A real estate broker was permitted to keep his registration where a brokerage loses its registration due to the conduct of the broker

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While it may seem an odd result at first blush, the recent decision of the Court of Appeal clearly explains how this was one of the possible appropriate outcomes.

In Baxter v. Ontario (Real Estate and Business Brokers Act Registrar), 2012 ONCA 543, the Court of Appeal looked at whether a Licence Appeal Tribunal member had erred in deciding not to revoke the registration of a broker whose conduct had caused the Tribunal member to decide that the registration of his brokerage should be revoked. The broker had acted for all parties in nine or ten transactions in which a sophisticated investor dictated how the broker would be involved, such as not to show the property or post signs on the properties and the properties were resold at an inflated value within a short period of time. The broker was found to have had a serious lack of understanding of his duties and failed to turn his mind to the mortgage fraud. The Tribunal member held that the broker should have been suspicious and should have performed the duties expected to represent all of the parties in the transactions.

Whether a broker or brokerage are entitled to registration depends on whether the legal test set out under s.10(1)(a) of the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C, is met. That test is whether past conduct affords reasonable grounds to believe that the broker or brokerage will not carry on business in accordance with law and with integrity and honesty. For the brokerage, you look to the past conduct of the officers and directors of the brokerage, which includes the broker of record for the brokerage. For the broker, you look to the past conduct of the broker. In this case, it was the same person and same conduct. The difference is in the nature of the business that is carried on by the broker and the brokerage. A brokerage has greater responsibilities than a broker such as accounting and supervision of salespersons. Due to the difference between the “business” of a broker and a brokerage, the Tribunal could make a different finding for the broker and brokerage. The Tribunal was required to and did consider both the revocation-related and general past conduct which included mitigating factors such as complete co-operation with the investigation, the lack of any effort to mislead the investigators, and 31 years of involvement in the industry with no complaints of prior fraudulent conduct.

The wording of the written decision of the Tribunal member was also attacked on the appeal. The Tribunal’s written decision was described by the Court of Appeal as including “poorly worded findings” and there were comments that portions of the written decision “could have been clearer”. The Tribunal member used “to conclude” instead of “for belief” in discussing the legal test, but this was held to be a use of the term “conclude” in the “vernacular sense” as a synonym for “belief” rather than an indication that the Tribunal member did not understand the legal test or applied the wrong test. The written decision was found to be adequate.