Decisions
DEVINDER RANDHAWA, et. al. [Decision]
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BCSECCOM #:
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Document Type:
Decision
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Published Date:
1997-09-19
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Effective Date:
1997-09-10
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Details:
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COR#97/161
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF THE VANCOUVER STOCK EXCHANGE
AND
IN THE MATTER OF DEVINDER RANDHAWA
HEARING AND REVIEW
PANEL: DOUGLAS M. HYNDMAN CHAIR
BRENT W. AITKEN MEMBER
PETER A. MANSON, Q.C. MEMBER
DATES: JULY 17 AND 18, 1997
APPEARING: H. RODERICK ANDERSON FOR DEVINDER RANDHAWA
DOUGLAS EYFORD FOR THE VANCOUVER STOCK EXCHANGE
PATRICK ROBITAILLE FOR COMMISSION STAFF
DECISION OF THE COMMISSION
1. INTRODUCTION
This decision relates to a hearing and review under section 28 of the Securities Act, R.S.B.C. 1996, c. 418, of a decision of a disciplinary hearing panel of the Vancouver Stock Exchange.
On November 13, 1995, the Exchange issued a citation containing allegations of misconduct against Devinder Randhawa. After a hearing on February 8 and 9, 1996, the Exchange hearing panel issued on February 27, 1996, a written decision in which it found that Randhawa had committed infractions under Exchange By-law 5.01. Following further submissions on penalty, the panel ordered Randhawa to pay a fine of $5,000, rewrite the Conduct and Practices Handbook examination, undergo a fitness hearing before reinstatement as an approved person, if reinstated be placed under strict supervision for one year, and pay the costs of the hearing in the amount of $9,202.
On March 26, 1996, Randhawa applied for a hearing and review of the decision. He submits that the hearing panel erred in law in several respects.
2. BACKGROUND
Randhawa was an approved person under Exchange by-laws, and a registered salesperson under the Act, from 1987 to 1993. He was originally employed by Haywood Securities Inc., later moved to Yorkton Securities Inc. and finally, in January 1991, moved to Canaccord Capital Corporation (then known as LOM Western Securities Ltd.). He started working in Canaccord’s Vancouver office but in December 1992 he moved to the Kelowna office, where he remained until his employment was terminated in June 1993.
Canaccord’s Kelowna office was a small operation. There were three registered salespersons, including Randhawa and the branch manager, Kevin Jersey, as well as two support staff. As well as being the branch manager, responsible for the operation of the office and regulatory compliance, Jersey conducted his own retail client business, which was the source of most of his remuneration, and brought in some financing deals to Canaccord.
While at Haywood in 1989, Randhawa participated in the initial public offering and listing on the Exchange of Achievers Training Group Inc. Many of his existing clients invested in Achievers shares and he took on a large number of new clients who were referred by the principals of Achievers and purchased shares from the initial public offering.
Achievers’ original business venture was not successful and, by 1992, the company was insolvent and faced the prospect of being suspended from trading or delisted from the Exchange unless it could arrange financing and a new business venture. In the fall of 1992 Randhawa, by then at Canaccord, discussed with Achievers’ chairman James Janz and president Todd Peever the possibility of Achievers’ entering a fiscal agency agreement with Canaccord. Janz and Peever chose not to enter such an agreement. Instead, they made an arrangement with Randhawa whereby he would assist Achievers in seeking investors and a potential business acquisition and Achievers would reimburse him for expenses he incurred.
From the fall of 1992 until his employment was terminated, Randhawa travelled extensively in the United States and Europe on behalf of Achievers, sometimes alone, sometimes accompanied by Peever. Some of the trips also involved work for other issuers. Because Peever did not have a credit card (as a result of personal financial problems) Randhawa paid Peever’s travel expenses and was reimbursed for those, as well as his own. On a trip to Europe in May 1993, Randhawa advanced $5,000 on behalf of Achievers to a German financier named Wolfgang Rauball, as a fee to secure an option on a business Achievers was interested in acquiring. He was later reimbursed for this as well.
Achievers did not have a bank account for most of this period, so until June 1993 its payments were handled through its solicitors, Maitland and Company. Reimbursement cheques were sent by Maitland and, later, Achievers to Randhawa at his Canaccord office. Under Canaccord’s operating procedures, all incoming mail was opened by management or by staff members under management direction. In the Kelowna office, all mail was opened by a support staff member directed by Jersey, except mail marked personal and confidential, which was opened by Jersey himself.
In or before March 1993, in connection with a property Achievers was looking into acquiring, the vendor demanded that Achievers put $25,000 U.S. in trust. Randhawa arranged for his wife, Celia Randhawa, to lend Achievers the $25,000, for which she was paid a bonus of 19,355 shares. Jersey was aware of this transaction around the time it occurred. The transaction was filed with and accepted by the Exchange. Achievers repaid the loan on March 22, 1993.
Around the same time, to begin funding its reactivation, Achievers completed a private placement of 500,000 shares at $.22 per share. Celia Randhawa purchased 40,000 of the shares.
On or shortly after March 24, 1993, Randhawa received through the Canaccord mail a bank draft for $6,250. He testified that this was a repayment of a loan he had made to a friend, Tim Hipsher. At the time, Hipsher was negotiating to sell a property to Achievers. Randhawa claimed to be unaware at the time that Hipsher had any involvement with Achievers.
On March 26, 1993, Achievers announced a private placement of 500,000 shares at $0.80 per share. Canaccord was paid an agent’s fee of 7.5 per cent for arranging the transaction. Randhawa purchased 73,333 shares of the offering.
On May 6, 1993, Achievers announced another private placement, of 500,000 shares for $1.28 per share. Canaccord was to be the agent for the offering. This private placement never completed.
Jersey and Randhawa appear to have had a strained relationship. Jersey was aware that Randhawa was travelling extensively on corporate finance business but Randhawa did not tell him specifically that he was travelling on Achievers’ business. Randhawa did talk to senior officers in Canaccord’s Vancouver office, including, he says, Canaccord chairman Peter Brown, about at least some of the work he was doing for Achievers. However, he did not tell anyone at Canaccord about the arrangement he had for Achievers to pay his (and Peever’s) travel expenses or about the $5,000 he advanced to Rauball on behalf of Achievers.
On one trip that Randhawa and Peever took to Dallas to look into a possible acquisition for Achievers, Brown sent another individual, Asa Manhas, to accompany them. When the potential vendor expressed concern that Achievers did not have the financing available to complete a timely acquisition, Manhas and Canaccord arranged to have the property acquired by another company.
On May 19, 1993, Randhawa sent a fax note to Peever advising him that one of the support staff at the Canaccord office had estimated the cost of his phone calls on behalf of Achievers at $6,600. Achievers appears to have included this amount in a reimbursement cheque sent to Randhawa on June 10, 1993. For reasons explained below, that cheque never reached Randhawa. It was later replaced by a second cheque that was reduced by approximately the amount of the phone charges.
Canaccord retains copies of all faxes sent out from its offices. The copy of Randhawa’s May 19 fax concerning the phone charges came to Jersey’s attention. Jersey talked about the fax with Mike Murphy in the Vancouver office and sent him a copy of the fax on June 2, 1993, asking Murphy to fax him the policy or arrangement Canaccord had with its registered representatives in Vancouver regarding phone and terminal costs.
On June 11, 1993, Jersey’s attention was drawn to a cheque sent by Achievers (which by this time had its own bank account) to Randhawa in the amount of $43,862.08. Jersey faxed it to Murphy. He subsequently faxed to Murphy copies of two cheques dated March 22, 1993, totalling $25,000 and payable to Celia Randhawa, which represented the repayment of her loan to Achievers, and the bank draft dated March 24, 1993, for the $6,250 paid by Hipsher to Randhawa. Jersey had been aware of Celia Randhawa’s loan and the repayment cheques for several months. It is not clear when he learned of the Hipsher bank draft.
On June 11, Canaccord suspended Randhawa and summoned him to Vancouver to explain the payments he had received. Canaccord was not satisfied with his explanations, and Randhawa’s employment was terminated on June 16, 1993.
After Randhawa’s suspension, Achievers sent Canaccord a cheque for $43,862.08 to replace the one sent to Randhawa. Canaccord returned the cheque uncashed, saying it was not party to Randhawa’s arrangement with Achievers. Achievers then sent a cheque for $37,053.54 to Randhawa. The reduction in the amount appears to represent the deduction of the amount for phone charges included in the original cheque.
On June 23, 1993, Canaccord filed with the Exchange a termination notice for Randhawa. The reasons given for Randhawa’s termination were as follows:
- Through our internal ‘surveillance’ procedures, Canaccord discovered that Mr. Randhawa, without the firm’s knowledge or prior approval, was submitting expense reports directly to, and being reimbursed by, The Achievers Training Group Inc., a VSE listed company, for monies he had expended on behalf of and/or advanced to it in his efforts to revive the company’s fortunes. It is our view that this violates the RR Manual guideline/principle of prior advice to the firm of “any offer of a gratuity or compensation from clients or anyone else, other than your own firm...”
While our internal investigation, and discussions with and correspondence from the principals of Achievers showed the monies and/or advances to be materially legitimate (ie. our investigation was of broad, rather than meticulous scope), and while Achievers’ management offered glowing praise with respect to Mr. Randhawa’s efforts, senior management of Canaccord Capital Corporation, as a result of Mr. Randhawa’s initial lack of candour during our inquiry, and on other occasions during his time with the firm, lost all confidence in his ability to represent us to the high standard that we expect.
After receiving the termination notice, the Exchange began investigating Randhawa’s activities. The investigation led to the issuance of the citation on November 13, 1995.
3. THE CITATION AND HEARING PANEL DECISION
The citation set out the alleged infractions as follows:
The relevant Exchange By-law and Rules read as follows:
- By-Law 5.01 Infractions
“Infraction” in this by-law means
Rule F.2.21 Duties
Registered representatives shall devote their full time during normal working hours to the securities business of the Member employing him and he shall not have any other gainful occupation except to the extent from time to time approved either generally or in any particular case by the Membership Committee.
Rule F.2.22 Arrangements with Clients
No other particulars of the allegations were brought to our attention.
The Exchange hearing panel heard evidence from David Ashby, the lawyer at Maitland and Company who acted as Achievers’ solicitor during the relevant period, from Jersey, from Randhawa and from James Janz, Achievers’ chairman. The decision was given in two parts. A written decision on liability was given on February 27, 1996, in which the hearing panel found that Randhawa had breached rule F.2.21 and was guilty of the infractions for which he was cited in count 2 of the citation. Following further submissions, the decision on penalty, as described above, was given on March 21, 1996.
4. ANALYSIS
Randhawa submits that the hearing panel erred in law in several respects and asks us to set aside the findings that he breached Exchange by-laws and rules, to set aside or reduce the penalties imposed by the hearing panel and to set aside or reduce the order for costs. Randhawa submits that the hearing panel erred in applying an incorrect standard of proof; in finding that he breached rule F.2.22(1)(c) or by-law 5.01(2); in finding that he breached rule F.2.21; in imposing penalties that, even in light of the findings of the hearing panel, are harsh and excessive and inconsistent with previous decisions; and in ruling that pre-hearing settlement discussions are irrelevant to the issue of costs.
Standard of Proof
The first issue referred to the standard of proof that must be met by the Exchange to establish misconduct against a registrant in a case like this. The hearing panel referred to the decision of the Court of Appeal in Rak v. B.C. (Superintendent of Brokers), (1990) 51 B.C.L.R. (2d) 27 (B.C.C.A.) and concluded that “it is our conclusion that the onus on the Exchange should be higher than a simple balance of probabilities but not a great deal higher.”
Randhawa argues that the hearing panel erred in articulating and applying this standard of proof. He says the standard of proof should be higher for a case of this type.
It is clear that the standard of proof required in cases that come before Exchange hearing panels is the balance of probabilities. In applying that standard, the hearing panel has the discretion, which must be exercised fairly and in accordance with the principles of natural justice, of determining what weight to give to various pieces of evidence produced in the hearing and which of two pieces of conflicting evidence to prefer.
In previous cases before the Commission where the issue of standard of proof has been raised, the Commission has said that, in serious matters, we would require a relatively high standard of proof within the civil standard of proof on the balance of probabilities (Rak, supra at 34; Re Aatra Resources Ltd. (1994), 3 C.C.L.S. 51 (B.C. Securities Commission)). We are not sure what the hearing panel meant by a standard that is “not a great deal higher” than a simple balance of probabilities, but the hearing panel was clearly cognizant of the issue and recognized that something more than proof on a bare balance of probabilities was needed for the Exchange to establish its case.
In any event, Randhawa did not point to any specific findings of fact of the hearing committee that he says were based on insufficient evidence. As we will see, Randhawa is challenging not the findings of fact but the hearing panel’s interpretation of the Exchange rules and by-laws.
Financial Dealings with a Listed Company
The hearing panel’s conclusion on count 2 of the citation was as follows:
- The next issue is whether or not the Respondent engaged in personal financial dealings with a listed company without the knowledge or approval of Canaccord contrary to Rule F.2.22 and Bylaw 5.01 2. Or did he make loan (sic) to the company without advising his employer.
Rule F.2.22(c) precludes “loans” by an R.R. without first informing his employer.
The question raised was whether the advances made by Mr. Randhawa constituted “loans”.
The Exchange cited Wilson v. Ward, 1932 2 D.L.R. 433, a decision of Duff J. in the Supreme Court of Canada and Canada Deposit Insurance Corporation v. Canadian Commercial Bank [1990] 4 W.W.R. 445. In these cases, a ‘loan’ is defined as the lending of money with the “expectation that the money will be repaid”.
Mr. Anderson, on behalf of Mr. Randhawa, argues that the advances in this case were no different than “disbursements” paid by lawyers on behalf of their clients and thus could not be considered “loans” as such.
In respect to the $5,000 advanced by the Respondent to Wolfgang Raubel on behalf of Achievers at the instructions of the president, Mr. Peever, the Panel is satisfied this was clearly a loan to Achievers. The Respondent advanced these funds expecting to be repaid and in due course he was. Normally a loan might be considered as an advance to the borrower but the employment of the funds as directed by a listed company with the expectation of being repaid could not be anything less. Mr. Randhawa admitted he could have phoned Canaccord’s president before advancing these funds but did not do so.
As to the very substantial travel expenses, Mr. Randhawa admitted that he paid approximately $10,000 of these for the travel expenses of Mr. Peever, Achievers’ president. He expected to be repaid these funds and he was.
Again, as to Mr. Randhawa’s personal travel expenses which were substantial and which were in due course repaid to him, it is difficult to see how these could be in a different category.
In any event, if the word “loan” does not specifically cover these advances, then Bylaw 5.01 2 applies. His conduct meets the criteria there set out since an R.R. who puts himself in the position of a creditor of a listed company without his firm’s approval has created an ambiguous position where his personal interest and that of his employer and clients may be contrary to his own and thus is detrimental to the interest of the Exchange and the public.
The panel concludes therefore that Mr. Randhawa is guilty of the infractions for which he is cited in count no. 2.
Mr. Anderson repeats before us his argument that the advances made by Randhawa were not really loans and were therefore not covered by the rule. In our view, the hearing panel’s conclusion that these were loans as contemplated in the rule is a reasonable interpretation. Randhawa paid out money on behalf of Achievers with the expectation that he would be repaid by Achievers. That is no different in substance from lending money directly to Achievers with the expectation of repayment.
Rule F.2.22(c) was clearly intended to prevent a registered representative from becoming a creditor of a listed company without his member firm’s knowledge, and that is exactly what happened in this case. We agree with the hearing panel that, if on a legal technicality these payments do not constitute loans, Randhawa contravened the spirit of the rule in not advising his employer and thereby acted in a manner detrimental to the interests of the Exchange and the public. Accordingly we agree with the hearing panel that Randhawa was guilty of the infractions cited in count 2.
Full Time Requirement
Count 1 of the citation, as set out above, alleged that Randhawa “failed to devote his full time during normal working hours to the securities business of Canaccord Capital Corporation”.
The hearing panel’s findings on this allegation were as follows:
- The second issue concerns the meaning of rule F.2.21 to the effect that R.R.s shall devote their full-time during working hours to, the securities business of the members employing him and they should not have any other “gainful occupation”.
In the case of Re: Kirby, a panel chaired by Mr. Gill concluded that the involvement of Mr. Kirby in “Izone” in the light of his substantial holding in the company, was such that he would benefit directly by the increase in value of his holdings and this constituted a breach of the rule precluding any other “gainful occupation”.
There is no question that Mr. Kirby’s involvement with the company Izone in that case was far more extensive than the Respondent’s involvement with the Achievers here.
As to the meaning of this rule, it is the Panel’s view that it does not require a time-clock attendance since an R.R.’s duties often take him out of the office.
On the other hand, if it were clear that the R.R.s (sic) other interests were such as to placed (sic) him in conflict with those of his employer, such as another “gainful occupation” this would constitute a breach of this rule.
In this case, the conflict is apparent as Mr. Randhawa and his wife both had shares although relatively few, and were owed substantial funds by the company Achievers. These interests, particularly the large amounts of monies owing by the company to Mr. Randhawa, put him in the position where his personal interest in being repaid and in the success of Achievers were such that he would be inclined to spend more time on Achievers’ affairs than his employer might want. There is also the conflict that arises between the R.R. and his clients who hold shares in Achievers. The advice he would be inclined to give them could be coloured by his personal interests.
The panel’s conclusion therefore is that the respondent was in breach of rule F.2.21.
The hearing panel refers to the question of Randhawa having another gainful occupation, without clearly finding whether or not he did so. Although rule F.2.21 prohibits an R.R. from a having another gainful occupation, the citation did not allege that he breached that aspect of the rule. The hearing panel’s analysis on this issue consisted of a brief reference to a previous case, Re Kirby (1994), 4 C.C.L.S. 288.
In the Kirby case, the citation alleged and the hearing panel found that Kirby had breached both aspects of rule F.2.21. The evidence showed that Kirby was effectively working full time at the offices of a listed company, performing the functions of a director and acting in the capacity of an officer. The hearing panel in that case found that, in addition to failing to devote his full time during normal working hours to the securities business of his member firm, Kirby had a gainful occupation with the listed company because, despite the fact he was not paid, his substantial shareholding meant that he would benefit directly if his efforts as an officer and director enabled the company to become a success.
In our view, the two cases are very different. Kirby was nominally employed as an R.R. by a member firm but was in fact working almost full time as a de facto director and officer of Izone. Kirby held a substantial shareholding in Izone. Randhawa’s involvement with Achievers was much more limited. He and his wife purchased Achievers shares in two private placements, the second of which was brokered by Canaccord. He arranged for his wife to lend Achievers $25,000, for which she received some shares as a bonus. Canaccord was aware of that transaction. And he travelled to the United States and Europe to help Achievers in seeking financing and a business acquisition. In that regard, he advanced money on Achievers’ behalf without advising Canaccord and, in so doing, he committed the infraction discussed above. Canaccord was, however, aware that Randhawa was working on financing and acquisitions for Achievers and Randhawa had Achievers send all of the reimbursement cheques to him at Canaccord’s office, where he knew they would be opened by management.
The hearing panel concluded that Randhawa’s interests in Achievers gave rise to conflicts of interest with his employer (“where his personal interest in being repaid and in the success of Achievers were such that he would be inclined to spend more time on Achievers’ affairs than his employer might want”) and with his clients (“[t]he advice he would be inclined to give them could be coloured by his personal interests”). Those may be real and valid concerns, but they do not relate to the allegation set out in the citation that Randhawa “failed to devote his full time during normal working hours to the securities business of Canaccord”.
Before us, the Exchange argues that Randhawa’s arrangement with Achievers was not part of the securities business of Canaccord, because Canaccord was unaware of his activities and his arrangement violated Canaccord’s established procedures. The evidence on Canaccord’s established procedures for R.R.s working on corporate finance activities was sketchy, but clearly it was common and accepted practice for R.R.s to initiate corporate finance deals and to do some work on them before involving the corporate finance or underwriting department. Canaccord was aware to at least some degree of Randhawa’s activities and, indeed, Canaccord earned fees on the private placement arranged by Randhawa and on a transaction involving one of the businesses he had located as a potential acquisition for Achievers. More to the point, the hearing panel made no finding that Canaccord was unaware of Randhawa’s activities or that the activities violated Canaccord’s normal procedures; they simply concluded that, because of his arrangement, Randhawa “would be inclined to spend more time on Achievers’ affairs than his employer might want”.
The Exchange and Commission staff argue that the hearing panel’s conclusions that the arrangement created conflicts of interest supported the finding of a breach of rule F.2.21. They point to the following passage from a decision of this Commission in Re Lutz (1993), 1 C.C.L.S. 264 at 270:
- The purpose of the full time employment requirement, in our view, is to ensure that salesmen in the securities business are committed to the business, are able to maintain an appropriate level of competence and knowledge and are not engaging in other business activities that will interfere with the duties and responsibilities or give rise to conflicts of interest. (emphasis added)
This passage says that one purpose of the full time employment requirement is to prevent involvement in other business activities that give rise to conflicts of interest. It is a twisted leap of logic to turn this point around and say that an activity that involves a conflict of interest must be in breach of the full time employment requirement.
The Exchange also referred us to several passages in the Conduct and Practices Handbook for Securities Industry Professionals as support for this interpretation. However, those passages are very general in nature and, in our view, provide no support for the notion that a registered representative who puts himself in a conflict of interest is thereby in violation of the full time employment requirement.
The securities business involves many potential and actual conflicts of interest, and there are a variety of regulatory tools that have been devised to address them. Some types of conflicts are prohibited. Others are regulated through disclosure, a requirement to obtain consent of the client, or review by an independent third party. There is no evidence or finding here as to whether Randhawa advised his clients on investing in Achievers shares during the period of his arrangement with Achievers or, if he did, whether he contravened any regulatory requirements in doing so. In any event, those were not the allegations of which Randhawa was given notice in the citation.
On the basis of this analysis, we conclude that the hearing panel erred in law in finding that Randhawa had breached rule F.2.21. That finding must be set aside.
Penalties
Randhawa submits that the penalties imposed on him by the hearing panel are harsh and excessive, and inconsistent with previous decisions. In particular, he notes that the penalties were virtually the same as those imposed in the Kirby case, which, as the hearing panel acknowledged, involved far more egregious conduct than was found in this case.
Although there is obvious merit in ensuring consistency and proportionality in the penalties imposed in the various cases considered by Exchange hearing panels, application of that principle should not be mindless. The hearing panel acknowledged Randhawa’s point about the difference between the cases but chose, nevertheless, to impose a similar penalty. Perhaps the hearing panel thought the Kirby penalty was too light. In the absence of the error we found above, we would not second guess the hearing panel’s decision on penalty.
However, in light of our finding that the hearing panel erred in finding a breach of the full time requirement, we consider it appropriate to vary the penalty. We will reduce the fine from $5,000 to $2,000 and the period of strict supervision from one year to three months, and will eliminate the requirement to undergo a fitness hearing before reinstatement. We make no change to the requirement to successfully write and pass the Conduct and Practices Handbook examination (or equivalent).
Costs
The hearing panel’s decision on costs was as follows:
- As to costs, Mr. Anderson referred us to negotiations that have taken place with the VSE towards a possible settlement and argued that our decision as to costs should be influenced by those negotiations.
We have concluded settlement negotiations are irrelevant as there is no process provided for in the bylaws and rules of the VSE permitting such consideration.
Accordingly we conclude Mr. Randhawa should pay $1,702 for the VSE’s disbursements and $7,500 towards legal fees and other expenses incurred by the Exchange.
Mr. Anderson provided us with a letter he had sent to the Exchange, prior to the issuance of the citation, offering to settle the matter. Randhawa offered to admit to “an inadvertent breach” of by-law 5.01 (2), to pay a fine of $3,500 and investigative costs of $850, and to be subject to three months strict supervision should he re-enter the industry. Although the letter was marked “without prejudice”, Mr. Anderson gave notice in the letter that he reserved the right to refer to it on the issue of costs if the matter proceeded to a hearing.
When the hearing panel convened on March 4, 1996 to consider penalty and costs, Mr. Anderson argued that consideration of costs ought to await determination of penalties so that submissions on costs relating to the settlement discussions could be considered. The hearing panel declined to defer determination of costs.
Randhawa argues that the hearing panel erred in law in failing to consider, in determining costs, positions taken in settlement discussions. He cites authorities to demonstrate that, in considering cost awards in civil proceedings, courts have accepted evidence concerning offers of settlement that have been refused, where the correspondence containing the offer contains a specific reservation of the right to raise the matter in that context. This is an exception to the general rule that “without prejudice” correspondence exchanged in settlement discussions is inadmissible at trial. The exception has developed to encourage parties to settle matters before trial rather than refusing reasonable offers, secure in the knowledge that costs can be recovered at trial.
The determination of costs in an Exchange hearing is a discretionary matter for the hearing panel to determine. There is nothing compelling a hearing panel to consider settlement discussions, but the fact that there is no specific procedure laid out in the by-laws for considering settlement discussions does not prevent a hearing panel from doing so. In our view a respondent ought to have an opportunity to raise the issue of prior settlement discussions in submissions on costs. In some circumstances, a hearing panel might reasonably conclude that it would be unfair for a respondent to bear the full costs of a hearing that resulted in findings and penalties equal to or lesser than those that the respondent had offered to accept in a settlement.
In this case, the settlement offer made by Randhawa did not go as far as the findings of the hearing panel or the penalties it imposed. As a result, even if the hearing panel had considered Mr. Anderson’s letter, it would presumably not have affected the order as to costs.
However, after our decision to reverse the hearing panel’s finding of a breach of the full time requirement and to reduce the penalties imposed by the hearing panel, Randhawa’s settlement appears much closer to the mark. In light of that fact, the fact that we found Randhawa liable on only one of the two counts in the citation, and the significant costs already incurred by Randhawa for the original hearing and this hearing and review, we consider it appropriate to set aside the costs ordered by the hearing panel.
5. DECISION
Under section 165(4) of the Act, we order that the decision of the hearing panel be varied to provide that Randhawa be ordered to:
1. pay a fine of $2,000;
DATED on September 10, 1997.
Douglas M. Hyndman Brent W. Aitken
Chair Member
Peter A. Manson, Q.C.
Member