Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2014-01-18

FILE:

9037/ONHWPA

CASE NAME:

9037 v. Registrar, Ontario New Home Warranty Plan Act

Appeal from a Notice of Proposal of the Registrar under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 - to Refuse Registration

Yorkdale Group Inc.

Appellant

-and-

Registrar, Ontario New Home Warranty Plan Act (the "Act")

Respondent

ORDER

ADJUDICATOR:

E. Alan Garbe, Vice-Chair

APPEARANCES:

For the Appellant:

Brian M. Campbell, Counsel

For the Respondent:

Gena Argitis, Counsel

David Outerbridge, Counsel

Heard in Toronto:

December 18, 2014

ORDER ON MOTION

The Appellant's motion is for an order to compel the Respondent to abide by the pre-hearing order dated October 15, 2014 (the "Order") issued in this matter at the conclusion of a pre-hearing held on October 8, 2014. This motion was adjourned from December 9, 2014 to December 18, 2014 to allow the Respondent time to bring a cross motion, should it elect to do so. The Respondent has filed a cross motion in this matter.

It is the Appellant's position that the Respondent has refused to abide by the terms of paragraph 6 of the Order, which stated that:

The conditions for registration of the Appellant as a "vendor" under the Act set forth in the letter of July 16, 2014, shall remain open for acceptance by the Appellant at any time up to the commencement of the hearing in this matter.

It is acknowledged by the both parties that the Registrar advised the Appellant that it had withdrawn the terms and conditions set forth in its July 16, 2014, letter (the "T & C Letter"), which were to be open for acceptance by the Appellant up to the hearing in this matter scheduled for January 12, 2015. As a consequence of the Respondent's action, the Appellant, which claims to have satisfied the conditions in the T & C Letter, cannot now accept those terms and conditions.

The cross motion of the Respondent seeks a declaration that the Order should be interpreted or "read down" so as not to bar the Respondent from refusing to register the Appellant as a "vendor". It is the Respondent's contention that as a result of an event that occurred after the pre-hearing and the issuance of the Order, the Respondent cannot now allow the Appellant to be registered as a "vendor" under the Act. The Respondent submits that paragraph 6 of the Order should be read as if words such as "subject to any further information..." were inserted at the beginning of paragraph 6 and, as there is now further information, the Respondent is at liberty to withdraw the terms and conditions in the T & C Letter.

The Respondent provides three reasons why the Order should be "read down":

1. paragraph 6 of the Order was not intended to block the Respondent from exercising its consumer protection function in the face of newly available, serious and credible evidence that the Appellant's principal lacks honesty and integrity;

2. paragraph 6 of the Order must be construed in light of paragraph 5 which permits the Respondent to amend the Notice of Proposal under appeal; and

3. the Tribunal does not have jurisdiction to order the Respondent, at a pre-hearing, to register a vendor without the Respondent's consent.

In the alternative, the Respondent submits that the Order should be amended to:

a) delete paragraph 6 effective as of the date of the pre-hearing; and

b) amend paragraph 2 of the Order to provide that the issue to be considered at the hearing of this matter is whether or not the Respondent has grounds for refusing to register the Appellant as a "builder" and as a "vendor" under the Act.

The event which occurred after the pre-hearing is the issuance, on October 15, 2014, of the report of the Honourable Paul R. Bélanger, Commissioner in the Elliot Lake Inquiry (the "Elliot Lake Inquiry") into the Algo Centre Mall collapse (the "Algo Report"). This report contains numerous examples of conduct by Levon Nazarian, the principal officer and a director of the Appellant, which the Respondent alleges shows "an egregious lack of honesty and integrity". The Respondent takes the position that it cannot, given its legislative mandate, allow the Appellant to be registered as a "vendor", in light of this information.

With respect to its alternative position, the Respondent argues that:

1. Paragraph 6 should be deleted because:

a) The Respondent would never have consented to the inclusion of paragraph 6 of the Order, or to the registration of the Appellant as a "vendor" under the Act, had the findings in the Algo Report been available at the time of the pre-hearing.

b) The findings in the Algo Report raise very serious concerns about the honesty and integrity of the Appellant's principal, that make it appropriate for this Tribunal to adjudicate the issue of honesty and integrity based on a full hearing of the evidence.

c) It is the Respondent's intention to refuse the registration of the Appellant as a "vendor" under the Act as a result of the findings in the Algo Report.

d) The Respondent should not be prevented from exercising its consumer protection function in the face of serious and credible evidence that the Appellant's principal lacks honesty and integrity.

e) The law is clear that a consent order may be varied when circumstances change after the issuance of the order and the justice of the case warrants a variation.

f) The Tribunal does not have jurisdiction to order the Respondent, at a pre-hearing, to register a vendor without the Respondent's consent. Such an order may be made, if at all, only at a hearing of an appeal of a notice of proposal to refuse registration under s. 9(4) of the Act. As of October 15, 2014, when the Algo Report was released, the Respondent ceased to consent to the Appellant's registration as a vendor.

2. If paragraph 6 of the Order is deleted, paragraph 2 should be amended to broaden the scope of the hearing to address whether or not the Respondent has grounds for refusing to register the Appellant as a "builder" and a "vendor" under the Act because:

a) the Respondent intends to refuse the Appellant's registration as a "vendor" under the Act;

b) to that end, the Respondent has issued an Amended Notice of Proposal, refusing such registration; and

c) the Appellant has filed a Notice of Appeal of the Amended Notice of Proposal.

The Appellant's response to the submissions of the Respondent is that they are all based upon the Respondent's claim that there is new information from the Elliot Lake Inquiry, which is incorrect. The Respondent knew that the Elliot Lake Inquiry had taken place and had initially refused the Appellant's application for registration as either a "builder" or a "vendor" because of the actions of Bob Nazarian, then an officer and director of the Appellant, with respect to the Algo Centre Mall collapse, as disclosed in the course of the Elliot Lake Inquiry. The T & C Letter was issued by the Respondent after the Appellant was re-organized to remove Bob Nazarian as an officer and director. The information regarding Levon Nazarian was or should have been known to the Respondent in the same way as the information about Bob Nazarian was known to the Respondent prior to the issuance of the Algo Report and therefore the Algo Report did not contain new information not previously known to the Respondent.

The Appellant argues that as the Appellant has fulfilled the terms and conditions contained in the T & C Letter, it should be registered as a vendor under the Act.

At the pre-hearing of this matter held on October 8, 2014, it was explained that the Registrar had been prepared to register the Appellant as a "vendor' if it accepted the terms and conditions in the T & C Letter, but was not prepared to register the Appellant as a "builder" under the Act. As the Appellant failed to fulfil the terms and conditions within the time period set forth in the T & C Letter, July 31, 2014, the Registrar issued a Notice of Proposal dated July 29, 2014, refusing the Appellant's application for registration under the Act.

As a result of submissions made by Counsel for both parties it became apparent that the Registrar was still prepared to register the Appellant as a "vendor" if the terms and conditions in the T & C Letter were fulfilled, but maintained its refusal to register the Appellant as a "builder".

The agreement that was reached between the parties at the pre-hearing was to give the Appellant additional time to fulfil the terms and conditions set forth in the T & C Letter and still allow the Appellant to appeal the Registrar's refusal to register the Appellant as a "builder".

The terms of this agreement were set forth in the Order.

The Appellant states that it has now meet those conditions in that it has:

a) agreed that only 44 units will be built (condition 1);

b) Bob Nazarian will not be involved in the project (condition 2);

c) the Appellant has selected a builder approved by the Respondent (condition 3); and

d) the Appellant has provided security in the amount of $440,000.00 (condition 4).

The Appellant submits it is therefore entitled to be registered as a vendor.

The Order was made on the consent of the parties. The Tribunal did not exercise, to use the words in the Respondent's Notice of Motion (subparagraph 5 c), "jurisdiction to order Tarion, at a pre-hearing, to register a vendor without Tarion's consent". The Tribunal acknowledges that a pre-hearing is not a "hearing" pursuant to section 9(4) of the Act; however, the Tribunal did not make an order at the pre-hearing compelling the Respondent to register an applicant without Tarion's consent (Respondent's factum, paragraph 46). Quite the contrary, the Order reflects the consent of the Respondent.

The Respondent submits that paragraph 5 of the Order, which provides that, if the Respondent decides to amend its Notice of Proposal in this matter, it is to do so by November 30, 2014, is relevant to the construction to be placed upon paragraph 6 of the Order.

Paragraph 5 of the Order was inserted as the Notice of Proposal dated July 29, 2014, lacked any details as to why the Appellant's application was refused. It is the Tribunal's view that whether or not the Appellant knew the reasons for the refusal as a result of the exchange of correspondence or otherwise, the Respondent has an obligation to set forth those reasons in its Notice of Proposal, as the Notice of Proposal and the Appellant's appeal thereof establishes the boundaries of the appeal in the same manner that pleadings in a civil matter establish the parameters of the litigation.

The Tribunal acknowledges that the Act, as consumer protection legislation, is to be given a broad and liberal interpretation in order to give effect to its purpose and intended protection, as stated in the cases referred to the Tribunal by Counsel for the Respondent. Further, the Tribunal accepts that its orders should not be construed in a manner that prevents the Respondent from carrying out its mandate.

It is an overstatement of the principle set out in Rule 2.1 of the Tribunal's Rules of Practice with respect to the interpretation of the Rules, to suggest that a ramification of this Rule is that Tribunal orders must be interpreted to ensure that they are "...proportional to the importance and complexity of the issues". The Tribunal accepts that, as a general principle, orders should be interpreted in relation to the gravity of the issues which are the subject matter of the order. The operative part of this principle is where there is a need for interpretation. In the present matter, the Tribunal does not accept that there is ambiguity in the Order such that it is open to alternative interpretations.

The matters addressed in the Order are within the jurisdiction of the Tribunal at a pre-hearing under the Statutory Powers Procedure Act: section 5.3(1)(a) - the settlement of any issue; section 5.3(1)(b) - the simplification of the issues, or under the catch-all section 5.3(1)(f) - any other matter that may assist in the just and most expeditious disposition of the proceeding.

As noted above, the Order was consensual and not as a result of a contentious proceeding.

If pre-hearings are to have value in the administrative justice process, orders arising from pre-hearings must be respected and enforceable. Parties to a proceeding in which a pre-hearing has taken place must be able to rely on the order rendered with respect to that pre-hearing as a party may make decisions and take actions based on that order. In the present matter, the Appellant, believing it had additional time to accept the terms and conditions in the T & C Letter, raised the not insignificant amount of $440,000.00 and may have, although no evidence was adduced, entered into a contract with one of the builders designated in the T & C Letter.

The Tribunal does not accept that the Order should be "read down" and finds that the Order stands as issued.

With respect to the alternative submissions of the Respondent, the Tribunal accepts that in certain circumstances and where the facts warrant, the Tribunal may on a motion, with compelling evidence, vary or amend an order of the Tribunal. Counsel for the Respondent referred to the case of Stoughton Trailers Canada Corp. v. James Expedite Transport Inc., 2008 ONCA 817, which dealt with the Court's discretion to set aside a default order and affirmed the reasoning of the Court in Beetown Honey Products Inc. (Re) (2003), 2003 CanLII 32918 (ON SC), 67 O.R. (3rd) 511 (SCJ). The Stoughton case considered whether or not a court had the discretion to set aside a default order and, in its brief decision, adopted the Beetown decision and stated that:

the discretion is broader and should be exercised where necessary to achieve the justice of the case;

and

there were reasonable grounds for questioning the correctness of the default judgment.

The Beetown decision addressed a situation where a consent order for cross-examinations had been made and as a result of new information, one of the parties to the consent order refused to abide by the order claiming that there was now a report available which would impact on the examination of one of the parties and which the other party was refusing to disclose.

The importance of the Stoughton and Beetown cases is that they broadened the discretion of the court to vary or set aside a consent order from being limited to situations of "subsequent consent", common mistake, misrepresentation or fraud and allow the exercise of the court's discretion where:

1. there are reasonable grounds to question the correctness of the order;

2. the existence of uncontradicted evidence demonstrates that the circumstances have changed after the consent order; and

3. as soon as such circumstances come to the attention of counsel, opposing counsel is advised and steps taken to bring the matter back before the court issuing the order.

All three of these test need to be passed for a court or tribunal to exercise its discretion to vary or set aside a consent order.

Applying these principles to the current matter, the existence of the statements in the Algo Report, which as noted above was issued after the pre-hearing held on October 8, 2014, regarding the conduct of Levon Nazarian, provides reasonable grounds to question the correctness of the Order. Whether or not there is uncontradicted evidence that circumstances have changed is a thornier matter given the Appellant's position that the information contained in the Algo Report was previously known to the Respondent. Although the evidence adduced at the Elliot Lake Inquiry may have been known to the Respondent, the fact that such evidence was accepted by and formed part of the Commissioner's report changed the nature of such evidence from mere testimony to accepted and credible facts. The Tribunal therefore finds that circumstances have changed after the consent order.

In considering the third principle, the Respondent did ultimately bring the matter before the Tribunal albeit after the Appellant brought its motion to compel the Respondent to comply with the Order.

It is also observed that in both the Stoughton and Beetown cases, the courts recognized the importance that discretion be used to amend an order to "achieve justice" and avoid "a negative impact on the administration of justice".

Having carefully considered the submissions of the Counsel for both parties, the Tribunal finds that conditions exist to amend the Order and makes the following order:

1. Paragraph 2 is amended to provide that the issues to be considered at the hearing of this matter are whether or not the Respondent has grounds for refusing to registered the Appellant as a "builder" and "vendor" under the Act.

2. Paragraph 6 is deleted from the Order.

3. The Appellant's motion is dismissed.

LICENCE APPEAL TRIBUNAL

E. Alan Garbe, Vice Chair

Released: January 23, 2015