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MORTGAGES - Mortgage fraud - What constitutes

Friday, October 13, 2017 @ 8:35 AM  

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Appeal by Nguyen from a Law Society Tribunal Appeal Panel’s decision that the Hearing Panel erred in its analysis of mortgage fraud. The Law Society brought disciplinary proceedings against Nguyen, alleging that he participated or assisted in fraudulent conduct in relation to mortgage transactions by failing to disclose to banks information that he knew was material to their lending decisions. The Hearing Panel stated that his understanding of fraud was fundamental to the analysis, accepted his evidence and concluded that the Law Society failed to prove that the transactions were fraudulent. The Appeal Panel concluded that the hearing panel erred by focusing on Nguyen’s belief and ordered a new hearing.

HELD: Appeal dismissed. The Appeal Panel’s determination that the Hearing Panel erred in its analysis of mortgage fraud was reasonable. The Hearing Panel incorrectly focused on what Nguyen thought about the honesty of his conduct, not whether reasonable people familiar with mortgage practice would regard the conduct as dishonest, and asked whether his evidence about his belief was understandable or credible. The mens rea of fraud required establishing that the person accused of fraud acted voluntarily with awareness of the external circumstances that were relevant to determining whether his or her conduct was dishonest. If a person had a subjective awareness (in the form of knowledge, willful blindness or recklessness) that the course of conduct that he or she voluntarily was undertaking could cause deprivation, then the offence of fraud was made out. The fact that the person accused of fraud may not have perceived that his or her conduct was dishonest or criminal was irrelevant. The appropriate question was whether Nguyen had a subjective appreciation that withholding the information could put the economic interests of the lenders at risk. Because the Hearing Panel did not properly determine whether there was a fraud or what the elements of that fraud were, any purported analysis of Nguyen’s mens rea was fatally flawed. Determining Nguyen's mens rea required first deciding whether the acts that Nguyen committed were dishonest and objectively put the economic interests of the lenders at risk. It was only once the external circumstances that made up the actus reus were determined that a decision could be made whether the requisite mens rea was established. The Appeal Panel reasonably decided that the appropriate remedy was to order a new hearing where the evidence could be analyzed and assessed within the appropriate framework.

Law Society of Upper Canada v. Nguyen, [2017] O.J. No. 4756, Ontario Superior Court of Justice - Divisional Court, H.E. Sachs J., September 14, 2017. Digest No. TLD-October92017012