy was to impose a two-year suspension.

[26] In a dissenting opinion, two members of the Appeal Division disagreed that the Hearing Division erred in law in its consideration of the appropriate penalty. Delay can be a mitigating factor in assessing the appropriate penalty even when that delay is not inordinate. However, according to the minority, in cases where revocation has been determined to be the appropriate penalty, the effect of delay as a mitigating factor cannot result in the substitution of a penalty which permits a lawyer to continue to practise. To do so would be inconsistent with the Divisional Court’s requirement in Bishop v. Law Society of Upper Canada, 2014 ONSC 5057, that exceptional circumstances “will normally have to be ones that would rise to the level where it would be obvious to other members of the profession, and to the public, that the underlying circumstances of the individual clearly obviated the need to provide reassurance to them of the integrity of the profession.” (para. 31).

[27] In the view of the minority, the Hearing Division’s decision on penalty was a decision involving questions of mixed fact and law. As such, it was reviewable on a standard of reasonableness and it was reasonable.

The Stay Decision Appeal

[28] The Appellant submits that the Appeal Division misinterpreted the leading decision of the Supreme Court of Canada on the issue of when unacceptable delay may result in an abuse of process in an administrative context: Blencoe v. British Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 S.C.R. 307. According to the Appellant, in Blencoe, the Supreme Court recognized that there were two sets of circumstances when delay would justify the imposition of a stay of proceedings where the fairness of the hearing has not been compromised – one where there is a requirement to prove significant prejudice and the other where there is not. In making this submission, the Appellant relies on para. 115 of Blencoe that reads:

I would be prepared to recognize that unacceptable delay may amount to an abuse of process in certain circumstances even where the fairness of the hearing has not been compromised. Where inordinate delay has directly caused significant psychological harm to a person, or attached a stigma to a person’s reputation, such that the human rights system would be brought into disrepute, such prejudice may be sufficient to constitute an abuse of process. The doctrine of abuse of process is not limited to acts giving rise to an unfair hearing; there may be cases of abuse of process for other than evidentiary reasons brought about by delay. It must however be emphasized that few lengthy delays will meet this threshold. I caution that in cases where there is no prejudice to hearing fairness, the delay must be clearly unacceptable and have directly caused a significant prejudice to amount to an abuse of process. It must be delay that would, in the circumstances of the case, bring the human rights system into disrepute. The difficult question before us is in deciding what is an ‘unacceptable delay’ that amounts to an abuse of process.

[29] According to the Appellant, this passage makes it clear that if the delay in question would bring the Law Society discipline process into disrepute there is no need to prove significant prejudice. With respect, this is a misreading of Blencoe. If hearing fairness has not been compromised, Blencoe requires showing both that the delay is unacceptable and that the delay caused a significant prejudice. If and only if both these conditions are satisfied will the delay be one that would bring the Law Society discipline system into disrepute.

[30] For this reason, I find that the Appellant’s appeal of the stay decision has no merit.

The Misconduct Decision Appeal

[31] The Appellant’s appeal of the misconduct decision focuses on the following sentence that appears in para. 163 of the Hearing Division’s decision: “We are unable to find credible evidence that any deposits were actually paid or that the other credits were genuine.”

[32] To sustain the findings of misconduct against the Appellant, the Law Society had the burden of proving two things – first, that there was mortgage fraud; and second, that the Appellant knowingly participated or assisted in those frauds. According to the Appellant, the above sentence demonstrates that when it came to the first of these requirements, the Hearing Division simply assumed that fraud had been committed instead of requiring the Law Society to call evidence that the deposits had not been paid and that the credits were not genuine.

[33] I disagree. In assessing whether the Law Society had met its onus of proving mortgage fraud, the Hearing Division was entitled to consider the fact that there was no evidence that the deposits had been paid and that there was no evidence that the other credits were genuine. These were facts, combined with a number of other facts, that made it reasonable for the Hearing Division to draw the inference that mortgage fraud had been committed.

[34] I, thus, find no merit to this aspect of the Appellant’s appeal.

The Cross-Appeal

Application of the Wrong Standard of Review

[35] I agree with the Law Society that the Appeal Division’s determination of the appropriate standard of review of a Hearing Division’s reasons is a question of law that is reviewable on the correctness standard (Igbinosun v. Law Society of Upper Canada, 2008 36158 (Div. Ct.), at para. 9).

[36] In this case, the Law Society asserts that the majority of the Appeal Division applied the incorrect standard of review in its consideration of the Hearing Division’s decision on penalty. It reviewed that decision on a standard of correctness, when the appropriate standard was reasonableness. It did so because it found that the Hearing Division’s consideration of delay disclosed errors of law. According to the Law Society, the Appeal Division erred when it characterized the Hearing Division’s decision in relation to delay as raising a question of law.

[37] In Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, the Supreme Court of Canada noted that sanction decisions in the professional regulation context do not usually involve “easily extracted and discretely framed questions of law. The Committee’s decision on sanction is not one that will determine future cases insofar as it is a useful case for comparison.” (para. 41).

[38] In this case, as both parties made clear, the Appeal Division’s decision on penalty does have important implications for future cases. That is because the Appeal Division’s consideration of the question of whether delay can constitute an “exceptional circumstance” that would justify the imposition of a sanction that did not involve the lawyer leaving the profession is fundamentally different than that of the Hearing Division. The differences are differences of principle that have implications beyond the factual circumstances of this particular case.

[39] Fundamentally, the Appeal Division, unlike the Hearing Division, found that delay that did not cause significant prejudice to the lawyer could constitute a mitigating circumstance that would justify imposing a suspension rather than revocation in a mortgage fraud case. While both divisions agreed that the ultimate goal of a penalty in this context is to reassure the public as to the integrity of the profession, the Appeal Division, unlike the Hearing Division, found that achieving this goal involved considering more than just the individual circumstances of the lawyer. It also involved considering the harm to the public’s confidence in the legal profession’s ability to regulate itself (which, in turn, impacts on the profession’s integrity) that is caused by repeated delays.

[40] For these reasons, I find that the Appeal Division was correct that the Hearing Division’s decision did raise an extricable question of law that justified a review on the standard of correctness.

The Standard of Review Applicable to the Appeal Division’s Decision

[41] The issue that then arises is what standard of review this court should apply to the Appeal Division’s analysis of the role that delay should play in the imposition of a penalty where revocation is presumptively called for. If the issue can be characterized as one that is of central importance to the legal system and outside the specialized expertise of the Appeal Division, the appropriate standard of review is correctness.

[42] As the Supreme Court of Canada stated in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 55: “A question of law that is of ‘central importance to the legal system … and outside the … specialized area of expertise’ of the administrative decision maker will always attract a correctness standard (Toronto (City) v. C.U.P.E. Local 79, at para. 62).”

[43] The threshold needed to transform a question of law into one of “central importance to the legal system” is rarely met due to the need for significance that transcends the particular factual and legal context at issue: see McLean v. British Columbia (Securities Commission), 2013 SCC 67, [2013] 3 S.C.R. 895, at paras. 26-27.

[44] In this case, the Appeal Division of the Law Society was considering the issue of delay in a particular context – the Law Society discipline context where a lawyer had been found to have committed misconduct that would ordinarily attract a penalty of revocation. In doing so, it was balancing the various interests at stake for the legal profession and the public in dealing with such cases. Thus, while delay and its effect on the administration of justice can be characterized as an issue of central importance to the legal profession, the specific context in which the issue was being considered make it one that was within the specialized expertise of the Law Society. As such, the Appeal Division’s decision on this issue is entitled to deference.

[45] For these reasons, I find that the standard of review applicable to the Appeal Division’s consideration of the issue of the delay and its effect on penalty is reasonableness.

Was the Appeal Division’s Decision on the Issue of Delay Reasonable?

[46] The reasonableness standard is concerned with whether there is justification, transparency and intelligibility within the decision-making process. It is also concerned with whether the decision falls within a range of possible, acceptable outcomes that are defensible in respect of the facts and the law. The reasonableness standard recognizes that there can be a “margin of appreciation within the range of acceptable and rational solutions” (Dunsmuir, at para. 47). In other words, reasonable people can disagree.

[47] Where the standard is reasonableness, a reviewing court “must not interfere unless the party seeking review has positively shown that the decision was unreasonable”. A court must review the reasons for the decision and consider “whether any of those reasons adequately support the decision.” A tribunal’s decision is 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.” (Law Society of New Brunswick v. Ryan, at paras. 48-49 and 55).

[48] In this case, the Appeal Division was faced with what it found to be a period of unwarranted delay that exceeded seven years, none of which was the fault of the Appellant. There is no issue that delay that does not justify a stay can be a mitigating factor in penalty. The only issue was whether such a delay could be a factor that turned a penalty of revocation into one that did not involve the lawyer leaving the profession. The Appeal Division concluded that it could. It did so because it recognized that delay in the investigation and prosecution of serious misconduct could be just as harmful to the integrity of and the public’s confidence in the legal profession as the Appellant’s continued right to practice law. The Appeal Division’s reasoning on this issue was justifiable, transparent and intelligible and the conclusion it came to fell within the “range of possible, acceptable outcomes which are defensible in respect of the facts and the law.” (Dunsmuir, at para. 47).

Was the Appeal Division’s Decision as to the Appropriate Penalty for the Appellant Reasonable?

[49] Under s. 49.35(2)(a) of the Law Society Act , R.S.O. 1990, c. L.8, the Appeal Division had the jurisdiction to decide the issue of penalty itself rather than sending the matter back to the Hearing Division. It decided to exercise this jurisdiction because of the length of time that the case had already been outstanding.

[50] The Appeal Division’s decision as to the appropriate penalty is entitled to deference from this court and is reviewable on a standard of reasonableness.

[51] In deciding to impose the penalty of a two-year suspension rather than revocation, the Appeal Division took into account the inordinate and unacceptable delay that had occurred in this case; the fact that the Appellant was not responsible for any of this delay and cooperated with the Law Society at all times; the fact that the Appellant had not waived any of the delay; the fact that apart from the four-month period during which the transactions at issue occurred, the Appellant had practiced law without incident since his call to the bar in 1989; the fact that the Appellant ceased to be involved with these type of transactions as soon as he received a client inquiry about possible mortgage fraud, which occurred prior to any communication from the Law Society; the fact that the Appellant had a reputation for honesty and integrity; and the fact that the Appellant had acknowledged responsibility for certain aspects of his conduct and expressed remorse. Having considered all of these factors, the Appeal Division concluded that the misconduct was unlikely to re-occur and that the ends of specific deterrence, general deterrence and the maintenance of public confidence in the integrity and regulation of the legal profession would most appropriately be met by the imposition of a two-year suspension rather than revocation.

[52] In my view, the reasons given adequately support the Appeal Division’s decision on penalty and display a line of analysis that could reasonably lead it from the evidence that was before it to its conclusion. In other words, it was a reasonable decision.

Conclusion

[53] For these reasons, the appeal and cross-appeal are dismissed. The parties agreed that if this was the result, there should be no order as to costs.

H. SACHS J.

THORBURN J.

ABRAMS J.

Released: 20160210