Court of Appeal for Ontario
Date: June 23, 2017
Docket: C62169
Judges: Sharpe, Lauwers and Miller JJ.A.
Between
The Law Society of Upper Canada Applicant (Appellant)
and
John Paul Abbott Respondent (Respondent)
Counsel
Sean Dewart and Tim Gleason, for the appellant
James Morton and Michelle Iezzi, for the respondent
Heard
December 22, 2016
On Appeal
On appeal from the decision of the Divisional Court (Justices Harriet E. Sachs, Julie A. Thorburn and Brian W. Abrams), dated February 10, 2016, with reasons reported at 2016 ONSC 641, affirming the order of the Law Society Tribunal Appeal Division, dated September 14, 2015, with reasons reported at 2015 ONLSTA 25.
Reasons for Decision
Lauwers J.A.:
A. Overview
[1] The Appeal Division of the Law Society Tribunal found John Paul Abbott to have knowingly participated in multiple instances of mortgage fraud, but reversed the decision of the Hearing Division to revoke his licence to practise law. In my view this unprecedented result was not justified on the facts or on the law. I would allow the appeal from the decision of the Divisional Court dismissing the appeal from the Appeal Division, set aside the decision of the Appeal Division of the Law Society Tribunal on penalty and reinstate the penalty of licence revocation ordered by the Hearing Division.
[2] Mr. Abbott was called to the bar in 1989. When the suspect transactions took place in 2006-2007, he was a sole practitioner in real estate and acted on about 500 transactions annually.
[3] In February 2007, a lender client advised Mr. Abbott that it suspected mortgage fraud in one of its transactions. The client complained to the Law Society on February 26, 2007, an investigation was authorized in March, and in April, the Law Society investigator required production of Mr. Abbott's client's files and client trust ledgers. Over the ensuing years other investigators asked for more information. Mr. Abbott was at all times helpful and responsive.
[4] The investigation report was issued on November 6, 2012, more than five and a half years after the investigation was authorized. The disciplinary Notice of Application was issued on April 9, 2013, and the hearing took place before the Hearing Division over four days in August 2014.
[5] The Hearing Division of the Law Society Tribunal found Mr. Abbott had engaged in professional misconduct by knowingly participating in or assisting in mortgage fraud in seven transactions over a four-month period in late 2006 and early 2007; by failing to disclose material facts to his lender clients; and by failing to perform legal services to the standard of a competent lawyer. The financial losses were estimated to be about $625,000. The Hearing Division ordered that Mr. Abbott's licence to practise law be revoked, but gave him the opportunity to seek a stay pending appeal. The merits reasons are reported at 2014 ONLSTH 194, and the penalty reasons are reported at 2015 ONLSTH 12.
[6] The Hearing Division exhaustively reviewed the suspect transactions and the evidence, and summarized the elements of Mr. Abbott's misconduct at paras. 194-97 of the merits decision, which set out the factual context:
In these transactions, and assuming that Mr. Abbott actually made the inquiries that he said he did, these inquiries were manifestly insufficient to address the risk of fraud. We conclude that having a concern about the risk of fraud and making an inquiry that does not genuinely address the concern is no different than having the concern and electing to make no inquiry at all. We conclude that Mr. Abbott knowingly assisted in these fraudulent transactions whether by failing to make inquiry or by making an inquiry that did not actually address the risk of fraud.
This conclusion is reinforced by Mr. Abbott's reaction to transactions in which third parties received payments. There were four of these transactions. Third party payments are said to be red flags in the Law Society Gazette and Law Society Magazine. The expert opinion states at pages 16 and 17 that inquiries should be made about such payments. While Mr. Abbott did so, his inquiry was limited to determining whether the vendor authorized the third party payment. As Mr. Abbott's counsel properly conceded in argument, such an inquiry does nothing to address the risk of fraud. An inquiry that does not address the risk that it is intended to address is practically no inquiry at all.
We do not conclude that Mr. Abbott had actual knowledge of fraud. We do find that he was reckless and wilfully blind. We conclude, on a balance of probabilities, that Mr. Abbott knew of the risk that his conduct could bring about fraud by completing fraudulent transactions yet persisted in completing the transactions despite that risk. We conclude that Mr. Abbott became aware that an inquiry was required that would address the risk of fraud yet he made no useful inquiry. He made a different inquiry preferring to remain ignorant of what actually mattered.
Standing back and reviewing the pattern of the transactions as a whole, we conclude on the balance of probabilities that, by at least transaction #3 (which is one of the most problematic transactions), Mr. Abbott actually suspected deposit fraud yet chose not to make meaningful inquiries. With respect to the two cases of repair credits, we find that Mr. Abbott must have been suspicious had he reviewed the file as he said he did yet he made no inquiries. We find knowing assistance on the basis of recklessness and wilful blindness.
[7] Mr. Abbott appealed under s. 49.32 of the Law Society Act, R.S.O. 1990, c. L.8. The Appeal Division unanimously agreed that Mr. Abbott had engaged in professional misconduct. Despite accepting the Hearing Division's factual findings, on a three-to-two split, the majority of the Appeal Division modified the penalty by substituting a two-year suspension for the licence revocation ordered by the Hearing Division, largely in response to what it found to be the Law Society's "inordinate and unacceptable" delay in investigating and prosecuting Mr. Abbott. There was undoubtedly a lengthy delay, as the chronology of events set out in Appendix 'A' shows. The Divisional Court dismissed the Law Society's appeal of the Appeal Division's decision.
B. The Issues
[8] This appeal raises two general issues for determination:
Did the Divisional Court err in dismissing the Law Society's appeal of the Appeal Division's order?
Did the Appeal Division err in allowing Mr. Abbott's appeal from the penalty of licence revocation imposed by the Hearing Division?
[9] I will address these issues in reverse order.
C. Did the Appeal Division err in allowing Mr. Abbott's appeal from the penalty of licence revocation imposed by the Hearing Division?
[10] I begin by describing the governing principles, then turn to the Appeal Division's decision, and conclude by discussing the application of the principles to the facts.
(1) The Governing Principles
[11] There are two sets of governing principles engaged in this issue. The first relates to the standard of review and the second to penalty.
(a) The Standard of Review
[12] The Appeal Division is required to defer to the penalty decisions of the Hearing Division, just as the court does with respect to the decisions of specialized professional disciplinary bodies: Igbinosun v. Law Society of Upper Canada (2008), 239 O.A.C. 178 (Div. Ct.), aff'd 2009 ONCA 484, 96 O.R. (3d) 138, at para. 9; Groia v. The Law Society of Upper Canada, 2016 ONCA 471, 131 O.R. (3d) 1, leave to appeal allowed, [2016] S.C.C.A. No. 310 (February 2, 2017), at paras. 54-56.
[13] There are three reasons for judicial deference. The first is that the Hearing Division is an expert tribunal. The second is that, unlike the Appeal Division, the Hearing Division hears live evidence over a period of time, in this case over four days, and has a decidedly more comprehensive understanding of the evidence. The third reason for deference is that the determination of the appropriate penalty for a lawyer's misconduct is a question of mixed fact and law, which does not lend itself to the extrication of a pure question of law, as the Supreme Court noted in Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, at para. 41.
[14] To paraphrase the jurisprudence, the reasonableness standard requires the Appeal Division to pay respectful attention to the Hearing Division's reasons and to consider them as a whole, not as a series of discrete and unrelated elements each of which must pass the test of reasonableness. The Appeal Division must consider whether the Hearing Division's outcome falls within the range of possible, acceptable and defensible outcomes that are open on the evidence. It is not the Appeal Division's role to seek out what it considers to be the single best answer to the issue resolved by the Hearing Division. Nor should it seize on an error that does not affect the decision as a whole as the pretext for reaching a different result. See Groia; Ryan; Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190; and Newfoundland and Labrador Nurses' Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708.
[15] In sum, the Appeal Division must find the penalty decision of the Hearing Division to be unreasonable before interfering with it.
(b) Penalty
[16] This appeal raises three issues regarding the appropriate penalty to be imposed on Mr. Abbott: the presumptive penalty of licence revocation, the existence of exceptional mitigating circumstances, and especially the effect of investigative and procedural delay on the penalty.
(i) The presumptive penalty of licence revocation
[17] The governing principles relating to the penalty to be imposed on a lawyer found to have knowingly participated in mortgage fraud were set out in Law Society of Upper Canada v. Mucha, 2008 ONLSAP 5, a decision of what was then called the Appeal Panel. Mucha is the converse of this case. After finding Mr. Mucha had knowingly participated in mortgage fraud in connection with sixteen real estate transactions, the Hearing Panel imposed a one-year suspension followed by a one-year practice restriction. The Appeal Panel allowed the Law Society's appeal and imposed the penalty of licence revocation.
[18] The Mucha Appeal Panel noted, at para. 21: "[W]e know of no case in which a penalty other than termination of practice has been granted once the Society has proven knowing participation in a mortgage fraud." The Panel recognized licence revocation as the presumptive penalty for this form of misconduct.
[19] In Mucha, the Appeal Panel instructed itself that the applicable standard of review was reasonableness and found, at para. 19, that the Hearing Panel's "disposition was unreasonable," on the basis, echoing Ryan, that: "There is no line of reasoning that can reasonably support this result", and "the disposition is outside of the range of reasonable dispositions available in the circumstances."
[20] The Mucha Appeal Panel quoted Sir Thomas Bingham M.R. in Bolton v. Law Society, [1993] EWCA Civ 32, [1994] 2 All E.R. 486, who said, at para. 14:
Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions to be imposed upon him by the Solicitors Disciplinary Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties. In such cases the tribunal has almost invariably, no matter how strong the mitigation advanced for the solicitor, ordered that he be struck off the Roll of Solicitors. [Emphasis in Mucha.]
[21] Licence revocation as the presumptive penalty for knowing participation in a mortgage fraud was considered and effectively adopted by the Divisional Court in Bishop v. Law Society of Upper Canada, 2014 ONSC 5057, 325 O.A.C. 160 (Div. Ct.). In that case the member had participated in fourteen instances of mortgage fraud. The majority of the Hearing Panel imposed a penalty of revocation, which the Appeal Panel upheld, and the member's appeal to the Divisional Court was dismissed. Justice Nordheimer stated, at para. 30: "there is nothing per se objectionable to a profession setting out presumptive penalties for breaches of different types of professional obligations."
[22] There is, as yet, no precedent for a lower penalty than licence revocation for a lawyer who has knowingly participated in mortgage fraud.
(ii) Exceptional mitigating circumstances
[23] The Mucha Appeal Panel stated, at para. 22: "only exceptional circumstances of mitigation may justify a departure from the ordinary disposition of revocation of licence." The Panel took the position, at para. 23, that presumptive revocation was "compelled by" the penalty factors, "particularly the overriding public interest," so that "only extraordinary or exceptional circumstances warrant a departure from that disposition."
[24] The Mucha Appeal Panel expressly limited what it would consider to constitute such extraordinary or exceptional circumstances, at para. 28:
As noted earlier, we do not suggest that there can never be exceptional circumstances justifying departure from the ordinary disposition of revocation where the licensee has knowingly participated in mortgage fraud. By way of illustration only, there may be compelling psychiatric or psychological evidence that, among other things, credibly indicates not only that the misconduct was out of character and unlikely to recur, but explains why it occurred. [Emphasis in Mucha.]
[25] Arguably, in Bishop the Divisional Court allowed for mitigating factors beyond those personal factors that would explain the lawyer's misconduct, at para. 31:
The other observation is that the mitigating factors that will amount to exceptional circumstances in any given case are not restricted to only certain types or forms. Medical reasons or financial desperation or situations of duress serve as examples of the type of mitigating factors that may amount to exceptional circumstances but those situations are not exhaustive of such factors. That said, it remains the case that any such factors will normally have to be ones that would rise to the level where it would be obvious to other members of the profession, and to the public, that the underlying circumstances of the individual clearly obviated the need to provide reassurance to them of the integrity of the profession. I would add, on that point, that factors that provide an explanation for the conduct of the lawyer will generally be ones that would most likely reach that requisite level of mitigation but they are not the only ones that may achieve that result. [Emphasis added.]
[26] The majority of the Appeal Division in this case stated fairly, in para. 41 of the decision, that Bishop "widened the concept" of exceptional circumstances beyond Mucha.
(iii) The effect of investigative delay on penalty
[27] The effect of investigative or procedural delay in administrative proceedings was addressed by the Supreme Court in Blencoe v. British Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 S.C.R. 307. Mr. Blencoe resigned his position as a minister in the Government of British Columbia after accusations of sexual harassment. In the summer of 1995, two complaints of discriminatory conduct by sexual harassment against him were filed with the British Columbia Council of Human Rights, later known as the British Columbia Human Rights Commission. The incidents were alleged to have occurred between March 1993 and March 1995. The hearings were scheduled before the British Columbia Human Rights Tribunal in March 1998, over 30 months after the complaints were filed.
[28] Mr. Blencoe suffered severe depression. He began judicial review proceedings in November 1997 to have the complaints stayed, arguing the Tribunal had lost jurisdiction because of the unreasonable delay in processing the complaints that caused serious prejudice to him and his family.
[29] Speaking for the five-person majority in Blencoe, Bastarache J. set out some basic principles. While he agreed "state-caused delay" could give rise to an administrative law remedy, at para. 101, he cautioned that "delay, without more, will not warrant a stay of proceedings as an abuse of process at common law," because it would not be appropriate to impose a "judicially created limitation period." He added: "In the administrative law context, there must be proof of significant prejudice which results from an unacceptable delay."
[30] Blencoe identified two grounds on which the prejudice arising from delay might affect administrative proceedings. The first, under the rubric of hearing fairness, relates to the impairment of: "a party's ability to answer the complaint against him or her, because, for example, memories have faded, essential witnesses have died or are unavailable, or evidence has been lost, then administrative delay may be invoked to impugn the validity of the administrative proceedings and provide a remedy" (at para. 102).
[31] The second ground is that an unacceptable delay could amount to an abuse of process "even where the fairness of the hearing has not been compromised" (at para. 115). Justice Bastarache expressed considerable caution about this ground, at para. 115:
Where inordinate delay has directly caused significant psychological harm to a person, or attached a stigma to a person's reputation, such that the human rights system would be brought into disrepute, such prejudice may be sufficient to constitute an abuse of process.… It must however be emphasized that few lengthy delays will meet this threshold. I caution that in cases where there is no prejudice to hearing fairness, the delay must be clearly unacceptable and have directly caused a significant prejudice to amount to an abuse of process. It must be a delay that would, in the circumstances of the case, bring the human rights system into disrepute. [Emphasis added.]
[32] The meaning of abuse of process was discussed in para. 118 of Blencoe. The Supreme Court adverted with approval to the principles of the criminal doctrine, which permit a stay where: "compelling an accused to stand trial would violate those fundamental principles of justice which underlie the community's sense of fair play and decency", or where the proceedings are "oppressive or vexatious". Justice Bastarache added, at para. 120:
"[A]buse of process" has been characterized in the jurisprudence as a process tainted to such a degree that it amounts to one of the clearest of cases. In my opinion, this would apply equally to abuse of process in administrative proceedings. For there to be abuse of process, the proceedings must… be "unfair to the point that they are contrary to the interests of justice". "Cases of this nature will be extremely rare". In the administrative context, there may be abuse of process where conduct is equally oppressive. [Emphasis added.]
[33] Further, for there to be an abuse of process, there must be a "causal connection" between the delay and the prejudice: "the delay must have caused actual prejudice of such magnitude that the public's sense of decency and fairness is affected" (at para. 133).
[34] The court is required to balance the competing interests in assessing whether a delay amounts to an abuse of process, as noted at para. 120:
In order to find an abuse of process, the court must be satisfied that, "the damage to the public interest in the fairness of the administrative process should the proceeding go ahead would exceed the harm to the public interest in the enforcement of the legislation if the proceedings were halted.
[35] Bastarache J. recognized, at para. 117: "There is, however, no support for the notion that a stay is the only remedy available in administrative law proceedings." However, he found that the personal prejudice to Mr. Blencoe coupled with the delay of 24 months did not amount to an abuse of process and that accordingly no remedy was warranted.
[36] Justice LeBel, speaking for the minority of four judges, agreed with the majority that a stay was not warranted but would have found an abuse of process and granted a modest remedy for the delay, namely an order expediting proceedings and awarding costs to Mr. Blencoe.
(c) A Summary of the Governing Principles
[37] To summarize, the relevant governing principles are the following:
the Appeal Division must find the penalty imposed by the Hearing Division on a lawyer to be unreasonable before it may substitute its own penalty;
in determining the penalty for knowing participation in mortgage fraud, priority is to be given to the public interest in maintaining the integrity of the profession;
the presumptive penalty is licence revocation;
that penalty can be withheld only in extraordinary or exceptional circumstances;
such circumstances will usually be personal to the member, and explain why the misconduct occurred and why there is no fear of repetition; and
where delay is claimed to constitute such an extraordinary circumstance, the effect of delay must be examined via the two branches of Blencoe:
first, hearing fairness - whether the delay impairs the defence's ability to make full answer and defence given the quality of the evidence; and
second, whether the delay gives rise to an abuse of process.
(2) Appeal Division: The Majority Decision
[38] The Appeal Division was divided in its reasoning and in the result. The Chair, Raj Anand, wrote the majority's reasons, and was joined by Roger Yachetti and Constance Backhouse. They set aside the penalty of licence revocation imposed by the Hearing Division on Mr. Abbott and substituted a two-year suspension. The dissent was written by Christopher Bredt, who was joined by lay bencher Marion Boyd. They would have dismissed Mr. Abbott's appeal and upheld the revocation of his licence to practise law.
(a) The Standard of Review
[39] The majority found that on questions of fact, credibility, and mixed fact and law, the standard of review is reasonableness, but with respect to questions of law, the standard of review is correctness (at para. 7).
(b) Penalty
[40] The majority upheld the Hearing Division's findings on Mr. Abbott's professional misconduct without reservation (at para. 11). The majority made several pertinent observations. First, and significantly, it pointed out that Mr. Abbott "did not argue that the fairness of the hearing below was compromised by the passage of time", thus setting aside the first branch of Blencoe. Second, the majority specifically upheld as reasonable the Hearing Panel's finding that, on the second branch of Blencoe: "Mr. Abbott had not demonstrated significant psychological harm or stigma to his reputation, caused by the length of the investigation." They continued, at para. 15:
The panel's ruling about the impact on the Lawyer and his reputation was largely factual. Based on the Lawyer's affidavit, and the report filed by his social worker, together with the examinations of both witnesses, the Hearing Division at paras. 32 to 63 carefully analyzed the Appellant's claim that he had suffered psychological and economic prejudice due to the delay. The panel acknowledged at para. 60 that "the length of the investigation was stressful and difficult for Mr. Abbott." Its factual finding that no significant prejudice was proven is reasonable. In this context, its finding of mixed fact and law, characterizing the damage to the public interest should the hearing proceed as falling short of the harm to the public interest in professional regulation if the proceeding were halted, was also reasonable and should not be disturbed on appeal.
[41] Third, the majority upheld the Hearing Division's refusal to dismiss Mr. Abbott's application for a stay on account of delay, concluding that its refusal was reasonable (at para. 16).
(i) The presumptive penalty of licence revocation
[42] The majority accepted that the presumptive penalty in the case is the revocation of Mr. Abbott's licence to practise law (at para. 31). It rejected Mr. Abbott's request to revisit whether licence revocation should be the presumptive penalty.
(ii) Exceptional mitigating circumstances
[43] The majority accepted, at paras. 41-42, that the Divisional Court's decision in Bishop "widened the concept of 'exceptional circumstances', but only in situations where the underlying circumstances of the individual case provided assurance to the public that the integrity of the profession will be maintained."
[44] Mr. Abbott advanced twelve mitigating circumstances. The Hearing Division rejected them as individually and cumulatively insufficient to mitigate the presumptive penalty of licence revocation even though it did not question the truth of many of them. The majority noted, at para. 46:
While this panel may not have reached precisely the same conclusions with respect to each of the listed mitigation items, that is not the test on appeal. Most of the Hearing Division's conclusions addressed questions of fact or mixed fact and law, and were reasonable.
[45] The majority of the Appeal Division went on to decide that the investigative and procedural delay was capable of constituting an exceptional circumstance that could mitigate the presumptive penalty of licence revocation.
(iii) The effect of investigative delay on penalty
[46] Despite its earlier conclusion that the Hearing Division's rejection of "most of" the mitigating circumstances was reasonable, the majority said at para. 54: "we are unfortunately unable to say whether the full range of mitigating circumstances was given proper effect." The majority focussed on what it considered to be the Law Society's inordinate investigative and procedural delay, expressed at para. 47:
Our focus, however, is on the panel's consideration of the overriding issue of delay, and the impact of its reasoning on the ultimate conclusion that Mr. Abbott's mitigating circumstances fell short of exceptional circumstances that would relieve against revocation.
[47] The majority found, at para. 17, that "the delay in this case was indeed inordinate", and added, at para. 29, that the delay "up to and somewhat beyond the issuance of the Notice of Application was inordinate and unacceptable, and exceeded what the community would regard as fair in the context of this case."
(iv) The Appeal Division's Penalty
[48] The majority took the position that the Hearing Division had made several errors of law in assessing the effect of the Law Society's investigative and procedural delay on Mr. Abbott's penalty. I discuss these alleged errors of law in more detail below. In view of these errors, the majority decided, at para. 56: "the Appeal Division is entitled to reach its own conclusion after directing itself to the proper factors and weighing them."
[49] The majority substituted a two-year suspension for the licence revocation imposed by the Hearing Division on Mr. Abbott, stating, at para. 90, that the mitigating circumstances, coupled with the delay, "constituted exceptional circumstances that merited the mitigation of the presumptive penalty of revocation of the Lawyer's licence." It picked out in particular, at para. 84, several mitigating circumstances that "spoke in his favour", which it took from para. 22 of the Hearing Division's penalty decision. I will review these below. Accordingly, the majority found, at para. 103, that, contrary to the Hearing Division's conclusion: "this is a sufficiently extreme and rare case that it justifies the substitution of a suspension in place of the presumptive penalty." This followed the majority's conclusion, at para. 101, again contrary to the findings of the Hearing Division, that: "Overall, the circumstances do not point to a likelihood of a reoccurrence of professional misconduct." The core of the majority's penalty reasoning is found in para. 104:
Considering all of the mitigating factors together, and after anxious and careful review, we have determined that the Lawyer has demonstrated "exceptional circumstances" that, in the formulation adopted in Mucha, are "more exceptional" than those that would justify an order to surrender his licence. A suspension will, for the reasons we have put forward, satisfy the onerous standard set by the Divisional Court in Bishop: the underlying facts concerning Mr. Abbott, in tandem with the institutional, stakeholder and personal interests concerning excessive delay, require the imposition of a remedy that will provide reassurance to the public of the integrity of the profession and its processes.
[50] The majority added, at para. 105:
At the same time, the imperatives of specific deterrence, general deterrence, and the maintenance of public confidence in the integrity and the regulation of the profession obviously point to the need for a lengthy suspension, in recognition of the nature and seriousness of the misconduct that occurred in this case, and the objectives that a long line of this Tribunal's case law has attempted to vindicate in cases of fraud and misappropriation.
(3) The Principles Applied
[51] In this section of the reasons I begin with the standard of review and then address the errors the majority made in its decision.
(a) The Standard of Review
[52] As I have noted, the Hearing Division imposed the penalty of revocation of Mr. Abbott's licence to practise law in view of his knowing participation in mortgage fraud. There are no decisions supporting a lesser penalty. On the face of things, the Hearing Division's imposition of the presumptive penalty fell within the range of possible, acceptable and defensible outcomes that were open on the evidence. In order to justify its rejection of that outcome, the Appeal Division was required to identify an overriding error of principle made by the Hearing Division that renders its penalty decision unreasonable, in the sense given metaphorically by Stratas J.A. in South Yukon Forest Corporation v. Canada, 2012 FCA 165, 431 N.R. 286, leave to appeal ref'd, [2012] S.C.C.A. No. 349, at para. 46:
"Overriding" means an error that goes to the very core of the outcome of the case.… [I]t is not enough to pull at leaves and branches and leave the tree standing. The entire tree must fall.
[53] The majority did not identify any such error of principle.
[54] In my view, the majority failed to: defer to the Hearing Division's penalty decision, as it was obliged to do; pay respectful attention to the Hearing Division's penalty reasons and consider them as a whole; and consider whether the Hearing Division's penalty fell within the range of possible, acceptable and defensible outcomes that were open on the evidence.
(b) The Majority's Errors
[55] The majority's reasons identify several issues on which it disagreed with the Hearing Division, to which I now turn.
(i) Does the Law Society Tribunal have a role in policing prosecutions?
[56] This is the core of the difference between the majority and the Hearing Division. The majority of the Appeal Division considered it to be part of the Law Society Tribunal's function to "curb inordinate delay" (at para. 78). Accordingly, the majority noted, at para. 84:
[H]arm to the administration of self-regulation, concern about repetition of delays, values of fairness, and efficient and effective service to the public and indeed to complainants are all prejudicial to the public interest more widely conceived. Delay in investigation and prosecution may be as harmful to public confidence in the legal profession's ability to regulate itself as Mr. Abbott's continued right to practise law.
[57] The dissent rejected the majority's approach, noting at para. 139:
The majority's rationale for reducing the penalty from revocation to a suspension in this case, is that it is necessary in the public interest to send a message to the Law Society that this type of delay is unacceptable. In our view, this rationale is not consistent with the need to assure the public of the integrity of the profession.
[58] Under the Law Society Act, questions of policy and resource allocation belong to Convocation, not to the Law Society Tribunal of which the Hearing and the Appeal Divisions form parts. Both Divisions are adjudicative bodies in the disciplinary scheme, with only limited policing functions.
[59] The majority criticized the Hearing Division for failing to "make findings of the significance of the delay for the intersecting public and private interests that were relevant to its penalty determination" (at para. 88). The majority added that if the Hearing Division had "accorded significant weight to the extraordinary delay that took place here … we do not believe the panel's conclusion on delay as a mitigating factor and the overall circumstances as 'exceptional' would have been the same" (at para. 89).
[60] With respect, the majority did not read the Hearing Division's reasons fairly. The Hearing Division was fully alive to the actual delay and knew the reasons for it, as it explained in the merits decision at paras. 17-20:
The Investigation Report in this matter is dated November 6, 2012. The Notice of Application was issued on April 9, 2013. There was a period of slightly over six years between the commencement of the investigation and the commencement of this Application. This hearing proceeded over seven years after the commencement of the investigation. As Mr. Dewart said in apparent understatement, this is not ideal.
The explanation for this delay has little if anything to do with this particular case. Rather, mortgage fraud investigations are among the most complex and time-consuming investigations and are extremely demanding upon resources.
The Law Society has faced a growing inventory of mortgage fraud complaints with the volume of investigations becoming much greater by 2005. Because of this volume, the Law Society triaged investigations based on perceived urgency/risk in order to best apply available resources.
A situation such as this raises difficult issues of resource allocation. Some may think that the Law Society should have diverted sufficient resources from other regulatory activities to address the volume of mortgage fraud investigations. Others may think that Law Society fees should have been raised to generate further resources. Irrespective of the right answer, if there is one, to this resource problem, there was a lengthy delay in this case.
[61] It is serious business for an adjudicative body to disturb, on grounds of investigative and prosecutorial delay, what would otherwise be the ordinary operation of the disciplinary scheme. This is because two public interests are in tension, as the Supreme Court noted in Blencoe at para. 120: "the public interest in the fairness of the administrative process should the proceeding go ahead", on the one hand, and, on the other hand, "the harm to the public interest in the enforcement of the legislation if the proceedings were halted". In my view, the role of the Law Society Tribunal in policing the prosecutorial function with respect to delay is defined by and limited to the authority of Blencoe.
[62] The Hearing Division adverted precisely to the balance between two aspects of the public interest in para. 63 of the merits decision in determining that the prosecution would not be stayed:
However, assuming inordinate delay which we need not decide, we find that the damage to the public interest in the fairness of this administrative process should this hearing proceed does not exceed the harm to the public interest in the professional regulation pursuant to the Law Society Act if this proceeding were halted. To the contrary, the public interest demands in the context before us that there be a determination of whether Mr. Abbott has engaged in professional misconduct in the serious circumstances alleged despite the fact of lengthy delay and the prejudice resulting from that delay.
[63] The Hearing Division carefully assessed the tension between the public interest in fairness and in enforcement, and its assessment was entirely reasonable. The Appeal Division erred in setting that assessment aside.
[64] The majority also faulted the Hearing Division for giving priority to general deterrence over specific deterrence in setting the penalty, noting at para. 83: "the Hearing Division gave precedence to general deterrence and maintenance of public confidence in the legal profession as the penalty objectives in this case, and minimized the importance of specific deterrence." The majority found this to be wrong, and required both objectives to be accommodated. The majority added, at para. 84: "we do not agree that 'reducing a penalty because of prejudice is most relevant where specific deterrence is the principal penalty goal.'"
[65] The Hearing Division recognized the need to take into account both specific and general deterrence and addressed the issue directly at paras. 30 and 32 of its reasons on penalty:
We accept the submission that delay causing prejudice can be a mitigating factor in many cases. However, we do not accept that prejudice arising from delay in this case is a proper basis to turn revocation into a lengthy suspension.
The second reason is that the principal basis for the presumptive revocation penalty is general deterrence and maintenance of public confidence in the legal profession. On the other hand, reducing a penalty because of prejudice arising from delay is most relevant where specific deterrence is the principal penalty goal. Where a panel is concerned about the prospect of a lawyer engaging again in professional misconduct, a panel can reasonably conclude that the lawyer will reflect on all of the impacts of the prior misconduct and want to avoid all such impact. To the extent that a penalty in a discipline proceeding can properly be seen as punishment, it is fair to reflect prejudice suffered from investigative delay in the penalty ultimately ordered. While there might be cases where prejudice was sufficiently significant that general deterrence and maintenance of public confidence would be sufficiently served by a lengthy suspension rather than revocation, this is far from being such a case.
[66] The Hearing Division's emphasis was entirely consistent with precedent. As Nordheimer J. observed, at para. 28 of Bishop:
I agree with the Appeal Panel that the penalty imposed by the Hearing Panel was a reasonable one. It fulfills the two purposes set out in Bolton [preventing the lawyer from repeating the misconduct and maintaining the reputation of the profession]. I acknowledge that there does not appear to be any real concern in this case that the appellant would repeat the conduct but that fact does not detract from the pressing need to send a consistent message that engaging in fraudulent conduct by a lawyer is a matter that will not be tolerated because of its impact on the profession as a whole. As was observed by Sir Thomas Bingham M.R. in Bolton, at p. 519:
The reputation of the profession is more important than the fortunes of any individual member. Membership of a profession brings many benefits, but that is a part of the price.
Although the majority of the Appeal Division quoted this passage from Bolton at para. 58, it does not appear to have given it any further thought.
[67] In my view, Hearing Division's consideration of general and specific deterrence in a case where the presumptive penalty is licence revocation was entirely reasonable.
(ii) Did the Hearing Division assess the delay evidence properly?
[68] The majority asserted the Hearing Division "misdirected itself" as to the effect of delay on penalty in light of the "widened formulation" of mitigating circumstances from Bishop (at paras. 48, 53, and 55).
[69] This is not a fair reading of the Hearing Division's penalty decision. The Hearing Division instructed itself correctly, at para. 21, that it would be wrong to adopt a restrictive reading of Mucha, in light of Bishop. After noting the holding in Bishop, it listed the mitigating circumstances advanced by Mr. Abbott at para. 22. The first raised the delay issue and its effect on the penalty squarely:
There was substantial delay in the investigation as was discussed in our prior reasons. While we did not order a stay of proceedings as asked, it is now submitted that the delay in this case and the attendant prejudice suffered by Mr. Abbott justifies a lesser penalty than revocation;
[70] In the succeeding paragraphs the Hearing Division analyzed each of the grounds. It addressed delay at paras. 30-31:
Finally, we address the issue of delay. We accept the submission that delay causing prejudice can be a mitigating factor in many cases. However, we do not accept that prejudice arising from delay in this case is a proper basis to turn revocation into a lengthy suspension.
The first reason is that we are not persuaded that much of the prejudice described by Mr. Abbott in his earlier evidence and during the penalty phase arises from investigative delay as opposed to from the issuance of the Notice of Application in the spring of 2013. The evidence of prejudice arising from investigative delay is quite limited as discussed in our decision on finding at paras. 32 to 60. While there was no doubt some prejudice, we do not find there to have been substantial prejudice arising from investigative delay. The evidence of prejudice was vague and general. Mr. Abbott sought no professional assistance during the investigation. There is no evidence from anyone about Mr. Abbott and his circumstances during the investigation. No medical or other expert evidence was adduced during the penalty phase of the hearing despite our earlier findings. To be clear, we continue to be concerned about the lengthy investigative delay in this case. However, our assessment here relates to the issue of prejudice arising from that delay.
(The second reason given by the Hearing Division emphasized general deterrence and was excerpted earlier in para. 65.)
[71] The Appeal Division drew several mitigating circumstances from para. 22 of the Hearing Division's penalty decision, which included the following:
Prior to the real estate transactions of 2006 and 2007 that are in issue in this case, Mr. Abbott's conduct was unimpeached.
There were a limited number of problematic transactions over a few months.
Since these real estate transactions, Mr. Abbott's conduct is also unimpeached and his dealings with the Law Society in this matter have been entirely appropriate.
Mr. Abbott testified willingly and honestly.
Mr. Abbott has a reputation for honesty and integrity in support of which a number of letters were filed from colleagues and clients.
[72] With respect, these mitigating circumstances are quite generic, and in the context of an active prosecution, one would expect the member to be on his best behaviour or risk making things worse. As for the supportive reference letters, it is well to keep in mind the observations of Sir Thomas Bingham M.R. in Bolton, at para. 16:
It often happens that a solicitor appearing before the Tribunal can adduce a wealth of glowing tributes from his professional brethren. He can often show that for him and his family the consequences of striking off or suspension would be little short of tragic. Often he will say, convincingly, that he has learned his lesson and will not offend again. On applying for restoration after striking off, all these points may be made, and the former solicitor may also be able to point to real efforts made to re-establish himself and redeem his reputation. All these matters are relevant and should be considered. But none of them touches the essential issue, which is the need to maintain among members of the public a well-founded confidence that any solicitor whom they instruct will be a person of unquestionable integrity, probity and trustworthiness. [Emphasis added.]
[73] The Appeal Division asserted that the Hearing Division resiled from Bishop in stating that the evidence did not provide a "credible explanation" for Mr. Abbott's misconduct. The majority stated, at para. 55, that the locus of the Hearing Division's error was in paras. 23 and 35 of the penalty decision, which I excerpt for convenience:
In our view, this all [referring to the claimed mitigating circumstances] falls far short of circumstances justifying anything other than revocation. Clearly, there is no "compelling psychiatric or psychological evidence that, among other things, credibly indicates not only that the misconduct was out of character and unlikely to recur, but explains why it occurred." There is no evidence that explains why the misconduct occurred or that it is unlikely to recur.
Ultimately, we conclude that revocation is the appropriate penalty given the gravity of the misconduct that we have found. We find no exceptional circumstances that would credibly explain the misconduct let alone credibly indicate that it is out of character and unlikely to recur.
[74] At bottom, this review shows the majority simply disagreed with the Hearing Division's reasoning about the effect of delay as an exceptional circumstance warranting the mitigation of Mr. Abbott's penalty. In my view, the Hearing Division considered the right questions and gave cogent answers. The majority disagreed with the weight the Hearing Division gave to the prejudice to Mr. Abbott and the sufficiency of the evidence that he would not repeat the misconduct. However, in the absence of a palpable and overriding error of fact, a misapprehension, or an error of law, the issue of the weight of the evidence is not within the purview of an appellate body and does not constitute an error of law entitling it to intervene. The Hearing Division made no such errors here.
(iii) What prejudice must be shown to warrant a reduction in the penalty?
[75] The Hearing Division and the majority disagreed about the prejudice the affected member must show in order to warrant a reduction in penalty under the principles of Blencoe. The Hearing Division followed Blencoe's requirement that exceptional circumstances must be shown, while the majority backed away from such a high standard, going so far as to confine Blencoe to cases where a stay of proceedings is at issue (at para. 81).
[76] The majority asserted the Hearing Division misapprehended Blencoe and erred in applying the more rigorous Blencoe test for a stay to its consideration of whether the delay could reduce Mr. Abbott's penalty (at para. 82). The majority's view was that while investigative and procedural delay coupled with the mitigating circumstances might not be sufficient to justify a stay of proceedings under Blencoe, the same delay coupled with the same mitigating circumstances could nonetheless warrant a reduction in Mr. Abbott's penalty (at para. 80). It asserted that beyond the context of a stay application, the applicable prejudice test was "much less onerous" (at para. 81).
[77] The sense conveyed by the majority's reasons is that once a tribunal is out from under the onerous burden relating to a stay of proceedings, then it is free to indulge para. 117 of Blencoe, where Bastarache J. noted that other remedies might be available. The majority relies especially on the minority reasons in Blencoe, which it explains at para. 66. The linchpin to the majority's approach is found in para. 73: "There is no basis, in our respectful view, to carve out revocation cases from the application of the impact of institutional delay."
[78] I do not agree. In my view it is appropriate to carve out revocation cases. The key point made in all of the mortgage fraud lawyer discipline cases is that dishonest misconduct presumptively results in revocation. It is in a different register, or of a different quality, than other lawyerly misconduct. The cases question whether, in the public interest, the profession can accept the continued licensing of a person who has shown himself to be willing to participate, for personal gain, in stealing someone else's money; does the member have the moral character to continue to be in a position of trust? To repeat the words of Sir Thomas Bingham M.R. in Bolton, at para. 16, the "character question" gets at "the need to maintain among members of the public a well-founded confidence that any solicitor whom they instruct will be a person of unquestionable integrity, probity and trustworthiness."
[79] The same sense of gravity reflected in the presumptive revocation penalty for dishonesty must be brought to bear on the assessment of the prejudice suffered by the lawyer as a result of the delay. The prejudice must be very serious.
[80] In my view, the majority did not pay sufficient attention to the statement of Bastarache J. at para. 122 of Blencoe: "the determination of whether a delay is inordinate is not based on the length of the delay alone, but on contextual factors, including the nature of the various rights at stake in the proceedings, in the attempt to determine whether the community's sense of fairness would be offended by the delay." In the case of mortgage fraud, the significant contextual factor is the presumptive penalty and the need to reassure the public of the integrity of the legal profession.
[81] The majority referred to several cases which, in my view, are unpersuasive authority for the proposition that a penalty short of revocation was called for.
[82] In Wachtler v. College of Physicians and Surgeons of the Province of Alberta, 2009 ABCA 130, 448 A.R. 317, the Council of the College found Dr. Wachtler guilty of unbecoming conduct concerning his drug-prescribing practices. The Council increased his suspension by two months from the penalty recommended by the Investigating Committee and required him to pay costs. In light of the 35-month delay, the Court of Appeal of Alberta set aside the two-month increase in the suspension and the costs award. The penalty imposed by the Council was not the termination of his licence to practise medicine, but what the College suggested was a "rehabilitative rather than a deterrent" penalty (at para. 43).
[83] The majority also cited Law Society of Upper Canada v. Marler, 2014 ONLSTH 203. The Hearing Division found the lawyer had committed professional misconduct, at para. 15, by "letting the [office] manager operate on his own with little or no direct supervision," which enabled the manager to steal over $600,000 in trust funds. The member did not personally engage in intentional misconduct. The delay in Marler was found to be seven years. The case slipped through the cracks because the Law Society was swamped by mortgage fraud claims (at para. 29). Both the Law Society and the member agreed that the delay along with several other strong mitigating factors should mitigate the penalty. The normal penalty was a suspension not revocation, and it was accordingly set "at the low end of the range", at 90 days (at para. 37).
[84] The majority also cited Law Society of Upper Canada v. Totera, 2014 ONLSTA 45, rev'd 2016 ONSC 1578, 347 O.A.C. 59 (Div. Ct.), a decision of the Appeal Division. The Divisional Court's reasons setting aside that decision were released March 8, 2016, after Appeal Division rendered its decision in this case. The allegation was that the member had knowingly participated in twelve fraudulent real estate transactions. The Hearing Panel found that the lawyer had not knowingly participated in mortgage fraud or failed to be honest or candid. It then dismissed the application on the basis of a five year delay. The Divisional Court set out the parties' positions, at para. 22:
The parties agree that there was inordinate delay, and the Law Society does not dispute that the public interest would not be compromised if the Disciplinary Proceeding against the Appellant were dismissed as the Hearing Panel concluded that the Appellant did not knowingly participate in mortgage fraud or fail to be honest or candid.
[85] The issue was whether the member had proven he suffered serious personal prejudice resulting from the delay under Blencoe. The Appeal Division seized on an error in the Hearing Panel's decision in which it stated that the member had not been cross-examined, and ordered a new hearing. However, the Divisional Court found that the Hearing Panel's failure to consider the member's cross-examination did not undermine its conclusion that the member "suffered serious psychological harm as a result of the delay in the investigation" (at para. 59). Accordingly, the Divisional Court set aside the Appeal Division's order and re-instated the Hearing Panel's dismissal of the prosecution based on Blencoe.
[86] The majority also cited the Law Society of Upper Canada v. Durno, 2015 ONLSTH 122, in support of the proposition that delay could result in a lesser penalty. The member admitted to knowingly assisting in mortgage fraud in eight real estate transactions. There were mitigating circumstances in addition to a delay of nearly a decade between the time the investigation started and its culmination, (there was an earlier application and an appeal that led back to the Hearing Division). Instead of revoking his licence, the Hearing Division permitted him to resign. In Durno, the Hearing Division emphasized, at para. 104, an important contextual point to which the majority in this case did not refer:
The appeal panel in Mucha acknowledged, at para. 30, that "the circumstances justifying permission to resign (which also results in a termination of licence) may be less exceptional than those that could ever justify a disposition that does not involve termination". [Emphasis in Durno.]
[87] The cases cited by the majority are all distinguishable and provide no guidance in a case where the presumptive penalty is licence revocation. Things are substantially different where the usual penalty is less than outright licence revocation. Totera was a straight application of Blencoe leading to dismissal for delay. In Durno the member would no longer be practising law.
[88] It is arguable that, under Blencoe, delay could mitigate the presumptive penalty of licence revocation if the delay amounts to an abuse of process. However, where there is a presumptive penalty of licence revocation, a member should be obliged to establish that the delay was so egregious and caused him such personal prejudice that revoking his licence to practise law would bring the regulatory system for lawyers into disrepute. The Hearing Division did not err by following Blencoe and insisting the penalty should be reduced only where the member could show that the delay was the cause of "substantial prejudice".
[89] In contrast to Blencoe, the majority of the Appeal Division considered that any prejudice to Mr. Abbott from the delay could give rise to a remedy and would have inferred prejudice from the delay (at para. 79), noting that Mr. Abbott "did not have to prove substantial prejudice to himself" (at para. 80). This was an error.
[90] In setting a penalty, the adjudicator should take into account in possible mitigation such factors as the Law Society's investigative and procedural delay, the prejudice to the interest of the public in a timely investigative and prosecutorial process, and to the interests of licensees more generally, to which the Appeal Division alluded. However, to convert a presumptive licence revocation into a lesser penalty that allows a member to continue to practise law requires egregious personal prejudice of the kind demanded by the Supreme Court in Blencoe as necessary to establish an abuse of process. As the Hearing Division found, this case does not meet that standard.
(iv) Concluding Observations on the Majority's Errors
[91] In my view, the Hearing Division did not make any palpable and overriding errors in apprehending the evidence, nor did it make any errors of law. Its reasons were reasonable in the sense expressed by the Supreme Court in Dunsmuir, at para. 47, in that they demonstrate "the existence of justification, transparency and intelligibility within the decision-making process." The Hearing Division's imposition of the presumptive penalty fell within the range of possible, acceptable and defensible outcomes that were open to it on the evidence.
[92] The findings of the Appeal Division that the Hearing Division made errors of law reflect its strong resolve to impose a lesser penalty than revocation on Mr. Abbott in order to send a message to the Law Society that delay is unacceptable, as the dissent pointed out. In doing so the Appeal Division exceeded its responsibility as an adjudicative body and misapprehended Blencoe. It did not defer to the Hearing Division but actively sought to subvert its reasoning, contrary to the Supreme Court's reasoning in Newfoundland Nurses. These were clear errors in principle.
D. Did the Divisional Court err in dismissing the Law Society's appeal of the Appeal Division's order?
[93] This court's approach in an appeal from the Divisional Court on an administrative law matter is to step into the shoes of the lower court and focus on the administrative decision: Groia, at para. 49; Ottawa Police Services v. Diafwila, 2016 ONCA 627, 352 O.A.C. 310, at para. 51.
[94] The question to ask is whether the Divisional Court identified the correct standard of review and applied it properly: see Agraira v. Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, [2013] 2 S.C.R. 559, at paras. 45-47. The court does not take the same approach as is does to an appeal from a lower court: Groia, at para. 54, citing Mouvement laïque québécois v. Saguenay (City), 2015 SCC 16, [2015] 2 S.C.R. 3, at paras. 29, 37-38 and 43.
[95] Acting as the appeal court, the Divisional Court is to apply a presumption of reasonableness to decisions of specialized professional disciplinary bodies like the Appeal Committee, as this court noted in Groia, at paras. 55-62, following Supreme Court jurisprudence post-Dunsmuir. But reasonableness review is not a rubber stamp.
[96] This court owes no deference to a decision of the Divisional Court on judicial review: Diafwila, at para. 51.
[97] In my view the Divisional Court erred in failing to apply the recognized principles of reasonableness review referred to earlier, to ensure that the Appeal Division deferred appropriately to the penalty decision of the Hearing Division, just as the court does with respect to the decisions of specialized professional disciplinary bodies. The errors in the Appeal Division's approach were laid out earlier and need not be repeated. The Divisional Court erred in failing to grapple with them. The Appeal Division's decision was unreasonable and the Law Society's appeal ought to have been allowed.
E. Disposition
[98] I would allow the appeal from decision of the Divisional Court, set aside the decision of the Appeal Division of the Law Society Tribunal on penalty and reinstate the penalty of licence revocation ordered by the Hearing Division, with costs payable to the Law Society fixed as agreed at $15,000 inclusive of disbursements and taxes.
Released: June 23, 2017
"P. Lauwers J.A."
"I agree. Robert J. Sharpe J.A."
"I agree. B.W. Miller J.A."
F. Appendix 'A' – Chronology
| Date | Description |
|---|---|
| Late 2006/Early 2007 | Eight transactions involving alleged mortgage fraud |
| February 22, 2007 | Bridgewater Bank, Mr. Abbott's client, advises him of its concerns of possible mortgage fraud involving two of the transactions |
| February 26, 2007 | Bridgewater complains to the Law Society |
| March 2007 | Law Society investigation authorized |
| April 19, 2007 | Law Society investigator requires production of Mr. Abbott's client files and trust ledgers |
| November 6, 2012 | Investigation report issued |
| April 9, 2013 | A notice of application for a determination by the Law Society Hearing Panel of whether the respondent had contravened s. 33 of the Law Society Act by engaging in professional misconduct |
| May 23, 2013 | Mr. Abbott moves for an order staying or dismissing the application for delay |
| August 18, 19, 20 and 21, 2014 | Hearing before the Hearing Division |
| October 10, 2014 | Decision of the Hearing Division |
| October 10, 2014 | Order of the Hearing Division dismissing Mr. Abbott's motion for an order staying or dismissing the application for delay |
| December 4, 2014 | Hearing Division's penalty submissions |
| January 22, 2015 | Hearing Division's penalty decision and order |
| March 24, 2015 | Appeal Decision Hearing |
| September 14, 2015 | Appeal Division decision and order allowing the appeal in part |
| January 5, 2016 | Divisional Court Hearing of the Law Society's appeal |
| February 10, 2016 | Divisional Court decision released |
| May 25, 2016 | Law Society's notice of appeal to the Court of Appeal |