Licence Tribunal

Appeal d'appel en Tribunal matière de permis

DATE: 2017-02-06

FILE: 10397/REBBA

CASE NAME: 10397 v. Registrar, Real Estate and Business Brokers Act 2002

Appeal from a Proposal of the Registrar under the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C to Refuse Registration

Ranjit Singh Randhawa Appellant

-and-

Registrar, Real Estate and Business Brokers Act 2002 Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Mary Ann Spencer, Member

APPEARANCES: For the Appellant: Self-represented

For the Respondent: George Drametu, Counsel

Heard in Toronto: January 17, 2017

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, Real Estate and Business Brokers Act, 2002 (the “Registrar” and the “Act” respectively). The Notice of Proposal dated August 9, 2016 proposes to refuse to register Ranjit Singh Randhawa as a salesperson under the Act.

Mr. Randhawa first applied for registration as a salesperson under the Act on February 11, 2015. He withdrew the application after being advised by registration staff of the Real Estate Council of Ontario (“RECO”) that it likely would be refused. He submitted a further application for registration as a salesperson on October 1, 2015. The Registrar proposes to refuse registration on the basis that Mr. Randhawa is not entitled to registration under section 10 of the Act. The reasons set out in the Notice of Proposal are that Mr. Randhawa cannot reasonably be expected to be financially responsible in the conduct of business; that his past conduct affords reasonable grounds for belief that he will not carry on business in accordance with law and with integrity and honesty; and, that he made a false statement in an application for registration, as set out in sections 10(1)(a)(i),(ii) and (iii) of the Act respectively.

For the reasons below, the Tribunal orders the Registrar to carry out the Proposal to Refuse Registration.

EVIDENCE AND FACTS

Registrar’s Evidence

The Registrar’s evidence comprised a book of documents (Exhibit 3) and the testimony of Brian Schlotzhauer, Deputy Registrar under the Act.

Mr. Schlotzhauer testified that the questions on RECO’s applications for registration are designed to ensure that applicants for registration meet the requirements set out in section 10 of the Act. Questions such as number 5, which asks if an applicant has any outstanding judgments or unpaid fines, and number 7, which asks if there are pending charges or convictions under any law, are designed to elicit information to assess an applicant’s financial responsibility and honesty and integrity.

On his February 11, 2015 application, Mr. Randhawa answered ‘yes’ to both questions 5 and 7. In a letter he submitted with his application, he explained that due to health issues requiring his hospitalization in the summer of 2012, he lost control of his trucking business’ operations. Anticipating accounts receivable would be deposited, he wrote two cheques on a Toronto Dominion bank (“TD bank”) account between September 9 and 12, 2012 and deposited them to a Royal Bank (“RBC”) account using an ATM machine. He also deposited a cheque to the RBC account which was written on the RBC account. He then proceeded to use the deposited funds to pay amounts owed by his business. However, the deposited cheques were NSF. As a result, the Royal Bank suffered a loss of $122,839.45. Mr. Randhawa was charged with Fraud Over $5,000. He was arrested on December 16, 2014 when he went to the police to obtain a criminal record check from the Canadian Police Information Centre (“CPIC report”) to submit to RECO with his application for registration.

Mr. Randhawa’s letter also explained that when he did receive a cheque for the accounts receivable, rather than depositing it to his RBC account, he cashed the cheque at a Money Mart in order to pay his company’s drivers, among others. He enclosed a spreadsheet indicating that he paid out $95,515.61 between September 13 and October 1, 2012.

Mr. Schlotzhauer testified that while Mr. Randhawa disclosed the fraud charges and the Royal Bank judgment against him, RECO staff also conducted a search for outstanding writs of execution. This revealed two judgments against the Appellant in favour of RBC totalling $756,928.77 and $137,839.46 as at February 12, 2015. The search also revealed undisclosed judgments in favour of Cash Flow Recoveries Inc. totalling $16,690.82 and $31,156.00 as at February 12, 2015, for which no payment plan was in place. He noted that the Appellant subsequently acknowledged these additional judgments but told staff he had not disclosed them because he believed it was only necessary to disclose the larger ones. Mr. Schlotzhauer explained that full disclosure on an application is important to the Registrar because it is the first indication of an applicant’s honesty and integrity. He further noted that the judgments provide an indication of how business was previously conducted by the Appellant.

The Appellant withdrew his application for registration after RECO registration staff advised him that it would likely be refused. On October 1, 2015, he submitted another application for registration as a salesperson. On this application, he answered ‘yes’ to question 5, which asks about outstanding judgments or debts and ‘no’ to question 7 which asks about pending charges and convictions. The application was accompanied by a letter which explained the details of the judgments and indicated they were all related to the business he had closed due to his illness. The Appellant also forwarded a letter from Peel Regional Police indicating a CPIC check had revealed no criminal record. On January 6, 2016, RECO registration staff sent an e-mail to the Appellant asking for confirmation that no payment arrangements were in place for the judgments, that a restitution payment of $40,000 that had been made to RBC and that a payment of $80,000 had been made by his former spouse in respect of a judgment in favour of IPS Invoice Systems. The Appellant confirmed that his former spouse had made the payment and that her name had been removed from the claim. He provided no information with respect to payment arrangements for the other judgments.

Mr. Schlotzhauer testified that the Registrar did not assign any weight to the fact that a payment had been made by the Appellant’s former spouse or to the fact that the Appellant had paid $40,000 in restitution to RBC. He noted that the latter was done solely to benefit the Appellant and referred to a copy of a September 23, 2015 letter from Mass Tsang LLP which advises the Appellant that the criminal charge of Fraud Over $5,000 was stayed that day in consideration of the restitution payment.

Mr. Schlotzhauer explained that the Registrar issued the Notice of Proposal to refuse registration because the past conduct of the Appellant indicated that he would not conduct business with honesty and integrity. The Appellant chose to cash accounts receivable at a Money Mart and distribute the funds with the knowledge that cheques deposited to RBC had not cleared. Further, the Appellant has significant outstanding debts which demonstrate that he does not meet the requirements to conduct business with financial responsibility. Mr. Schlotzhauer also indicated that this was not a situation where conditions on registration could be considered, noting both the size of the outstanding debt and the fact that no reasonable explanations for the Appellant’s actions had been provided.

Asked on cross-examination if a declaration of bankruptcy by the Appellant would have changed the Registrar’s views, Mr. Schlotzhauer indicated that this was a question he could not answer without knowing details of the bankruptcy. He indicated that factors such as the size of the bankruptcy, who was involved, and its current status would all be considered.

Appellant’s Evidence

Mr. Randhawa testified that he worked hard to pass the examinations to meet the educational qualifications required for registration as a salesperson. He noted that he did disclose both the criminal charges against him and the RBC judgment in the application for registration he submitted on February 11, 2015. He had no intention of hiding judgments; he was under the impression that if he declared the larger judgments that it would provide an idea of what he was going through. He noted that the judgments in favour of Cash Flow Recoveries Inc. which he had failed to disclose were dated in October 2013 and that he had fought from the beginning to reduce them, stating he “was fighting for my honesty and integrity”. He has not filed for bankruptcy because he intends to pay the judgments against him. However, he cannot negotiate with his creditors if he is unable to work.

With respect to the deposit of cheques to the RBC account in September 2012, Mr. Randhawa stated that he had no bad intentions. He was relying on his corporation’s accountant. He had been expecting receivables to be deposited to the TD account. The fact that he deposited a cheque to the RBC account it was written on, was just a mistake. He testified that he did not know that there was a problem until approximately September 15, 2012 when he learned the cheques he had deposited were NSF. However, on cross-examination, he amended this date to September 17, 2012. He confirmed he picked up the cheque for accounts receivable on September 12, 2012 and cashed it at Money Mart. He acknowledged that the spreadsheet he provided with his February 11, 2015 application indicates that he made two payments from the proceeds after September 17, 2012.

Counsel for the Registrar asked Mr. Randhawa to confirm that the letter of explanation he provided with his February 11, 2015 application indicated that he chose to go to Money Mart to cash receivables because drivers were upset by delays in receiving payment and were aware of his situation with the bank. Mr. Randhawa stated that drivers were not aware of his bank situation. Rather, they were anxious because vehicles were sitting in the yard and not being dispatched. Therefore, they refused to accept cheques. It was a mistake that he wrote that they were aware of his situation with the bank.

On cross-examination, Mr. Randhawa repeated that he wishes to be registered as a real estate salesperson in order to work and then negotiate with RBC rather than declare bankruptcy. He stated that he initially worked as a truck driver and then formed his company. He ran the company and was responsible for all decision making and securing loads. The only office employees he had were a dispatcher and an accountant. Therefore, when he became ill and unable to work in the summer of 2012, the business failed. He is currently employed as a dispatcher with a trucking company.

Mr. Randhawa also testified that he had been unaware that he had been charged with Fraud Over $5,000 until he went to the police station to request a CPIC report for his application for registration. He testified that he had regular contact with an RBC lawyer who had his address and does not know why he could not be contacted. He asked why he would have gone to the station if he had been aware there was an outstanding warrant for his arrest.

THE LAW

The entitlement to registration is set out in section 10 of the Act as follows:

10. (1) An applicant that meets the prescribed requirements is entitled to registration or renewal of registration by the registrar unless,

(a) the applicant is not a corporation and,

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

(ii) the past conduct of the applicant or of an interested person in respect of the applicant affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty, or

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

The Registrar may refuse to register an applicant under s. 13(1) of the Act if, in the Registrar’s opinion, the applicant is not entitled to registration under s. 10 of the Act.

On appeal to the Tribunal, s. 14(5) of the Act states that the Tribunal may “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.”

ANALYSIS

The Appellant is entitled to registration under the Act unless one of the grounds in section 10 of the Act applies. The onus is on the Registrar to prove that the Appellant cannot reasonably be expected to be financially responsible in the conduct of business; that there are reasonable grounds for belief that the Appellant will not act in accordance with law, with integrity and with honesty; or that the Appellant made a false statement on his application for registration.

Financial Responsibility

The documentary evidence is that there are a number of judgments against the Appellant. These include two in favour of RBC in the amounts of $756,928.77 and $137,839.46 as of February 12, 2015, the latter of which survives any bankruptcy proceedings. There are also two judgments in favour of Cash Flow Recoveries Inc. in the amounts of $31,156.90 and $16,690.82 as of February 12, 2015. The Tribunal notes that in the October 1, 2015 letter which he submitted with his second application for registration, Mr. Randhawa listed additional judgments of $25,000 in favour of IPS Systems and $4,842 in favour of Capital One Bank.

In the letter accompanying his February 11, 2015 application for registration, Mr. Randhawa explained that he had expanded his business in February/March 2012 but was diagnosed with cancer in May 2012. Following surgery on June 18, 2012, he was unable to attend to his business for six to eight weeks. In an e-mail to RECO staff dated March 1, 2015, which he sent in response to questions about his application, Mr. Randhawa wrote that he had been trying to negotiate with RBC but “if something not working out I might have to apply for bankruptcy protection”. With respect to the Cash Flow Recoveries judgments, he wrote that if he was successful negotiating with RBC, he “will talk to these creditors also otherwise these judgments will be reported in bankruptcy”.

The Tribunal does not wish to diminish the seriousness of the health issues Mr. Randhawa faced. However, it is unclear to the Tribunal whether the accumulation of what is a very significant amount of debt was due solely to his inability to manage the business in the summer of 2012. While the evidence is that the smaller of the two judgments in favour of RBC results from the September 2012 deposit of NSF cheques, Mr. Randhawa provided no evidence to explain how or when the other debts were incurred, other than medical documents verifying his illness and his testimony that he was then unable to manage his business.

The evidence is that not only is Mr. Randhawa’s financial position unfavourable, but, other than paying $40,000 restitution to RBC in exchange for the criminal charges against him to be stayed, he also has not taken any steps to address the judgments which continue to accumulate interest charges. Notwithstanding his March 1, 2015

E-mail, Mr. Randhawa made it clear at this hearing that he intended to negotiate with his creditors only when he became registered. He testified that he “can’t negotiate with them if I can’t work”. However, he testified that he is currently employed and, on his October 1, 2015 application, indicated that he has been continuously employed since August 2012. In this regard, the Tribunal notes that the information submitted on this application differs from the information submitted on the February 15, 2015 application, on which Mr. Randhawa indicates he was unemployed between September 2012 and January 2014. While Mr. Randhawa might have expectations of a higher income were he to be registered, the fact that he has made no effort either to negotiate with his creditors or to declare bankruptcy, almost two years after he indicated his intent to do so, is evidence of a lack of financial responsibility.

Based on the evidence of his significant debt, the lack of a full explanation for how it was incurred, and the fact that it has not been addressed, the Tribunal finds that with regard to his financial position, the Appellant cannot reasonably be expected to be financially responsible in the conduct of business as set out in section 10(1)(a)(i) of the Act.

Integrity and Honesty

The evidence is that on July 22, 2014, Mr. Randhawa was charged with Fraud Over $5,000 under the Criminal Code with respect to the deposit of NSF cheques to his RBC business account. The Tribunal acknowledges that Mr. Randhawa was not found guilty; the charge was stayed on September 23, 2015 when he paid $40,000 restitution to the bank.

The police report which Mr. Randhawa submitted with his February 11, 2015 application for registration indicates that he deposited three cheques to his RBC business account sometime between September 9 and 12, 2012. Two of the cheques, in the amounts of $95,000 and $16,000, were written on a TD bank business account and were returned NSF. The third, in the amount of $65,000, was written on the RBC account to which it was deposited. The report states “once the funds were deposited they were dispersed via cheques to businesses and other individuals”. Mr. Randhawa did not dispute this evidence. His testimony is that he relied on his accountant and anticipated the deposit of business accounts receivable to his TD bank account, and, that the cheque written on the RBC account was a mistake. He also testified that he picked up a cheque for accounts receivable on September 12, 2012. The undisputed evidence is that this cheque was cashed at a Money Mart and that $95,515.61 was then distributed in cash to drivers and other creditors between September 13 and October 1, 2012.

Mr. Randhawa provided the following explanation in the February 11, 2015 letter he submitted with his application:

In the month of September 2012 …we had outstanding receivables balance coming into TD Bank Account for direct deposit from factoring company…And I deposited 2 cheques in one week time and Nobody from Bank informed me that the first 2 cheques are NSF…And I deposited the third cheque to cover the payments going out from RBC account. And when the third cheque went NSF I got a call from the Account Manager. Then I went to my factoring company office to find out what happen. There was some funds due to deposit…I picked up cheque and was planning to deposit to RBC account for their loss. And at the same time I was delayed for paying my drivers. My drivers were very upset with me, some of them quite worried and followed me to the factoring company office as they were aware of my situation with bank, and insisted to get paid first by cashing cheque from Money Mart instead of depositing into bank….I cashed the cheque and made cash payment to 24 drivers…I thought that I will borrow later some funds to full fill bank loss.

Mr. Randhawa testified that he learned the cheques he had deposited to RBC were NSF on approximately September 15, 2012, and then revised this date on cross-examination to September 17, 2012. This testimony is not supported by the time line and is not credible. The letter quoted above clearly states that he went to the factoring office because he was aware that the cheques he had written were NSF. He testified that he did this on September 12, 2012. This date is supported by the details he submitted with respect to the payments he made from the proceeds of the cheque, the majority of which were made on September 13, 2012. The letter also states that he planned to deposit the cheque “to RBC for their loss” but instead, he cashed it at a Money Mart at the insistence of drivers who were aware of his situation at the bank. His testimony, however, was that the drivers did not know about his situation at the bank but were nervous because trucks had not been dispatched. While the drivers may well have preferred to be paid in cash, this does not explain why Mr. Randhawa chose to go to a Money Mart; the logical inference is that he did so because he knew he would not be able to withdraw cash if he took the cheque to the bank. On a balance of probabilities, the Tribunal finds that Mr. Randhawa was aware that funds were not available in his TD bank account but knowingly wrote cheques on it, deposited them to RBC and then immediately wrote cheques against the RBC account; these actions constitute fraud.

The question before the Tribunal is whether there are reasonable grounds for belief that Mr. Randhawa will not carry out business in accordance with law and with honesty and integrity were he to be registered as a salesperson under the Act. The standard to be applied by the Tribunal in making its determination is set out in Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157:

19As applied to this case, s. 6(2)(d) of the Act requires the Registrar simply to show that Mr. Barletta’s past or present conduct provides reasonable grounds for belief that he will not carry on business in accordance with the law and integrity and honour. The Registrar does not have to go so far as to show that Mr. Barletta’s past or present conduct makes it more likely than not that he will not carry on business as required.

The evidence is that Mr. Randhawa has failed to conduct himself in accordance with law and with honesty and integrity in the past; the Tribunal has found that Mr. Randhawa knowingly defrauded the Royal Bank in 2012. This finding alone does not necessarily preclude registration. However, the Tribunal finds that Mr. Randhawa has not accepted responsibility for this past conduct.

As noted above, while there are credibility issues with Mr. Randhawa’s testimony, there are examples throughout it that are illustrative of an attempt to minimize his personal accountability for his past actions. Mr. Randhawa testified that he relied on his accountant when he wrote the cheques on his TD account even though he also testified that his business failed because he was solely responsible for its management. The fact that he deposited a cheque to the RBC account it was written on was just a mistake. His written statement that his drivers were aware of his situation with the bank was also a mistake. He cashed the accounts receivable cheque at a Money Mart, even though he intended to deposit it to cover RBC losses, because drivers pressured him.

Mr. Randhawa also did not provide any evidence with respect to his current conduct to support his application for registration other than to state that he had worked hard to pass the courses required to meet RECO’s educational requirements. For example, he provided no letters of reference from either his current employer or his sponsoring broker of record.

The evidence is that Mr. Randhawa defrauded RBC in September 2012. There is no evidence to support that he has accepted responsibility for his past conduct and no evidence to support that his conduct has changed. Therefore, the Tribunal finds that there are reasonable grounds to believe that Mr. Randhawa will not conduct himself in accordance with law and with integrity and honesty as set out in section 10(1)(a)(ii) of the Act.

False Statement on an Application

Question 5 on the “Application for New/Reinstatement: Broker/Salesperson” states “Are there any unpaid judgments and/or unpaid debts outstanding against you? (If yes, refer to Page 3 for Completion Instructions)”. Those instructions state “If you answered yes, you must submit a copy of each judgment and other such documents pertaining to outstanding debts…you must also submit full particulars regarding the circumstances that led to the matters…”

The evidence is that while Mr. Randhawa answered “yes” to Question 5, he failed to disclose all of the judgments against him when he submitted his February 15, 2015 application for registration. After RECO staff conducted a search and found two undisclosed judgments in favour of Cash Flow Recoveries Inc., they sent a letter to Mr. Randhawa on February 27, 2015 asking him to provide particulars. Mr. Randhawa provided that information on March 1, 2015 and wrote “these were not reported in the application because of misunderstanding that I declared the major judgment of RBC and not need to report the other ones.” He testified “I was under the impression that if I declared the largest two it would give an idea of what I was going through.” He also stated that his failure to disclose all of the judgments was simply an honest mistake.

Mr. Schlotzhauer testified that the completion of the application for registration is the first indication of an applicant’s honesty and integrity. Mr. Randhawa did disclose the criminal charge of “Fraud Over $5,000”, a report from Peel Regional Police that set out the details with respect to that charge, and the two large judgments in favour of RBC. Given the potential negative impact of this disclosure on his application, the Tribunal can find no benefit that might accrue to Mr. Randhawa in withholding information about the smaller judgments. While there is no dispute that he initially failed to provide complete disclosure, the Tribunal accepts that the omission was an error. Therefore, the Tribunal finds that he did not make a false statement or provide a false statement in an application for registration as set out in section 10(1)(a)(iii) of the Act.

CONCLUSION

In summary, the Tribunal has found that the Appellant cannot reasonably be expected to be financially responsible in the conduct of business and that there is reason to believe that he will not conduct himself in accordance with law and with integrity and honesty as set out in sections 10(1)(a)(i) and (ii) of the Act. Therefore, grounds for refusing to register the Appellant under s. 13(1) of the Act have been made out. However, the Tribunal has the power under s. 14(5) of the Act to substitute its opinion for that of the Registrar. Accordingly, the Tribunal must consider the appropriate action to direct the Registrar to take, which may, in appropriate cases, include approving the registration with conditions as an alternative to a refusal.

The Act is designed to protect the public interest. Financial responsibility and honesty and integrity are essential for participants in the real estate industry to protect consumers in what is a very significant financial transaction. The Tribunal has found, on a balance of probabilities, that the Appellant committed fraud when he deposited cheques to RBC knowing there were insufficient funds available to cover them and then proceeded to make disbursements. He gave no indication that he has accepted responsibility for his actions; rather, his testimony during this hearing, some of which contradicted the written explanation he had submitted to the Registrar, downplayed his personal accountability. The Appellant also has incurred significant debts; some, as a result of the fraud. The only action he has taken to address the debts was the payment of some restitution in exchange for the criminal charge against him being stayed. Based on these findings, the Tribunal concludes that registration, even with conditions, is not appropriate and that the Appellant’s application for registration as a salesperson must be refused.

ORDER

Pursuant to the authority under the provisions of the Act, the Tribunal orders the Registrar to carry out the Proposal to Refuse Registration dated August 9, 2016.

LICENCE APPEAL TRIBUNAL

_______________________

Mary Ann Spencer, Member