Hussnain Team P.R.E. Corporation v. Registrar, Real Estate and Business Brokers Act, 2002, 2023 CanLII 87424

Licence Appeal Tribunal File Number: 15109/REBBA

In the matter of an appeal from a Notice of Proposal and Decision of the Registrar, Real Estate and Business Brokers Act, 2002, S.O. 2002, c.30, Sch. C – to Revoke Registration, Order of Immediate Suspension and Director’s Order

Between:

Hussnain Team P.R.E. Corporation trading as HH Homes Realty Brokerage and Hussnain Hameed

Appellants

and

Registrar, Real Estate and Business Brokers Act, 2002

Respondent

DECISION

VICE-CHAIR: Avril A. Farlam

APPEARANCES:

For the Appellant: Amandeep Dhillon, Counsel Rahul Gandotra, Counsel

For the Respondent: Shane Smith, Counsel

HEARD by Videoconference: August 11, 2023

OVERVIEW

1Hussnain Team P.R.E. Corporation trading as HH Homes Realty Brokerage and Hussnain Hameed (the “appellants”) appeal the following issued by the Registrar, Real Estate and Business Brokers Act, 2002 (the “Registrar”) pursuant to the provisions of the Real Estate and Business Brokers Act, 2002, S.O. 2002, C. 30, Sch. C (the “Act”):

(i) Notices of Proposal dated July 17, 2023 to revoke the registrations of the appellants as a real estate brokerage and as broker, respectively (“NOP”);

(ii) the Director’s Order dated July 18, 2023 ordering any person having on deposit or controlling any assets or trust funds of HH Homes to hold those funds or assets, ordering HH Homes to refrain from withdrawing any asset or trust funds from a person having it on deposit or controlling it, and ordering HH Homes to hold any asset or trust funds of a client, customer or other person in trust for the person entitled to it; and

(iii) the Immediate Suspension Order dated July 17, 2023 immediately suspending the registrations of the appellant Hussnain Hameed (“Hameed”) as a broker, and the registration of the appellant Hussnain Team P.R.E. Corporation trading as HH Homes Realty Brokerage (“HH Homes”) as a brokerage under the Act (the “Order”).

2Pursuant to s. 15(3) of the Act, if an appellant requests a hearing, the Order expires 15 days after the written request for hearing is received by the Tribunal unless, during the 15-day period, the Tribunal extends the time of the expiration until the hearing is concluded.

3This hearing commenced on August 11, 2023. All parties agreed at the hearing that the sole issue in dispute before me is whether the immediate suspension of the appellants’ registrations is necessary in the public interest. All parties agreed that the appeals of the Notices of Proposal and the Director’s Order should proceed to a case conference before proceeding to a hearing. Based on the agreement of all parties, I so ordered.

4This hearing proceeded with respect to the Order only.

5At the conclusion of this hearing, I ordered that the Order is extended until my decision resulting from this hearing is released.

6The Registrar issued the Order under s.15 of the Act to immediately suspend the registration of Hameed and the registration of HH Homes under the Act because the Registrar considered it in the public interest to do so.

7The Order is based on the NOP to revoke the registration of Hameed as a broker and to revoke the registration of HH Homes as a brokerage under s. 10 of the Act.

8With respect to Hameed, the NOP alleges that:

(a) pursuant to s. 10(1)(a)(i), having regard to Hameed’s financial position or the financial position of an interested person in respect of Hameed (namely HH Homes), Hameed cannot reasonably be expected to be financially responsible in the conduct of business,

(b) pursuant to s. 10(1)(a)(iii), Hameed’s past conduct affords reasonable grounds for belief that he will not carry on business in accordance with law and with honesty and integrity, and

(c) pursuant to s. 10(1)(e), Hameed, or an interested party in respect of Hameed (namely HH Homes), is carrying on activities that are in contravention of the Act or its regulations.

9With respect to HH Homes, the NOP alleges that:

(a) pursuant to s. 10(1)(d)(i), having regard to HH Homes’ financial position or the financial position of an interested person in respect of the corporation (namely Hameed), HH Homes cannot reasonably be expected to be financially responsible in the course of its business,

(b) pursuant to s. 10(1)(d)(ii), having regard to the financial position of its officers or directors or an interested party in respect of its officers or directors (namely Hameed), HH Homes cannot reasonably be expected to be financially responsible in the conduct of its business,

(c) pursuant to s. 10(1)(d)(iii), the past conduct of HH Homes’ officers or directors or of an interested person in respect of the corporation (namely Hameed) affords reasonable grounds for belief that its business will not be carried on in accordance with the law and with integrity and honesty, and,

(d) pursuant to s. 10(1)(e), HH Homes, or an interested party in respect of HH Homes (namely Hameed) is carrying on activities that are in contravention of the Act or its regulations.

10According to the Notice of Appeal with respect to the Order, the appellants’ grounds for appeal are that the Registrar misapplied the Act, failed to complete a full investigation of the facts and failed to consider relevant evidence, and the Registrar misapprehended the facts.

ISSUE

11The sole issue in dispute before me is whether the extension of the Order is necessary in the public interest.

RESULT

12For the reasons that follow, I extend the Order against both appellants until the hearing of all issues in this appeal is concluded. The remaining issues in this appeal, including the NOPs and the Director’s Order, will proceed to a case conference on a date to be set by the Tribunal, before proceeding to a hearing.

ANALYSIS

Registrar’s authority to immediately suspend licence and right to hearing

13The Registrar’s authority to immediately suspend or revoke a registration is found in found in s. 15(1) of the Act which provides that if the Registrar considers it in the public interest to do so, the Registrar may by order temporarily suspend the registration and the order takes effect immediately under s. 15(2).

14The immediate suspension order expires 15 days after the written request for a hearing is received by the Tribunal unless the Tribunal extends the time of expiration within the 15-day period under s. 15(3)(b).

15Under s. 14(5), the registrant may request that the Tribunal hold a hearing. Following a hearing, the Tribunal may by order direct the Registrar to carry out the proposal, or may substitute its opinion for that of the Registrar and the Tribunal may attach conditions to its order or to a registration.

16The Registrar bears the onus at the hearing to establish that the immediate suspension of the licence is necessary in the public interest.

Facts Not in Dispute

17The following facts are not in dispute:

18Hameed has been a registered salesperson under the Act since 2015.

19In June 2021 HH Homes was registered under the Act and commenced operations.

20Hameed is the sole shareholder, officer and director of HH Homes.

21At the time HH Homes commenced operations, Hameed had not yet completed the real estate broker program and could not act as the broker of record. Hameed hired Birjis Rizvi to be broker for HH Homes (“former broker”). The former broker resigned in December 2022.

22In December 2022 Hameed became the broker of record for HH Homes.

23At this time the appellants do not dispute that there is a shortfall of some $341,772.81 in the trust account of HH Homes.

24Neither appellant has any prior history of regulatory discipline under the Act.

25Hameed cannot explain this shortfall and does not know what the cause is.

Positions of the Parties

26The Registrar submits that the Order is necessary in the public interest.

27The appellants submit that an extension of the Order is not necessary in the public interest. The appellants also submit that the Order should not be extended against either appellant, and alternatively, if the Order is extended against the appellant HH Homes, then it should not be extended against the appellant Hameed so that he can continue to work at another brokerage and earn income. As a further alternative, the appellant submitted that I should allow the registrations to continue with conditions imposed.

Immediate Suspension is Necessary in the Public Interest

28For the following reasons, I find that the Registrar has established that the Order is necessary in the public interest and should be extended pending the outcome of all issues in this appeal.

29The Registrar bears the evidentiary burden to establish that it is in the public interest that the Order be extended pending the outcome of this appeal. Registrar’s counsel acknowledged this burden and submitted that there are two parts to determining this issue.

30Firstly, the Registrar must establish a prima facie case that the alleged conduct occurred. Secondly, the Registrar must establish that the nature of the alleged conduct and the surrounding circumstances are such that it is in the public interest that the Order be extended pending the outcome of all issues in this appeal.

31The Registrar’s witnesses, inspector Linda Jung, Director of Registration Angela Volpe, and investigator Anthony Smith testified at the hearing. The appellant put forward his evidence in chief by way of affidavit sworn August 9, 2023, was cross-examined and re-examined, but did not call any other witnesses.

Prima Facie Case Has been Established

32I find that the Registrar has established a prima facie case that the conduct alleged in the Order occurred.

33In her testimony, Linda Jung, a RECO inspector, gave details of how the shortfall in the trust account was discovered. She testified about the correspondence from HH Homes asking for more time to reconcile the accounts and how the shortfall grew larger after December 8, 2022 when she first started the inspection and after December, 2022 when Hameed became the broker of record for his brokerage HH Homes. Ms. Jung testified about a number of efforts made by HH Homes to produce a proper reconciliation of its bank account which were not successful because the reconciliations were not properly completed. Deposit slips appeared to be missing, accounting software was in place but did not contain complete and correct information.

34It wasn’t until Ms. Jung carried out a reconciliation with the records provided that it was confirmed there was a significant shortfall in the trust account. The March 2023 reconciliation showed a shortfall of some $320,000.00 of consumer funds in the HH Homes trust account. Ms. Jung asked that the shortfall be funded immediately and an explanation provided for it. HH Homes did not do either. The shortfall grew in the next several months to some $341,000.00 prompting a new demand to rectify this and provide an explanation. Hameed said he was working on financing to make up the shortfall in the trust account but provided no explanation. Ms. Jung’s testimony was supported by banking and other records of HH Homes. Ms. Jung’s testimony was not shaken on cross-examination and I find it to be credible. Although Hameed swears in his affidavit that the shortfall in the trust account has not grown or changed since he has been broker of record, this statement is not credible in light of the oral and documentary evidence from Ms. Jung.

35At the end of the hearing, the appellants confirmed in closing submissions that, at this time, they do not dispute that there is a shortfall of some $341,772.81 in the trust account of HH Homes.

36The NOP allege that Hameed and HH Homes have not complied with their respective legislative obligations under the Act regarding the operation of the brokerage and the real estate trust account including sections 12, 27, 34 and 35 of the Act, s. 7, 19 and 30 of the General Regulation under the Act, O. Reg. 567/95 and s. 12, 13 and 14 of the Educational Requirements, Insurance, Records and Other Matters Regulation under the Act, O. Reg. 579/05, (the “Regulations”). At this point in the proceeding, I find that the evidence establishes that has been proven on a prima facie basis. Hameed, either through the employees of HH Homes or personally has failed to ensure that the brokerage complies with the Act and the Regulations, and has failed to maintain a trust account safeguarding the funds of members of the public who are parties to real estate trades.

37Although Hameed in his affidavit swears that the former broker was responsible for ensuring that HH Homes complied with the Act and regulations, including the maintenance of proper books and records for HH Homes and its bank accounts, including HH Home’s trust account, Hameed concedes in his affidavit and in his testimony on cross-examination that he had the ability to effect transfers from the bank accounts online, including the trust account.

38Hameed blames the shortfall on poor record keeping by HH Homes’ former broker. Hameed also states in his affidavit that he “…did not have any day-to-day involvement, oversight or dealings with the Brokerage’s finances and/or the Accounts” and was “…shocked to learn of Ms. Rizvi’s lack of record keeping and failure to properly complete her duties as Broker of Record.” Hameed hired new administrative staff following the departure of the former broker and alleges that the new staff was unable to prepare a complete reconciliation of the accounts of HH Homes as a direct consequence of the former broker’s “inadequate record-keeping and what appears to be her failure to properly complete her duties as Broker of Record.” Hameed swears that “To the extent that a shortfall exists, it appears to have been in existence during Ms. Rizvi’s oversight as Broker of Record and is a result of transactions that transpired prior to my becoming Broker of Record.”

39Hameed suggests that he will now be able to fix the shortfall in his trust account. Hameed states in his affidavit that “…just late last week, I was made aware that RECO wants full and complete monthly reconciliations, conducted and prepared by a CPA or other professionally designated accountant, of all the Brokerage’s records from inception from June 2021 up to July 2023.” Mr. Hameed swears in his affidavit that he has “…now retained a CPA with whom I am working to complete the requested reconciliation.”

40Hameed swears in his affidavit that “…I was prepared to pay the Shortfall amount into a trust account, to allow me and/or the Brokerage to continue operations, pending completion of our investigation and resolution of this matter….To that end, I have completed a refinancing of my personal property and have the funds available to put into trust, if required, and as a condition to the removal of the restrictions imposed on myself and the Brokerage by the Restrictive Orders.” However, it is clear from the appellants’ admission that the shortfall in the trust account exists, and that they have been unable or unwilling to correct it. The result is that money belonging to consumers remains missing. Although the appellants submit that there is no victim who has come forward to complain, I accept the submission of the Registrar that there are victims, they are just not identified at present. Whenever trust funds are missing out of a real estate brokerage account without explanation, there is a victim whose money has been taken.

41However, I find based on his own testimony that Mr. Hameed is an experienced business person. He testified that he wrote 3 cheques on one of his accounts totalling $29,000.00 knowing that the funds were not there and now blames his bank. These funds were pre-construction payments for the purchase of three units Hameed was purchasing. Although Hameed swears in his affidavit that his sole source of income comes from his real estate practice and the brokerage, in cross-examination Hameed testified that he owns a $1.8 million income property which is paid for and provides him with income.

42Hameed admitted in cross-examination that the operating account of HH Homes was in a negative state when the Order was made. At that time the account was overdrawn by some $84,000.00 and Hameed admitted that either he or HH Homes owned this amount.

43The evidence of Hameed is at odds with that of not only Ms. Jung but also Anthony Smith, a RECO investigator and I do not find it credible as a result. I prefer the evidence of Ms. Jung and Mr. Smith over that of Hameed where it conflicts. Mr. Smith testified that he interviewed the former broker the day before the hearing and she gave him a written document that she said outlined what happened. Mr. Smith said that the former broker told him she had gone to Hameed to express concerns about the inspection Ms. Jung was going to do in December, 2022 and he told her it would be fine. The former broker told Mr. Smith that she believed there were suspicious transactions from the trust account and then to the commission accounts and other accounts. The former broker also told Mr. Smith that she had authority to disburse money out of the trust account but believed Hameed also had access to the account to do this and provided documents from the bank showing her name and Hameed’s as signing authorities on the trust account. The former broker did not have an explanation as to why no deposit slips were kept. The former broker said after Ms. Jung’s inspection and after speaking to Hameed, she was not comfortable and left.

44While technically hearsay, Mr. Smith’s interview of the former broker as relayed by him and by the written document she provided him with is enough on a prima facie evidentiary basis to raise concerns by the Registrar about Hameed’s financial position or the financial position of HH Homes, and concerns that the appellants cannot reasonably be expected to be financially responsible in the conduct of business, to afford reasonable grounds for belief that the appellants will not carry on business in accordance with law and with honesty and integrity based on their past conduct and to indicate that the appellants are carrying on activities that are in contravention of the Act or its regulations.

45Hameed is the sole directing mind of HH Homes and the broker of record since December 2022. In those capacities, he is responsible to ensure that he and HH Homes are financially responsible in the course of their business, and do not afford reasonable grounds for belief that their business will not be carried on in accordance with the law and with integrity and honesty, or they are carrying on activities that are in contravention of the Act or its regulations.

46Ensuring that funds in the trust account belonging to others remain in the trust account until properly disbursed in accordance with the law, and maintaining records to prove that this is being done, is a fundamentally important obligation of the appellants. Hameed has been the broker of record since mid-December 2022 and has been responsible since at least that date.

47I find that the Registrar has established the grounds for the Order on a prima facie evidentiary basis based on the totality of the evidence.

Extension of the Order is in the Public Interest

48I find that the Registrar has established that the nature of the alleged conduct and the surrounding circumstances are such that it is in the public interest that the Order be extended pending the outcome of all issues in this appeal.

49Angela Volpe, Director of Registration under the Act testified that there are concerns here because of the significant shortfall in the trust account. The trust account is where consumer deposits are held in trust. Ms. Volpe reviewed the reasons why both appellants are not entitled to registration as set out in the NOPs. The ultimate concern is the significant amount of consumer deposits which are missing from the trust account without explanation, despite requests for explanation. Also concerning is that the monthly trust account reconciliations have not been done since HH Homes commenced business in 2021. Hameed is the sole shareholder and directs the activities of HH Homes. Hameed has failed to provide any explanation or any rectification of the shortfall, even after the NOPs and the Order were issued in July, 2023. Despite talk of refinancing, it appears that the appellants cannot afford to put the missing funds back in the trust account.

50Ms. Volpe testified that the Order is not something that the Registrar does very often. However, it was considered to be important here to protect the trust and the trust funds of consumers. It is not in the public interest to have the appellants trading in real estate in circumstances where there is money missing from the trust account. Hameed has admitted he doesn’t know why the money in the trust account is missing which is concerning and also that there is no explanation or culpability for the consumer funds that are missing. The legislation requires money missing from a brokerage trust account to be replaced immediately. Hameed is not in compliance nor is HH Homes even though this situation has been known for several months. As the directing mind of HH Homes, Hameed is the person responsible for the shortfall in the trust account. Many claims have been filed with RECO’s insurers for both missing consumer deposits and commission protection.

51I accept the evidence of Ms. Volpe. It is clear from the evidence that Hameed directs and controls HH Homes and is responsible not only as its broker but as its sole shareholder, director and officer. It is in the public interest and in the protection of the public’s money that the appellants not trade in real estate at this time.

52I do not accept the appellants’ submission that Hameed be allowed to be a broker for some other real estate brokerage so that he can continue to work during this appeal. The paramount consideration in this hearing is the public interest, not the private interest of Hameed. Hameed is not precluded from working, just from trading in real estate.

Conditions

53Even though I have determined that an extension of the Order to be necessary in the public interest, in reaching that conclusion I have considered whether any condition should be imposed on the appellants’ registrations to allow them to continue to trade in real estate, as suggested by the appellants.

54The appellants submitted that conditions could be attached to their registrations which could operate as safeguards, such as a requirement that HH Homes submit weekly reconciliation reports. Hameed should be allowed to sell real estate through another brokerage where he doesn’t have to handle funds.

55I am not persuaded that any conditions could adequately protect the public from the actions of the appellants at this time. HH Homes and Hameed have shown that they are unwilling or unable to submit the required monthly reconciliations. There has been no evidence that gives me confidence that the appellants could or would comply with more stringent requirements. Further, weekly reconciliations are meaningless given that the monthly reconciliations have not been delivered. Hameed has shown an unwillingness or inability to safeguard trust funds, an essential feature of the trusted position of a trader in real estate who consumers trust with what is for most people the largest financial transaction of their lives. Hameed has only recently even decided to hire an accountant to be responsible for the books and records of HH Homes.

56I am also not persuaded that any conditions such as those suggested by the appellants, or any other condition, are enforceable conditions that could be imposed on the appellants as an alternative to the extension of the Order at this time.

Conclusion

57I find that the Registrar has met the burden of establishing that the Order should be extended against both appellants until the hearing of all issues in this appeal is concluded.

Next Steps

58The appeals of the Notices of Proposal and the Director’s Order will proceed to a case conference before proceeding to a hearing in accordance with notice to be sent by the Tribunal to the parties.

ORDER

59For the reasons set out above, pursuant to s.15(3) of the Act, I extend the Order against both appellants until the hearing of all issues in this appeal is concluded.

60The remaining issues in this appeal, including the NOPs and the Director’s Order, will proceed to a case conference on a date to be set by the Tribunal, before proceeding to a hearing.