Law Society of Ontario v. Nguyen, 2022 ONSC 2858

CITATION: Law Society of Ontario v. Nguyen, 2022 ONSC 2858 DIVISIONAL COURT FILE NO.: 549/20 DATE: 2022/05/18

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT Backhouse, Lederer, Davies JJ.

BETWEEN:

LAW SOCIETY OF ONTARIO Applicant (Respondent in Appeal)

– and –

TANG TRANG NGUYEN Respondent (Appellant)

COUNSEL: Tanus Rutherford, for the Applicant (Respondent in Appeal) Mark A. Russell, for the Respondent (Appellant)

HEARD: April 19, 2022

Lederer J.

Introduction

[1] The Law Society of Ontario (the Respondent) obtained an order revoking the licence of Tang Trang Nguyen (the Appellant) to practice law on the basis that he knowingly assisted clients in mortgage fraud. Tang Trang Nguyen appeals those findings and the revocation of his licence.

[2] In 2010, the Law Society commenced an application to the Law Society Hearing Panel for a determination that Tang Trang Nguyen had engaged in professional misconduct when acting on 12 real estate transactions. The Law Society alleged that Tang Trang Nguyen had:

• knowingly assisted in dishonest fraudulent conduct by his vendor and purchaser clients (breaching subrule 2.02(5) of the Rules of Professional Conduct),
• failed to be honest and candid when advising his lender clients (breaching subrules 2.02(1) and 2.04(6,1)),
• acted for multiple parties without adequate disclosure or consent from his lender clients (breaching subrules 2.04(3), (6) and (8)), and
• failed to serve his lender clients to the standard of a competent lawyer (breaching subrule 2.01(2).

[3] It has taken some time and a lengthy process to get from that beginning to this appeal:

1. A hearing before the Law Society Hearing Panel, heard beginning on November 29, 2010 and continuing over 25 hearing days between that day and June 13, 2012 with Reasons for Decision delivered on January 25, 2013.
2. A hearing before the Law Society Hearing Panel, heard on April 1 and 2, 2013 with Reasons for Decision on Penalty and Costs delivered on June 13, 2013.
3. A hearing before the Law Society Tribunal, Appeal Division, heard on February 11, 2014 with Reasons for Decision delivered on July 17, 2014.
4. A hearing (an appeal) before the Divisional Court, heard on November 18, 2015 with oral reasons delivered on that day.
5. A hearing before the Law Society Tribunal, Hearing Division (the name of the Hearing Panel having been changed), heard beginning on September 12, 2016 and continuing over 24 hearing days between that day and August 16, 2017 with Reasons for Decision delivered on April 11, 2018.
6. A hearing before the Law Society Tribunal, Hearing Division (a request for a stay or adjournment, and submissions as to Penalty and Costs), heard on September 4 and 5, 2018.
7. A hearing before the Court of Appeal (a motion to extend the time to seek leave to appeal the decision of the Divisional Court), heard on October 11, 2018 with Reasons for Decision delivered on that day.
8. The hearing as to penalty and costs having been conducted on September 4 and 5, 2018, Reasons for Decision on Penalty and Costs delivered by the Law Society Tribunal, Hearing Division on November 26, 2018.
9. A hearing before the Law Society Tribunal, Appeal Division, heard March 10 and 11, 2020 with Reasons for Decision delivered on April 30, 2020.

[4] The core issue in this appeal is how the issue of Tang Trang Nguyen’s credibility should have been dealt with in the various proceedings that have taken place.

Background

Hearing #1

[5] At the first hearing, the one heard by the Law Society Hearing Panel, Tang Trang Nguyen was acquitted of all charges of knowing assistance and failure to be honest and candid. However, the Panel found he had fallen below the applicable professional standards on two transactions. On one of them he was found to have been duped by an unscrupulous client. His mistakes were in negligence, not knowing assistance or deceit.

[6] The Law Society Hearing Panel found Tang Trang Nguyen to be credible in the evidence he provided. His testimony was “clear and concise” and given without “equivocation or evasions”[^1]. It was not alleged that Tang Trang Nguyen had devised a fraud against his lender clients. What was alleged was that he knowingly assisted a client’s fraud of those lenders. In such circumstances his state of mind is to be taken as separate from that of the client. The Hearing Panel found that Tang Trang Nguyen “did not deliberately deceive his lender clients and did not fail to be honest and candid in the advice given to them”[^2]. He had an “innocent mind”[^3] and believed that his lender clients already had the information (“the material facts”) he acknowledged he was aware of but did not pass on to them.[^4]

Hearing #1 (Penalty)

[7] At the second of the hearings and proceedings listed, the Law Society Hearing Panel considered what penalty should be imposed with respect to the failure of Tang Trang Nguyen to act within the applicable professional standards. The Panel ordered that Tang Trang Nguyen be reprimanded and undergo a practice review.

Appeal #1

[8] The Law Society appealed the dismissal of the allegations of misconduct and the penalty imposed. This appeal is the third of the hearings and proceedings referred to. The Law Society Tribunal, Appeal Division granted the appeal. It found that the Hearing Panel had made two fundamental errors of law. First, the Hearing Panel erred in its definition of fraud. This error raised concern over the analysis and determination that Tang Trang Nguyen had not knowingly assisted fraud or failed to be on guard against any fraud. Second, the Hearing Panel had erred in holding that Tang Trang Nguyen had no obligation to disclose material facts to his lender clients because he “believed” those clients already knew those facts. This error suggested that Tang Trang Nguyen had failed to properly serve his lender clients by not disclosing those material facts to them. As a result of these errors a new hearing, before a differently constituted panel, was ordered.

[9] Although the Hearing Panel’s treatment of credibility “[did] not ultimately affect [the] conclusions on the merits of the appeal”, the Appeal Division expressed concern over how the Hearing Panel approached its findings of credibility.[^5] It highlighted two of the reasons the Hearing Panel gave for finding Tang Trang Nguyen to be a credible witness. In coming to this conclusion, the Hearing Panel had relied on the understanding that upon being asked, Tang Trang Nguyen had promptly provided his files and that he did not gain anything from the transactions other than his modest fees. The Hearing Panel had asked itself why he would risk his licence to practice law for only modest fees.[^6] The Appeal Division observed that “it cannot be said merely fulfilling this obligation [to provide files when asked] weighs in favour of accepting a licensee’s evidence” and noted that “[t]he case law is clear that lawyers may knowingly participate in fraud while only benefiting from the fraud through customary fees.” As found by the Appeal Division: “[t]he implicit suggestion that a lawyer would never risk a finding of professional misconduct for modest fees is not supportable”.[^7]

[10] The Appeal Division outlined that the “primary tool in deciding credibility should be a very close analysis of the evidence on the disputed facts in question”:[^8]

Opportunities for knowledge, powers of observation, judgment and memory, ability to describe clearly what he has seen and heard, as well as other factors, combine to produce what is called credibility…

The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions….

Again a witness may testify what he sincerely believes to be true, but he may be quite honestly mistaken….[^9]

[11] Contrary to the submissions made by counsel for Tang Trang Nguyen, the Appeal Division did not accept the credibility findings made by the Hearing Panel. Rather the Appeal Division expressed serious concerns regarding the credibility findings that had been made even though, in the end, those concerns had no impact on the overall determination of the appeal.

Divisional Court

[12] Tang Trang Nguyen did not accept the decision of the Appeal Division. He appealed that decision to the Divisional Court. This is the fourth of the hearings noted earlier in these reasons. The Divisional Court considered the substantive errors, as found by the Appeal Division (referred to by the court as the Appeal Panel). The Court found that the Appeal Division had properly stated the test for fraud and reasonably stated a lawyer’s disclosure obligation.[^10]

[13] The Court agreed with the Appeal Division that the Hearing Panel had erred when it found fraud is unproven, even where there is dishonesty as to the material fairness of the transaction, if there is no intent to deprive the lender of money.[^11] The Court also agreed that it is not enough to excuse the failure of the lawyer to disclose material facts to a lender where he believes, on reasonable grounds that the lender was already aware of those facts.[^12] It is only if the lawyer actually knows that the lender is aware that the lawyer is excused from disclosure. Thus, insofar as the merits were concerned the Divisional Court agreed with the Appeal Division.

[14] The Divisional Court was asked to and did go further. The appellant, Tang Trang Nguyen, argued that the decision of the Appeal Division was “permeated with re-appraisals of fact and credibility.”[^13] The Divisional Court did not agree and went on to confirm the concern with the findings of fact and credibility that had been made by the Hearing Panel:

As the Appeal Panel noted in paras. 4 and 5 of the Decision, quoted above, it found the errors of law went to the heart of the Hearing Panel’s understanding of the issues before it and rendered the factual findings unsafe. This conclusion was reasonable.[^14]

[Emphasis added]

[15] The idea that the factual findings made by the Hearing Panel were unsafe went to the heart of the Divisional Court’s upholding of the Appeal Division’s determination that a new hearing was required:

In our view the Appeal Panel did consider the effect of the Hearing Panel’s errors on the overall decision and concluded that the Hearing Panel’s decisions respecting the impugned transactions were unsafe and would have to go back for a new hearing.[^15]

[16] The import of this determination is that, in this case, the facts, the merits and the findings of fact with respect to each of them are inexorably connected.

Hearing #2

[17] The appeal having been dismissed by the Divisional Court, the process moved to the second hearing before what had, by that time, been renamed as the Law Society Tribunal, Hearing Division. The hearing was equally long as the first one had been but the result was entirely different. With the corrected understanding of what constituted fraud and the proper appreciation of the obligation of a lawyer to disclose material facts to his or her client being applied to the circumstances of Tang Trang Nguyen, the Hearing Division came to a different appreciation of his actions and what those actions said about his conduct and credibility.

[18] The Hearing Division addressed the first of the errors raised by the decision of the Appeal Division. It explained the revised understanding of what constitutes fraud:

Fraud is defined as a dishonest act that leads to deprivation. Deprivation includes either an actual loss or a risk of loss to the victim’s financial interests.[^16]

The crime of fraud consists of dishonest deprivation. The dishonesty may involve… outright deceit, falsehoods or other fraudulent means. Non-disclosure of important facts may constitute fraudulent means. Deprivation caused by prohibited dishonesty may consist in actual loss or the placing of the victim’s pecuniary interests at risk.[^17]

[Emphasis added by the Hearing Division]

Mortgage fraud typically occurs when individuals intentionally borrow money under false pretenses. Fraud need not involve actual loss by the lender, as long as economic interests are placed at risk through dishonesty… Fraud occurs where there is dishonesty about the underlying material facts of the transaction.[^18]

[Emphasis added by the Hearing Division]

Fraud occurs when the lender is misled about the material features of the transaction.[^19]

[19] Understood in this way it becomes clear that the question of whether Tang Trang Nguyen “knowingly” assisted in the conduct of the fraud had to be re-examined. The Appeal Division took account of what is understood to be included in this criterion:

The term “knowingly” refers to subjective knowledge on the part of the lawyer.

The well-established jurisprudence holds that subjective knowledge includes actual knowledge, willful blindness or recklessness.[^20]

[20] What this made plain was the need to reconsider the evidence (what was said by Tang Trang Nguyen) in the context of this revised understanding of the constituents of participation in a fraud. To accept the credibility assessment and factual findings as made by the Hearing Panel (the first hearing) would ignore the concerns expressed by the Appeal Division and fail to acknowledge the finding of the Divisional Court that accepting the factual findings of the first hearing would be “unsafe”. I repeat that in the circumstances, it is not possible to separate a consideration of the legal errors identified by the Appeal Division from the concerns raised as to the credibility assessment and factual findings made as part of the decision of the Hearing Panel following the first hearing.

[21] The Hearing Division, at its second hearing, turned its mind to the second error identified by the Law Society Tribunal, Appeal Division. The Hearing Division knew and accepted that a lawyer who acts for the purchaser in a residential real estate transaction involving a mortgage most often also acts for the lender. Faced with “red flags of fraud” (that is indicators that suggested the presence of fraud) or other facts that may be material to the lender, the lawyer (in this case Tang Trang Nguyen), as the solicitor acting for the lender, is obligated to make the appropriate inquiries and draw them to the attention of the lender. If not acting for the lender, the lawyer is still obliged to make appropriate inquiries and refuse to continue to act for the client if there is not a satisfactory explanation for the apparent indicators (the “red flags”) of fraud. The Hearing Division understood that a lawyer is not relieved of his or her duty to disclose material facts because of a reasonable belief that the client already knows the information.[^21] Actual knowledge is required.

[22] This required the Hearing Division to reconsider the evidence of Tang Trang Nguyen in the context provided by this fresh understanding of the obligation owed by him to his lender clients. Again, it would not be possible to separate the credibility of that evidence and the factual findings based on it, from the application of a proper understanding of the legal principals involved.

[23] At the second of the hearings conducted by the Hearing Division, the Law Society of Ontario alleged that, between August 1998 and June 2007, Tang Trang Nguyen engaged in professional misconduct in connection with 10 real estate transactions. The decision of the Law Society Tribunal, Hearing Division reviewed each of them. A general review of the 10 transactions revealed many features that the Law Society identified, and the Hearing Division accepted, as “flags of fraud”:

• In all of the transactions, on closing, the purchasers did not contribute funds or had contributed only very nominal funds to the purchase of the property.
• In seven transactions, deposits were not put into a trust account or paid to a realtor, as would be the usual practice. Instead, deposits were said by the parties involved to have been made in cash or paid directly to the vendor. Tang Trang Nguyen had failed to verify that any deposit was paid.
• In seven transactions, extra or undocumented deposits or credits to the purchaser were said to have been paid or allowed, without such payments being verified by Tang Trang Nguyen. These extra credits to the purchaser were not reflected in the Agreements of Purchase and Sale.
• In five of the transactions, undocumented loans from the purchaser to the vendor reduced the balance due on closing to zero and in two of the transactions excess funds remained.
• In four transactions, Tang Trang Nguyen acted for all three parties (vendor, purchaser and lender) without advising the lender.
• In at least four transactions, the purchasers and vendors had non-arms-length relationships.
• In three transactions, mortgage proceeds or proceeds of sale were paid to third parties who had no apparent connection to the transaction and no apparent entitlement to the funds.
• In four transactions, to determine the balance payable by the purchaser, the vendor’s solicitor performed a “reverse” calculation using information from the purchaser’s solicitor about the exact amount of the mortgage advance and the purchaser’s closing costs (legal fees and disbursements). Thus, the “balance due on closing” was calculated by subtracting the entire mortgage proceeds less expenses of the sale from the sale price, in order to reduce any balance payable by the purchaser to zero or a negligible amount.[^22]

[24] The Law Society Tribunal, Hearing Division reviewed each of the 10 impugned transactions. This review revealed serious shortcomings in the actions of Tang Trang Nguyen that were not identified as such in the initial review undertaken at the first hearing.[^23] This occurred, in large part because the legal premises against which his actions were measured were different. Where initially a finding of fraud was understood to require an actual loss and a belief that the client was already aware of any material fact was enough to excuse a failure to inform the client of that fact, the evidence by Tang Trang Nguyen was accepted as justifying the action taken. Under the corrected understanding of fraud and the obligations of a lawyer, what had been a justification became something less. The impact and standing of these explanations required re-evaluation. In the normal course, such a re-evaluation would naturally include an examination of the credibility of Tang Trang Nguyen. In this case it was required. The consideration of credibility undertaken by the first Hearing Panel was, itself, flawed. As the Law Society Tribunal, Appeal Division found, that consideration had relied on factors that could not properly contribute to such an analysis. The fact that Tang Trang Nguyen responded quickly to a request for his files and received only a modest fee for his work do not assist in a determination of credibility, what was required was a careful analysis of the evidence.

[25] The decision of the Law Society Tribunal, Hearing Division (the second of its hearings) demonstrates that analysis.[^24] It found that:

• Tang Trang Nguyen repeatedly sought to provide explanations and excuses for his serious failures to disclose material information to the lenders. However, his explanations were not credible; they are self-serving and not supported by any documentation or realistic inquiries or investigations;
• in every transaction, Tang Trang Nguyen’s evidence about what occurred was unlikely and inconsistent with the probabilities;
• all the transactions display disturbingly similar patterns and multiple red flags of fraud;
• in seven of the transactions there was no evidence that a deposit had been paid and no evidence of any effort was made by Tang Trang Nguyen to obtain confirmation of a deposit;
• it was not credible that Tang Trang Nguyen had received verbal assurances of payments from his vendor and purchaser clients and yet made no effort to verify the alleged deposits, and, then, failed to advise his lender clients of a concern in this regard.[^25]

[26] In his submissions, counsel for Tang Trang Nguyen submitted that the mens rea requirement to demonstrate fraud was absent. What motivated Tang Trang Nguyen was not an intention to mislead or a wilful disregard for his duty and obligations. As he understood it, all that happened was consistent with the practices, values and workings of the Vietnamese community which his practice served and which he was a member of. The submission was made in furtherance of demonstrating that Tang Trang Nguyen did not “knowingly” assist in any fraud. It’s not that the Hearing Division did not consider this perspective but it determined that this did not assist Tang Trang Nguyen. Rather it confirmed concern for his credibility. Tang Trang Nguyen was a seasoned practitioner, who had dealt with hundreds of real estate transactions in the course of his career. He was educated and trained in Ontario and was aware of the normal requirements of a real estate practice. Tang Trang Nguyen knew that “[a] community’s practices do not change what is material to a lender client.” His reliance on what was acceptable practice in the Vietnamese community as justifying his actions was not credible.

[27] In summary, the Law Society Tribunal, Hearing Division, at its second hearing found that Tang Trang Nguyen was:

• responsible for knowingly participating in fraud;
• failed to be honest and candid and failed to disclose material information to his client;
• had acted in a conflict of interest in four transactions by acting for all parties – purchasers, vendors and lenders – without making adequate disclosure to the lender; and
• failed to serve his lender clients to the standard of a competent lawyer, by failing to make disclosure of material facts and by failing to make reasonable inquiries about the unusual features of the transactions.[^26]

Steven Nguyen

[28] I have not yet referred to Cuong The Nguyen (identified in the Record and at the hearing of this appeal as Steven Nguyen). He plays an important role in this case.

[29] Steven Nguyen and Tang Trang Nguyen are not related personally but have a professional relationship. Like Tang Trang Nguyen, Steven Nguyen is a real estate lawyer in Toronto. Like Tang Trang Nguyen, he was described as working primarily in the Vietnamese community. They were both involved in some of the cases that were reviewed, by the Hearing Panel, in the case concerning Tang Trang Nguyen. Like Tang Trang Nguyen, the Law Society brought discipline proceedings against Steven Nguyen. The Law Society alleged that Steven Nguyen had participated or assisted in fraudulent conduct in relation to eight transactions over a two-and-a-half-year period, between 2006 and 2009. There was a hearing before the Hearing Panel. Tang Trang Nguyen was a witness at this hearing as was Steven Nguyen at the first of the two hearings, by the Hearing Division, concerning Tang Trang Nguyen. In a decision released on April 16, 2016 which is to say approximately three years after the first Hearing Panel decision considering the actions of Tang Trang Nguyen, the Hearing Panel considering the case of Steven Nguyen found that the Law Society had failed to prove the eight transactions were fraudulent. The Hearing Panel did find Steven Nguyen guilty of professional misconduct in relation to seven of the eight transactions. He had failed to advise his lender clients of certain material facts in relation to the transactions. The Hearing Panel suspended Steven Nguyen for two months. The Law Society Tribunal, Appeal Division, in a decision dated April 27, 2016, allowed, in part, an appeal by the Law Society of the Hearing Panel’s decision. In doing so the Appeal Panel found that the Hearing Panel erred in law in its definition of fraud and that this error tainted its analysis of the evidence. As a result, the Appeal Panel set aside the Hearing Panel’s findings and ordered a new hearing with respect to six of the eight impugned transactions. To this point the similarity in the cases of Tang Trang Nguyen and Steven Nguyen is hard to miss. Like Tang Trang Nguyen, Steven Nguyen appealed the decision of the Appeal Division to the Divisional Court and, again, like the appeal of Tang Trang to the Divisional Court, the Court dismissed the appeal.[^27]

[30] This is where the two cases diverge. Unlike Tang Trang, Steven Nguyen appealed the decision of the Divisional Court to the Court of Appeal. At the Divisional Court there had been a dissenting judgment. The dissenting judge noted that the use of the wrong definition of fraud did not automatically taint the factual and credibility findings and render the ultimate decision in error:

However, even accepting that the Hearing Panel’s analysis of the actus reus element of fraud was flawed, that does not lead inexorably, as the Appeal Panel found that it did, to the conclusion that the ultimate decision of the Hearing Panel is equally flawed and irretrievably tainted.[^28]

[31] As understood by counsel for Tang Trang Nguyen, the Court of Appeal upheld the dissent.[^29] The Court did make note of the dissent:

The dissenting judge accepted the majority’s conclusions on the definition of mortgage fraud. However, he concluded that, even though the Hearing Panel’s legal analysis of mortgage fraud was flawed, it did not automatically follow that the Hearing Panel’s factual findings relating to the appellant’s mental state were irretrievably tainted. To find the appellant guilty of mortgage fraud, it was necessary to find that he was aware of, wilfully blind or reckless to the fraud. On the basis of the Hearing Panel’s factual findings concerning the investigations the appellant conducted, and his state of mind, it would be impossible to conclude that he knew or was wilfully blind or reckless to a fraud that put the lender’s financial interests at risk.[^30]

[32] But its decision rests more on its own analysis than a simple acceptance of what the Hearing Panel had found. The Court of Appeal reviewed the six transactions which were the foundation for the Appeal Division’s order that there should be a new hearing and the findings made by the Hearing Panel with respect to each of them. It found that even though it agreed with the Appeal Division’s articulation of the test for mortgage fraud, it did not agree that it was reasonable to order a new hearing.[^31] The Appeal Division had distinguished participation in mortgage fraud from the failure to live up to the standard of the reasonable practitioner. To be found to have participated in mortgage fraud, a lawyer had to be “aware of, wilfully blind or reckless to the fraud.” This is nothing more or less than the Court of Appeal repeating the requirement that to be found to have participated in a fraud a lawyer has to “knowingly” assist his or her client in the fraud. The Court of Appeal concluded that “[n]one of the shortcomings in the legal test for mortgage fraud that the Hearing Panel applied undermined its finding that Steven Nguyen was not aware of, wilfully blind or reckless to any fraud.”[^32] The Court found that Steven Nguyen did not “knowingly” assist in any fraud. In so doing it relied on the dissenting judge’s understanding of the evidence and actions of Steven Nguyen:

There was no suggestion that the appellant was himself engaged in a fraudulent endeavour, that is, that he was an active participant in some plan to mislead the lenders. Indeed, there does not appear to be any evidence that the parties to the underlying real estate transactions were engaged in any such fraudulent conduct. The question was whether the appellant had, in some fashion, participated, or assisted, the perpetration of a fraud by intentionally withholding information from his lender clients. The evidence is clear that the appellant was alert to this possibility. Indeed, it was the appellant’s concern that the parties might be involved in a fraudulent transaction, and his recognition of the “red flags,” that led him to make the inquiries that he did regarding the credits so as to satisfy himself that the parties were acting honestly.[^33]

[33] As a result, there could be no finding that Steven Nguyen had participated in a fraud. The rationale upon which the Appeal Division had ordered a new hearing was that the Hearing Panel, having misunderstood the constituents of fraud, had so skewed the evidence as to whether Steven Nguyen had participated in fraud that a further hearing was required. Based on the determination of the Court of Appeal the order for a new hearing was set aside.

Hearing #2 (motion for a stay)

[34] The Court of Appeal decision in the case of Steven Nguyen was released on August 13, 2018. This was after the decision of the second hearing of the Hearing Division in the case of Tang Trang Nguyen (April 11, 2018), but before the release of its decision as to the resulting penalty. The hearing with respect to penalty was conducted on September 4 and 5, 2018. It was the sixth of the proceedings listed at the outset of these reasons. At that time counsel for Tang Trang Nguyen requested a stay or adjournment. As a result of the decision of the Court of Appeal in the case of Steven Nguyen, counsel wished to move to extend the time to seek leave to appeal the decision of the Divisional Court, made three years earlier, and to seek leave to bring that appeal. The stay was refused.[^34]

[35] The decision of the Law Society Tribunal, Hearing Division dealing with penalty and costs was released on November 26, 2018. It ordered that the licence of Tang Trang Nguyen be revoked.

Court of Appeal (motion to extend time)

[36] In the meantime, on October 11, 2018, a motion was taken before the Court of Appeal asking that the time to seek leave to appeal the decision of the Divisional Court made on November 18, 2015 be extended to ask that Court to account for the decision made, by the Court of Appeal, in the case of Steven Nguyen. This was the seventh of the listed proceedings. The motion was refused; the rehearing had taken place, no intention to appeal had been formulated until after the passage of several years and to reopen the case would “obliterate the principle of finality, and…bring the administration of justice into disrepute.”[^35]

Appeal #2

[37] This left the matter to be the subject of an appeal of the Hearing Division’s second hearing to the Law Society Tribunal, Appeal Division. This is the last of the proceedings listed at the outset of these reasons. That decision was delivered on April 30, 2020.

[38] The substance of the appeal concerned the findings of fact and credibility that had been made at the second of the hearings of the Hearing Division:

Before us the Lawyer’s primary ground of appeal arises out of the different findings of fact and credibility made by the second hearing panel, as compared to those of the first hearing panel. He argues that the findings of fact and credibility made by the first hearing panel should either have bound the second hearing panel, or in the alternative, should have at least been considered by it.[^36]

[39] This appeal did not just seek to set aside the decision made by the Hearing Division at its second hearing, but also the first appeal and its determination that the Hearing Panel at its first hearing had erred in law as to its findings of credibility, the constituents of fraud and the obligation on lawyers acting on real estate transactions. These were findings that had already been upheld by the Divisional Court. There had been no appeal from the decision of the Divisional Court.

[40] There were two subsidiary issues raised on the appeal as to the merits of what the Hearing Division had determined at its second hearing:

Did the hearing panel apply an incorrect test for mortgage fraud and knowing assistance in fraudulent or dishonest conduct?

Did the hearing panel err in its findings of fact and credibility so that those findings were reasonable?

[41] The problem was the same. Tang Trang Nguyen was trying to re-litigate the same issues that had been decided in the first appeal to the Appeal Division and confirmed by the Divisional Court. The understanding of these issues, utilized by the Hearing Division at its second hearing, flowed directly from the decision of the Appeal Division made in response to the Hearing Division’s first hearing. This is another attempt to have the Appeal Division reconsider its own rulings, rulings that had been the subject of the appeal heard and determined by the Divisional Court.

[42] Not surprisingly the Appeal Division dismissed each of these grounds for appeal. In that decision (the second appeal) the Appeal Division says the following:

In our view, an order for a new hearing results in an entirely new hearing, and the second hearing panel was not bound to consider any of the findings of fact and credibility made by the first hearing panel.[^37]

[43] This is correct. To argue otherwise is to suppose that when a new hearing is ordered, the parties are left to disaggregate the decision and evidence of the proceeding which is the subject of the new hearing to determine which parts the appeal tribunal agreed with and are, thus, not to be the subject of the rehearing. As for the two subsidiary questions the Appeal Division noted:

The hearing panel provided careful and extensive reasons correctly setting out the applicable legal principles and explaining its findings of fact and credibility, which are supported by the evidence.^38

[44] This stands as complete answer where the objection is to principles enunciated by the Appeal Division in an earlier appeal and adopted by the Hearing Division in a subsequent hearing which is the subject of the current appeal.

Analysis (this Appeal)

[45] Nonetheless, the Notice of Appeal that brings the matter to this Court demonstrates a further attempt to go back to the findings made in the Hearing Division’s first decision. It asks for the following:

1. An Order that the Order of the Law Society Hearing Panel dated June 13, 2013, be affirmed;
2. In the alternative, that the Divisional Court make the Order that ought to have been made by applying the factual findings from the first Hearing Panel to determine whether Tang Trang Nguyen committed professional misconduct as set out in the Notice of Application LCN 03/10;
3. In the further alternative, an order remanding the hearing to a differently-constituted Hearing Panel to determine, in consideration of the factual findings of the first Hearing Panel, whether Tang Trang Nguyen committed professional misconduct as set out in the Notice of Application LCN 03/10.

[46] The request to go back to the first decision and set to the side everything that has happened since begs for an answer to the question: what is this position founded on? As I perceive it, this is part of a continuing effort to find a way to have the dissenting decision in the case involving Steven Nguyen, and its adoption by the Court of Appeal, applied to this case. The argument is that the Appeal Division, in considering the first decision of the Hearing Division, did not set aside the findings of fact or credibility made by the Hearing Division and based on the reasoning from the Court of Appeal in the case of Steven Nguyen those findings were not “tainted” by the errors of law and should be left to stand. The argument is that the application of the facts as found by the first Hearing Panel to a proper understanding of the legal principles involved (the constituents of fraud and the duty of the lawyers) would produce the same result as they had in the case of Steven Nguyen: Tang Trang Nguyen should not be found to have assisted a fraud, although, in some transactions, he fell below the standard expected of a practicing lawyer. On this theory, his licence to practice would not have been revoked.

[47] This approach cannot stand. The fundamental premise on which it is based is wrong. The findings of the first appeal rest on errors of law made by the Hearing Panel. When the factual findings made at the first hearing of the Hearing Panel are applied to the corrected statements of the law, a determination that Tang Trang Nguyen did not assist in fraud and did not fail in his duty to advise his clients of material facts cannot be sustained. The Hearing Panel found that Tang Trang Nguyen did not deliberately deceive his lender clients.[^39] This does not consider that a proper understanding of “knowingly assisted” includes “wilful neglect”. The evidence demonstrated that there were indicators that Tang Trang Nguyen should have recognized as raising the possibility of the presence of fraud.[^40] The Hearing Panel said that on a close examination, it found fraudulent activity in only one of the twelve transactions.^41 But it proceeded on an incorrect understanding of what constitutes fraud. I repeat what was said earlier, it found fraud was unproven, even where there was dishonesty as to the material features of the transaction, if there was no intent to permanently deprive the lender of money. However, properly understood, “[f]raud occurs when the lender is misled about the material features of the transaction.”[^42] When the facts, as found by the Hearing Panel, are applied to the correct understanding of the applicable legal principles, it is apparent that Tang Trang Nguyen wilfully ignored red flags that lenders were being misled as to material facts and in so doing assisted in fraud; fraud that was established by the facts as found by the Hearing Panel.

[48] At the first hearing Tang Trang Nguyen acknowledged that he had not provided information to clients when he “believed” they already knew those facts. Understanding that “belief” was not enough to relieve Tang Trang Nguyen of his responsibility to advise his clients of material facts exposes the error in the decision made at the first hearing. Even if the facts as found by the Hearing Panel could be reinstated, the findings made by the Hearing Panel would still be wrong because the Hearing Panel’s understanding of the legal principles involved was wrong. This understanding confirms the observation made by the Appeal Division in the first appeal. Its decision did not turn on concerns about the credibility findings that had been made by the Hearing Division.

[49] Even if this was not the case, it would not matter. It remains the case that the assessment of credibility and the resultant findings of fact as found by the Hearing Panel following its first hearing are not to be taken as reliable. Contrary to the position taken by counsel for Tang Trang Nguyen, the Appeal Division, in the first appeal, expressed concern over how the Hearing Panel had approached these issues, a concern that was repeated by the Divisional Court when it found that that the factual findings that had been made by the Hearing Division at its first hearing were “unsafe”. These concerns were substantiated by the fact and credibility findings made by the Hearing Division at its second hearing.

[50] The Court of Appeal when it was asked to extend the time for considering leave to appeal the decision of the Divisional Court made note of the need for finality in proceedings dealt with by the Court and the abuse of process that can occur when that principle is not met. In this case the actions of Tang Trang Nguyen have been the subject of a long, careful and comprehensive process. A decision was made, concerns were raised and a new hearing ordered; that decision was the subject of a further appeal which confirmed the initial errors and the need for a new hearing. There was a new hearing and a second appeal. To set all this aside and go back to the findings made at the first hearing would as the Court of Appeal observed “obliterate” the principles it referred to, finality and abuse of process.

[51] It is not for this Court to comment on the circumstances in the case concerning Steven Nguyen; however, the facts and evidence involved were found by the Hearing Division, when it was asked to stay the penalty portion of its second hearing, to be “different.” There was no strong likelihood that it would be a legal precedent binding on the case of Tang Trang Nguyen. The Court of Appeal when asked to extend the time to seek leave to appeal the decision of the Divisional Court noted that the decision it had made in the case of Steven Nguyen was available to assist in any further appeal to the Appeal Division but noted the position of the Law Society that the decision in the case of Steven Nguyen provided no applicable authority.[^43]

[52] The case of Steven Nguyen was reviewed by the Appeal Division as part of the second appeal. Relying on the Court of Appeal’s decision, it was submitted on behalf of Tang Trang Nguyen that it was an error to have conducted an entirely new hearing. The Appeal Division found that a new hearing is just that. There is no deference or adherence to be given to what was determined at the first hearing. The reason for the new hearing is that there were errors in the first one. There is no rational basis for sustaining anything from something that was fundamentally flawed. The Divisional Court said as much when it refused to accept the submission made on behalf of Tang Trang Nguyen that the Appeal Panel’s decision on the first appeal was “permeated with re-appraisals of fact and credibility” and “found that the errors of law went to the heart of the Hearing Panel’s understanding of the issues before it…”[^44]

[53] The Appeal Division did suggest that there had been opportunities within the process where the relationship of the factual findings to the legal principles involved could have been raised in furtherance of warranting what is now sought, being the acceptance of the facts as found by the Hearing Panel at its first hearing:

It was certainly open to [Tang Trang Nguyen] to have argued before the appeal panel that, despite the errors, a new hearing was unnecessary because the findings of fact and credibility made by the first hearing panel would have dictated the same result even without the errors. It does not appear he did so.[^45]

Again, it was open to [Tang Trang Nguyen] to have argued before the Divisional Court that a new hearing was unnecessary despite the legal errors.[^46]

[54] Hindsight tends to be clearer but one has to wonder whether, in these circumstances such an approach would have succeeded.

[55] It could also be said that Tang Trang Nguyen could have, as Steven Nguyen did, appealed the decision of the Divisional Court to the Court of Appeal. There is no purpose in speculating as to the possible result. The facts remain. The cases are not the same. In one case the Court of Appeal found that Steven Nguyen was “not aware of, wilfully blind or reckless to any fraud.” The Court found that he did not “knowingly” assist in any fraud. In the case of Tang Trang Nguyen, the Divisional Court found the findings of fact made by the Hearing Division “unsafe” and the subsequent second hearing by the Hearing Division found there was an array of indicators of fraud (“red flags of fraud”) that led to a finding that he knowingly assisted in fraud. There is no reason to accept the facts as found by the first Hearing Panel would have been sustained if the decision of the Court of Appeal in the case of Steven Nguyen had been brought to bear. Even if they had, as noted above, it was the errors of law that were the root of the concern. With the facts as established at the first hearing of the Hearing Panel applied to the correct appreciation of the legal principles involved, the answer would have been the same. Tang Trang Nguyen assisted in fraud and failed in his duty to his clients by failing to advise them of the material facts.

Penalty

[56] Revocation of the licence to practice is the presumptive penalty where the licensee has knowingly assisted in fraud. Counsel on behalf of Tang Trang Nguyen submitted that note should be taken of the “divergent credibility findings” in the two hearings of the Hearing Division. In this situation there are no “divergent credibility findings”. There is only one credibility finding consistent with a proper understanding of the legal principles involved. What appeared as explanations in the context of the misapprehended understanding of the legal principles in the first hearing became excuses for wrongful acts in the face of the correct understanding of the applicable law in the second hearing. Making excuses leads to concerns for the credibility of the person providing them. There are no exceptional or compelling circumstances that would allow this Court to set aside the penalty that has been imposed.

Conclusion and Costs

[57] For the reason reviewed, the appeal is dismissed.

[58] As agreed to by the parties, costs to the Law Society of Ontario, as the successful party, in the amount of $18,000

Lederer, J.

I agree _______________________________

Backhouse, J.

I agree _______________________________

Davies, J.

Released: May 18, 2022

CITATION: Law Society of Ontario v. Nguyen, 2022 ONSC 2858

DIVISIONAL COURT FILE NO.: 549/20

DATE: 2022/05/18

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT Backhouse, Lederer, Davies JJ.

BETWEEN:

LAW SOCIETY OF ONTARIO Applicant (Respondent in Appeal)

– and –

TANG TRANG NGUYEN Respondent (Appellant)

REASONS FOR JUDGMENT

Lederer, J.

Released: May 18, 2022

[^1]: Law Society of Upper Canada v. Tang Trang Nguyen 2013 ONLSHP 16, 2013 ONLSHP 0016 at para. 500 #1(Hearing #1).

[^2]: Ibid at para.6

[^3]: Ibid at para. 501

[^4]: Ibid at paras. 16 and17

[^5]: Law Society of Upper Canada v. Nguyen, 2014 ONSLTA 32 at para. 29 (Appeal #1)

[^6]: Law Society of Upper Canada v. Tang Trang Nguyen, supra (fn.1) at para. 500 #4 and #7 (Hearing #1) quoted at Law Society of Upper Canada v. Nguyen, ibid at para. 30 (Appeal #1)

[^7]: Ibid at para. 32

[^8]: Ibid at para. 32

[^9]: Faryna v. Chorny 1951 252 (BC CA), [1952] 2 DLR 354 at pp. 356-357 (B.C.C.A.) quoted ibid at para. 31

[^10]: The Law Society of Upper Canada v. Nguyen 2015 ONSC 719 at para. 3 (Div. Ct.)

[^11]: Ibid at para. 3 quoting Law Society of Upper Canada v. Nguyen, supra (fn. 5) at para. 18 (Appeal #1)

[^12]: Ibid at para. 3 quoting Law Society of Upper Canada v. Nguyen, supra (fn. 5) at para. 19 and 20 (Appeal #1)

[^13]: Ibid at para. 10

[^14]: Ibid at para. 10

[^15]: Ibid at para. 13

[^16]: Law Society of Upper Canada v. Nguyen, 2018 ONLSTH 45 at para. 37 (Hearing #2) relying on R. v. Theroux [1993] 2 S.C.R. 5 at p. 20, 1993 134

[^17]: Ibid at para. 38 quoting Law Society of Upper Canada v. Hatcher 2012 ONSLAP 27 at para. 23

[^18]: Ibid at para. 40) quoting Law Society of Upper Canada v. Nguyen, supra (fn. 5) at paras 8 and 9 (Appeal Division)

[^19]: The Law Society of Upper Canada v. Nguyen, supra (fn. 10) at para. 3 (Div. Ct.)

[^20]: Law Society of Upper Canada v. Nguyen, supra (fn. 16) at paras. 50 and 51 (Hearing #2)

[^21]: Ibid at paras. 48, 49 and 54-59

[^22]: Ibid at paras. 1, 13-20 and 72-84

[^23]: Ibid at paras. 113, 119, 124, 125, 126, 134 (Transaction #1: 13-15 Columbus Avenue, Toronto); para. 140 (Transaction #2: 708-51 Baffin Court, Richmond Hill); paras. 149, 156, 159, 160, 165 (Transaction #3: Charcoal Way, Brampton); paras. 176, 179, 191, 192, 196, 199 (Transaction #4: 60 Rutherford Road, Brampton); para. 200, 201, 206, 208, 209, 213 (Transaction #5: 58 Muirland Crescent, Brampton); 227, 228, 231 (Transaction #6: 5 Moncrieff Drive, Toronto); paras. 238, 249, 252, 258 (Transaction #7: Brandy Crescent, Vaughan); paras. 270, 278, 280 (Transaction #8: 1619 Weston Road, Toronto); paras. 291, 297, 298, 301 (Transaction #9: 38 Walwyn Ave., Toronto) and paras. 314-316 (Transaction #10: 27 Richvale Drive South, Brampton)

[^24]: Ibid at paras. 318-334

[^25]: Ibid at paras. 318, 319, 323, 324, 326

[^26]: Ibid at paras. 335, 340, 344, 350

[^27]: Law Society of Upper Canada v. Nguyen, 2017 ONSC 5431 (Steven Nguyen, Div. Ct),

[^28]: Ibid at para. 79

[^29]: Factum of the Appellant at para. 28

[^30]: The Law Society of Upper Canada v. Nguyen, 2018 ONCA 709 at para, 15 (Steven Nguyen, C.A.)

[^31]: Ibid at para. 38

[^32]: Ibid at para. 42

[^33]: Ibid at para. 43 quoting from Law Society of Upper Canada v. Nguyen, supra (fn. 27) at para. 81

[^34]: Law Society of Ontario v. Nguyen, 2018 ONLSTH 157 (Hearing #2, penalty)

[^35]: The Law Society of Upper Canada v. Tang Trang Nguyenheard October 11, 2018, unreported (Court of Appeal, Docket M49686))

[^36]: Law Society of Ontario v. Nguyen 2020 ONLSTA 10 at para. 5 (Appeal #2)

[^37]: Ibid at para. 6

[^39]: Law Society of Upper Canada v. Tang Trang Nguyen, supra (fn. 1) at para. 6 (Hearing #1)

[^40]: Ibid at para. 502

[^42]: Law Society of Upper Canada v. Nguyen, 2014 ONLSTA 32 at para. 18 (Appeal #1)

[^43]: The Law Society of Upper Canada v. Tang Trang Nguyen, supra (fn. 39) at para. 4 (C.A.):

The moving party is free to challenge the outcome of the rehearing through the appellate process established for that purpose. To the extent that a recent decision of this court may assist, he is entitled to rely on that authority. I note that the respondent argues that the recent authority does not exist.

[^44]: The Law Society of Upper Canada v. Nguyen, supra (fn. 10) at para. 10 (Div. Ct.)

[^45]: Ibid at para. 34

[^46]: Ibid at para. 36