Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2012-05-07

FILE:

6682/REBBA

CASE NAME:

6682 v. Registrar, Real Estate Business Brokers Act 2002

An Appeal from a Notice of Proposal by the Registrar, Real Estate Business Brokers Act, 2002, to Revoke Registration

Anton Jeeva Arulappu

Applicant

-and-

Registrar, Real Estate Business Brokers Act, 2002

Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Richard Macklin, Vice-Chair

APPEARANCES:

For the Applicants:

Aleem Baksh, Agent

For the Respondent:

Johnathan Hurter, Agent and Johnathan Miller,Counsel

Heard in Toronto:

April 4 and 5, 2012

REASONS FOR DECISION AND ORDER

OVERVIEW

The Registrar of the Real Estate and Business Brokers Act, 2002 (“the Registrar” and “Act”, respectively) seeks, by Notice of Proposal dated January 20, 2010 and supplementary Proposal dated October 4, 2011, to revoke the broker’s licence of Anton Arulappu (the “Applicant”). The Applicant has appealed to the Licence Appeal Tribunal (“the Tribunal”).

There are three bases for the proposal: that the Applicant was a participant in a large-scale stolen car scheme, that he failed to disclose to the Registrar his run-ins with the law and that he used a proscribed designation – P.Eng.- on his business cards and advertising. The Applicant denies any criminal wrongdoing and seeks a reprieve from his admitted non-disclosure. In terms of the use of the P.Eng. designation, he states that he is a licensed engineer, but not in Ontario. He further states that, upon learning that he could not use the P.Eng. designation, he stopped and, therefore, should not be revoked for a simple misunderstanding.

The Notices of Proposal also allege impropriety on the Applicant’s part in respect of a failure to disclose Environmental Protection Act charges and a failure to disclose his registration with the Financial Services Commission of Ontario. These allegations, however, were withdrawn at the hearing.

FACTS

I. Background

The Applicant started a used car business in and around 1999 called Jenny Auto Sales (“JAS”). He was registered as a salesperson under the Motor Vehicle Dealers Act at that time. Since 2000, according to the Applicant, the controlling mind of JAS has been an individual named J.A. and the Applicant has been no more than a sales manager. He testified that his involvement with JAS ended in 2005, the same year that the Applicant obtained his licence as a real estate salesperson. He has since obtained a licence as a real estate broker.

Notwithstanding the Applicant’s evidence that that he ceased to perform any managerial functions at JAS as of 2005, his name remained on the JAS corporate profile report, as an officer and director, until 2012. The reason that the JAS information is important is that JAS appears to be at the centre of a stolen car operation that was discovered in August 2008 (“the Chop Shop”). The Registrar believes that the Applicant was a central figure in that crime ring. That allegation is wholly denied by the Applicant.

II. The “Chop Shop”

In the fall of 2005, the Applicant met with a property owner, M.R., and entered into a “Entry Permit” agreement in the Applicant’s name, with Mr.R.s’ company (“the lessor”). Under this agreement, the Applicant was granted permission to enter a storage property and utilize part of a barn, two construction trailers and some outside space for storage. The Applicant handed Mr. R. a “Jenny Auto Sales Inc.” business card with, amongst others, the words “A. Anton – President" on it. The Applicant testified that he entered into the lease agreement for the benefit of JAS and that JAS utilized the facility, not him.

In August of 2008, the York Regional Police Service (“YRPS”) received an anonymous tip regarding a “chop shop” operation that was being conducted in the barn leased by the Applicant and others¹. On inspection of the second floor of the barn, the YRPS found 17 vehicles, in various states of disrepair, that were confirmed as stolen. A search of the two JAS trailers found large volumes of car parts – which were presumed stolen. A generator, other parts and a VIN tag were also found in the outdoor areas on the lessor’s property, and identified or presumed as stolen.

The investigative findings at the lessor’s property led the YRPS to suspect JAS as being behind the criminal enterprise and, accordingly, a search warrant was obtained for the home and surrounding area (i.e. yard and garage) of the director of the company. As noted above, the corporate profile reports for JAS, at that time, indicated that the Applicant was a director and officer. As a result, his home was searched.

The search of the Applicant’s home yielded business documents and forged insurance documents, related to the stolen vehicles. One of the officers who searched the home was Cst. Ron VanGroff. Cst. VanGroff testified in chief that the search of the Applicant’s property also found an engine key and a rear seat that were both linked to stolen vehicles found at the lessor’s property. On cross-examination, however, he confirmed that the evidence regarding the finding of the key and rear seat was based on hearsay. Supplemental Report – 12, dated September 24, 2008, prepared by Cst. Van Groff, describes what was found at the Applicant’s home and appears to indicate that it was only documents related to the key and rear seat that were found, not the actual key and rear seat. The significance of this distinction will be described later in these Reasons.

The Applicant testified that in 2008 he received tax audit notices regarding JAS and this caused him to obtain the company’s files from storage and retain them in his home. The purpose of retaining the documents was to attempt to reconstruct the company’s financial information in order to, amongst other things, plead for a reduced tax assessment. The corporate documents also included the documents related to the stolen property, which – the Applicant states - he had in his possession unwittingly. The Applicant testified that numerous other individuals had access to the lessor’s property and that one or more of them is the criminal – not him.

The Applicant further testified that in 2005 he sent a Form 1 to remove himself as a director and officer of JAS. Apparently, the Ministry of Government Services failed to process the change. As at January 2012, he was still listed as an officer and director, along with the party he says is the true sole officer and director of JAS – J.A. As at March 2012, the records have been amended and Mr. A is listed as the sole officer and director. The company ceased doing business many years ago.

Ultimately, the Applicant and JAS were charged with 18 counts of possession of property obtained by crime and two counts of uttering forged documents – in respect of the chop shop. All charges against the Applicant were withdrawn. JAS plead guilty to two counts of possession of property obtained by crime and paid a fine of $5,000.00 for each count.

III. Failure to Disclose

An applicant for registration or renewal of registration as a real estate salesperson or broker, must, amongst other things, disclose in their application at Question #7 if they are "facing current charges" or if they have "been found guilty of an offence under any law." In addition, whatever the answer to that question may be, if the status quo changes and the applicant is charged with new charges and/or convicted of new offences during the term of registration, he or she must disclose that change in status quo within five business days (see s. 34(1) of O.Reg 567/05 of the Act). The following chart sets out the Applicant’s breaches of these two requirements. These breaches are not denied by the Applicant:

Date of Registration or Renewal

Date and Description of “Charges Under Any Law”

Breach of Disclosure Obligation

June 24, 2005 – application for “new: broker/salesperson”

January 23, 2007- uttering forged document – Criminal Code of Canada

Failure to, within 5 days, report change in June 24, 2005 application

June 21, 2007 – application for “new: broker/salesperson”

January 23, 2007 – uttering forged document – Criminal Code of Canada

False answer to Question #7 as the applicant answered “no” regarding the existence of any charges under any law, whereas the appropriate answer was “yes”.

January 29, 2008 – application for renewal: “broker/salesperson”

January 23, 2007 – uttering forged document – Criminal Code of Canada

False answer to Question #7 as the applicant answered “no” regarding the existence of any charges under any law, whereas the appropriate answer was “yes”.

August 28, 2008 – possession of property obtained by crime (x18), uttering forged document(x2)

Failure to, within 5 days, report change in January 28, 2009 application.

The Applicant acknowledged his mistakes in failing to report the above-noted criminal charges, all of which were withdrawn. He testified that since he had done nothing wrong (as established by all charges against him having been withdrawn), he felt that he had no obligation to disclose. He testified that he has since learned his lesson as exemplified by the Provincial Offences Act charges that were laid against him under the Act. Specifically, the four infractions set out above were the grounds for a prosecution under the Provincial Offences Act. The Applicant was convicted of these four counts on March 15, 2012, and reported the change of status quo within five days.

IV. P. Eng

It is apparent from the evidence that the Applicant had, for a period of time, used the designation P.Eng on business cards and advertisements. The Registrar called evidence that Ontarians are regulated in terms of who can hold themselves out to be engineers and, without producing the legislative rules in that regard, stated that the rules were similar to what they are for realtors under s. 4 of the Act. The Applicant testified that he has an engineering degree from the University of Peradeniya in Sri Lanka. He is entitled to hold himself out as an engineer there and was not aware that he was restricted from doing so in Ontario. He further states that as soon as the problem was drawn to his attention he removed the business cards and advertisements that contained the designation. The Registrar did not contest that these remedial steps were taken.

THE LAW

The pertinent legislation in respect of the Registrar’s proposal are the following sections of the Act:

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, …

(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; …

(f) the applicant is in breach of a condition of the registration; or …

Conditions

(2) A registration is subject to such conditions as are consented to by the applicant or registrant, as are applied by the registrar under section 13, as are ordered by the Tribunal or as are prescribed. 2002, c. 30, Sched. C, s. 10 (2).

Notice re: refusal, suspension, etc.

14. (1) The registrar shall notify an applicant or registrant in writing if he or she proposes to,

(a) refuse under subsection 13 (1) to grant or renew a registration;

(b) suspend or revoke a registration; or

(c) apply conditions to a registration or renewal to which the applicant or registrant has not consented. 2002, c. 30, Sched. C, s. 14 (1); 2004, c. 19, s. 18 (11).

Hearing

(5) If a hearing is requested, the Tribunal shall hold the hearing and may by order direct the registrar to carry out the registrar’s proposal or substitute its opinion for that of the registrar and the Tribunal may attach conditions to its order or to a registration. 2002, c. 30, Sched. C, s. 14 (5).

ANALYSIS

I. Findings Regarding the Chop Shop

The Registrar asks the Tribunal to find that the Applicant was directly involved in the chop shop operation. The Registrar further submits that, accordingly, on account of the Applicant being an active participant in a crime of dishonesty, there are grounds upon which the Tribunal can find that the Applicant will not carry out his duties as a broker, in accordance with law and with integrity and honesty. There is no direct evidence of the involvement of the Applicant in the chop shop. The primary circumstantial evidence and submissions of the Registrar thereon are as follows:

1. The Applicant was a direct participant in the leasing of the storage space in the trailers and the barn and that is where the chop shop operations occurred. It makes no sense that a person would put themselves personally “on the hook” for a storage agreement if they are not receiving a benefit (i.e. proceeds of crime);

2. Jenny Auto Sales plead guilty to two counts in relation to the chop shop and the Applicant was, at the time, a registered officer and director of Jenny Auto Sales;

3. There was ample evidence at the hearing before this Tribunal that a Chop Shop was operating in and around the storage space rented by the Applicant; and,

4. Documents related to the stolen property and the insurance documents through which further crimes were committed were found in the Applicant’s house.

The Registrar also alleged, as noted above, that the Applicant had, at his home, a key and rear seat that belonged to stolen cars. There was, however, considerable ambiguity in the Registrar’s case surrounding the issue of whether the key and the seat were found on the Applicant’s property, or whether it was only documents related to the key and seat that were found. The officer who was directly involved with these items was not called to testify at the hearing. Apparently, numerous photographs were taken at the property but none were produced. The Supplementary Report prepared by Cst. VanGroff speaks to documents related to the key and rear seat being found, not the actual key and seat. The distinction is important because the Applicant, in his evidence, furnished an excuse for why he had documents related to stolen property in his home. However, in light of his abject denial that the key or seat were found on his property, he did not offer an explanation in that regard. A finding that a key and rear seat for stolen cars were found on the Applicant’s property, without an innocent explanation, would amount to cogent evidence of his involvement in the chop shop.

The Tribunal recognizes that this is not a criminal hearing and that the burden of proof regarding the Applicant’s participation in the Chop Shop rests on the Registrar, on a balance of probabilities. The Tribunal finds that the Registrar has not met his burden in this regard. Although the Registrar has established that a chop shop was being conducted at the lessor’s property, it has not established that the Applicant was a participant in the scheme. Other individuals had access to the property. The Applicant’s version of events that he was an unwitting and distant participant in the whirlwind that surrounded JAS is believable. He states that he helped out JAS in late 2005, by entering into a storage facility agreement but did nothing else in regard to the storage facility. He also stated that he was, at late 2005, no longer JAS’ controlling mind. No evidence was led by the Registrar regarding the ongoing business of JAS at the storage facility. Who was paying the annual storage fees? How were the annual storage fees delivered to the lessor? After the storage agreement was signed, was the applicant involved in the storage arrangement in any way? Such evidence, if it exists, could have been available through, amongst other sources, Mr. R.

The Applicant was not challenged on his assertion that he was facing tax penalties on account of him being a registered officer and director of JAS. This tax exposure provides a bona fide basis upon which the Applicant was in possession of JAS documentation. The unwitting possession of documents related to a criminal operation is not a basis upon which to revoke a registration. On the other hand, as noted above, if the applicant had been in possession of stolen property (i.e. the keys and the back seat), the Registrar’s case would have been stronger. As further noted above, if such evidence exists, it could easily have been called at this hearing but was not.

In addition, no evidence was led showing that the Applicant had any involvement in JAS activity post-2005, from which it could be inferred that he had involvement in their illegal activities. It is true that the Applicant did not remove himself from the JAS corporate profile report until recently. It is also true that the most up-to-date corporate profile report tells us that another individual, Mr. A. is the President and Director of JAS and has been so since July 2005. Corporate registration documents are not decisive evidence as to the operating mind of a corporation. In this case, the party with the burden of proof, the Registrar, did not go further and locate evidence of the Applicant being the de facto controlling mind or of his having any other involvement with JAS, post 2005. Thus, without more, the Applicant’s failure to remove himself from a public registry cannot be equated with being a participant in a relatively large-scale criminal operation. The evidence, in its totality, does not rise to the necessary level to find that the Applicant was a directing mind of JAS at the material times or in any way involved in a chop shop crime ring. Accordingly, the Tribunal does not find that the chop shop evidence is a ground upon which it can have reasonable grounds to believe that the Applicant will not conduct himself in accordance law and with integrity and honesty. The Applicant’s history of non-disclosure, however, is another story.

II. Findings Regarding Non-Disclosure

Based on the evidence called at the hearing, reflected in the chart set out above, the Registrar has made out a case for reasonable grounds that the Applicant will not conduct himself according to law and with integrity and honesty. Accordingly, the Registrar has met his onus at this hearing under s. 10 (1)(a)(ii) of the Act.

A separate non-disclosure issue arises in this case in regards to the Applicant’s failure to disclose the revocation of his car salesperson licence. The Registrar submits that although this failure to disclose was not a ground in the Notices of Proposal, it is a fact that should be taken into account in the disposition of this case. The revocation occurred on June 20, 2007. The Applicant testified that he was not aware that his car salesperson licence had been revoked until a meeting with officials in the Registrar’s office, held June 11, 2009. The Applicant’s lack of knowledge of his having been revoked was not challenged by the Registrar. Thus, the substance of the Registrar’s complaint – on the MVDA issue – is that the Applicant failed to notify him, within 5 days, of a revocation that the Registrar’s staff were aware of and indeed, they were the ones who broke the news to the Applicant.

A failure to notify is not to be taken lightly. In this case, however, the failure to notify the Registrar of the revocation of the car salesperson licence is not severe as it appears the Applicant was not aware of the revocation.

III. Findings Regarding P.Eng.

Similarly, the Tribunal does not find that the Applicant’s use of the designation P. Eng. is a severe transgression. Again, it appears the Applicant’s mistake in this regard was unwitting and was corrected upon his being notified.

Indeed, the central issue in this case is not whether the Applicant committed transgressions, but whether he should be revoked or some lesser sanction imposed. That issue is addressed next.

IV. Revocation or Lesser Sanction

The failure to accurately complete registration or renewal of registration documents is a serious misdeed. The registration process is the Registrar’s first opportunity to assess the honesty of an applicant, in an industry where the trustworthiness of registrants is the central pillar in protecting the public from harm. If the registrant complies with his disclosure obligations at first instance, he or she must continue to do so at each subsequent renewal. The policy concerns regarding the trustworthiness of registrants does not diminish with increased tenure.

When a registration applicant or registrant is caught failing to disclose a criminal charge or conviction, they often turn to a “dog ate my homework” excuse which can variously reflect such themes as: “I didn’t know that simply being charged had to be reported”; or “I’m innocent of those charges so I don’t have to report them”; or “I was given a conditional discharge, so I wasn’t really charged”. The Registrar is then placed in a difficult position because it is, on a practical level, very difficult to prove that an applicant is intentionally trying to deceive the Registrar. Nonetheless, the wording on the application for registration is clear and meant for the comprehension by persons of moderate intelligence. The failure to disclose charges in the face of such plain language warrants a remedial order. The question in this case, as stated above, is the severity of the order.

A review of the jurisprudence yields a relatively consistent thread of reasoning to the effect that orders of revocation or a refusal to register are reserved for severe cases. Specifically, based on the cases presented by the parties, these revocation or refusal to register cases either involve those rare instances where the Registrar has been able to establish an intent – on the part of the applicant – to deceive the Registrar² and/or proven significant underlying criminal activity (often in the nature of crimes of dishonesty)³.

In this case, the Applicant failed to disclose the existence of criminal charges. The Tribunal is not convinced that he intended to deceive the Registrar, although it does not wish to be seen as condoning the Applicant’s convenient inability to comprehend the clear wording of Question #7. In addition, as noted above, the Applicant has not been convicted of any of the allegations surrounding the chop shop and the allegations were not proven at this hearing. Thus, a remedial order, short of revocation, will be ordered. The Tribunal feels, in this case, that such an order will be sufficient to bring home the message to the Applicant – and others – that they must be much more careful in filling out registration renewal forms.

ORDER

Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs that the Registrar not carry out the Notice of Proposal dated January 20, 2010 or the Supplementary Proposal dated October 4, 2011, but continue the Applicant's registration, subject to the following conditions:

1. That the registration of the Applicant will be suspended for a period of ninety (90) days from the date of the release of these reasons;

2. That the Applicant advise the Registrar and his employer in writing, within five business days, of any charges that he is facing under any Federal legislation or any Provincial legislation where the charge would fall under Part III of the Provincial Offences Act, R.S.O. 1990, c. P.33;

3. That the Applicant advise the Registrar and his employer in writing if he is charged, subsequent to the release of these reasons, with any charge of the nature described in paragraph 2 above. Such advice shall disclose the full extent of those charges and be delivered to the Registrar and his sponsoring dealer within five business days of the date of charge;

4. That the Applicant provide the Registrar with an updated RCMP criminal record report on or before October 31, 2012. The report is to be a current report, no more than thirty (30) days old. Any further criminal record disclosure conditions can be imposed by the Registrar at the time of renewal of registration – if a renewal occurs and the further disclosure is deemed necessary by the Registrar; and

5. That the Applicant fully and promptly co-operate with any inquiry made by the Registrar, in respect of any charges, findings or convictions related to the Applicant regarding any charge of the nature described in paragraph 2 above.

LICENCE APPEAL TRIBUNAL

Richard Macklin, Vice-Chair

Released: May 7, 2012

Footnotes

1. 1A chop shop is a criminal enterprise wherein cars are stolen and their parts removed and sold on the black market.
2. 2Raco v. Registrar, Real Estate Business Brokers Act, [2010] O.L.A.T.D. No. 255; Ottolino v. Registrar, Motor Vehicle Dealers Act, June 30, 2004, L.A.T.
3. 3Griese v. RegistrarMotor Vehicle Dealers Act (Unreported: May 27, 1993) (Ont.Div.Ct.); Barroso, supra; Giannini v. Registrar, Real Estate and Business Brokers, (1985) 14 C.R.A.T. 179; Ottolino, supra