Date: 2022-07-14

Appeals under s. 9(5) of the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B. from a Notice of Proposal to Refuse a Registration

Between:

Habib Irani and Shaffat Khan

Appellant

-and-

Registrar, Motor Vehicle Dealers Act, 2002

Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Jennifer Friedland, Member

APPEARANCES:

For Mr. Khan Justin Jakubiak, Counsel

For Mr. Irani Self Represented

For the Respondent Husein Panju, Counsel

HEARD BY VIDEO: January 10, 11, 12, 13, 14, 26, 28 February 23, 24, 28, March 21, 22, 23, April 1, 2022

A. OVERVIEW

1The appellants, Habib Irani and Shaffat Khan, appeal against a Notice of Proposal (NOP) issued by the Registrar under the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B. (the “Act” or “MVDA”) on April 27, 2021 to refuse their registrations as salespeople under the Act.

2By Notice of Other and Further Particulars dated June 10, 2021, the Registrar added one Gabriel Pinto (GP) to the NOP. GP also appealed the NOP but then withdrew his appeal in December 2021.

3Amendments to the initial NOP and further particulars were also provided on September 30, 2021.

4The allegations arise in the context of the appellants’ former employment at Ontario Hyundai (“OH” or the “dealership”) in Whitby, Ontario where Mr. Khan was the acting General Manager (“GM”) during the relevant time and Mr. Irani was a Financial Services Manager (FSM), as was GP.

5OH is owned by Alpha Auto Group (AAG) which owns a number of dealerships in Ontario and elsewhere in North America.

6The basis for the NOP is the Registrar’s opinion that the past conduct of the appellants affords reasonable grounds for belief that they will not carry on business in accordance with law and with integrity and honesty. The Registrar contends that this disentitles them to registration pursuant to s. 6(1)(a)(ii) of the Act.

7The Registrar relies on two categories of alleged past conduct. First, it asserts that the appellants participated in a “scheme” with respect to early loan terminations (ELTs) at RBC. In this purported scheme, the FSMs encouraged consumers to obtain financing even where the consumer was prepared to pay cash. In exchange for agreeing to financing the consumer would get some incentive and the dealership would earn a commission from the bank. The consumer could then pay back the loan whenever they wanted including the very next day, through the dealership. It was not disputed and was well known that banks could claw back the commission paid to a dealership if a loan was repaid within 180 days; but during the impugned period, RBC was not charging back for ELTS. The Registrar contends that by arranging an increasing number of loans that were ELTS during the period that the bank was not clawing back, the FSMs, and by extension, Mr. Khan, took advantage of the bank.

8The appellants were both fired for their participation in this alleged scheme – though for Mr. Khan, his termination came approximately two months after Mr. Irani’s. The Registrar contends that as GM, Mr. Khan knew of the purported ELT scheme, benefited from it and should have done something to stop it.

9The other area of past conduct relied on by the Registrar relates to consumer trades. The bulk of these allegations are against GP and are not disputed by the appellants. In the NOP, there are nine transactions where GP is said to have overcharged for products, sold products that were not agreed to, and/or failed to provide the consumer with a Bill of Sale. Although GP is no longer a party to these proceedings, his conduct bears some relevance to the allegations against Mr. Khan. The Registrar contends that as GM, Mr. Khan was either complicit in GP’s wrongdoing or failed in his duties as GM by not detecting the wrongdoing and stopping it.

10Against Mr. Irani, the Registrar relies on past conduct relating to two consumer trades; one in which he is said to have overcharged a consumer, another in which he is said to have initially overcharged a consumer and then shifted the amount of the overcharge to a product the consumer says he did not want. In relation to the latter consumer, it is also alleged that Mr. Irani failed to provide the Bill of Sale in the timeframe required under the Act.

11The appellants do not – for the most part – dispute the facts relied on by the Registrar, they just do not agree that their past conduct affords reasonable grounds for belief that they will not carry on business in accordance with the law and with integrity and honesty. They further contend that they have been treated unfairly by OMVIC and they seek costs against the respondent.

12The appellants’ registrations were cancelled after they were terminated by OH. In March of 2021 they each applied to transfer their registration to new dealerships. Those are the registrations that the Registrar has proposed to refuse. Due to the NOP, the appellants have been unable to work in the industry for over a year.

B. RESULT

13For the reasons given below, I do not agree that the appellants’ past conduct affords reasonable grounds for belief that they will not carry on business in accordance with law and with integrity and honesty. I therefore substitute my opinion for that of the Registrar and order the Registrar not to carry out its NOP.

14Mr. Irani and Mr. Khan are both to be registered forthwith without conditions.

15A timeline for submissions on costs – if any of the parties still wish to make such a request – will be provided as part of my Order. The parties are reminded that Rule 19 provides a limited basis for seeking costs.

C. STATUTORY CONTEXT AND LAW

16An individual applicant who meets the prescribed requirements for registration as a salesperson under the MVDA is entitled to registration except in certain circumstances as set out in section 6(1) of the MVDA. Those circumstances include the ground alleged to disentitle the appellants in this case as set out above.

17At a hearing, the onus is on the Registrar to prove, on a balance of probabilities, the facts it relies on in support of its position that the appellant is not entitled to registration.

18With respect to the question of whether that past conduct affords reasonable grounds to believe that business will not be carried on in accordance with the law and with integrity and honesty, the standard is somewhat less than a balance of probabilities.¹ I need not be satisfied that it is more likely than not, that the appellants will not carry on their business in accordance with the law and with integrity and honesty. At the same time, “reasonable grounds for belief” has to be more than “mere suspicion” and will be found to exist “where there is an objective basis for the belief which is based on compelling and credible information”.² There must also be a nexus between the appellants’ past conduct and their ability to conduct business as a motor vehicle salesperson serving the interests of the public.³

19Under s. 9 (5) of the Act, following a hearing I may by order direct the Registrar to carry out its proposal or substitute my opinion for that of the Registrar. Additionally, I may attach conditions to my order or to a registration.

20A hearing of a notice of proposal is a hearing de novo. This means that I do not owe deference to the Registrar’s decision.⁴ As well, even if I find that the appellant is not entitled to registration for the reasons set out in the entitlement provisions of the statute, I must still consider whether revocation is the appropriate remedy.⁵

D. EVIDENCE AND ANALYSIS

21The facts on which I have based my decision were presented through documentary evidence entered as exhibits and oral testimony heard over the course of 13 days.

22For the Registrar, I heard from the following 12 witnesses:

• Heather Heggestad –vice-president of RBC automotive finance for Ontario, North and East Regions;
• Jennifer Charlebois – retail account manager with RBC Automotive at the relevant time;
• Robert Walker – Chief Compliance Officer for Alpha Auto at the relevant time and GM of Barrie Honda; now President of Alpha Auto Group, Ontario Platform (as of Jan 1, 2022);
• William Thompson – Chief Operating Officer for Millennium and First Canadian Protection Plan (“FCPP”), a supplier of products and services to dealerships;
• Chris Lush – Business Development Manager with Insurance Insight Inc.;
• Jeffrey Brandes – former FSM at OH;
• Philip McLean – sales person at OH;
• Consumers “B” “C” “D” and “E”; and
• Sam Consentino, Manager of Investigations at OMVIC.

23For the appellant, Khan, I heard from Mr. Khan.

24The appellant, Mr. Irani, did not testify⁶.

25The exhibits admitted during the hearing and reviewed by me in coming to my decision include, but are not limited to: 5 volumes of materials submitted by the respondent (among other items, these contained the deal files with respect to various consumer transactions; correspondence between AAG and OMVIC, AAG and the appellants, AAG and the police; proof of cheques written to various consumers; as well as charts and demonstrative aids in relation to the ELT and consumer trade issues; emails and text messages and various OMVIC documents, among other items)⁷.

26From Mr. Irani, I had a reference letter from his superior in the Canadian Armed Forces on which I put no weight given that Mr. Irani himself did not testify. Mr. Irani also put in various texts, emails and industry specific documents; as well as a decision of the Ontario Labour Board dated November 3, 2020 in which he was successful in a claim against his employer for improper deductions from his wages and withholding vacation pay.

27I also reviewed the exhibits admitted on behalf of Mr. Khan which included various emails and texts.

28Even where I do not specifically mention an exhibit or a person’s testimony, I have reviewed that evidence in coming to my decision in this case.

Appellants’ Roles and History of Registration

Habib Irani

29Mr. Irani had been registered as a salesperson under the Act since March 26, 2015. He started working at OH in February 2018 as a Financial Services Manager. He was terminated by letter from his employer dated January 9, 2021 and his registration cancelled that same day.

30The role of an FSM is to meet with the customer once an agreement has been reached to purchase a vehicle. The FSM offers the consumer additional ancillary products, for example, an extended warranty or a protection package. The FSM also arranges financing. As well, the FSM is responsible for ensuring that the proper paperwork is completed in relation to any financing or additional products.

Shaffat Khan

31Mr. Khan had been registered as a salesperson under the Act since August 15, 2008. He began working at OH in May 2017, initially as a sales manager then during the relevant time, as acting General Manager. He was terminated by letter from his employer dated March 5, 2021 and his registration canceled on March 8, 2021. I say that Mr. Khan was “acting” GM because although he was given the responsibilities of a GM and is being held accountable by the Registrar on account of his role as GM, he was not in fact officially employed in that capacity by Alpha Auto Group.

32I will briefly review the context of Mr. Khan’s role as GM as it is relevant to my conclusions with respect to his past conduct and whether it should disentitle him to further registration under the Act.

33The Registrar relied on two contracts reflecting Mr. Khan’s role as GM. The first is dated November 22, 2019 and signed by the CEO of AAG, Kuldip Billan. This agreement does not mention Mr. Khan’s new role or title, but specifies that his current compensation plan would be amended by increasing his base salary to $100,000 per annum and providing for a $5000 month bonus based on achievement of the monthly budget target as set by Alpha Auto Group.

34Mr. Walker described that when the November 2019 contract was signed Mr. Khan was moving from a position of sales manager into a general manager role and he was being given the opportunity to show whether he could perform that role and take on overall responsibility for the dealership.

35A further contract was signed between Mr. Khan and AAG on October 26, 2020. Mr. Walker testified that this contract “finalizes that transition” to GM.

36Notably, the contract between AAG signed by its CEO and Mr. Khan is for the position of “General Sales Manager, Ontario Hyundai,” not “General Manager.” When asked why the contract did not reflect the position of GM, Mr. Walker explained that Hyundai Canada required a certain vetting process for anyone hired as GM at a Hyundai Dealership. AAG used the term “general sales manager” to avoid having to go through that vetting process.

37Through various witnesses called by the Registrar, including Mr. Walker, Jeff Brandes (an FSM) and Phil McLean (a salesperson); and through Mr. Khan’s own testimony, a number of relevant details emerge about Mr. Khan’s role as “GM”.

• AAG did not provide any training to Mr. Khan before putting him in the role of GM.
• Mr. Khan had no prior experience as GM.
• Mr. Khan’s prior experiencing managing others was as sales manager where he supervised 12-15 people.
• In his new role he oversaw approximately 97 employees and was responsible for multiple departments including areas where he had no prior experience at all (for example, accounting or parts and service).
• OH was a high volume dealership.
• In addition to needing to manage parts and service, sales (new, used and leasing), FSMs, administration and accounting, Mr. Khan also now had to handle matters relating to occupational health and safety, OMVIC, and consumer complaints.
• As well, Mr. Khan was placed in the role of GM during a time of some upheaval. There had been substantial turnover at the dealership prior to October 2019.
• The evidence was that OH was understaffed when Mr. Khan was put in the role of GM. As one example, when he became GM, his previous position as sales manager was not filled.
• Mr. Brandes, called by the Registrar, testified that at a previous dealership where he worked there were a number of managers covering different departments. He thought that at OH they were “understaffed managerially”.
• On top of being asked to oversee 97 employees and run a high volume dealership with no training or experience, Mr. Khan shortly had to do so in the face of the COVID-19 pandemic.
• Mr. Khan had to address many additional issues due to COVID; including employee layoffs, inventory shortages, and staffing shortages.
• He had to lay off approximately 60 people in March 2020.
• In April of 2020 the cleaning staff did not work at OH and so Mr. Khan was responsible for ensuring cleaning.
• He had vendors who were not being paid.
• He had employees laid off who raised complaints about vacation pay. Some of the employees took AAG to the Ontario Labour Relations Board (OLRB) over the issue of vacation pay.
• He had to hire staff back in May and June 2020.
• He additionally had to deal with all of the unique and new COVID protocols: e.g., putting up screens, and signs, learning how to impose social distancing, having to learn and make decisions on the fly relating to the pandemic, dealing with employees who were worried or sick, and preparing for Ministry of Health visits which happened regularly.

38Robert Walker, who testified for the respondent, was the Chief Compliance Officer for Alpha Auto during the relevant time. He has more than 30 years experience in the industry and more than 15 in the role of GM. Mr. Walker admitted that he had personally been involved training new GMs in the past, saying “I can think of several instances where there was training provided, where I myself had spent time with general managers who were new to the role.” But no such training was provided to Mr. Khan.

39Mr. Khan testified that he was supposed to have been given a management training program, but it never happened – possibly due to COVID, he thought.

Pay Structure and Profit at OH

40Before describing the specifics of the alleged wrongdoing it is also worth describing the incentive and pay structure at OH.

41FSMs (such as Mr. Irani or GP) do not earn a salary. Rather, their compensation is 100% commission driven and is based on a percentage of the gross monthly profits that they are able to generate for the dealership. These profits are generated by selling products to consumers after they have agreed to purchase a vehicle, such as warranties or protection packages and various insurance products.

42The FSMs also generate profits for the dealership by arranging financing. When a loan is arranged through a particular bank, that bank will typically pay the dealership a commission for sending the financing contract to them.

43The specific percentage of the gross profits that an FSM can earn each month depends on the average gross profits the FSM has brought in. If the average is $2,000 or more per month, the FSM will earn 26% of those profits. Thus, for example, if the FSM had 50 deals in a month that generated $100,000 in profit for the dealership, then the gross monthly average would be $2,000, and the FSM would earn 26% of that $100,000. If the average gross profit in the month were less than $2,000 in profit, the FSM would earn less of a percentage of that total gross profit. Mr. Walker acknowledged that the FSMs – particularly GP – earned significant profit for the dealership.

44Within the FSM’s payment scheme there are additional incentives and disincentives for certain products. For example, the FSMs were encouraged to sell First Canadian products to consumers. If they sold an equivalent Hyundai product – even if it were of equivalent quality and cheaper for the consumer – the FSM would have $500 deducted from their gross monthly profit average.

45In terms of who benefited from the majority of the profits earned by FSMs and the dealership as a whole, it was Alpha Auto Group, the corporation that owned the dealership. Mr. Walker confirmed that the 74% of gross monthly profit remaining after the FSMs had been paid, ended up in the pockets of AAG. He further confirmed that OH is one of AAG’s top dealerships in terms of profit. Out of nine dealerships owned by AAG in Ontario, Mr. Walker ranked OH as at least its third highest earner.

46The evidence satisfies me that AAG was interested in the profitability of its dealerships and monitored the profits of OH. AAG also had access to the logs and records at OH. Further, it was AAG that was responsible for paying the compensation to the FSMs and Mr. Khan⁸.

Past Conduct – Early Loan Terminations

47As noted above, one source of profit for a dealership stems from incentives paid by lending institutes to dealerships when consumers finance their purchase through that institution. In this case, we are dealing with RBC. The commission is called an “origination fee.” There might also be a “quality bonus.”

48The RBC incentive paid to a dealership varies based on several factors, including the interest rate and the size of the loan. The range of commissions paid to the dealership for any particular loan might range from approximately $400 to approximately $4,000 depending on the various factors.

49There is one caveat, however, to the origination fee or quality bonus incentives: if the consumer repays the loan within the first 180 days, the bank has the right to “charge back” or “claw back” those commissions. A loan that terminates within the first 180 days is known as an “early loan termination” or ELT.

50Heather Heggestad – RBC VP of automotive finance for the region – testified that charging back for ELTs was apparently not a term of RBC’s contract with OH or AAG at the relevant time, though it is now. Mr. Walker testified that he would be surprised to learn that there was no such contract. Either way, the evidence satisfies me that both appellants and the other FSMs at OH operated on the assumption that the bank did have the right to chargeback an origination fee or quality bonus if the loan was repaid under 180 days. In such a case, the dealership (i.e. AAG) would chargeback the FSM to recoup the FSM’s portion of that compensation.

51The bank’s right to chargeback for ELTs was also reflected in the incentive sheets distributed monthly which said on each of them “RBC reserves the right to chargeback Origination Fee and/or Quality Bonus with the first 180 days of any loan advance.”

52Regardless of the potential for chargebacks, the evidence satisfies me that consumers who were prepared to pay cash for their vehicles were encouraged to switch to financing instead by the FSMs at OH. To encourage the consumer to switch from cash to financing, the FSMs would offer incentives. For example, free window tinting, discounts on other products or other perks.

53A former FSM – Jeff Brandes – was called by the respondent. He was fired shortly after Mr. Irani and GP for his alleged involvement in the ELT “scheme”. Mr. Brandes had started at OH in April 2019 but left in November 2019 due to what he described as a toxic environment because of GP. He returned in February 2020, was laid off for COVID, and then rehired again in May, 2020.

54Mr. Brandes explained the general practice at the dealership, which the appellant Mr. Khan corroborated. Mr. Brandes explained that it was standard practice to try to convert a cash customer to financing in order to obtain the commission. He also described the various benefits for a customer of obtaining financing. He gave as an example where a consumer may have borrowed the cash for the car from a line of credit that had a higher interest rate than the dealership could offer for financing.

55Mr. Brandes testified that he always told the customer that the loan could be paid back at any time but acknowledged that this could include “one day financing” whereby the loan would be paid back the very next day. In those cases, the consumer would come in with a cheque made out to OH for the amount of the loan, OH would then obtain a payout statement from the bank, and then issue a cheque to RBC for the amount to be repaid. This would of course be an ELT, subject to being clawed back.

56Mr. Khan was one of the people who signed the cheques that went to RBC for early payouts that went through OH. The consumer could also pay back their loan early themselves by contacting the bank.

57It is clear from the evidence that the number of loans taken out through RBC that ended up being ELTS increased significantly over the 14-month period from the beginning of October 2019 to the end of November 2020.

58My own calculations based on the charts relied on by the Registrar and submitted through RBC⁹ show that in the 14 months prior to the period at issue there were 24 ELTS altogether out of 119 loans taken out through RBC – meaning that 20.2% of those loans ended up being ELTs.

59In comparison, during the 14 months from the beginning of October 2019 until the end of November 2020 (the period at issue on this appeal) there were 140 ELTs out of 264 loans sent altogether to RBC during that period, thus approximately 53% of those loans were ending up as ELTs.

60Ms. Heggestad testified that the average national ELT rate was between 5% and 6.5% – though that average does not quantify how many loans were taken out (eg if only two loans are taken out and one terminates early that would be a 50% ELT rate).

61In this case, it is clear that there was a significant increase in both the total number of loans sent to RBC during the impugned period and in the number of those loans that terminated early.

62The bulk of the ELTs during the relevant period show that the loans were terminated within the first month.

63Evidence about the reason why more financing deals were being sent to RBC regardless of whether they might be paid out early was provided by both Mr. Brandes and Mr. Khan.

64Mr. Brandes testified to his understanding that RBC was willing to overlook ELTs in order to increase their business with OH. He recalled having been told this by either Mr. Irani or GP after he had returned to OH after the COVID layoffs in May or June 2020. He testified that this explanation made sense to him. He described the RBC representative as being very aggressive. He did not do an economic analysis of whether it was in fact in RBC’s interest to overlook ELTs, but he expressed that it certainly seemed plausible that they would do so if enough business were sent their way.

65Mr. Khan testified to a similar understanding. He recalled that sometime in the Fall of 2019, prior to assuming the role of GM, he was on the floor with the former GM when GP came over and told them that RBC had just promoted the dealership to a new tier and that as long as they maintained a certain volume of loans with RBC they would not claw back ELTs.

66It turned out that during the impugned period, when the number of ELTS increased, RBC did not in fact chargeback for any of them. That evidence is not in dispute.

67In terms of why the Registrar calls this increase in ELTs a “scheme,” initially it alleged in its NOP that some consumers were not aware of, or did not fully understand that loans were being arranged for them. I agree that if such were the case, this would certainly make it a “scheme.” However, in its Notice of Further and Other Particulars, dated September 30, 2021, the Registrar withdrew that allegation.

68The only evidence from any consumer regarding how they came to agree to financing was from Consumer B – who said he initially wanted to pay cash, but was offered financing and agreed to it to improve his credit. I will say more about Consumer B’s transaction below. Suffice to say here that his loan was not through RBC and his transaction took place after the period of the alleged scheme.

69The Registrar’s remaining basis for describing the increase in ELTs as a “scheme” was its contention that the appellants had to have known that ELTs were not being charged back for some reason other than what Mr. Brandes and Mr. Khan described.

70The Registrar relies on the testimony of Ms. Charlebois – the “aggressive” RBC rep described by Mr. Brandes. Ms. Charlebois testified that she had a conversation with Mr. Irani in late 2019 or early 2020 in which she told him that RBC understood that “life happens” and that “one or two” ELTs “here and there” would be normal but “obviously, if there’s a problem, then we’ll be talking about it.”

71The Registrar also relies on a text message exchange between Mr. Irani and the RBC rep sent June 11, 2022. In this exchange, Mr. Irani tells Ms. Charlebois that he is sending a lot of deals her way but might have “one or two” that get paid out early and “please don’t charge me back as usual.” To which she gave him a thumbs up emoji.

72The Registrar asks me to rely on these two exchanges to conclude that Mr. Irani and the other FSMs, as well as Mr. Khan, knew or ought to have known that they were not supposed to be facilitating loans that might terminate early to the extent that they were. The Registrar relies on the echo of the “one or two” ELTs in support of this. However the reference to “one or two” ELTs being okay was not the whole of Ms. Charlebois’ testimony. She also testified to Mr. Irani making comments “about RBC not ever having clawed back in the past” and that he was “thankful that RBC never clawed back.” She confirmed that he made those comments right up to the end of her working there, which was in December 2020.

73Ms. Charlebois also testified that she had told Mr. Irani that it was not an automatic clawback process.

74Ms. Heggestad testified that 10% or more ELTs would usually trigger a flag and then the national office would take a closer look. She further explained that a concern might depend on how many loans were received – for example as where there could be a 50% rate of ELTs but relating to only two deals during that period. Thus, a rise above 10% would trigger a closer look but would not necessarily trigger a concern in every case.

75As to why RBC did not in fact charge back on any of the ELTs during the impugned period, the Registrar suggested in its NOP that this was due to staffing shortages at RBC related to COVID-19, as a result of which RBC suspended its standard practice of auditing the status of financing contracts to determine ELTs. However, this too is not quite the evidence that came out at the hearing. Rather, Ms. Heggestad explained that RBC had first implemented its chargeback policy in 2018 and that it monitored ELTS through a stringent manual process at the time that she described as not working for the dealers or for RBC. RBC therefore decided to suspend that process sometime in 2019 (well before COVID) in favour of implementing an automated process. The witness did not have the specific date for when in 2019 RBC had suspended the stringent process. She did however testify that their new system still had not been implemented by the time COVID-19 hit at which time RBC made a decision that it would not implement the automated system at that time either. Ms. Heggestad explained that monitoring chargebacks was not a priority for the national office during COVID.

76There was no evidence to support an inference that the FSMs or Mr. Khan knew that RBC had suspended its monitoring system. Ms. Heggestad testified that this information would not have been passed on to the dealerships or the FSMs.

77She further testified that despite having suspended its initial manual system, RBC still had the capability of monitoring for ELTs and flagging any concerns and did so.

78She acknowledged that the data showing the number of loans from OH terminating early were available to RBC and the national office and that no concerns were ever raised about that number of ELTs.

79Ms. Charlebois also confirmed that if a concern had been raised it would have been passed on to her to raise with the FSMs at OH. No concern was ever raised.

80There was some discrepancy over how the increase in ELTs ultimately came to RBC’s attention. The RBC rep testified that the RBC monitoring system did flag a concern in or around November 2020 and she then contacted Mr. Walker.

81Mr. Walker on the other hand could not recall in his testimony who spoke to whom first. After some discussion among counsel it was agreed (after Mr. Walker had finished testifying) that the Registrar could put in one page from Mr. Walker’s interview with an OMVIC investigator as an exhibit. In that interview, given on March 23, 2021, Mr. Walker said he was the one who had contacted RBC, having had occasion to review some of OH’s records and noticing a high number of cheques made out to RBC.

82I find that I do not need to decide who contacted whom first. It makes sense that RBC would eventually get around to monitoring its own processes. It makes equal sense that Mr. Walker, the head of compliance for AAG, could have reviewed the files at any time to determine whether there was a concern relating to ELTs or other issues. AAG would have been aware of the profits that were being generated on its behalf through the increase in loans to RBC and had full access to the data behind that increase during the relevant period. As well, as I will address below, there is evidence that a Facebook complaint about OH (that does not form part of the allegations in the NOP) did lead Mr. Walker to turn his attention to OH in or around September 2020.

83In any event, at some point in late fall 2020, it is clear that RBC and Rob Walker did have some discussions about the increase in ELTs and subsequently Mr. Khan was sent an email from the COO of AAG and directed to stop sending any loans at all to RBC. Mr. Khan complied with that direction. The email from the COO was sent on December 10, 2020.

84On January 9, 2021 both Mr. Irani and GP were fired for their participation in the alleged scheme. Jeff Brandes was fired in or around February 2021 and Mr. Khan was fired on March 5, 2021.

85There was ultimately a settlement between RBC and AAG but it was protected by a confidentiality agreement and so its terms were not revealed at the hearing. As Mr. Consentino (the OMVIC rep) acknowledged, AAG and RBC might have settled for zero dollars or they might have settled for much more. The quantum of settlement, if any, is not known.

86Both Mr. Walker and Ms. Heggestad acknowledged that OH currently maintains elite status with RBC.

Analysis re: ELTS

87I am not persuaded that the increase in ELTS during the impugned period was conduct on the part of either appellant that affords reasonable grounds to believe that they will not operate their business in accordance with law and with honesty and integrity.

88There was no dispute that RBC was entitled to claw back any incentives paid for loans that terminated in less than 180 days. The appellants’ position is that the increase arose when GP advised that RBC would not be clawing back provided they sent sufficient business to RBC. The total number of loans to RBC did subsequently increase, as did the percentage of ELTs.

89Although the RBC witnesses testified that there was no policy in place whereby incentives would not get clawed back if enough business was sent their way, this does not disprove that the FSMs – and by extension Mr. Khan – had come to understand otherwise based on what GP had told them, and based on the increase in ELTs that then ensued and that were not, in fact, clawed back.

90I have outlined above what the FSMs understood to be the case from their perspective, as testified to by Mr. Brandes and Mr. Khan and which, as Mr. Brandes testified, “seemed more than plausible” given how aggressive the RBC rep had been and given that RBC did not in fact charge back for any ELTs during that period.

91I have no basis to conclude that the FSMs understood otherwise.

92I find overall that this is not an issue that raises consumer protection concerns. At most, the dealership took advantage of the fact that RBC seemed not to be clawing back commissions during the impugned period and thus they increased the number of deals sent to RBC, including those that they knew would terminate early.

93It was not alleged that the process followed by OH was anything but out in the open. RBC was contacted whenever a loan was paid out early and provided OH with a payout statement in respect of that loan.

94As well, this process of sending loans to RBC despite the prospect that they would terminate early was a process that had begun before Mr. Khan became acting GM.

95There was no evidence to show that the appellants knew about RBC’s monitoring system being suspended. In fact, Ms. Heggestad testified that they specifically would not have known that.

96The nefariousness initially alleged with respect to consumers being duped into signing for loans or not being aware of what they were signing for was withdrawn. The only evidence I had was from a consumer who did agree to a loan and this loan was not repaid through OH and was not through RBC.

97Mr. Walker wrote a letter to OMVIC in January 2020 to alert them to the ELT issue. In that letter, he confirmed that there was no consumer harm.

98In short, I do not find that the conduct relating to ELTs affords reasonable grounds to believe that either appellant would not carry on business as a dealer in accordance with law and with integrity and honesty. The conduct was not illegal. It was also not dishonest, but rather out in the open, with RBC being contacted each time there was an early payout.

99I will agree that the conduct of the FSMs in arranging loans in order to obtain the commission and then facilitating the early termination of those very same loans in some cases, is hardly the height of integrity. I also agree that the FSMs, the GM and AAG – the latter of which benefited from the bulk of the profits generated through the RBC commissions – could have realized that something was amiss when none of those ELTs were clawed back. At the same time, I believe the testimony of Jeff Brandes and Mr. Khan when they say they were provided a reason for RBC not clawing back.

100Ultimately, it is clear that RBC was more than capable of monitoring its own processes and I am not prepared to find that the appellants should be held responsible for RBC’s failure to implement its own policies and procedures.

Past Conduct - Consumer Trade Issues

101The other area of past conduct that the Registrar submits ought to disqualify both appellants from registration relates to overcharges for certain products, charges for products not agreed to by the consumer, and failing to provide Bills of Sale at the time required under the Act.

102The majority of the wrongdoing alleged in the NOP and the more egregious examples of it as described at the hearing, relate to deals for which GP was the FSM. There were nine transactions that raised concerns about GP’s past conduct as set out in the NOP.

103GP’s conduct was not in dispute and was admitted by the appellants. Since he is no longer an appellant in these proceedings his conduct is relevant only insofar as it relates to Mr. Khan. The Registrar contends that as GM, Mr. Khan had a duty to ensure compliance, and that he either knew or ought to have known that there were overcharges and other issues arising in some of GP’s transactions. The registrar submits that Mr. Khan’s failure to take sufficient steps to address the issues should disentitle him to registration. I will explain below why I disagree with that conclusion.

104I will first address the allegations in relation to Mr. Irani. There are two deals which the Registrar submits raise concerns about the conduct of Mr. Irani

Consumer B - Irani

105Consumer B came to the dealership on December 29, 2020 and agreed to buy a used car. The salesperson was Phil McLean, who testified at the hearing. After reaching an agreement to purchase the car, the consumer was taken to see Mr. Irani and was offered financing. Consumer B had been intending to pay cash but thought if he could get financing it might be good for his credit rating.

106The evidence was that B had very bad credit. He had just moved back from the U.S. and thought it would be good to establish his credit in Canada. Mr. Irani managed to secure him 21.99%. This rate was described as “egregious” by Mr. Walker when he testified about this transaction, whereas the fact that Mr. Irani was able to obtain that rate for Consumer B was described by the salesperson as pulling a rabbit out of a hat. Consumer B provided additional documents when requested in order to facilitate the financing (which was with TD, not RBC).

107On December 31, 2020, Mr. McLean texted Consumer B that his financing was approved and offered to pick him up on Monday, January 4, 2021 to sign the paperwork and pick up the car. The text was sent at 2:22 pm on New Year’s Eve day. The dealership was scheduled to close that day at 3pm. The consumer texted that he was already on the way and despite the salesperson again suggesting Monday, January 4, 2020, Consumer B showed up, just as the dealership was closing for New Year’s. The consumer acknowledged that as a result of his sudden attendance after hours on a holiday everything was very rushed. Mr. McLean also testified that nothing would have been ready for the consumer since he had come in so suddenly. The consumer recollected that he signed a Bill of Sale that day and disagreed with Mr. Irani’s suggestion that he only would have signed the financing contract; however, the only document in evidence that was signed December 31, 2020 was the banking contract. Consumer B testified that he did not ask for a copy of the paperwork at that time.

108Consumer B next came in to OH on January 5, 2021 with his brother. Mr. McLean testified that he went to get Mr. Irani who asked Mr. McLean to take the paperwork down for him whereas the consumer testified that Mr. Irani brought down the paperwork himself. I prefer Mr. McLean’s testimony as it had other details that corroborated that sequence, including that the consumer’s brother noticed an admin charge of $2,499 on the Bill of Sale and complained, thus Mr. McLean took the bill back to Mr. Irani, who said it must be a typo and came down with a revised Bill of Sale. On the revised bill, the admin fee was $499 but there was now $2,000 added as a charge for insurance. Consumer B and his brother argued with Mr. Irani for some time over whether there was supposed to be an insurance charge.

109Mr. McLean testified that he did not hear the conversation between the consumer and his brother and Mr. Irani because he purposely stood off to the side. He said that Consumer B was “pretty darn upset” and that he had “never seen a customer be so off the deep end.”

110Consumer B described being livid and that there was 90 minutes of arguing to take the $2,000 off but Mr. Irani refused, saying that the insurance was needed for financing. According to the consumer, Mr. Irani also said that he had to take the vehicle as he had signed for it.

111Consumer B ultimately took delivery of the vehicle with the insurance still on the bill. He acknowledged that he was given 8 years of oil changes for the confusion. The Bill of Sale in evidence showed $2,000 insurance and the 8 years of free oil changes. The oil change addition was initialed by the consumer and the bill was signed by the consumer and Mr. Irani, but not by the salesperson.

112Mr. McLean testified that he saw Mr. Irani put the Bill of Sale into the consumer’s bag for him. The consumer denied finding any papers in his bag.

113The consumer testified that he had both a physical and neurological disability. He said he was walking with a cane at the time of the transaction, though the salesperson recalled him wearing a leg brace, which was why he thought it “gentlemanly” of Mr. Irani to have put the Bill of Sale in his bag for him. As for the consumer’s apparent neurological disorder, though the consumer later provided a doctor’s letter to OMVIC describing his condition or possible conditions, there is no evidence that Mr. Irani would have known that he had a neurological issue. My own perception of Consumer B from his testimony and his written communications, was that he was extremely articulate and obviously of high intelligence, if not somewhat belligerent and sarcastic. I did notice that he spoke with what I described as something of a drawl but without having knowledge that this reflected a more serious medical condition, I cannot fault Mr. Irani if he did not treat the consumer any differently because of it.

114The consumer still owed OH $8,000 when he took possession of the vehicle as he was supposed to have brought in a deposit for that amount but had forgotten to do so. Mr. McLean went the following day to pick up the deposit from the consumer’s house whereupon the consumer asked for the Bill of Sale. Mr. McLean returned to the dealership and told Mr. Irani that the consumer wanted the Bill of Sale. Mr. Irani gave Mr. McLean an envelope to mail to the consumer. The consumer says he received the documents at the end of that week but that it did not include a Bill of Sale signed December 31, 2020.

115On January 7, 2021, before receiving the documents in the mail, Consumer B wrote to Mr. Khan, seeking a copy of the bill that he had been told was in the mail and a copy of the contract he was sure he had signed on December 31, 2020.

116There was evidence that Mr. Irani’s day off was that Friday, January 8, 2022. By Saturday, January 9, 2022, he had been fired for his involvement with what Mr. Walker described as the ELT “scheme.”

117On January 13, 2021 Consumer B wrote to Mr. Khan again, asking for information about the insurance he had paid for. On January 16, he wrote again, still seeking a copy of the December 31, 2020 contract he was adamant he had signed. He then said he would not write again. He testified that when he did not hear from Mr. Khan he next complained to OMVIC. Ultimately, Mr. Walker paid him $2,000 in settlement of his complaint.

118I will address Mr. Khan’s lack of response to this complaint as part of the allegations against that appellant.

119With respect to Mr. Irani’s alleged malfeasance regarding this deal, it does appear possible that Consumer B had not requested insurance. It is not reflected on the banking contract signed December 31, 2020; however those documents do reflect an approximately $2,000 increase in the sale price being financed. Since Mr. Irani did not testify, I am left without a satisfactory explanation for how the additional $2,000 went from being on the sale price of the financing contract, to being off the sale price but on a Bill of Sale as an admin charge; to being off as an admin charge but added as an insurance payment. Ultimately, there was no insurance coverage registered, nor is there evidence that a certificate for insurance was signed.

120Mr. McLean testified that he did not know or hear about any other times that Mr. Irani had not provided documents to a consumer.

121Ultimately, it does appear that something was off with this deal, but I find it difficult to conclude exactly what. The consumer and Mr. McLean, both agreed that the initial deal was extremely rushed having taken place after closing on New Years Eve, when neither Mr. Irani nor Mr. McLean was expecting the consumer. Then there was clearly a disagreement about the insurance when the consumer came to pick up the vehicle as described by both the consumer and Mr. McLean who witnessed the intensity of the disagreement but could not overhear its content. In the end, the consumer – who was there with his brother – signed the Bill of Sale that included the $2,000 insurance, initialed the free 8 years of oil changes, and left with the car even though he still had not paid the $8,000 deposit.

122Mr. Irani did not testify to give his side of what happened. However, he was able to bring out from some of the other witnesses that typically a transaction would not be considered complete if the deposit was still owing. In closing, Mr. Irani suggested that this provides a reason for not providing the consumer with a Bill of Sale on the day he took the car. Mr. McLean also confirmed that it would have been the admin person who was responsible for preparing the insurance documentation, though it would be the FSM’s job to ensure it was done correctly. It is also evident that Mr. Irani would not have had time to follow up on registering insurance given that he returned to work on Saturday January 9, 2021 only to learn he had been fired.

123I accept that it’s possible that there might have been an overcharge on this file. And I would have liked to hear from Mr. Irani on it. At the same time, Mr. McLean, the salesperson, did state that he occasionally saw higher admin fees when an FSM had to put substantial work into obtaining a loan. If that is the case though, then the $2,000 that was initially attached to the admin fee ought not to have shifted elsewhere. On the other hand, it is also possible that there was simply confusion on this file for the various reasons set out above.

124I do accept that the consumer ought to have been provided with a copy of the Bill of Sale immediately upon signing it, as required under s. 40(9) of O/Reg 338/09. However, given the rush of events as testified to by Mr. McLean on the day the consumer came in to sign, it is not certain that he in fact signed a Bill of Sale on that day. In any event, I cannot conclude that either of the consumer trade issues alleged with respect to this transaction amount to past conduct that ought to disentitle the appellant from future registration as a salesperson. As I note below, there is simply too much murky context to find malfeasance on the part of Mr. Irani with respect to this deal.

Consumer L - Irani

125The only other of Mr. Irani’s deals impugned by the Registrar is Consumer L’s. This consumer purchased a vehicle in March 2020. The allegation as set out in the NOP is that Irani charged him $3,500 for insurance. “In exchange for this $3,500 insurance charge, Irani registered the consumer for a GAP insurance product that has a provider retail price of $2,226.”

126This consumer did not testify.

127Mr. Walker and Mr. Consentino were both taken through the documents pertaining to this alleged overcharge in cross-examination by Mr. Irani. Ultimately, Mr. Irani was able to show that although there was a difference in the insurance between the documents, there was also a rebate had not been taken into consideration on the Bill of Sale and the total amount financed (showing the $2,226 insurance) was only 18 cents less than the total on the Bill of Sale.

128At the end of the day, as Mr. Consentino agreed, it was a “a little ambiguous” that there was in fact an overcharge. Rather, taking into consideration the rebate, it was likely that this consumer was actually undercharged.

129As well, Mr. Irani was able to show that the deal file included a direction to his admin person to prepare the GAP Insurance documents and that all of those documents were then signed by that admin person and not by Mr. Irani. Though it may well have been Mr. Irani’s responsibility to double check all the details, I am not prepared to say that this past conduct affords reasonable grounds for belief that Mr. Irani would not act with honesty or integrity or in accordance with law as a salesperson.

130I agree with Mr. Irani’s closing submissions that OMVIC really had to dig for this purported wrongdoing. The consumer never complained. And Mr. Consentino acknowledged that rather than just relying on Mr. Walker’s analysis of the file, OMVIC might have benefited from interviewing Mr. Irani, which it never did.

131Ultimately, I find that at its height, the past conduct relating to Consumer L shows an error. Certainly there was not sufficient evidence to prove that it was a purposeful overcharge initiated by Irani – even if it was likely his job to have noticed the error.

Analysis & Conclusion – Mr. Irani

132I have described above why I do not find that the ELT conduct affords reasonable grounds to believe Mr. Irani will not act in accordance with the law and with integrity and honesty as a registrant.

133I further find that neither of the two deals described above are sufficient to prevent him from registration.

134There is sufficient context surrounding both deals that I find it difficult to conclude on a balance of probabilities that there was specific wrongdoing, though I have some suspicion that something was awry with respect to Consumer B’s file. Possibly the explanation is that Mr. Irani did hope to collect an additional $2,000 on the admin fee given how hard he worked to arrange the loan for this consumer. If so, that same $2,000 ought not to have then shifted elsewhere on the bill. That said, suspicion of past conduct is not proof of that conduct.

135In conclusion, I do not agree with the Registrar that Mr. Irani’s past conduct in relation to ELTs and with respect to the above transactions, even when considered all altogether, affords reasonable grounds for belief that he will not carry on business as a salesperson in accordance with law and with integrity and honesty. Mere suspicion is not enough to make out “reasonable grounds for belief.” In Mr. Irani’s case, I have some suspicion that something was awry in Consumer B’s deal and I have considered that the ELT pattern does not represent the height of integrity. At the same time, there is sufficient surrounding context to all of the above described conduct that mitigates any wrongdoing and makes me unable to even suspect there will be a future concern if Mr. Irani is again registered as a salesperson under the Act.

136I further do not find it necessary to attach conditions to his registration. Mr. Irani is obliged as a registrant to comply with the Act and there are remedies available to OMVIC if he fails to do so. The dealership where he is registered will also share some responsibility for monitoring the conduct of Mr. Irani as its salesperson.

The alleged past conduct of Mr. Khan

137I have earlier set out the context of Mr. Khan’s role as GM – including that he was placed in the role by AAG without prior experience as a GM, without any training, and in circumstances where his official role was not even that of GM because AAG wished to avoid Hyundai Canada’s vetting process. He also had an enormous number of responsibilities in areas where he had no prior experience at all. The dealership was high volume and the Registrar’s own witnesses acknowledged it was understaffed managerially. Mr. Khan also had to deal with COVID-19 hitting the industry with all the protocols and problems that the pandemic involved. Further, he had to deal with hiring, firing and employment complaints against AAG for withholding vacation and other issues.

138It is within the above context that the Registrar asserts Mr. Khan ought to have noticed and stopped the issues relating to the increase in ELTs at RBC and to have addressed the conduct arising in relation to consumer trades. GP’s trades are the ones most at issue here.

139While I will only briefly describe GP’s conduct for the purposes of this decision, I have reviewed the conduct relating to GP carefully, including by comparing Bills of Sale, considering the evidence from Rob Walker, the sales reps of the various products, and the evidence of Mr. Brandes (the FSM called by the Registrar) regarding the appropriate prices to charge for the various ancillary products as well as the evidence about how products get registered, who is responsible for registering them and other details. I have also reviewed the allegations in the NOP that were admitted as being factually correct with respect to GP.

140Suffice to say here that, as admitted by the appellants, GP in multiple instances charged more than would be considered appropriate for certain products when weighed against an industry standard of what was acceptable – for example charging $4,000 for a protection package when all that was registered was a $150 rust protection plan.

141As well, some of the products sold by GP – such as some extended warranty products from First Canadian – had a hard cap, meaning that the FSMs could not charge above a certain amount. When certain details such as the year and model of the vehicle were entered into the product company’s portal the maximum amount would be autogenerated in the system and printed on the form. Then the product would be registered in that amount. The representative from First Canadian testified that while an FSM could go into the portal to lower the premium, the FSM could not raise it above the cap. In at least two transactions of GP’s with different consumers, GP had charged beyond the maximum allowable cap, and he appears to have done so by whiting out the auto-printed maximum amount and handwriting in a higher amount.

142Thus for example, in relation to Consumer C, the maximum that could be charged for the FCPP extended warranty product he sold this consumer was $3,180 but GP whited that out and charged this consumer $9,000 for that product. The lower, proper amount, was the amount written on one Bill of Sale and registered with FCPP. But the $9,000 amount was handwritten on the registration document signed by the consumer and was also reflected on the Bill of Sale that she was provided (after having to ask for it).

143There were other issues in relation to Consumer C’s transaction that I will address below. This consumer and Consumers D and E all testified at the hearing because each had raised certain issues with Mr. Khan which the respondent alleges he did nothing about. I will therefore briefly describe those complaints.

144With respect to the remaining GP consumer trade issues relating to Consumers F, G, H, I, J, and K – the facts relating to the various overcharges and other issues as set out in the NOP were admitted by the appellants. I am not going to review those facts here. For the purposes of this decision I accept that the discrepancies and overcharges occurring in GP’s trades were there to be found in his deal files.

Specific complaints that came to Mr. Khan’s attention

Consumer B

145As noted above, Consumer B wrote to Mr. Khan on January 7, 2021 to request a copy of his Bill of Sale. The evidence was that by then it was already in the mail and the consumer confirmed it was received. After receiving the documents, the consumer then wrote to Mr. Khan on January 11, 2021 asking for the document he thought he had signed on December 31, 2020. Mr. Khan did not respond. A follow up email from the consumer was sent on January 13, 2021 this time asking for information about the insurance provider. A final email was sent to Mr. Khan on January 16, 2021 in which the consumer again asks for the contract purportedly signed on December 31, 2020. He tells Mr. Khan that he will not be contacting him again and then goes to OMVIC.

146Mr. Khan acknowledged that he did not respond to Consumer B. He testified that what he did do was pass the request on to Phil McLean the salesperson involved with that consumer and he asked Mr. McLean to deal with it. He explained that his hands were full then having just lost two of his FSMs.

147Even if Mr. Khan ought to have responded to the consumer to tell him that he was looking into his questions, I can hardly conclude this is conduct that calls into question Mr. Khan’s ability to act in accordance with law and with integrity and honesty as a salesperson in the future. The context satisfies me that Mr. Khan’s job as GM – which was already overwhelming for an untrained and inexperienced GM – was now even harder having just lost two of his FSMs that very week.

Consumer C

148Consumer C is the consumer who was charged $9,000 for a product that was capped at $3,180. However, this blatant overcharge handwritten onto her copy of the warranty document was not noticed by the consumer until February 2021. Before that she had a specific complaint that she had raised with Mr. Khan after learning that GP had not paid out the lien on the car she had traded in, as he was supposed to have done.

149Consumer C’s purchase was in July 2020. Her initial complaint was made on August 19, 2020. Consumer C wrote to Mr. Khan asking that the lien issue be addressed and seeking copies of the documents she had signed and the Bill of Sale. She testified that she had signed a number of documents on the day she picked up the car and that GP had told her that one set of documents would be staying at the dealership and the other would be mailed to her. She testified that she did not ask for a Bill of Sale at the time, having been told it would be mailed to her.

150Consumer C testified that Mr. Khan called within about 30 minutes from her sending that email. He explained that GP was on vacation but that he would issue her a cheque for the missed payments on the trade-in. Mr. Khan also told Consumer C that she could come pick up her file.

151Mr. Khan testified that he ensured that the lien was paid out, that the consumer then came in to pick up the cheque for the missed payments and that he provided her a copy of the documents she had requested. He testified that he did not notice the $9,000 charge for the warranty product.

152I find that Consumer C’s first complaint was adequately dealt with by Mr. Khan. However, he ought to have next followed up with GP to ensure that GP was promptly dealing with lien payouts and providing Bills of Sale on time. Should this have drawn his attention to a bigger issue with GP? Maybe it should have. However, I accept Mr. Khan’s testimony that it did not. My findings in relation to Mr. Khan’s credibility are expanded on below.

153Consumer C later discovered the significant overcharge on her extended warranty. She complained to FCPP and received compensation for the full amount she paid. The FCPP rep who testified confirmed that her reimbursement was made on February 15, 2021.

154Prior to that date – on February 8, 2021 – Consumer C had emailed Mr. Khan about what she had learned from FCPP about the overcharge. She asked for his attention to the matter. On February 9, 2021, she followed up on the email saying it was an urgent matter.

155Mr. Khan testified that by this point he had already handed certain of GP’s files over to Mr. Walker, including Consumer C’s he though and had been told that Mr. Walker would handle any complaints. I accept Mr. Khan’s explanation that he passed this complaint on to Mr. Walker. By that time, all of his FSMs had been fired and Mr. Walker was clearly involved in issues surrounding GP’s alleged wrongdoing. I do not find it unreasonable that Mr. Khan would leave Consumer C’s complaint about the $9,000 charge with AAG to deal with.

Consumer D

156Consumer D was also called as a witness. She had purchased a car where GP was the FSM in or around November 11, 2020. There were two signed bills of sale in the deal file. One is undated and includes a $1,725 freight charge, a $3,098 extended warranty charge and a $4,000 protection package charge. The consumer testified that GP made her sign various documents in relation to those items and that she was also told to sign the Bill of Sale but without being given the opportunity to review it. Then when she came to pick up the vehicle she was given this Bill of Sale and objected to it. She spoke to GP and said she had not agreed to the charges. He accused her of lying. She spoke to Mr. Khan and he said he would remove the freight charge since she was right it should not be there – as it was a demo car she had purchased – but he told her she had to pay for the other items because she had signed the Bill of Sale. The consumer threatened to call OMVIC and Mr. Khan reportedly said go ahead and handed her the phone. She described Mr. Khan as very rude. She told him she would not take the car until the charges were removed.

157Consumer D shortly received a call from the salesperson to say that the dealership had removed the charges to which she had objected. She went in and Mr. Khan apologized to her for being rude. He showed her that the extended warranty and freight charge had been removed and she signed the second bill. The difference in final price between the first and second Bill of Sale was $4,319.99 in the consumer’s favour. She testified that she had also requested that the $4,000 protection package be removed but it was not removed. It was not contested that in exchange for the $4,000 protection package, all that was registered was a $150 rust protection plan.

158With respect to this complaint and whether Mr. Khan addressed it sufficiently, there was some ambiguity on the evidence whether this consumer requested any remedy with respect to the protection package and I do not find it proven on a balance of probabilities that the protection package issue was initially raised. I do, however, find that Mr. Khan ought not to have been rude to the consumer when she first attended. At the same time, the evidence from Mr. Khan as well as the consumer satisfies me that he was apologetic afterwards and regretted his behaviour. I find he thus addressed the consumer’s concerns adequately overall, even if not perfectly. The consumer did not complain to OMVIC though she was contacted by Ms. Barkey, the OMVIC investigator involved in the case (who was not called as a witness).

159I note that there was no allegation elsewhere on the evidence that Mr. Khan was otherwise ever rude or impolite.

Consumer E

160On or about December 28, 2020, Consumer E and her partner were shown a vehicle they liked. They were taken to GP’s office. They discussed financing. She signed a credit check. They discussed an extended warranty and a rust module. She learned that freight would be waived as there were some kilometres on the car. The couple went home and worried over whether they could afford the vehicle. They were expecting a child. The consumer contacted GP to find out if they were locked in. He said they were because they had asked for winter tires to be put on and had signed the credit check. The consumer then went back to the dealership on December 31, 2020 with her cousin and met with GP to again inquire whether she was locked into the purchase. GP showed her a Bill of Sale that she had purportedly signed but she did not recall signing any Bill of Sale.

161She left with the vehicle but not the Bill of Sale. She testified that GP had told her she would get it later from the bank. She found she needed it earlier than that when she tried to arrange insurance. She emailed GP and asked for the Bill of Sale but he gave her something other than the Bill of Sale, and more like a banking document showing how much she would be paying. She thought the amount was different than she had remembered and that the payment schedule was different. Eventually, the insurance company was able to obtain a Bill of Sale from OH and when she saw it, she saw it was different than the one she had signed.

162Consumer E wrote to Mr. Khan on February 8, 2021 by which time she now had both bills of sale – the one provided by OH and the one that OH had sent her insurance company. She asked to discuss the matter with Mr. Khan.

163The Registrar contends in its NOP that “after reviewing her documents, Consumer E contacted Khan on or about Feb 4, 8, 16, and March 8, 2021. Khan did not respond to Consumer E’s concerns with the trade.” However, this allegation was not made out on the evidence. Mr. Khan did respond. He wrote on February 8 and apologized for not reviewing the file the week before. He said he would take a look and get back in touch with her. The consumer then followed up on February 16 and though Mr. Khan could have been more prompt in his response, he did leave her a voice mail on February 26 and they spoke thereafter. The consumer testified that Mr. Khan told her that he had to confer with his higher ups – which is consistent with his testimony as to how he was handling GP complaints at that time.

164The consumer next followed up on March 8, 2021. However, by then Mr. Khan had been fired. He was let go on March 5, 2021 for his purported involvement with the ELTs. Obviously he cannot be faulted for not further responding.

Timing of the revelations concerning GP

165There were some discrepancies between Mr. Khan’s evidence and Mr. Walker’s regarding when GP’s purported wrongdoing came to light and who discovered the issues. My finding with respect to the chronology impacts my finding with respect to the credibility and reliability of Mr. Khan. I found, as a whole, that Mr. Khan’s evidence of the chronology was the more credible and reliable of the two.

166Mr. Walker testified that his investigation into issues at OH began in September 2020 after seeing a complaint about the dealership on Facebook (this complaint does not form the basis for any of the grounds raised in the NOP). He testified that his investigation into that issue led him to discover issues relating to the ELTs and subsequently instances of overcharging and price gouging, particularly with respect to GP’s files. He testified that after gathering information about all of the wrongdoing he handed everything over to OMVIC. Although Mr. Walker acknowledged that his memory was not perfect, it was clear that he believed he had uncovered evidence of overcharges and other issues relating to consumer trades over the fall of 2020.

167Mr. Walker’s chronology of events, however, does not cohere with the rest of the evidence.

168For example, the evidence from Mr. Khan was that he was the one who alerted AAG to issues relating to GP toward the end of October 2020. This was supported by a “What’s App” message from Mr. Khan to the COO of AAG expressing concern about two of GP’s files. That message was then followed by an email to his superiors at AAG dated October 27, 2020 in which he forwarded the two files of concern. Mr. Khan testified to then going in to OH on a Sunday to review other files of GP’s. He says he pulled approximately 45 files and then had a call with Mr. Walker who sent an associate to Toronto to pick those files up. That latter arrangement was also supported by text messages. According to Mr. Khan, some of the files relied on by OMVIC and reviewed in these proceedings were those pulled by Mr. Khan. He testified that Mr. Walker came in to go through more files in or around December 2020 and was also in to look through files after the FSMs were fired, but that it was he, Mr. Khan, who first alerted AAG to issues with GP.

169Mr. Khan believes that it was Mr. Walker’s review of the files he had pulled that led to Mr. Walker noticing the increase of ELTs at RBC.

170Mr. Walker, on the other hand, testified that he was the one to initially pull further files to investigate. He said he did this sometime in the fall of 2020. He did not recall receiving files from Mr. Khan, other than the first two that Mr. Khan passed on to AAG upper management. Mr. Walker testified that he thought Mr. Khan only raised concerns with respect to those two files to deflect attention from himself, knowing that Mr. Walker was investigating various issues. Mr. Walker testified that he thought Mr. Khan was complicit in the ELT “scheme” and also the consumer trade issues.

171On a number of occasions Mr. Walker referenced knowing by the Fall of 2020 that there were consumer trade issues. For example, as he was describing the issues with Consumer B, he could not remember precisely when he had spoken to that consumer but thought it was likely in November 2020 and that Consumer B’s transaction would have happened some months earlier. However, Consumer B did not even attend the dealership until the end of December 2020 and did not come to OMVIC or Mr. Walker’s attention until after the FSM’s had been fired, sometime in January 2021.

172Mr. Walker also testified that he ultimately turned all of the files over to OMVIC to investigate. He referred to sending OMVIC a letter outlining his findings. That letter was sent January 19, 2021 – long after he claims to have discovered all the consumer trade issues – yet in it he refers only to his discovery of the ELT issue. He says nothing about any other issues. Notably, in this letter, he does not mention Mr. Khan at all. Only Mr. Irani and GP.

173The January 9, 2021 letters terminating the employment of Mr. Irani and GP also only refer to the ELTs as the reason for their termination. Neither mentions any consumer trade issues.

174Even when Mr. Khan was fired on March 5, 2021, the only reason given for his termination was his role as GM during the purported ELT “scheme.” There was no allegation or insinuation that he was complicit in dealer trade issues as Mr. Walker insinuated at this hearing.

175I also do not find it plausible that Mr. Walker or anyone at AAG would think Mr. Khan was in on various schemes and yet allow his further promotion as unofficial GM on October 26, 2020. Mr. Walker insinuated that AAG promoted Mr. Khan as a ruse, to make him feel secure in his position as GM and not suspect that there was a continuing investigation into his purported wrongdoing. However, later in his testimony – as he was being questioned about why AAG would try to avoid the Hyundai Canada vetting process required for a GM – he said he was not actually involved in the decision making with respect to Mr. Khan’s promotion. I find that both positions can’t be correct. Either he knows or he does not know the circumstances surrounding Mr. Khan’s further promotion at the end of October 2020.

176I found on the whole that Mr. Walker – while helpful to a point – was weak on his memory of the chronology as supported by other details. He was also quick to agree to insinuations from which he later retreated.

177It also does not make sense, in my view, that the Chief Compliance Officer for the dealership would try to entrap Mr. Khan rather than addressing the concerns he is now claiming to have noticed. If AAG in fact thought that there was wrongdoing going on at the dealership and that Mr. Khan, Mr. Irani and GP were all in on it, it simply does not make sense that AAG would put consumers at risk by lying in wait to see if more consumer trade issues may arise.

178I find Mr. Khan’s testimony as to the chronology to be more consistent with the rest of the evidence before me. I accept that he is the one who first told AAG about concerns regarding GP and that he was the first to pull specific files of concern in relation to GP’s transactions.

Analysis & Conclusion - Mr. Khan

179The Registrar’s case against Mr. Khan is wanting. Although the Registrar has submitted that it would be open to me to find that Mr. Khan knew that GP was overcharging consumers and that Mr. Khan was somehow complicit in that wrongdoing, I do not find there is evidence to support that conclusion.

180The Registrar also invites me to find Mr. Khan’s testimony unworthy of belief in other respects. For example, the Registrar invited me in closing to conclude that Mr. Khan did see that GP had charged Consumer C $9,000 for a product that was supposed to be capped at $3,180. However, I find no reason to disbelieve Mr. Khan when he said he did not notice that charge.

181I found Mr. Khan to be a reliable and credible witness on the whole. His evidence was detailed, and consistent with the rest of the evidence. He had a good memory for details and was able to provide context for each event. He did not appear guarded nor as if he were hedging any of the issues raised with him. As well, he took ownership of where he could have done better. On the whole, I did not find Mr. Khan’s evidence suspect. As noted above, where it conflicts with Mr. Walker’s testimony I prefer Mr. Khan’s testimony.

182Apart from inviting me to find Mr. Khan lacking in belief, the main thrust of the Registrar’s submissions against Mr. Khan was that Mr. Khan was in a position to have spotted the wrongdoing, was responsible for addressing it as GM, and did not take sufficient steps to do so. The Registrar contends that Mr. Khan’s failure to have taken steps to address the various issues raised in this case goes to Mr. Khan’s honesty and integrity.

183The Registrar points specifically to the issues with GP and submits that Mr. Khan knew there were complaints and issues with GP’s deal files – at the very least with him failing to provide bills of sale on time even if Mr. Khan didn’t also see the overcharges – but Mr. Khan nonetheless allowed GP to continue to operate without consequence or closer scrutiny.

184I agree that there is evidence that Mr. Khan knew of complaints regarding GP and did not effectively discipline GP or monitor his files until finally doing so in October when he raised two issues with management and then looked into further potential problems with GP’s files and passed a number of such files on to Mr. Walker.

185There was evidence generally from Mr. Brandes and Mr. McLean that GP had been a long-standing problem in multiple ways at the dealership. Mr. Brandes had in fact left OH in 2019 for a time because he did not get along with GP. GP was known to raise his voice, and to argue with customers. Mr. McLean testified that he often overheard complaints about GP. I conclude that Mr. Khan would have also known of such complaints.

186Yet I also accept Mr. Khan’s testimony, which is supported by the two OH employees called by the Registrar, that Mr. Khan’s nature was non-confrontational, and that he was spread very thin at the dealership and wearing too many hats.

187I further accept Mr. Khan’s testimony that he thought he could rely on his FSMs, as they were managers and should be capable of handling complaints themselves. Thus his practice was to tell GP to deal with complaints when they arose. I accept Mr. Khan’s testimony that he did not think to review any of GP’s files until finally doing so in or around the end of October / early November 2020 after two specific incidents concerning GP had come to his attention through a salesperson. Mr. Khan acknowledges that if he had taken a closer look at GP’s files sometime earlier, he could have brought up specific issues with GP and with upper management at AAG.

188Part of the Registrar’s position is based on the timing of when matters came to Mr. Khan’s attention. The Registrar submits that Mr. Khan only acted as if he was concerned about GP's conduct because he knew that Mr. Walker was conducting an investigation and he wanted to deflect attention from himself. As already noted above, while that theory is plausible, I do not find it proven on a balance of probabilities. To the contrary, I accept Mr. Khan’s evidence that he was the one who passed on concerns about some of GP’s transaction because he was concerned about those transactions, and that he then went in to do a more thorough review of all of GP’s files.

189Ultimately, even if I were to agree that Mr. Khan ought to have been more alert to issues in GP’s deal files and more responsive to the consumers who complained to him, such conduct does not, in my opinion, afford reasonable grounds for belief that he would not act with integrity and honesty and in accordance with the law as a salesperson if registered under the Act. At its height, the evidence shows that Mr. Khan was not a perfect GM.

190Furthermore, I find that anything that might be said against Mr. Khan would be equally true against the dealership who put him in a supervisory role without training, during a crisis, and while short staffed. AAG was Mr. Khan’s employer. AAG decided to put Mr. Khan in charge of a 97-person, high volume, high profit dealership with no training and no experience as a GM. AAG had a Chief Compliance Officer who did not once attend OH to see whether this brand new untrained inexperienced GM was handling everything adequately or had the right systems in place to ensure compliance.

191I find that it hardly lies in the mouth of AAG or OMVIC to complain about Mr. Khan’s failure to keep an eye on every single aspect of the dealership when those in charge of the dealership and who benefited from the lion’s share of all profit generated by that dealership themselves fully abandoned all such supervision.

192I am aware that AAG is not the subject of these proceedings. I refer to AAG’s lack of oversight as a comparison point. Mr. Walker has 30 years of experience, half of which was as a GM and he was the Chief Compliance Officer at AAG, a role that is presumably created for a reason. AAG obviously also had access to the records and books at its dealership. Further, it is clear that AAG was extremely interested in the profitability of OH. It strikes me that AAG, as the owner of the numbered company operating as OH and registered as a dealer under the Act, might also have overseen its employees and compliance issues at its dealership instead of passing the buck to an untrained, unofficial GM, left in charge of one of its most high volume dealerships, without adequate support, in the midst of a pandemic.

193In conclusion, even if I were to take the alleged past conduct of Mr. Khan at its height, I might conclude that he ought not to take on the job of GM going forward – at least not until he has been properly trained for the role. But I cannot conclude 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. Even with respect to whether he should act in the future as a GM, I would leave that decision to his next employer. I see no reason to impose any prohibition against him taking on that role as a condition to his registration.

E. Conclusion

194For the reasons stated above, I do not agree that the past conduct of either appellant affords reasonable grounds to believe that they will not carry on business in accordance with law and with honesty and integrity.

195There were obvious and conceded issues relating to GP’s conduct but he is no longer an appellant.

196For both appellants in relation to the ELT issue, I have noted that the increase in RBC loans that the FSMs had reason to know might terminate early does not represent the height of integrity. At the same time, I accept the evidence of Mr. Khan and the Registrar’s own witness, Mr. Brandes, that Mr. Khan and the other FSMs understood that RBC could claw back if it wanted to but that it would not necessarily do so if sufficient business was sent their way. The evidence is undisputed that RBC did not in fact claw back during that period. I do not find it appropriate that Mr. Khan and Mr. Irani should lose their careers as motor vehicle salespeople just because RBC had reason not to enforce its own policies and procedures for a time.

197For Mr. Irani, otherwise, I have found that the alleged past conduct is not proven on a balance of probabilities. But even accepting that something was untoward with respect to the two files raised against him in the NOP, I am not persuaded that this means he should not be registered as a salesperson going forward. The evidence shows that he completed 100s of deals each year. OMVIC and/or Mr. Walker were ultimately able to find two that raised a concern. For each there is context that does not lead me to worry about Mr. Irani’s future conduct as a salesperson.

198With respect to Mr. Khan, my overall impression of Mr. Khan from all of the witnesses except Mr. Walker was that Mr. Khan was highly capable, well-liked, and very interested in doing well in his job. I find that at its height, the Registrar has shown that Mr. Khan was not great at monitoring compliance as a GM. Had he had proper training and appropriate support, he may well have noticed all of the issues raised in this NOP and thrived in that aspect of the job as well. The evidence does not persuade me – or leave me with even a “mere suspicion” – that he will not act in accordance with law and with integrity and honesty as a salesperson.

199Both appellants should be registered forthwith without conditions.

200I note that both parties provided caselaw which I have reviewed. I find that cases relating to honesty and integrity are not easily transferable and that this particular case turns on its own facts. I therefore find it unnecessary to review those cases as part of this decision. They are listed in the footnote below.¹⁰

F. Costs

201The appellants both requested costs. I said I would provide a timeline for submissions on costs as part of my order. The parties must follow the requirements of Rule 19 should they wish to seek costs. They are reminded that the test for awarding costs at the Tribunal it is not easy to meet.

ORDER

202Pursuant to s. 9(5) of the Act, the Tribunal substitutes its opinion for that of the Registrar and orders that Mr. Irani and Mr. Khan each be registered forthwith as a salesperson under the Act without conditions.

203If any of the parties wish to bring an application for costs, they shall comply with the following timelines and terms:

• Any application for costs by any party shall be served on the other parties and sent to the Tribunal on or before July 22, 2022.
• Responding submissions, if any, shall be served on the other parties and filed with the Tribunal on or before July 29, 2022.
• Submissions must follow Rule 19 of the Tribunal’s Rules and clearly and succinctly state the basis for costs.
• Submissions should be brief and no more than 5-pages maximum excluding case law, if any.

LICENCE APPEAL TRIBUNAL

Jennifer Friedland, Member

Footnotes

1. 1See 2203099 Ontario Ltd. o/a Jax Bar & Grill v. Registrar, Alcohol and Gaming, 2013 CanLII 51164 (ON LAT) and Ontario (Alcohol and Gaming Commission) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157 [“751809”].
2. 2751809, supra, at para. 18, citing Mugesera v. Canada (Minister of Citizenship and Immigration), 2005 SCC 40 at para. 114.
3. 3CS v. Registrar, Real Estate and Business Brokers Act, 2002, 2019 ONSC 1652 at para 32.
4. 4Zahariev v. Ontario (Registrar of Motor Vehicle Dealers and Salespersons), 2005 CanLII 44815 at paras. 7-12 (Div. Ct.).
5. 5Arulappu v. Registrar, Real Estate and Business Brokers Act, 2011 ONSC 797 (Div Court)
6. 6It was apparent that Mr. Irani had intended initially to testify, however during the hearing he learned he had been charged with various provincial offences relating to the incidents alleged in the NOP. Upon being apprised of this development, I recommended that he obtain legal advice as to the impact of his testimony, if any, on his right to remain silent with respect to those offences. I am not aware of whether he did or did not obtain such advice, only that by the end of the hearing when it would have been his chance to testify, he opted not to testify.
7. 7After the hearing, the respondent resubmitted its 5 document briefs with the items that were not referred to at the hearing redacted. These will form the official exhibits in this matter. One correction is needed: the email correspondence between Consumer E and Mr. Khan (Exhibit 3, Tab 5G) was referred to at the hearing and should not be redacted.
8. 8I am saying AAG here even though technically the profits went to the numbered company operating as OH and not to AAG. It was also OH that provided the compensation to the FSMs, not AAG. But the undisputed evidence is that it is AAG at the top of OH and there is no one between whoever they put in as GM and the Sr. Management at AAG. For all intents and purposes, AAG is OH.
9. 9For the sake of this analysis I am assuming the RBC charts are accurate though there is at least one anomaly on the face of the records – namely that they show that “MK” also earned origination fees or quality bonuses on ELTS but is an admin person and not an FSM or registered salesperson according to the agreement of the parties. According to Mr. Walker, MK should not have been arranging any loans though he may have assisted with them. Therefore either Mr. Walker is incorrect or the charts may have missing or incorrect information. I find I do not need to solve this discrepancy for the purpose of this decision. As well, I note that the accuracy of the charts were not called into question by any of the parties.
10. 10For the appellant Khan: Zabian [2011] O.L.A.T.D. No. 68, paras 28-32, 35-36; Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc.; (Famous Flesh Gordon's), 2013 ONCA 157, paras 18, 19, 24, 26-29, 31-33, 37; 11524 v. Registrar, Motor Vehicle Dealers Act, 2002, 2019 CanLII 83885 (ON LAT), paras 52, 54, 77; Registrar,(Alcohol and Gaming Commission of Ontario) v. Thomas Kyron, 2019 ONSC 5039, para 27; 11248 v. Registrar of Alcohol, Gaming and Racing, 2018 ONLAT HRLA 11248, paras 34-36, 73, 75, 77, 79, 84; Arulappu v. Registrar, Real Estate and Business Brokers Act, 2011 ONSC 797, paras 8-9; Amit Khosla v. Registrar, Motor Vehicle Dealers Act, 2002 ONLAT 12337/MVDA; Justin Bradley Moore o/a Bluewave Auto Sales v. Registrar, Motor Vehicle Dealers Act, 2019 CanLII 101597 (ON LAT) For the Registrar: Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon's), 2013 ONCA 157 at para 18-19, 27-29; 1855456 Ontario Inc o/a 1st Class Auto Sales and Rasheed Halbouni v. Registrar, Motor Vehicle Dealers Act, 2002, 2020 CanLII 34394 (ON LAT) at para 75, 90 & 91; 1855456 Ontario Inc. v. Registrar, Motor Vehicle Dealers Act, 2002, 2021 ONSC 2905 at para 14; Bukshtein v. Registrar, Motor Vehicles Dealers Act, 2021 CanLII 90668 (ON LAT) at para 75-76; (Re Deimer), [2015] O.L.A.T.D. No. 59 at para 67-68; (Re Hosseini-Rad), [2004] O.J. No. 1273 131; Zabian v. Registrar, Motor Vehicle Dealers Act, 2002, 2021 CanLII 114053 (ON LAT) at para 38