LAW SOCIETY TRIBUNAL

HEARING DIVISION

Date: March 2, 2026

Tribunal File No.: 23H-064

BETWEEN:

Law Society of Ontario

Applicant

• and -

Yuce Baykara

Respondent

Before: Karen Hulan (chair), Ingrid Berkeley, Paul Le Vay

Heard: April 21-22, 24-25, and May 9, 2025, by videoconference, and by written submissions

Appearances:

Joshua Elcombe, for the applicant

Alfred Esterbauer, for the respondent

Summary:

BAYKARA – Failure to Provide Legal Services to Standard of Competent Lawyer – Syndicated Mortgage – Recusal Motion – Adjournment

The Lawyer sought to recuse a member of the panel who had represented the Law Society in civil matters and before the Tribunal – The panel dismissed the motion as sufficient time had passed to erode any perceived concern of bias – The presumption of impartiality was not rebutted – The Lawyer then sought an adjournment of the hearing to appeal this decision – The adjournment was denied on the basis of the practice direction on adjournments and because this was an interim decision.

The panel concluded that the Lawyer was the lenders’ lawyer in the syndicated mortgage transactions and that he failed to serve his clients to the standard of a competent lawyer – The Lawyer did not meet with his clients to explain and execute complex syndicated mortgage documentation – He did not advise his clients of all facts material to their interests or ensure his clients were aware of changes in appraised value – The Lawyer did not comply with the terms of the loan agreement and accepted incomplete and inaccurate forms – The Lawyer did not lack sufficient knowledge, experience or skill and that allegation was dismissed – The panel ordered a hearing on penalty to be scheduled.

REASONS FOR DECISION ON FINDINGS

INTRODUCTION

1Karen Hulan (for the panel):– This professional misconduct proceeding arose out of a failed real estate development in which several individuals who invested in a syndicated mortgage lost their investment.

2The Law Society alleges that the Licensee, Yuce Baykara, acted as lawyer for the investors. Mr. Baykara denies this and maintains that his role was limited to that of bare trustee and mortgage administrator.

3The Law Society also alleges that Mr. Baykara failed to provide legal services to the standard of a competent lawyer by:

• acting for clients in an area of law in which he lacked sufficient knowledge, experience, and legal skill;

• failing to meet with his clients personally to explain and execute complex syndicated mortgage documentation;

• failing to apply legal judgment to the documents governing the syndicated mortgage transaction;

• failing to advise his clients, throughout the retainer, of all facts material to their interests;

• failing to comply with the terms of the loan agreement;

• failing to ensure that his clients were aware of the appraised current value of the mortgaged property under development; and

• releasing his clients’ money before securing their interests on a registered mortgage.

4Finally, the Law Society alleges that Mr. Baykara did not comply with s 24 of By‑Law 9 as he failed to maintain Forms 9D and 9E and accepted FSCO¹ Forms 1 and 1.1 as alternatives to these forms. Further, these forms were incomplete and contained inaccurate information.

5The Law Society did not proceed with two of the allegations in the notice of application and therefore they are not repeated here.

6There is no dispute that Mr. Baykara was acting as bare trustee and mortgage administrator for the lenders. The issue is whether he was also acting, or at least represented that he was acting, as their lawyer. If he was their lawyer, or could have reasonably been understood to have been their lawyer, then there is the further issue of whether he executed his duties to the standard of a competent lawyer.

7We conclude that Mr. Baykara was the lenders’ lawyer in the syndicated mortgage transactions. We find that Mr. Baykara failed to serve his clients to the standard of a competent lawyer by failing to:

• meet with his clients personally to explain and execute complex syndicated mortgage documentation;

• advise his clients throughout the retainer of all facts material to their interests;

• comply with terms of the loan agreement;

• ensure that his clients were aware of the appraised current value of the mortgaged property under development; and

• secure his client’s interests on a registered mortgage before releasing their money.

8We find that Mr. Baykara failed to comply with s 24 of By-Law 9 by failing to maintain Forms 9D and 9E and by accepting, as an alternative to the forms, Investor/Lender Disclosure Statements for Brokered Transactions (FSCO Forms 1 and 1.1) that were incomplete and contained inaccurate information.

9We dismiss the allegations that Mr. Baykara lacked sufficient knowledge, experience and legal skill in real estate law when he acted for his clients, or in applying legal judgment to documents governing the syndicated mortgage transaction.

PRELIMINARY ISSUES

Recusal motion and adjournment request

10At the opening of the hearing, Mr. Baykara brought a motion seeking to have Mr. Le Vay recuse himself on the basis of a reasonable apprehension of bias. The motion was heard and dismissed with reasons to follow.

11Mr. Baykara did not initially file any evidence on the motion, notwithstanding the onus on him to establish a reasonable apprehension of bias. He was accorded a brief recess and later in the day delivered an affidavit from his associate setting out the fact that Mr. Le Vay had in the past represented the Law Society in Law Society of Ontario v Fuhgeh² and Law Society of Ontario v Bahimanga,³ both before this Tribunal. In the latter, he had appeared as co-counsel with Mr. Elcombe, counsel for the Law Society in the present matter. The Bahimanga case was also referred to on the website of Mr. Le Vay’s firm (Stockwoods). The affidavit further stated that Mr. Elcombe had advised the Licensee that members of Stockwoods currently represented the Law Society in ongoing litigation matters. No particulars were provided and there was no evidence that Mr. Le Vay had any involvement in any current case for the Law Society. Both parties agreed that Stockwoods was a litigation boutique.

12Mr. Esterbauer’s position on behalf of the Licensee was that Mr. Le Vay’s previous work as counsel for the Law Society gave rise to a reasonable apprehension of bias. Actual bias was not alleged. The concern, more specifically, was that Mr. Le Vay represented the Law Society in civil matters⁴ and Tribunal matters. Mr. Esterbauer stated that cases where Mr. Le Vay represented the Law Society before this Tribunal give rise to greater concern than civil cases, however, it is loyalty to his former client overall that is ultimately of concern rather than the forum in which he represented that client.

13The reported cases in the Bahimanga matter are from 2017 and 2018.⁵ The various decisions in the Fuhgeh matter range from 2018 to 2023. When asked how much time would have to pass before it would be acceptable, for a lawyer who represented the Law Society to become a Tribunal adjudicator, Mr. Esterbauer responded that at some point in time the duty of loyalty erodes and eventually vanishes but that is not the case here. Mr. Le Vay, he argued, was counsel in reported cases just two years before this hearing.

14While he provided no evidence that Mr. Le Vay presently represents the Law Society in any matter, Mr. Esterbauer submitted that the fact that Law Society remains a Stockwoods’ client was also grounds for recusal on the basis of reasonable apprehension of bias. He argued that, as law firm partner, Mr. Le Vay appears to have a pecuniary interest in his firm’s retainer by the Law Society. He conceded that this possible pecuniary interest was not an “overriding principle” in the sense of being determinative but, rather, simply a factor that a reasonable person would consider in determining whether there is a reasonable apprehension of bias.

15Mr. Esterbauer says that this case is unlike many of those before us in the motion (below) where recusal was sought after the decisions had been rendered. In those cases, he supposes that there was a stronger desire not to undo the cases following the hearings and decisions. In contrast, his objection was raised at the outset of the hearing, suggesting that a lesser onus applied.

16Finally, Mr. Esterbauer advised that he could not locate a case with a similar fact pattern and asked us to infer that is because other judges or adjudicators (as the case may be) avoided an apprehension of bias by recusing themselves.

17Referring to the legal test cited in Committee for Justice and Liberty et al. v National Energy Board et al., 1976 CanLII 2 (SCC), he submitted that a reasonably well-informed member of the public could be concerned about Mr. Le Vay’s ability to be impartial in this matter in light of the previous work he had done as described above.

18It was Mr. Elcombe’s position on behalf of the Law Society that the Licensee had not discharged the onus of establishing a reasonable apprehension of bias. Relying on Wewaykum Indian Band v Canada, 2003 SCC 45 (Wewaykum 2003) at para 76, he argued that the party seeking recusal of an adjudicator must overcome a strong presumption of adjudicative impartiality by establishing substantial and fact specific grounds to show that an informed person, viewing the matter realistically and practically, would think it more likely than not that the adjudicator could not decide the matter fairly. Mr. Elcombe also relied on the Ontario Court of Appeal’s reasons in Terceira v Labourers International Union of North America, 2014 ONCA 839. The Court in Terceira contrasted the rules applicable to conflicts applicable to lawyers, which are based on a fiduciary duty owed to a client, versus what governs an adjudicator’s duty, which is anchored in principles of fairness and impartiality, with a strong presumption of impartiality. It was important, he submitted, to apply the correct test: Terceira, paras 27-30. Finally, he referred to Edmison v Wawanesa Mutual Insurance Company, 2017 SKQB 133. In that case, the trial judge had worked at the same firm as counsel for the defendant insurer, which had been one of her clients. Her decision to decline to recuse herself on that basis was upheld on appeal.

19We find that Mr. Baykara has not met his onus to establish a reasonable apprehension of bias by Mr. Le Vay.

20The Supreme Court of Canada addressed the issue of reasonable apprehension of bias with respect to judges (and adjudicators) in Wewaykum 2003. Justice Binnie had authored the Supreme Court’s reasons in Wewaykum Indian Band v Canada, 2002 SCC 79. The appellants later discovered that he had previous involvement in the case before the Court when he was the Associate Deputy Minister for the federal Department of Justice. They unsuccessfully sought an order setting aside the court’s judgment.

21The Court articulated the law in the area at para 60, quoting its previous decision in Committee for Justice:

... the apprehension of bias must be a reasonable one, held by reasonable and right minded persons, applying themselves to the question and obtaining thereon the required information. In the words of the Court of Appeal, that test is “what would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude. Would he think that it is more likely than not that [the decision‑maker], whether consciously or unconsciously, would not decide fairly.”

22An allegation that a judgment may be tainted by bias or by a reasonable apprehension of bias is most serious: Wewaykum 2003 at para 2. The grounds for recusal must be substantial. The test is not related to the “very sensitive or scrupulous conscience”: Wewaykum 2003 at para 76, citing Committee for Justice at p 395. The Court elaborated at para 59:

Viewed in this light, “[i]mpartiality is the fundamental qualification of a judge and the core attribute of the judiciary” (Canadian Judicial Council, Ethical Principles for Judges (1998), at p. 30). It is the key to our judicial process, and must be presumed. As was noted by L’Heureux-Dubé J. and McLachlin J. (as she then was) in S. (R.D.), [1997 CanLII 324 (SCC)] at para. 32, the presumption of impartiality carries considerable weight, and the law should not carelessly evoke the possibility of bias in a judge, whose authority depends upon that presumption. Thus, while the requirement of judicial impartiality is a stringent one, the burden is on the party arguing for disqualification to establish that the circumstances justify a finding that the judge must be disqualified.

23The analysis is highly fact specific and evaluated on an objective standard: paras 73 and 77. In Wewaykum 2003, despite the fact that Justice Binnie had had limited supervisory involvement in the very matter in issue, albeit many years earlier, the test was not satisfied and there was no need for recusal in that case.

24Wewaykum 2003 also answers another of Mr. Esterbauer’s arguments: that a lesser onus applies because the matter has been raised at the outset of the case, rather than later on. The Supreme Court clearly states that the standard remains the same whenever the issue of disqualification is raised (para 78).

25In Terceira, above, the Court of Appeal considered reasonable apprehension of bias in the administrative law context. The Vice-Chair of the Ontario Labour Relations Board had previously represented one of the parties in an employment law matter. The employees requested the Vice-Chair to recuse himself due to a reasonable apprehension of bias. He declined to do so. The Court of Appeal agreed with that decision. The Court pointed to the fact that in selecting adjudicators, the OLRB draws on the expertise of practitioners in a specialized bar and that a presumption of disqualification would operate to disregard that practical reality (para 29). The same can be said for this Tribunal. Appointed adjudicators like Mr. Le Vay may be drawn from the ranks of lawyers who have dealt with professional discipline cases, which is also a specialized bar. As a result, it is not surprising that adjudicators have familiarity with the parties appearing before them. In Terceira, the Court found that there was a failure to rebut the presumption of impartiality (para 32).

26The Court’s decision in Edmison, above, confirms that the fact that an adjudicator has previously acted for a party in unrelated matters is not a bar to that person later fulfilling an adjudicative role in a proceeding in which the former client is a party.

27As stated previously, the evidence provided on behalf of Mr. Baykara was limited to the previously cited cases and reference to the link on Stockwoods’ website referencing the Bahimanga case where Mr. Le Vay had worked with Mr. Elcombe. This work occurred several years ago. There was no evidence that Mr. Le Vay continues to prosecute claims for the Law Society or is doing any work for it currently.

28We were not persuaded that a reasonable, right-minded, and properly informed person would think that Mr. Le Vay was consciously or unconsciously influenced by his former work with Mr. Elcombe six and seven years earlier, or his work for the Law Society in the other matters cited by Mr. Baykara. It is not uncommon for a judge or an adjudicator to preside over matters where he or she had previously worked alongside counsel as lawyer. It has been six years since Mr. Le Vay and Mr. Elcombe worked together. There has been a sufficient passage of time to erode any perceived concern of bias based on this ground.

29Further, the allegation that Mr. Le Vay has a pecuniary interest is insufficient to meet the Wewaykum 2003 test. The only evidence before us in this regard is a hearsay statement that Stockwoods was currently representing the Law Society in ongoing litigation matters, without any particulars. It was agreed by the parties that Stockwoods is a litigation boutique with a number of lawyers and partners, of which Mr. Le Vay is but one. Its website refers to many other matters. As Mr. Esterbauer conceded, this factor is not overriding but, rather, is one that must be weighed based on specific evidence. In the circumstances, the evidentiary record did not bear out a sufficiently relevant or material pecuniary interest to meet the threshold described in the case law reviewed.

30The presumption of impartiality is integral to the proper functioning of the judicial system and to this adjudicative tribunal. A party seeking the recusal of a panel member must advance serious and substantial grounds in order to overcome this presumption. The fact that Mr. Le Vay previously represented the Law Society does not meet this high threshold.

31We were not persuaded that any of the above considerations on their own, or in combination, would lead a reasonable and right-minded person to conclude that Mr. Le Vay would not decide this case fairly.

32Mr. Baykara then sought an adjournment of the hearing to appeal our decision. The adjournment request was denied. There is not yet a right of appeal from our recusal decision as there is not yet a final decision or order of the Hearing Division: Law Society Act, s 49.32(1). In addition, Rule 6.3 of the Tribunal’s Rules of Practice and Procedure provides that adjournment requests are not automatic, even when on consent; and, the Law Society did not consent.

33Mr. Baykara provided no reason for his request other than to allow time to appeal our decision on the recusal motion. The decision to proceed with the hearing was consistent with the Practice Direction concerning adjournments. In arriving at our decision to proceed, we balanced the public interest in conducting hearings in a timely manner with Mr. Baykara’s right to a fair hearing. The notice of application was issued quite some time ago, on May 30, 2023. The events underpinning the application occurred in 2017 and 2018. Much time has passed. The parties were notified on April 8, 2025 of the composition of this panel and yet it was not until the morning that the hearing commenced on April 21 that the notice of motion was served and filed. In light of these factors, and having concluded that the fairness of the hearing was not compromised, the hearing proceeded as scheduled.

BACKGROUND

34Mr. Baykara was called to the Bar in 2014. At the time of the events giving rise to this application he worked in association with a law firm in Vaughan through his professional corporation, Knights Legal Professional Corporation (Knights LPC).

Overview

The participants

35In May 2016, a developer, 7397 Islington Development Inc. (7397), purchased a vacant lot at 7397 Islington Avenue in Vaughan for $3.2 million for the purpose of developing a senior citizens’ residence.

36Mike Wang was the principal of 7397 as well as the principal of Forme Development Groupe Inc. and Time Development Group Inc. (the parent company of 7397).

377397 entered into a mortgage agreement with Sans Souci Mortgage Services Corporation (SSMS) mortgage brokerage in which SSMS agreed to procure a syndicated mortgage. The mortgage agreement provided, amongst other things, that SSMS would raise funds in the amount of $2 million within 90 days and would undertake to achieve a maximum of $6 million within six months of the date of the initial close.

38Hasson Pereira was the principal of SSMS and director and sole shareholder of Sans Souci Capital Corporation (SSCC).

39Between November 21, 2017 and June 16, 2018, 26 investors (the lenders) advanced funds to Mr. Baykara’s trust account totalling $1,077,560. Some of the lenders advanced funds through registered accounts (RRSPs, TFSAs, LIRAs). These accounts were held with Computershare Trust Company of Canada (Computershare).

40On November 24, 2017, Mr. Baykara registered on title the charge/mortgage for the syndicated mortgage for the face value of $4.375 million. It was registered in third position, behind two other mortgages: a first mortgage for $2.4 million and a second mortgage for $3 million. Mr. Baykara was listed as mortgagee for the syndicated mortgage, holding it in trust for the lenders. Computershare later became co-mortgagee, holding it in trust for those lenders who had advanced funds through their registered accounts.

41In May 2018, the original first mortgage was discharged and replaced with a mortgage in the amount of $3.6 million. Both the second and the third mortgagees agreed to postpone to the new first mortgage (the postponement). As a result, the lenders’ syndicated mortgage remained in third position behind two mortgages, but now totalling $6.6 million rather than the previous amount of $5.4 million.

42In November 2018, 7397, Forme Development Group Inc. and other corporations operated by Mr. Wang applied for creditor protection under the Companies Creditors Arrangement Act, RSC 1985, c C-36 (CCAA). The project was ultimately sold for an amount that was less than the value of the first two mortgages; as a result, the syndicated lenders lost their investments.

The investment process

43While the mortgage agreement between 7397 and SSMS did not specify that the syndicated mortgage loan was to be used for costs such as applying for zoning charges, advertising, interior design and architect’s fees (known as soft costs) rather than construction costs, there is no dispute that that was the purpose of the loan. It had an effective date of October 1, 2017.

44The mortgage agreement provided for the payment of fees to SSMS and to Knights LPC, Mr. Baykara’s firm. SSMS would be paid 14% sales commission. SSCC would receive 2% for “administration, consulting, due diligence, research and processing, etc.” Knights LPC would be paid 1% “as Bare Trustee and Mortgage Administration”. There is disagreement about whether SSMS would be allocated 10% of the shares in 7397 if it raised funds as agreed. That dispute is described later in these reasons. Mr. Baykara did not draft the mortgage agreement.

45Mr. Baykara drafted several documents for the lenders:

• a bare trust agreement;

• a loan agreement; and

• a document entitled “Memorandum and Instructions of Yuce Baykara”.

46The bare trust agreement was an agreement between Mr. Baykara and each of the lenders. It indicated that Mr. Baykara would receive the lenders’ funds and hold the syndicated mortgage in trust for the lenders as bare trustee. He would administer the loan on their behalf. The bare trust agreement was provided to the lenders and a copy was retained in each lender’s file maintained by Mr. Baykara.

47The loan agreement was an agreement between 7397 as borrower and Mr. Baykara, as trustee for the lenders, as the lender. It is dated October 1, 2017. The lender agreed to lend up to $15 million for a term of three years (with the possibility of a one-year extension) with the funds being advanced in installments. SSMS provided the loan agreement to the lenders and Mr. Baykara kept copies in each lender’s file.

48The document entitled “Memorandum and Instructions of Yuce Baykara” set out Mr. Baykara’s role as bare trustee and lawyer. SSMS provided this memo to lenders, and again, Mr. Baykara kept a copy of the memo signed by each lender and by him in the lender’s file. The memo was also signed by Mr. Baykara as “Lawyer”.

49FSCO Forms 1 and 1.1 were used instead of Form 9D (Investment Authority) as is permitted by the Law Society’s By-Law 9. The FSCO forms were Investor/​Lender Disclosure Statements for Brokered Transactions. The FSCO forms provided to the lenders contained errors.

50As outlined above, some lenders advanced funds through registered accounts which were held at Computershare. In addition to the bare trust agreement and the loan agreement, those lenders were required to sign two additional documents: “Arm’s Length Mortgage Agreement and Direction” and “Indemnification”. Some of the Computershare lenders also signed a document entitled “Solicitors Certificate of Disclosure and Undertaking”. Five of these lenders also received a “Solicitor’s Certificate of Disclosure and Undertaking” signed by Mr. Baykara. In it he acknowledged acting for the mortgagor 7397 and the lender/investor.

51Mr. Baykara did not meet with the lenders to discuss the mortgage agreement, the bare trust agreement, the loan agreement, the Memorandum and Instructions of Yuce Baykara, or the Financial Services Commission of Ontario (FSCO) forms. He did not meet with the Computershare lenders to review the Computershare documents with them.

THE LAW SOCIETY INVESTIGATION

52Mary-Ann Lord, a Law Society forensic auditor, investigated this matter and provided evidence by way of affidavit and through cross-examination. She was tendered as a fact witness. Her affidavit sets out facts she discovered and documents she obtained in the course of her investigation. The affidavit highlights certain facts and certain provisions in the documents. This is often the way investigators highlight evidence they have uncovered in their investigation. Mr. Baykara’s counsel was able to cross-examine Ms. Lord in order to highlight other facts and/or call into question the facts that Ms. Lord chose to highlight.

53We raise this point because Mr. Esterbauer objected to Ms. Lord’s affidavit because it contained opinion. In the main, it did not. Ms. Lord’s evidence highlighting certain facts uncovered in her investigation is not opinion evidence. Her evidence was generally restricted to providing relevant documents and information obtained in her investigation and to highlighting relevant parts of that evidence. To the extent that she offered opinions in her evidence, we did not consider her opinions in reaching our decision. We had the benefit of Mr. Esterbauer’s cross-examination and submissions on the evidence and we had the benefit of receiving and reviewing the full documents, not just those parts highlighted by Ms. Lord.

54Ms. Lord’s investigation consisted of reviewing Mr. Baykara’s complete file for the 7397 development, including client trust ledgers, banking details, and supporting documentation in Mr. Baykara’s possession related to the Forme Development court proceedings.

55The file also included copies of the mortgage agreement, the loan agreement, the bare trust agreement, the Memorandum and Instructions of Yuce Baykara, FSCO Forms 1, 1.1 and 1.2, and other documents collectively referred to by Mr. Baykara as ‘the investor package’.⁶ Some lenders’ files contained the appraisal. Computershare lenders’ files contained five additional documents required by Computershare. Five lenders’ files contained an additional document titled “Solicitor’s Certificate of Disclosure and Undertaking”.

56The investigation also included Mr. Baykara’s written responses to questions, an interview, and follow-up information he provided to Ms. Lord after his interview. Ms. Lord’s information was derived solely from those sources of information. She did not interview any other parties to the transaction or to the development. She did not speak to any lenders.

57As a result of Ms. Lord’s investigation, the Law Society alleges that:

• there was inadequate communication with lenders,

• Mr. Baykara acted as lawyer,

• there were inconsistencies in the Loan Agreement he drafted,

• he improperly released fees,

• he did not disclose the 2018 postponement, and

• he did not maintain an interest reserve.

All of these deficiencies, it is alleged, were to the lenders’ detriment.

58The Law Society relies upon the investigation results reviewed below.

Inadequate communication with lenders

59The Law Society alleges that SSMS made errors when it communicated with lenders. The Memorandum and Instructions of Yuce Baykara instructed Mr. Baykara to accept the FSCO forms as proof of the loan agreement.

60Ms. Lord, in her affidavit, points to errors in the FSCO Form 1 drafted by SSMS, including:

• SSMS did not disclose any conflict of interest arising from it receiving a 10% share in the development if funding targets were met. Ms. Lord acknowledged that her knowledge about the SSMS – 7397 agreement was limited to that set out in the mortgage agreement.⁷

• The purchase price and date were listed as $6.33 million and June 23, 2014,⁸ respectively, when it was in fact purchased for $3.2 million on May 6, 2016.

• The property was purchased for $3.2 million on May 6, 2016, but the October 27, 2017 appraisal provided a current market value of $13.8 million.

• It indicated that the appraiser used a “3 prong approach” including “Direct Comps., Residual Land Value Analysis, Cost Approach, Income Approach” whereas the appraisal was limited to the direct comparison approach.

• The amount of the syndicated mortgage was listed as $1.5 million. In fact, although it was not fully funded, the face value was $4.375 million. The use of the inaccurate figure in the loan-to-value calculation resulted in a loan-to-value ratio that was too low.

• FSCO Form 1.1 states that Mr. Baykara would monitor the disbursement of funds, but Ms. Lord did not find any evidence that he did.

• The FSCO form omitted reference to the hourly rate legal fees that would be paid to Mr. Baykara as set out in the mortgage agreement. The forms did not set out that SSMS, SSCC, and Mr. Baykara’s law firm were paid a percentage of funds raised.

61Finally, Ms. Lord noted that Mr. Baykara did not advise the lenders of the postponement and there is nothing in his files to demonstrate that they were advised by anyone of the postponement. The bare trust agreement provided discretionary authority to Mr. Baykara to administer funds, but it is silent about authorizing a postponement without lender instruction. She acknowledged that if the lenders provided instructions to allow the postponement, then Mr. Baykara could act on those instructions. Ms. Lord did not talk to anyone from SSMS about what they relayed to the lenders.⁹

Mr. Baykara as lawyer

62Ms. Lord pointed to several documents that refer to Mr. Baykara as the lenders’ lawyer.

63Mr. Baykara drafted the Memorandum and Instructions of Yuce Baykara. It refers to him as “trustee and solicitor”, as acting on the lenders’ behalf but with 7397 agreeing to pay “your legal fees”.¹⁰ It refers to Mr. Baykara as “lawyer” and sets out the lawyer’s responsibilities. It states, “I consent to Yuce Baykara acting on my behalf” and refers to the Rules of Professional Conduct (the Rules) which are applicable to lawyers. Finally, it instructed Yuce Baykara to act on the lender’s behalf. It is signed by Mr. Baykara as “Lawyer”.

64Some of the lenders with registered accounts were provided the “Solicitor’s Certificate of Disclosure and Undertaking” signed by Mr. Baykara in which he acknowledged acting for both the mortgagor and the investor.

65The loan agreement refers to payment of legal fees separate from bare trustee fees. Invoices show payment of both types of fees.

66Some lenders who advanced funds through Computershare signed a document entitled “Purchase Instruction Form.” This document contains a term and condition that the lender has obtained “legal advice, and carried out such due diligence…” as the lender considered appropriate.

67Ms. Lord did not ask SSMS what it described to lenders about Mr. Baykara’s role. She acknowledged that some documents provided to lenders did not refer to Mr. Baykara as “Lawyer”.

Inconsistencies in the loan agreement

68Ms. Lord pointed out inconsistencies in the loan agreement prepared by Mr. Baykara.

69First, the maximum loan to value ratio provided to one lender was listed as both 85% and 100% of the appraised value of the development. Ms. Lord conceded that this was likely an error as the mortgage agreement provided for 85%. She conceded that total advances from the syndicated mortgage never exceeded the $13.8 million appraised value.¹¹

70Second, the interest rate was listed as “twelve percent (16%) per annum” and noted elsewhere in the document as “12% per annum”. She acknowledged that “16%” could have been a typographical error as it was otherwise referred to as 12% and the lenders were in fact paid 12% upfront in accordance with the agreement.

71Third, it stated that the syndicated mortgage would be in second and third position. She acknowledged in cross-examination that the mortgage agreement (which the lenders were also provided) identified the syndicated mortgage’s position correctly, that is, as a third mortgage behind two others totalling $5.4 million.

72Fourth, the loan agreement stated that there would be an interest reserve of 24% whereas the bare trust agreement provided for an interest reserve of 12%. Mr. Baykara did not maintain any interest reserve and so the lenders ultimately lost this amount.

73Fifth, the loan agreement stated that the second mortgagee agreed to reduce the second mortgage in favour of the syndicated mortgage in accordance with a schedule which was not appended. That schedule would have contained information for lenders describing how their security could improve.

74Finally, the loan agreement provided that loan advances would be made on the advice of a quantity surveyor and at the discretion of the lender/bare trustee. The quantity surveyor was to assess the financial needs for construction and instruct the lender about loan advances. Mr. Baykara did not consult a quantity surveyor. He said to Ms. Lord that he had seen a quantity survey, but none was in his file and none was produced. Ms. Lord acknowledged that the syndicated mortgage funded soft costs (and this was relayed to the lenders) and that these are not costs addressed by a quantity surveyor.

Release of fees

75Mr. Baykara released the funds in 10 installments. Each time loan proceeds were advanced, he paid lenders their initial 12% interest upfront and paid fees to SSCC, SSMS, and himself.

76As more lenders became involved in the syndicated mortgage, Mr. Baykara registered a Transfer of Charge to transfer the new mortgage interests to himself and Computershare. A Schedule of Charge was attached to each Transfer to note the additional loans and the new syndicated lenders’ shares of the syndicated mortgage.

77For three lenders, Mr. Baykara advanced the loan proceeds, paid the lenders their interest, and paid fees before registering the Transfer of Charge. Ms. Lord states that this reversed the order in which the transaction is expected to be completed.

78There is no allegation that the timing of the release of funds was improper.

No disclosure of 2018 postponement

79There were no FSCO forms (or Form 9Ds) or other evidence to show that lenders were aware that the May 2018 postponement increased the value of the first mortgage by $1.2 million. FSCO forms should have been updated and provided to the lenders who had loaned funds before the postponement to show them the postponement. Even lenders who loaned money after the postponement were provided outdated FSCO forms that did not reflect the increased amount of the first mortgage.¹²

No interest reserve

80Mr. Baykara did not maintain an interest reserve, causing lenders to lose the 24% of their initial investment that this reserve would have protected.

Missing information

81Some lenders’ files included a copy of the appraisal; others did not.

82Again, the loan agreement refers to the mortgage’s priority position in accordance with Schedule E, which was not attached.

HASSON PEREIRA’S EVIDENCE

83Mr. Baykara called Mr. Pereira as a witness. At the time that SSMS entered into the mortgage agreement with 7397, Mr. Pereira had been a licensed mortgage agent for approximately two years. He was the founder and principal of SSMS, a licensed mortgage brokerage firm. He had experience with two previous syndicated mortgages (also for soft costs). Those projects were successful. He also had some prior dealings with the development group that was involved in the 7397 project.

84SSMS’s team consisted of four or five people whose duties included researching the viability of the project. The development plan was to construct a four storey, 83-unit building for senior citizens with underground parking for 99 vehicles. It would be a medium density residential development. SSMS determined that it would be a profitable project and so it entered a mortgage agreement with 7397. At the time it entered the mortgage agreement, there were already two mortgages totalling $5.4 million on the property and thus the syndicated mortgage would be third in priority. It was decided that the loan to value ratio of all mortgages would be 85% at most. Mr. Pereira testified that prior to deciding that SSMS would become involved in the project, he read the Cushman appraisal dated October 27, 2017 which appraised the project at $13.8 million.

85Mr. Pereira provided evidence related to each of the Law Society’s allegations set out above, namely, communication with lenders, Mr. Baykara’s role in the syndicated mortgage, the loan agreement, the propriety of releasing fees, disclosure of the 2018 postponement, and payment of interest to lenders.

Communication with lenders

86SSMS met with many of the lenders individually and as a group. Mr. Pereira explained the process to lenders and the project they were investing in.

87The initial meeting with each lender was three or four hours long. They were each sent an investment package before the meeting. Mr. Pereira then met with them to explain what the funds would be used for and reviewed all documents with them.

88There was then a second meeting. In preparation for that meeting, SSMS populated all required forms with the lender’s information. Some of the forms were FSCO template forms.

89Mr. Pereira reviewed the FSCO forms. He knew that they had to be correct because lenders would receive a copy and would be able to review them.

90The documents were reviewed and signed at the second meeting with the lenders. He said that the lenders would know the appraised value of the project before the second meeting, but he did not review the initial Cushman appraisal with lenders.

91Several other documents formed part of the investor package.¹³ A checklist was used at the meeting that listed each document in the investor package. He reviewed each document on the checklist and once the lender understood the document he initialled the corresponding item on the checklist. The process was repeated until all documents identified on the checklist were addressed.

92Mr. Baykara drafted the loan and bare trust agreements. These were legal documents and so Mr. Pereira did not explain the details or legal implications of these agreements to lenders; rather, he provided an overview. The lenders read those documents, initialled them, and signed them. He explained that Mr. Baykara was bare trustee; meaning that he was to ensure that money was held in trust.

93Similarly, Mr. Pereira read Computershare’s additional documents and asked lenders if they agreed with them. If so, he initialled that portion of the checklist. He did not explain those documents to the lenders because, again, he is not a lawyer.

94He reviewed the FSCO forms with lenders, section by section. The lenders initialled the bottom of each page of the FSCO forms and signed the last page. Certain FSCO documents referred to standard charge terms. He relayed those terms but did not explain those to lenders. He then initialled the checklist.

95Mr. Pereira acknowledged that the $6.33 million purchase price and the July 23, 2014 purchase date on one lender’s FSCO Form 1 were incorrect. Those were witnessed by another mortgage broker and not by Mr. Pereira. Mr. Pereira’s evidence was that these errors were of no consequence. What was important for the lender to consider was the $13.8 million appraised value and the loan-to-value ratio. Every lender was provided a copy of the October 27, 2017 appraisal. Those two factors were not impacted by the errors.

96The FSCO Form 1.1 indicated that the mortgage was for soft costs.

97All documents on the checklist were addressed with lenders before the Memorandum and Instructions of Yuce Baykara was signed. Mr. Pereira testified that he was present when Mr. Baykara signed the Memorandum and he thinks that he was present when Mr. Baykara explained this document to lenders. As outlined below, we do not accept this evidence.

98Mr. Pereira did not explain the contents of the Memorandum because he is not a lawyer.

99Mr. Pereira witnessed lenders’ signatures to the Acknowledgement and Direction addressed to Yuce Baykara and Knights LPC. Computershare had its own Acknowledgement and Direction which he reviewed with lenders and then they signed.

100The SSMS team was familiar with the 7397 project. In addition to researching it before deciding to become involved, Mr. Pereira met with the developers once or twice at the SSMS office to talk about the money that SSMS had raised toward the syndicated mortgage. They received updates such as the Due Diligence Report dated January 18, 2019, which were provided to lenders periodically to make sure that the project was moving forward. Every so often lenders were invited to a team meeting at the SSMS office to receive an update about the project. If there were any changes then lenders would be told as they had to approve changes.

Mr. Baykara was not lenders’ lawyer according to Mr. Pereira

101Mr. Pereira testified that he told lenders that Mr. Baykara was not their lawyer. Lenders, he said, were advised to obtain independent legal advice but if they did not, then they could contact Mr. Baykara in his role as bare trustee and ask questions about the trusteeship.

102Any questions that lenders had about the mortgage were directed to SSMS.

103Mr. Pereira is of the view that Mr. Baykara understood his role as bare trustee and performed it well. He offered his view that Mr. Baykara complied with the rules and regulations of the Law Society of Ontario. As discussed below, we conclude that this was not Mr. Baykara’s only role and we give this opinion as to Mr. Baykara’s compliance no weight.

The loan agreement

104Any questions that lenders had about the loan agreement would have been directed to Mr. Baykara since he drafted the document; it was a legal document; and Mr. Pereira was not a lawyer and could not review it with them.

Proper release of fees

105Under the mortgage agreement, SSCC (of which Mr. Pereira was Director and Shareholder), received 16% of the loan proceeds. Of that, 14% went to SSMS (of which Mr. Pereira was Principal); and 2% to Sans Souci Wealth Management, which employed the underwriting team that did the due diligence.

106The agreement was that when money arrived, fees were paid and the funds were released. That was the normal process.

Lenders aware of postponement in May 2018

107Mr. Pereira testified that SSMS received a further appraisal report prior to the postponement. The purpose for this appraisal was to make sure that SSMS and the syndicated lenders agreed to the postponement. A further appraisal, dated February 11, 2018, was performed by CBRE and appraised the project at $10 million. Mr. Pereira did not inform the lenders of the new appraisal. His explanation for this was that the first appraisal of $13.8 million in 2017 was a construction appraisal and therefore more reliable. This explanation was questionable given the specific purpose for the CBRE appraisal.

108Mr. Pereira convened a lender meeting on May 12, 2018, and invited all lenders to attend. He testified that the meeting was to explain the postponement and ensure that a majority agreed The lenders were advised about the change in the first mortgage and that the loan to value ratio would increase as a result. The majority of lenders agreed. Mr. Baykara was not present due to family commitments, but Mr. Pereira reported to someone at his firm who he said passed along the information to Mr. Baykara about what had occurred.

109He testified that over 50% of the lenders attended the meeting. He does not have a copy of the notice he sent to lenders about the postponement. He does not recall who attended or whether it was virtual or in person. SSMS maintained the number of votes but did not record who voted or how.

110Mr. Pereira acknowledged that the FSCO forms were not updated to reflect the postponement for the lenders who joined the syndicated mortgage following the postponement. As a result, the first mortgage was still listed as $2.4 million when it was in fact $3.6 million. This was an error.

Interest reserve

111Mr. Pereira’s evidence on this point was that which is set out in the loan agreement, that is, lenders would receive 12% of their investment upfront and 24% at the end.

No conflict of interest

112Mr. Pereira testified that the potential, set out in the mortgage agreement, for SSMS to receive 10% of the shares in the project was not disclosed to the lenders. It was his view that there was no conflict of interest since at the time of signing the loan agreement SSMS had not reached the $2 million qualifying benchmark, and therefore there was no conflict to disclose. He disagreed that the potential for SSMS to acquire shares presented a conflict requiring disclosure. He explained that it was the brokerage that had an interest in the project at that time and not the broker or agents. He eventually conceded the conflict point, but later he produced an email to show that the mortgage agreement was revised on November 8, 2017 to remove the 10% share option. Following production of that email, he then testified that SSMS did not disclose the potential for it to receive 10% shares in the project because the share option had been removed from the agreement.

Appraisals explained

113Mr. Pereira testified that the initial $13.8 million Cushman appraisal value was not the value of the vacant lot. The vacant lot value was its purchase price. The $13.8 million reflected the approvals granted by the city and that the only thing left was to construct the building. Once completed the project could have been worth more than $13.8 million. The appraiser used the direct comparison approach method, which is normal for a property of that type.

MR. BAYKARA’S INTERVIEW AND WRITTEN RESPONSE TO THE INVESTIGATION

114Mr. Baykara did not testify at the hearing. It is his position that the Law Society did not prove the allegations against him on a balance of probabilities. He says that his rebuttal to the allegations was provided when he was interviewed on March 25, 2022, as a part of the investigation and when he subsequently provided written answers to questions. The Law Society investigator appended the written investigation response, interview transcript, and the written responses as exhibits to her affidavit. The written response to investigation is dated February 2, 2021, the interview occurred on March 25, 2022, and the written responses appear in emails exchanged from April 8 to May 13, 2022.

115The Law Society requested an adjournment to seek instructions to summons Mr. Baykara to testify. This request was denied. The Law Society had closed its case. Mr. Baykara did not undertake to testify as a witness. There was no affidavit upon which the Law Society could cross-examine him. It was for Mr. Baykara to decide, upon hearing the Law Society’s case against him, whether he would testify as part of his own case. He was not obliged to do so. Furthermore, the Law Society did not issue a summons in advance of this hearing to compel his testimony as part of its case.

116The Law Society encouraged us to draw an adverse inference from Mr. Baykara’s decision to not testify.

117Mr. Baykara disagrees. The burden to prove the allegations rests with the Law Society and it is only when it discharges that onus that any onus would then shift to him to rebut the evidence. Mr. Baykara says that the Law Society did not discharge its onus and as a result he was not required to rebut the evidence submitted: Law Society of Ontario v Talarico, 2013 ONLSHP 3 at para 110, citing Law Society of Ontario v Yungwirth, 2011 ONLSHP 131 at paras 83-84 (Yungwirth overturned in part on other grounds, 2013 ONLSAP 24).

118Consistent with Talarico, we considered Mr. Baykara’s representations, interview transcript and written responses to questions as they were attached as exhibits to the investigator’s affidavit and are therefore available for us to consider: Talarico at para 95.¹⁴ We do not, however, accept the transcript or written responses for the truth of their contents but rather as the basis for statements made in the investigator’s affidavit. We acknowledge that Mr. Baykara was affirmed at the outset of the interview, however, information he provided in that context was not subject to the scrutiny of cross-examination. What follows is a review of the information contained in the transcript and written responses.

119Relevant information from his written investigation response, the interview, and written responses is outlined below.

120Knights LPC is his professional corporation. In 2017, through his professional corporation, he worked in association with Hummingbird Lawyers. In 2017 about 30% of his practice was in real estate. He also had a corporate law practice and managed litigation matters in both areas. Prior to the 7397 syndicated mortgage he was involved in two other syndicated mortgages. He did not advance funds on behalf of investors in those other projects; rather he distributed money to clients.

121He met Mr. Wang through Mr. Pereira. He did not do other work for Mr. Wang or Forme. He first learned of the 7397 project in August 2017, received the first investor funds in November 2017, and the last investor funds in July 2018. He consulted with LawPRO and Law Society Practice Management about how to create separate trust accounting and reporting for syndicated mortgages and what his obligations were. Money received from non-registered lenders and registered lenders through Computershare was deposited into a dedicated Islington trust account at Knights LPC. Between September 2017 and June 2018, there were a total of 10 closings representing a total of $4.35 million charged to title as a third mortgage.¹⁵

122He understood that the investors were sophisticated investors because Mr. Pereira had a lot of business relationships and has been involved in securities, wealth management, and banking for most of his career. At another point in the interview Mr. Baykara indicated that he did not know whether the investors were sophisticated investors or not. He assumes that an investor who invests money with a developer should have some level of sophistication about investing. He did not speak to any investors prior to them advancing funds. He knew some of them from other projects.

123His role in the 7397 syndicated mortgage was to receive funds from the registered and unregistered fund groups, register investors’ names on title under the security, allocate the distribution of payments, and forward funds based on the schedule to the developer. There was a one-time interest payment to the investor.

124He did not provide legal advice to the investors. He did not provide any opinion to lenders about the syndicated mortgage or their investment but he made himself available to all lenders by phone or email if they needed to speak with him. All of his contact information was on their paperwork and lenders contacted SSMS who then relayed questions directly to Mr. Baykara for follow up. All investors had opportunities and channels to approach and speak with him about their investments. Mr. Pereira told him that investors were told to get independent legal advice, and Computershare investors had a package that told them to obtain independent legal advice.

125Mr. Baykara understood that it was lawyer Monica Goyal’s role to explain to investors the purpose of the documents but not the contents or legality of them and not the feasibility of any security or anything to do with the mortgage. He believes that Ms. Goyal expressly told investors that she was not their lawyer. In his opinion, it is possible to explain legal documents without providing legal advice. He believes that an investor meeting with a lawyer to review legal documents will know that it is just that – a review, and not legal advice.

126Investors would need information sessions such as those conducted by Ms. Goyal because FSRA (FSCO) document packages are daunting.

127He provided an information session on another project similar to that which Ms. Goyal provided in this project, in order to explain the FSRA (FSCO) package. In that case, he expressly told investors that he was not their lawyer and he urged them to obtain advice from a lawyer, financial advisor, accountant, or any other professional that deals with this type of investment.

128He did not draft the mortgage agreement. He was not retained by SSMS to draft any documents. He did not know that under the mortgage agreement, SSMS undertook to close $2 million in 90 days and a maximum of $6 million within six months. The mortgage agreement was between SSMS and 7397 and so it was not his responsibility to disclose the possibility that SSMS could acquire shares in the project. He is not aware of FSRA requirements for disclosure.

129He drafted the bare trust agreement. It was an agreement between Mr. Baykara and the investors. It states that “interest rate” “means Twelve (12%) percent paid upfront in year 1 and 24% paid at the end of the term calculated and payable as set forth in the Loan Agreement.”

130Mr. Baykara’s evidence on the interest issue varies. In his written response to the investigation, Mr. Baykara stated that all lenders received 12% interest payments up front and agreed to receive the remaining 24% interest at the end of the mortgage term. When interviewed a year later, Mr. Baykara said that he did not know the purpose of the interest reserve. he stated that his role as bare trustee was to intake funds, register the mortgage charge, and deal with a one-time interest payment; and that the bare trust agreement incorrectly referred to an interest reserve. The initial 12% interest for one year was paid out to investors. He did not establish an interest reserve and does not remember why he did not do so. He believes that this project was not designed to have an interest reserve and inclusion of it in the loan agreement was an error. At another point in the interview, he stated that investors would receive 24% interest at the end of the third year.

131He drafted the loan agreement. He saw a copy of the quantity survey. It was for soft costs.

132He drafted the “Memorandum and Instructions of Yuce Baykara”. He included “You are cautioned” to ensure that everyone understood that he was simply the mortgage administrator. He disagreed that the caution was limited to financial advice or the financial viability of the project.

133He drafted the agency agreement. While the Law Society may require a lawyer to verify a client’s identification at the time they execute documents, FSCO also requires that of mortgage brokers. SSMS met with the investors and so they verified identification.

134Under By-Law 9, where individuals are investing with a lawyer Mr. Baykara’s understanding is that there is no requirement to have FSCO documentation or FSCO disclosure, and a lawyer would use Form 9D. Mr. Baykara says that the FSCO forms were required because the investors were brought to the project through a mortgage brokerage.

135Information on FSCO Form 1 should be complete and accurate. He did not have an explanation for why there were incomplete sections but thinks that the documents were sent to FSCO and he does not recall any response from FSCO saying that documents were incomplete. He cannot comment on any errors on the form because he did not complete the form. In his view, it was not his place to review the forms for accuracy.

136While the FSCO forms replaced Form 9D and represented to investors that Mr. Baykara would monitor the disbursement and use of funds, his monitoring was limited to discussing the project and costs with Mr. Wang, his staff and lawyer on a regular basis. If he had seen any red flags then, in accordance with the bare trust agreement, he would not have proceeded. Before advancing further funds, he did not check to see if previous funds had been spent in the way they were intended to be spent. He could contact Mr. Wang or his lawyer for updates on the status of the project. He was advised that the project was progressing to the point of obtaining construction funding and so he advanced funds.

137Most investors met with SSMS to complete the documents. Mr. Baykara ensured that investor packages from SSMS were complete, meaning that they were not blank.

138He did not recall whether there was an explanation provided for the discrepancy between the August 2016 appraisal for $11.5 million and the $3.2 million purchase price three months earlier. He later responded that there was no discrepancy because the purchase price was for a vacant lot but circumstances changed by the time of the appraisal – there was a market uptick and the project was at a more advanced stage of development. The October 2017 appraisal increased to $13.8 million for similar reasons. For instance, the price per square foot increased, and there was a favourable OMB decision on the site plan approval, which included parking and kitchens for individual units, helping to increase the price.

139The Cushman appraisal explains how they chose the direct comparison approach. He was advised by Mr. Wang and SSMS that appraisals were available to investors who wanted to see them.

140SSMS provided electronic and hard copy reporting packages to investors but he does not recall if both appraisals were provided to investors.

141He does not know why Mr. Pereira did not update the FSCO forms for investors who became involved after the May 2018 postponement. Mr. Pereira told him that at least one of those investors was made aware of the increased amount of the first mortgage. If an investor invested through Computershare, then maybe they were told by Computershare. Computershare signed the postponement.

142He undertook to determine why in three instances funds were advanced before the security was in place. No additional evidence was provided to indicate that the question was answered.

143He was paid both bare trustee and lawyer fees.

144The formal Companies Creditors Arrangement Act process was started in late 2018. The project was listed for sale at $6.9 million and sold in September 2019 for $4.1 million. None of the parties in the second and third priority position knew that the property was being sold under power of sale. Mr. Wang denied being served with a power of sale.

145The first time that Mr. Baykara represented to lenders that he could or should act as their lawyer was when he wrote to them on November 4, 2019 to advise about the questionable nature of the sale of the project. The suggestion that they would be required to pay legal fees was not well received by lenders.

146He completed a proof of claim package in an effort to preserve the right of redemption of the mortgage and continued his efforts to preserve the lenders’ money. The lenders were given the right to make a claim against Mr. Wang and Forme and properties in the Companies Creditors Arrangement Act proceedings. Mr. Baykara has not been paid for this work.

147Due to COVID he left his former practice of law and began work at his current firm running creditor operations. It is a blended business/lawyer role with more emphasis on business.

ISSUES

148We considered the following issues:

1. Was Mr. Baykara the lenders’ lawyer? If so, was there professional misconduct as alleged?

2. Should an adverse inference be drawn because there is no lender evidence?

3. Is expert evidence required to establish the standard of care?

Issue 1: Was Mr. Baykara the lenders’ lawyer? If so, was there professional misconduct as alleged?

The Law Society’s Position

Mr. Baykara was the lenders’ Lawyer

149The Law Society points to the Memorandum and Instructions of Yuce Baykara, the bare trust agreement, and the loan agreement as indications that Mr. Baykara was acting as both bare trustee and lawyer. Those documents include references to Mr. Baykara as lawyer (or solicitor) and to the investor as client. Investors knew that Mr. Baykara was a lawyer who drafted both agreements. The agreements were on his letterhead; therefore, it was reasonable for them to conclude that he was their lawyer.

150The Law Society also points to several documents that similarly refer to Mr. Baykara as lawyer or solicitor and to the investor as client. Those included Verification of Identity, Agency Agreement between Messrs. Baykara and Pereira, Acknowledgement and Direction, and Acknowledgement. Invoices were issued for bare trustee and for legal work. His trust ledger referred to investors as clients. He maintained investor documents in files labelled “clients”.

151The Law Society asserts that Mr. Baykara performed legal work for the lenders when he processed mortgage transactions for them. He issued invoices to 7397 for payment of his legal fees for legal work performed for the lenders. He was paid at his hourly rate by 7397 on behalf of the lenders.

152The Law Society stated that Mr. Baykara did not provide any evidence as to whether he inquired if investors received independent legal advice. As a result, the Law Society asserts that he did not discharge his duty to confirm that they received independent legal advice. This is supported by the “Solicitor’s Certificate of Disclosure and Undertaking”¹⁶ where Mr. Baykara left unchecked those boxes which would have confirmed that he disclosed to investors that he did not represent them, and that he advised them to seek independent legal advice.

153Finally, there is no document that clearly states that Mr. Baykara was not the investors’ lawyer.

154Through documents he drafted, Mr. Baykara represented to lenders that he was their lawyer. While he disputes this, by his own admission he did not meet with lenders prior to their investment and at no time did he provide them with legal advice about any document in the investor package. He improperly delegated this task to SSMS, a non-licensee.

155The Law Society also alleges that Mr. Baykara failed in his duties as lawyer to the lenders by:

• failing to meet his professional responsibilities pursuant to the Rules by failing to communicate with and advise clients, and permitting errors and misrepresentations in the investor packages provided to lenders;

• failing to comply with By-Law 9; and

• improperly releasing fees prior to registering the mortgage.

156Finally, it alleges that he did not properly execute his duties as bare trustee.

Failure to meet and advise clients

157There is no dispute that Mr. Baykara did not meet with the lenders before they invested funds. He acknowledged this during the investigation and maintained it in his submissions that he was not their lawyer. He did not explain syndicated mortgage documentation to them and did not update them at any stage before the project and their investment appeared to be in jeopardy. He did not explain facts material to their investment, such as the appraised value of the project or the 2018 postponement.

158The Law Society alleges that Mr. Baykara had a duty to explain to his clients that the purchase price of the property in May 2016 was $3.2 million whereas the October 2017 appraised value was $13.8 million, and to explain the significance of the difference to them before registering the mortgage in the fall of 2017.

Errors, omissions and misrepresentations

159The Law Society raises concerns about errors, omissions and misrepresentations in the mortgage, loan, and bare trust agreements, as well as the Memorandum and Instructions of Yuce Baykara. The Law Society says:

• The mortgage agreement provides that SSMS would receive 10% of the shares in the 7397 project if the requisite funds were raised and delivered on time. This was not explained to lenders.

• The loan agreement set out contradictory information about the maximum loan to value ratio. One section referred to it as 85% of the appraised value while elsewhere in the document it was noted as 100% of the appraised value.

• Interest was noted as 12% per annum twice in the loan agreement and appears once as 16% per annum.

• The loan agreement provides contradictory information about the priority placement of the syndicated mortgage; noting that it is a third charge but elsewhere noting that the lenders’ interest was as second and third mortgage.

• The loan agreement refers to a Schedule E that is not attached. It represented that the second mortgagee reduced its second mortgage of the lenders’ syndicated mortgage.

• The loan agreement provided that the bare trustee would make loan advances at his discretion following receipt of advice from a quantity surveyor. Mr. Baykara did not consult with a quantity surveyor.

• The bare trust agreement refers to a Schedule C, the loan agreement, but it was not appended.

• The bare trust agreement and the loan agreement set out conflicting information about the amount of the interest reserve.

• The Memorandum and Instructions of Yuce Baykara states that he was acting on behalf of the lenders as their trustee and solicitor.

Failure to comply with By-Law 9

160The Law Society submits that Mr. Baykara could not delegate his responsibility to SSMS to meet with lenders to explain FSCO forms. It notes that there is no documentation in Mr. Baykara’s lenders’ files to show that new By-Law 9 forms or even new FSCO forms were prepared and reviewed with the lenders to show the increased value of the first mortgage in May 2018. There was nothing documenting that the lenders were aware that the postponement resulted in two mortgages with priority over the syndicated mortgage increasing by $1.2 million. Mr. Baykara did not explain any of this. Instead, Mr. Baykara took the position that he received instructions through the signed Memorandum and Instructions of Yuce Baykara to receive FSCO forms (1, 1.1 and 1.2), provided by SSMS to the lenders, as proof of the loan agreement and simply kept copies of the FSCO forms in his files.

161The Law Society acknowledges that under By-Law 9, Mr. Baykara was permitted to use FSCO forms; however, it says that he was then required to ensure that the information on the forms was correct. Errors in the FSCO forms included:

• They did not disclose SSMS’s potential conflict of interest. There was the potential for SSMS to earn 10% of the shares in the project if certain funding targets were achieved.

• The purchase price was listed as $6.330 million (not $3.2 million) on at least one form and the purchase date was July 23, 2014 (not May 6, 2014).

• One syndicated lender advanced funds after the postponement in May 2018 that increased the value of the mortgages that had priority over the syndicated mortgage that she invested in, and yet, the FSCO forms that she signed did not reflect the increased value of the first mortgage.

• The value of the syndicated mortgage was $1.5 million (not the face value which was $4.375 million) and this resulted in a loan to value calculation that was too low.

• The FSCO Form 1 shows estimated block fees to paid to SSCC, SSMS and Mr. Baykara that were higher than the amounts they would have received when the percentage was applied as described in the mortgage agreement. The FSCO Form 1 did not include the legal fees paid to Mr. Baykara and it did not disclose the possible 10% of shares in 7397 going to SSMS if funding targets were met.

• The FSCO Form 1.1 stated that the appraisal used various approaches when appraising the property (Direct Comparison, Residual Land Value Analysis, Cost Approach and Income Approach) but the appraisal stated that only one approach (the Direct Comparison Approach) was used.

• FSCO Form 1.1 stated that Mr. Baykara would monitor the use of disbursements by 7397 but the Law Society found no evidence of monitoring.

Release of Fees

162It is the Law Society’s position that Mr. Baykara should have provided his clients with information about the financial remuneration of the SSMS mortgage brokerage. This was not described in any of the loan documents and Mr. Baykara did not meet with them to explain it and make sure that the lenders understood. He relied on the mortgage agents to communicate with lenders even when SSMS was acting for both lender and borrower.¹⁷

163The Law Society takes issue with Mr. Baykara’s release of funds by way of ten closings. In some instances, he disbursed fees to SSCC, SSMS, and himself, and interest to those new lenders before registering the transfer of charge.

Failures as bare trustee

164According to the Law Society, Mr. Baykara also failed to properly execute his duties as bare trustee. Those actions included:

• Releasing loan proceeds to pay SSMS mortgage agent commissions and his own fees before registering the loans/transfer of charge.

• Failing to maintain an interest reserve as required under the loan agreement that was meant to ensure that lenders would receive 24% interest at the end of their three-year investment.

• Failing to seek the advice of a quantity surveyor before making loan advances as he was required to do pursuant to the loan agreement that he drafted.

Mr. Baykara’s position

Solely bare trustee and mortgage administrator

165Mr. Baykara maintains that he was not the lenders’ lawyer, he did not represent himself as such, and no lender understood that he was their lawyer. He did not meet with lenders or provide them with legal advice because he was not their lawyer.

166He points to the Memorandum and Instructions of Yuce Bakara and bare trust agreement he drafted to include reference to lenders obtaining independent legal advice. When those documents are read together as a whole, they demonstrate that he was solely acting as bare trustee. The reference to “the lawyer” referred to Mr. Baykara acting as lawyer to register the mortgage for the bare trustee (i.e. himself). Similarly, reference to the Rules and not being able to act for all lenders if a conflict arose between them refers to Mr. Baykara again acting in his capacity as lawyer for the bare trustee (again, himself). If anything, including reference to the Rules was more than what he was required to do when drafting the Memorandum.

167Alternatively, Mr. Baykara says that any confusion about the language used in the Memorandum does not determine the issue of whether he was acting as their lawyer. The entire document, and all documents read as a whole, including reference to independent legal advice, must be considered. For instance, the FSCO Form 1.1 refers to him as mortgage administrator and not as lawyer.

168Mr. Pereira testified that he explained to lenders that Mr. Baykara was solely the bare trustee and mortgage administrator. He told them that Mr. Baykara was not their lawyer and he cautioned them to obtain independent legal advice.

169In his submissions, Mr. Baykara says that many of the lenders were experienced investors. They understood that he was a bare trustee and mortgage administrator and that his responsibility was to register the mortgage and ensure that title was consistent with the transaction. They understood that they were beneficiaries of a trust that he held and that they were not his clients. They also understood that they would hold a third mortgage and the mortgage in fact remained third in priority even after the postponement.¹⁸

170It is Mr. Baykara’s position that he performed all duties as bare trustee as he was required to do. He registered the mortgage against the property in November 2017.

Compliance with By-Law 9

171Mr. Baykara maintains that he was not the lenders’ lawyer but if we were to find otherwise then he says that there was no breach of By-Law 9. By-Law 9 allows FSCO forms to be used instead of Form 9 and 9D where a lender provides written instructions to use the alternative. Those written instructions were provided in the Memorandum and Instructions of Yuce Baykara. There was no breach of the By‑Law.

172Admittedly, there were mistakes in the FSCO forms such as incorrect purchase price and date, but those did not mislead lenders because what was pertinent information to them was the appraised value of the project and not the purchase price of the vacant land. They were provided with the appraised value, and the appraisal report also included the correct purchase price and date. In short, any errors in the FSCO forms were immaterial and there is no evidence that any lender relied on those errors when deciding to loan money.

173Mr. Pereira testified that he carefully reviewed all relevant documents for the investment with lenders, and they fully understood what they were investing in. SSMS and the lenders relied on the appraisal report to understand the nature of the project. Mr. Baykara says that he went beyond what was expected of a bare trustee when he obtained a reliance letter from the appraiser. The market value of the project was appraised at $13.8 million and that was the number included on the FSCO forms and used to understand the loan to value ratio. There was no evidence that the appraisal was done negligently or that it could not be relied upon. The appraiser employed the correct type of appraisal for the development project.

Release of fees

174In submissions, it is Mr. Baykara’s position that he was not required to register a transfer of charge before advancing funds in 2018 for payment of commissions and fees upon receipt of funds from new lenders.

175During his interview, Mr. Baykara was asked about the payment of fees before a lender’s investment was registered:

Q: So did you have a system in place? I mean, you would agree that that shouldn’t happen. Right? Security should be in place before the money is released?

A: I agree that there is probably a reasoning for something like that, and I will undertake to find out, because I can’t answer that right now.¹⁹

176Once there was a proposal for a new mortgage to be registered (the increased first mortgage which was the subject of the postponement), Mr. Pereira convened a meeting of investors and obtained their instructions to provide a postponement. As bare trustee, Mr. Baykara exercised his discretion to register the postponement based on information relayed to him by Mr. Pereira about the lenders’ instructions. The bare trust and other agreements, such as the loan agreement, gave some limited discretionary authority to the bare trustee to deal with the lenders’ security, provided that he acted reasonably.

177In sum, Mr. Baykara’s position is that he proceeded in a prudent manner and acted reasonably and competently as the bare trustee as the lenders understood his role to be. He continued to act in this fashion as bare trustee even after Companies Creditors Arrangement Act proceedings commenced. When the documents are considered as a whole, along with the description from Mr. Pereira about what he and SSMS explained to the lenders, it is clear that the lenders understood what they would receive – a part of a syndicated mortgage for the 7397 project, held in third priority.

178If we determine that Mr. Baykara was acting as the lenders’ lawyer, then it is his position that the Law Society has not established on a balance of probabilities that he breached the Rules. Clear, cogent and convincing evidence is required to establish on a balance of probabilities that he breached the Rules: Law Society of Upper Canada v Aguirre, 2007 ONLSHP 46 at para 4. He says that no such evidence was tendered in this case.

Analysis

179For the following reasons we conclude that Mr. Baykara was acting as the lenders’ lawyer and that his omissions constitute professional misconduct.

The investor package

180Mr. Baykara represented to lenders that his role was as bare trustee and lawyer. Several documents specifically refer to Mr. Baykara as the lenders’ lawyer. He drafted many of those documents. We recognize that some documents do not refer to him as a lawyer but those do not affect the description of lawyer and clients elsewhere. There are several references in various documents provided to lenders that explicitly state that he was their lawyer, while other references only suggested that he was. Those include:

• The Memorandum and Instructions of Yuce Baykara contained several references that describe his dual role:

“I am acting as trustee and solicitor….”

“Although I am acting on your behalf, the Borrower, 7397… has agreed to pay your legal fees”

“The lawyer’s responsibility is limited to ensuring the mortgage is legally registered on title…

“The lawyer is not permitted to personally guarantee the obligations of the borrower….”

“I consent to Yuce Baykara acting on my behalf with respect to this matter pursuant to Rules 3.4, 3.4-6, and 3.4-7 of the Rules of Professional Conduct.”

• The Memorandum states that Mr. Baykara may not be able to act for all lenders in his role as bare trustee if a conflict were to arise between them; however, it cites the applicable Rules, which are only applicable to lawyers.

• He signed the Memorandum as “Lawyer”.

• One Solicitor Certificate says that Mr. Baykara was retained by both 7497 and the lenders.

• The loan agreement refers to “Bare Trustee, Solicitor”, is presented on firm letterhead, and refers to payment of bare trustee fees as well as additional legal fees for lawyer, paralegals and law clerk.

• The loan agreement provides that ““lender’s solicitors” shall mean Yuce Baykara….”

• The bare trustee agreement was provided on firm letterhead and states that “Bare Trustee’s Solicitors means Yuce Baykara, Barrister & Solicitor” and “the Bare Trustee will cause the Bare Trustee’s Solicitors, to….”

• The bare trustee agreement does not refer to independent legal advice, but rather it states:

i. The Bare Trustee makes no representations, warranties or agreements with respect to the advisability, soundness, potential income, profitability, return, security of the Loan any other matter or aspect relating or pertaining to the Loan, the Property, the Loan Agreement, the Lender Security or the Borrower except as are expressly set out in this Agreement. EACH OF THE LENDERS ACKNOWLEDGES AND AGREES THAT ITS PARTICIPATION IN THE LOAN IS AT ITS OWN RISK AND THAT IT IS THE SOLE OBLIGATION OF EACH LENDER TO INDEPENDENTLY INVESTIGATE AND SATISFY ITSELF AS TO ALL ASPECTS OF THE LOAN, THE PROPERTY, THE LOAN AGREEMENT, THE LENDER SECURITY AND THE BORROWER.

ii. The Bare Trustee²⁰ will cause the Bare Trustee's Solicitors,²¹ to:

(a) address its legal opinions in respect of the Lender Security to both the Lenders (if possible) and the Bare Trustee; and

(b) provide each lender with a document book containing executed copies of the Lender Security and all other material legal documents relating to the Loan (including Declarations of Trust) within a reasonable time after the first advance of the Loan. If any Lender wishes to engage the services of its own legal counsel or other advisors in connection with the Loan or the Lender Security, the cost of such additional advice shall be at the cost of such Lender.

• The trust agency agreement and the trust verification of identification provide for “signature of lawyer” which is signed by Mr. Baykara.

• The acknowledgement and direction document and the trust acknowledgement of receipt document both have lines with the note “Insert lawyer’s name” and Mr. Baykara’s name is inserted.

• FSCO Form 1.1 provides that legal fees will be paid to Mr. Baykara’s law firm, Knights LPC.

• At least one non-Computershare lender made a cheque payable to Mr. Baykara’s law firm to advance her investment.

• He issued invoices for bare trustee fees and legal fees.

181We find that the documents, when read separately and as a whole, signal to the lenders that Mr. Baykara was their lawyer. If he intended to represent that he was solely acting as bare trustee, then he could have easily excluded all references to himself as “solicitor” or “lawyer” and to lenders as “clients”. Similarly, while the bare trust agreement refers to lenders obtaining independent legal advice, Mr. Baykara did not confirm that they had. The caution in the bare trust agreement set out above could reasonably have been understood by lenders to refer to financial risk. Mr. Baykara could have easily taken steps to make clear to the lenders that he was not their lawyer, for example, by requiring them to sign a document expressly confirming their understanding that he was in no way their lawyer. He did not take those steps. Instead, he included references in several documents suggesting he was acting as a lawyer and he charged fees accordingly.

182Mr. Baykara drafted several documents for the investment but did not review those documents with the lenders. He relied on SSMS to do so. Mr. Pereira did not explain the loan agreement or bare trust agreement to lenders because they were legal documents and he was not a lawyer. Instead, he told them to direct any questions about those documents to Mr. Baykara; this alone would suggest that Mr. Baykara was acting as more than Bare Trustee. The Memorandum, the Solicitor Certificate, and invoices for legal fees all signal that he was the lenders’ lawyer. In light of all of these indications that he was their lawyer, the inclusion of one reference to lenders obtaining independent legal advice in the bare trust agreement (which was repeated by Mr. Pereira) is simply insufficient to suggest that he was not.

183The Law Society asserts that the fact that Mr. Baykara’s trust ledger refers to certain lenders as clients or that his files were labelled as client files is an indication that the lenders were his clients. We do not arrive at the same conclusion. This tells us nothing about what was represented to the lenders about Mr. Baykara’s role in their investment as presumably neither the trust ledger nor his client files were available to them. There was no evidence on this point. Reference to clients on the trust ledger or files does not suggest anything about how lenders regarded his role.

184In concluding that Mr. Baykara acted as lawyer we also considered legislation, By-Law 9 and case law. According to the Law Society Act, RSO 1990, c L.8 (the Act); the Mortgage Brokerages, Lenders and Administrators Act, 2006, SO 2006, c 29; By-Law 9; the Rules; and case law, Mr. Baykara performed legal work for clients in this matter.

Law Society Act

185Section 1(6) of the Act states that a person provides legal services if s/he does any of the following:

2. selects, drafts, completes or revises, on behalf of a person,

i. a document that affects a person’s interests in or rights to or in real of personal property,

vi. a document that affects the legal interest, rights or responsibilities of a person, other than the legal interests, rights or responsibilities referred to in subparagraphs i to v….

186Mr. Baykara drafted the bare trust agreement, the loan agreement and the Memorandum and Instructions of Yuce Baykara, which formed part of the investor package for lenders investing in the syndicated mortgage. That work, and the legal interests addressed by it, is captured by s 1(6).

Mortgage Brokerages, Lenders and Administrators Act

187Pursuant to s 5 of the Exemptions From the Requirements to be Licensed, O Reg 407/07, made under the Mortgage Brokerages, Lenders and Administrators Act, 2006, in order to administer a mortgage in Ontario, an individual must have a mortgage administrator’s licence unless that person is a lawyer, and both of the following circumstances exist: the lawyer administers mortgages, acting in his or her professional capacity as a lawyer on behalf of a client; and, the lawyer does not hold himself or herself out as administering mortgages except as a lawyer.

188There was no evidence that Mr. Baykara has a mortgage administrator’s licence. Since he is a lawyer, he is permitted to act as mortgage administrator without a licence. He can administer a mortgage only if he does so in his professional capacity as a lawyer on behalf of a client. He registered the syndicated mortgage as lawyer for the lenders.

By-Law 9

189Section 24(1) of By-Law 9 sets out licensees’ record keeping requirements when acting for lenders. In instances where there are individuals advancing funds to a syndicated mortgage, the lawyer shall maintain a file for each charge containing:

(a) a completed investment authority (Form 9D or FSCO Form 1), signed by each lender before the first advance of money to or on behalf of the borrower;

(b) a copy of a completed report of the investment;

(c) if the charge is not held in the name of all the lenders and a declaration of trust or copy thereof is provided to the licensee, a copy of the declaration of trust;

(d) if the charge is not held in the name of all the lenders, an original declaration of trust;

(e) a copy of the registered charge; and

(f) any supporting documents supplied by the lender.

190Once the first advance of money is made then each lender will receive the completed report of the investment (or if applicable, a copy of the declaration of trust): By-Law 9, s 24(4).

191The lawyer shall obtain a new investment authority²² each time there is a change in the priority of the charge that reduces the amount of security available to it or a change to another charge of higher priority that reduces the amount of security available to the lender’s charge. The Form 9D (or its substitute, FSCO Form 1) must be signed by each lender before the change occurs and a new investment report is obtained. These shall also be maintained in each lender’s file: By-Law 9, ss 24(4) and (5).

192Mr. Baykara’s attempts to satisfy licensee requirements under By-Law 9 signal his understanding that he was acting as lawyer.

Rules of Professional Conduct

193We also consider the definition of “client” in the Rules:

"client" means a person who:

(a) consults a lawyer and on whose behalf the lawyer renders or agrees to render legal services; or

(b) having consulted the lawyer, reasonably concludes that the lawyer has agreed to render legal services on their behalf

and includes a client of the law firm of which the lawyer is a partner or associate, whether or not the lawyer handles the client's work….

194This definition requires consultation between the lawyer and person in order for the latter to be a “client”. However, a lawyer cannot claim that an individual is not his client simply by failing to provide consultation, nor can he shield himself from the fiduciary duties that arise from the lawyer-and-client relationship by simply failing to meet with people and delegating that task to a non-licensee.

195The lenders did not consult with Mr. Baykara but that does not end the matter. The Commentary to the definition of client provides that a lawyer-and-client relationship may be established without formality. Case law elaborates on certain indicators of a lawyer-and-client relationship. Those which are relevant to this case include correspondence between the lawyer and party; an account rendered by the lawyer to the party; instructions given by the party to the lawyer; the lawyer acting on instructions; statements made by the lawyer that they are acting for the party; legal documents created for the party; and a reasonable expectation by the party about the lawyer’s role. Not all indicia are required: Jeffers v Calico Compression Systems, 2002 ABQB 72 at para 8.

196Mr. Baykara referred us to Law Society of Upper Canada v James, 2015 ONLSTH 83, where the panel determined that a reasonable person in the complainant’s position would not have concluded that the lawyer was acting for the complainant. The letter detailing the terms of the mortgage in that case was not on firm letterhead. The documents all concerned registering the mortgage in the land registry and offered no advice about the transaction. The lawyer did not meet with the complainant. These factors suggested that the licensee was not acting as lawyer; however, there were other factors which suggested otherwise. There was an acknowledgement and direction identifying the law firm and a paralegal’s commissioner stamp that referred to the law firm. In other words, there were several indicators of a lawyer-client relationship, yet the panel still found otherwise.

197Although the panel concluded that there was no lawyer-and-client relationship, it found that the licensee violated Rule 2.01(14)²³ by failing to ensure that the complainant understood that he was not her lawyer and was not protecting her legal interests. The panel was concerned that the lawyer did not take steps to make it clear that he was not protecting the complainant’s interest. Some documents generated by Teraview identified his firm and were directed to the firm and could lead to confusion. An easy remedy would have been to include a line in a letter or a document to confirm that he was not protecting the complainant’s interests. In failing to do so, he did not ensure that the complainant understood that he was not her lawyer and was not protecting her interests. As a result, he was found to have violated Rule 2.01(14).

198Some of those facts are similar to the matter before us but not all. We have found that there was a lawyer-client relationship. There were far more indicators of a lawyer-client relationship in this matter than there were in James.²⁴

199In the matter before us, Mr. Pereira gave evidence that is difficult to reconcile. He explained to lenders that Mr. Baykara was not their lawyer and he urged them to obtain independent legal advice; yet if they had questions about the loan agreement then they were directed to Mr. Baykara, since it is a legal document he drafted and because Mr. Pereira is not a lawyer. Suggesting that Mr. Baykara was not their lawyer but then directing them to Mr. Baykara for legal questions they may have had about legal documents he drafted is confusing at best. Whatever Mr. Pereira may have believed, he treated Mr. Baykara as being the lawyer for the lenders in directing them to Mr. Baykara for advice.

Professional misconduct

200Having found that Mr. Baykara was the lenders’ lawyer, we then considered whether any actions or omissions constitute professional misconduct as alleged in the notice of application. We find that Mr. Baykara engaged in professional misconduct by:

• Failing to comply with s 24 of By-Law 9 by failing to maintain Forms 9D and 9E and by accepting, as an alternative to the forms, Investor/Lender Disclosure Statements for Brokered Transactions (FSCO Forms 1 and 1.1) that were incomplete and contained inaccurate information.

• Failing to provide legal services to the standard of a competent lawyer, contrary to Rule 3.1-2 of the Rules, by:

a. failing to meet with his clients personally to explain and execute complex syndicated mortgage documentation;

b. failing to advise his clients throughout the retainer of all facts materials to their interests;

c. failing to comply with terms of the loan agreement;

d. failing to ensure that his clients were aware of the appraised current value of the mortgaged property under development; and

e. failing to release his clients’ money before securing their interests on a registered mortgage.

201The Law Society has not established on a balance of probabilities that Mr. Baykara lacked sufficient knowledge, experience and legal skill in real estate law when he acted for his clients, or in applying legal judgment to document governing the syndicated mortgage transaction. That allegation is dismissed.

Non-compliance with By-Law 9

202By-Law 9, s 24(1) provides that “every licensee who acts for or receives money from a lender shall… maintain a file for each charge, containing, (a) a completed investment authority, signed by each lender before the first advance of money to or on behalf of the borrower….”

203There are exceptions to this requirement. The exception applicable to this matter is set out in s 24(2)(d):

…the lender has executed the Investor/Lender Disclosure Statement for Brokered Transactions, approved by the Chief Executive Officer under subsection 54(1) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, and has given the licensee written instructions, relating to the particular transaction, to accept the executed disclosure statement as proof of the loan agreement.

204In other words, the By-Law provides that the FSCO Forms 1 and 1.1 could be used as alternative forms, provided there are written instructions from the client to accept those documents. That was the case here. We find nothing improper in choosing to use the FSCO forms in place of Forms 9D and 9E. However, Mr. Baykara failed to ensure the accuracy of the information on the forms and he did not review the forms with lenders. This is a failure to comply with By-Law 9.

No client meetings

205Mr. Baykara acknowledges that he did not meet with the lenders. Although Mr. Pereira gave evidence of a vague recollection that he attended meetings with some lenders at which Mr. Baykara was present, having assessed all of the evidence we accept Mr. Baykara’s acknowledgement and conclude that he did not meet with lenders.

206Mr. Baykara failed to ensure that lenders understood the nature of the investment, including payment of interest and the priority of the syndicated mortgage in relation to other mortgages. Mr. Baykara did not disclose to lenders or made them aware of the appraised current value of the property, including the value in 2018.²⁵

Failure to meet, advise and ensure clients’ understanding

207A lawyer’s competence is not limited to knowing substantive law and procedure. Competence also involves advising clients, communicating at all relevant stages of a matter, and performing all functions conscientiously and diligently.²⁶ It is these aspects of competence that Mr. Baykara did not demonstrate in his role as the lenders’ lawyer.

208There is no evidence to support Mr. Baykara’s representation that some or all of the lenders may have been sophisticated lenders with knowledge and experience of syndicated mortgages. He assumed that an investor who invests money with a developer should have some level of sophistication about investing, but he was not entitled to assume or speculate as to whether they understood material facts: Law Society of Upper Canada v Nguyen, 2014 ONLSTA 32 at paras 5, 24, and 51 (upheld, 2015 ONSC 7192). He had to verify their understanding with them directly. The verification of identity document asked for the investor’s occupation. That was left blank in several cases. Of those which contained the information, we simply know that occupations included senior accounting clerk, boarding attendant, retired agronomist, retired teacher, aviation maintenance, nurse/financial analyst, construction worker, quality control inspector, call centre operator, financial officer, and transit operator. It tells us nothing about their level of knowledge about syndicated mortgages. Mr. Baykara had no reasonable basis for the assumption that he purportedly made.

Failure to comply with the loan agreement

209Mr. Baykara did not comply with the terms of the loan agreement that he drafted. The agreement provided that an interest reserve would be created and the lenders would receive 24% of their investment at the end of the three-year investment. That was not done and the lenders lost funds they would have otherwise received even when the development project failed.

Releasing clients’ money before registering the charge

210During his interview, Mr. Baykara undertook to explain why fees were released before security was registered. There was no evidence that the undertaking was fulfilled. As a result, we are left with the statement he made in response to the proposition that security should be in place before money is released. He stated, “I agree that there is probably a reasoning for something like that, and I will undertake to find out, because I can’t answer that right now.” This is clearly insufficient.

Breach of fiduciary duty

211A lawyer owes a fiduciary duty to their client. This overarching duty gives rise to a number of duties including the duty to inform the client of information that may affect the client’s interests: Rule 3.2-2; Nguyen at paras 21 and 24. This requires, at its most basic level, communication with the client; but the duty extends beyond that. The lawyer has to assess the facts and law, determine options and recommendations, and communicate that information to the client in a manner that is appropriate for a given client. The client is then in a position to provide informed instructions: Law Society of Ontario v McLean, 2018 ONLSTH 122 at para 2.

212A lawyer has a duty to disclose all relevant facts to clients and must always take reasonable steps to ensure that clients understand instructions they provide. That responsibility cannot be delegated to another: Nguyen, para 51. Mr. Baykara could not rely upon Mr. Pereira’s responsibilities as a mortgage broker, or upon information sessions offered by another lawyer (Ms. Goyal), as a means of escaping his own responsibility to the lenders to ensure they understood all material facts. Similarly, he could not rely upon what others, such as Mr. Pereira, told him was relayed to the lenders: Nguyen, para 52.

213We found that Mr. Baykara was the lenders’ lawyer. He admits to not communicating with lenders at all before funds were invested. Mr. Baykara could not delegate that responsibility to Mr. Pereira. Moreover, he did not ensure that the lenders were told about the potential conflict of interest between SSMS and the lenders.²⁷ Finally, Mr. Baykara was responsible for ensuring that the FSCO forms were correct.

214A similar issue arose in Nguyen where it was alleged that the licensee failed to disclose information to lenders. There were some findings of misconduct while other allegations were dismissed. The Law Society appealed. The appeal panel ordered a new hearing. It determined that the hearing panel erred in law when it concluded that it was sufficient to discharge a lawyer’s duty of disclosure to a client if he had reasonable grounds to believe that the lender client had all material facts. The licensee in that case was not relieved of his obligation to disclose material facts simply because he believed, without confirmation, that the lender client had the relevant information: para 19. The licensee had a fiduciary duty to advise his client and this could not be delegated to the mortgage broker: para 51.

215It is only when the client has been provided with all relevant information that they may provide informed instructions: Named Person v Vancouver Sun, 2007 SCC 43 at para 138. Material information to a lender includes significant changes in the purchase price of a property: Law Society of Upper Canada v Talarico, 2015 ONLSTH 222 at para 24; and if the amount of the syndicated mortgage exceeds the purchase price: Law Society of Ontario v Nejal, 2024 ONLSTH 42 at para 15.

Issue 2: Should an adverse inference be drawn because there is no lender evidence?

Mr. Baykara’s position

216According to Mr. Baykara, the Law Society has not made out its case and cannot do so by relying upon documents only. The investigator did not speak to the lenders or SSMS and therefore does not know what was relayed to the lenders about his role. The only evidence that we have is that provided by Mr. Baykara in his interview and from Mr. Pereira’s testimony.

217Mr. Baykara asks us to draw an adverse inference from the fact that there was no evidence from any lender that one or more of them thought that he was acting as their lawyer. In fact, there is no evidence from any lender that they misunderstood any material aspect of the loan transaction. He urges us to infer that the reason for this lack of witness evidence is because lenders knew that he was not their lawyer and that they understood the terms of their investments.

218Put simply, Mr. Baykara says that the Law Society did not discharge its onus. If we find otherwise, then Mr. Baykara reminds us that Mr. Pereira and SSMS reviewed documents with lenders. The information contained in the Memorandum is consistent with the financial terms of the transactions. It provides that the mortgage broker or agent would review the Disclosure Statement with the lender and that was done and signed by Mr. Pereira. It would have been redundant for Mr. Baykara to then do the same. It was reasonable for him to rely on SSMS.

Law Society’s position

219The Law Society says that evidence from lenders was not required. At the very least Mr. Baykara had a duty to communicate material facts to the lenders and ensure their understanding of the documents they signed and the nature of the investment. Those responsibilities are established by the Rules and case law. He admits that he did not meet with lenders at all.

Analysis

220The Hearing Panel in Law Society of Upper Canada v Yungwirth, 2011 ONLSHP 131, dismissed the allegation that the licensee knowingly assisted in dishonesty in fraud in that real estate case primarily on three failures of the Law Society, two of which centred on lender-related evidence. First, the Law Society failed to call any local bankers involved who had direct knowledge of the transactions; and second, it failed to call the alleged participants in the transactions. The Law Society appealed.

221The Appeal Panel in Law Society of Upper Canada v Yungwirth, 2013 ONLSAP 24, held that the Hearing Panel misapprehended what the Law Society needed to provide to demonstrate that a transaction was dishonest or fraudulent. The Hearing Panel was fixated on the need for specific evidence (such as fair market value valuations) and failed to address the vast amount of undisputed circumstantial evidence of deception and “red flags of fraud.” The Hearing Panel’s insistence on best evidence from specific lenders, when there was ample evidence of fraud, was an error. The Yungwirth Appeal Panel stated the following at para 60 and cited an earlier appeal decision:

Fourth, the hearing panel misdirected itself as to the need for the Society to lead evidence from the alleged participants in dishonesty and fraud. The suggestion that the Society should be expected to call the alleged fraudsmen to prove dishonesty or fraud is unwarranted. The appeal panel’s observations in Law Society of Upper Canada v Silver, 2012 ONLSAP 4 (adopted in Law Society of Upper Canada v Osborne, 2013 ONLSAP 14) have application here:

[12] Though the hearing panel’s findings are unchallenged, we do not wish to be taken as endorsing some of the propositions set out in the hearing panel’s reasons if applied to the proof of mortgage fraud more generally. In our respectful view, the failure to call the participants in subject transactions, particularly those alleged to have been complicit in fraud, need not make it impossible or even difficult to prove that transactions are fraudulent, based on documentary evidence. Indeed, a number of “red flags” were easily identified here that were not dependent on viva voce evidence from participants in the transactions. Nor should it be said, as a general proposition, that lenders must necessarily testify that they were defrauded when the documentary evidence demonstrates circumstantially that mortgage transactions were designed to extract monies (often to individuals who were not parties to the transactions) without disclosure to the lenders of the fundamental features of those transactions. For example, it may well be unnecessary for a lending institution to verify that it might not have closed a transaction had it known about the purported escalation of the property’s value. This would be particularly true if the lender specifically instructed its lawyer in writing to provide it with that information.

[Emphasis added]

222The same passage was recited in Law Society of Upper Canada v Talarico, 2014 ONLSAP 8, a case where the Appeal Panel confirmed that real estate fraud can be proven without evidence from participants in real estate transactions or the institutional lenders. It held that such evidence is not required where there is compelling circumstantial evidence suggesting fraud. The Appeal Panel overturned the Hearing Panel’s decision to dismiss allegations of participating or assisting in mortgage fraud and to have failed to have been honest and candid with lender clients.

223Choosing not to meet with lenders and delegating that task to SSMS and the information sessions to Ms. Goyal, are examples of Mr. Baykara failing to meet his obligations under Rule 3.1-2 of the Rules. While evidence from one or more lenders stating a belief that Mr. Baykara was their lawyer could have assisted the Law Society in advancing its case, such evidence was not required for us to determine that Mr. Baykara failed to satisfy his responsibilities to the lenders. There is no adverse inference to be drawn.

Issue 3: Is expert evidence required to establish the standard of care?

224Mr. Baykara submits that the Law Society ought to have tendered expert evidence to support its allegations that he did not perform duties to the standard of a competent lawyer. Syndicated mortgages are a complex and technical area of real estate law. To prove that Mr. Baykara did not meet the standard, the Law Society must first establish the standard and then through opinion evidence demonstrate how his work fell below the standard. He says that the need for expert evidence is particularly heightened in light of the absence of evidence from any investor. In support of this submission, he refers to case law where expert evidence was required.

225Mr. Baykara draws our attention to two civil law cases where Ontario courts stated that a standard of care expert is required in professional negligence cases: Krawchuk v Scherbak, 2011 ONCA 352, and Bari v Ahuja, 2017 ONSC 7693.

226We note that in Krawchuk the trial judge did not consider expert evidence but also did not articulate the standard of care and he failed to consider a code of ethics for real estate agents which would have at least provided some measure of the standard of care. That is different than the case at hand. Again, we consider the Rules, the Act, the By-Law and Tribunal case law.

227Most importantly, the courts stated in Krawchuk and in Bari that a standard of care expert is not required in civil professional negligence cases for non-technical matters that an ordinary person may be expected to have knowledge; and, where actions are so egregious that it is obvious that they do not meet the standard. As stated above, we find that Mr. Baykara represented to lenders that he was mortgage administrator, bare trustee and their lawyer. As such, he had obligations to them under the Rules, the Act, and By-Law 9.

228We agree with the Law Society that civil law standards do not apply in the professional regulatory context. Pursuant to the Statutory Powers Procedure Act, RSO 1990, c S.22, we are able to take notice of technical facts such as compliance with By-Law 9. In this case, Mr. Baykara did not obtain new By-Law 9 or FSCO forms following the postponement as he was required to do under By-Law 9. Expert evidence is not required to establish non-compliance with By-Law 9: Law Society of Upper Canada v Nguyen, 2015 ONSC 7192, 2014 ONLSTA 32.

229We were asked to consider Tribunal cases as well where expert evidence was required or considered.

230The Hearing Panel in Law Society of Upper Canada v Anderson, 2009 ONLSHP 13, permitted expert evidence on estate administration. In that case, the Law Society sought to introduce the evidence of an expert in estates law and practice. The licensee objected at least in part for the alleged possible prejudice from such evidence. Importantly, the Law Society agreed that the expert would not opine on the Rules or the Law Society’s By-Laws. At para 37, the panel acknowledged that those questions were for it to decide. The evidence was relevant to understanding “the practices of reasonably competent and prudent practitioners engaged estate administration form part of the core factual matrix in which these Rules of Professional Conduct must be interpreted and applied.” It was found to be necessary because estate administration was a complex, highly technical and specialised area of law outside of the experience of panel members.

231Anderson is different than the present matter. A determination of whether there was adherence to the Rules and requirements of By‑Law 9 lies at the heart of this matter to be determined by us.

232We were referred to Chin v Law Society of Upper Canada, 2018 ONSC 2072 (Div Ct), where the Hearing Panel received expert evidence on consent of both parties to assist it to understand standards of practice and warning signs of fraud. Ms. Chin appealed on a number of grounds, one of which was that the panel unduly relied on expert opinion. The Divisional Court disagreed, describing the report as generic. It was open to the panel consider it to understand flags of possible fraud as it was useful for panel members who did not have experience in real estate law as it addressed standards of practice and warning signs of fraud. This case does not state that expert evidence was required to determine the standard of care generally, or the standard of care of the issue before us.

233It was determined in Law Society of Upper Canada v Gregoropoulos, 2015 ONLSTH 76, that expert evidence about the standard of care of a reasonably prudent real estate practitioner was relevant and necessary. That case involved allegations of dishonesty and fraud, or alternatively that the lawyer ought to have known that he was being used by others to facilitate dishonesty and fraud.

234The Law Society in Gregoropoulos alleged that the licensee engaged in mortgage fraud. The hearing was held in 2015. It involved allegations that the licensee engaged in 17 fraudulent real estate transactions, or ought to have known that he was being used by another in connection with fraudulent transactions. The transactions occurred between June 2002 and October 2005. The Law Society sought to introduce the evidence of an expert to address the standards expected of a reasonably prudent real estate lawyer in a real estate transaction. The expert provided evidence about warning signs (or red flags) to fraudulent real estate transactions. The panel qualified the expert and stated at para 2:

the Law Society Tribunal does not necessarily have, and the panel members themselves do not necessarily have, particular experience and expertise in real estate practice. To the extent that the panel members do not have experience and necessary expertise in real estate practice, the evidence of Mr. McLellan is both necessary and useful.

235The Law Society submits that the panel in Gregoropoulos may have overstated that expert evidence will be required in all real estate cases. We are urged instead to consider the reasons in Law Society of Ontario v. Mazinani, 2022 ONLSTA 6 as its facts are more closely aligned with those in this case. The panel in Mazinani stated at para 72 that very basic facts, such as failing to meet with clients at all, do not require expert evidence.

236The Tribunal cases cited by Mr. Baykara are distinguishable from the present matter. The experts were not asked to opine on the interpretation of the Rules as that is a panel’s responsibility. In this matter we are considering whether there were indicators of a lawyer-client relationship. That requires reviewing the facts of this case and the standard established in the Rules, the Act, By-Law 9, and Tribunal case law. We do not require an expert opinion to determine whether Mr. Baykara was the lenders’ lawyer, nor to assist us in understanding whether Mr. Baykara met his obligations under either the Rules, the Act, or the By-Law.

237In this way, our task is similar to the panel in Law Society of Ontario v Mazinani, 2020 ONLSTH 123, which found that Ms. Mazinani failed to communicate with her client in a timely and effective manner, as well as failed to know general legal principles, procedures and substantive law in the area. It is the former that is similar to this matter and requires a review of the evidence and an understanding of the standard of care outlined in the Rules. The appeal panel in Mazinani, at para 71, agreed with the panel’s approach to the standard of care, noting that expert evidence was not required because her failings were of a rudimentary and not a technical nature, citing Law Society of Upper Canada v Besant, 2013 ONLSHP 76 at para 109 for support.

238The lawyer in Law Society of Ontario v Di Giacomo, 2023 ONLSTA 5, similarly did not meet with syndicated lenders to explain mortgage documents before the mortgages were registered or before he advanced mortgage funds. He relied on a non-licensee to draft the investment authority, explain the mortgage documents to lenders, and arrange for their execution by lenders. Although there was an agreed statement of facts in that case, the appeal panel, in determining the appropriateness of the joint submission on penalty, remarked at para 70 about the licensee, “No specialist expertise was required to understand that a lender’s lawyer cannot delegate substantially all of the required legal work to a non-lawyer borrower’s agent in any loan transaction, let alone a syndicated mortgage transaction.” Other misconduct included failing to verify client identity, failing to ensure that the Form D investment authority was completed and improperly postponing mortgages.

239We conclude that neither lender nor expert evidence is required to understand Mr. Baykara’s responsibilities to the lenders as set out in the Act, the Mortgage Brokerages, Lenders and Administrators Act, By-Law 9, the Rules, and case law. He did not meet those requirements.

The Goyal decision

240After the conclusion of the hearing, and while our decision remained under reserve, we were advised that the Tribunal, with a differently constituted panel, released its decision in Law Society of Ontario v Goyal, 2025 ONLSTH 78.

241That panel found that Ms. Goyal had engaged in professional misconduct relating to two syndicated mortgage transactions. Between 2016 and 2019, she acted for 59 lender clients in a $3.58 million syndicated third mortgage. Her clients ultimately lost nearly all invested funds. She lacked competence in syndicated mortgages, failed to meet or advise clients properly, relied on inaccurate documents, failed to monitor advances, ignored obvious red flags about appraisals and construction progress, and advanced funds despite borrower defaults. She also failed to maintain required By-Law 9 records, accepted incomplete FSCO disclosure forms, acted in conflicts of interest, and substituted syndicated mortgages without obtaining written client consent. Ms. Goyal also provided inadequate legal advice to seven additional lenders in another syndicated mortgage in the 7397 project at issue in the matter before us, again failing to meet standards of competence or maintain proper records.

242Professional misconduct was found based on Ms. Goyal’s admissions of professional misconduct, the testimony of two lenders, Ms. Goyal’s affidavit and book of documents, an agreed statement of facts and accompanying book of documents.

243Mr. Baykara objected to us reviewing the Goyal decision. Following receipt of written submissions from the parties we issued an endorsement stating that we would review the Goyal decision and stated our reasons for doing so. We again extended the opportunity to the parties to provide written submissions about the significance and weight, if any, we should give to the Goyal decision. The parties provided those submissions.

244Mr. Baykara submits that the Goyal decision should be afforded no weight because the decision was based on an agreed statement of facts and admission of professional misconduct. As such, the panel did not have to weigh evidence, assess credibility of witnesses, draw adverse inferences from the Law Society’s failure to adduce lender evidence or undertake a legal analysis.

245Furthermore, he submitted that since Ms. Goyal admitted misconduct, expert evidence was not required to establish the standard of care. In contrast, central to this matter is whether the Law Society has adduced sufficient evidence to establish the standard of care and led sufficient evidence to demonstrate that Mr. Baykara failed to meet it.

246Mr. Baykara submits that the precedential value Goyal could offer us is with respect to penalty. Otherwise, we must reach our own conclusions about whether Mr. Baykara engaged in professional misconduct, based on the evidence in this case.

247Goyal is factually similar in many ways to the one before us. Mr. Pereira involved Ms. Goyal as bare trustee in a syndicated mortgage that was in third priority. Ms. Goyal prepared the loan agreement, the trust agreement, and a “Memorandum and Instruction of Monica Goyal.” She delegated responsibility to SSMS to review the investor package with lenders. She accepted FSCO forms from SSMS in place of By-Law 9 Form D forms. The FSCO forms contained errors. She did not confirm that each lender had acquired independent legal advice.

248Some facts were slightly different. Ms. Goyal did not maintain an interest reserve in the manner or amount as required but she had at least initially withheld one-half of the interest payable at the end of the investment. She had telephone calls with seven of the 59 lenders to answer questions.

249Mr. Baykara distinguishes the Goyal matter. First, the Goyal syndicated mortgage was for construction costs and so the opinion of a quality surveyor about the value of the construction performed was relevant to when loan advances were made. In contrast, the Baykara syndicated mortgage was for soft costs and so the quality survey was not relevant as to when advances of fund should be made. Second, the Goyal appraisals were based on planned features of the building which did not materialize, whereas the validity of the Baykara appraisals was not challenged. Third, the missing Schedule E was relevant to the Goyal lenders since the syndicated mortgage was for construction and reduction of a prior mortgage. Schedule E is not relevant in the Baykara matter because the syndicated mortgage was to fund the borrower’s soft costs. We accept these distinctions.

250Mr. Baykara raises a fourth distinction that we do not accept. He submits that Ms. Goyal admitted to not maintaining an appropriate interest reserve whereas Mr. Baykara denies that lenders were paid anything less than what they were owed under the bare trust agreement. The loan agreement he drafted stated that 7397 agreed to pay lenders interest on the principal sum calculated annually with 12% paid upfront and 24% at the end of the term. Mr. Baykara paid lenders the initial interest payment of 12% but he did not create an interest reserve to pay the 24% owing at the end of the investment period.

251Finally, Mr. Baykara noted that Ms. Goyal admitted that her actions constituted professional misconduct, but he refutes the allegations against him. However, the panel could not make such a finding unless it also accepted that she engaged in professional misconduct.

252Simply because the cases bear some similarity does not mean that the findings in Goyal should apply to Mr. Baykara. In his submissions, Mr. Baykara represents that he was not aware of the Goyal matter and was therefore not able to participate as intervenor. No disclosure was made of Ms. Goyal’s admissions. It would be procedurally unfair to him if we were to transfer those findings to him when he did not have the opportunity to speak to his role in the Goyal matter.

253The Law Society submits that the panel in Goyal could not have found professional misconduct based on the agreed statement of fact and Ms. Goyal’s admissions unless it was satisfied that she engaged in professional misconduct. The conduct was strikingly similar to that in which Mr. Baykara engaged and so the Goyal decision is precedent. More specifically, Goyal is authority for a finding of misconduct in relation to acts or omissions that are similar to this case, namely:

• Dispersing loan proceeds without first receiving reports from a quantity surveyor.

• Failing to maintain an interest reserve.

• Failing to append Schedule E to the loan agreement.

• Disbursing loan proceeds without first registering an updated Schedule to Charge.

• Permitting incorrect information on FSCO forms and failing to review those forms with lenders.

• Relying on mortgage agents to disclose key information to lenders.

254We have not factored the Goyal decision into our finding of professional misconduct. While it is true that the Goyal panel could not have found professional misconduct unless it was satisfied that was the case, it was reached on the basis of an agreed statement of facts and significant admissions by Ms. Goyal. The evidence in that case, while similar, is not on all fours with that before us in this matter. Crucially, the evidence in this case was completed before the Goyal decision became available.

255We reach this conclusion without accepting Mr. Baykara’s submission that we do so because we ought to draw adverse inferences from a lack of lender evidence, or because there was no expert evidence in this case.

CONCLUSION

256We find that the Licensee contravened s 33 of the Act by engaging in professional misconduct by failing to serve to the standard of a competent lawyer by:

• failing to meet with his clients personally to explain and execute complex syndicated mortgage documentation;

• failing to advise his clients throughout the retainer of all facts material to their interests;

• failing to comply with terms of the Loan Agreement;

• failing to ensure that his clients were aware of the appraised current value of the mortgaged property under development;

• failing securing his clients interests on a registered mortgage before releasing his clients’ money; and

• by failing to comply with s 24 of By-Law 9 by failing to maintain Forms 9D and 9E and by accepting, as an alternative to the forms, Investor/Lender Disclosure Statements for Brokered Transactions (FSCO Forms 1 and 1.1) that were incomplete and contained inaccurate information.

257The scheduling coordinator will arrange a penalty hearing.

Footnotes

1. 1Financial Services Commission of Ontario (now Financial Services Regulatory Authority of Ontario).
2. 2Tribunal file nos. 17H-102 and 21A-008.
3. 3Tribunal file no. LCN99/15.
4. 4Hill v Cambridge (City), 2023 ONCA 164; Khan v Law Society of Ontario, 2021 ONSC 6019, 2021 ONSC 966, 2019 ONSC 4974, and 2019 ONSC 6580, which were cited in the notice of motion.
5. 5The professional misconduct hearing in Bahimanga occurred in April and June 2017 and the penalty hearing occurred in February 2018.
6. 6The file also contained the checklist used by SSMS, an agency agreement, verification of identity, acknowledgement and direction, acknowledgement, set of standard charge terms and a copy of a cheque.
7. 7As is described further below, Mr. Pereira denies that this was a conflict of interest because at the time the mortgage was registered this potential for shares was not realized. It had to meet certain benchmarks. It is the Law Society’s position that even the potential for shares ought to have been disclosed to lenders as a possible conflict of interest. Mr. Pereira produced an email showing that this term was removed from the mortgage agreement on November 8, 2017.
8. 8The actual date on the form was July, not June.
9. 9Mr. Pereira says he called a meeting of lenders and obtained instructions.
10. 107397 did pay Mr. Baykara’s legal fees.
11. 11We note that the total advances did not even exceed the original $3.2 million purchase price.
12. 12The Memorandum and Instructions of Yuce Baykara states, “There is a possibility of postponement to a construction mortgage on the units as the project is constructed” but there is no reference to the May 2018 postponement in this document or any other in evidence.
13. 13There were 14 documents on the SSMS checklist for most lenders and 17 documents for Computershare lenders.
14. 14Overturned on appeal on other grounds: 2014 ONLSAP 8.
15. 15Yuce Baykara (Placeholder) $3,297,440; Computershare registered investors $532,560; Baykara non-registered investors in trust $545,000.
16. 16Required for investors whose funds were received via Computershare.
17. 17It was raising funds through the syndicated mortgage for the borrower and was paid fees for doing so.
18. 18Neither party called a lender investor as a witness.
19. 19There was no evidence that this undertaking was fulfilled. We therefore do not have any explanation from Mr. Baykara about the timing of release of fees in relation to registering the charge.
20. 20Mr. Baykara.
21. 21Also Mr. Baykara.
22. 22Form 9D/FSCO Form.
23. 23Rule 2.01(14) of the pre-October 2014 Rules of Professional Conduct, which is similar to the current Rule 7.2-9.
24. 24There is no evidence that Mr. Baykara provided any legal advice to lenders. He did not meet with lenders; however, he drafted the “Memorandum and Instructions of Yuce Baykara” on firm letterhead. He drafted the bare trust agreement and loan agreement that, as explained above, suggested that he was acting as lawyer. There were several other documents, including trust agency agreement, the trust verification of identification, the acknowledgement and direction, the trust acknowledgement, the FSCO Form 1.1 and invoices for legal fees, which suggested that Mr. Baykara was acting as their lawyer.
25. 25Mr. Pereira did not disclose this information to them, either.
26. 26Rules, Rule 3.1-1.
27. 27SSMS might have acquired 10% shares in the project if it generated benchmark funding for the syndicated mortgage. Regardless of whether this term was later removed, as Mr. Pereira testified, there was no evidence that this was raised with lenders at any point.