Ontario’s highest court has discussed the mandate of regulators of professions in The Law Society of Upper Canada v Watson, 2026 ONCA 372.
The Court says that the mandate of professional regulators is “to protect the public, to regulate the profession and to preserve public confidence in the profession”. However, there is a corresponding duty on regulators “also to deal fairly with members whose livelihood and reputation are affected. This court has emphasized that nothing is to be gained by giving one of these functions priority over the other…”.
The decision in Watson will have little direct application for most regulators. It deals with whether “wasted costs” should be awarded to a registrant after the regulator discontinued a 56-day discipline hearing. “Wasted costs” are specifically addressed in the Law Society tribunal rules. This is different from the rules of many regulatory schemes that provide, to the extent that the regulator is liable to pay costs at all, that the regulator must only do so where the commencement of the discipline process was unwarranted. In Watson, the Court returned the matter to the tribunal for a new decision on whether the regulator should have to pay “wasted costs” because it found the first decision on that issue was flawed.
In doing so, the Court made several significant comments on the duty of regulators to deal fairly with registrants, including the following:
- The duty of fairness to registrants requires regulators “to be neutral and rigorous in the investigation and prosecution of disciplinary cases.”
- Investigations should be balanced, making reasonable efforts to find the evidence relevant to the allegations. Investigations should not be one-sided looking only for evidence that supports the allegations.
- It was concerning that the investigator finalized his report before interviewing the registrant. Further, the subsequent interview of the registrant did not seek an explanation for many of the concerns identified in the already finalized report.
- The fact that allegations will largely turn on the credibility of the witnesses does not relieve the regulator of its responsibility to conduct a proper investigation. For example, in this matter, a key document that cast doubt on a core allegation by the complainant was not obtained despite being readily available from a public record.
- Decisions about disclosure to the registrant need to be made with the duty of fairness in mind. For example, the Court said:
Taking the position that these sets of documents were not relevant strongly suggests that the LSO viewed its role through the one-sided lens of what supports the prosecution. This was part of a broader pattern of conduct throughout the investigation and the hearing.
- Even though disclosure obligations do not require a regulator to obtain documents it does not possess, the duty of fairness may require the regulator to respond reasonably to defence efforts to obtain production of important and potentially relevant documents from third parties (in this case, accounting records from the complainant).
On the assessment of costs against the regulator, the Court gave some general guidance as follows:
- “The burden of establishing that a proceeding was unwarranted or that costs were wasted, rests with the party making that allegation, and the Law Society’s conduct must be analyzed at the time decisions were made without overly relying on hindsight…While hindsight is not to be used, hindsight is distinguished from conducting a ‘holistic after-the fact examination’…”.
- Regulators should not be deterred from bringing misconduct proceedings for fear that it will have to pay costs if it is unsuccessful. The default presumption is that no costs will ordinarily be payable by the regulator. However, it is incorrect to say that a discipline tribunal should exercise extreme caution in awarding such costs as that would downplay the regulator’s responsibilities to registrants.
- The criteria for awarding “wasted costs” against the Law Society can be met by a series of small acts or omissions that cumulatively meet the test under the Law Society tribunal rules.
- “Finally, even if the tribunal concludes that proceedings were unwarranted, there is a residual discretion not to award costs based on the circumstances of the case…”.
This decision makes clear that the requirement for regulators to protect the public while also acting fairly toward registrants is particularly important in the disciplinary context.
