IN THE SUPREME COURT OF BRITISH COLUMBIA

Transcription

1 IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Between: And Westergaard v. Registrar of Mortgage Brokers, 2010 BCSC 912 Keith Bryan Westergaard and GET Acceptance Corporation Registrar of Mortgage Brokers (W. Allan Clark) and the Financial Services Tribunal Date: Docket: S Registry: Vancouver Petitioners Respondents - and - Between: And Registrar of Mortgage Brokers Docket: S Registry: Vancouver Petitioner Keith Bryan Westergaard, GET Acceptance Corporation and the Financial Services Tribunal Respondents Before: The Honourable Mr. Justice Pitfield Reasons for Judgment

2 Westergaard v. Registrar of Mortgage Brokers Page 2 Counsel for the Petitioners, Westergaard and GET Acceptance Corporation: (Action No. S097393) Counsel for the Respondents, Westergaard, Get Acceptance Corporation: (Action No. S098048) Counsel for the Respondents, Registrar of Mortgage Brokers and Financial Services Tribunal: (Action No. S097393) and Counsel for the Petitioner, Registrar of Mortgage Brokers: (Action No. S098048) D.J. Manson J.W. Zaitsoff J.G. Penner S.A. Jackson No other appearances. Place and Date of Trial/Hearing: March 23-25, 2010 Place and Date of Judgment: Vancouver, B.C. June 29, 2010

3 Westergaard v. Registrar of Mortgage Brokers Page 3 Introduction [1] These petitions result from a single decision of the Financial Services Tribunal (the FST ) dismissing Mr. Westergaard s appeal from a decision of the Registrar of Mortgage Brokers (the Registrar ). After a hearing, the Registrar cancelled Mr. Westergaard s registration as a submortgage broker under the Mortgage Brokers Act, R.S.B.C. 1996, c. 313 (the MBA ), and prohibited him from applying for registration for a period of five years from February 18, [2] Both petitions are concerned with the impact of s. 22(7) of the MBA on hearings directed to the question of whether an applicant should be registered under the MBA. In broad terms, the section and the petitions are concerned with the use, if any, that may be made of information known to the Registrar for more than two years prior to the issue of the notice of hearing to inquire into an applicant s suitability for registration under the MBA: 22(7) A proceeding under this Act may not be commenced more than 2 years after the facts on which the proceeding is based first came to the knowledge of the registrar. [3] The Registrar s petition claims that the FST improperly determined that s. 22(7) restricts the facts on which the Registrar may rely in making a decision regarding registration. Mr. Westergaard says that the FST properly determined that s. 22(7) restricts the facts which may be considered, but improperly determined that answers to questions asked of Mr. Westergaard at the hearing in respect of matters of which the Registrar had been aware for more than two years represented new facts to which s. 22(7) did not apply. [4] The Registrar s Petition seeks a declaration that s. 22(7) of the MBA does not apply to suitability hearings conducted under the MBA. Among other things, the Westergaard Petition seeks an order quashing the FST decision and directing the Registrar to register him as a submortgage broker.

4 Westergaard v. Registrar of Mortgage Brokers Page 4 The Statutory Scheme [5] Section 4 of the MBA governs the registration and the renewal of registration of mortgage and submortgage brokers: 4. The registrar... (a) (b) (c) must grant registration or renewal of registration to an applicant if in the opinion of the registrar the applicant is suitable for registration and the proposed registration is not objectionable, must not refuse to grant or refuse to renew registration without giving the applicant an opportunity to be heard, and may, in the registrar's discretion, attach to the registration or renewal of registration terms, conditions or restrictions the registrar considers necessary. 8 (1) After giving a person registered under this Act an opportunity to be heard, the registrar may do one or more of the following: (a) (b) (c) (d) suspend the person s registration; cancel the person s registration; order the person to cease a specified activity; order the person to carry out specified actions that the registrar considers necessary to remedy the situation; if, in the opinion of the registrar, any of the following paragraphs apply: (e) (f) (g) (h) (i) the person would be disentitled to registration if the person were an applicant under section 4; the person is in breach of this Act, the regulations or a condition of registration; the person is a party to a mortgage transaction that is harsh and unconscionable or otherwise inequitable; the person has made a statement in a record filed or provided under this Act that, at the time and in the light of the circumstances under which the statement was made, was false or misleading with respect to a material fact or that omitted to state a material fact, the omission of which made the statement false or misleading; the person has conducted or is conducting business in a manner that is otherwise prejudicial to the public interest;

5 Westergaard v. Registrar of Mortgage Brokers Page 5 (j) the person is in breach of a provision of Part 2 or 5 of the Business Practices and Consumer Protection Act prescribed under section 9.1 (2). [6] If the Registrar refuses to grant or refuses to renew registration after giving the applicant an opportunity to be heard, the applicant may appeal to the FST, constituted under the Financial Institutions Act, R.S.B.C. 1996, c A decision of the FST is subject to judicial review. On judicial review, the court may grant any relief that the applicant for judicial review would be entitled to obtain in a proceeding for mandamus, prohibition or certiorari, or relief by way of declaration or injunction, or both, in relation to the exercise, refusal to exercise, or proposed or purported exercise of a statutory power: Judicial Review Procedure Act, R.S.B.C. 1996, c. 41, s. 2(2). Background [7] There is agreement between the parties with regard to the following facts. [8] With brief exceptions, Mr. Westergaard was a registered submortgage broker to various mortgage broker companies in British Columbia from 1972 through From 1996 to 1998, he was the designated individual, which I take to mean the responsible individual, for Aaron Acceptance Corporation ( Aaron BC ), a company controlled by Mr. Westergaard and registered as a mortgage broker under the MBA. [9] On June 16, 1998, Mr. Westergaard terminated his registration and that of Aaron BC under the MBA. He moved to Alberta and carried on business as a mortgage broker in that province in conjunction with Aaron Acceptance Corporation ( Aaron Alberta ) which he also controlled. [10] On June 1, 2001, the Registrar told Mr. Westergaard that he must apply for registration as a submortgage broker in British Columbia on behalf of Aaron Alberta because that company was offering mortgages for sale in the Province. Mr. Westergaard applied forthwith as directed. The Registrar s staff conducted an investigation and recommended that Mr. Westergaard not be registered because he was not a suitable candidate and his registration was objectionable. The Registrar

6 Westergaard v. Registrar of Mortgage Brokers Page 6 issued a notice of hearing on April 11, 2002, so that Mr. Westergaard could be heard as contemplated by s. 4(b) of the MBA. A suitability hearing was scheduled for September 14, The reason for the lengthy interval between the issue of the notice and the proposed hearing date is not evident from the material provided on this application. [11] Sometime in 2003, Mr. Westergaard directly or indirectly purchased the shares of GET Acceptance Corporation ( GET ), another British Columbia company which was registered as a mortgage broker under the MBA on June 16, Mr. Westergaard was and is that company s sole director and its designated individual. [12] Mr. Westergaard entered into negotiations with the Registrar regarding his 2001 application to be licensed as a submortgage broker. On August 22, 2003, the Registrar agreed to approve his application for registration subject to a number of conditions. The suitability hearing scheduled for September 14, 2003 was cancelled. [13] Mr. Westergaard agreed to the conditions and on August 29, 2003, he was registered as a submortgage broker for a one-year term instead of the customary two years. His registration was renewed for a further term of one year on August 29, 2004, subject to the same conditions. [14] On July 28, 2005, Mr. Westergaard applied for renewal of his registration without conditions. On August 29, 2005, the Registrar granted the renewal for a period of two years but refused to remove the conditions. Mr. Westergaard appealed the Registrar s decision to the FST. The FST ruled that the Registrar had not followed the appropriate registration process and remitted the issue of registration to the Registrar to be dealt with at Mr. Westergaard s option either by way of a renewal application or a fresh registration application. [15] On April 6, 2006, Mr. Westergaard applied for renewal of his submortgage broker registration in accordance with the directive from the FST. The Registrar s staff embarked upon an investigation and, in due course, Mr. Westergaard was

7 Westergaard v. Registrar of Mortgage Brokers Page 7 advised by notice of opportunity to be heard dated January 15, 2007, that the Registrar was considering making an order suspending or cancelling Mr. Westergaard s registration as a submortgage broker pursuant to s. 8 of the MBA, or denying Mr. Westergaard s application for renewal of his registration as a submortgage broker. The Registrar issued a notice of hearing on March 20, 2007, and an amended notice of hearing on June 15, The suitability hearing proceeded over 13 days commencing September 10, [16] The notice of hearing issued by the Registrar to Mr. Westergaard, GET, another individual, and another corporation, alleged the following facts in relation to Mr. Westergaard s suitability for registration: 12. That Westergaard is not suitable for registration and his proposed registration is objectionable for the following reasons: He was the sole director and officer of Aaron Acceptance Corporation ("Aaron"), which was a registered mortgage broker, and was a registered submortgage broker with Aaron. Aaron had three monetary judgments awarded against it which remain outstanding. Two of those judgments related to mortgages brokered by Aaron which were found to be unconscionable. Westergaard has indicated that he is not willing to pay those judgments, as he feels he has no personal liability with respect to them. In an application to the Registrar for registration as a submortgage broker dated June 1, 2001, Westergaard stated that there were no pending legal proceedings against him. He further stated that no judgment, which is unsatisfied, had ever been rendered against him personally or against any business of which at the time he was an officer or director in any civil court in British Columbia for any reason whatsoever. Contained in the application is the following warning: ANY APPLICATION CONTAINING A FALSE STATEMENT MAY RESULT IN THE REFUSAL, SUSPENSION OR CANCELLATION OF ANY LICENCE OR REGISTRATION. At the time of this application, there was at least one pending legal proceeding against Westergaard: White v. Aaron Acceptance Corporation et al. In addition, there were three unsatisfied judgments outstanding against Aaron, a company at which time Westergaard was both an officer and director. Subsequent to his registration on various conditions effective August 29, 2003, Westergaard has employed an unregistered submortgage broker, Iantorno, to work for GET as its general manager. Further,

8 Westergaard v. Registrar of Mortgage Brokers Page 8 Westergaard has failed to ensure that clients of GET receive proper disclosure with respect to the conflict of interest of Iantorno and with respect to whether mortgages being sold to lenders have previously been in arrears. [17] An amended notice of hearing was issued on June 15, The allegations in relation to Westergaard were not revised. The hearing proceeded as planned commencing in September On February 18, 2008, the Registrar issued a ruling cancelling Mr. Westergaard s registration effective February 28, 2008, and imposing a condition that he not apply for registration before February 18, In ruling as he did, the Registrar determined that s. 22(7) did not apply to the assessment of an applicant s suitability under ss. 4 or 8(1) of the MBA. [18] On February 19, 2008, Mr. Westergaard and GET appealed to the FST from the Registrar s decision. Mr. Westergaard disputed the Registrar s conclusion that s. 22(7) did not constrain the assessment of suitability. After considering written submissions, the FST released its decision on September 5, 2009, dismissing Mr. Westergaard s appeal from the Registrar s finding that he was unsuitable for registration and that his proposed registration was objectionable. In its reasons, the FST concluded that the Registrar erred in holding that s. 22(7) did not apply to suitability hearings, but concluded that sufficient facts had come to the Registrar s knowledge within the two-year period to justify commencement of the hearing and the Registrar s determination that Mr. Westergaard s registration should be cancelled. In response to the FST ruling, Mr. Westergaard filed a petition for judicial review on October 8, The Registrar s petition disputing the application of s. 22(7) was filed on November 3, [19] The decision of the Registrar, affirmed by the FST, to cancel Mr. Westergaard s registration as a submortgage broker was stayed by order of this court on October 14, 2009, pending disposition of his petition for judicial review. The stay remains in effect.

9 Westergaard v. Registrar of Mortgage Brokers Page 9 The FST Decision [20] The FST determined that it should consider the questions of fact and law before the Registrar on the basis of reasonableness, but issues of statutory interpretation, on the basis of correctness. [21] The FST concluded that s. 22(7) was broad enough to apply to a registration proceeding initiated by an applicant and not restricted to proceedings commenced or initiated by the Registrar: I conclude that a suitability hearing under s. 4 of the Act is a proceeding under the Act. I also find that s. 22(7) applies to proceedings under s. 4. As a consequence, a proceeding under this Act may not be commenced more than two years after the facts on which the proceeding is based first came to the knowledge of the registrar and I am satisfied the evidence support the fact that this Hearing commenced on January 15, I base my decision on the analysis stated above, but I apply the greatest weight to two considerations: an overall reading of s. 22 as the context for s. 22(7); and to the submission that applying s. 22(7) to s. 8(1)(a) disciplinary hearing, but not s. 4, could result in absurd outcomes. In my overall reading of s. 22 I find the careful limitations placed on other sub-sections of s. 22 references an offense lead me to conclude the same careful consideration was applied to s. 22(7) where no qualification was attached to proceedings. I find this reinforced by s. 7(1)(a) coupled with s. 7(6) of the Act. (Ruling FST , p. 49) [22] The FST then addressed the mixed questions of fact and law and, in the context of the Westergaard judicial review, framed that issue as follows: Whether, based on the facts which the Registrar was entitled to consider, [the delegate] erred in determining Westergaard was not suitable for registration as a submortgage broker in British Columbia and his registration was objectionable. (Ruling FST , p. 49) [23] The FST reproduced the following paragraphs of the Registrar s ruling: As I have concluded that [Westergaard] is not credible, I have no difficulty in finding that he deliberately attempted to mislead the [registrar] with respect to unsatisfied judgments on his June 1, 2001 application for registration, updated on August 22, 2003, which still contained inaccurate statements about these judgments. So the registration that was granted on August 29, 2003, and in effect today, was at least partially based on misinformation. He

10 Westergaard v. Registrar of Mortgage Brokers Page 10 has also attempted to mislead this tribunal [Hearing] about the status of unsatisfied judgments against his company Aaron [BC].... I am of the opinion that [Westergaard] is not suitable to be registered under the Act as the above described behaviour demonstrates his lack of sufficient honesty, integrity and professionalism. He has accepted secret commissions. He has not complied with the requirements the requirements of the Act by employing an unregistered submortgage broker for a second time. He has circumvented the Act's registration and disclosure requirements. He was less than forthright in his testimony during the tribunal [Hearing] on several matters. Disclosure is a fundamental requirement of the Act and [Westergaard] has on numerous occasions misstated the facts and/or failed to disclose what he should have disclosed not only to the public but to his regulator. His outright refusal to satisfy judgments in the circumstances outlined and in particular his deliberate attempt to mislead this tribunal [Hearing] and falsely allege malpractice of his former lawyer for his own benefit, leaves me little alternative but to conclude that his registration would be objectionable. (Ruling FST , pp. 49, 50) [24] The FST summarized Mr. Westergaard s position that the Registrar had erred in reasoning as he did: by finding Westergaard was not suitable for registration as a submortgage broker with conditions based on the pre-2003 facts known to the registrar when registering Westergaard as a submortgage broker with conditions on August 29, 2003; in finding that the post-2003 facts found by the Registrar were sufficient a basis on which to find Westergaard was not suitable for registration as a submortgage broker with or without conditions; in holding that it was a relevant consideration when considering Westergaard's suitability that Westergaard was not prepared to pay liabilities which he was not personally liable to pay as a matter of law; in holding it was a relevant consideration when considering Westergaard's suitability that 22 years earlier he had pled guilty to a criminal offense for which he had been pardoned; and in finding that GET and Westergaard were responsible for the activities of a submortgage broker [Iantorno] employed by another mortgage broker [Get-BC] when the submortgage broker was performing the function of the other mortgage broker. [25] Having determined that s. 22(7) applied to a suitability hearing, the FST addressed the question of what constituted new facts which could be considered by the Registrar, as distinct from more-than-two-year-old-facts which could not be considered. The FST determined that the following were new facts:

11 Westergaard v. Registrar of Mortgage Brokers Page 11 Mr. Westergaard and GET had employed one Iantorno as a submortgage broker when Iantorno was not registered as a submortgage broker to GET; At the suitability hearing, Mr. Westergaard confirmed his refusal to accept responsibility for the discharge of business-related judgments obtained by third parties against Aaron BC several years before August 2003 in respect of unconscionable mortgages; Correspondence first produced at the suitability hearing contradicted a statement made by Mr. Westergaard to the Registrar in relation to the registration proceeding regarding the status of outstanding judgments against Aaron BC; and Answers provided by Mr. Westergaard to questions pertaining to events that occurred more than two years before issue of the notice of hearing undermined his credibility. [26] After discussing the new facts, the FST stated its conclusion: Based only on the aforementioned new facts, I am satisfied that the Registrar had reasonable cause to conclude Westergaard is not credible; that his August 22, 2003 revised application contained inaccurate statements and that he mislead the Hearing, as well as the Registrar in 2003, about the status of unsatisfied judgments. The events leading up to the Appeal describe a strongly linked and appropriately sequenced series of events: an application for registration; granting of registration subject to conditions; an appeal to the Financial Services Tribunal concerning the conditions; a decision of the Tribunal giving rise to a hearing under section 4 of the Act; and the subsequent hearing under section 4. These can all be traced to the appeal of the conditions attached to Westergaard's registration. It would seem not only logical, but essential, that a hearing arising so directly from an appeal concerning the conditions attached to a registration should permit questions relating to the initial factors giving rise to the Conditions. In the course of the Hearing the Registrar was provided an opportunity to receive evidence, some more than two years past the date it became known to the Registrar, but nevertheless essential to her understanding of the roots of the original conditions and Westergaard's attitude towards these issues in order to determine if the conditions should be removed. If one were to conclude the Registrar could not at least question Westergaard in relation to these facts known for more than two years - in this case facts that gave rise

12 Westergaard v. Registrar of Mortgage Brokers Page 12 to the Conditions Westergaard sought to have removed - then it would be extremely difficult for the Registrar to reach a well-reasoned decision and, I suggest, difficult for Westergaard to receive a fair hearing on the removal of conditions attached to his registration. During the Hearing, 13 days in total, the Registrar was able to hear first hand facts that gave rise to the initial Conditions and, at the same time, form an opinion concerning the attitude, integrity and honesty of Westergaard towards the events that gave rise to the Conditions. Hence even when prohibited [by s. 22(7)] from directly considering the facts that came to the knowledge of the Registrar over two years ago, I do not believe it is necessary to ignore the responses and attitudes demonstrated by Westergaard during the hearing. The Registrar noted in the Decision that during the hearing Westergaard was cross-examined on previous disciplinary hearings and "He minimized his culpability and did not appreciate the gravity of his offense." [Decision, page 31] The Registrar noted that: "it's clear that not only did Westergaard ignore a Supreme Court Order, he has "been blatantly untruthful to this tribunal. He has also effectively alleged malpractice [by his previous lawyer]" [Decision, page ] The Registrar also states that: "He [Westergaard] has also attempted to mislead this tribunal about the status of unsatisfied judgments against his company Aaron." [Decision, page 36] These observations, which I believe are reasonable given the testimony of Westergaard, constitute new facts, and I believe to be important information that the Registrar is entitled to rely upon in arriving at her decision concerning Westergaard suitability. But I also note that even in the absence of the responses to these questions, I conclude that the Registrar had reasonable grounds on which to conclude Westergaard was not suitable for registration and that his registration would be objectionable. The registrar set out rather clearly the standard by which she would determine both his suitability and whether his registration would be objectionable, and concluded that Westergaard is not suitable for registration under the Act because his described behaviour demonstrates a lack of sufficient honesty, integrity and professionalism. In reaching this conclusion the Registrar cited the fact Westergaard had accepted secret commissions, a reference to the conviction in I would not accept this as a basis for the Decision, but find that even without this fact the Registrar had reasonable grounds for her conclusion. I accept that the registrar had reasonable grounds to conclude that at least some of Westergaard's testimony at the Hearing was misleading and perhaps deliberately so. Westergaard's comments concerning his lawyer for the Duster judgment matter certainly implied malpractice, and based on the evidence, inappropriately.... Just to be clear on my decision, I have determined that the Registrar erred in concluding that section 22(7) did not apply to section 4 proceedings. As a consequence it follows that pre-august 2003 facts known to the Registrar should not be directly considered. But I also determine that Westergaard's responses to questions concerning these pre-august 2003 facts and his demonstrated attitude towards the matters can and should be considered as they speak to the suitability of Westergaard for registration, particularly when

13 Westergaard v. Registrar of Mortgage Brokers Page 13 the base for the Hearing was Westergaard's appeal to remove the conditions attached to his registration. (Ruling FST , pp ) [27] The FST dismissed Mr. Westergaard s appeal but remitted the issue of penalty in the form of the five-year suspension back to the Registrar because it appeared that the penalty was determined, in part, by reference to facts that the Registrar should not have taken into account. Analysis [28] Briefly stated, the issue is this. In what manner, if any, does s. 22(7) of the MBA restrict a reference to or reliance upon facts known to the Registrar for more than two years in the course of a suitability hearing convened pursuant to the MBA for the purpose of considering whether Mr. Westergaard s registration as a submortgage broker should be cancelled or suspended, or his application for the renewal of his registration denied? A. Standard of Review [29] On this judicial review, the court can only provide relief, should it be appropriate to do so, in relation to the FST decision. The Registrar s decision is not amenable to judicial review because the MBA permits an appeal from it to the FST. [30] The first step in a judicial review is to determine the standard of review that should be applied to the impugned decision. I am satisfied that the appropriate standard in relation to s. 22(7) of the MBA is that of patent unreasonableness. [31] Section 242.1(7) of the Financial Institutions Act, R.S.B.C. 1996, c. 141, provides that s. 58 of the Administrative Tribunals Act, S.B.C. 2004, c. 45, will apply to the FST. Section 58 provides as follows: 58 (1) If the tribunal's enabling Act contains a privative clause, relative to the courts the tribunal must be considered to be an expert tribunal in relation to all matters over which it has exclusive jurisdiction. (2) In a judicial review proceeding relating to expert tribunals under subsection (1)

14 Westergaard v. Registrar of Mortgage Brokers Page 14 (a) (b) (c) a finding of fact or law or an exercise of discretion by the tribunal in respect of a matter over which it has exclusive jurisdiction under a privative clause must not be interfered with unless it is patently unreasonable, questions about the application of common law rules of natural justice and procedural fairness must be decided having regard to whether, in all of the circumstances, the tribunal acted fairly, and for all matters other than those identified in paragraphs (a) and (b), the standard of review to be applied to the tribunal's decision is correctness. [32] Section of the Financial Institutions Act is the privative clause that applies to decisions of the Tribunal: 242.3(1) In respect of this Act or any other Act that confers jurisdiction on the tribunal, the tribunal has exclusive jurisdiction to (a) (b) inquire into, hear and determine all those matters and questions of fact and law arising or requiring determination, and make any order permitted to be made. (2) A decision of the tribunal on a matter in respect of which the tribunal has exclusive jurisdiction is final and conclusive and is not open to question or review in any court. [33] The combined effect of s of the Financial Institutions Act and s. 58(2)(a) of the Administrative Tribunals Act is that the standard of review applicable to the interpretation of s. 22(7) of the MBA is that of patent unreasonableness. The mandate of the FST is to assess the merits of the Registrar s decision in the context of the statutory provisions of the MBA and the relevant facts. The appeal requires the interpretation of the statute which is a question of law, and an assessment of the reasonableness of the decision having regard for the facts upon which the Registrar is permitted to rely. The legal and factual issues are those which the FST is authorized to consider by virtue of s of the Financial Institutions Act. As a consequence, s. 58(2)(a) of the Administrative Tribunals Act governs. [34] If the interpretation of the relevant question of law, namely the interpretation to be accorded s. 22(7) of the MBA, is to be considered patently unreasonable, the

15 Westergaard v. Registrar of Mortgage Brokers Page 15 interpretation must be irrational, not in accordance with reason, or so flawed that no amount of curial difference can justify letting it stand: Allman v. Amacon Property Management Services Inc., 2007 BCCA 302, at para. 19. [35] The FST concluded that it must assess the Registrar s interpretation and application of s. 22(7) of the MBA in the context of a suitability hearing on a standard of correctness. In my opinion, that determination was appropriate as was its conclusion that the Registrar s decision regarding Mr. Westergaard s suitability for registration must be reasonable having regard for the facts and evidence the Registrar was entitled to consider. [36] While it may seem incongruous to review the FST decision on judicial review through the lens of patent unreasonableness when its decision considered the correctness of the Registrar s interpretation of s. 22(7) and the reasonableness of the decision itself, I am satisfied that is the approach required because of the combined effect of the Administrative Tribunals Act and the Financial Institutions Act. B. Scope and Meaning of Section 22(7) [37] In my opinion, the FST reasonably concluded that a suitability hearing undertaken in response to an application to renew registration is a proceeding within the meaning of s. 22(7) of the MBA. [38] The word proceeding is ordinarily broadly construed. Guidance is derived from the decision of the Supreme Court of Canada in Markevich v. Canada, [2003] 1 S.C.R. 94, 2003 SCC 9 at para. 24: 24 Interpreted in their grammatical and ordinary sense, these words clearly encompass the statutory collection procedures in the ITA. Although the word "proceeding" is often used in the context of an action in court, its definition is more expansive. The Manitoba Court of Appeal stated in Royce v. MacDonald (Municipality) (1909), 12 W.L.R. 347, at p. 350, that the "word 'proceeding' has a very wide meaning, and includes steps or measures which are not in any way connected with actions or suits". In Black's Law Dictionary (6th ed. 1990), at p. 1204, the definition of "proceeding" includes, inter alia, "an act necessary to be done in order to obtain a given end; a prescribed mode of action for carrying into effect a legal right".

16 Westergaard v. Registrar of Mortgage Brokers Page 16 [39] The question of whether a proceeding for the purposes of s. 22(7) extends beyond enforcement proceedings is more difficult. Section 22 addresses offences and enforcement in respect of the contravention of specified provisions of the MBA, the contravention of a direction of the Registrar, or the making of false or misleading statements in any record required to be filed under the MBA. Sections 22(5) through (7) are more general in nature: (5) In addition to the penalties provided in this section, the registrar may take any other action or proceeding against the person or corporation provided by law. (6) In proceedings for an offence under this Act, it is a defence if the person charged proves that the commission of the offence was due to a mistake of fact, or to an accident, and that the person took all reasonable precautions and exercised all due diligence to avoid the commission of the offence by himself, herself or itself or any person under his, her or its control. (7) A proceeding under this Act may not be commenced more than 2 years after the facts on which the proceeding is based first came to the knowledge of the registrar. [emphasis added] [40] Section 22(5) authorizes non-statutory enforcement against a person or corporation. The subsection does not apply in the context of a suitability hearing as the hearing is not a proceeding against anyone. It is a proceeding that affords an applicant the opportunity to be heard. Section 22(6) is restricted in its application to proceedings for offences under the MBA. It does not apply to a suitability hearing. Subsection (7) contains no restrictive words and, on its face, is a statement of general limitation that applies to any proceeding commenced under the Act. [41] In order to restrict the application of s. 22(7) to offence, enforcement, or penalty proceedings of the kind contemplated or authorized by s. 22 in the manner urged by the Registrar, the word section would have to be substituted for the word Act in the phrase under this Act. Alternatively, the word enforcement would have to be inserted before the word proceeding in order to limit the broad meaning otherwise associated with the word proceeding. In my opinion, either modification would amount to an unauthorized judicial amendment rather than a permitted judicial interpretation of the subsection. If s. 22(7) is not intended to apply to anything but

17 Westergaard v. Registrar of Mortgage Brokers Page 17 enforcement proceedings otherwise contemplated by s. 22, as claimed by the Registrar, the legislature must effect the change. The court cannot do the legislature s work. [42] It is true that the expansive meaning of the word proceeding may lead to anomalous results. For example, in response to an application for registration, the Registrar may undertake an investigation and convene a suitability hearing as a consequence of learning that the applicant has been convicted of the offence of theft or fraud. The prior conviction might support the Registrar s determination that the applicant should not be registered. More than two years later, the same applicant might reapply. While it can be argued that nothing should prevent the Registrar from taking the prior conviction into account as one of the factors to be considered when deciding if the subsequent application for registration should be accepted, the legislature has stipulated that the Registrar should be prohibited from doing so. In other words, a prior conviction will not forever be a bar to registration. [43] While the result may appear inappropriate, and, as the Registrar claims, antithetical to the registration and supervision of submortgage brokers generally, any perceived anomaly must be remedied by an amendment to s. 22(7), or by some other amendment that would prohibit registration in the face of any conviction for an offence of a specified kind, much as the Business Corporations Act, S.B.C. 2002, c. 57, s. 124, prohibits persons convicted of certain offences from serving as a corporate director for a period of five years from the expiration of the sentence including any period of probation. [44] In the context of this case, the application of s. 22(7) does not produce an inappropriate result. After all, in 2003, the Registrar concluded that the facts then known did not justify a proceeding in the nature of a hearing and did not support a refusal to register subject to conditions. It is not appropriate to permit the Registrar to revisit his earlier decision by resurrecting prior history which did not result in a decision adverse to Mr. Westergaard at relevant times.

18 Westergaard v. Registrar of Mortgage Brokers Page 18 [45] The FST s determination that s. 22(7) applied to a suitability hearing was not patently unreasonable. In fact, in my opinion, the determination was correct, should it be argued that the higher standard applies. [46] It follows that the Registrar s petition seeking a declaration that s. 22(7) of the MBA does not apply to a suitability hearing is dismissed. Application of Section 22(7) [47] How then is s. 22(7) to be applied in the context of the Westergaard suitability hearing? [48] The principal limitation is that facts known to the Registrar more than two years prior to issue of the notice of hearing cannot be the facts which ground the determination of suitability. Those facts might be termed old facts. The question of suitability must be considered in the context of new facts being those of which the Registrar acquires knowledge not more than two years prior to the date on which a notice of hearing is issued. Reliance upon old facts is patently unreasonable. If those are the only facts relied upon to support the determination of suitability, the decision itself will be unreasonable and unworthy of confirmation. [49] An exception to the principal limitation arises in relation to a fact that came to the knowledge of the Registrar within the two-year time limitation when the new fact contradicts an old fact and indicates that the old fact was misstated or misrepresented, whether the misstatement or misrepresentation was advertent or inadvertent. In that case, the fact of the contradiction may be relied upon to assess suitability. In that instance, it is not the old fact that grounds the determination of suitability. Rather it is the fact of the contradiction or inconsistency which was identified within the two-year time frame that is relevant. [50] Finally, in the absence of contradiction or conflict, the assessment of an applicant s credibility and general suitability for registration at the time of the hearing may take into account the applicant s present perspective or attitude towards old facts. Reference to old facts for that purpose does not offend s. 22(7). It is not the

19 Westergaard v. Registrar of Mortgage Brokers Page 19 old facts that are important. It is the applicant s present views or perception of those facts that is relevant to the determination of suitability. [51] The application of each of the foregoing principles is reflected in the FST decision. [52] The FST properly described Mr. Westergaard s employment of Iantorno as a submortgage broker when he was not registered as such, and the fact that Mr. Westergaard and GET allowed another broker to operate from its premises contrary to the provisions of the MBA, as new facts. [53] The FST identified and described contradictions and conflicts between old facts pertaining to the 2003 registration process, and new facts of which the Registrar acquired knowledge at the hearing or in any event not more than two years prior to the issue of the notice of hearing. The FST concluded that the contradictions and conflicts were relevant to the assessment of suitability: Based only on the aforementioned new facts, I am satisfied that the Registrar had reasonable cause to conclude Westergaard is not credible; that his August 22, 2003 revised application contained inaccurate statements and that he mislead the Hearing, as well as the registrar in 2003, about the status of unsatisfied judgments. (Ruling FST , p. 60) [54] Finally, the FST determined that the Registrar could rely upon the answers provided by Mr. Westergaard to questions related to matters of which the Registrar had knowledge in 2003, not for the purpose of using those events to provide the factual base on which to ground the refusal to register, but for the purpose of assessing Mr. Westergaard s present attitude to business issues and matters affecting the administration of the MBA generally, factors which were relevant to the assessment of credibility and suitability. In my opinion, a reference to old facts for that purpose does not offend s. 22(7) of the MBA. [55] In other respects, the FST inappropriately endorsed the Registrar s reliance upon certain other facts. Specifically, the FST concluded that the Registrar properly took into account Mr. Westergaard s unwillingness to pay the unsatisfied judgments

20 Westergaard v. Registrar of Mortgage Brokers Page 20 against Aaron BC to conclude that it reflects negatively on one s integrity and professionalism, qualities that are essential in determining whether a person is suitable to be registered under the Act. With respect, that conclusion was patently unreasonable, with or without reference to s. 22(7), and could not be relied upon to support a refusal to register. [56] In the first place, the Registrar was aware of Mr. Westergaard s refusal to discharge corporate liabilities for which he had no personal liability in Nothing had changed to the date of the hearing. Adherence to the same view post-2003 did not amount to a new fact free from the limitation imposed by s. 22(7). Secondly, the MBA endorses the role of corporations as mortgage brokers. Nothing in the MBA suggests that the protection from liability afforded to shareholders and directors of corporations in ordinary circumstances will be eroded in so far as mortgage brokers or submortgage brokers are concerned. Nothing in the MBA requires a shareholder or director to indemnify others for their losses. In my opinion any conclusion to the contrary is unreasonable. So too, is the conclusion that unwillingness to gratuitously discharge the debts of another person registered under the MBA should be a factor in the assessment of suitability. [57] In this instance it is clear from the reasons of the FST that the Registrar s inquiries in the course of the hearing went far beyond a consideration of new facts. The examination of Mr. Westergaard appears to have extended to the circumstances surrounding a very old offence for which he had been convicted but pardoned, and the circumstances giving rise to the judgments against Aaron BC. It is evident from the extract of the Registrar s reasons, supra, para. 23, that those facts were part of the factual base upon which the Registrar relied in support of his conclusion. It is not apparent that the line of questioning was used by the Registrar solely for the purpose of assessing Mr. Westergaard s present attitude to those prior events when that attitude could either enhance or undermine credibility. The Registrar s use of the facts for any other purpose was prohibited by s. 22(7) of the MBA.

21 Westergaard v. Registrar of Mortgage Brokers Page 21 [58] It is not appropriate to decide, on a judicial review, whether the FST would have reached the conclusion it did without reference to Mr. Westergaard s ongoing refusal to gratuitously discharge corporate liabilities, or the circumstances giving rise to the pre-2003 events which were improperly considered and relied upon by the Registrar. The appropriate remedy is to quash the FST s decision and to remit the appeal from the Registrar s decision for reconsideration in accordance with these reasons. The collateral or subsidiary decisions regarding penalty and costs are also set aside and remitted for reconsideration. [59] There will no order with respect to costs on judicial review. Mr. Justice Pitfield