Licence Tribunal

Appeal d'appel en Tribunal matière de permis

DATE: 2014-07-09

FILE: 7448/MVDA

CASE NAME: 7448/MVDA v. Registrar, Motor Vehicle Dealers Act 2002

An Appeal from a Notice of Proposal by the Registrar, Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B - to Refuse/Revoke Registration

Hicham Lebada Appellant

-and-

Registrar, Motor Vehicle Dealers Act 2002 Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Alex McCauley, Member

APPEARANCES:

For the Appellant: Stuart MacKay, Counsel

For the Respondent: Brian Osler, Counsel

Heard in London: February 25, 26, 27, and May 13, 2014

REASONS FOR DECISION AND ORDER

BACKGROUND

This is a hearing before the Licence Appeal Tribunal (the “Tribunal”) arising out of a Notice of Proposal issued by the Registrar, Motor Vehicle Dealers Act 2002 (the “Registrar” and the “Act” respectively.) The Notice of Proposal dated May 31, 2012 proposed to revoke/refuse to grant the registration of Hicham Lebada (the “Appellant)”), as a salesperson under the Act.

FACTS

This matter arises from a Notice of Proposal (NOP) dated May 31, 2012. In the NOP, a number of parties including the Appellant were alleged to have committed several breaches of the Act and faced revocations of their respective registrations and the registrations of four dealerships: 5 Stars Dealers Inc, Oxford Motors, Marins Auto Ltd.and Canadian Auto Group Inc. Gina Gabraiel and Gabie Gabraiel, who are brother and sister, were the persons in charge at 5 Star Motors. . Gina was an owner on paper, Gabie was hands on. Several other persons involved in the dealerships were named as well. Breaches of section 6 of the Act, were cited, that is, failing to act in accordance with law and with honesty and integrity.

At the commencement of a hearing on February 27, 2013, in London, it was disclosed that terms of settlement had been reached and agreed to by all parties. The order was released March 18, 2013. The offer of settlement never included Hicham Lebada and the Registrar’s position was that they would be proceeding with the allegations against Mr. Lebada. This, in spite of objections from Mr. Lebada’s Counsel.

The allegations against Mr. Lebada arise from incidents of misleading advertisements by 5 Star Auto and Oxford dealership. At the time of the release of the alleged misleading ads the Appellant was the general manager at the dealerships and allegedly in charge of the dealerships, including overseeing advertising. According to documentation, the Appellant was named as general manager of 5 Star Auto on August 3, 2011, and Oxford Motors on October 25, 2011.

On October 8, 2009, the Appellant declared personal bankruptcy. On his statement of affairs, the Appellant indicated he was unemployed notwithstanding that he was registered by OMVIC as a salesperson.

The Registrar alleges that the bankruptcy report from the trustee in bankruptcy raised serious concerns about the honesty of the Appellant in dealing with the issues surrounding his bankruptcy. The Registrar alleges inconsistencies in statements made in resolving the bankruptcy and that these inconsistencies are evidence of deception on the part of the Appellant and provide evidence that the Appellant will not act in his affairs with honesty and integrity

The Registrar takes the position that the Act, and section 6 in particular, provides for consumer protection, especially to the more vulnerable. It is therefore essential that Registrants rise to and display a high standard of character, operating at all times with honesty and integrity.

The hearing took place, in London, on February 25, 26, 27, 2014 and May 13, 2014. At the conclusion of the evidence, the parties provided written submissions and those submissions were completed on June 4, 2014.

THE LAW

The intention and objective of the Act is to protect the public interest. In doing so, the Act prohibits the making of false statements in an application for registration or renewal and requires that registrants be financially responsible in the conduct of business, that they comply with terms and condition of Registration and that they carry on business in accordance with the law and with integrity and honesty.

The Act states, in part, as follows:

Prohibition

4.(1) No person shall,

(a) act as a motor vehicle dealer unless the person is registered as a motor vehicle dealer under this Act; or

(b) act as a salesperson unless he or she is registered as a salesperson.

Name and place of business

(2) A motor vehicle dealer shall not,

(a) carry on business in a name other than the name in which the motor vehicle dealer is registered; or

(b) invite the public to deal in a place other than the place that is authorized in the registration of the motor vehicle dealer.

Unregistered salesperson

(3) A motor vehicle dealer shall not retain the services of a salesperson unless the salesperson is registered in that capacity.

Supply to unregistered person

(4) A motor vehicle dealer shall not supply motor vehicles to another motor vehicle dealer for the purpose of trading in motor vehicles unless the other motor vehicle dealer is registered in that capacity.

Salespersons

(5) A salesperson shall not trade a motor vehicle on behalf of a motor vehicle dealer unless the salesperson is registered to that dealer.

Regarding the right to registration, the Act states:

Registration

6. (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;

(b),(c) REPEALED: 2004, c. 19, s. 16 (5).

(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 reasonably be expected to be financially responsible in the conduct of its business,

(ii) having regard to the financial position of its officers or directors or an interested person in respect of its officers or directors, the applicant cannot 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;

(e) the applicant or an interested person in respect of the applicant is carrying on activities that are, or will be if the applicant is registered, in contravention of this Act or the regulations, other than the code of ethics established under section 43;

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

(g) the applicant fails to comply with a request made by the registrar under subsection (1.1).

Request for information

(1.1) The registrar may request an applicant for registration or renewal of registration to provide to the registrar, in the form and within the time period specified by the registrar,

(a) information specified by the registrar that is relevant to the decision to be made by the registrar as to whether or not to grant the registration or renewal;

(b) verification, by affidavit or otherwise, of any information described in clause (a) that the applicant is providing or has provided to the registrar.

Refusal to register, etc.

8. (1) Subject to section 9, the registrar may refuse to register an applicant or may suspend or revoke a registration or refuse to renew a registration if, in his or her opinion, the applicant or registrant is not entitled to registration under section 6.

Conditions

(2) Subject to section 9, the registrar may,

(a) approve the registration or renewal of a registration on such conditions as he or she considers appropriate; and

(b) at any time apply to a registration such conditions as he or she considers appropriate.

Notice re: refusal, suspension, etc.

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

(a) refuse under subsection 8 (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.

Content of notice

(2) The notice of proposal shall set out the reasons for the proposed action and shall state that the applicant or registrant is entitled to a hearing by the Tribunal if the applicant or registrant mails or delivers, within 15 days after service of the notice, a written request for a hearing to the registrar and to the Tribunal.

EVIDENCE

The Tribunal dealt initially with the allegations surrounding misleading advertisements. Since 2009, there have been a number of issues regarding incidents of misleading advertisements involving 5 Star Motors and OMVIC. There were disciplinary interactions between 5 Star and the Registrar. On June 24, 2010, a disciplinary panel found that 5 Star had issued misleading advertisements. As a result, Gina Gabraiel and two managers were required to take a remedial course and the dealership was fined.

On June 21, 2011, the Registrar issued a NOP to revoke the registrations of Gina Gabraiel and 5 Star for continuing misleading advertisements between July 5, 2010 and June 21, 2011. The matter was resolved by a consent order from the Tribunal on January 18, 2012.

The Registrar further alleged that from January 2012 until May 2012, 5 Star was still submitting misleading advertisements and failed to submit advertisements for pre-approval by OMVIC, in breach of the order. This appears to have resulted in the NOP that was issued against various dealerships under the control of the Gabraiels, the Gabraiels themselves, along with various salespersons one of whom was the Appellant. As noted above, the matters were resolved in a settlement reached with all parties except the Appellant Mr. Lebada and a consent order with conditions was released on March 18, 2013.

The Registrar alleges that the Appellant was the manager in charge of 5 Star and Oxford Motors in 2011 at the time that the misleading advertisements were in effect. The management position of the Appellant was submitted to OMVIC in business change notifications signed by the Appellant. The notice regarding 5 Star was dated August 3, 2011. The business change notice regarding Oxford was signed on October 25, 2011 by the owner Gabie Gabraiel.

Andrea Corth

Ms Corth, the Business Standards Coordinator for OMVIC gave evidence. In her current position, she is responsible for ensuring that advertising standards as instituted by OMVIC are adhered to by dealerships and dealers.

She outlined a history of breaches of the advertising policies primarily by 5 Star and a list of disciplinary sanctions against 5 Star dating back to 2010. Many of these problems were settled with 5 Star agreeing to make necessary revisions to their existing advertising practices and to have future ads submitted to OMVIC for review prior to their release.

The instances of non-compliance on the part of 5 Star continued. On August 5, 2011, an NOP was issued against 5 Star and the owners and a manager, to revoke the registrations. On January 18, 2012, this NOP was resolved by an agreement between the dealers and OMVIC which resulted in a further conditional consent order. There had been an ongoing history of non-compliance resulting in another NOP being issued to revoke the registrations of 5 Star, Gina Gabraiel and Ziad Manuel. The NOP was issued on August 5, 2011. On January 18, 2012 this NOP was resolved with a settlement agreement amongst the parties.

In the Notice of Appeal by 5 Star dated August 19, 2011 (Vol. 6 Tab 9, Registrar’s Book of Documents) the principals state in their reason for appeal (Paragraphs 4 and 5) that the previous manager has been terminated and Hicham Lebada (the Appellant) is the manager in charge of the dealership and responsible for all aspects of the operation of the dealership.

Ms. Corth explained the importance of ensuring that dealer ads are clear. In her view, it creates a level playing field. It is consumer protection legislation that protects the vulnerable from being misled.

After all of these interventions, the dealership continued to have advertising issues. Ads were not being submitted prior to release as was stipulated in the settlement agreement. Some of the current ads cited did not contain cost of borrowing. Under the Act, prices must be all inclusive; some of the dealership ads did not include costs for HST or fees.

In cross-examination, Ms. Corth stated that Gina Gabraiel was the owner and person overall in charge at 5 Star. She confirmed that a Mr. Paul Lavandeira had been appointed by 5 Star and that he had direct authority to ensure that advertising by 5 Star complied with the consent order. She dealt with Mr. Lavendeira consistently.

Ms. Corth confirmed that she never dealt with the Appellant directly, except for one letter dated January 18, 2011.

Ms. Corth reiterated that she never dealt with the Appellant on issues of advertising, always Mr. Lavendeira.

Although the Appellant, as stated in the Notice of Appeal filed by 5 Star on August 19, 2011, seemed to be given broad control over affairs at the dealership including advertising, this is not supported by independent evidence. The Appellant maintains he had no control over advertising and this seems to be supported by the evidence of Ms. Corth who stated she never dealt directly with the Appellant in matters of advertising at the dealerships. The responsibility for advertising seems to rest with Mr. Lavendeira who was appointed for this specific purpose by the dealership owner Gina Gabraiel. The Tribunal never heard any direct evidence to the contrary.

The ownership, in its responsibility for the managerial control of the dealerships under their control, has been less than stellar. They have faced sanctions for misleading ads on several occasions. They supposedly took steps to appoint persons to correct this problem and then move on, only within months to be back before OMVIC facing the same problem.

Mary Jane South, Deputy Registrar of OMVIC

Ms. South is familiar with 5 Star Motors and its disciplinary history. She stated that proper advertising by dealers is crucial to ensuring that consumers are not duped by false or misleading ads.

Ms. South identified the Appellant as a general manager of 5 Star Motors. There was correspondence on file that identified him as the manager as early as 2011. On July 27, 2011, the Appellant signed an OMVIC business form and indicated his position as general Manager (GM). In August 2011, OMVIC received a Business Change Notice which indicated that the Appellant was appointed as person in charge, replacing Ziad Manuel at 5 Star Motors.

Paul Lavandeira was not a registered salesperson under the Act and did not sign any documentation relating to OMVIC. The Appellant was deemed to be responsible going forward, for all aspects of managerial control at the dealership, including advertising.

The second item of contention for the Registrar was the bankruptcy of the Appellant. On October 8, 2009 Hicham Lebada declared personal bankruptcy. The concerns arise from the trustee of bankruptcy who issued a report on October 14, 2010. The report outlined some anomalies under the Bankruptcy Act. These concerns resulted in a conditional order of discharge issued to the Appellant. The conditional order had a requirement that the Appellant pay $25,000.00 to various creditors to receive his absolute discharge from bankruptcy. The Applicant paid this stipulated amount.

On April 27, 2011, the Appellant was given an absolute order of discharge from bankruptcy.

The Registrar contacted the Appellant with concerns raised in the report from the trustee in bankruptcy relating to the outstanding tax debt and other matters which had been raised in the trustee’s report. .

Ms. South, in her evidence, recounted correspondence which she had with the Appellant’s Counsel at the time. In a letter dated March 20, 2012, Ms. South indicated the items required by the Registrar for their investigation of the Appellant’s bankruptcy of October 2009. (Vol # 3 Registrar’s Book of Documents, page 722).

Her chief concerns were contained in question 6 (B) of the trustee’s report as outlined in the Registrar’s book of documents (page 724 of the Registrar’s Book of Documents Volume 3 and the matter of the tax debt, question 11, of the same document). It is her position that the trustee opposed the discharge of bankruptcy because of concerns around these issues and concerns which in her view went to the heart of the honesty and integrity question as it applied to the Appellant. She was also concerned about the mention of an extravagant life style which ultimately was a factor in the bankruptcy.

In Ms. South’s view, the Appellant was deceptive when he denied having a secondary business. She was also concerned by other allegations as outlined in the various reports including an application to CIBC for a credit card. It must be noted that although at the time some of these matters may have seemed suspicious, all were ultimately dealt with in the matter of the bankruptcy and the Appellant received an absolute discharge. Further, there was never any allegation that the Appellant committed any offence in connection with the bankruptcy (Vol. 3 page 724 clause 6 (c), Registrar’s Book of documents).

Ms. South indicated in her evidence that if the allegations of improper advertising were the only matters dealing with the Appellant’s registration, the parties would not be at this hearing.

Paul Pickering, Trustee in Bankruptcy

Mr. Pickering’s role is to administer the bankruptcy process as laid out in the Act. He is an officer of the Court and his responsibilities flow from the Court in this matter, the Appellant was required to satisfy a $25,000.00 debt to creditors and the court before a final discharge from bankruptcy would occur. This condition was met and satisfied.

The Trustee opposed the initial discharge from bankruptcy and required a hearing under section 161 of the Act.

There was concern about ownership matters dealing with a property at 9660 Longwoods Road in London. The concern was that the property may have been used as an asset on a CIBC credit application. The Appellant denied owning the property at the section 161 hearing. There was contrary information: on the credit application he indicated he owned the property. He explained that he listed the property as a debt because he is a co-signer on the property. He stated that he had no ownership in the property. He was required to list all debts on a loan application which was why he showed the Longwoods property.

The Applicant’s investments over the years were an accumulation of stocks. The Applicant admitted he never kept appropriate records of his investments. At the time of the bankruptcy matters and subsequent filing of his income tax returns, he could only guess at the amount of his investments. There was never any attempt by the Applicant to be deceptive regarding his investments.

Tax returns for the preceding 5 years that had not been filed. These were prepared and filed by the time of the bankruptcy hearing.

“Extra Ordinary Accounting Ltd.” which was a business registered to the Appellant, never did any actual accounting business. It was used as an investment vehicle for recovering commissions from Hyatt Auto Sales. His salary from Hyatt’s flowed into and out of this business account. The Appellant believed he could charge expenses against the Hyatt income by flowing them through this business account. Revenue Canada advised him he could not. The business was closed for inactivity. The business never actually did any accounting work. It had been set up by the Applicant while still in school as an investment tool or tax shelter.

In cross examination, Mr. Pickering answered several questions about his initial concerns about the bankruptcy of the Appellant. His concerns were all satisfied. There were no allegations of impropriety that could be substantiated. This included the trust matter around the property on Longwoods in London; there was no improper conduct around the use of that trust.

With regard to his impression of Mr. Lebada throughout the bankruptcy process, he found Mr. Lebada to be truthful and not at all deceptive.

Mr. Pickering did not agree with OMVIC’s assertion that the Appellant was untruthful or deceptive in dealing with the issues surrounding his bankruptcy.

Glenn Schmid, Senior Bankruptcy Analyst, Office of Superintendent of Bankruptcy

Mr. Schmid described a section 161 examination. It examines the affairs and conduct of the debtor. If his office is not satisfied with the initial examination, the debtor can be recalled or a further more detailed investigation can be conducted by the RCMP. In this case no further investigation or enforcement action was required.

Hicham Lebada,

Mr. Lebada was born in 1978. He received his formal education in London Ontario, and received his undergraduate B.A from Western University. Mr. Lebada continued taking university accounting courses at the time he went to work for Toufic Zabian at Hyatt Motors.

His father got him the job at Hyatt Motors. He was initially hired in 2003 to work on the computers. In 2007, he became a salesperson and later a sales manager at Hyatts.

Early in 2009, Mr. Lebada left Hyatt Motors. In his words, things had got bad at Hyatts. He had serious concerns about the state of the business and how it was deteriorating. In his view, the owner was experiencing personal issues that were negatively affecting the business money was being sucked out of the business. Mr. Lebada’s pay cheques, in late 2008, were being bounced, by the T.D. Bank. The bank subsequently closed his account.

Mr. Lebada lent money to Mr. Zabian and had also allowed him to use his credit cards. When he left Hyatt he was owed money by Mr. Zabian.

After leaving Hyatt he was offered a position at 5 Star Auto. He transferred his licence to that dealership, but did not start work immediately. He went to work there part time after filing his bankruptcy in October 2009. He did not collect income from 5 Star at the time he declared bankruptcy.

Mr. Lebada maintained that the Longwoods property was a debt. It was never considered an asset, he was a co-signatory. He never offered that property as an asset on an application for a loan. He did though have to declare it as a debt when applying for loans to the bank.

Mr. Lebada is listed on some of the disclosures in his bankruptcy as a “Consultant”. He said that this was Mr. Pickering’s idea, because in reality many salespersons are referred to as consultants.

He explained his company, Extraordinary Accounts. He set this up while in school. He never did any accounting work with the company. Monies in the company came from income from Hyatt’s. He thought he could use the company as a tax shelter, and had obtained an American Express card in his name. He found out that he could not use the company for tax avoidance by putting money from another source into it. The company was closed by Revenue Canada for inactivity.

Mr. Lebada stated that he had invested successfully prior to his dealings with Hyatt Motors and his bankruptcy issues. Mr. Pickering calculated $4600.00 in stocks at the time of bankruptcy. He had lost all of his investments.

Mr. Lebada maintains that his conditional discharge from bankruptcy was the result unfounded allegations against him by Toufic Zabian the former owner of Hyatts who was facing disciplinary proceedings initiated by OMVIC. Mr. Lebada was never called by OMVIC to give evidence even when Mr. Zabian accused him of stealing money from the company. He was never questioned by OMVIC in this regard.

There were questions around an application to CIBC for a line of credit. There is a T-4 slip from 2004 for a tax deduction of $27,000.00. This particular T-4, in reality, was to be a T-4A. He was not paid as an employee. He had requested a change. This document, referred to in volume 7, p. 39 of the Registrar’s Book of Documents, was sent directly to CIBC by staff at Hyatts. Mr. Lebada stated he still has that line of credit.

Mr. Lebada admitted to not filing income tax returns from 2004-2008. He admitted to being irresponsible. He had hoped his finances would improve. His tax returns are now complete and up to date. During this time, when he lost all of his investments and he was facing bankruptcy, he admitted to handling his personal matters poorly. He drank heavily every day. Over the course of the past 5 years, his affairs have been in order in all aspects, including finances.

Mr. Lebada suggests that if Mr. Pickering had dealt with the tax issues first it would have quickly explained the discrepancy that showed less than 50 cents on the dollar. His losses in the stock market could only be claimed against capital gains. There was no way he could claim this loss. Once that became clear, Mr. Lebada was of the view that there would have been an immediate absolute discharge from bankruptcy.

Mr. Lebada took on increased responsibilities with 5 Star and Oxford Motors as a sales manager. He strenuously opposed any suggestion that he had any responsibility for advertising. That was the sole domain of the owners. He maintains that he answered to Lawrence Weir for advertising (Registrar’s Book of Documents Vol. 3, page 674).

In January 2011, he applied for renewal of his sales licence with OMVIC. He called directly and advised of his bankruptcy. He was told that as long as he was discharged there was no issue. He was granted his licence.

All of this changed dramatically around the time that Mr. Zabian was being investigated by OMVIC. Ms. South, the Deputy Registrar, became involved and an in-depth investigation around the circumstances of Mr. Lebada’s bankruptcy began. In addition, his role at 5 Star and Oxford Motors as a general manager took on significance as it related to his responsibilities with regard to advertising at these two dealerships.

Mr. Lebada was forthcoming in all of OMVIC’s requests. Through his lawyer, he authorized full disclosure of all materials requested by OMVIC.

Over all of his 7 years as a salesperson and sales manager, with the exception of the question around advertising, there have never been any complaints filed against him, or any complaints from OMVIC.

In 2012, Mr. Lebada left 5 Star, alleging the ownership was using the OMVIC investigation against him. He went to South Dale Motors until May 2013. He left during the OMVIC hearings; in his view it wasn’t a good fit.

At South Dale Motors, OMVIC had advised the management that Mr. Lebada was going to lose his licence. South Dale was audited by OMVIC while he was there, but apparently they were only interested in his files.

Mr. Lebada is now at Garston Motors in Cambridge as a salesperson.

In cross examination, Mr. Lebada stated that he gave the owner of Hyatt Motors 2 weeks’ notice. It was pointed out that on page 98 of tab 19 of the Registrar’s Book of Documents he had stated he was asked to leave Hyatt’s after lending the owner $200,000.00. In spite of this discrepancy Mr. Lebada maintained he had given 2 weeks’ notice.

There were questions of Mr. Lebada about his father being charged with tax evasion and GST fraud while he was an employee of Hyatt”s. Mr. Lebada denied his father was ever convicted. His father looked after the books and taxes at Hyatt’s but beyond that he had no direct involvement with his father’s dealings at Hyatt’s.

The Tribunal is at a loss to establish any relevance as to what Mr. Lebada’s father did or did not do at Hyatt’s as it pertains to the allegations before it.

Mr. Lebada stated that he was upset that he wasn’t called to Mr. Zabian’s hearing because his reputation was being slandered there. He was accused of stealing Mr. Zabian’s money.

When asked why he did not outline all of his grievances against Hyatt’s in his correspondence to OMVIC, he replied that he thought he was being investigated for his bankruptcy not events at Hyatts.

Mr. Lebada stated that his reported income was different than his stated income because the reported income was net of expenses. He admitted to not keeping good financial records up to the time of his bankruptcy.

At his current place of employment, his brother is his supervisor. In addition, his brother just recently became a part owner.

Regarding documentation forwarded to OMVIC which gave him responsibility over advertising at 5 Star, the Appellant denies any knowledge of such documentation.

At the conclusion of the evidence, the Tribunal requested written submissions from the parties. These have been received and carefully considered by the Tribunal in reaching its decision.

APPLICATION OF LAW TO FACTS

The Tribunal has carefully reviewed the evidence and the written submissions of the parties.

The Tribunal is of the opinion that all witnesses including the Appellant gave evidence in a truthful and forthright manner with their best recollection of the facts.

According to the Registrar, the conduct at issue on the part of the Appellant is that leading up to his bankruptcy and his failure to bring 5 Star Auto into compliance with the consent order of January 18, 2012 while he was the person in charge at 5 Star.

The Tribunal will first address the allegations around the issue of failing to comply with the consent order, while the Appellant was the person in charge at 5 Star:

To suggest that 5 Star and some of the related dealerships had a history of non-compliance covering several years, requiring several interventions by OMVIC is an understatement. Advertisement irregularities had been allowed to continue after several interventions by the regulator. These interventions included one disciplinary finding, and at least two Notices of Proposal. There was a total lack of due diligence on the part of the owners of the dealerships to correct the advertising problems. There seems to have been a total disregard for the orders from the OMVIC

This is a concern for the Tribunal. The Registrar, in this matter is looking to suspend the registration of the Appellant. All this in spite of the fact that the dealership owners, who are generally held to a higher standard, are still registered despite promises that were never kept, and previous NOPs which were resolved by consent orders, which in turn appeared to be regularly ignored.

The Tribunal notes as well that no one from the ownership at 5 Star were called by the Registrar to give evidence at this hearing. The management team from 5 Star has never been before a Tribunal to explain their responsibilities or that of their staff.

Mr. Lebada, for his part, states that he was the general manager, but only as it applied to the selling of vehicles. He staunchly denies having any role in advertising. He stated that his employer, Gabie Gabraiel, made it clear to him that he had no responsibility for advertising. Advertising was the domain of Lawrence Weir, Mr. Lebada’s immediate supervisor.

Mr. Lebada maintained he had no knowledge of the statement contained in the Notice of Appeal signed August. 19, 2011 (Vol. 6 tab 9, Registrar’s Book of Documents). The Registrar points to a signature purported to be that of Mr. Lebada on a business change notice (Volume 3 tab 96 E, pages 674-678). Mr. Lebada for his part denied signing the document.

The Registrar’s witness, Andrea Corth, has a responsibility to ensure compliance with the advertising standards stipulated by OMVIC policies. She admitted to being well acquainted with 5 Star and their advertising non-compliance issues. In her evidence Ms. Corth stated she never dealt directly with Mr. Lebada. She dealt with other persons at 5 Star regarding advertising issues. Her dealings were primarily with Paul Lavendeira who had direct authority to ensure that advertising was in compliance with the consent order in place. (Vol. 1, tab 3 page 48). She never dealt with Mr. Lebada. There had been one letter from OMVIC to Mr. Lebada regarding advertising (Vol. 6 tab 7, page 28). She could not say why the letter was directed to Mr. Lebada. He never dealt with the letter and she received a response from Larry Weir who she regularly dealt with on advertising issues. Not Mr. Lebada.

There were a number of persons alleged to have responsibility with regard to the issues of improper advertising as set out in the NOP issued May 31, 2012. These parties all entered into an agreement with the Registrar that led to a consent order by the Tribunal on March 18, 2013. The order contained conditions. Mr. Lebada was not included in the agreement and the allegations against him remained outstanding.

The evidence of the Deputy Registrar, Ms. South, is somewhat disconcerting when in her testimony, she made the statement to the effect that if we were just dealing with the advertising issue, the parties would not be before the Tribunal at a hearing. From this, the conclusion drawn by the Tribunal is the advertising issue as it applies to Mr. Lebada at this hearing are of minor consequence.

Based on the evidence before it, the Tribunal is satisfied that Mr. Lebada had no control of advertising at 5 Star. There were many people with their finger in that pie. The Tribunal is satisfied that Mr. Lebada was a part of the senior management team, but accepts his testimony when he states categorically that he had no hand in the advertising end of the business.

It is the view of the Tribunal that the matter of improper advertising has been appropriately dealt with previously by the Tribunal order of March 18, 2013. The evidence before the tribunal indicates that any involvement that Mr. Lebada may have had with advertising was minimal to non-existent. The Tribunal dismisses the allegation of improper advertising as alleged by the Registrar in its NOP against Mr. Lebada.

The Tribunal will now turn its attention to the allegations of improper conduct by Mr. Lebada leading up to his bankruptcy

In this regard, the Registrar alleges that Mr. Lebada conducted himself improperly when applying for his bankruptcy. None of the allegations put forth by the Registrar have been proven to be improper on Mr. Lebada’s part. He has adequately explained all of the matters of concern to the Registrar. Briefly those concerns were around, the T-4 slip on the credit card application, the property on Longwoods Dr. in London, the company that was in his name, Extra Ordinary Accounting, and failing to file his income tax returns.

The Registrar has not brought forth independent evidence to support any of its allegations against Mr. Lebada. There has been no independent evidence from any financial institution to support the allegations regarding the credit applications and whether or not there were any improprieties surrounding these applications. There has been no evidence from the federal tax authorities to indicate that the T-4 slip in question was improper or to challenge the Appellant’s explanation for the confusion in respect of it. There was no evidence from anyone from Hyatt Motors to refute the explanation from the Applicant.

The only evidence about the Longwoods property or the trust account came from the Registrar’s witness, the trustee, Mr. Pickering. It was his evidence that this trust was proper. There was no deception on the part of the Appellant in his reporting or use of the trust.

As for the income tax obligations, the Appellant admitted to being irresponsible at the time. He has filed the outstanding returns and paid the taxes. Since then, over the past four years he has filed all tax obligations faithfully and on time. This was not disputed.

Mr Pickering initially had questions for Mr. Lebada. These were answered satisfactorily and Mr. Lebada ultimately received an absolute discharge from bankruptcy. The Tribunal heard evidence that had there been unresolved issues, a number of steps could have been taken, the least of which would be an investigation by the RCMP.

The Tribunal does not dismiss out of hand Mr. MacKay’s submission that Mr. Lebada’s troubles emanated from his time at Hyatt’s. The events which occurred at Hyatt’s always seemed to be the “elephant in the room”. The Registrar attempted to probe matters that had taken place at Hyatt’s while the Appellant was employed there. The Tribunal was not about to re-examine the events which involved Hyatt Motors which had already been dealt with by another Tribunal and the Courts, but it left an indelible impression on this Tribunal that previous events at Hyatt’s seem to have drawn the Registrar’s attention to Mr. Lebada.

Mr. Lebada has an unblemished record as a salesperson since he has begun his career. There has never been a complaint filed against him.

Since his bankruptcy over 4 years ago, Mr. Lebada appears to have conducted his affairs in a responsible and forthright manner. There has been no evidence to the contrary.

Counsel for the Registrar, in submissions, referred the Tribunal to the decision of the Bankruptcy of John David Trueman [2001] A.J. No. 588 2001 ABQB 377 25 C,B.R. (4th)124 Paragraph 15. The fact situation in that case does not remotely fit the circumstances of the Appellant’s situation and thus the comments contained there are not reflective of the Appellant’s situation and the failure to file income tax returns.

The Appellant cooperated fully with the Registrar during the examination of events surrounding his bankruptcy. He did not hesitate to release all documentation to the Registrar.

The Tribunal finds no reasonable evidence to support the Registrar’s allegation the Mr. Lebada was dishonest or deceitful in matters leading up to his bankruptcy proceedings.

Therefore, the Tribunal finds that the evidence before it does not support the allegation that the past conduct of the Appellant affords reasonable grounds to believe that he will not carry out his duties in accordance with the law and with integrity and honesty based on past conduct.

The proposal by the Registrar that conditions be placed on the Appellant’s registration for a period of time to afford close supervision of the Appellant, in the view of the Tribunal is not reasonable under the circumstances. There has been no evidence to suggest such conditions are warranted.

ORDER

Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs that the Registrar not carry out the Proposal.

LICENCE APPEAL TRIBUNAL

Alex McCauley, Member

Released: July 9, 2014