THE REAL ESTATE COUNCIL OF ALBERTA

Transcription

1 THE REAL ESTATE COUNCIL OF ALBERTA IN THE MATTER OF Section 39(1)(b)(i), s.41 and s.47(1) of the REAL ESTATE ACT, R.S.A. 2000, c.r-5 AND IN THE MATTER OF a Hearing regarding the conduct of GARRY ROLAND HOLBROOK, registered at all material times with LEASECO REALTY INC., Brokerage Hearing Panel Members: Christine Zwozdesky, Chair Madeline Sarafinchan Julia Jones Appearances: Hearing Date: Paul Pidde, Legal Counsel, for Garry Roland Holbrook Leela Ramaswamy, for the Executive Director of the Real Estate Council of Alberta October 3, 2017 at the offices of the Real Estate Council of Alberta in Calgary, Alberta DECISION OF A HEARING PANEL ON CONDUCT DESERVING OF SANCTION AND DECISION ON SANCTION AND COSTS A. Introduction Mr. Holbrook admitted to engaging in conduct deserving of sanction. The parties provided the Hearing Panel with a signed Admission of Conduct Deserving of Sanction document that included a Schedule of Agreed Facts and Agreed Breaches. The document was dated October 3, 2017 and is attached to this Decision as Schedule A. The Notice of Hearing set out four allegations of conduct deserving of sanction. Mr. Holbrook admitted to the first three allegations and the Executive Director did not proceed with the fourth allegation. The parties also provided the Hearing Panel with a Joint Submission on Sanction document dated October 3, The document set out proposed sanctions and costs and an analysis of why the parties found them to be appropriate in the circumstances. The document is attached to this Decision as Schedule B. The conduct in question occurred from August to October, 2007 and involved a commercial property located at [( address )], [( City )], Alberta. 1

2 B. Hearing Panel Composition The parties did not object to the composition of the Hearing Panel. C. Issues The Hearing Panel was convened to decide whether the conduct admitted to by Mr. Holbrook constituted conduct deserving of sanction, and if so, whether the joint submission regarding sanction and costs is appropriate in the circumstances. D. Applicable Legislation and Rules Sections 46 and 47 of the Real Estate Act refer to situations where the Industry Member admits to conduct deserving of sanction, as follows: 46(1) An industry member may, at any time after the commencement of proceedings under this Part and before a Hearing Panel makes its findings in respect of the industry member s conduct, submit to the executive director a statement of admission of conduct deserving of sanction in respect of all or any of the matters that are the subject matter of the proceedings. (2) A statement of admission of conduct may not be acted on unless it is in a form acceptable to the executive director and meets any additional requirements set out in the rules. 47(1) If a statement of admission of conduct is accepted, the executive director shall immediately refer the matter to a Hearing Panel, and in that case the Hearing Panel shall deal with the matter as if it had been referred to it under section 39(1)(b). (2) If a statement of admission of conduct is accepted, each admission of conduct in the statement in respect of any act or matter regarding the industry member s conduct is deemed for all purposes to be a finding of the Hearing Panel that the conduct of the industry member is conduct deserving of sanction. Section 47(1) of the Real Estate Act above refers to section 39(1)(b), which states that the Executive Director may refer a matter to a Hearing Panel if the Executive Director determines there is sufficient evidence of conduct deserving of sanction. Mr. Holbrook agreed he breached sections 42(a), 54(3) and 55(1), of the Real Estate Act Rules. Those Rules are as follows: 42 Industry members must not: 2

3 (a) make representations or carry on conduct that is reckless or intentional and that misleads or deceives any person or is likely to do so; 54 (3) An industry member shall not provide any services to the client or potential client in a trade or anticipated trade in which the industry member has, or will have, a conflict of interest without receiving the written and informed consent of the party. Disclosure Requirements 55 (1) Before eliciting or as soon as possible upon receiving confidential information from any person concerning that person s real estate needs, motivation, financial qualifications or in any event before entering into a service agreement, an industry member must disclose in writing to that person: (a) the nature of the services the industry member will provide; (b) whether the industry member is acting in the trade or anticipated trade on behalf of any other person, in any capacity; (c) (d) any conflict of interest that may exist; and any other facts that may be likely to influence the person s decision. If breaches of the Real Estate Act or Real Estate Act Rules have been proven, section 43 of the Real Estate Act sets out the sanctions and costs that a Hearing Panel may order: Decision of Hearing Panel 43(1) If a Hearing Panel finds that the conduct of an industry member was conduct deserving of sanction, the Hearing Panel may make any one or more of the following orders: (a) an order cancelling or suspending any authorization issued to the industry member by the Council; (b) an order reprimanding the industry member; (c) an order imposing any conditions or restrictions on the industry member and on that industry member s carrying on of the business of an industry member that the Hearing Panel, in its discretion, determines appropriate; (d) an order requiring the industry member to pay to the Council a fine, not exceeding $25 000, for each finding of conduct deserving of sanction; 3

4 E. Exhibits (d.1) an order prohibiting the industry member from applying for a new authorization for a specified period of time or until one or more conditions are fulfilled by the industry member; (e) any other order agreed to by the parties. (2) The Hearing Panel may, in addition to or instead of dealing with the conduct of an industry member under subsection (1), order the industry member to pay all or part of the costs associated with the investigation and hearing determined in accordance with the bylaws. The following exhibits were entered at the Hearing: Exhibit 1: The Notice of Hearing document dated April 19, 2016 Exhibit 2: A binder that contained the following documents Tab 1 The Notice of Hearing document Tab 2 Admission of Conduct Deserving of Sanction with Schedule A Tab 3 Joint Submission on Sanction dated October 3, 2017 Tab 4 Broadfoot: Notice of Administrative Penalty # dated August 23, 2013, re: Howard John (Jack) Broadfoot Tab 5 Novick: Decision dated February 18, 2014 and Decision on Sanction and Costs dated May 31, 2014, James Novick Tab 6 Calma: Letter of Reprimand dated March 16, 2005, Edmar P. Calma Tab 7 R. v. Anthony-Cook: 2016 SCC 43, 2016 CSC 43 F. Additional Submissions made at Hearing Mr. Holbrook s counsel emphasized to the Hearing Panel that the lack of disclosure of the conflict of interest and the nature of the services to be provided, as well as the lack of consent of the purchaser for Mr. Holbrook to provide services when there was a conflict of interest, were not in writing. G. The Hearing Panel s Decision Pursuant to section 47(2) of the Real Estate Act, the admissions in the Admission of Conduct Deserving of Sanction document are deemed for all purposes to be a finding of this Hearing Panel and that conduct is conduct deserving of sanction. Accordingly, the Hearing Panel finds that Mr. Holbrook engaged in conduct deserving of sanction, specifically he breached: 1. Section 42(a) of the Real Estate Act Rules. In September 2007, Mr. Holbrook presented a post-dated Agreement of Purchase and Sale to the 4

5 purchaser. The post-dated Agreement, had it been signed before the post date, could have misled the existing tenant into believing the Agreement had been received after the tenancy and Right of First Refusal had expired. 2. Section 54(3) of the Real Estate Act Rules. Between August and October 2007, Mr. Holbrook provided services to the purchaser involving a trade in real estate, without first advising him of the conflict of interest that existed and without receiving the purchaser s written and informed consent before providing services. 3. Section 55(1) of the Real Estate Act Rules. Around August 2007, before eliciting confidential information from the purchaser about his real estate needs, motivation, and/or financial qualifications, Mr. Holbrook failed to disclose material facts in writing, including that his broker had a financial interest in the real estate trade and the nature of the services he would be providing to the purchaser. The Parties provided the Hearing Panel with a Joint Submission on Sanction document which proposed the following sanctions: A Letter of Reprimand for the breach of section 42(a); A fine of $3, for the breach of section 54(3); A fine of $3, for the breach of section 55(1); Completion of three educational courses: o Unit 4 of the Real Estate Associates Program (REAP) Consumer Relationships, o Unit 5 of REAP, Contract Law o Unit 12 of REAP, Ethics, Professionalism and Risk Reduction; and Costs of $ Regarding whether the proposed sanction and costs were appropriate in the circumstances, the Hearing Panel reviewed the factors to consider in disciplinary matters set out in Jaswal v. Newfoundland (Medical Board), [1996] N.J. 50 as follows: a. The nature and gravity of the proven allegations The Hearing Panel finds the nature and gravity of the admitted conduct to be serious. There was a clear conflict of interest that was not disclosed in writing and Mr. Holbrook failed to obtain written consent to provide services in the face of that conflict of interest. In addition, presenting the postdated Agreement could have misled a third party regarding its legal interest in the property which the Panel considers to be serious. 5

6 The Rules are enacted for public protection and to ensure the public s confidence in industry members regarding their dealings in real estate. Breaching these Rules undermines the integrity of the industry and brings the industry into disrepute. b. The age and experience of the industry member Mr. Holbrook now has 30 years experience in the industry and had 20 years experience when the breaches occurred. He had enough experience to know that the lack of written disclosure of the conflict of interest and failure to obtain written consent to provide services in the face of a conflict of interest was a serious breach as was the presentation of the post-dated Agreement for signature. c. The previous character of the offender and, in particular, the presence or absence of prior complaints or convictions Mr. Holbrook had no previous disciplinary history. d. The number of times the offence was proven to have occurred The conduct involved one incident. e. The role of the industry member in acknowledging what occurred Mr. Holbrook admitted to the conduct deserving of sanction at the outset and cooperated fully with the investigation. He also signed the Admission of Conduct Deserving of Sanction and the Joint Submission on Sanction. f. Whether the industry member had already suffered serious financial or other penalties as a result of the allegations having been made There was no evidence provided to the Hearing Panel of financial or other penalties suffered by Mr. Holbrook as a result of these allegations. g. Impact of the incident on the victim, in any There was no evidence provided to the Hearing Panel that the purchaser was negatively impacted. The Panel noted that the purchaser was a professional and had legal/advisors that he relied on during the process. The Panel did not find the purchaser to be a vulnerable party. h. Mitigating circumstances factors supporting leniency Mr. Holbrook admitted to the facts from the outset, cooperated with the investigation, had no disciplinary history, voluntarily entered into the Admission of Conduct 6

7 Deserving of Sanction and Joint Submission on Sanction, sparing the complainants from having to testify, all of which the Hearing Panel considers to be mitigating circumstances. i. Aggravating circumstances - factors supporting a stronger penalty The requirement for conflict of interest disclosure to be in writing is important and serious and the lack of written disclosure is a serious breach of the Rules. Also, Mr. Holbrook ought to have known better given his age and experience. j. The need to promote specific and general deterrence and thereby protect the public and ensure the safe and proper conduct of the profession Specific deterrence is the concept that the sanction imposed should have the effect of discouraging the individual from engaging in misconduct in the future. The Panel found specific deterrence to be of minimal concern in the circumstances because of Mr. Holbrook s response to the investigation, his cooperation with the investigation and his admission to the conduct and agreeing to the sanctions. General deterrence is the concept that the punishment imposed should have the effect of discouraging others from engaging in similar misconduct. The Panel found general deterrence to be important in the circumstances as written disclosure rules affect the integrity of the industry and give the public confidence in their dealings with the industry. k. The need to maintain the public s confidence in the integrity of the profession The Panel finds this is an important aspect to be considered in these circumstances. Written disclosure and consent to provide services in situations where there is a clear conflict of interest, is a foundation for maintaining the public s confidence and the integrity of the profession. It is an important cornerstone for ensuring confidence and integrity and any breach must be taken seriously. In addition, presenting information, a representation, that will likely mislead a person regarding their interest in a property, is dishonest which seriously affects the public s confidence and integrity of the profession. The Panel acknowledges there were mitigating circumstances regarding this conduct and representation but finds it is an important factor when considering appropriate sanctions. l. The degree to which the offensive conduct that was found to have occurred was clearly regarded, by consensus, as being the type of conduct that would fall outside the range of permitted conduct 7

8 A failure to disclose a conflict of interest in writing and presenting misleading information is a serious breach and there was consensus that this conduct falls outside the range of permitted conduct. m. The range of sentence in other similar cases. The Parties provided three cases for the Hearing Panel to consider as precedents in determining the appropriate sanction. They are summarized and considered by the Hearing Panel as follows: Broadfoot Three Notices of Administrative Penalty: Howard John (Jack) Broadfoot, Royal LePage Noralta Real Estate, August 23, 2013 Case# Mr. Broadfoot, on three separate occasions with three separate clients, breached Sections 41(d) and 54(3) of the Real Estate Act Rules. Section 41(d) was regarding his failure to fulfill his fiduciary duty owed to his clients and Section 54(3) was regarding the failure to receive written and informed consent from his clients when he had a conflict of interest. He received a $6, Administrative Penalty for each incident. Mr. Broadfoot was a real estate broker who represented clients listing their properties through the brokerage. It was important to the clients that their properties be sold as they had entered into fixed contracts for the purchase of a new property. Through the brokerage, the clients entered into a Guaranteed Sales Program where a third party company agreed to purchase the property at a fixed price if the brokerage was unable to sell the property. One of the owners of the brokerage was also the owner of the third party company. Mr. Broadfoot never advised the clients in writing of the conflict and never obtained the clients written and informed consent before representing them in the sale of their properties. There was also a term in the Guaranteed Sales Agreement that the third party company may elect not to purchase the property. Mr. Broadfoot did not advise his clients to seek independent advice, nor did he point out this term. The Hearing Panel finds that this case was relevant and comparable as both industry members breached section 54(3). In the Broadfoot case, there was an additional breach of fiduciary duty, section 41(d), which the Panel considers to be very serious. The nature of the breach was more serious in the Broadfoot case, as was the impact 8

9 on the complainants. These differences are properly addressed in the proposed sanction of $3, compared with the $6, imposed in the Broadfoot case. Novick Decision dated February 18, 2014 and Decision on Sanction and Costs dated May 31, 2014 Re: James Novick Mr. Novick breached seven sections of the Real Estate Act Rules: 62(2)(a), 62(2)(c), 62(2)(e), 54(3), 53(c), 41(d) and 42(a) during one real estate trade where his brokerage acted for a client in selling his property and Mr. Novick entered into an Agreement to purchase that property. Mr. Novick was fined a total of $22, ($7, each for the breach of Rules 41(d) and 42(a) and $1, for each of the other five breaches) plus he was ordered to complete two educational courses and ordered to pay costs of $17, Mr. Novick failed to disclose the conflict of interest and failed to disclose that he had direct knowledge of the seller s confidential information. Mr. Novick had not obtained written and informed consent of the client nor did he provide an opportunity for the client to obtain independent legal advice. The Panel finds that Mr. Novick s conduct involved more serious breaches of the Real Estate Act Rules and more breaches of the Rules than Mr. Holbrook. In both instances Rules 54(3) and 42(a) were breached and for these two breaches Mr. Novick received a total fine of $9, Mr. Novick did not take responsibility for his conduct and caused delays in the investigation and hearing process which is different from how Mr. Holbrook responded to the allegations and investigation. For these reasons, the Panel found that the sanction ought to be significantly less for Mr. Holbrook. The Board finds that a sanction of $3,000.00, when the circumstances of each case is compared, is reasonable. The costs awarded in the Novick case were $17, because there was a full hearing and a preliminary application initiated by the industry member which was denied. In addition, the Industry Member did not cooperate, delayed the proceedings and refused to sign an Agreed Statement of Facts with respect to facts he did not contest at the hearing. The Panel finds that this is not comparable to the facts involving Mr. Holbrook and therefore significantly less costs of $1, are appropriate in the circumstances. Calma The third case provided to the Hearing Panel was a Letter of Reprimand re: Edmar P. Calma dated March 16, 2015, Case#

10 Mr. Calma breached section 42(a) of the Real Estate Act Rules and received a Letter of Reprimand from the Executive Director. Mr. Calma was aware that his clients had informed the bank that the down payment funds were a gift. When the receipt of those funds were delayed he lent the funds to his client and did not confirm with his client that the bank had been advised of this change in circumstances. The Panel finds that the proposed Letter of Reprimand for Mr. Holbrook for the breach of section 42(a) would be consistent with the circumstances and sanction in the Calma case. Regarding the proposed sanction and costs, the Panel finds the joint submission submitted by the Parties was consistent with previous sanctions in similar cases with similar breaches of the Real Estate Act Rules. In addition, a review of the Jaswal factors confirms the proposed sanction and costs are appropriate in the circumstances. Finally, the educational courses Mr. Holbrook proposes to complete, align with the breaches and will address specific deterrence matters in the circumstances. H. Conclusion Pursuant to section 47(2) of the Real Estate Act, the Hearing Panel has determined that Mr. Holbrook engaged in conduct deserving of sanction. For the reasons set out in this decision, the Hearing Panel makes the following orders pursuant to section 43 of the Real Estate Act: A Letter of Reprimand for the breach of section 42(a); A fine of $3, for the breach of section 54(3); A fine of $3, for the breach of section 55(1); Completion of three educational courses: o Unit 4 of the Real Estate Associates Program (REAP) Consumer Relationships, o Unit 5 of REAP, Contract Law o Unit 12 of REAP, Ethics, Professionalism and Risk Reduction; and Costs of $1, This Decision is certified and dated this 8th day of November, Christine Zwozdesky, Hearing Chair 10