Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2016-06-30

FILE:

10071/MVDA

CASE NAME:

10071 v. Registrar, Motor Vehicle Dealers Act 2002

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

Jadwiga Martins

Appellant

-and-

Registrar, Motor Vehicle Dealers Act 2002

Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Patricia McQuaid, Vice-Chair

APPEARANCES:

For the Appellant:

Justin Jakubiak, Counsel

For the Respondent:

Michael Rusek, Counsel

Heard in Toronto:

May 26 and June 3, 2016

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 February 19, 2016 proposed to refuse to grant the registration of Jadwiga Martins (the “Appellant”), as a salesperson under the Act on the basis that her past conduct was inconsistent with the intention and objectives of the Act which require that a registrant be financially responsible in the conduct of business and that she carry on business in accordance with the law and with integrity and honesty.

The Registrar relies on section 6(1)(ii) and (iii) of the Act, which read:

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,

(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;

There are two main reasons for the Registrar’s refusal. The first relates to allegations of an “industry specific” theft – a charge of theft over $5,000 contrary to the Criminal Code of Canada. The charge was laid against Ms. Martins in November 2014 and was withdrawn on June 22, 2015. She made restitution in the amount of $7000 to her former employer, Lakeshore Honda. The second reason relates to allegations of false and misleading information on Ms. Martins’ May 2015 and January 2016 applications to the Ontario Motor Vehicle Industry Council (“OMVIC”).

It is important to note that Mr. Rusek, in his closing submissions, stated that the Registrar was not asking the Tribunal to find that Ms. Martins took the $7,000, but that she was “reckless” in how she handled the paperwork in the transaction (in respect of which the $7,000 went missing), and this past conduct provides reasonable grounds to believe that she will act in a similar way in the future. Mr. Jakubiak took exception to the Registrar’s position on this issue, arguing that the Notice of Proposal did not set out with any particularity, that this was a ground for the refusal. Therefore, the Appellant was prejudiced in that she did not know until closing submissions that this was, in large measure, the case she had to meet. Mr. Jakubiak is correct: such particulars are not set out in the Notice of Proposal. However, giving the Registrar the benefit of a broad interpretation of “past conduct”, and after hearing their submissions on this issue, the Tribunal was prepared to consider the Appellant’s conduct in relation to her handling of the transaction file.

After carefully considering the evidence and submissions, the Tribunal directs the Registrar not to carry out the Proposal.

EVIDENCE

Ms. Martins was employed as a financial services manager at Lakeshore Honda (and from time to time at its affiliates) from August 2008 to August 2014. This position required that she be registered with OMVIC. In her role as a financial services manager, she handled the credit application on a vehicle sale, reviewed the various financing options with a purchaser, coordinated loans and leases with the financing company and, as well, coordinated sales of aftermarket products such as extended warranties. She was not involved in the front line sale of vehicles then, nor is she seeking to become a salesperson in the usual sense. There is no record of consumer complaints against her.

A significant part of the evidence lead through three witnesses (Lorenzo D’Alessandro, Zygmund Pawlak, and Hugh Schokoohi) from Lakeshore Honda, focussed on the circumstances surrounding the missing $7,000 and the resulting charges. One of the allegations of providing false and misleading information flows directly from the fact of the theft charge. The Tribunal will therefore deal with this evidence first.

The issue of past conduct: acting in accordance with the law and with integrity and honesty

The transaction in issue will be referred to as the “H” deal. The only two persons who could be said to have had involvement with the H deal were Zygmund Pawlak, the salesperson who sold the vehicle to Mr. H., and Ms. Martins. Their recollection of events was decidedly at odds with each other. However, they did agree that Mr. H came to Lakeshore Honda on June 28, 2014 to take delivery of a 2010 Odyssey. It was a cash deal; there was no financing on the sale. Mr. H showed up with $7,000 in cash and intended to pay the balance by a Visa credit card. It was explained to him, by Mr. Pawlak and then by Ms. Martins, that they could not accept a Visa payment for the amount. It was against Lakeshore Honda policy to do so. Ms. Martins directed Mr. H to a local branch of the Scotiabank to obtain a bank draft.

According to Mr. Pawlak, after Mr. H. returned with the bank draft, he went to Ms. Martins’ office where she then counted the cash and checked the file at his request to ensure everything was in order, which she did. Ms. Martins’ recollection is that she did speak with Mr. H. and directed him to the bank to obtain a draft, but Mr. Pawlak did not seek her out to confirm that this was indeed necessary; rather, she encountered Mr. Pawlak and Mr. H as she was walking through the used car sales area as she was heading outside for a cigarette. She testified that she did not see Mr. Pawlak again that day and specifically denies counting the cash with Mr. Pawlak.

What they both agreed to (as did Mr. Lorenzo D’Alessandro, the Vice President of Lakeshore Honda) is that cash should never be left in the “deal” file, which files were usually put on Ms. Martins’ desk by the salespersons for processing by her. Cash was supposed to be handed over to the accounting department or put in the dealership’s safe. Ms. Martins and Mr. Pawlak agreed that no receipt for cash was given to the customer.

June 28^th was a busy day at the dealership. Ms. Martins stated that she left at 6 p.m. Many of the deal files from the day were on her desk when she left and had not been reviewed by her. It was the beginning of a long weekend for her. When she returned to the office the following Wednesday, she reviewed deal files that involved financing or lease deals first, as was her usual practice. These files had to be processed and forwarded to Honda Finance. Cash deals, such as the H deal were given a lower priority. She noted that she did not see the file for the H deal in her office that day, but was not concerned, assuming that perhaps Mr. Pawlak had taken it. When she was next in, on the following Friday, she testified that she thoroughly checked her office for the file, which still needed to be processed by her, but did not find it. She also checked with the accounting department and in the file storage area. It was not there either.

Ms. Martins was away on a scheduled holiday the next week. It was around that time that Mr. Pawlak and the other salesperson on the H deal, noticed that they had not been paid the commission they were owed on the H deal. Upon her return from holidays, Ms. Martins continued her search for the H file, with no success. She felt some panic about the fact that she could not find the file, but did not alert anyone. Mr Pawlak testified that he asked Ms. Martins where the money was and that she told him not to worry, that she knew where the file was and she would look after it. He did not inquire of her as to what was happening with it, nor did he complain to anyone at this point. From his testimony, it appeared that he was less concerned about finding the cash, but that the deal be processed so that his commission could be paid. It is not unreasonable to infer from the evidence that Mr. Pawlak and Ms. Martins were each working from the assumption that the $7,000 in cash was not in the missing file as it would have been put in the safe or handed over to accounting.

Around this time, Ms. Martins had an interview for a job at a different dealership. She testified that she had been increasingly discontented at Lakeshore Honda. She got the job and gave two weeks’ notice. She testified that she did at one point, before her departure, find the H file and left it in her filing system, but she did not recall seeing the H deal file in the days immediately before her departure, nor did she speak to anyone in the accounting department, Mr Pawlak or the sales manager, Hugh Schokoohi, about the fact that she could not find it. She described her last few days at Lakeshore Honda as chaotic as a result of her shortening her notice period to one week at her new employer’s request. Her recollection was that she gathered up all the deal files on her desk and left them with the accounting department, and packed up her personal files in a box and took them home.

In his testimony, Mr. D’Alessandro was very clear about checks in place when cash is accepted in partial payment; for example, that if the accounting department is not open, cash is to be put in the safe, logged and initialled by a witness. None of the other witnesses referred to that procedure as being the practice, perhaps because in the normal course, as indicated by Mr. Pawlak, cash amounts would usually be $300-$400. A cash payment of $7,000 was highly unusual. As Mr. D’Alessandro described the events as they unfolded, Ms. Martins resigned before he found out about the missing $7,000. He suggested that he did not remember why she resigned. It was clear from his evidence that he believed her resignation was linked to the missing cash and this belief permeated his evidence.

The missing file was brought to his attention because the salespersons wanted to be paid their commission. Mr. D’Alessandro asked Mr. Schokoohi to contact Ms. Martins to ask her if she knew where the file might be. Mr. Schokoohi sent her a text; she responded that it was likely at the dealership. They searched again with no success, and so he sent her another text and asked Ms. Martins to check her personal files, which she agreed to do. Shortly thereafter, she contacted him and said she found parts of the file among her personal papers, specifically, the bank draft, and a work order for the vehicle, but no cash. Mr. Schokoohi came to her house immediately and picked up the documents.

Mr. D’Alessandro called her and accused her of taking the $7,000. He did not accept Ms. Martins’ assertion that she did not. In his words, “it did not pass the smell test”. He gave her two days to bring him the money or he would call the police, which he ultimately did. He also filed a claim for the amount with their insurer and received payment from them, less the $2,000 deductible. What followed from this, in terms. of the charges laid against Ms. Martins is important in terms. of the nondisclosure issues; however, the “conduct” issues will be addressed first.

As stated previously, there was no finding of guilt made against Ms. Martins. Her handling of the missing file between June 28 and her departure may be questionable. It is curious that she did not alert anyone to the fact that she was not able to process it before she left, when she knew Mr. Pawlak would be looking for his commission. Ms. Martins did not deny that she did not follow steps that should have been taken in terms. of processing the file. She prided herself as being diligent and meticulous in her work; yet her handling of this file seemed to be anything but that. However, based on the evidence heard, from all of the dealership’s witnesses and that of Ms. Martins, there would have been no expectation that any cash, whether $400 or $7,000, would be left in the file.

Mary Jane South, the Registrar, testified that Ms. Martins’ conduct in dealing with the missing file suggests a lack of honesty and integrity, and even unethical behaviour. Ms. Martins did not let on to Mr. Pawlak that she could not find the file. Ms. Martins’ response was that she thought the file was misplaced and would be found. In Ms. South’s assessment, Ms. Martins’ behaviour was that of a person who was covering up something. Money was missing and she knew there was a problem. The fact that the very file, or at least parts of it, that was missing was in her house is highly concerning to the Registrar. In submissions, the Registrar stated that Ms. Martins resigned in the midst of all of this, suggesting that some level of guilt, or at a minimum, misconduct, be inferred from her departure. Yet, Ms. South reiterated that the issue for the Registrar is not whether Ms. Martins took the money.

The Registrar’s position in this regard might be viewed as “splitting hairs”. She is not asking that the Tribunal find that Ms. Martins took the money. There is insufficient evidence on that point. Ms. Martins categorically denies she took the money and has consistently stated that position. If she had taken this money, it does not seem plausible that she would have turned over parts of the file to Mr. Schokoohi after she had left the dealership, which is the very action that placed her under suspicion. The Registrar is asking the Tribunal to find unethical conduct, namely a lack of honesty and integrity, based on her casual handling of the H file, which is conduct in respect of one file in her six years of being registered.

The Tribunal found Ms. Martins to be a credible witness. Ms. Martins explained that she was feeling disengaged at that point in the summer of 2014 and was not so concerned about the H file because it was not a financed transaction. This is not an excuse for what was essentially a mishandling of this file, but it is not an unreasonable explanation. She does not deny that she did not follow the proper procedures on the H deal and has taken responsibility for that. The fact that parts of the file were found in her personal possessions seems. a coincidence, and one that does not reflect well on her; yet she was forthcoming in disclosing the existence of those documents. If she had something to hide, whether of a criminal nature or unethical conduct, a reasonable inference is that she would not have called Mr. Schokoohi. However, she did, and significant negative consequences followed.

Based on the evidence before it, the Tribunal finds that the evidence supports at most a careless handling of one file. The past conduct of the Appellant does not provide reasonable grounds for belief that she will not carry on business in accordance with the law and with integrity and honesty.

Issue: False and misleading information provided to the Registrar

As a result of the circumstances surrounding Ms. Martins handling of the H file, criminal charges were laid against Ms. Martins in November 2014. At this point she was not working. The job that she had left Lakeshore Honda for did not work out. She then applied to Toronto Honda, but that offer was withdrawn by them; Ms. Martins presumed because of discussions they may have had with Lakeshore Honda. She initially intended to fight the charges. However, after consulting with her lawyer, she decided to pay restitution. Her understanding was that there would be no admission of guilt and the charges would be withdrawn. She paid $5,000 in March. Her lawyer went to court to request an extension of time to pay the remaining $2,000. Her lawyer told her that she could at this point go ahead and try to find work. She did not make the final payment until June 2015.

The transcripts from the court proceedings show that on March 9, 2015, Ms. Martins’ counsel on that matter and the Crown counsel attended. Ms. Martins’ lawyer advised the court that $5,000 restitution had been made, but that $2,000 was outstanding. He asked the Crown if the charges could be withdrawn that day or whether they had to come back. The Crown wanted to be satisfied that the whole amount had been paid. They arranged to return on April 20, but that date was adjourned to June 15 to allow Ms. Martins more time to come up with the funds. The balance was paid on June 22 and the charges were formally withdrawn.

The Registrar alleges that there are three instances of false or misleading statements. The first relates Ms. Martins’ response to question 5 on her May 2015 application:

Has the registrant ever been found guilty or convicted of an offence under any law, or are there any charges pending?

She answered “No”. The Registrar’s position is that as of May 2015, the charges were still pending because restitution had not been paid in full. Ms. Martins never made inquiries of OMVIC for clarification as to what pending meant or whether the fact that she had an expectation that they would be withdrawn meant she did not have to disclose them. It was Ms. South’s testimony that if she had answered “no” to that question on June 23, that would have been acceptable, but not before. It was Ms. Martins’ testimony that she believed as of March 2015 that a deal had been made for the withdrawal of the charges because of the arrangement made for restitution, the first payment of which was made that month.

That understanding was not unreasonable. The lawyers had struck a deal, and $5,000 of the agreed $7,000 had been paid. Her view was that full payment was merely a matter of time. Given what had transpired as of March 2015, this withdrawal was not just a “hopeful expectation” as alluded to in the case of Peterson v. Registrar, Motor Vehicle Dealers Act, 2002.

Based on the evidence before it, the Tribunal cannot conclude that the Appellant knowingly made false statements on the May 2015 application. At worst, Ms. Martins made an honest mistake as to the effective date of the withdrawal.

The second instance of false and misleading information alleged also relates to her May 2015 application. Question 7 asked:

Did you sign a document which sets out specific terms. and conditions to be attached to your OMVIC registration? Please note that you are only required to answer ‘yes’ if any of these terms. and conditions remain in force.

Ms. Martins answered “No”. Conditions had been placed on Ms. Martins’ registration while she was working at Lakeshore Honda, in August 2010. These were standard conditions imposed when a registrant has had a bankruptcy. Ms. Martins had declared bankruptcy in 2008, which had been disclosed. These conditions were never removed from her registration; however, the Registrar’s record clearly states that Ms. Martins’ registration was terminated in October 2014. At that time, Ms. Martins no longer had a sponsoring dealer; her registration was deemed to have expired.

Therefore, when Ms. Martins completed the May 2015 application, as conceded by Ms. South in cross-examination, there was no registration to which conditions could attach. The Tribunal finds that Ms. Martins’ answer to this question was not false.

The third instance of false and misleading information alleged relates to the January 10, 2016 application. This was an application to a different dealership than the May 2015 application, as the previous position did not come to fruition. In this new position, her role would be to train business managers at different dealerships on the products offered to them by the new employer. At this point, the criminal charges were formally withdrawn, her answer to Question 5 was correct. There were no charges pending. However, Question 4 asked:

Has the registrant ever been involved in bankruptcy proceedings, filed a consumer proposal, a commercial proposal or had a petition filed against him/her under any bankruptcy or insolvency legislation in any jurisdiction?

Ms. Martins answered “Yes”.

The second part of that question stated:

If you have not disclosed this bankruptcy, consumer proposal or commercial proposal on a previous OMVIC application, kindly attach a complete copy of the statement of affairs and certificate of discharge [if applicable] to this application.

Ms. Martins noted here: “Previously disclosed in 2008”, referring to her bankruptcy.

However, Ms. Martins had filed a consumer proposal in July 2015, and this was not disclosed on the January 10, 2016 application. Ms. Martins followed up with the OMVIC representative on January 25, 2016. She was eager to have her application processed. She had a job offer but required an OMVIC registration. She was following up to see whether the police check had been received, as well as asking about the increase in the application fee. Given her recent experience with OMVIC, in relation to the criminal charge and her May 2015 application, it is not surprising that she asked at that time, whether there was any particular reason why her file was being reviewed. The representative responded that once her application was reviewed she would be able to provide Ms. Martins with more information.

Ms. Martins was beginning to question herself. On February 1, 2016, she called OMVIC again, and this time, she inquired whether she had disclosed her consumer proposal of July 2015 on the application; she thought the question related to bankruptcy only. The representative checked the file and told her that she had answered ‘Yes” to question 4. Ms. Martins asked if OMVIC needed the information about the consumer proposal. The OMVIC representative responded that they did and Ms. Martins sent in those documents that same afternoon.

In submissions, Mr. Rusek suggested that Ms. Martins had conveniently glossed over the consumer proposal and that she only disclosed something when she had to. The suggestion seemed to be that she suspected that she might get found out, and only this prompted the disclosure of the consumer proposal, and this fits with a pattern of non-disclosure on her part. The Tribunal finds that this does not reasonably follow from the facts as revealed through the documented e-mail exchange between Ms. Martins and the OMVIC representative.

The facts here do not suggest a deliberate non-disclosure. Ms. Martins had not previously shied away from disclosing her financial issues, and she did disclose the consumer proposal three weeks after the application was first filed, without a prompt from OMVIC. There was no previous history of non-disclosure in respect of this question. She had consistently disclosed the bankruptcy and knew from past experience that it might lead to terms. and conditions, but that the bankruptcy in the past had not disqualified her. Thus, there was no apparent reason not to disclose her consumer proposal. And indeed, as Ms. South stated in her testimony, if a person makes a mistake on the application, discovers that mistake and corrects it, it will not result in a refusal by the Registrar. She testified that if this had been the only issue, Ms. Martins would be registered. The Registrar is looking at the context of this application in its entirety.

While the Tribunal concludes on the evidence that Ms. Martins did not at first instance disclose the consumer proposal on the January 10, 2016 application, it also finds that she did, upon realizing she had omitted to disclose, correct that mistake. It was a mistake, but not one which the Tribunal can conclude was knowingly made so as to avoid full disclosure to OMVIC. This is not a situation like that in 9948 v. Registrar, Motor Vehicle Dealers Act, 2002, referred to by the Registrar, where the Tribunal found that the Appellant made a conscious and deliberate decision to conceal information on his application forms.

Having concluded as it has with respect to each of the allegations of non-disclosure, the Tribunal does not find that these support a refusal to register the Appellant.

Are conditions on the registration appropriate?

The Registrar stated that she did not suggest conditions for registration of the Appellant because of concerns about monitoring those conditions. She stated that OMVIC staff cannot actively monitor conditions; they must rely on a registrant’s integrity and honesty. Yet, conditions are not at all uncommon on registrations, and indeed, conditions were imposed on Ms. Martins in 2010. There was no evidence of any concern that OMVIC could enforce these or that Ms. Martins did not comply. In light of the issues in this appeal, the Tribunal is prepared to impose one condition responsive to these particular circumstances to ensure that should there be any future conduct that leads Ms. Martins to appear before the courts, this should immediately be brought to the attention of the Registrar.

ORDER

Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs the Registrar to not carry out the Proposal and to register the Appellant subject to the following condition.

1. The Appellant shall advise the Registrar and her sponsoring dealer in writing, within five business days, of any charges that she faces under any Federal or Provincial law and such advice shall disclose the full extent of those charges.

LICENCE APPEAL TRIBUNAL

_________________________

Patricia McQuaid, Vice-Chair

Released: June 30, 2016