Another Unfair Investigation

Courts give significant deference to the investigative choices of regulators. However, twice in just over one month, Ontario’s Divisional Court has found a regulator’s investigation to be procedurally unfair. In late January there was the case of: Kastner v. Health Professions Appeal and Review Board, 2023 ONSC 629 (CanLII) discussed in our February 8, 2023, blog. In early March the Court released Watson v. Law Society of Ontario, 2023 ONSC 1154 (CanLII).

In the latter case, serious allegations were raised about the registrant’s (a lawyer) misappropriation of funds and falsifying of documents. Three of the allegations could even be characterized as constituting criminal conduct. The registrant insisted that he was primarily a business partner with the complainant (rather than their lawyer) and was owed the money kept. After a 56-day hearing, the allegations were withdrawn and dismissed because the extensive cross-examination of the complainant raised so many credibility concerns that there was no longer a reasonable prospect of a finding. The registrant sought his costs from the regulator, which request was denied.

The Court found that the investigation was one-sided and unfair. Basic corporate and financial documents, that upheld the registrant’s position that they were a business partner of the complainant entitled to payment, were not sought or analyzed when obtained. The most obvious example was not obtaining the officially filed version of corporate documents that disproved the complainant’s allegation that they had been altered and fraudulently filed by the registrant. The Court said: “Merely taking the complainant’s word at face value without testing it by reference to documents other than the ones she herself provided, is not consistent with procedural fairness.”

The Court was troubled by the investigator filing a final report before interviewing the registrant. The subsequent interview did not include seeking the registrant’s explanation for some of the more serious allegations and did not result in a supplementary report. This concern was aggravated by the regulator’s failure to disclose relevant information and failure to agree to reasonable production requests (from the complainant). The Court also commented on the regulator taking the legally incorrect position that its disclosure obligations only applied to evidence intended to prove the allegations and not also to evidence that would support the registrant’s defence, including evidence going to the credibility of the complainant.

The Court disagreed with the regulator’s reliance on its policy for investigating allegations of a sexual nature to justify not critically assessing the credibility of the complainant nor seeking corroboration of the allegations. While the policy was an appropriate stance for allegations of a sexual nature, where there often are no other witnesses and few documents, that approach was entirely inappropriate for the type of allegations in this kind of “documents” case.

Despite these deficiencies, the Court found there was no palpable and overriding error in denying the registrant’s costs on the basis that the referral to a hearing was unwarranted. There was sufficient evidence of serious concerns warranting a hearing to assess the credibility issues even if an adequate investigation had been conducted. On this point, the Court indicated that the tribunal should assess all of the information in the reasonable possession of the regulator, and not just the information provided to the screening committee.

However, under the applicable provisions for this regulator, costs could also be awarded to the registrant on the basis that the regulator had acted with undue delay, negligence or other default. Given the gaps in the investigation and the questionable positions taken by the regulator during the hearing, the Court returned that issue to be determined by a differently constituted panel.

While Courts still afford significant deference to regulatory investigations, they must be even-handed, balanced, proportionate to the circumstances, and fair to the registrant.

More Posts

The Business Did It

Business structures for registrants are quickly evolving in many sectors. Accountability for registrants is sometimes disputed where only the individuals, and not the business entities

A Suspension Is a Suspension

Ontario’s Divisional Court has upheld a finding that a registrant engaged in professional misconduct by trying to circumvent the impact of a suspension. In Casella

Couldn’t Disagree More

Can a regulator make a finding of professional misconduct against a registrant based largely on the evidence of a witness who has a strong motivation