Law Society Hearing Panel concluded that appellant lawyer could not be found to have committed fraud in “flip transactions” in absence of evidence from other persons involved in the allegedly fraudulent transactions. The Appeal Panel found that the Hearing Panel made errors of law in respect of what is required to prove fraud, and ordered a new hearing. On review, the court determined that the standard of review was reasonableness, since the decision regarding the application of the test for fraud to the facts is a question of mixed fact and law. The court ruled that the Appeal Panel’s decision was reasonable, and dismissed the appellant’s appeal.

Administrative law – Decisions of administrative tribunals – Law Societies – Barristers and solicitors – Professional misconduct or conduct unbecoming – Competence – Fraudulent transactions – Disciplinary proceedings – Penalties – Judicial review – Evidence – Standard of review – Reasonableness simpliciter

Law Society of Upper Canada v. Talarico, [2014] O.J. No. 3617, 2014 ONSC 3423, Ontario Superior Court of Justice, July 30, 2014, M.R. Dambrot, K.E. Swinton and Toscano Roccamo JJ.

The appellant was an experienced real estate lawyer in Ottawa who acted for both the ultimate purchasers and institutional lenders in numerous “flip transactions” in which a property was acquired by one purchaser and rapidly flipped to the ultimate purchaser for an inflated price. The appellant did not disclose a number of material facts to the institutional lenders, including that the transactions were “flips”. The Law Society brought disciplinary proceedings against the appellant for mortgage fraud, incompetence and professional misconduct. The central allegation was that the appellant participated or knowingly assisted in fraudulent or dishonest conduct by not being honest and candid when advising his clients.

The Law Society Hearing Panel concluded that the allegations regarding fraud were not established on the basis that it is impossible to draw inferences of fraud or dishonest conduct or intent without obtaining evidence from the persons involved in the transactions, i.e. the institutional lenders. The Hearing Panel did find that the appellant had committed professional misconduct in failing to serve his clients to the standard of a competent lawyer, and ordered that he be suspended for three months and pay costs of $25,000.

The Law Society brought an appeal to the Law Society Appeal Panel. The Appeal Panel found that the Hearing Panel made several errors of law regarding what is required to prove fraud. The Appeal Panel ordered a new hearing on all particulars. The appellant appealed to the Superior Court of Justice on the ground that the Appeal Panel erred in law by concluding that the Hearing Panel misdirected itself as to how fraud must be proven. On review, the court determined that the standard of review in this case is reasonableness, since the decision regarding the application of the test for fraud to the facts is a question of mixed fact and law. The court decided that the Appeal Panel did not commit an error of law and that its decision was reasonable, and dismissed the appellant’s appeal.

This case was digested by Kara L. Hill of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact her directly at khill@harpergrey.com or review  her biography at http://www.harpergrey.com.

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