Date: 2020-03-09

Appeal from a Proposal of the Registrar under section 13 of the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C to Refuse a Registration

Between:

Allan Douglas Shepheard

Appellant

and

Registrar, Real Estate and Business Brokers Act, 2002

Respondent

DECISION AND ORDER

PANEL:

Marisa Victor, Member

APPEARANCES:

For the Appellant:

Allan Douglas Shepheard, self-represented

For the Respondent:

Shane Smith, Counsel

HEARD:

In-person on: January 29, 30, 2020

REASONS FOR DECISION AND ORDER

Overview

1Mr. Shepheard appeals the Registrar’s most recent proposal to refuse his registration as a real estate agent. I am tasked with determining whether Mr. Shepheard now meets the criteria for re-licensing.

2Mr. Shepheard was a licensed real estate agent from 1995 until 2014 when his licence was revoked by the Registrar due to bankruptcies, extensive unpaid debts, criminal and provincial offences convictions, disciplinary committee hearings and related unpaid fines. The Register’s decision to revoke the licence was confirmed by this Tribunal in 2014 (the 2014 Revocation).¹ In 2016 he re-applied for his real estate licence and was refused registration. The appellant appealed that decision to this Tribunal and the refusal was confirmed by me in a decision released in January 2018 (the 2018 Decision).²

3As a re-applicant for a registration under the Real Estate and Business Brokers Act, 2002 (the Act), Mr. Shepheard is required to show that he is now eligible for registration due to new or other evidence or a material change in his circumstances since the 2018 Decision.

4The Registrar’s position is that even if the appellant meets that test, he should still be denied a licence on three subsequent grounds.

5I find that the appellant has failed to show that he is eligible for registration.

ISSUES

6The Tribunal must decide if the Registrar’s Notice of Proposal to refuse the appellant’s registration should be carried out or if the Tribunal should substitute its own opinion.

7To answer this question, I must decide the following issues:

Issue I: Is the appellant eligible to reapply for registration because there is new or other evidence or his material circumstances have changed?³

Issue II: If the appellant can reapply:

a) Is the appellant not entitled to registration because he cannot reasonably be expected to be financially responsible in the conduct of business;⁴

b) Is the appellant not entitled to registration because his past conduct affords reasonable grounds for belief that he will not carry on business in accordance with law and with integrity and honesty;⁵ or

c) Is the appellant not entitled to registration because he would be in breach of the Act if registered?⁶

RESULT

8After reviewing the evidence, I find Mr. Shepheard has not provided new or other evidence or shown a material change in circumstances such that he now entitled to registration.

ISSUE 1 - The appellant is NOT eligible to reapply for registration

Law

9The appellant’s registration was previously refused in the 2018 Decision. Under s. 17 of the Act, in order to reapply for registration, the appellant has the burden to show on a balance of probabilities that:

a. The required time has passed since his registration was revoked;⁷ and

b. There is new or new or other evidence or his material circumstances have changed.

Evidence

10The appellant ‘s evidence covers three main subject areas which I will deal with in turn:

a. The appellant’s current employment and income;

b. Testimony from a real estate broker willing to supervise him and testimony from a consumer who made a complaint to RECO about the appellant; and

c. The appellant’s current debt load and future financial plan.

Employment and Income

11The appellant’s current employment comes from two main sources. First, he runs his own property management company which provides snow removal and grass cutting services. Second, until December 2019, he provided coaching to real estate agents.

12He testified that he makes $2,500/month earned income from coaching. The amount he makes from his property management company is unknown. He also receives $500/month from Canada child benefit, $376/month from Canada Pension Plan and $824/month in interim child support.

13The appellant filed his personal income tax returns for 2015 to 2018 showing income ranging from $26,000 to $34,000 per year.

14The appellant testified that his income from coaching would be deposited into his property management company account and he would draw $2,500 a month from that account to pay himself. However, he stated that his income from coaching was steadily going down and, as of December 2019, he had resigned from his coaching position. He planned to open his own coaching business.

15He testified that he began his property management company in 2015 because he did not want to work for minimum wage. The appellant described the ups and downs of his snow removal and grass cutting business, the long hours and the physical labour involved. He testified that it was hard to hire help but when he could he would pay workers cash on a daily basis. He testified that he has only two complaints regarding his company and that he felt that was a good outcome given that people in Ottawa like to complain. He stated that honouring the property management contracts kept food on his table. He stated his gross income before deductions was $50,000 per year. He stated that corporate income tax returns for 2017 and 2018 had not yet been completed. The appellant was unclear as to how much he earned from his property management company in a month.

16In cross-examination, the respondent asked why the property management company had not completed any income tax returns since 2016. The appellant advised that his accountant charged three times as much for corporate tax returns ($1500) and he was therefore not able to afford to file. The appellant did not know how much he deducted from his gross taxes per year. The appellant also acknowledged that he paid some of his outstanding fines from his corporate bank account but had not reimbursed the company account from his personal account. He acknowledged outstanding taxes owed and estimated the value at $3,000.

Witness Testimony

17The appellant called two witnesses. The first, Mr. Robin Chinkiwsky, is a registered real estate broker. Mr. Chinkiwsky testified that he has known the appellant for twenty years and worked briefly with him shortly before his registration as revoked. Mr. Chinkiwsky operates out of a home office in Merrickville. He testified that he would be willing to supervise the appellant if the appellant were to regain his licence. Mr. Chinkiwsky stated that he anticipated that the appellant would be his only agent and that the appellant would work out of Greely and focus on the Ottawa area. Mr. Chinkiwsky believed that the appellant would be successful given his knowledge and experience in the industry.

18In cross-examination, the witness testified that although he projected that the appellant would be able to complete 25 deals a year at approximately $250,000 gross, he himself makes $100,000 a year based on 30-40 transactions. He qualified that number by stating his sales were in a small town and house prices and lots have a lower value.

19The appellant also called Mr. Andrew Drake as a witness. Mr. Drake testified for the respondent at the Tribunal hearings leading to the 2014 Revocation and the 2018 Decision. Mr. Drake and his then wife filed a complaint with RECO regarding the appellant’s actions. The complaint was that the appellant had entered into an agreement to rent the Drake’s property while the appellant was acting as their representative in a search for another property. The appellant initially owed $20,000 to the Drakes.

20Mr. Drake testified that although the appellant’s actions contributed to the demise of his first marriage, he felt that six years was a long enough punishment for the appellant to be “in purgatory” and that he should be allowed to use his sales skills to earn a living in real estate. Mr. Drake testified that he was regularly receiving $200/month in restitution from the appellant towards the debt owed and the balance is now approximately $5,000. Mr. Drake testified that he believed that the appellant had learned his lesson.

21In cross-examination, the witness confirmed that his view of the appellant has softened towards the appellant since the 2018 Decision. Mr. Drake testified that he would use the appellant as a real estate agent again if RECO had on-going oversight of the appellant. However, he acknowledged that he had not known that RECO does not engage in direct oversight of its registrants.

Appellant’s Current Debt Load

22As part of his 2019 application for registration, the appellant filed a statement of his outstanding debts (the 2019 debt statement). In the 2018 Decision, the appellant’s debts totalled $360,795.06. The 2019 debt statement showed a debt of $358,403.97.

23The appellant also testified about his current debt load. In terms of debt reduction, the appellant testified that his debt of $436.32 to Cash Flow Recoveries, as noted in the 2019 debt statement, is now paid off. The appellant owed $20,000 to RECO for the Discipline Committee fine as of the 2018 Decision. The balance owing on that fine is now $18,900. The appellant owed the Ontario Court of Justice $29,365.00 as of the 2018 Decision. The balance owing is now $27,025.00. The appellant owed Mr. Drake $20,000 at the 2018 Decision. Mr. Drake reduced that amount to $10,000. The amount owing is $4,600.

24The appellant testified that the 2019 debt statement does not capture all his debts. In October 2019 the appellant obtained a new loan of $5,800 from Easy Financial. The appellant advised that he had yet to file any taxes for his property management company and therefore there were outstanding taxes he estimated at $3000. In addition, the appellant’s property management company has been paying $100/month towards the appellant’s RECO Discipline Committee fine. The appellant agreed that he had not paid his corporation back for those amounts, so he owes approximately $1,100 to his own company.

25The amounts the appellant owes to Revenue Canada has increased since the 2018 Decision, partly due to interest charges. The appellant testified that his current taxes owed are spread out over five accounts:

a. $84,000 in personal taxes owed

b. $83,000 in HST collected owed

c. $25,000 in source deductions owed

d. $4,488 HST owed by the property management company

e. $96.60 in source deductions owed by the property management company

26The total owed, not including the unreported corporate taxes for the property management company, are $212,000 plus interest.

27The appellant also entered as evidence a financial analysis dated January 14, 2020 by Adam Schacter a financial and investment advisor. That plan includes a net worth summary showing a total debt of $357,000. However, those figures do not include $22,337.64 in debt owed to Drivetown Ottawa for the appellant’s vehicle and $2,400 owed to Unik Propane - two amounts that are listed in the 2019 debt statement. This would bring the total debt up to approximately $372,000.

A. Analysis

28I must determine whether the appellant has presented new or other evidence or shown that his material circumstances have changed such that he is now entitled to registration. This is a requirement under s. 17 of the Act.

29In my 2018 Decision I stated that the Act does not require the appellant to establish that the material change in circumstances is positive in order to satisfy s. 17.⁸ At this hearing, the respondent argued that, on the contrary, the Act requires a finding that there has been a positive change in the appellant’s circumstances in order to satisfy s. 17. The respondent relied on previous Tribunal decisions that have found that the purpose of the section is to require only new and better information that could have changed the previous decision.⁹ Any other result could lead to inconsistent Tribunal decisions based on the same facts. Therefore any material change must be positive in nature.

30Previous Tribunal decisions are not binding on me, including my own. Given the decisions brought to my attention regarding the nature of a material change required, I agree with the respondent that a material change in circumstances must be positive in nature and must relate to the issues that were the basis for the previous decision. This requires that, in order to satisfy the test in s. 17, the appellant must establish that he is in a better position than he was when the revocation or refusal took place. Further, that better position must relate to the reasons the licence was revoked or refused in the first place. This leads to consistent Tribunal decisions on the facts particular to the appellant.

31In this case, the appellant’s financial position and debt load were central to the 2014 Revocation and the 2018 Decision. The mere passage of time or changes to the appellant’s family life or lifestyle do not satisfy the requirement of a positive material change in circumstance as they do not relate to the reasons for the appellant’s loss of registration.

32Considering all of the evidence tendered, I cannot find that the appellant has new or other evidence that was not previously available or has had a material change in his circumstances since the 2018 Decision such that he is now entitled to registration.

33The appellant’s employment and income evidence was problematic. The amounts of income he testified to were inconsistent with his testimony in the 2018 Decision, inconsistent with his tax returns and internally inconsistent. In addition, there are unknown amounts of unreported income from his corporation. He testified he made $50,000 gross from his property management company, approximately $30,000 per year from coaching and yet he his tax returns showed an annual income of approximately $30,000. If that is the case then his property management company work results in no income. This is inconsistent with his testimony that his company work puts food on the table and is preferable to working for minimum wage. One also wonders why he would engage in such physically difficult work with long hours if it resulted in no income. In any event, it is clear that since the 2018 Decision the appellant is reporting a lower income and further he has quit the coaching job he says paid him $2400 a month. His employment and income situation is worse that it was at the time of the 2018 Decision.

34The appellant’s witnesses added little to his case as neither addressed relevant new evidence or material change in circumstances since the 2018 Decision. The exception is that Mr. Drake did acknowledge receiving $200 a month from the appellant towards the debt he is owed.

35The appellant’s current debt load is large with additional unquantified debts. The appellant’s records and testimony indicate that his total debt is approximately $360,000 to $375,000 which is the same or larger than it was at the time of the 2018 Decision ($360,000). This is in part due to interest on amounts owed to Revenue Canada, but also due to new consumer debts the appellant has taken on for his car ($20,000) and to Easy Financial ($6,000). These new consumer debts

outpace the appellant’s ability to pay off old debts. There are also amounts that remain unknown such as the appellant’s corporate tax owed for 2017 onward, and the amounts the appellant owes to his own company. His debt situation is therefore worse than it was at the time of the 2018 Decision.

36Should the appellant apply for registration in the future, he needs to have solid financial evidence that accurately shows his current debt situation and demonstrates a marked improvement from his current situation.

37The appellant has not brought forward evidence of any material improvement in his financial circumstances since the 2018 Decision other than nominal payments towards some of his debts. The appellant’s situation in regard to his employment, income and debt load shows only a negative change in his circumstances. He has not met his burden under s.17 of the Act to show that since the 2018 Decision there is new or new or other evidence or his material circumstances have changed.

B. No Need to Proceed to Issue II

38As the appellant has not satisfied the test in s. 17, I do not need to consider the three grounds for refusal under Issue II for which the respondent bears the onus to prove.

39That being said, the respondent submitted evidence on all of these grounds and the appellant had the benefit of hearing that evidence. Should the appellant reapply for registration he would need turn his mind to those considerations. In particular, the respondent argued that the appellant faced a complete bar to registration under s. 10(1)(e) due to his outstanding debt to RECO stemming from Discipline Committee fines where were due in February 2014. The original amount of that fine was $20,000 of which the appellant’s company has paid off $1,100. The appellant should consider whether future applications for registration are worth applying for while that fine remains oustanding.

(a) ORDER:

40The Tribunal directs the Registrar to carry out the Proposal to refuse the appellant’s registration.

Footnotes

1. 18650 v Registrar, Real Estate and Business Brokers Act, 2012, 2014 CanLII 79510
2. 2Allan Douglas Shepheard v Registrar, Real Estate and Business Brokers Act, 2002, 2017 ONLAT REBBA 10839
3. 3See s. 17 of the Act
4. 4See s. 10(1)(a)(i) of the Act
5. 5See s. 10(1)(a)(ii) of the Act
6. 6See s. 10(1)(e) of the Act
7. 7Not at issue in this hearing.
8. 8See para 31.
9. 9See 8098 v. Registrar, Motor Vehicle Dealers Act, 2002 at para. 11.