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Financial Regulation - Financial Services Regulatory Authority (FSRA). Harold The Mortgage Closer Inc. v. Chief Executive Officer of the Financial Services Regulatory Authority of Ontario
In Harold The Mortgage Closer Inc. v. Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (Div Court, 2024) the Divisional Court considered a motion to quash a JR, here which challenged the issuance of a 'notice of proposal' by the 'Financial Services Regulatory Authority' (FSRA) to revoke and refuse to renew a mortgage broker license, to impose administrative penalties - and as well of the FSRA's publication of enforcement policy documents, and more. The applicants also filed for a full de novo hearing before the Financial Services Tribunal in relation to this matter.
Here the court addresses the preliminary Authority's 'notice of proposal' procedures, which it finds as premature from a JR perspective - since there are one full administrative hearing and subsequent appeals still available to it:[8] Under the applicable statutory scheme, the applicants will be entitled to a full hearing process before the tribunal in respect of the allegations contained in the regulator’s notice of proposal. A very high degree of procedural protection is available to the applicants in light of the serious nature of the relief sought against them. The hearing is a full trial de novo. It is not just an appeal from the notice of proposal. The hearing outcome will be based on the evidence to be admitted, after pre-hearing disclosure, cross-examination of witnesses, and submissions.
[9] The regulator rightly distinguishes two types of claims brought by the applicants. They each result in different outcomes.
[10] First, it is plain and obvious and without any serious doubt that the applicants’ complaints about the conduct of the regulator in issuing the notice of proposal and its contents are premature.
[11] Mr. Solmon asserts that it is clear that the regulator issued a notice of proposal that was deliberately false and that the court needs to be available to police such egregious misconduct.
[12] That is neither the scheme of the relevant statutes nor of the Judicial Review Procedure Act on which the applicants rely. This case is on all fours with Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII). In that precedent decision, a judge quashed a tribunal’s decision to appoint an investigator. The decision was made in direct violation of the statutory procedural right of the target of the investigation to be heard prior to the decision being made. In Volochay, even with the breach of a statute, the Court of Appeal held that proceedings must be left to run their course if there is an adequate alternative to the court becoming involved and absent exceptional circumstances.
[13] In this case, the applicants’ reliance on very general duties of a regulator in ss. 3 and 6 of the Financial Services Regulatory Authority of Ontario Act, 2016, SO 2016, c 37, Sch 8, do not really add any more strength to the case than is available from the general legal notion that government bodies should obey the law, behave fairly, and should not lie.
[14] Even assuming for the sake of argument that the applicants can establish that the regulator deliberately issued and publicized falsehoods about the applicants in the notice of proposal, this application still runs right into the hearing before the Financial Services Tribunal provided by the Mortgage Brokerages, Lenders and Administrators Act, 2006, SO 2006, c 29.
[15] In that hearing, the regulator will bear the burden of proving the allegations in its notice of proposal. The applicants will be entitled to defend themselves fully and fairly. At the end of the day, the tribunal will make findings of fact and apply the appropriate law. If it finds that the regulator has been untruthful or violated its duties, it will consider the appropriate outcome. If the applicants are then not content with the outcome, they have further appeal rights to the court and possibly also the ability to seek judicial review for matters that do not fall within appeal rights.
[16] I do not agree with Mr. Solmon that the facts are uncontested or clear. I understand why the applicants allege the regulator said things to which they object. But I would not be able to make findings of fact on the written record before me and I do not believe that a panel of this court will be any better off on an early judicial review. The panel is a review body. It is not a fact-finding body generally.
[17] The place for findings of fact to be made on disputed evidence is before the tribunal.
[18] Moreover, any procedural unfairness caused to the applicants by the delivery of the notice of proposal containing incorrect facts can and will be cured by a full trial process before the tribunal with a high standard of procedural fairness and natural justice enforced.
[19] I note that I do not necessarily agree with the tribunal’s decision in this case that it has no authority to review the conduct of the regulator or to cause it to take steps deemed necessary for fairness of the proceeding before the tribunal. The notice of proposal is not necessarily spent or rendered a dead letter by the delivery of the request for a hearing. The notice of proposal remains the regulator’s statement of allegations that guides the issues before the tribunal.
[20] But even if the applicants ask the tribunal to give some remedy against the regulator and the tribunal declines after a full hearing, the applicants will still have their appeal and review rights before the court. In those hearings, the court will be armed with a full evidentiary record, findings of fact on the contested evidence, and the specialist tribunal’s views and reasoning on the issues that were argued before it by the parties.
[21] Under Volochay, the tribunal proceeding must be left to run its course as it is a very adequate alternative to the relief sought contesting the notice of proposal and the regulator’s conduct in issuing it. There are no exceptional circumstances at play in my view. Mr., Solmon submits that this case is exceptional because the claim is that the regulator included untruthful allegations in the notice of proposal deliberately. That does not take the case outside the principle in Volochay. Moreover, the strategy that, “the best defence is a good offence” is not as unusual or exceptional before the court as Mr. Solmon surmises.
[22] It follows that I quash as premature the portion of the application challenging the validity of the notice of proposal.
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