2007 BCSC 1777 Buchanan v. Financial Services Tribunal

Before: The Honourable Mr. Justice Curtis

Reasons for Judgment

Counsel for the Petitioner:	Johannes Schenk
Counsel for the Respondent, Financial Services Tribunal:	Angela R. Westmacott
Counsel for the Respondent, Real Estate Council:	Frits Verhoeven
Counsel for the Respondent, Superintendent of Real Estate:	Richard Fernyhough
Date and Place of Hearing:	October 25, 26, & 30, 2007
	Vancouver, B.C.

[1] Peter Buchanan, a licensed realtor has applied under the Judicial Review Procedure Act, R.S.B.C. 1996, c. 241, for an order quashing decisions of the Real Estate Council Disciplinary Committee and the Financial Services Tribunal finding him guilty of professional misconduct in a real estate transaction.

[2] The proceedings against Mr. Buchanan were initiated by a complaint against him by Lubomira Cermakova and Jaroslav Cermak, in relation to the sale of their condominium property at 1808 Purcell Way, North Vancouver. The essence of the complaint was that Mr. Buchanan advised the sellers that they were liable to pay a special level of $5,500 when in fact there was no special levy in place.

[3] Mr. Buchanan contends that the Discipline Hearing Committee of the Real Estate Council based their decision upon the provisions of the Real Estate Act, when, in fact, the applicable law was the Real Estate Services Act, S.B.C. 2004, c. 42, which came into effect January 1^st, 2005. It is Mr. Buchanan’s position that the Financial Services Tribunal’s determination that the references in the Discipline Committee decision were simply errors of inadvertence which could be corrected by requiring the Committee to issue a Corrigendum changing the reference to the existing Act was wrong in law and should be quashed.

[4] There is no issue that the Act which applies to the proceedings against Mr. Buchanan is the Real Estate Services Act.

[5] The repealed Real Estate Act provided:

31 (1) Whether a complaint is made or not, the council may inquire and, when directed by the superintendent, must inquire whether a licensee has done any of the following:

…

(b) committed a breach of this Act or the regulations or failed to comply with an order of the superintendent;

…

(3) If the inquiry indicates that the licensee may be guilty of wrong doing under subsection (1), the council may and when directed by the superintendent must, after due notice to the licensee, conduct a hearing, consider the whole case, and report its findings and recommendations to the superintendent, who may, after making any further inquiries the superintendent considers necessary, in his or her discretion,

(a) dismiss the complaint,

(b) cancel the licence of the licensee,

(d) suspend, for a period of time the superintendent considers appropriate, the licence of the licensee, or

(e) if action is taken under paragraph (c) or (d), order the licensee to enroll in and complete a course of studies or training prescribed by the superintendent.

[6] Regulation 75/61 of the Real Estate Act provided:

9:12 Every person who

(a) demonstrates negligence or incompetence in performing any act for which he is required to hold a license, or

(b) …

is guilty of a breach of this regulation.

[7] The Real Estate Services Act provides:

35 (1) A licensee commits professional misconduct if the licensee does one or more of the following:

(a) contravenes this Act, the regulations or the rules;

(b) breaches a restriction or condition of their licence;

(d) demonstrates incompetence in performing any activity for which a licence is required;

(e) fails or refuses to cooperate with an investigation under section 37 [investigation by council] or 48 [investigations by superintendent];

(f) fails to comply with an order of the real estate council, a discipline committee or the superintendent;

(g) makes or allows to be made any false or misleading statement in a document that is required or authorized to be produced or submitted under this Act.

42 (1) If notice of a discipline hearing has been given in accordance with section 40 (3) [notice], a discipline committee may proceed with the discipline hearing, whether or not the licensee appears in person and whether or not the licensee is represented by legal counsel at the hearing.

(2) For the purposes of a discipline hearing, sections 34 (3) and (4) [power to compel witnesses and order disclosure], 48 [maintenance of order at hearings] and 49 [contempt proceeding for uncooperative witness or other person] of the Administrative Tribunals Act apply to the discipline committee.

43 (1) After a discipline hearing, the discipline committee must

(a) act under this section if it determines that the licensee has committed professional misconduct or conduct unbecoming a licensee, or

(b) in any other case, dismiss the matter.

(2) If subsection (1) (a) applies, the discipline committee must, by order, do one or more of the following:

(a) reprimand the licensee;

(b) suspend the licensee's licence for the period of time the committee considers appropriate or until specified conditions are fulfilled;

(d) impose restrictions or conditions on the licensee's licence or vary any restrictions or conditions applicable to the licence;

(e) require the licensee to cease or to carry out any specified activity related to the licensee's real estate business;

(f) require the licensee to enroll in and complete a course of studies or training specified in the order;

(g) prohibit the licensee from applying for a licence for a specified period of time or until specified conditions are fulfilled;

(h) require the licensee to pay amounts in accordance with section 44 (1) and (2) [recovery of enforcement expenses];

(i) require the licensee to pay a discipline penalty in an amount of

(i) not more than $20 000, in the case of a brokerage or former brokerage, or

(ii) not more than $10 000, in any other case.

[8] The term incompetence is not defined in the Real Estate Services Act.

[9] The November 8, 2005 Notice of Discipline Hearing sent to Mr. Buchanan stated:

The Real Estate Council will hold a hearing to be conducted under sections 40-42 of the Real Estate Services Act to determine whether Peter Lawrence Finlay Buchanan, Ernest James Mansley, and/or One Percent Realty Ltd. (hereinafter the “licenses”) have contravened the Real Estate Services Act (the “Act”) or Rules:

More specifically, but not so as to limit the generality of the foregoing, the Discipline Committee will consider whether:

1. The licenses have committed professional misconduct pursuant to s. 35(1)(a) and/or (d) of the Act, or have contravened Rule 3-1 (managing broker responsibilities) or Rule 3-2 (associate broker and representative responsibilities) in that the licensee, Peter Lawrence Finlay Buchanan, in relation to the listing and sale of a strata title property at 1908 Purcell Way, North Vancouver, British Columbia:

(a) Failed to determine:

(i) the amount of monthly maintenance fees payable by the owners of the strata lot;

(ii) whether there was a special levy imposed by the strata corporation in respect of the strata lot, and, if so, the amount of the special levy;

(b) Failed to prepare a Contract of Purchase and Sale clearly setting out the respective responsibilities of the buyer and of the sellers with respect to the price to be paid for the property and, in particular, any adjustment in the price relating to monthly strata fees or special levies;

(c) Inserted the following clause in an addendum to the Contract of Purchase and Sale: “Specifically, the current special levy to be credited to the buyer by the seller [is] in excess of $5,000”, when there was no such special levy;

(d) Failed to accurately advise the sellers as to their obligations concerning payment for the monthly maintenance fees for the strata lot;

(e) Failed to advise the sellers that there was no special levy on the property;

(f) Advised the sellers that they were obliged under the terms of the Contract of Purchase and Sale to credit the buyer for a special levy in the amount of $5,500; and/or;

(g) Failed to advise the sellers to obtain legal advice concerning their obligations, if any, to credit the buyer for an amount in relation to the special levy referred to in the Contract of Purchase and Sale Addendum.

[10] The Decision of the Discipline Hearing Committee however, although titled “In the Matter of the Real Estate Services Act, S.B.C. 2004, c. 42, also recited: “And in the matter of a possible breach of the former Real Estate Act and Regulations, thereunder by the Respondents.”

[11] The Decision of the Discipline Committee was stated, in part, as follows:

1. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan was negligent within the meaning of section 9.12 of Regulation 75/61 under the former Real Estate Act in that he:

(a) failed to determine the amount of the monthly maintenance fees payable by his clients and, further, he also failed to determine whether there was a special levy imposed by the strata corporation in respect of the strata lot and the amount of the special levy.

(b) failed to advise the sellers to obtain legal advice concerning their obligations if any, to credit the buyer for the amount of the special levy.

2. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan was incompetent within the meaning of 9.12 of regulation 75/61 under the former Real Estate Act in that he:

(a) failed to prepare a Contract of Purchase and Sale clearly setting out the respective responsibilities of the buyer and the seller with respect to the price to be paid for the property and in that regard included a clause in the contract of purchase and sale which specified that “the current special levy to be credited to the buyer by the seller is in excess of $5,000”, when there was no special levy.

(b) failed to advise the Cermaks that there was no special levy on the property after he had reviewed the Form B Certificate and discovered the contents of that document;

(c) advised the sellers that they were obligated to pay the special levy and therefore under the terms of the contract of purchase and sale to credit the buyer with a special levy when he had not ascertained the true state of affairs which was that there was no special levy.

[12] That decision on its face records a finding under the repealed provisions of the Real Estate Act. Those provisions did not have the same wording as the new Act. The proper function of the Discipline Committee was to make a finding pursuant to the new Act not the old one. The reasonable interpretation of the wording of the decision is that the Committee erroneously applied the test set out in the provisions of the old Act.

[13] The decision resulted in a 30-day suspension, a condition Mr. Buchanan complete disciplinary education assignments, and be under the supervision of his managing broker, and that he pay $4,006.60 of the Committee’s costs. Mr. Buchanan appealed.

[14] The grounds of Mr. Buchanan’s appeal were stated in Mr. Buchanan’s Amended Notice of Appeal as follows:

1. The Chairperson alternatively, the Hearing Committee erred in finding that there was special levy payable without any evidence to support that notion.

2. The Chairperson alternatively, the Hearing Committee relied on the Form B document contents without hearing evidence of the author of the said Form B Certificate. The Chairperson alternatively, the Hearing Committee made a palpable and overriding error in this respect.

3. The Chairperson alternatively, the Hearing Committee erred in finding the Appellant, Peter Buchanan guilty of negligence within the meaning of section 9.12 of Regulation 75/61 under the former Real Estate Act and further erred to find Peter Buchanan incompetent within the meaning of section 9.12 of Regulation 75/61 of the former Real Estate Act.

4. The decision of the Chairperson alternatively, the Hearing Committee is inherently flawed alternatively, void in that it appeared ex facie the decision that only the Chairperson rendered the decision. The remaining members of the Hearing Committee namely, M.J. Cowe and A.R. Ghouri failed to indicate whether they agree or disagree with the decision of the Chairperson.

5. The Chairperson, Anne Petrone who presided over the hearing has an underlining bias against the Appellant who is a member of Discount Commission Realtors. The bias of the Chairperson, Anne Petrone renders her decision dated November 2, 2006, void.

[15] The Financial Services Tribunal rendered its decision May 22, 2007. That decision refers to the Real Estate Council’s submission on the issue of the references to the Real Estate Act as follows:

The Respondent’s submission was received by the FST on March 16, 2007.

The submission notes that there has been an “error of inadvertence” in the Decision of the Discipline Hearing Committee dated November 2, 2006.

Effective January 1, 2005 the Real Estate Act was replaced by the Real Estate Services Act. For matters taking place prior to January 1, 2005 the Council proceeds under the authority of the Real Estate Act and for matters taking place after January 1, 2005 the Council proceeds un [sic] the authority of the Real Estate Services Act. The Buchanan matter took place over the period March to May of 2005 and as a result the authority of the Real Estate Services Act is relevant.

It is noted that the Notice of Discipline Hearing indicates that the Hearing will be conducted pursuant to Sections 40 to 42 of the Real Estate Services Act to determine “whether the licensees have committed professional misconduct pursuant to Section 35(1)(a) and/or (d) of the Act, or have contravened Rule 3-1 (managing broker responsibilities) or Rule 3-2 (associate broker and representative responsibilities)….”

However, the decision of the Discipline Hearing Committee refers to findings of negligence and incompetence under Section 9.12 of Regulation 75/61 under the former Real Estate Act. Due to the timing of the events in the Buchanan matter, the correct reference and applicable provision is Section 35(1) of the Real Estate Services Act.

[16] At page 11 of the Tribunal decision, the reference to Mr. Buchanan’s position on that issue is:

The FST received the Appellant’s reply on April 2, 2007. The submission appears to argue that the FST does not have the jurisdiction to vary the original decision of the Discipline Hearing Committee and to substitute a finding of professional misconduct as a result of incompetence, pursuant to Section 35(1) of the Real Estate Services Act.

[17] The decision of the Financial Services Tribunal on the issue concerning the references to the repealed Real Estate Act in the decision of the Discipline Committee is at page 15 of the reasons:

Two further submissions were received regarding the “error of advertence” described previously in this decision under the caption “Events and Submissions of the Appeal: Submission of the Respondent”. These submissions were from counsel for the Superintendent (April 23,2007) and counsel for the Council (May 4, 2007).

Both submissions argued that the incorrect reference in the Decision of the Discipline Hearing Committee was an error of inadvertence. The submission of the Superintendent indicates that this error can be easily remedied by the FST inviting the Council to issue a Corrigendum to its Decision to clarify its intention.

Counsel for the Council agrees that the issuance of a Corrigendum to the original decision would provide an acceptable solution. In the alternative, the two suggested solutions proposed in the Submission of the Respondent would also be acceptable.

And at page 20:

It is clear that the references to the Real Estate Act in the Decision of Discipline Hearing Committee are in error. It is equally clear that the error is one of inadvertence especially in light of the fact that the Notice of Hearing indicated that the Hearing was to be conducted pursuant to Sections 40 to 42 of the Real Estate Services Act to determine “whether the licensees have committed professional misconduct pursuant to Section 35(1)(a) and/or (d) of the Act…..”

It is my opinion that the remedy proposed by counsel for the Superintendent is the most suitable remedy under the circumstances. Therefore, I request the Council to issue a Corrigendum to its Decision of November 2, 2006.

[18] The Corrigendum issued by the Discipline Committee of the Real Estate Council dated November 2, 2006, reads as follows:

Page 1

A. Delete: “AND in the matter of the possible breach of the former Real Estate Act and Regulations thereunder by the Respondents …”

And Substitute: “AND in the matter of the possible breach of the Real Estate Services Act and the Council Rules thereunder by the Respondents …”

B. Delete: “the former Real Estate Services Act”

And Substitute: “the Real Estate Services Act”

Page 14

C. Delete: “(a) Mr. Buchanan was negligent in that he failed to determine the amount of the monthly maintenance fees payable by his clients and, further, he also failed to determine whether there was a special levy imposed by the strata corporation in respect of the strata lot and the amount of the special levy.”

And Substitute: “(a) Mr. Buchanan demonstrated incompetence in that he failed to determine the amount of the monthly maintenance fees payable by his clients and, further, he also failed to determine whether there was a special levy imposed by the strata corporation in respect of the strata lot and the amount of the special levy.”

Page 15

D. Delete: “(g) in relation to paragraph (g) of the Notice of Hearing, the Committee found that Mr. Buchanan was negligent in that he failed to advise the sellers to obtain legal advice concerning their obligations if any, to credit the buyer for the amount of the special levy.”

And Substitute: “(g) in relation to paragraph (g) of the Notice of Hearing, the Committee found that Mr. Buchanan demonstrated incompetence in that he failed to advise the sellers to obtain legal advice concerning their obligations if any, to credit the buyer for the amount of the special levy.”

Pages 16-17

E. Delete: “1. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan was negligent within the meaning of section 9.12 of Regulation 75/61 under the former Real Estate Act in that he:

(b) failed to advise the sellers to obtain legal advice concerning their obligations if any, to credit the buyer for the amount of the special levy.

2. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan was incompetent within the meaning of 9.12 of regulation 75/61 under the former Real Estate Act in that he:

(b) failed to advise the Cermaks that there was no special levy on the property after he had reviewed the Form B Certificate and discovered the contents of that document;

And Substitute: “1. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan demonstrated incompetence within the meaning of section 35(1)(d) of the Real Estate Services Act in that he:

(b) failed to advise the sellers to obtain legal advice concerning their obligations if any, to credit the buyer for the amount of the special levy.

2. The Discipline Hearing Committee decided that Peter Lawrence Finlay Buchanan demonstrated incompetence within the meaning of section 35(1)(d) of the Real Estate Services Act in that he:

(b) failed to advise the Cermaks that there was no special levy on the property after he had reviewed the Form B Certificate and discovered the contents of that document;

Page 17

F. Delete: “5. The Discipline Hearing Committee decided that Ernest James Mansley was negligent within the meaning of 9.12 of regulation 75/61 under the former Real Estate Act in that in he was not in active charge of the business of the brokerage with respect to this transaction.”

And Substitute: “5. The Discipline Hearing Committee decided that Ernest James Mansley was in breach of section 3-1(1) of the Council Rules in that in he was not actively engaged in the business of the brokerage with respect to this transaction and, as such, contravened section 35(1)(d) of the Real Estate Services Act.”

[19] The finding of the Financial Services Tribunal that the references in the decision of the Discipline Committee was an error of inadvertence does not properly address the issue of what actually occurred in the formulation of the decision of the Discipline Committee. Mr. Buchanan was entitled to have his professional conduct assessed in accordance with the requirements of the Act then in effect, namely the Real Estate Services Act. A reading of the reasons of the Discipline Committee clearly states that Mr. Buchanan’s conduct was considered and assessed in relation to the wording set out in the repealed Real Estate Services Act. This is not a case of applying the right test and accidentally referring to the wrong Act, but rather, of applying the test set out in an Act which had been repealed. The Discipline Committee of the Real Estate Council does not have jurisdiction to render a decision upon the basis of a repealed statute, and its decision made on that basis was invalid.

[20] When the matter was decided by the Financial Services Tribunal, it was treated as though the proper test had been applied and the references to the repealed Real Estate Act were simply erroneous references. The Financial Services Tribunal failed to address itself to the fact that Mr. Buchanan had never had his case properly heard in the first place because his conduct had never been considered in relation to the Act in effect. In those circumstances, the proper course would have been for the Tribunal to refer the matter back to the Discipline Committee to be heard and decided according to the Real Estate Act in a new hearing, which, of course, would allow the parties to address such issues as might be raised in such a hearing. Ordering a Corrigendum without a proper hearing never did give Mr. Buchanan what he was entitled to – to meet the case against him under the Real Estate Services Act in effect.

[21] I note the Corrigendum dated June 5, 2007 states, “The Discipline Hearing Committee has deliberated and amends its decision as follows:” but the corrigendum itself appears to indicate the wording of the findings and the statute references were simply amended to coincide with the new Act. That is an entirely different process than considering the facts of the case in relation to the test set out in the Real Estate Services Act.

[22] I find that the Financial Services Tribunal, in failing to recognize that the decision of the Discipline Hearing Committee was, in fact, no valid decision at all, had no jurisdiction to direct that the Discipline Hearing Committee simply issue a Corrigendum to correct the statute references. The result of such an order was that no hearing was ever heard in which the evidence was considered in relation to the requirements of the statute in effect. The Financial Services Tribunal has no jurisdiction to produce such a result. Stated in a more direct way, Mr. Buchanan is entitled to have his conduct assessed under the Act in force and that has yet to happen.

[23] The Real Estate Services Act provides that an appeal from its Discipline Hearing Committee can be made to the Financial Services Tribunal.

[24] An issue arose in this case as to the provision of the Financial Services Tribunal Act and the standard of review that applies to this application for judicial review. In British Columbia, an administrative tribunal whose enabling Act brings it within the purview of the Administrative Tribunals Act is reviewable on the basis of the standard articulated in either section 58 or 59 of that Act. Section 58 articulates a standard of patent unreasonableness, and section 59 articulates one of correctness. The distinction between the sections corresponds to the distinction between tribunals whose enabling acts contain privative clauses and those whose do not.

[25] The Financial Services Tribunal Act contains both a privative clause and a section bringing the Financial Services Tribunal within the purview of the Administrative Tribunals Act. Alone, these two elements suggest that the Tribunal’s decisions should be reviewable on the basis of the standard laid out in section 58 of the Administrative Tribunals Act, namely patent unreasonableness. However, section 242.1(7) of the Financial Services Tribunal Act makes specific reference to the application of section 59 to the Tribunal, and notably does not include any reference to section 58.

[26] In my view, the reference to section 59 is clearly a typographical error. The presence of the privative clause in the Financial Services Tribunal Act leads me to infer that the Legislature intended the Tribunal’s decisions to be subject to the standard of review set out in section 58.

[27] The outcome of this case, however, does not depend on the choice between a standard of patent unreasonableness and one of correctness. The Financial Services Tribunal’s decision would not withstand scrutiny under either standard of review. The decision was “patently unreasonable” (within the meaning of section 58) because it failed to provide Mr. Buchanan with a hearing under the statute then in effect. This failure was both a failure to take the statutory requirements into account, and an excess of jurisdiction.

[28] The decision of the Financial Services Tribunal in this matter is quashed. The matter is remitted to the Tribunal with the direction that it must render a decision which ensures Mr. Buchanan an assessment of his conduct in relation to the provisions of the Real Estate Services Act.

“V.R. Curtis J.”

Citation:	*Buchanan v. Financial Services Tribunal,*
	2007 BCSC 1777