T. Baxter Real Estate Ltd. and Timothy Baxter v. Registrar, Real Estate and Business Brokers Act, 2002, 2010 CanLII 96811

Licence Appeal Tribunal

DATE: 2010-01-25

FILE: 5179/REBBA

CASE NAME: 5179 v. Registrar, Real Estate and Business Brokers Act, 2002

Appeal From a Proposal of the Registrar, Real Estate and Business Brokers Act, 2002, S.O. 2002, c.30, Sch. C

T. Baxter Real Estate Ltd. And Timothy Baxter, Applicants

-and-

Registrar, Real Estate and Business Brokers Act, 2002 Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Elizabeth L. Sproule, Vice-Chair

APPEARANCES:

For the Applicants: Michael L. Learner, Counsel

For the Respondent: George P. Drametu and Maya Sabharwal, Counsel

Heard in London: December 14, 15, 16, and 17, 2009

REASONS FOR DECISION AND ORDER

BACKGROUND

This matter is an appeal from a Notice of Proposal (the “Proposal”) of the Registrar, Real Estate and Business Brokers Act, 2002 (the “Registrar” and the “Act”), dated November 12, 2008, to revoke the registration of Timothy Baxter (“Mr. Baxter”) as a Broker, and T. Baxter Real Estate Ltd. (“Baxter Realty”) as a Brokerage under the Act.

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 Reality 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.

ISSUE

Does Mr. Baxter’s conduct afford reasonable grounds for belief that he will not carry on business in accordance with the law and with honesty and integrity and that he will not operate the business of Baxter Realty with honesty and integrity and in accordance with the law?

PRELIMINARY MATTERS

The Applicants objected to the qualification of both Mr. Cacciavollani and Mr. Cummings as experts in the field of real estate. Both men had at least 20 years experience in sales in the industry. The objection to them was that they did not have any superior training or teaching experience that would make them a qualified expert, unlike the realtor being put forth by the Applicants as an expert. An oral ruling was made that their evidence is admissible as expert evidence. Written reasons for this decision are set out below.

Section 15 of the Statutory Powers Procedure Act¹ provides that the Tribunal may admit as evidence any oral testimony, document or other thing relevant to the subject-matter of the proceeding. The exception is that it may not admit evidence that would be inadmissible in a court by reason of privilege under the law of evidence or is inadmissible under any statute.

Reference was made to the leading case of R v. Mohan 1994 CanLII 80 (SCC), [1994] 2 S.C.R. 9, which sets out the four criteria to the admissibility of an expert’s evidence:

1. Relevance

2. Necessity in assisting the trier of fact

3. The absence of any exclusionary rule

4. A properly qualified expert.

The evidence the two experts were to provide related to the values of the specific properties the Applicants were involved with in a particular jurisdiction in 2004. As one of the allegations was that the Applicant listed properties at artificially inflated prices this evidence was relevant. The Tribunal has no knowledge of property values in 2004 where the Applicants carried on business and therefore this evidence would be of assistance to the Tribunal. There is no exclusionary rule that would apply to this evidence. However, it was argued that the last criterion was not met, in that neither individual is a ‘properly qualified experts’.

A number of cases were put forth to be considered by the Tribunal in determining this point.² The Tribunal found the case of Ontario (Ministry of Municipal Affairs and Housing) v. Ontario (Municipal board), [2001] O.J. No. 922 particularly helpful. It involved a judicial review of a ruling by the OMB to decline to admit opinion evidence from a witness the Board had found to have 30 years practical experience in dealing with hydrogeology related matters and was an experienced expert. However, the Board refused to accept his evidence on the ground that the witness had no formal training in the fields in question and would be called to contradict the evidence of a fully trained hydrogeologist. In paragraph 2 of his decision Justice Wright states:

“Persons whom the tribunal considers to have special training or experience in the field may offer opinions. In law such a person is called an “expert”. As Professor Paciocco notes in his book on Evidence, (p.136) “expertise” in this sense is a modest status achieved when the “expert” possesses special knowledge and experience going beyond that of the trier of fact. Where this threshold level exists, deficiencies in expertise can affect the weight of the “expert” evidence, but do not normally affect its admissibility.”

The Tribunal found that the 20 years of experience these two individual had in the real estate industry, in the vicinity of the Applicants’ place of business and with some of the actual properties was special knowledge and experience beyond that of the Tribunal and therefore their evidence should be admitted and given the weight deemed appropriate.

EVIDENCE AND FACTS

The evidence of the Registrar consisted of documentation and the testimony of Angela Volpe, Manager of the Registration Department of the Real Estate Council of Ontario (“RECO”), Jo Ann Swain, an Inspector with RECO, John Cacciavollani, realtor, and Timothy Cummings, realtor.

The evidence of the Applicant consisted of documentation, and the testimony of Mr. Baxter and Bruce Sworik, realtor.

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 1985 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 had 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, title for this property was registered to another individual, “T”, on May 31, 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 listing 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 anything was amiss. Something was amiss and ultimately in September of 2007, title of this property was transferred to the Canada Mortgage & 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 resell. 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 in 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 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.³ 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 it to Mr. A for the parties to sign.

One of documents repeatedly prepared by Mr. Baxter as part of these transactions was a document entitled “Confirmation of Co-operation and Representation”. This document identified the Listing Broker, (Baxter Realty), as a ‘Dual Agent’. The document itself states:

“The Listing Broker must be impartial and equally protect the interests of the Seller and the Buyer in this transaction. The Listing Broker has a duty of full disclosure to both the Seller and the Buyer, including a requirement to disclose all factual information about the property known to the Listing Broker”.⁴

In the “Additional comments and/or disclosures” area on the same form Mr. Baxter always added a comment to the effect that the Broker had not physically shown the buyer the property.

Ms. Volpe expressed the Registrar’s concerns with Mr. Baxter’s explanation, of his involvement, that he was simply following Mr. A’s instructions. By simply taking instructions from a non-registrant and filling out papers, Mr. Baxter was not doing his job, in the Registrar’s opinion, but rather letting others do it. The transactions Mr. Baxter assisted Mr. A in were for all intents and purposes private sales. Mr. Baxter simply provided the paperwork that the parties would need for financing. All registrants are required to take courses involving ethics every two years. Therefore Mr. Baxter should have known that to be paid to do nothing was too good to be true. He had responsibilities under the Act to exercise due diligence, to evaluate the properties and not simply ‘slap’ a price on them. He has been in the industry 30 years and should know what his duties are. It was the Registrar position that whether or not one of the consumers harmed may not have had ‘clean hands’ does not change those responsibilities and therefore is not relevant. Mr. Baxter, in Ms. Volpe’s words, has simply attempted to ‘deflect’ responsibility for his role in these questionable transactions.

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 CMHC always checked the previous selling price.

With respect to this last point, a letter was obtained by the Applicants’ Counsel from a Senior Manager, Homeowner Underwriting, (presumably at CMHC), dated December 8, 2009, confirming that the mortgages provided on the two properties subject to the consumer complaints were approved by an automated underwriting system. This system relies on the most recent data on the borrower and loan transaction, as well as on the property sale price. CMHC relies on all industry players to act honestly to ensure the data is credible. The system has no capability for inputting all possible relevant historical information regarding the borrower or property.⁵

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. In June of 2005, Mr Baxter was contacted by a solicitor acting on behalf of a purchaser of a property for which Mr. Baxter had been the listing salesperson, which involved Mr. A, and which had closed in January, 2005. Mr. Baxter was advised that this consumer (“J”) may have been induced into buying the property by misrepresentation and asked Mr. Baxter to provide some details as to his involvement. He was asked, among other things, if he had known the price the seller had purchased the property for and whether this had been disclosed. This property had been a property Mr. A had purchased through Baxter Realty for $68,000, and which title was conveyed to Mr. A’s company on September 1, 2004. It was relisted by Baxter Realty for sale the same day for $147,500 and Mr. Baxter had acted for both the buyer and the seller in the sale to Consumer J. Mr. Baxter prepared a response to the solicitor’s letter, a draft of which he first faxed to Mr. A on July 5, 2005, asking Mr. A to let him know what he thought of his responses.⁶ Mr. Baxter acknowledged that he did not disclose the purchase price Mr. A. had paid for the property to “J”; nor did he have any appraisal or valuation done of the property.

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. Interestingly enough, in February 2007, when the property purchased by Consumer J was being sold under power of sale, Mr. Baxter represented the then successful purchaser of the property for $52,500. Knowing Consumer J had paid $146,000 when she purchased the property with the assistance of Mr. Baxter and Baxter Realty, the extreme change in market value would have been noteworthy one would think. This all took place before RECO began its investigation.

In April of 2007, Ms. Swain of RECO attended Baxter Realty in response to the complaint by Consumer J. Mr. Baxter never met Consumer J although they had spoke on the phone. Consumer J had contacted Mr. Baxter to arrange an inspection of the property, which he declined to provide as his agreement with Mr. A had been that if Mr. A found the buyer Mr. Baxter would not show the property but simply do the paperwork. Mr. Baxter did do up the agreement of purchase and sale, and an amending agreement and waiver, all of which he sent to Mr. A for execution by the parties. He did not receive the executed amending agreement or waiver back, nor did he ever receive a deposit. He did however receive a commission in the amount of $4,380 when the transaction closed, some time after the originally agreed closing date.

Ms. Swain attended again at Baxter Realty in November 2007 after receiving notice of another consumer complaint. At that time Mr. Baxter was still dealing with Mr. A. At no time did Ms. Swain give Mr. Baxter any direction as to who he should or should not be doing business with. Mr. Baxter apparently believes RECO should have said something to him if they thought he should not be working for Mr. A.⁷

A copy of the newsletter published by RECO in September 2004, and distributed to all registrants was submitted into evidence.⁸ Page three of this publication is a full page article entitled “Mortgage Fraud: Targeting a Growing Problem”. In the first column of the article it is stated, “one method used to perpetrate mortgage fraud is to misrepresent the purchase price of a property.” It then goes on to outline how such a fraud might occur.

Mr. John Cacciavillani, a realtor with 25 years experience in the same jurisdiction as Baxter Realty testified as to his knowledge of the property purchased by Consumer J. He had put in an offer of $65,000 on the property (it was listed for $68,700) on behalf of a client just prior to Baxter Realty’s involvement.⁹ The transaction did not close as it did not pass his client’s inspection. Based on his analysis of the income flow, the property would have negative returns at the price listed by Baxter Realty.¹⁰ Based on this fact and his knowledge of the property Mr. Cacciavillani was of the opinion that the price Baxter Realty had listed the property for was not realistic. Mr. Cacciavillani also indicated that he has never had a purchaser make an offer to purchase and close a transaction ‘sight unseen’.

Mr. Timothy Cummings, a Realtor with over 20 years experience in the same jurisdiction, testified as to his knowledge of another one of the properties listed and sold by Baxter Realty involving Mr. A and/or his associates. Mr. Cummings had the listing of this property as of June 9, 2004. He listed it for $194,000 as it had been on the market since January 2004 at a price of $210,000 without selling. The property sold for $175,000 to Mr. Baxter’s client, (Mr. A) and closed on September 30, 2004. It was then relisted the same day for $389,000. It was Mr. Cummings opinion, given that the property was on the market for a fairly long time, the price it ultimately sold for, and the lack of indication that anything was done to the property, that the listing price was ‘unrealistically high’. Mr. Cummings indicated that he would not be willing to list a property at such an unrealistic price as it would cost him money to try and sell it and he would not want to damage his credibility or reputation by doing so

This property was in fact sold for $380,000 to an individual who Mr. Baxter knew to be a family friend of Mr. A’s. The instructions to Mr. Baxter regarding this transaction came in an email from Mr. A dated December 8, 2004 which read as follows:

“Buyer for ‘xxxxxxxx’ Ave.

‘Name’

Deposit 1% of sale price

Sale price 380K

No condition

Acceptance date dec. 9

Closing dec 10

Send a commission statement

For 1% amendment.

Will advise fax number.

Then when closed we could wait a week or so --- and re-list for 397k with a sale of 377k.“ ¹¹

The last line of this email it particularly noteworthy. Although asked, Mr. Baxter was unable to shed any light on what he believed Mr. A to have meant by it.

Mr. Sworik, a realtor with 31 years of experience in the real estate industry was called by the Applicants to provide his opinion as to appropriateness or regularity of Mr. Baxter’s conduct in the transactions reviewed by RECO. Mr. Sworik was very careful to not suggest Mr. Baxter had acted incorrectly. He described Mr. Baxter as having worked for a sophisticated investor who was highly profit driven and inflexible in his demands and that Mr. Baxter was simply acting on his client’s instructions. Mr. Sworik did however identify many aspects of the transactions as ‘not normal’. In particular, it was not normal that the properties were not inspected by the agent, that the agent was not to show the property, that the agent did not do a comparative market analysis, that the agent’s representative/salesperson did not meet with the people involved, that the vendor would ever pay for a deposit and that instructions would be given in the form of the December 8, 2004 email (set out above). Mr. Sworik testified that these circumstances would have led him to ask questions.

It was suggested by Mr. Sworik that the size of the office an individual is working out of would impact the amount of information available to them. With a franchise brokerage there would be an increased volume of transactions and a focus to educate salespeople which would not occur in an independent office. He also suggested that there is a lot more known in the industry today about mortgage fraud and there is much more scrutiny now of transactions.

Mr. Sworik also suggested that there is a lot of confusion in the industry about the concept of a ‘dual agent’ and many agents use the categorization of ‘dual agent’ incorrectly. There is a different standard that an agent must meet when dealing with a ‘client’ verses a ‘customer’. The client would be entitled to more information, although a customer is entitled to be treated fairly and with honesty and integrity. Where there is a conflict between the interests of a client and customer, Mr. Sworik advised that the client’s interests would take precedence. Although Mr. A would, in some instances not appear to be a party to the transactions, it was Mr. Sworik’s opinion that he would be viewed by most agents as the ‘client’. The suggestion was that his interests would trump that of the other party, assuming that the description of ‘dual agency’ used by Mr. Baxter was erroneous.

Mr. Baxter explained that he described his relationship with the various purchasers as ‘dual agent’ because that is what he was taught in the course he took and that he does not ‘do that anymore’, suggesting that he was in error. He did not however provide an explanation as to what was the correct way to describe the relationship he had with the buyers of Mr. A’s properties, or how this would have changed the standard or duties he owned to those buyers and how his conduct at the time would have satisfied those duties.

LAW

The Act states, in part:

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,

(i) having regard to the applicant’s financial position or the financial position of an interested person in respect of the applicant, the applicant cannot reasonably be expected to be financially responsible in the conduct of business,

(ii) the past conduct of the applicant or of 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, or

(iii) The applicant or an employee or agent of the applicant makes a false statement or provides a false statement in an application for registration or for renewal of registration;

(d) The applicant is a corporation and,

(i) having regard to its financial position or the financial position of an interested person in respect of the corporation, the applicant cannot be reasonably be expected to be financially responsible in the conduct of its business,

(iii) the past conduct of its officers or directors or of an interested person in respect of its officers or directors or of an interested person in respect of the corporation affords reasonable grounds for belief that its business will not be carried on in accordance with the law and with integrity and honesty, or

(iv) an officer or director of the corporation makes a false statement or provides a false statement in an application for registration or for renewal of registration;

Ontario Regulation 580/05, Code of Ethics¹² states in part:

s. 3 A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

s. 4 A registrant shall promote and protect the best interests of the registrant’s clients.

s. 5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.

s. 37 (1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.

(2) A registrant shall not knowingly make an inaccurate representation about services provided by the registrant.

CONCLUSION

The issue before the Tribunal is whether Mr. Baxter’s conduct affords reasonable grounds to conclude that he and Baxter Realty will not carry business with honesty and integrity and in accordance with the law. It is the Tribunal’s responsibility to reach its own decision on this issue after considering all the evidence presented by both the Applicant and the Registrar. The Tribunal owes no deference to the Registrar’s opinion.¹³

The facts in regard to Mr. Baxter’s involvement in the real estate transactions which have been the focus of these proceedings are not in dispute. What is in dispute is how his conduct should be characterized.

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 on listing a property for a 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.

If this highly questionable transaction in December of 2004 did not alert Mr. Baxter that something was seriously wrong, then being contacted by a solicitor in June of 2005 suggesting a consumer had been misled should have. Rather than run the opposite way from Mr. A upon hearing this, Mr. Baxter sent Mr. A a copy of his response for Mr. A’s input.

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 experienced 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 by the desire to continue to be paid commissions by Mr. A to simply do paperwork.

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 pay 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 they 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 prices 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 this 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.

It has been suggested that there is nothing wrong with a purchaser asking any price they want, unreasonable or otherwise. That may be true; however, the involvement of a registered real estate agent provides an appearance of legitimacy and when an agent is acting on behalf of both parties there is an expectation, and obligation, that the interests of both parties will be protected. It is not simply a matter of ‘buyer beware’, as Mr. Baxter seemed to think.¹⁴

Mr. Baxter expressed regret that he identified Baxter Realty’s role as ‘dual agent’ in the various transactions. He apparently made this mistake because somewhere along the line he took a course and that is how he was told to do it. Firstly, it is difficult to understand how he made such a ‘mistake’, repeatedly. What is involved in being a dual agent is clearly stated on every ‘Confirmation of Co-operation and Representation’ form he completed. The buyer and the seller are to be treated equally and fairly, and there is an obligation to disclose factual information that the agent has (which would clearly include the current market value). Had he read or knew the content of the forms he was filling out, he would have known what his obligations were. He would have realized that he had no intention to fulfill those obligations and could have properly advised any buyer that they would not be provided with any services. Put in the best light possible this practice raises an issue of his competency that he did not know what his obligations were to the purchasers. In the worst light, it amounts to misrepresentation: to execute and provide meaningless forms to buyers who may rely upon by them. This was a clear breach of the Code of Ethics¹⁵

It is not clear to the Tribunal how Mr. Baxter’s conduct could be seen in a better light if the various buyers were not to be considered ‘clients’, as the dual agency created, but simply ‘customers’. They were still a party to the trade and Mr. Baxter had an obligation to act fairly and with honesty and integrity, which he did not do in the Tribunal’s opinion. Simply putting in a clause to the effect that the Broker did not show the property to the buyer does not wipe out all obligations to the buyer in the circumstance. This appears to be another misunderstanding of Mr. Baxter.

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 be truly 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.

In summary, the Tribunal finds that Mr. Baxter knew that all 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 parties 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 that 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 any 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?

It has been emphasised, and the Tribunal accepts, that Mr. Baxter has been completely co-operative with RECO in its investigations. He made full disclosure and there was no attempt to falsify documents or mislead RECO in anyway. Also, that there have been no prior complaints against Mr. Baxter and he has never been convicted of a crime. As stated he has been in the industry 3l years.

Having considered all the evidence the Tribunal finds 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.

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 the law. Therefore its licence should be revoked at this time.

With respect to Mr. Baxter’s registration, it was argued by Counsel for the Registrar that the facts of this case are similar to those in Re Khetani [2006] O.L.A.T.D. No 473, in which the registrant’s licence was revoked. In that case the Tribunal found that the registrant ”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”.¹⁶ 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.

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 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. Mr. Baxter has operated in the industry without incident 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.

ORDER

The Registrar is hereby ordered to carry out his Proposal to revoke the registration of T. Baxter Real Estate Ltd., as a brokerage under the Act.

The Registrar is hereby ordered not to carry out his Proposal to revoke the registration of Timothy Baxter, as a broker under the Act, but to register him subject to the following conditions:

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.

LICENCE APPEAL TRIBUNAL

Elizabeth L. Sproule, Vice-Chair

RELEASED: January 25, 2010

Footnotes

1. 1Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22
2. 2Bombardier v. Canada(Restrictive Trade Practices Commission), [1980] F.C.J. No. 508; Engineering Students Society, University of Saskatchewan v. Saskatchewan (Human Rights Commission), [1983] S.J. No. 274; Laudon v. Roberts, [2007] O.J. No. 1702; Koeth v. Slack Lumber & Supplies Ltd., [2008] O.J. No. 4729; Dulong v. Merrill Lynch Canada Inc., 2006 CanLII 9146 (ON SC), 23 C.P.C. (6th) 172, 80 O.R. (3d) 378; Ontario Workplace Safety and Insurance Appeals Tribunal, 2006 Carswell Ont 9372; R. v. Thomas [2006] O.J. No. 153.
3. 3Exhibit 1, Tab 8A
4. 4Exhibit 1, pg. 164-165
5. 5Exhibit 10
6. 6Exhibit 1, pg. 196
7. 7Exhibit 12
8. 8Exhibit 11
9. 9Exhibit 6
10. 10Exhibit 6 pg. 13
11. 11Exhibit 3, pg. 907
12. 12This regulation came into effect in March 31, 2006, prior to this similar rules of conduct were set out in RECO’s By-law No. 10: see Rules 1,2,3, 10 and 42..
13. 13Ontario (Motor Vehicle Dealers Act, Registrar) v. Shine Car Sales, 2003 CanLII 11437 (ON SCDC), [2003] O.J. No. 603
14. 14Exhibit 12
15. 15S. 37 (2) Code of Ethics, Ontario Regulation 580/05
16. 16Pg.5