Citation and Court Information

CITATION: Smith v. Real Estate Council of Ontario, 2024 ONSC 3965

DIVISIONAL COURT FILE NO.: 536/23

DATE: 20240715

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Sachs, Reid and Davies JJ.

BETWEEN:

Darrah Smith Applicant

– and –

Real Estate Council of Ontario Respondent

COUNSEL: Patrick Summers, for the Applicant Shaun Chu-A-Kong and Sania Cherian, for the Respondent

HEARD at Toronto: May 22, 2024

REASONS FOR DECISION

Davies J.

A. Overview

[1] Darrah Smith is a real estate agent who was found by the Discipline Panel of the Real Estate Council of Ontario (RECO) to have breached her professional Code of Ethics by including the wrong amount for the property taxes and local improvement charge in a property listing.

[2] Ms. Smith unsuccessfully appealed the Discipline Panel’s decision to RECO’s Appeal Panel.

[3] Ms. Smith now seeks judicial review of the Appeal Panel’s decision. Ms. Smith advanced three grounds:

a. The Discipline Panel unreasonably excluded evidence from her proposed experts who would have testified about local improvement charges and the difficulties agents encounter confirming whether a property is subject to a local improvement charge;

b. The Discipline Panel unreasonably prohibited Ms. Smith’s from calling one of her proposed experts as a fact witness about his own practices; and

c. The Discipline Panel’s decision that Ms. Smith breached the Code of Ethics by including inaccurate tax information was unreasonable considering Ms. Smith’s efforts to verify the property taxes and local improvement charge on the property.

[4] For the following reasons, we dismiss the application for judicial review.

B. Standard of Review

[5] The standard of review in this case is reasonableness. The burden is on Ms. Smith to establish that the Appeal Panel’s decision was unreasonable. We must not ask ourselves whether the Appeal Panel reached the correct or best answer. Rather, we must ask whether the reasons and outcome were reasonable. A decision will be reasonable if it is rational, logical and justified in relation to the applicable facts and law. This Court will only intervene if there is no line of analysis that could reasonably support the Appeal Panel’s findings: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at paras. 99 to 107.

C. Admissibility of Expert Evidence

[6] Ms. Smith sought to call two experts at her discipline hearing but the Discipline Panel ruled that their evidence was inadmissible for two reasons. First, the proposed experts had been asked to opine on the ultimate issue that the Discipline Panel had to decide. Second, the proposed expert evidence was not necessary because it did not address matters that were beyond the expertise and knowledge of the Discipline Panel.

[7] Ms. Smith argued on this judicial review application that the Discipline Panel’s decision to exclude her experts was unreasonable.

[8] Deference is owed to the Discipline Panel’s decision. This Court should only interfere with the Discipline Panel’s ruling on the admissibility of evidence if it is “clearly unreasonable, contaminated by an error in principle, or reflective of a material misapprehension of evidence”: R. v. Abdullahi, 2021 ONCA 82 at para. 35, R. v. Shafia, 2016 ONCA 812 at para. 230, Connor Homes v. Director, 2021 ONSC 3195 at para. 55, Penner v. Niagara (Regional Police Services Board), 2013 SCC 19 at para. 27.

[9] Before discussing the admissibility of Ms. Smith’s experts, I will briefly describe the events that gave rise to the discipline proceedings against Ms. Smith.

[10] Ms. Smith was retained by the owners of a property in Georgina to list their property for sale in the spring of 2017. Ms. Smith knew that houses in Georgina were typically subject to a local improvement charge in addition to annual property taxes. A local improvement charge can either be paid as a single lump sum payment when the municipality imposes the charge on the property or in installments over time.

[11] Before listing the property, Ms. Smith asked her clients if the property was subject to a local improvement charge. She also asked her clients for information about the property taxes. The clients told Ms. Smith the taxes were approximately $3,700 a year. The clients also told Ms. Smith they had paid the local improvement charge in full and were not paying any local improvement charge in addition to their taxes.

[12] Ms. Smith never got a tax bill from the owners despite several requests. Ms. Smith testified she searched two databases and discovered that the property’s assessed value was $394,000 the previous year. Using a formula recommended on the Town of Georgina’s website, Ms. Smith calculated the property taxes to be approximately $3,350. Ms. Smith testified she then added $160 to her property tax calculation. She explained that she overestimated the property taxes so if there was an error, it would favour the purchaser.

[13] Ms. Smith listed the property three times. In each listing, Ms. Smith stated that the taxes on the property were $3,554.32. In the first two listings, Ms. Smith stated that the local improvement charge had been paid in full, which, despite the information Ms. Smith received from her clients, was not true.

[14] The third listing was the focus of the discipline hearing. That listing was published on July 6, 2017. In it, Ms. Smith again stated that the taxes were $3,554.32. She did not mention the local improvement charge. Ms. Smith included a note in the “Brokerage Remarks” section of the listing that stated, “Buyer to Verify Taxes & Measurements.” Only a real estate broker can see a note in the “Brokerage Remarks” section of the listing so only a real estate broker would have seen the disclaimer in the listing about the buyer verifying the taxes and measurements. The “Brokerage Remarks” portion of the listing is not available to the public so a prospective purchaser would not have seen that disclaimer.

[15] Ms. Smith’s clients received an offer on the property in response to the third listing and signed an agreement of purchase and sale on July 13, 2017. The agreement of purchase and sale also stated that the buyer should verify the information in the listing.

[16] In fact, the property was subject to a local improvement charge of $796.40 a year until 2026. Including the local improvement charge, the taxes for the property were $4,183.59 in 2017.

[17] RECO alleged that Ms. Smith violated several provisions of the Code of Ethics established under what was the Real Estate and Business Brokers Act, S.O. 2002 c. 30, Sched. C (now the Trust in Real Estate Services Act) because she knew or ought to have known that the amount she included in the listing for the taxes was inaccurate. In the alternative, RECO alleged Ms. Smith failed to take adequate steps to verify the taxes before making representations in the listing.

[18] Ms. Smith sought to call two experts at her discipline hearing: David Metherall and Barry Lebow.

[19] Mr. Metherall is a real estate broker. Mr. Metherall was asked to opine on whether Ms. Smith’s conduct represents a breach of the Code of Ethics. He prepared a report on the history of local improvement charges and the challenges realtors face in determining whether a property is subject to a local improvement charge. Mr. Metherall wrote that the taxes paid or owing and local improvement charges are not “readily available to realtors” because municipalities generally will not release that information to realtors. Mr. Metherall also stated that the only way for a realtor to get information about taxes and local improvement charges is “to have local knowledge” and ask the vendor of the property. Mr. Metherall explained that a local improvement charge, if applicable, would appear on the owner’s tax bill as a “special charge.” Mr. Metherall stated that, in his opinion, Ms. Smith acted diligently in her efforts to confirm the taxes and local improvement charge for the property in question. Mr. Metherall opined that the method used by Ms. Smith to calculate the taxes was reasonable and consistent with acceptable practices for real estate agents in Ontario.

[20] Mr. Lebow is a Professional Land Economist and real estate agent. He was asked to opine on what a “typical agent” would have done in Ms. Smith’s circumstances. Mr. Lebow adopted Mr. Metherall’s opinion. He also opined that Ms. Smith had “exercised all avenues” to get full and accurate information about the property taxes and local improvement charge for the property in question. He opined that “a reasonable and competent agent could not have gone any further” to get accurate information. Finally, he took the position that “this matter should not have resulted in discipline action.”

[21] The Discipline Panel ruled that neither expert was admissible. The Appeal Panel upheld the Discipline Panel decision as reasonable.

[22] Ms. Smith argues the Discipline Panel applied too strict a standard to the question of the admissibility of the expert evidence. Ms. Smith also argued the Discipline Panel erred in finding that the expert evidence was not necessary. Finally, Ms. Smith argued it was unfair of the Discipline Panel to exclude her expert evidence when the prosecutor was permitted to call a Compliance Officer to testify about industry standards. I do not agree with any of these arguments.

[23] First, the Discipline Panel did not err in applying the formal test for the admissibility of expert evidence when deciding whether to permit Ms. Smith to call Mr. Metherall or Mr. Lebow. Ms. Smith is correct that the formal rules of evidence do not apply at administrative hearings. Administrative tribunals can admit any relevant evidence. Administrative tribunals have the discretion to admit expert evidence that does not meet the strict test for admissibility articulated by the Supreme Court of Canada in R. v. Mohan, [1994] 2 SCR 9: Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, s. 15. The Mohan test focuses on (a) whether the expert opinion evidence is relevant, (b) whether the proposed expert is properly qualified to give the proffered opinion, (c) whether the expert evidence in inadmissible under any other rule of evidence, and (d) whether the evidence is necessary in the sense it is outside the expertise of the decision maker. While the Discipline Panel was not required to strictly apply the Mohan test, that does not mean it was an error for the Discipline Panel to do so. Administrative tribunals are not required to apply a lower standard. It is within their discretion to apply the four-part test for the admissibility of expert evidence from Mohan.

[24] Second, it was open to the Discipline Panel to decide, within its discretion, that the expert evidence was not admissible either because the opinions proffered were too close to the ultimate issue the Panel had to decide or because the expert evidence was not necessary.

[25] Ms. Smith relied on a recent decision in which this court found that the Licence Appeal Tribunal erred in excluding expert evidence: Connor Homes v. Director, 2021 ONSC 3195. In that case, the Licence Appeal Tribunal was considering a decision not to renew the Appellant’s residential care licence, which is required to operate a foster care home. The Appellant sought to adduce expert evidence on children’s mental health and fire safety. The Divisional Court held that the Licence Appeal Tribunal erred in finding the expert evidence was unnecessary. The court held that while the Licence Appeal Tribunal has expertise adjudicating licensing matters, it did not have expertise in children’s mental health or fire safety as it related to residential care facilities for children.

[26] The circumstances of this case are distinct from Connor Homes. Here, the Discipline Panel has expertise on the professional standards and practices of real estate agents in Ontario. The Discipline Panel had the reports from Mr. Metherall and Mr. Lebow and knew what evidence they would each give. Each opined that Ms. Smith acted appropriately and did not violate the Code of Ethics, which was the precise issue the Discipline Panel had to decide. And the proposed experts would have testified about issues that fall within the scope of the Discipline Panel’s expertise. It was, therefore, open to the Discipline Panel to decide that their evidence was not necessary.

[27] Finally, Ms. Smith argues that it was unfair to prevent her from calling expert evidence when a prosecution witness gave opinion evidence about how a prudent realtor should have acted in Ms. Smith’s circumstances. The Council called a Compliance Officer, Natalia Martinez, who gave evidence about what realtors should do if they are unable to confirm the taxes and local improvement charges through proper documentation, such as a tax bill. Ms. Martinez testified that the realtor should either leave that portion of the listing blank or, if the local real estate board requires the realtor to input a dollar value for the taxes, the realtor must include a disclaimer in the listing stating the realtor was not able to confirm the taxes. Ms. Smith argued that her experts should have been permitted to give evidence on the same issue in response.

[28] In my view, the Discipline Panel’s decision to exclude Ms. Smith’s experts was not unfair. Ms. Smith’s expert reports focused on whether she took reasonable steps to get accurate information about the taxes from her clients. Ultimately that was not the determinative issue. The Discipline Panel accepted Ms. Smith’s evidence about her efforts to confirm the property taxes. The Discipline Panel accepted that Ms. Smith asked her clients if the property was subject to a local improvement charge. Those efforts were set out in the agreed statement of facts.

[29] The outcome of the case before the Discipline Panel turned on a very narrow issue: was the “disclaimer” Ms. Smith included in her listing sufficient given that she knew the tax information she included in the listing was inaccurate? In other words, the decisive issue was whether the disclaimer Ms. Smith added to the listing clearly articulated to prospective buyers that the tax information was not accurate. That was the focus of Ms. Martinez’s evidence. Ms. Smith’s proposed experts did not address the adequacy of the disclaimer so the Discipline Panel’s decision to exclude their evidence was not unfair.

[30] I, therefore, find that the Appeal Panel’s decision to uphold the Discipline Panel’s decision on the inadmissibility of the expert witnesses was reasonable.

D. Exclusion of the fact witness

[31] When the Discipline Panel refused to allow Ms. Smith to call Mr. Metherall as an expert, her counsel sought to call him as a fact witness to testify about what he would have done to determine the taxes and local improvement charges in the circumstances in which Ms. Smith found herself. The Discipline Panel ruled that the proposed fact evidence from Mr. Metherall was inadmissible because it was irrelevant. The Discipline Panel also found that Ms. Smith’s counsel was trying to circumvent the ruling on the expert evidence by recasting Mr. Metherall’s opinion evidence as fact.

[32] The Appeal Panel upheld the Discipline Panel’s decision to exclude Mr. Metherall as a fact witness as reasonable. The Appeal Panel agreed that even as a fact witness, Mr. Metherall would be giving opinion evidence about what he would have done in a similar circumstance. The Appeal Panel found that it was within the Discipline Panel’s discretion to exclude Mr. Metherall’s evidence.

[33] On this judicial review application, Ms. Smith argued the Discipline Panel improperly excluded Mr. Metherall’s evidence because he did not participate in the transaction in question. Ms. Smith also argued it was unfair of the Discipline Panel to exclude Mr. Metherall’s evidence when the prosecutor was permitted to call a Compliance Officer to testify about industry standards.

[34] In my view, the Discipline Panel’s decision to prohibit Mr. Metherall as a fact witness was reasonable. What Mr. Metherall (or any other realtor) would have done in Ms. Smith’s circumstances is not relevant to the narrow issue of whether the listing was misleading and it was reasonable for the Discipline Panel to find that his evidence was irrelevant. I have already found that it was not unfair to allow the Council to adduce evidence from the Compliance Officer about how Ms. Smith could have clearly communicated in the listing that the tax information was inaccurate.

E. Was the Discipline Panel’s Decision that Ms. Smith violated the Code of Ethics reasonable?

[35] The Code of Ethics requires realtors to “treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity”: Code of Ethics, s. 3. Realtors are required to “promote and protect the best interests” of their clients: Code of Ethics, s. 4. Realtors are also required to “provide conscientious service” and “demonstrate reasonable skill, judgment and competence”: Code of Ethics, s. 5. Finally, realtors must use their “best efforts to prevent error, misrepresentation, fraud or any unethical practice”: Code of Ethics, s. 38. The Discipline Panel found that Ms. Smith violated each of those provisions because she made statements about the property taxes and local improvement charge in the listing that she knew or ought to have known were inaccurate.

[36] Before considering the facts of Ms. Smith’s case, the Discipline Panel made five important findings:

i. Realtors should only use a reliable source such a tax bill as the basis for statements made in listings about the taxes.

ii. Realtors should not use their own calculations as the basis for determining the taxes.

iii. Realtors should not put unverified information about taxes and local improvement charges in listings.

iv. If a realtor cannot confirm the tax figures, they should make it clear in the public information that the numbers presented are an estimate.

v. Disclaimers in the “Broker Notes”, which are not visible to the public, are not sufficient to relieve the selling agent from the obligation to confirm the figures in the listing.

[37] Ms. Smith’s arguments on this judicial review application focus primarily on the first finding that realtors should use only a reliable source such as a tax bill as the basis for the tax information shown in a listing. Ms. Smith argues that the Discipline Panel unfairly created a new rule that realtors must obtain a tax bill from their client before listing a property for sale, which imposed an unreasonable burden on realtors. Ms. Smith also argued that the Discipline Panel created a standard of absolute liability if realtors do not obtain a copy of the municipal property tax bill.

[38] In my view, Ms. Smith has mischaracterized the Discipline Panel’s decision. The Discipline Panel did not say realtors must, in all cases, obtain a copy of the municipal property tax bill. The Discipline Panel accepted that municipalities will often only release tax or local improvement charge information to property owners. The Discipline Panel accepted that Ms. Smith could not confirm the taxes or local improvement charge herself.

[39] Rather, the Discipline Panel found that realtors should only include verified tax information in a listing and if the realtor cannot verify the tax information from a reliable source, the realtor must make it clear in the listing that the tax information is an estimate only. The real crux of this case is whether Ms. Smith made that clear in the listing in question.

[40] The facts in this case were not really in dispute. The Discipline Panel accepted that before Ms. Smith first listed the property, she asked the owners for information about the taxes and local improvement charges. The Discipline Panel accepted that the owners told Ms. Smith that they were paying about $3,700 in taxes a year and that the local improvement charge was paid in full.

[41] Ms. Smith acknowledged that she knew that houses in Georgina were typically subject to local improvement charges in addition to the annual property taxes. Ms. Smith had previously sold another property on the same street. Ms. Smith had seen the tax bill for that other property and knew it was subject to a local improvement charge. Ms. Smith also owned property in Georgina that was subject to a local improvement charge.

[42] Ms. Smith admitted that she never got a tax bill from the owners. Ms. Smith explained how she used two databases to find the property’s assessed value in 2016 and used that information to estimate the taxes. Ms. Smith testified the amount she included in the listing for the property taxes was about $160 more than her calculation. She explained that she overestimated the property taxes so any error would favour the purchaser.

[43] Ms. Smith first listed the property on May 30, 2017. In that listing, Ms. Smith wrote that the 2017 taxes were $3,554.32. Ms. Smith testified that when she first listed the property, she did not mention the local improvement charge. She added “L.I.C. Paid in Full” to the listing a few days later after her clients told her the local improvement charge had been paid. Ms. Smith also included a note in the “Brokerage Remarks” section of the listing that said, “Buyer to Verify Taxes & Measurements.” That note would not have been visible to prospective purchasers because “Brokerage Remarks” are only visible to other agents.

[44] Ms. Smith listed the property a second time in late June 2017 at a lower price. The second listing contained the same information about the taxes. It also contained a note in the public portion of the listing that said, “Local Improvement Charges Paid in Full.” Finally, the listing contained a note in the “Brokerage Remarks” that said, “Buyer to Verify Taxes & Measurements.”

[45] In early July 2017, the owners lowered the price again and Ms. Smith prepared a third listing. The third listing also stated the taxes on the property were $3,554.32. The third listing contained the same caution in the “Brokerage Remarks” about the buyer verifying the taxes. But the third listing did not say anything about a local improvement charge. Ms. Smith testified she removed the reference to the local improvement charge having been paid because the owners had not given her a copy of their tax bill:

So because I didn’t have anything in writing, other than him saying that he had paid [the local improvement charge], I thought that it would be best not to have that in there.

[46] The purchaser discovered that the tax information in the listing was incorrect the day before the deal was to close. This discovery gave rise to a flurry of communications. During those communications, the owners told Ms. Smith for the first time there was a $796.40 “special charge” on their tax bill, which was the local improvement charge. In one of her messages to the clients, Ms. Smith wrote, “I should have looked at the actual bill, but I thought the charges were paid in full.” Nonetheless, she minimized the significance of the problem in her communications with her clients by saying the buyer needed to verify the taxes.

[47] The Discipline Panel found that Ms. Smith removed any reference to the local improvement charge in the third listing because she was concerned that she had not received written confirmation from her clients that it had been paid in full. The Discipline Panel found that despite those concerns, Ms. Smith chose to keep the tax information the same in the third listing and made no mention of a local improvement charge. Once the problem was discovered, Ms. Smith acknowledged to her clients that she should have looked at their tax bill herself. If she had done so, she would have understood the “special charge” was a local improvement charge.

[48] There was no dispute that the tax and local improvement charge information in the listing was inaccurate. There was also no dispute that it is crucial for the tax information in a real estate listing to be accurate because purchasers and mortgage brokers rely on that information to secure financing. What was in dispute was whether the disclaimer Ms. Smith included in the listings clearly communicated to prospective buyers and other agents that she had not verified the tax information in the listing.

[49] Based on all the evidence, it was open to the Discipline Panel to find that a disclaimer in the listing that was visible only to other agents and brokers did not clearly communicate that the tax information was based on Ms. Smith’s own calculations, not verified information. And it would not have been obvious from the information Ms. Smith included that the amount listed for the taxes was only an estimate. Ms. Smith included a very precise figure in the listing for the taxes - $3,554.32. It was reasonable for the Discipline Panel to find that that $3,554.32 figure was misleading without a clear disclaimer, visible to anyone viewing the listing, that Ms. Smith had done her own calculation of the taxes and had not verified her calculation against the municipal tax records. The Discipline Panel’s finding that Ms. Smith did not treat everyone fairly, honestly and with integrity was, therefore, reasonable. The Discipline Panel’s finding that Ms. Smith did not act diligently was also reasonable given its finding that Ms. Smith did not clearly communicate that the information in the listing was unverified and was only an estimate.

[50] It was also open to the Discipline Panel to find that by including inaccurate information in the listing without a sufficient disclaimer, Ms. Smith exposed her clients to various forms of harm, including a civil claim. The Discipline Panel also found that by including inaccurate information in the listing, Ms. Smith created “stressful last-minute issues.” And she created a risk that the transaction would be aborted when the purchaser figured out that the tax information was incorrect the day before the property was to close. It was reasonable for the Discipline Panel to find that, by including inaccurate information in the listing without a proper disclaimer, Ms. Smith was not acting in a way that protected the client’s best interests.

[51] Finally, it was open to the Discipline Panel on all the evidence to find that Ms. Smith failed to make best efforts to prevent an error or misrepresentation. Again, the Discipline Panel did not say Ms. Smith was required to obtain a tax bill from her clients. Rather, the Discipline Panel found that she “should have made it clear that the figure she included in the MLS listing for the annual taxes was an estimate” and she should have said the local improvement charges had not been confirmed given her concerns.

[52] The Discipline Panel’s decision on the merits was reasonable. The Appeal Panel’s decision to uphold the Discipline Panel’s decision was also reasonable.

F. Conclusion and Costs

[53] Ms. Smith’s appeal is dismissed.

[54] Based on the agreement of counsel, Ms. Smith is ordered to pay costs in the amount of $4,000 (inclusive of HST and disbursements) to RECO.

Davies J.

I agree

Sachs J.

I agree

Reid J.

Date: July 15, 2024