B.C. – evidence of fraud need not be ‘new’ to be admissible on post-decision challenge – #261

The fact that evidence of fraud existed at the time of hearing might justify its rejection as ‘new’ evidence on a post-decision challenge but cannot justify rejecting it as evidence of fraud. In McCallum v. Mooney, 2019 BCSC 1938, Madam Justice Nitya Iyer granted a defendant’s application to set aside a default decision, even after having unsuccessfully challenged it by internal appeal, due to claimant allegedly withholding a key document during the initial hearing on the merits.

Despite arising out of a residential tenancy dispute, the principle confirmed and applied by Iyer J. has broad application.

Mr. McCallum owned residential property which he leased to Mr. Mooney by way of one (1) year tenancy agreement ending November 9, 2018.  Mr. McCallum wanted Mr. Mooney to move out earlier which the latter did in early October 2018.

Under B.C.’s Residential Tenancy Act, SBC 2002, c 78 (“RTA”), a landlord may request a current tenant to vacate the premises to allow a landlord’s family member to take up tenancy.  The RTA also allows a tenant to claim compensation equal to 13 months rent if the landlord fails to occupy the premises in accordance with the stated purpose given in the notice to end the tenancy.

Mr. McCallum asserted that the tenancy came to an end by way of mutual agreement signed by Mr. Mooney on September 14, 2018 (“Agreement”).  Mr. Mooney objected to the Agreement even after having signed it, disputing the reasons given by Mr. McCallum for ending the tenancy.  Mr. Mooney moved out in October and received the return of his security deposit.

Mr. Mooney subsequently learned that the premises had either been sold or were to be sold and had not been occupied by a member of Mr. McCallum’s family.   Mr. Mooney filed a notice of dispute with B.C.’s Residential Tenancy Branch (“Branch”), paid a filing fee and submitted his supporting material.  He claimed 13 months rent, the return of his security deposit and reimbursement of the filing fee for the dispute.

Mr. McCallum received notice of the hearing and receipt of delivery of Mr. Mooney’s materials but did not pick them up.  He also did not participate in the hearing for reasons which he later conceded were “an error on his part”.  The hearing proceeded in his absence with only evidence and argument by Mr. Mooney.

By April 17, 2019 decision (“Decision”), based on Mr. Mooney’s uncontested evidence a Branch arbitrator awarded Mr. Mooney $25,164.25.  Mr. Mooney registered the Decision in provincial court (“Registration”) and filed a certificate of judgment against title to two (2) properties owned by Mr. McCallum (“Charges”).

Mr. McCallum learned about the Charges and, after contacting the Branch, learned also about the Decision.  He promptly applied June 14, 2019 for review consideration.  His application was heard by another Branch arbitrator but dismissed on July 3, 2019 (“Review Decision”). Mr. McCallum applied for judicial review of the Decision and Review Decision and the setting aside of the Registration and Charges.

Iyer J. addressed key challenges raised by Mr. Mooney to her hearing Mr. McCallum’s application.  Those challenges stem from Mr. McCallum challenging both the Decision and the Review Decision but, in doing so, fell outside the RTA delays in which to challenge the Decision. The solutions to those challenges are either fact specific or addressed by the RTA and have limited application beyond disputes under the RTA.

A key challenge raised by Mr. Mooney concerned the date at which Mr. McCallum brought forth the Agreement as evidence of the alleged fraud.  In first instance, Mr. Mooney did not produce the Agreement despite it existing at that time and available to Mr. Mooney.  Only Mr. McCallum brought the Agreement forward and did so at the time of the internal RTA appeal procedure which lead to the Review Decision.

In the Review Decision, the second Branch arbitrator declined to hear the evidence filed by Mr. McCallum. Mr. McCallum challenged the Review Decision, alleging that it was patently unreasonable because the Branch arbitrator did not address the issue of fraud.  Before Iyer J., Mr. Mooney did not address directly that issue of fraud and focused on the merits of each decision.

Iyer J. held that the standard of review was whether the decision was patently unreasonable. See Administrative Tribunals Act, SBC 2004, c 45 section 58 and Lissimore v Workers’ Compensation Appeal Tribunal, 2019 BCSC 444 paras 28-29.

Section 79(2) of the RTA limits the court’s intervention to three (3) grounds: (1) the applicant was unable to attend the hearing for unanticipated circumstances beyond his/her control; (2) the applicant has new and relevant evidence that was not available at the time of hearing; or (3) the applicant has evidence that the decision sought to be reviewed was obtained by fraud. Mr. McCallum invoked (2) and (3).

Iyer J. held that two (2) of the three (3) instances alleged by Mr. McCallum as fraud either (i) were not in issue or (ii) were open to the Branch arbitrator to conclude in the manner determined.  Iyer J. focused on the third allegation of fraud raised by Mr. McCallum, namely the Review arbitrator’s decision not to address Mr. Mooney’s omission to produce the Agreement.  She identified that issue as follows: did Mr. Mooney commit a fraud by submitting the September 11 document and not submitting the Agreement?

 “[24] I have reviewed the evidence before the original arbitrator and the evidence before the review arbitrator. Mr. Mooney submitted a Mutual Agreement to End a Tenancy form dated September 11, 2018 to the original arbitrator. It was signed only by Mr. McCallum. That document lists as tenants Mr. McCallum and a “Lex Van Arem”. Mr. McCallum submitted the Agreement to the review arbitrator. As I have said, it is dated September 14, 2018. It is signed by both Mr. McCallum and Mr. Mooney, and lists only Mr. Mooney as a tenant. Both the September 11 document and the Agreement were in evidence before the review arbitrator.

[25] The substance of Mr. McCallum’s allegation of fraud was that Mr. Mooney had intentionally withheld the Agreement, putting only the September 11 document before the original arbitrator. The review arbitrator failed entirely to address that issue. While the fact that the Agreement existed at the time of the hearing could be a basis to reject it as constituting “new and relevant evidence”, it cannot be a basis to reject it as evidence of fraud. Fraud often arises from a person misleading a decision-maker by withholding relevant evidence that exists at the time of the hearing.

Iyer J. held that the review arbitrator had conflated the three (3) grounds of review and failed to address this issue of fraud.  Mr. McCallum’s decision not to attend the initial hearing or file the Agreement then did not preclude him from raising it later.

Iyer J. did not attempt to decide the issue of fraud without actually hearing the parties.  Rather, Iyer J. (i) set aside the Review Decision and remitted the matter for reconsideration by a review arbitrator; (ii) set aside the provincial court decision; and, (iii) directed the Director of Land Titles to cancel the Registration.

Costs were not awarded due to the fact the judicial review arose because of Mr. McCallum’s decision not to accept receipt of the materials in the dispute resolution package.

urbitral note – First, the reasons demonstrate that evidence of fraud is relevant on a post-decision challenge even if the evidence existed at the time of the initial hearing, the party tendering had had the opportunity to attend that initial hearing but did not.  The reasons underline that issues of fraud must be dealt with and, in light of the wording of the legislation, a failure to do so amounted to a patently unreasonable result.

Second, the reasons do not suggest that a party, present at an initial hearing, can withhold evidence available to it and then only submit it post-decision on an internal appeal or court review. In such cases, the courts will likely subject that same evidence to standards familiar to attempts to adduce new evidence.

Third, Iyer J. did not judge the validity of the allegation of fraud but only a party’s opportunity to raise it and to have its evidence and argument considered.  The actual results will be determined at a subsequent hearing likely to be attended by all parties.