Gerald Kirby Appellant And: Association of Chartered Professional Accountants of Newfoundland v. Labrador, 2022 NLSC 60

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Kirby v. Association of Chartered Professional Accountants of Newfoundland and Labrador , 2022 NLSC 60 Date : April 1, 2022 Docket : 202101G4574 and 202101G4576 Between: Gerald Kirby Appellant And: Association of Chartered Professional Accountants of Newfoundland and Labrador Respondent Before: Justice Daniel M. Boone Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: February 14 and 23 and March 23, 2022

Summary : An accountant appealed from two decisions of a disciplinary tribunal finding him guilty of several charges, and from the decision that imposed punishment. The Court dismissed the appeal in respect of numerous charges, finding that the Tribunal had not erred in the assessment of credibility of witnesses, in the characterization as professional services of his involvement in certain transactions with a person who was also a client, or in finding that his conduct in respect of one of the charges reflected on his suitability for membership.

The Court allowed an appeal from the Tribunal’s characterization of a mere conflict of interest as bringing discredit to the profession and also allowed an appeal from a finding that the accountant had forged his client’s signature. The Court dismissed an appeal from the sanctions imposed, which included expulsion from the profession .

Appearances: David P. Goodland, Q.C. Appearing on behalf of the Appellant Augustine F. Bruce, Q.C. Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: Faryna v. Chorny, (BC CA), [1952] 2 D.L.R. 354, [1952] 4 W.W.R. 171 (B.C.C.A.);Shears v. Shears, 2019 NLCA 40; C. (R.) v. McDougall, 2008 SCC 53; Dyck v. Roulston (1997), (BC CA), 32 B.L.R.(2d) 221, 36 B.C.L.R. (3d) 126 (C.A.); Marten v. Disciplinary Committee of the Royal College of Veterinary Surgeons, [1965] 1 All E.R.949, [1966] 1 Q.B. 1; Erdmann v. Institute of Chartered Accountants of Alberta, 2013 ABCA 147; Ratsoy v.

Architectural Institute (B.C.) (1980), (BC SC), 113 D.L.R. (3d) 439, 22 B.C.L.R. 303 (S.C.); Housen v. Nikolaisen, 2002 SCC 33; R. v.Villaroman, 2016 SCC 33 STATUTES CONSIDERED: Chartered Professional Accountants and Public Accountants Act, S.N.L. 2014, c. C-10.1 REASONS FOR JUDGMENT Boone, J.: BACKGROUND [1] Gerald Kirby (Kirby) is a member of the Association of Chartered Professional Accountants of Newfoundland and Labrador(the “Association”). A former client, Deborah Dunne, made allegations of professional misconduct against him.

A disciplinary tribunalof the Association held two separate hearings and found him guilty on several charges. The sanctions ordered against Kirby after onehearing included an 18-month suspension of his license as a public accountant, a fine, and an order for costs; after the other hearing thepenalties included a revocation of his certificate to practice as a chartered accountant, and financial penalties. [2] Kirby appeals from six of the findings of professional misconduct, and from some of the penalties imposed against him. [3] The complaints arose out of three transactions involving personal care homes.

As well as practicing as an accountant, Kirbywas involved in the business of operating personal care homes, in his personal capacity and through corporate entities. The corporationsincluded Retirement Home Specialists Inc. (“RHSI”) in which Kirby was a 50% shareholder, Retirement Home Investments Inc.(“RHII”) in which his son owned all the shares, and an umbrella entity, EPR Kirby Group of Companies. [4] The following descriptions of those three transactions are based on the facts found by the Tribunal.

The First Alderwood Transaction [5] In 2005 Deborah Dunne asked Kirby to assist in finding a buyer for Alderwood, a personal care home that she and her husbandowned. Kirby knew that Northern Property Real Estate Investment Trust (NPR) was in the market to buy personal care homes. NPRutilized a business model through which it purchased the homes and then immediately leased them back to the vendors to operate. Kirbyarranged a deal, but not for a direct sale from the Dunnes to Northern Properties. Rather, in 2007, RHSI purchased Alderwood from theDunnes for $3.125 million.

Kirby was paid a commission of $125,000 by the Dunnes, and another commission by NPR on that sale. RHSI then simultaneously sold Alderwood’s real property to Northern Properties for $3.675 million, but retained ownership of all itsnon-realty property. Northern Properties then leased Alderwood back to RHSI for a 20-year term at escalating rental rates. The pricepaid by NPR to RHSI reflected the obligations of RHSI under the rental agreement. [6] Kirby had not acted as the accountant for Alderwood before he was approached by the Dunnes to broker its sale.

However, hedid perform assurance work for Alderwood for the years 2006 to 2009. The Dunnes testified that they considered Kirby as their

accountant during the material time. The Twin Town Manor Inc. (TTMI) Transaction [ 7 ] The Dunnes left the province after they sold Alderwood. Deborah Dunne returned in 2010. Her husband had no further involvement in the events leading to the complaint, so further references to “Dunne” in this judgment are to Deborah Dunne. [ 8 ] Dunne approached Kirby and expressed an interest in acquiring another personal care home. Kirby told Dunne that Twin Town Manor, owned by Twin Town Manor Inc. (“TTMI”), was for sale.

He put Dunne in contact with the owner, and he facilitated a deal to acquire Twin Tower Manor by purchasing the shares of TTMI and a related holding company. Dunne needed financing to complete this transaction. Kirby told Dunne that she wouldn’t qualify for financing on her own, but he offered to help her to arrange financing on conditions: Dunne would provide a cash down payment; Kirby’s daughter, Allison Kirby, would put up a similar down payment and own 50% of TTMI and the holding company; and Dunne would operate the home. This deal closed in 2011.

Dunne paid $170,000 in cash and Allison Kirby $175,000, each contribution booked by Kirby as a shareholder’s loan. Dunne’s cash investment was later repaid to her by TTMI. Dunne, Allison Kirby and Kirby’s son, Michael Kirby, were appointed to the board of TTMI. Dunne took over the operations of the home. [ 9 ] Personal care homes have an obvious need for pharmaceutical products. Pharmacy suppliers offer various arrangements for the purchase of such supplies.

During the time that Kirby was helping Dunne to arrange financing for the TTMI transaction, Kirby and Michael Kirby approached Shoppers Drug Mart (Shoppers) and struck an arrangement under which TTMI would agree to purchase pharmaceutical supplies exclusively from Shoppers for a ten-year period. Michael Kirby and Allison Kirby became Directors of TTMI before the deal involving Dunne closed, and they signed the agreement with Shoppers on behalf of TTMI in that capacity.

In consideration of the obligations taken on by TTMI under this Agreement, Shoppers made a $264,000 up-front payment, called “Support Funds.” Kirby and Michael Kirby directed Shoppers not to pay the Support Funds to TTMI, but to RHII, a company owned by Michael Kirby. RHII in turn provided $175,000 of that money to Allison Kirby for her to use as her cash investment into TTMI. RHII kept the remaining $89,000 of the Support Funds, less a small payment to CMHC on behalf of TTMI. [ 10 ] Kirby provided accounting and payroll services to TTMI from 2011 to 2015.

The financial statements that he prepared did not say anything about the payment of the Support Funds or show the obligations owed by TTMI to Shoppers. [ 11 ] Shoppers terminated the pharmaceutical supply Agreement in 2015 and demanded return of a prorated portion of the Support Funds from TTMI. The Second Alderwood Transaction [ 12 ] RHSI operated Alderwood under its lease back agreement with NPR until 2012. NPR then offered to sell Alderwood to RHSI for $2.9 million. This suited NPR and RHSI as both had been losing money on Alderwood.

Kirby negotiated a price of $2.1 million, but in return for this lower price, RHSI agreed to pay $800,000 more to NPR for the purchase of a different personal care home. [ 13 ] Kirby asked Dunne to operate Alderwood, but she told him that she would do so only if she had an ownership interest. Kirby and Dunne agreed that Dunne and Michael Kirby would set up a new company, WBRCI, as a vehicle to purchase and operate Alderwood. Kirby set up WBRCI. Each of Dunne and Michael Kirby invested $150,000, and Kirby arranged for financing the rest of the money needed for the purchase. Dunne operated the home.

This arrangement stayed in place until Dunne purchased Michael Kirby’s interest in 2015. [ 14 ] While RHSI was operating Alderwood, Kirby and Michael Kirby negotiated a pharmaceutical supply agreement with Shoppers for that facility. When RHSI sold its interests in Alderwood to WBRCI, it did not make any adjustment for the Support Funds paid by Shoppers, and WBRCI did not assume the obligations of RHSI under the Shoppers Agreement.

In 2015, after Dunne had bought out Michael Kirby, WBRCI terminated the Agreement and then Shoppers demanded payment of a prorated portion of the Support Funds from RHSI. [ 15 ] Kirby provided accounting and tax services to WBRCI from 2012 to 2015. THE DECISIONS UNDER APPEAL Decision on 2018 Complaint [ 16 ] The Complaints Authorization Committee (the “CAC”) of the Association retained an accountant to investigate the charges.

Following the investigation, the Association referred a complaint (the 2018 Complaint) to the Disciplinary Panel consisting of 16 charges, some of which included sub-charges. [ 17 ] The full text of the charges in the 2018 Complaint is attached as Appendix A. The Tribunal found that the Association had proved 14 of those 16 charges. Kirby appeals from the decision on five (numbered 1, 2, 4, 7 and 10) of those charges, a

summary of each of which follows. [ 18 ] Kirby performed assurance accounting services for Alderwood in the years 2007 and 2008. Charge 1 alleged that he was in a conflict of interest because, during the same time as he provided assurance services, he was entitled to profits from RHSI, arranged the sale of Alderwood from the Dunnes to RHSI, and then from RHSI to NPR on the same day for $$550,000 more, and he was paid a commission of $125,000 by the Dunnes.

[ 19 ] Charge 2 alleged that Kirby provided accounting services to Dunne and that he failed to disclose several of his interests that were in conflict with hers. Charge 2(

a) alleges the undisclosed interest was his entitlement to the profits of RHSI from the flip from Alderwood to RHSI to NPR. Charge 2(

b) alleges that his undisclosed interest was his son’s ownership of RHII to which Kirby diverted the TTMI Support Funds paid by Shoppers, a portion of which was used to fund his daughter’s investment in TTMI. Charge 2(

c) alleges that the undisclosed interest was his entitlement to the profits of RHSI when it sold Alderwood in 2012 to WBRCI. [ 20 ] Charge 4 alleged that Kirby charged a commission on professional services for arranging the 2008 Alderwood sale without a written agreement setting out the services to be performed or the basis for the fee. [ 21 ] Charge 7 alleged that Kirby negotiated the TTMI Agreement with Shoppers, diverted the Support Funds under that agreement to RHII, and used a portion of those funds as Allison Kirby’s investment in TTMI without the knowledge of Dunne on whose behalf Kirby was arranging the TTMI transaction.

The Association alleged that this behavior was misconduct of a serious or reprehensible nature that reflected on Kirby’s honesty, integrity, or trustworthiness, or his suitability for membership in the Association. [ 22 ] Charge 10 related to Kirby’s involvement in the second Alderwood transaction. This charge alleged that Kirby provided professional services to WBRCI in negotiating and completing the purchase of Alderwood but did not disclose to Dunne the existence of a provider agreement with Shoppers or that Support Funds under that Agreement had been paid to RHSI.

The Association alleged that the nature of this conduct brought discredit to the profession. [ 23 ] The other charges not under appeal provide some context. The Tribunal found Kirby guilty of completing assurance services without either disclosing his financial or familial interest in the companies or transactions for which he prepared reports, or without disclosing or reporting certain aspects of the transactions, such as the revenues and obligations accrued under the Shoppers provider agreements.

Kirby has not appealed from those findings. [ 24 ] The Tribunal dismissed two conflict of interest charges – Charges 3 and 5 – because the conflicting interests were not a factor at the material time periods. Decision on 2019 Complaint [ 25 ] In April 2019, the CAC ordered the Association to refer another complaint against Kirby (the 2019 Complaint) consisting of three charges.

The full text of the 2019 charges is attached as Appendix B [ 26 ] The first charge in the 2019 Complaint alleged that Kirby forged, or directed the forgery of, Dunne’s signature on TTMI Directors’ Resolutions authorizing the company to lease a vehicle for Kirby’s benefit. The second alleged that Kirby directed his employee to witness the forged signature. The third alleged that Kirby contacted or attempted to contact that employee to improperly influence his evidence before the Tribunal. [ 27 ] The Tribunal considered these charges in a separate hearing and decision.

The Tribunal dismissed the second and third charges but found Kirby guilty of the first charge, of forging or directing the forgery of the Directors’ Resolutions. Kirby appeals that finding of guilt. Sanctions Decisions [ 28 ] The Tribunal held a separate hearing on sanctions and imposed the following penalties for the charges established under the 2018 Complaint: a reprimand, a $25,000 fine, the surrender of Kirby’s license and the striking of his name from the register, and the payment of the Association’s costs in the amount of $203,447.23.

Kirby appeals these penalties. [ 29 ] The Tribunal imposed further penalties for the conduct established under the 2019 Complaint: an 18-month suspension, a $10,000 fine, a costs order, and a requirement to complete an ethics course. Kirby does not appeal this sanction order. GROUNDS OF APPEAL Grounds of Appeal from Findings of Guilt under 2018 Complaint [ 30 ] Kirby appeals the findings of guilt on three grounds. First, he says that the Tribunal erred in accepting Dunne’s evidence in respect of Charges 1, 2, 4 and 10.

Second, he says that the Tribunal erred in finding that the conduct subject of Charges 1, 2, 4, 7 and 10 was in relation to professional services. Third, he says that the Tribunal erred by mischaracterizing the conduct involved in Charge 7 as serious and reprehensible and reflecting on his honesty, integrity, or trustworthiness; and the conduct in Charge 10 as being of a nature to discredit the profession. Grounds of Appeal from Finding of Guilt under 2019 Complaint [ 31 ] Kirby appeals on two bases from the finding of guilt on Charge 1 of the 2019 Complaint.

The first ground says that the Tribunal erred in finding that Kirby forged Dunne’s signature or directed that it be forged. The second ground related to the evidence of the employee who the Association alleged was directed by Kirby to witness the forged signature. The Association could not locate this person to testify at the hearing, and applied that a transcript of an interview that he gave be admitted into evidence. The Tribunal declined to rule immediately on this evidentiary issue, but instead postponed deciding the admissibility of the interview transcript until its final decision.

Kirby alleges that the refusal to rule on the question of admissibility until the hearing was over was procedurally unfair to Kirby because it meant that he had to make decisions on the evidence he would call, including whether to testify, without knowing the case that he had to meet. Grounds of Appeal from 2018 Sanctions Decision [ 32 ] Kirby appeals from the decision imposing sanctions under the 2018 Complaint on the ground that the Tribunal

mischaracterized the seriousness of the conduct in Charges 7 and 10. ISSUES [33] The first issue that must be considered in respect of each of these appeals is the applicable standard of review, which will differwith the grounds for each appeal. [34] Other than the standard of review, the following issues must be resolved: 2018 Complaint 1. Did the Tribunal err in accepting the evidence of Dunne in respect of Charges 1, 2, 4, and 10? 2. Did the Tribunal err in finding that the conduct on which Charges 1, 2, 4, 7 and 10 were based occurred while he was providingprofessional services? 3.

Did the Tribunal err in finding that the conduct alleged in Charges 7 and 10 reflected on Kirby’s suitability for membership in theAssociation? 2018 Sanctions Decision 4. Did the Tribunal mischaracterize the seriousness of Kirby’s misconduct? 2019 Complaint 5. Did the Tribunal err in finding that Kirby forged Dunne’s signature on two TTMI Directors’ Resolutions or direct that her name beforged? 6. Did the decision by the Tribunal to delay its decision on the admissibility of the employee’s interview transcript constituteprocedural unfairness?

ANALYSIS Standard of Review [35] Kirby appeals pursuant to a statutory right of appeal set out in the Chartered Professional Accountants and Public AccountantsAct, S.N.L. 2014, c. C-10.1, s. 43. The parties agree, therefore, that appellate standards of review apply. Accordingly, where Kirbygrounds an appeal in an argument that the Tribunal made an error of law, this Court will apply a standard of correctness, and substituteits decision where it disagrees with the Tribunal on that point of law.

Where Kirby grounds an appeal in an error of fact, then the reviewis conducted on a standard of palpable and overriding error; this Court will only overturn the Tribunal where the factual error is plainlyseen and its correction effectively undermines the outcome.

Where Kirby identifies a possible error of mixed fact and law, then thestandard of review falls along a spectrum; where the Court can extract an issue of law from the mix, then it will substitute its decision ifthe Tribunal was incorrect; where the alleged error falls closer to a finding or inference of fact, then the standard applied by this Court ispalpable and overriding error. Did the Tribunal err in accepting the evidence of Dunne in respect of 2018 Complaint Charges 1, 2, 4 and 10? [36] Kirby says that the Tribunal made a mistake in deciding that Dunne’s evidence was credible.

He says that her testimonyincluded lies; that she was evasive; that she implausibly tried to rationalize obvious contradictions when she was confronted on cross-examination with documents that contradicted her evidence; that the Tribunal relied on her evidence as establishing implausiblepropositions incapable of subjective confirmation; and finally that the Tribunal did not seem to recognize her lies nor give any reason forfinding her credible. [37] Kirby also argues that the Tribunal applied a different standard to the assessment of his credibility than it used in assessing thecredibility of Dunne. [38] The Tribunal noted that the credibility of witnesses was a factor that it would have to assess in making its findings of fact, andit stated at the outset of its decision that it would apply the following test, taken from the British Columbia Court of Appeal decision inFaryna v.

Chorny, (BC CA), [1952] 2 D.L.R. 354, [1952] 4 W.W.R. 171 (B.C.C.A.), in considering credibility: 10 The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whetherthe personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to anexamination of its consistency with the probabilities that surround the currently existing conditions.

In short, the real test of the truth ofthe story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informedperson would readily recognize as reasonable in that place and in those conditions. [39] The test set out in Faryna v. Chorny is often cited as a guide to the exercise of fact finding in the face of competing witnesstestimony.

But, the British Columbia Court of Appeal in that case also described the process of appellate review of a fact-finder’scredibility assessment: 11 The trial judge ought to go further and say that evidence of the witness he believes is in accordance with the preponderance ofprobabilities in the case and, if his view is to command confidence, also state his reasons for that conclusion. The law does not clothe thetrial judge with a divine insight into the hearts and minds of the witnesses.

And a court of appeal must be satisfied that the trial judge'sfinding of credibility is based not on one element only to the exclusion of others, but is based on all the elements by which it can betested in the particular case.

[ 40 ] The descriptions of the exercise of credibility assessment at both the initial fact-finding stage and on appellate review in Faryna v. Chorny have been endorsed by the Newfoundland and Labrador Court of Appeal on numerous occasions: see, e.g., Shears v. Shears , 2019 NLCA 40 , at para. 35 . [ 41 ] The process of appellate review of credibility findings therefore requires an assessment of whether the fact-finder considered all of the relevant elements against which credibility can be tested. But in Shears v.

Shears , Hoegg JA also noted that the process allows for significant deference to the impressions that the fact-finder may mention but perhaps can’t explain in detail. In support of that proposition, Hoegg JA cited this passage from the decision of the Supreme Court of Canada in C. (R.) v. McDougall , 2008 SCC 53 , at para. 72 : 72 With respect, I cannot interpret the reasons of the majority of the Court of Appeal other than that it disagreed with the trial judge's credibility assessment of F.H. in light of the inconsistencies in his evidence and the lack of support from the surrounding circumstances.

Assessing credibility is clearly in the bailiwick of the trial judge and thus heightened deference must be accorded to the trial judge on matters of credibility. As explained by Bastarache and Abella JJ. in R. c. Gagnon, [2006] 1 S.C.R. 621, 2006 SCC 17 (S.C.C.) , at para. 20 : Assessing credibility is not a science. It is very difficult for a trial judge to articulate with precision the complex intermingling of impressions that emerge after watching and listening to witnesses and attempting to reconcile the various versions of events.

That is why this Court decided, most recently in H.L., that in the absence of a palpable and overriding error by the trial judge, his or her perceptions should be respected. [ 42 ] It would be an error for a fact-finder to apply a different standard to the assessment of the credibility of some witnesses than others. However, in order to succeed on the ground that the fact-finder applied different levels of scrutiny, the appellant must point to an element used in analyzing the evidence of one witness that was not used, although clearly applicable, in considering the evidence of another.

In the absence of such a showing, there is a real risk that the appellate court would simply replace the fact-finder’s assessment of credibility with its own. [ 43 ] Therefore, appellate review of a fact-finder’s credibility determinations involves examining the reasons against a standard that requires a sufficient, but not perfect or comprehensive, explanation by the fact-finder that includes material and balanced considerations as to why evidence was accepted or rejected. [ 44 ] Credibility is part of the fact-finding exercise and, therefore, an error in credibility assessment will only result in overturning the decision if the error is not only clearly seen but also is an overriding error – one related to a material issue the correction of which undermines the outcome. [ 45 ] This is the approach that I will apply in considering Kirby’s arguments that the Tribunal erred in its assessment of the credibility of Dunne. [ 46 ] Kirby argues that the Tribunal applied a different standard to assessing the credibility of Dunne than in assessing his credibility because it accepted Dunne’s viva voce evidence despite its inconsistency with documents, but refused to accept his story unless it was supported by clear documentary evidence. [ 47 ] However, in the instances relied upon by Kirby to establish this argument, the Tribunal’s reference to Kirby’s failure to provide documentary evidence to support his position was not a factor in the assessment of his credibility.

Rather, this discussion related to the requirement that a professional accountant document such matters, and the finding that Kirby failed to fulfill this obligation. [ 48 ] For instance, Charge 1 under the 2018 Complaint alleges that Kirby was in a conflict of interest in acting as accountant for Alderwood when he had interests in the first Alderwood transaction resulting from his part ownership of RHSI and the commission he was paid by Alderwood.

Kirby argued that the Tribunal erred by accepting Dunne’s evidence relating to this charge when other evidence demonstrated that she was aware of Kirby’s conflicting interest, but then refused to accept Kirby’s evidence because he didn’t present documents clearly establishing that he told Dunne of the conflict. However, this argument relies on a false equivalency. The Tribunal did find that Dunne and her husband were somewhat aware of Kirby’s conflicting interests because they were informed by the lawyer who acted for them on the transaction (and who also owned RHSI with Kirby).

They rejected Kirby’s position because the rules of professional conduct require that he document the conflict of interest and his disclosure of it.

This latter finding was not a determination of Kirby’s credibility, but rather a finding that the Dunnes’ indirect awareness of the conflicting interests did not satisfy Kirby’s professional obligations to disclose the conflict and document the disclosure. [ 49 ] Similarly, in respect of Charge 4 (charging a commission without documented agreement), the Tribunal found that the Dunnes were aware of the commission, although not the precise basis for calculation, but found that Kirby failed in his professional responsibility to document the basis for the contingency commission in advance.

Again, this latter decision was not a credibility finding but instead a decision that the Dunnes’ awareness of the contingency fee did not displace Kirby’s professional obligation to document the basis for the fee that he charged. [ 50 ] The balance of Kirby’s arguments regarding the Tribunal’s credibility findings were based on his position that Dunne’s evidence was not credible because her testimony included obvious falsehoods and implausible explanations of documents that were inconsistent with her story. [ 51 ] Kirby argues that although the Tribunal indicated that it would apply the Faryna v.

Chorny standard for assessing credibility, its reference to that standard was mere boilerplate that was never actually applied by the Tribunal. [ 52 ] This argument by Kirby cannot withstand reading of the Tribunal decision. At every point where the Tribunal made findings of fact it clearly and expressly addressed the factors of plausibility and consistency. It never accepted the testimony of any witness

uncritically or fully, but rather compared the evidence of the witnesses with conflicting testimony and with the documents. [ 53 ] Moreover, all of the inconsistency and “holes” in Dunne’s testimony on which Kirby relies on appeal were pointed out to the Tribunal by Kirby’s lawyer. The Tribunal identified some of these inconsistencies as a basis for rejecting portions of Dunne’s evidence. [ 54 ] Further, the findings of guilt made by the Tribunal were not based entirely on Dunne’s evidence.

The conflict of interest charges were supported by the documents and by Kirby’s own evidence that established his undisclosed conflicting interests. The charges connected to the TTMI and second Alderwood transactions were based upon the Tribunal’s consideration and resolution of the evidence of Dunne, Kirby, and the documents. Even if the credibility of Dunne might have been more suspect than the Tribunal found, this would not have entirely undermined the factual findings on which the guilty decisions on these charges were based. [ 55 ] This ground of appeal fails.

Did the Tribunal err in finding that the conduct on which the 2018 charges were based involved professional services? [ 56 ] Kirby says that all of the conduct that formed the basis of the Tribunal’s decision that he was guilty of the five charges under appeal occurred in the course of business activities that were not regulated by the Association. Kirby presented different arguments along these lines in respect of each of the five 2018 charges under appeal.

Charge 1 [ 57 ] Charge 1 alleged that, contrary to Rule 202.1 of the Association’s Code of Ethical Principal and Rules of Conduct ( CEPROC ), Kirby provided review engagement reports and financial statements for Alderwood at the same time that he was entitled to profits from RHSI, which benefited from the first Alderwood transaction and a commission on the sale. [ 58 ] Kirby argued that the Tribunal could only have found him guilty of this charge if it concluded that he had failed to maintain his independence in respect of the provision of assurance services.

He says that the Tribunal erred in law by considering only whether Kirby was in a conflict in providing other unspecified professional services to Alderwood. [ 59 ] Rule 202.1 of CEPROC is headed “Independence in Assurance or Specified Auditing Procedure Engagements.” Kirby admitted that he provided such services to Alderwood during the material time. He does not dispute the finding that he had personal interests that conflicted with those of Alderwood.

However, he argues that in coming to its conclusion on Charge 1, the Tribunal did not make a finding that his independence in relation to assurance or auditing services was affected. Kirby says that the other services he provided to Alderwood and the Dunnes at the same time – arranging and negotiating the sale of Alderwood – were not assurance services and could not be considered in relation to this charge. [ 60 ] The Tribunal did conclude that Kirby’s other work for Alderwood constituted non-assurance professional services.

In its decision it does refer to the conflict of interest created in the provision of those services. However, the Tribunal found specifically that Kirby was engaged in providing assurance services at the same time that he had undocumented and undisclosed interests in conflict with Alderwood: 91. In 2006, the Respondent provided notice to reader review services and, in 2007-2008 review engagement services to Alderwood. The Respondent’s firm also prepared various accounting records and tax returns for this company. Review engagements cannot be considered basic accounting work.

In providing such services, the Respondent was required to hold himself free of any interest, influence or relationship which, in the view of a reasonable observer, could impair his professional judgment or objectivity. 92. During the 2007-2008 engagement period, the Respondent also arranged for a sale of Alderwood’s assets to RHSI, a company in which he held a 50% interest. In doing so, he provided professional services to both Alderwood and DD, the sole shareholder of Alderwood.

The Alderwood Sale was arranged in such a manner that the Respondent stood to potentially benefit by way of a subsequent sale of these assets to another company, at a higher price. He also stood to benefit though the receipt of two commissions (the RHSI commission and the RHSI fee). … 94. …The Tribunal finds that a reasonable observer would conclude that the Respondent’s personal interest in RHSI placed him in a conflict of interest which threatened his judgment and objectivity during his period of engagement with Alderwood.

In the circumstances, it was incumbent upon the Respondent to identify, document, evaluate and disclose this threat to his engagement as well as impose safeguards to reduce this threat to an acceptable level before continuing with the engagement. 95. The Respondent did not identify the nature of the threat to his objectivity and he failed to resolve this threat in accordance with the requirements of Rule 202.1. The Tribunal notes four (4) areas in which the Respondent’s conduct was substandard. Firstly, he failed to inform DD of the nature of his interest in RHSI.

While this information may have been relayed to DD through RR, it was not RR’s role to ensure the Respondent’s obligations had been complied with. Secondly, the Respondent failed to explain or document for DD that RHSI would be receiving the RHSI Fee in addition to the RHSI Commission. This arrangement essentially amounted to RHSI receiving a commission for facilitating the sale of the Alderwood assets to itself. This is not an arrangement which a reasonable member would have expected to have occurred.

Thirdly, the Respondent failed to explain or document the details of how the RHSI Commission or RHSI Fee would be calculated. Finally, the Respondent failed to take any of the steps to manage this threat to his objectivity through segregation of Alderwoods files at his office, or other satisfactory means, such that his continued engagement could be seen as objective. [ 61 ] The Tribunal then concluded that this conduct was in violation of Rule 202.1 of CEPROC , which expressly requires independence in assurance services.

Although the Tribunal referred to the non-assurance services that Kirby provided, it decided that he did not take steps to avoid the threat of conflict in the provision of assurance services. Kirby’s other gains from the first Alderwood transaction, in part resulting from his non-assurance services to Alderwood in structuring the transaction, constituted the interests in conflict with his provision of independent assurance services.

The finding was not that Kirby was in a conflict in the provision of non- assurance services, but that the money he made from these other services was the interest that conflicted with his obligations in assurance services.

[62] This ground of appeal fails in respect of the decision on Charge 1. Charges 2(

a) and 4 [63] Charge 2 alleged that while Kirby provided accounting services to Dunne, he failed to disclose conflicts between his interestsand Dunne’s. Charge 2(

a) specifically alleged that the undisclosed interest was his entitlement to the profits of RHSI resulting from theflip of Alderwood to NPR. [64] Charge 4 alleged that Kirby charged a commission on professional services for arranging the first Alderwood transactionwithout a written agreement setting out the services to be performed or the basis for the fee. [65] In respect of both those charges, Kirby argues that he was not providing accounting services to Dunne by arranging andnegotiating the first Alderwood transaction.

He says that Dunne sought him out because of his expertise in the business of personal carehomes, and not because he was an accountant, and therefore his conduct in respect of these transactions was not subject to professionalregulation or discipline. Kirby concedes that he should not have provided accounting services to Dunne and Alderwood after thetransaction closed in light of his involvement in the transaction, and he does not appeal from the findings of guilt on conflict of interestcharges related to the later provision of assurance services.

However, he says that his later provision of accounting services could nottransform his earlier involvement into regulated services. [66] The Tribunal decided that Kirby’s activities in the Alderwood transaction were accounting services: 97. With respect to Charge 2(a), the Tribunal finds that the Respondent provided non-assurance services to Alderwood in 2007 and 2008by arranging and facilitating the sale of assets of Alderwood to RHSI for $3,125,000. These services were provided in the context of aprofessional relationship and involved a certain amount of advice on an accounting level. [67] Charge 2(

a) referred to CEPROC: R202.3 Independence in Other Professional Services (

a) Requirement to disclose interest, influence, and relationships.

A member who provides any services not subject to R202.1 and R202.2 and the CGA Independence Standard shall disclose in writing tothe client or employer any interest, influence, or relationship in respect of the client’s or employer’s affairs which impairs the member’sprofessional judgement or objectivity, or which, in the view of a reasonable observer, may have that effect. [68] Kirby essentially argues that the effect of the Tribunal decision is to make an accountant who engages in non-accountingbusiness dealings subject to professional regulation.

Rule 202.3, as interpreted by the Tribunal, does not go so far as that. By its plainterms, it provides that professional accountants who provide services that are not specifically regulated by R202.1 and 202.2 must avoidor disclose conflicts of interest. The Tribunal expressly decided that Kirby provided services in connection with the first Alderwoodtransaction in the context of a professional relationship and involved accounting advice. It had earlier found, at paragraph 45, that Kirbyprovided accounting services – tax advice- in advance of closing of the deal.

It did not explicitly address the evidence from Dunne andKirby as to how the relationship had started with Dunne looking for assistance in finding a buyer for Alderwood, but it had heard thatevidence. It clearly concentrated instead on the actual services provided by Kirby and not the genesis of the relationship. [69] The facts found by the Tribunal make this case different from that of Dyck v. Roulston (1997), (BC CA), 32B.L.R. (2d) 221, 36 B.C.L.R. (3d) 126 (C.A.), on which Kirby relies.

That case involved an appeal from a finding that the plaintiff’saccountant was not liable for breach of fiduciary duty in respect of an investment he recommended to his clients, because the trial judgefound that the investment was not based on his professional advice but “on no more than invitation with a view to making a quickprofit.” In this case, the Tribunal found as fact that Kirby was acting as an accountant for Dunne and Alderwood during the transactionin which the Alderwood home was sold to a company that Kirby partially owned. [70] Kirby has not demonstrated, therefore, that the Tribunal erred in law by finding that his conduct in the first Alderwoodtransaction involved accounting services subject to professional discipline. [71] Charge 4 refers to: R508.1 Contingent Fees Other Non-Assurance Services A member or a firm engaged in the practice of public accounting or related business or practice may charge a contingent fee in respect ofa non-assurance service, provided:

a) It does not create any interest, influence or relationship which impairs the professional judgement or objectivity of themember or firm, or which, in the view of a reasonable and informed third party, may have that effect in respect of an engagementdescribed in R508(a);

b) A written agreement with the client detailing the basis or remuneration is obtained in advance of the engagement. [72] The Tribunal found Kirby guilty of Charge 4 because, although the Dunnes expected to pay Kirby for his services in facilitatingthe Alderwood transaction, the contingency fee of 4% of the sale value had not been agreed in advance, and not agreed in writing. Kirbyagain says that the work for which he was paid involved services other than accounting, but the Tribunal found as a fact that he didprovide accounting services in connection with this transaction. More importantly, the wording of Rule 508.1(

c) precludes unwrittencontingency fee arrangements charged by accountants engaged in “public accounting or related business or practice,” which wouldcertainly be broad enough to encompass the services provided by Kirby contemporaneously with his public accounting services in thiscase.

[ 73 ] This ground of appeal fails in respect of Charges 2(

a) and 4. Charge 2(b) [ 74 ] This charge alleged that Kirby was in a conflict of interest when he arranged both the TTMI transaction, and the Shoppers Agreement for TTMI. The Tribunal noted at paragraph 101: “To substantiate this charge, the Association must establish that an accountant/client relationship existed with [Dunne] when the [Shopper’s] Agreement was negotiated and Support Funds paid.” [ 75 ] Kirby argues that the Tribunal erred in law by deciding that he was Dunne’s accountant during the relevant period.

He says that the evidence showed that on her return to this province in 2010, Dunne asked Kirby whether he knew of a personal care home for sale, and that this enquiry led to the TTMI transaction. Kirby says that he had not performed any accounting work for Dunne since the terminal Alderwood financial statements in 2009.

He says, therefore, that he was not Dunne’s accountant, and he did not provide any accounting services to Dunne during the TTMI transaction. [ 76 ] The Tribunal found at paragraph 104 that “the accountant/client relationship between [Dunne] and [Kirby] had continued following the Alderwood Sale and that such a relationship existed, throughout the time frame in which the TTMI Purchase was negotiated and ultimately executed.” In so finding, it relied on these facts it found earlier in its decision: 67.

It was [Dunne’s] testimony that she still considered [Kirby] to be her accountant when she approached him in late 2010. The Tribunal accepts her evidence on this point. [Kirby] had provided accounting services in the past and it was reasonable for [Dunne] to assume that a professional relationship still existed. Any reasonable member of the public in her position would have reached the same conclusion.

More importantly, however, from early 2011 forward [Kirby] provided professional services to [Dunne] by arranging financing for both the purchase of the shares of TTMI as well as the planned renovations for the Twin Tower Home.

These services were similar to those performed for [Dunne] in the past, and for which [Kirby] had been compensated as a result. [Kirby] did not inform [Dunne] that he could not provide accounting services for her nor was there evidence to suggest that he recommend that [Dunne] obtain independent accounting advice during this time frame. [ 77 ] The determination that a professional relationship exists is not a pure finding of fact but rather a mixed question of fact and law, which involves the application of the legal nature of such a relationship to a set of facts. [ 78 ] Kirby says that the Tribunal’s determination that there was an accountant/client relationship at the time of the TTMI transaction was based on two fallacious bases: that Dunne considered Kirby to be her accountant in 2010 even though he had not provided accounting services to her since 2009; and that Kirby’s accounting work for TTMI after the transaction somehow retrospectively characterized their earlier dealings. [ 79 ] If the decision that a professional relationship existed had been based solely on Dunne’s belief and on the work that followed after the TTMI transaction had closed, then the decision that a professional relationship existed during the transaction would not have been logically sustainable. [ 80 ] However, the Tribunal based its decision on the nature of the work performed by Kirby.

It described the work he did in arranging for the purchase of shares and for financing the transaction as professional accounting work. This is consistent with its earlier finding regarding the work Kirby did in respect of the first Alderwood transaction: 90.

While the initial relationship between the [Kirby], Alderwood and [Dunne] may have involved a business arrangement the Tribunal does not accept [Kirby’s] characterization of his role as merely that of a “commercial real estate agent.” From the outset, [Kirby] provided services to both [Dunne] and Alderwood in facilitating financing and performing services in circumstances in which [Dunne] and Alderwood were entitled to rely on [Kirby’s] membership in the Association as giving particular competence.

These services would be considered professional services as defined under CEPROC . [ 81 ] The definition of professional services under CEPROC referred to by the Tribunal is as follows: Any services performed or offered to be performed by a member for a client or employer, in which the member asserts membership in the Association.

In addition, “professional services” refers to those activities, including the provision of goods, where the public or the member’s associates are entitled to rely on the member’s membership in the Association as giving particular competence. [ 82 ] Kirby argued that the Tribunal should not have referred to that definition, and this Court can’t take it into account, because that definition was not properly before the Tribunal. CEPROC was included in the document brief prepared by the Association investigator and filed as evidence in the Tribunal.

However, the definition referred to above was left out of the document brief. [ 83 ] This position cannot hold up to any scrutiny. A Disciplinary Tribunal can always consider the code of ethics and rules of conduct that govern the profession. The code and rules are distributed to every member (in fact, the evidence showed that the quality assurance manual that Kirby used in his accounting firm referred to CEPROC ). The code and rules are not a mere document. [ 84 ] Kirby has not demonstrated that the Tribunal erred in the definition of professional services.

It applied that definition to the facts and found that Kirby should have avoided conflict of his interests with those of Dunne in relation to services he performed for the TTMI transaction. This ground of appeal in respect of Charge 2(

b) fails. Charge 2(c) [ 85 ] This charge alleged that Kirby was in a conflict of interest when he arranged the second Alderwood sale by RHSI and NPR to WBRCI (owned 50% by each of Dunne and Michael Kirby) because of his interest in RHSI, which he did not disclose to Dunne. [ 86 ] Kirby again argues that his work in arranging for the second Alderwood sale did not constitute professional services. The Tribunal, at paragraph 109, decided that it was: “[Kirby] provided professional services to [Dunne] in making arrangements for the

WBRCI purchase. [Dunne] considered him to be her accountant at the time. At the same time, [Kirby] was also acting as the accountant for TTMI, a company in which [Dunne] held an interest.” [ 87 ] Although the Tribunal did not repeat its earlier reference to the CEPROC definition of professional services, it is clear from the context that it was this definition that it utilized. The Tribunal found that Kirby suggested, and then helped Dunne structure, WBRCI as the corporate vehicle under which she and Michael Kirby invested in WBRCI.

The Tribunal considered that work to be regulated accounting services. [ 88 ] I find that Kirby has failed to demonstrate that the Tribunal erred in the standard it applied to determine that he provided professional services to Dunne in connection with the WBRCI transaction. This ground of appeal in respect of Charge 2(

c) fails. Charges 7 and 10 [ 89 ] Charge 7 related to the TTMI transaction and Charge 10 to the second Alderwood transaction. Kirby appealed the findings of guilt on these charges on the ground that the Tribunal erred in its decision that his work in arranging, negotiating, and facilitating each transaction constituted professional services. For the reasons that I have outlined, I find that the Tribunal did not err in so characterizing the work that he performed. [ 90 ] Kirby’s appeal grounded in alleged error in the characterization of his conduct in respect of each of Charges 7 and 10 therefore fails.

Did the Tribunal err by mischaracterizing the misconduct alleged in charges 7 and 10? Charge 7 [ 91 ] Charge 7 alleged that Kirby’s misconduct in respect of the TTMI Support Funds was serious and reprehensible and reflected a lack of honesty and integrity. [ 92 ] Kirby does not appeal the findings of fact underlying the conclusion that he was guilty of this charge.

The Tribunal found that, during the same time that Kirby was negotiating the TTMI share purchase on behalf of Dunne and Allison Kirby, he also negotiated a provider agreement with Shoppers under which TTMI agreed to purchase all of its pharmaceutical supplies from Shoppers in return for payment of Support Funds in the amount of $264,000. Kirby had Michael and Allison Kirby appointed as Directors of TTMI during this time (i.e. before Allison Kirby and Dunne had purchased the shares of TTMI) and in that capacity they executed the Shoppers Agreement.

Under the Agreement, Shoppers should have paid the $264,000 to TTMI, but instead Kirby directed Shoppers to pay that money to RHII, a company Michael Kirby owned. $175,000 of that money was used by Allison Kirby as her investment in TTMI (whereas Dunne put up her own money). Therefore, Allison Kirby in effect used TTMI’S own money to purchase its shares. RHII took the rest of the Support Funds without any entitlement to that money. Although Dunne knew of the provider agreement, she never knew about the Support Funds.

When TTMI cancelled the provider agreement in 2015, Shoppers demanded a prorated amount of the Support Funds. It was only then that Dunne learned that Shoppers had paid Support Funds, and only later that she learned that those funds had been paid to RHII and some used by Allison Kirby as her 50% contribution toward purchase of TTMI shares. [ 93 ] The Tribunal found: 122. The Tribunal finds that an accountant/client relationship existed between [Kirby] and [Dunne] throughout the entirety of 2011.

That said, the Tribunal finds that it is not necessary for the Association to establish that a professional relationship existed between [Kirby] and [Dunne] for this charge to be proven. Rule 108 indicates that it is applicable to members acting in a professional capacity or otherwise . In the circumstances, conduct of a member which is outside of a professional relationship can still be considered unethical, and in breach of Rule 108, to the extent the conduct reflects on the member’s suitability to be a member of the profession as defined in this rule. [underlining original] 123.

The Tribunal finds that [Kirby] negotiated the [Shoppers] Agreement at a time when he knew that [Dunne] was going to buy-into TTMI. The TTMI APS had been signed and the parties were working towards completion of the TTMI Purchase. As [Dunne] was one of the planned purchasers. [Kirby] should have informed her of the [Shoppers] Agreement as well as the contractual obligations agreed to therein.

More importantly, [Kirby] should have informed [Dunne] that the Support Funds were being diverted to a company under [Michael Kirby’s] control, rather than TTMI, and being used to satisfy [Allison Kirby’s] investment in TTMI. 124. The Tribunal finds that [Kirby] deliberately withheld the negotiation of the [Shoppers] Agreement, and the payment of the Support Payments to RHII, from [Dunne]. [Kirby’s] actions were reprehensible and reflected a lack of honesty and integrity.

The Association has proven this charge on a balance of probabilities. [ 94 ] Kirby does not on this appeal dispute that this conduct could be considered reprehensible and reflecting a lack of integrity and honesty if he had acted in this way while providing accounting services. The Tribunal’s finding of guilt on this charge was primarily based on its decision that an accountant-client relationship existed between Kirby and Dunne during the material time. I already considered and dismissed Kirby’s ground of appeal that he was not acting as an accountant.

This effectively disposes of his primary appeal on Charge 7. [ 95 ] Kirby also appeals from the Tribunal’s alternative finding that the Association would have made out this charge even if the relationship between Kirby and Dunne was a business, and not professional, relationship. [ 96 ] Kirby argues that this alternative finding by the Tribunal required the application of a two-part test that the Tribunal did not apply, and he relies on cases he says establish that a professional can only be disciplined for conduct outside the practice of the profession on the application of a two-part test that involves finding, first, that the conduct would be reprehensible on the part of anyone; and, second, that the conduct would be especially reprehensible on the part of a professional: Marten v.

Disciplinary Committee of the

Royal College of Veterinary Surgeons, [1965] 1 All E.R. 949, [1966] 1 Q.B. 1 (a case involving discipline of a veterinarian for treatmentof his farm animals); Erdmann v. Institute of Chartered Accountants of Alberta, 2013 ABCA 147 (a case concerning an accountantthreatening a builder with complaints of building code violations); Ratsoy v. Architectural Institute (B.

C.) (1980), (BCSC), 113 D.L.R. (3d) 439, 22 B.C.L.R. 303 (S.C.) (a case involving an architect violating building codes and orders on his ownbuilding). [97] Kirby says the conduct that the Tribunal found that he had engaged in would have been acceptable on the part of an ordinarybusinessperson, and that by finding that it was reprehensible the Tribunal applied the standards required of a professional accountant tohis conduct in business. [98] I do not accept this submission. The Tribunal found that Kirby’s conduct was unethical on the part of any person. That findingis supported by the evidence.

Kirby diverted funds that were properly the funds of TTMI, and then negotiated on behalf of Dunne forher investment in a company that should have been worth $264,000 more if Kirby had not directed the funds to be paid to RHII, whichhad done nothing to earn that money. And then Kirby arranged for RHII to make $175,000 of, effectively, TTMI’s own moneyavailable to his daughter for her to use to acquire an equal interest in TTMI with Dunne, who put up her own money with no idea thatAlison Kirby’s investment was a sham.

That conduct would be unethical, as the Tribunal found, by any standard applied to businessdealings. [99] I also do not entirely accept Kirby’s formulation of the test for unbecoming conduct outside the scope of a profession, althoughit might be applicable in some situations. Misconduct on the part of a professional can occur in circumstances outside the strict scope ofpractice that still require adherence to the principles of professional conduct.

In my view, an accountant who engages in unethicalbusiness practices in dealing with a client outside the scope of accounting engages in conduct that reflects on his suitability for theprofession. The professional can be held to a higher standard in the conduct of everyday affairs where the fundamental principles ofintegrity and honesty at the core of the profession are engaged. [100] This view is consistent as well with the wording of CEPROC, Rule 108, on which the charge was based.

That Rule expresslystates that it is applicable to members acting in a professional capacity or otherwise. [101] Therefore, Kirby’s appeal from the finding of guilt on Charge 7 fails. Charge 10 [102] Charge 10 invoked a different rule of conduct than did Charge 7.

It referred to Rule 101 (conduct that brings discredit to theprofession) and impugned Kirby’s actions in negotiating for Dunne the second Alderwood purchase in 2012 without disclosing to her theexistence of the Shoppers’ Agreement with Alderwood, and the Support Funds paid to RHSI, and without disclosing his interest in RHSI. [103] The Tribunal found: 132. The Tribunal finds that [Kirby] knew about the RHSI Provider Agreement but failed to inform [Dunne] of the details of same,including the fact that support funds had been received by RHSI.

While it does not appear that the RHSI Provider Agreement wasformally assumed by WBRCI, [Kirby] did not take steps to ensure that [Dunne’s] interest would be protected in the event of itstermination. [Kirby’s] failure to disclose was, at least in part, motivated by a desire to assist RHSI in recouping some of its losses fromthe sale of another personal care home. [Kirby] should have clearly disclosed the nature of his interests in RHSI and taken steps toensure that any liability under this agreement remained with RHSI in the event of termination. [Kirby’s] actions in this case broughtdiscredit to the profession pursuant to Rule 101 of CEPROC.

The Association has proven this charge on the balance of probabilities. [104] The Tribunal found as fact that WBRCI did not assume any obligations under the Shoppers Agreement when it purchased theoperating assets of Alderwood from RHSI. It also found that WBRCI complied with the Shoppers Agreement by purchasing itspharmaceutical supplies from Shoppers until 2015.

When WBRCI terminated this Agreement, Shoppers claimed the unearned portion ofthe Support Funds from RHSI, not from WBRCI. [105] The decision of the Tribunal on Charge 10 is effectively a finding that Kirby was in a conflict of interest by not disclosing toDunne that Shoppers had paid Support Funds to RHSI, that he had an interest in RHSI, and that some of those funds were unearned bythe time of the sale of Alderwood’s non-realty assets to WBRCI.

However, as WBRCI did not assume any of the obligations under theShoppers Agreement, and RHSI continued to be responsible for repayment of unearned Support Funds if the Agreement was terminated,any conflict between the interests of Kirby and Dunne in respect of the Shoppers Agreement would have been minimal and technical atbest. [106] The Tribunal did not identify the standard it applied to determine that Kirby’s conduct involved in Charge 10 amounted toconduct that caused discredit to the profession contrary to Rule 101.

It merely found a conflict and concluded that the conductdiscredited the profession. [107] Neither party provided any case law guiding the choice of standard by which to measure conduct that is alleged to discredit theprofession. I do not have to precisely identify the appropriate standard in order to dispose of this ground of appeal. I find that a merefailure to disclose a technical conflict of interest would not by any appropriate standard constitute conduct that discredits the profession. [108] I allow the appeal from the decision that the Association had proved that Kirby was guilty of Charge 10.

Did the Tribunal in its Sanctions Decision mischaracterize the seriousness of Kirby’s misconduct? [109] The Tribunal decided that it needed to take a global approach to the punishment it set for Kirby in respect of each complaint,rather than a piecemeal consideration of each of the charges for which he was convicted. This was the correct approach. [110] I have decided that the Tribunal’s conviction of Kirby on Charge 10 should be set aside. The question therefore arises whether

the sanction decision ought to be reversed on that basis. I have reviewed the Sanctions Decision carefully. Other than a reference in the

summary of the Association arguments, the conduct involved in Charge 10 did not receive a separate consideration from the Tribunal in deciding sanctions and appears to have been rolled up in the Tribunal’s finding at paragraph 41, that Kirby’s “conduct revealed a pattern of failing to properly distance his professional services to his clients from his personal business interest.” Even though I decided that the conflict of interest involved in Charge 10 was a technical conflict without material effect on the client, the failure to disclose this conduct was still part of the pattern identified.

Kirby has not demonstrated that the sanctions imposed by the Tribunal would have been any different if the Tribunal had found that Charge 10 had not been proven. [ 111 ] Kirby also says that the Tribunal erred when it found that Kirby’s failure to disclose the flip from RHSI to NPR, and the leaseback to RHSI in the first Alderwood transaction, “and his corresponding potential for benefit, was indicative of a significant element of moral turpitude which must be reflected in the sanctions.” The facts as found by the Tribunal supported this finding. [ 112 ] The primary focus of the Tribunal in imposing the significant sanction of expulsion imposed by the Tribunal was Kirby’s conduct in respect of the TTMI transaction: 44.

The Tribunal finds that [Kirby’s] actions with respect to the Support Funds was reprehensible and reflected a significant element of moral turpitude. The Support Funds were properly payable to TTMI, a client of [Kirby’s]. Instead, [Kirby] arranged for them to be paid to a company owned by his son. … While one hundred and fifty thousand dollars ($150,000) of the Support Funds were eventually paid to TTMI on closing, this amount was paid on account of AK’s interest in TTMI in order to equal [Dunne’s] investment.

While [Dunne] may have been repaid her initial investment in TTMI at a later date, her investment remained at risk until that time. Even more disconcerting, however, was the fact that the balance of the Support Funds remained with MK’s company. There was no evidence to suggest that this balance ever made its way back to TTMI or its shareholders. The Tribunal finds that [Kirby’s] actions in relation to the Support Funds revealed a lack of honesty and integrity.

Whether his actions fell within the definition of “misappropriation”, or were better characterized as appropriation of funds for his and/or his family’s benefit, this conduct seriously calls into question his suitability as a member in the Association. 48. In terms of proportionality, the Tribunal finds that the factual circumstances and findings outlined in the cases submitted by the Association were more analogous with the findings in this case.

Having found that the respondent [Kirby] exhibited a serious lack of judgment and a significant degree of moral turpitude, the Tribunal finds that [Kirby’s] actions warrant a reprimand and expulsion from membership.

While the level of misappropriation (or appropriation for the benefit of his family) in relation to the Support Funds may not have been as extreme as some of the cases cited by the Association, the Tribunal is swayed by the submission that it is not the amount of money taken, but the fact that it is taken at all that is inexcusable. [ 113 ] Kirby argued at the sanctions hearing that the conduct found by the Tribunal constituted at most an error of judgment, and his appeal is based on the same argument. [ 114 ] There was ample support in the record for the Tribunal’s decision that Kirby had directed that money be paid to his son’s company that should have been paid to TTMI in consideration of the obligations it took on under the Shoppers Agreement, that he then arranged for this money to be used by his daughter as a sham investment in TTMI to match Dunne’s and give her an equal interest in the company.

It may be that the former owner of the TTMI shares was aware of the direction to pay RHSI, but I cannot see how this could be a mitigating factor, as the former owner was then in the process of selling his shares to Dunne and Allison Kirby. Neither Michael Kirby, Allison Kirby, Gerald Kirby, or their companies had any right or entitlement whatsoever to this money and yet Kirby directed the money to them, and he never even told Dunne that Shoppers had paid money to commit TTMI to the Agreement. [ 115 ] I see no reason to overturn any aspect of the Sanctions Decision. Kirby’s appeal of that decision is dismissed.

Did the Tribunal err in finding that Kirby forged Dunne’s signature on two TTMI Directors’ Resolutions or direct that her name be forged? [ 116 ] In its decision on the 2019 Complaint, the Tribunal found that Kirby asked Dunne to allow TTMI to lease a vehicle for his use. Dunne refused because TTMI did not have the money to do so and it did not need the vehicle. Kirby repeated the request later. When Dunne still refused, Kirby told her that the lease had already been arranged. Dunne received a cash payment to offset the car benefit paid to Kirby.

Dunne said that she saw no documents related to this transaction until 2016 when the car dealer showed her the lease and two TTMI Directors’ Resolutions that were included in the dealer’s lease file. [ 117 ] Both Directors’ Resolutions were dated January 5, 2013. The first resolved that Allison Kirby would be appointed President, and Dunne Vice President, but that the President would have sole power to authorize borrowing or contracts on behalf of TTMI.

The second said that Allison Kirby would be the sole signing officer for the corporation. [ 118 ] Both Directors’ Resolutions were signed by Allison Kirby and purported to have been signed by Dunne. However, the Tribunal found that Dunne’s signature on each Resolution was forged. Kirby does not challenge that finding on appeal. [ 119 ] The first charge under this Complaint alleged that Kirby forged or directed the forgery of Dunne’s signature to each Resolution. The Tribunal found that the charge was made out on the evidence: 79.

The fact that Directors Resolutions Nos. 1 and 2 were on file with the Jaguar dealership, leads to the reasonable inference that these documents were provided as evidence of the authority of AK to sign the Lease. Whether the documents were actually required for this purpose is largely irrelevant. 80. The evidence of both [Dunne] and MK was that [Kirby] was the only person to benefit from the Lease as it was he who drove the Jaguar.

As [Kirby] was responsible for the bookkeeping of TTMI, as well as doing a number of things behind the scenes for the business, the Tribunal finds that it is reasonable to infer that he prepared, or caused to be prepared, Directors’ Resolutions Nos, 1 and 2. It is also reasonable to infer that [Kirby] forged [Dunne]’s signature, or arranged for [Dunne]’s signature to be forged, on these documents, without her knowledge and/or consent. While the manner in which JP’s [an employee of EPR Kirby] signature may have

been placed on these Directors’ Resolutions was not exactly clear from the evidence, the Tribunal finds that it is reasonable to infer that [Kirby] arranged to have the forged signatures of [Dunne] appear to have been witnessed by JP, given the connection between JP and the Kirby family. [ 120 ] Kirby argued on appeal that the Tribunal’s chain of reasoning from circumstantial evidence to the conclusion that Kirby had forged Dunne’s signature was so weak as to have constituted a palpable error.

Obviously, if this argument is valid, then the error would have been overriding as the Tribunal finding that Kirby either forged Dunne’s signature, or directed it to be forged, underpinned the conclusion that the Association had proven this charge. [ 121 ] The conclusion by the Tribunal that it was Kirby who forged Dunne’s signature was based on circumstantial rather than direct evidence. The use of circumstantial evidence to reach a conclusion involves a form of inferential reasoning to fill in the gaps left by the direct evidence.

In this case, the gaps were between the direct evidence that established that Dunne’s signature was forged and that the documents were used for Kirby’s benefit, and the conclusion that Kirby forged the documents. The Tribunal filled in the gap by inferring that Kirby must have been the one who forged the documents. [ 122 ] Appellate review of an inference of fact proceeds on the same basis as review of other findings of fact: Housen v. Nikolaisen , 2002 SCC 33 , at paras. 19-25 .

An inference from fact can’t be overturned unless it is an obvious error and correcting it would alter the outcome. [ 123 ] The standard of proof before a professional disciplinary tribunal is similar to the civil standard. Circumstantial evidence may show that, on a balance of probabilities, the professional is guilty of professional misconduct, but only if the necessary inference is the only reasonable inference to be drawn from the proven facts. If there are other inferences that could plausibly have been drawn, then the inference of misconduct is not one that should be drawn.

The accused professional does not have to answer a case based on circumstantial evidence with direct evidence to the contrary. Rather, the decision-maker must consider whether there are other plausible inferences that can be drawn from facts directly proven: see R. v. Villaroman , 2016 SCC 33 . [ 124 ] In this case, the Tribunal inferred that it was Kirby who forged Dunne’s name to the documents because someone did, and because Kirby benefitted by obtaining a lease of an expensive car. That inference may have been the only reasonable one if, for instance, Dunne’s name had been forged on the lease.

However, Dunne’s name was not forged on the lease, but on Directors’ Resolutions. Those documents were dated and signed or forged some significant time before the vehicle was leased, and could have been put to any number of purposes other than the vehicle lease. There is no evidence as to how the Resolutions came to be in the hands of the vehicle dealership, and therefore they could have been provided by someone other than Kirby. Others, such as Allison or Michael Kirby or even persons unknown, could have benefitted from the forgery.

The inference that Kirby must have been the one who forged Dunne’s signature is not the only reasonable or plausible inference that could have been drawn from the facts directly proven. Therefore, drawing such an inference was clearly wrong. [ 125 ] As that error of inference was crucial to the finding of guilt in respect of this charge, it follows that appeal from the decision on the 2019 Complaint should be allowed. [ 126 ] In light of that decision, there is no need to consider Kirby’s argument that he was denied procedural fairness. CONCLUSION and DISPOSITION [ 127 ] In the result: 1.

Kirby’s Appeals from the findings of guilt in respect of Charges 1, 2, 4 and 7 in the 2018 Complaint are dismissed; 2. Kirby’s Appeals from the findings of guilt in respect of Charge 10 in the 2018 Complaint is allowed; 3. Kirby’s Appeal from the 2018 Sanctions Decision is dismissed; 4. Kirby’s Appeal from the finding of guilt in respect of Charge 1 of the 2019 Complaint is allowed. [ 128 ] The result in this matter has been mixed, although the outcome for Kirby has not been significantly altered. Kirby and the Association shall each bear their own costs of this appeal. _____________________________ DANIEL M.

BOONE Justice APPENDIX ‘A’ THE ASSOCIATION OF CHARTERED PROFESSIONAL ACCOUNTANTS OF

NEWFOUNDLAND AND LABRADOR IN THE MATTER OF A COMPLAINT AGAINST GERALD KIRBY, CPA, CGA STATEMENT OF CHARGES 1.

That the said Gerald Kirby, CPA, CGA, while engaged to perform a review of the financial statements of Alderwood Estate and Retirement Centre Ltd. (“Alderwood”) for the year ended October 31, 2007 and October 31, 2008, did issue a review engagement report attached to the financial statements of Alderwood as at January 10, 2008 and December 15, 2008, respectively, and failed to hold himself free of any interest, influence, or relationship which, in respect of Alderwood’s affairs would impair his professional judgment or objectivity or which, in the view of a reasonable observer, would have this effect, contrary to Rule 202.1 of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that: (

a) in or about the period January to March, 2008, while acting on behalf of both Alderwood and a company, Retirement Home Specialists Inc. (“RHSI”), he arranged the sale of the assets of Alderwood to RHSI for $3,125,000 which RHSI on the same day it purchased Alderwood, then sold the same assets to NPR Health Property General Partner Ltd. (“NPR”) for $3,675,000, and during which at all relevant times, he had a verbal agreement with “RR”, the sole shareholder of RHSI, to equally divide any profits or losses of RHSI between them; (

b) on or about March 5, 2008, he was paid a commission in the amount of $125,000 by Alderwood for his professional services in negotiating and arranging the sale of the assets of Alderwood to RHSI; (

c) during the course of the engagement, he or employees of his accounting firm prepared the accounting records, tax returns and financial statements for Alderwood. 2. THAT the said Gerald Kirby, CPA, CGA, while providing professional services to “DD”, failed to disclose in writing to “DD”, his client, an interest, influence, or relationship in respect of his client’s affairs which impaired his professional judgement or objectivity, or which, in the view of a reasonable observer, may have that effect, contrary to Rule 202.3(

a) of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that: (

a) in or about the period January to March, 2008, while acting on behalf of both Alderwood Estate and Retirement Centre Ltd. (“Alderwood”), in which “DD” was a shareholder, and a company, Retirement Home Specialists Inc. (“RHSI”), in arranging the sale of the assets of Alderwood to RHSI for $3,125,000 , he did not disclose to “DD” that on the same day RHSI purchased Alderwood, it then sold the same assets to NPR Health Property General Partner Ltd. (“NPR”) for $3,675,000, and further did not disclose to “DD” that at all relevant times, he had a verbal agreement with “RR”, the sole shareholder of RHSI, to equally divide any profits or losses of RHSI between them; (

b) in or about the period April to November, 2011, while arranging the purchase of Twin Town Manor Inc. (“TTMI”) on behalf of “DD” and his daughter, who each had a 50% interest in TTMI, he acted as a representative of TTMI to negotiate a Pharmacy Provider Agreement between “TTMI” and Shoppers Drug Mart Inc. (“SDMI”) and diverted the funds payable to TTMI under the agreement in the amount of $264,000 to Retirement Homes Investments Inc. (“RHII”), a company owned by his son, and then subsequently used $175,000 of the funds as his daughter’s contribution for her 50% interest in the purchase of TTMI, and at all relevant times, did not disclose the existence of the agreement or payment of the funds to “DD”; (

c) in or about 2012, while acting on behalf of both “DD” and RHSI, he arranged the sale of the assets of Alderwood from RHSI to Witless Bay Retirement Centre Inc, a company owned 50% by “DD” and 50% by his son, and did not disclose to “DD” that he had a verbal agreement with “RR”, the sole shareholder of RHSI, to equally divide any profits or losses of RHSI between them. 3.

THAT the said Gerald Kirby, CPA, CGA, while engaged in the practice of public accounting, charged a contingent fee in circumstances where charging such fee created an interest, influence, or relationship that impaired his professional judgement or objectivity or which, in the view of a reasonable and informed third party, may have that effect in respect of an assurance engagement, contrary to Rule 508.1(

a) of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that on or about March 5, 2008, while engaged to review the financial statements of Alderwood Estate and Retirement Centre Ltd. (“Alderwood”) for the years ended October 31, 2007 and October 31, 2008, he charged Alderwood a commission in the amount of $125,000 for his professional services in arranging the sale of the assets to Alderwood to Retirement Home Specialists Inc. (“RHSI”), a company with which he had a verbal agreement with the sole shareholder, “RR”, that any profits or losses of RHSI would be divided equally between them. 4.

THAT the said Gerald Kirby, CPA, CGA, while engaged in the practice of public accounting, charged a contingent fee in respect of a non-assurance service without obtaining a written agreement detailing the basis or remuneration in advance of the engagement contrary to Rule 508.1(

c) of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that on or about March 5, 2008, he was paid by Alderwood Estate and Retirement Centre Ltd.

(“Alderwood”) a commission in the amount of $125,000 for his professional services in arranging the sale of the assets to Alderwood to Retirement Home Specialists Inc. (“RHSI”) and failed to obtain a written agreement concerning the services to be provided and the fees to be charged. 5.

THAT the said Gerald Kirby, CPA, CGA, while engaged in the practice of public accounting, attached a Notice to Reader report to the financial statements of Alderwood Estate and Retirement Centre Ltd. (“Alderwood”) for the year ended October 31, 2009, without the appropriate disclosure of any interest, influence, or relationship between the member and the client in the compilation engagement report, contrary to Rule 202.4 of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that during the course of the engagement, he had an interest in Retirement Home Specialists Inc. (RHSI) which company leased and operated Alderwood, as he had a verbal agreement with the sole shareholder of RHSI that any profits or losses of RHSI would be divided equally between them, and he did not disclose that interest, influence, or relationship in the Notice to Reader accompanying the financial statements. 6.

THAT the said Gerald Kirby, CPA, CGA, in or about the period November, 2011 to July, 2015, while engaged to review the financial statements of Twin Town Manor Inc. (“TTMI”) for the years ended December 31 of each year, failed to remain free of any interest, influence, or relationship in respect of his client’s affairs which would impair his professional judgment or objectivity, or which, in the view of a reasonable observer, would have that effect, contrary to Rule 202.1 of the Code of Ethical Principal and Rules of Conduct of the Certified General Accountants Association of Newfoundland and Labrador, in that: (

a) during the course of the engagement his daughter was a Director and 50% shareholder of TTMI; (

b) he provided a personal guarantee of $1,000,000 for a bank loan from TD Bank to TTMI; (

c) he provided loans in the amount of $300,000 to TTMI; (

d) during the course of the engagement, his accounting firm prepared the accounting records, tax returns and financial statements for TTMI; (

e) during the course of the engagement, he was retained by TTMI to oversee its operations and provide management advice for which he was paid a salary. 7. That the said Gerald Kirby, CPA, CGA, in or about the period April to November, 2011, while providing professional services to “DD” in the negotiation and purchase of Tw

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