Sunday, June 3, 2012

Cunningham Successfully Appeals Disbarment at Appeal Panel: An Update

     Readers have expressed great interest in my series of posts on the fundamental importance that both the appearance and reality of impartiality plays in the legality of the decisions of both courts and tribunals.  Readers will recall that some time ago a Law Society of Upper Canada Hearing Panel disbarred Karen Cunningham and an appeal panel chaired by respected criminal lawyer, Mark Sandler overturned that decision.

     One of the grounds of appeal advanced by Ms. Cunningham's very able counsel, Mr. Andras Schreck, now Justice Schreck, was that the Hearing Panel showed a lack of independence when they simply "cut and paste" the bulk of Society counsel's submissions in their reasons. In the interest of clarity for all of my readers this is an allegation of a reasonable apprehension of bias.

     Mr. Sandler found that Hearing Panel's independence or appearance of independence was not undermined.  He also went on to say that it was unnecessary given his earlier finding that the Hearing Panel had committed legal error to determine whether the full-scale adoption of Society Counsel's submissions was legal error.

     It is clear from this decision that the fulsome adoption by a Hearing Panel of counsel acting akin to a prosecutor before them without any independent evaluation and analysis may constitute an act of reasonable apprehension of bias.

     Karen Cunningham was accused of the following particulars of misconduct in a Notice of Applciation dated March 6, 2008 in connection with 16 real estate transactions that closed between March 2002 and January 2006:

                     1.  (a)   knowingly assisting mortgage fraud,

                          (b)  failing to be on guard against being duped;

                     2.        failing to be honest and candid with lender

                     3.        acting for parties with conflicting interests
                                (in repsect of 14 of the 16  properties);

                     4.        abdicating professional responsibility and
                                failing to serve lender clients.

Ms. Cunninghamn admitted to the following misconduct at her conduct hearing but steafastly maintained her innocense with respect to the counts alleging that she "abdicated professional responsibility with respect to the 16 properties and knowingly assisted mortgage fraud: 

 -   1.  (b)   failing to guard against being duped;

 -   3          acting for parties with conflicting interests in respect of 14 properties;

-    4.         failing to serve lender clients in respect of all 16 properties.

Following a very lengthy hearing in which she is said to have been cross-examined by counsel for the Law Society of Upper Canada(L.S.U.C.) for about ten days the hearing panel found that Ms. Cunningham had knowingly assissted mortgage fraud and disbarred her.

Appellant's argument on appeal:

     The Appeal Panel''s decision listed the following grounds of appeal advanced by Mr. Andras Schrek, Ms. Cunningham's counsel on the appeal attacking the lower panel's reasons:

(i)    the reasons are so inadequate as to prevent meaningful review;

(ii)   the reasons adopt the L.S.U.C's written submissions word-for-word in a
 way that is incompatible with an independent evaluation by hearing panel
  of the evidence; and

(iii)   the reasons demonstrate legal misdirection in deciding the issue of

The Appellant did not challenge the lower panel's finding that she abdicated her professional responsibility in respect of all 16 properties.  The thrust of her position on appeal was that she never knowingly assisted mortgage fraud and that she did not fail to be honest and candid with her lender clients.

Hearing Panel Reasons found
to be fatally flawed:

     Ms. Cunningham testified at her conduct hearing and described her involvement and knowledge of each transaction with the trust of her testimony being why she did not know, suspect or advert to the risk that the transactions were fraudulent.  Counsel for the L.S.U.C. acknowledged in closing argument that she was not urging the panel to make a finding of actual knowledge and acknowledged material differences in Ms. Cunningham's level of involvement - "in some transactions the lawyer knew enough about the transactions that she was willfully blind or reckless as to the obvious signs of fraud...In the remaining transactions, the lawyer knew virtually nothing about the transaction only because she abdicated her professional responsibility to her staff...In some of the transactions she is guilty of both."

"The Hearing Panel accepts the submissions made by Ms. Rutherford that there is clear and cogent
evidence to support the finding of willfull blindness and or recklessness in respect to the specified 16 transactions and that accordingly, Ms. Cunningham knowingly assisted in the fraud and failed to
be honest and candid with her lender clients."

No analysis of distinctions in
knowledge and involvement:         

     The Appeal Panel found that the hearing panel engaged in no analysis of the very important distinctions noted above and this error was compounded by the panel's statement that it was accepting the L.S.U.C's submissions that there was clear and cogent evidence to support the finding of willful blindness and recklessness on every transaction when that was not their position at all.

Reasons not responsive to
key issues raised:
     Reasons must at least be responsive to the key issues raised noted the Appeal Panel.  They stated the following on this point:

"Of course, a hearing panel is not bound by the Society's concessions in closing argument.
 But when the appellant's testimony is dependent on the distinctions between the
transactions and the Society acknowledges that at least some of these transactions compel
a different treatment, the hearing panel must at least indicate what the appellant's
involvement was, and why it was able to find (despite both parties' positions) that the
appellant was willfully blind and/or reckless respecting every transaction."  (at para 20)

 "As for the "why", the hearing panel appears to find that the appellant was aware of the
"red flags" on every transaction (signalling to her that they were fraudulent) and, at the same
time, appears not to reject the appellant's position that she erroneously relied on 
others, and in most cases only became involved at the end of the file.  It is entirely
unclear what the hearing panel did or did not accept as the underlying facts.  As noted earlier,
given the positions of the parties, this was of critical importance.(at para 21)

Hearing Panel "cuts and pastes"
L.S.U.C.'s factum in

     The Appellant complained on appeal that the hearing panel effectively "cut and paste" word for word the L.S.U.C.'s factum in the portion of their reasons entitled "Submissions and Analysis".  The Appeal Panel noted that the hearing panels 40 page reasons incorporated the entire L.S.U.C's factum and that portion comprised 21 pages.  The panel also attached the L.S.U.C's  written outline of the evidence to its reasons as Exhibit "C" and indicates that it was helpful to the hearing panel in reviewing the evidence and preparing its reasons.

  "After careful consideration, we have concluded that the hearing panel's independence or the appearance of its independence was not undermined." ( at para 29)

"Given our earlier conclusion that the hearing panel's reasons disclose reversible error, it is unnecessary to decide whether the word-for-word adoption of the Society's 71 paragraph factum and 72 page outline of the facts constitutes reversible error." (at para 38)            

     In addition to adopting the the facts as put forward by the L.S.U.C. in their factum the hearing panel also adopted their legal submission that "The member's belief that he had not acted dishonestly and certainly did not intend to decieve anyone, has no bearing on the panel's determination of his subjective awareness."  The Appeal Panel found that indeed such evidence was highly relevant evidence on this issue and constituted legal error.


     The appeal is allowed.  The findings on particulars 1(a) and 2 must be set aside.  Since revocation of the appellant's license was tied, in large part, to those findings, the penalty must be set aside as well.  The findings on all other particulars are upheld.

Karen Rosalee Caroline Cunninghma    v.  The L.S.U. C. 2012 ONLSAP 15 (CanLii)

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