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

Appellants

and

Registrar, Motor Vehicle Dealers Act, 2002

Respondent

RECONSIDERATION DECISION

Adjudicator: Colin Osterberg, Member

Representatives:

For Shaffat Khan: Justin Jakubiak, Counsel

For Habib Irani: Self Represented

For the Respondent: Husein Panju, Counsel

REASONS FOR DECISION AND ORDER

A. Overview

1In its decision dated July 14, 2002 (the “Appeal Decision”), the Tribunal set aside the Registrar’s Notices of Proposal dated April 27, 2021 (“NOP”), to refuse to register Habib Irani and Shaffat Khan (the “appellants”) under the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B (the “Act”), and directed the Registrar to register the appellants as motor vehicle salespersons.

2In its decision dated October 31, 2022 (the “Costs Decision”) the Tribunal ordered the Registrar to pay costs to the appellants in the amount of $4,000 each.

3The Registrar requests that the Tribunal reconsider the Costs Decision pursuant to Rule 18.1 of the Licence Appeal Tribunal, Animal Care Review Board, and Fire Safety Commission Common Rules of Practice and Procedure, Version I (October 2, 2017) (the “Tribunal Rules”).

4The Tribunal will not allow a request for reconsideration unless one or more of the criteria listed in Rule 18.2 of the Tribunal Rules are established. Those criteria include where the Tribunal has made an error of law or fact such that the Tribunal would likely have reached a different result had the error not been made.

5The Registrar’s position is that the Tribunal made errors of law in its Costs Decision and asks the Tribunal to cancel the order in accordance with Rule 18.4(b)(i).

6The appellants argue that the Costs Decision is not a decision which finally disposes of an appeal and so the Tribunal does not have jurisdiction to consider this request for reconsideration. The appellants also argue that the Tribunal did not make an error of law such that it would likely have reached a different result had the error not been made.

B. ISSUES

7The first issue to be decided on this reconsideration is whether the Tribunal has jurisdiction to reconsider the Costs Decision.

8The second issue to be decided on this reconsideration is whether the Registrar has established that the Tribunal made an error of law such that the Tribunal would likely have reached a different result had the error not been made.

C. Result

9For the reasons which follow, the Registrar’s request for reconsideration is allowed and the Costs Decision is cancelled.

D. analysis

Issue 1 – Jurisdiction of the Tribunal

10Pursuant to R. 18.1 of the Tribunal Rules, the Tribunal may reconsider “any decision of the Tribunal that finally disposes of an appeal”. The Registrar argues that this gives the Tribunal jurisdiction to reconsider the Costs Decision in this case.

11The appellants argue that the Costs Decision does not finally dispose of the appeal but is a procedural order. They argue that the Appeal Decision finally disposed of the appeal and that the appeal proceeding was disposed of before the Costs Decision was made.

12I find that the appellants’ appeal was not fully disposed of before the Costs Decision was made. The appellants made their request for costs before the Appeal Decision was released, as they were required to do under R. 19.2, and this became one of the issues the Tribunal was required to determine before the appeal was “finally disposed of”.

13The purpose of a reconsideration is to allow the Tribunal the opportunity to correct, among other things, errors of law in its decisions before requiring the parties to appeal to the Divisional Court or to seek judicial review. I see no reason that the Legislature would have intended that the Tribunal should not be able perform this function with respect to a costs award.

14I find that the Tribunal has jurisdiction to reconsider the Costs Decision.

Issue 2 – Errors of Law

15The Registrar alleges that, in the Costs Decision, the Tribunal made error(s) of law such that the Tribunal would likely have reached a different result had the error(s) not been made. There are two categories of error alleged. First, the Registrar alleges that the Tribunal erred in law when it found that certain actions of the Registrar amounted to an improper, or illegal, delegation of its authority under the Act. Second, the Registrar alleges that the Tribunal based its determination of whether the Registrar’s conduct was unreasonable on other improper considerations.

16In Yatar v. TD Insurance Meloche Monnex, 2021 ONSC 2507 (“Yatar”), the Divisional Court describes what constitutes an error of law as follows:

On a statutory appeal limited to questions of law alone, the court considers whether the decision-maker correctly identified and interpreted the governing law or legal standard relevant to the facts found by the decision maker.

17The Court in Yatar goes on to state that:

If the adjudicator ignored items of evidence that the law required him or her to consider in making the decision, then the adjudicator erred in law…An error in law or legal principle made during the fact-finding exercise…can give rise to an extricable question of law.

18I find that, in making its Costs Decision, the Tribunal failed to correctly identify and interpret the law governing, or the legal standard relevant, to the question of whether the Tribunal may order costs under the Tribunal Rules. As a result, it considered improper factors in determining whether a costs award should be made.

The test for awarding costs

19The Tribunal’s authority to grant costs comes from s. 17.1 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 (“SPPA”). That section provides that a Tribunal may order costs in the circumstances set out in the rules of that Tribunal which in this case are the Tribunal Rules.

20The Rule 19.1 of the Tribunal Rules provides that:

Where a party believes that another party in a proceeding has acted unreasonably, frivolously, vexatiously, or in bad faith, that party may make a request to the Tribunal for costs.

21“Proceeding” is a defined term in the Tribunal Rules. It means “the entire Tribunal process from the start of an appeal to the time a matter is finally resolved.” (emphasis added)

22The Tribunal has interpreted “in a proceeding” to mean that the impugned conduct must have occurred in the proceeding and does not include conduct which relates to the subject matter of the proceeding. I agree with the Tribunal in 2551665 Ontario Inc. o/a Headquarters v. Registrar of Alcohol, Gaming and Racing, 2018 ONLAT LLA 10969, when it stated:

[Rule 19] requires that the conduct complained of occur during the proceeding itself. The purpose of the rule is to prevent unruly behaviour such as continually interrupting the adjudicator, repetitive motions, aggressive or rude behaviour, malicious accusations, etc. In other words, the Tribunal expects respectful conduct during the proceeding. The awarding of costs is not necessarily related to success in a case. It is unrelated to how much a party may have paid in order to appear before the Tribunal.

23In Chesterman Farm Equipment Inc. v CNH Canada Ltd., 2016 ONSC 698 (“Chesterman”), the Divisional Court considered an award of costs made by a tribunal under the Farm Implements Act, R.S.O. 1990, c.F4 (“FIA”). The costs award in that case was made under a rule which provided that costs may be awarded “where a party believes that another party has acted clearly unreasonably, frivolously, vexatiously or in bad faith considering all of the circumstances”. The Divisional Court found that conduct which relates to the subject matter of the proceeding is not a basis for an award of costs under the rules of that tribunal and that the conduct had to have been within the hearing itself and not in relation to the initial dispute: see para. 184-188.

24The Court of Appeal for Ontario reversed the Divisional Court’s decision on the basis that neither the SPPA nor the rules of that tribunal stated that the conduct to be considered in awarding costs had to be conduct that occurred within a proceeding: CNH Canada Ltd. v. Chesterman Farm Equipment Ltd, 2018 ONCA 637.

25In the present case, unlike in Chesterman, the Tribunal Rules do provide that the conduct to be considered is that which occurs in the proceeding.

26Finally, the type of conduct which can be the subject of a request for costs is circumscribed by Rule 19.1. The Tribunal Rules do not provide for a consideration of the reasonableness of the parties’ positions on the subject matter of the appeal. In my view, that would have the effect of creating an assumption that the successful party in an appeal is entitled to their costs. In my view, that is not the intention expressed in the Rules.

27I find that Rule 19.1 requires the Tribunal to consider only conduct within a proceeding in determining whether an award of costs may be made.

28Rule 19.5 of the Tribunal Rules sets out the factors which the Tribunal must consider when deciding whether to order costs and the amount of those costs. It states:

In deciding whether to order costs and the amount of costs to be ordered, the Tribunal shall consider all relevant factors including: the seriousness of the misconduct; whether the conduct was in breach of a direction or order issued by the Tribunal; whether or not a party’s behaviour interfered with the Tribunal’s ability to carry out a fair, efficient, and effective process; prejudice to other parties; and the potential impact an order for costs would have on individuals accessing the Tribunal system.

29These factors are to be applied only to conduct in a proceeding. Although the non-exhaustive word of “including” is used in Rule 19.5, in my view the list of relevant factors that follow “including” does not, in my view, act to expand the types of conduct that may be considered beyond that which occurs in the proceeding pursuant to Rule 19.1. It simply means that, when considering the conduct which the Tribunal has determined to be unreasonable under Rule 19.1, the Tribunal is to consider all relevant factors of the type described in Rule 19.5 in determining whether that conduct whether costs should be ordered and the amount of those costs.

1. Delegation of authority

30In the Costs Decision, the Tribunal found that the Registrar delegated its authority to Sam Cosentino, a Manager of Investigations at the Ontario Motor Vehicle Industry Council (“OMVIC”), to make decisions on the Registrar’s behalf during the course of proceedings and, in particular, decisions with respect to whether to settle or abandon its proposal to refuse to register the appellants. At paragraph 73 of the Costs Decision, the Tribunal states that, by having Mr. Cosentino attend the hearing, instruct counsel, and decide whether or not to proceed with the hearing, the Registrar has delegated its authority “to propose or refuse an applicant’s registration”.

31In its submissions, the Registrar argues that there is no legal requirement obligating the Registrar to personally attend a Tribunal hearing or to personally instruct the Registrar’s counsel during the hearing. I agree.

32However, the substance of the Tribunal’s reasons was that Mr. Cosentino made decisions with respect to whether or not to refuse to issue licenses to the appellants or whether to apply conditions to those licenses. Those are decisions which the Act authorizes the Registrar to make, and the Act does not provide that the Registrar may delegate that authority. The Tribunal found as a fact that Mr. Cosentino made such decisions rather than the Registrar and that this was in breach of the Act.

33In my view, the Tribunal did not err in law when it found that the Registrar was not entitled to delegate its decision-making authority under the Act to Mr. Cosentino as the Tribunal found that it did.

34However, I find that the delegation of authority as found by the Tribunal is not conduct within the proceeding itself. The act of delegation had no effect on the conduct of the proceeding beyond the issue of whether the Registrar or Mr. Cosentino determined whether to settle or to require a hearing. This is not conduct in the proceeding and was not a factor the Tribunal was authorized to consider when deciding whether to award costs.

35The Tribunal also found that it was unreasonable for the Registrar to have Mr. Cosentino attend the hearing and instruct counsel when he was insufficiently qualified to do so given his background and experience. In my view, the qualifications of the person who is assigned by the Registrar to instruct counsel at a hearing is not conduct in a proceeding. The mere fact that a person is more or less qualified to act in the role assigned to them by the Registrar is not a factor which the Tribunal is authorized to consider by the Tribunal Rules when assessing costs.

36In my view, the Tribunal considered factors relating to the delegation of the Registrar’s authority which are not conduct in the proceedings and which are not part of the legal test with respect to an award of costs and thereby the Tribunal made errors of law.

37With respect to whether these were errors of law “such that the Tribunal would likely have reached a different result had the error not been made”, the Tribunal states at paragraph 77 of its Costs Decision:

While each of these alone may not warrant costs, taken together when viewed in light of the Registrar also giving the decision-making over to Mr. Cosentino – improperly, if not illegally – this amounts to conduct sufficiently unreasonable to warrant a costs award, in my view.

38I take this to mean that that the improper delegation of authority to Mr. Cosentino was necessary to its determination that a costs award was warranted. It is therefore likely that the Tribunal would have reached a different result had it not considered that issue in awarding costs.

39I am satisfied that the Tribunal made errors of law such that the Tribunal would likely have reached a different result had the error not been made when it awarded costs on the basis of the improper or illegal delegation of the Registrar’s authority under the Act.

2. Other conduct considered in awarding costs

40At paragraph 77 of the Costs Decision, the Tribunal summarized the Registrar’s unreasonable conduct as follows:

I have found various instances of unreasonable conduct on the part of the Registrar as described above. These include continuing to rely on evidence from an interested party without having sought any information from the appellants; continuing the proceedings once the allegation of consumer harm in relation to the ELTs had been withdrawn; continuing against Mr. Khan given the circumstances of AAG having putting him in charge of the dealership with no training or experience while abandoning all oversight of the dealership itself; and continuing against Mr. Irani without appreciating the facts or context of the transactions it was impugning. While each of these alone may not warrant costs, taken together when viewed in light of the Registrar also giving the decision-making over to Mr. Cosentino – improperly, if not illegally – this amounts to conduct sufficiently unreasonable to warrant a costs award, in my view.

41I will review each of the factors identified in paragraph 77 of the Costs decision as set out above.

Relying on an interested party’s evidence

42The Tribunal found that it was unreasonable for the Registrar to have relied on information from a witness while not seeking any information from the appellants before issuing its NOP or after proceedings had commenced. As noted above, conduct that relates to the subject matter of the proceeding is not conduct which occurs “in a proceeding” and is not a proper basis for an award of costs.

43The dispute which led to the appeal was whether the appellants’ past conduct afforded reasonable grounds to believe they would not carry on business in accordance with law and with integrity and honesty. The Registrar’s assessment of the weight to be given the information provided by a witness, or what further investigation might be required to satisfy itself that there are such reasonable grounds to believe, at any stage of the proceeding, is conduct that directly relates to the subject matter of the proceeding and is not a proper consideration for the Tribunal when awarding costs.

44I find that the Tribunal erred in law when it relied on this conduct when determining whether costs should be awarded.

Continuing the hearing after the NOP was amended to remove an allegation and in the face of a weakening case against Mr. Khan and Mr. Irani

45About four months before the hearing commenced, the Registrar amended its NOPs to remove an allegation with respect to the appellants’ conduct which it said resulted in consumer harm. The Tribunal says that this should have caused the Registrar to reconsider its case. The Tribunal found that it was unreasonable for the Registrar to continue the hearing to completion despite the case against the appellants’ showing multiple weaknesses early on and throughout the hearing.

46In addition, the Tribunal was critical of Mr. Khan’s employer for placing him in a position for which he was unqualified and providing him with insufficient training or oversight.

47With respect to Mr. Irani, the Tribunal found that the allegations against Mr. Irani were not compelling and that the weakness in its case were there to be discovered by the Registrar prior to the hearing had it requested more information from the appellants.

48The assessment of the strength of the Registrar’s case and the investigation of its allegations against the appellants are matters that directly relate to the subject matter of the proceeding and are not conduct in the proceeding. The Tribunal erred in law when it considered this conduct when determining whether costs should be awarded.

Failure to consider registration of the appellants with conditions

49Given the weaknesses in the Registrar’s case, the Tribunal, at paragraph 66 of its Costs Decision, finds the Registrar’s “unwillingness to even consider registering the appellants on terms and conditions unreasonable.” This is a matter which goes to the subject matter of the proceeding and is not conduct “in the proceeding” itself. Further, according to the Tribunal at paragraph 65, the Tribunal found, not that the Registrar was unwilling to consider registration with conditions, but that the Registrar considered that no terms and conditions would be appropriate. In my view, the consideration of settlement by the parties is not part of the legal criteria which are properly before the Tribunal and its consideration in the Costs Decision was an error of law.

The parties’ right to a hearing

50Most, if not all, of the acts which the Tribunal considered in awarding costs involved the assessment of the strength of the Registrar’s case at various points in the proceeding and the decision by the Registrar to maintain its position through the conclusion of the hearing. The Tribunal essentially found that the Registrar should have recognized at an earlier stage, even before the NOP was issued, that it had a weak case and should have either withdrawn its NOP and issued licenses, or settled the appeal on terms and conditions.

51The Registrar argued that it has the right to a hearing in order to have all the evidence tested by an impartial adjudicator. The Tribunal held that this was not true and that only the person who disagrees with a decision of the Registrar is entitled to a hearing: See Costs Decision paragraphs 59 and 86.

52It is a basic principle of natural justice that both parties to a dispute are entitled to participate in the Tribunal process and that both are entitled to a fair hearing in order to have the evidence tested by an impartial adjudicator. The Tribunal’s finding that the Registrar is not so entitled, and its consequent failure to consider that basic right in awarding costs, is an error of law

Failure to consider Rule 19.5 factors before determining that costs should be awarded

53The Tribunal appears to have made its determination before any consideration was given to the Rule 19.5 factors for awarding costs. In paragraph 77 of the Costs Decision, the Tribunal found that the conduct of the Registrar was “sufficiently unreasonable” in order to warrant a costs award. This was before any discussion of the factors that the Tribunal is required to consider under Rule 19.5.

54In doing so, the Tribunal fails to set out the standard by which the conduct can be described as “sufficiently unreasonable” or its authority for imposing the standard it imposed in the Costs Decision. The Tribunal states in paragraph 35 that there was nothing “frivolous, vexatious, or in bad faith about the Registrar’s conduct.” It also says in paragraph 77 that each of the instances of unreasonable conduct on its own may not warrant costs and that, only when taken together and viewed in light of the Registrar giving decision-making authority over to Mr. Cosentino did the conduct rise to the level of unreasonableness. Beyond that, the Tribunal does not describe the factors it takes into account when determining that the conduct was sufficiently unreasonable to warrant a costs award.

The Tribunal’s determination with respect to what was sufficiently unreasonable to warrant costs appears inconsistent with Rule 19.5. Rule 19.5 of the Tribunal Rules describes the factors that the Tribunal is required to consider when deciding whether to award costs and it does not appear that the Tribunal considered those factors before determining that the Registrar’s conduct was sufficiently unreasonable that costs should be awarded. In my view, this was an error of law.

The Tribunal’s consideration of the Rule 19.5 factors

55After already deciding that the Registrar’s conduct was sufficiently unreasonable to warrant a costs award, the Tribunal then turned to the Rule 19.5 factors.

56The Tribunal found that the Registrar’s misconduct was serious on the basis that this appeal involved a refusal to register rather than the revocation of an existing licence and therefore prevented the appellants from working in the industry before the appeal was resolved. The Tribunal found that this required the Registrar to be “even more certain of its position before proposing to refuse a transfer application.”

57There is no basis in the law for the finding that there is a higher standard of certainty required of the Registrar when refusing an application as opposed to revoking a licence. The Tribunal erred in law when it determined that there was such higher standard.

58Further, Rule 19.5 states that the Tribunal is to consider “the seriousness of misconduct”. When considering this at paragraph 79, the Tribunal states that it did not find “misconduct” on the part of the Registrar. It then finds that the conduct is serious due to the impact it had on the appellants given that the NOP involved a refusal to issue a licence rather than a revocation as stated above.

59As set out above, the conduct the Tribunal considers serious in this analysis is not conduct that takes place in the proceeding. I have found that Rule 19.5 factors are to be applied only to conduct in a proceeding.

60The Tribunal found that the Registrar’s conduct was not in breach of any direction or order.

61The Tribunal found that the failure of the Registrar to properly assess its case resulted in a 14-day hearing which was itself a process that was not fair, efficient or effective. In other words, a fair, efficient and effective hearing in this case would have been no hearing at all. Rule 19.5 requires the Tribunal to consider whether the party’s behaviour interfered with the Tribunal’s ability to carry out a fair, efficient, and effective process. It does not invite the Tribunal to consider whether there should have been process at all.

62In my view, the Tribunal misinterpreted Rule 19.5 by failing to consider whether the Registrar’s behaviour in the proceeding interfered with the Tribunal’s ability to carry out a fair efficient, and effective process and it thereby made an error of law.

63The Tribunal dismissed the concern expressed by the Registrar that an award of costs on the basis of whether the position taken by a party might lead to a costs award against an appellant if an NOP is upheld. The Tribunal repeated its error of law that it is the appellant that has the right to a hearing, not the Registrar. This is significant since, as the Tribunal itself says at paragraph 86 that “…it would indeed be inappropriate to saddle an appellant with costs simply for exercising that right under the Act.”

64This implies that, had the Tribunal considered that the Registrar also has a right to a hearing under the Act, it likely would have reached a different result.

65I find that, if the errors of law made by the Tribunal with respect to the conduct of the Registrar it was entitled to consider when making an award of costs, as described above, were not made, it is likely the Tribunal would have reached a different result. All, or certainly most, of the conduct the Tribunal determined to be unreasonable was conduct that was not properly considered by the Tribunal when deciding whether an award of costs should be made. The Tribunal did not set out any conduct which occurred in the proceeding which might justify a costs award.

E. Conclusions

66I find that the Registrar has established that the Tribunal made errors of law such that the Tribunal would likely have reached a different result had the errors not been made.

F. ORDER

67Pursuant to Rule 18.4(b) of the Tribunal’s rules, I cancel the Costs Decision of the Tribunal.