Jacques Roy (Quebec) —

Professional Conduct Decision

What is a professional conduct decision?

An investigation into a Licensed Insolvency Trustees (LIT)'s professional conduct is initiated when there is information to suggest that the LIT has not properly performed the duties of a trustee or there has been improper administration of an estate or lack of compliance with the Bankruptcy and Insolvency Act (BIA).

In some cases, the findings are sufficiently serious to support a recommendation for sanctions against the LIT's licence (cancel or suspend a LIT's licence (subsection 13.2(5) of the BIA) or impose conditions or limitations (subsection 14.01(1) of the BIA)).

The professional conduct decision is deemed to be a decision of a federal board, commission or tribunal and may be judicially reviewed by the federal court.

Canada

Bankruptcy District of the Province of Quebec

In Re the Disciplinary File of the Trustee Jacques Roy

Applicant: Sylvie Laperrière, Senior Disciplinary Analyst
-and-
Respondent: Jacques Roy, Trustee

Application Pursuant to Sections 14 et seq.
of the Bankruptcy and Insolvency Act


We have been mandated to rule on a series of complaints made by the disciplinary analyst against the trustee in the bankruptcy of Pierre André Jacob and in the bankruptcy of Distribution Sunliner (1985) Inc.

Pierre André Jacob file

The principal analyst's report mentioned alleged failures by the trustee to perform his statutory duties in the administration of the bankruptcy of Pierre André Jacob. The first part of the report is related to a complaint filed by the Trans-Canada Credit Corporation on regarding the administration of this file.

  1. The analyst alleged that the trustee committed the following offence:
    [TRANSLATION]
    The trustee signed false and misleading minutes on the conduct of the meeting on regarding his confirmation as trustee by the creditors and the failure to indicate that the meeting was suspended to make certain verifications, thereby contravening section 13.5 of the Bankruptcy and Insolvency Act and Rule 45.

Section 13.5 of the Bankruptcy and Insolvency Act provides:

A trustee shall comply with such code of ethics respecting the conduct of trustees as may be prescribed.

Rule 45 provides:

Trustees shall not sign any document, including a letter, report, statement, representation or financial statement, or associate themselves with any such document, that they know, or reasonably ought to know, is false or misleading, and any disclaimer of responsibility set out therein has no effect.

The evidence regarding what took place in the trustee's office from to is contradictory, to say the least. According to the trustee, an initial meeting was held as indicated by the minutes of that meeting, and his appointment was confirmed. According to the trustee's testimony, Steve Pitt and Éric Descheneaux of the creditor Trans-Canada Credit were present. According to Mr. Pitt, they asked the trustee whether a proposal had been made by the debtor since the latter had only two debts, one to Trans-Canada Credit and the other to Visa Desjardins. The trustee allegedly replied that he did not think Visa Desjardins would agree to a proposal being filed in this case. Mr. Pitt told him he would check and let him know.

On the director of Trans Canada Credit, who had not been present at the meeting, objected that contrary to the minutes of the meeting the trustee had not been confirmed in his position. He demanded that a meeting be held as soon as possible.

In fact, it appeared that Éric Descheneaux contacted Visa Desjardins. Having been satisfied that Visa Desjardins would not object to a proposal, another trustee, Pierre Roy, was contacted and indicated he would agree to take over the file.

Accordingly, a [TRANSLATION] "new meeting" was held by the trustee Jacques Roy on . At that meeting, the trustee Jacques Roy indicated that a proposal would not be made in the file. At that point Messrs. Descheneaux and Pitt gave him a letter from Pierre Roy, trustee, confirming his acceptance of the file. Although the bankrupt was sent a notice of the meeting, he did not attend. The trustee first decided to suspend the meeting. However, on the trustee sent the parties concerned a transcript of the meeting, according to which [TRANSLATION] "the firm Pierre Roy & Associés Inc. is confirmed as trustee in this file".

There is no question that there was a misunderstanding between the trustee and the representatives of the Trans-Canada Credit Corporation, the result of which was the sending on of the minutes of the meeting according to which Jacques Roy effectively transferred the file to the new trustee.

Under our case law, the Superintendent of Bankruptcy had to show that the trustee had [TRANSLATION] "had the guilty intent to mislead and prepare a false document". We consider there is no evidence in the record that the trustee intended to mislead anyone or to prepare a false document, although the parties concerned did not agree what happened at the meetings in question. This complaint must be dismissed.

  1. The second allegation of an offence, or complaint, reads as follows.

    [TRANSLATION]
    The trustee did not perform his duties in a timely manner and did not carry out his functions with due care, by not accepting the application for substitution by representatives of Trans-Canada Credit and delaying the preparation of minutes of the creditors' meeting of , thereby contravening section 13.5 of the Act and Rule 36.

Rule 36 reads as follows:

Trustees shall perform their duties in a timely manner and carry out their functions with competence, honesty, integrity and due care.

When the trustee learned the wishes of the Trans-Canada Credit representatives on , he first came to the conclusion that no meeting had taken place. Additionally, the bankrupt was not present.

On he contacted Mr. Sévigny and agreed to the substitution of trustees and transfer of the file to the trustee Pierre Roy. He accordingly prepared minutes of a meeting held in due form said to have been held on , apparently in the absence of the bankrupt, who in any case had never received a notice of the meeting, and forwarded it to the parties concerned on .

We are of the opinion that the trustee did not perform his duties in a timely manner and did not carry out his functions with due care, by not accepting the application for substitution by the representatives of Trans-Canada Credit at the time of the meeting, namely , and by delaying the preparation and forwarding of the minutes of the creditors' meeting of , contrary to section 13.5 of the Act and Rule 36.

Bankruptcy of Distribution Sunliner (1985) Inc.

The trustee was discharged with respect to the assets of the debtor company Distribution Sunliner (1985) Inc. on .

Under section 41(8) of the Act, according to the trustee's counsel, the trustee's discharge gave the latter immunity from any subsequent objection or action regarding his administration.

Section 41(8) of the Act provides as follows:

The discharge of a trustee discharges him from all liability

  1. in respect of any act done or default made by him in the administration of the property of the bankrupt, and
  2. in relation to his conduct as trustee,

but any discharge may be revoked by the court on proof that it was obtained by fraud or by suppression or concealment of any material fact.

Counsel had based a preliminary motion to dismiss on a new provision (section 41(8.1)) added to the Act on , to the effect that section 41(8) should not "be construed to prevent an investigation or a proceeding in respect of a trustee under subsection 14.01(1)". Since this new provision was inapplicable, as the trustee's discharge was made before it came into effect, counsel submitted, the disciplinary analyst could not reopen the file.

In a decision on in Freedman & Freedman, Harry Bick & al. (CFPIT-1600-99), J.E. Dubé J. of the Federal Court of Canada Trial Division held that section 41(8.1) had no retroactive effect. At the same time, he [TRANSLATION] "clarified" the rule that the Superintendent had disciplinary jurisdiction over the conduct of trustees and that discharge of the administration of the assets of a bankruptcy even before , the date the new provision came into effect, did not have the result of barring the proceeding mentioned in section 41(8.1) of the Act.

By a decision rendered on , therefore, we allowed the evidence presented in connection with the management by the trustee of the property of the debtor Distribution Sunliner (1985) Inc., despite his discharge on .

Several complaints originally filed by the analyst were withdrawn or reduced. We will therefore limit ourselves to the complaints still in the file.

  1. The analyst alleged:

    [TRANSLATION]
    The trustee failed to obtain a statement from an officer of Distribution Sunliner (1985) Inc., from which it would have been possible to confirm the accuracy at the time of the bankruptcy of the inventory dated , thereby contravening section 5(5) of the Act and paragraphs 6 and 7 of Directive No. 31 on taking inventory of the bankrupt's property, issued by the Superintended of Bankruptcy on .

Section 5(5) of the Act provides:

Every person to whom a directive is issued by the Superintendent under paragraph (4)(b) or (c) shall comply with the directive in the manner and within the time specified therein.

Paragraphs 6 and 7 of Directive No. 31 provide:

  1. Where the trustee is relying on a third party inventory, he should assure himself that this policy has been adhered to.
  2. The bankrupt or the officer of the bankrupt corporation shall be given a copy of the inventory sheets and asked to complete the attached written statement (Appendix). This statement or a document signed by the trustee as to its absence is to be attached to the inventory.

The trustee admitted there was no statement as the inventory was prepared before the bankruptcy and the summary of the inventory was within a few hundred dollars of the value shown on the balance sheet. Accordingly, the sworn statement on the balance sheet simply replaced the inventory statement.

According to the trustee, therefore, it was unnecessary to conduct a second inventory, since a complete inventory had been conducted in the days preceding the bankruptcy and the president of the debtor company had signed a sworn statement attesting to its accuracy by means of his signature on the bankruptcy balance sheet.

We are not required to rule on the significance of the requirements in section 5(5) of the Act, paragraphs 6 and 7 or Directive No. 31 on the taking of an inventory of the bankrupt's property. On the other hand, counsel for the analyst argued that there was a sale of several boats the very day after the inventory was taken. We assume that the sale of these crafts would have affected the inventory, in view of the trustee's admission.

We conclude that the trustee failed to obtain a statement from an officer, of Distribution Sunliner (1985) Inc. from which it would have been possible to confirm the accuracy at the time of the bankruptcy of the inventory dated , thereby contravening section 5(5) of the Act and paragraphs 6 and 7 of Directive No. 31 on taking inventory of the bankrupt's property, issued by the Superintendent of Bankruptcy on .

  1. Further complaint

    [TRANSLATION]
    The trustee did not obtain the inspectors' permission to sell accounts receivable to Isomur and accept in consideration a sum of money payable at a future time, thereby contravening section 30(1)(a) and (f) of the Act.

Section 30(1)(a) provides:

… sell or otherwise dispose of for such price or other consideration as the inspectors may approve all or any part of the property of the bankrupt, including the goodwill of the business, if any, and the book debts due or growing due to the bankrupt, by tender, public auction or private contract, with power to transfer the whole there of to any person or company, or to sell the same in parcels…

Section 30(1)(f) provides:

… accept as the consideration for the sale of any property of the bankrupt a sum of money payable at a future time, subject to such stipulations as to security and otherwise as the inspectors think fit…

The trustee admitted that he had not received the inspectors' approval authorizing the sale of accounts receivable in July 1994, adding that it was a sale authorized by the National Bank of Canada, which at the time held a general transfer of book debts, and consequently the trustee did not have to obtain the inspectors' approval to sell the property in question.

Counsel for the analyst noted that when the time came to sell the assets, all subject to security, and amounting to $490,000, the trustee obtained the inspectors' approval. [TRANSLATION] "The trustee should have done the same thing for the accounts receivable". It is clear that section 30(1) (a) of the Act makes no distinction regarding permission from the inspectors for any sale of assets made by the trustee, whether such property is subject to a security or not.

Counsel for the trustee responded that precedent and academic authority agree that the trustee has absolute power to sell the assets, enter into compromises in the bankruptcy file and initiate court proceedings without prior authorization from the inspectors, but in the event that a decision made by the trustee proves prejudicial to the estate, the trustee was exposing himself. Accordingly, the trustee had no legal obligation to obtain the inspectors' prior approval, as the absence of the latter's approval did not in any way affect the trustee's ability to act.

Counsel referred us to the following authorities to confirm his argument:

  • P.-É. Bilodeau, Précis de la faillite et de l'insolvabilité, Éditions Revue de droit de l'université de Sherbrooke, Sherbooke, 2002, p. 39.;
  • J. Deslauriers, La Faillite et l'insolvabilité au Québec, Wilson & Lafleur Éd., Montréal, 2004, p. 386;
  • In re Craig: Blais v. Shaw, [1968] B.R. 652;
  • Brown v. Gentleman, [1971] S.C.R. 501, at 511;
  • Béliveau v. Mercure, [1971] Que. C.A. 309;
  • Masson v. Gingras, [1972] C.S. 634;
  • In re International Bowling Construction Ltd.: Verroeulst v. Gaston, [1976] C.S. 344;
  • Re Plourde: Marcoux v. Filion, (1979) 31 C.B.R. (n.s.) 308 (Que. C.A.);
  • Cie du Trust National ltée v. Trottier, [1989] C.A. 1769 (C.A.).

The complaint is dismissed.

  1. Further complaint

    [TRANSLATION]
    The trustee did not obtain the inspectors' approval to employ an attorney to file a motion to recover funds against Isomur and Messrs. Rivard and Genest, thereby contravening section 30(1)(e) of the Act.

Section 30(1)(a) of the Act provides that the same approval is necessary to "employ a solicitor or other agent to take any proceedings or do any business that may be sanctioned by the inspectors".

For the same reasons, and in view of the authorities on the point, we conclude that the trustee did not need to obtain the inspectors' prior approval to employ a solicitor to initiate any proceedings, even if he was exposing himself of personal actions.

The complaint is dismissed.

  1. Further complaint

    [TRANSLATION]
    The trustee did not obtain the inspectors' approval to compromise the claim for $15,000, plus interest and the scheduled indemnity, made by the estate against Isomur pursuant to the judgment of , thereby contravening section 30(1)(i) of the Act.

Section 30(1)(i) of the Act provides that the same approval is required in order to "compromise any claim made by or against the estate".

For the same reasons, we feel that the inspectors' prior approval was not necessary.

The complaint is dismissed.

  1. Further complaint
    The trustee did not document his file:
    • on the reconveyance to the trustee by Isomur of the Bay Distributors' account receivable of $6,031.43;
    • on the results obtained regarding collection of the said account receivable by the trustee and the balance of $9,000 payable by Isomur;
    • and on the decision to postpone sine die proceedings for recovery against Messrs. Georges Rivard and Jean-Yves Genest, of the amount owed under the judgment of ;
    thereby contravening section 5(5) of the Act and paragraph 5 of Directive No. 22 on the realization of the estate's assets, issued by the Superintendent of Bankruptcy on .

Section 5(5) of the Act reads as follows:

[Compliance with directives] Every person to whom a directive is issued by the Superintendent under paragraph (4)(b) or (c) shall comply with the directive in the manner and within the time specified therein.

Paragraph 5 of Directive No. 22 reads as follows:

As it is a statutory obligation on the part of a trustee to realize on all assets for the benefit of the estate, it is therefore expected that a trustee will document his files as much as possible in support of the receipts, disbursements and actions taken on all the transactions. The Official Receiver may, at his discretion, request from the trustee a copy of that documentation.

This directive confirms that the trustee has a duty to realize on all the assets of the estate. It is up to him to prove that he was unable to document everything that took place in his office regarding the receipts, disbursements and actions taken. The trustee's response that [TRANSLATION] "this would create a mountain of paper" is clearly inadequate.

Accordingly, we conclude that the trustee did not document his file, etc. up to \.

The complaint is maintained.

  1. Further complaint

    [TRANSLATION]
    The trustee failed to keep a record of the time spent on administration of the estate for the prescribed period after the date of his discharge, thereby contravening section 26(2) of the Act and Rule 65 (since , Rule 68(1)).

Section 26(2) of the Act provides:

The estate books, records and documents relating to the administration of an estate are deemed to be the property of the estate, and, in the event of any change of trustee, shall forth with be delivered to the substituted trustee.

Rule 68(1) provides:

Unless the court orders otherwise, a trustee shall keep, for at least four years after the date of the trustee's discharge, the books, records and documents relating to the administration of that estate.

This rule replaced Rule 65, which applied in 1995. The rule read as follows:

Unless the court otherwise orders, the trustee who completes the administration of an estate shall keep, for not less than six years from the date of his discharge, the estate books, records and documents referred to in subsection 26(2) of the Act.

This rule draws and drew its source from section 26 of the Act, which indicates the books, records and documents that are part of the assets and which must be transferred to any substituted trustee on request. Further, the trustee must permit these estate documents to be inspected and copies there of made by the Superintendent, the bankrupt or any creditor or their agents at any reasonable time (section 26(3)).

However, there is nothing in Rule 65 or section 26(1) or 26(2) of the Act to indicate that the trustee's time slips are an estate document which the trustee is required to keep. In other words, the slips of a trustee in bankruptcy are nowhere covered by section 26(1). They are the trustee's personal working papers, as opposed to statements of receipts and disbursements which show the remuneration salary requested by the trustee which are estate documents.

By analogy, the courts have established that the trustee's correspondence is not an "estate document" within the meaning of section 26 of the Act:

  • Re Chua (1995), 34 C.B.R. (3d) 226 (B.C.S.C.)
  • Re Robson (2002), 32 C.B.R. (4th) 105 (Ont. S.C.)
  • GMAC Commercial Credit v. TCT Logistics Inc. (2002), 37 C.B.R. (4th) 267 (Ont. S.C.)

We conclude that the trustee had no duty to keep the record of time spent on administering the estate.

The complaint is dismissed.

  1. Further complaint
    [TRANSLATION]
    The trustee did not carry out his functions with due care:
    • by not documenting his file on the instructions given by the trustee to Yves Lemaire of Gérance Mauricie, to follow upon the trustee's behalf on the recovery of money from BCL, and by not documenting his file on the change in status of Mr. Lemer, who according to the trustee was acting for the National Bank of Canada in the collection of these amounts;
    • by not informing BCL that it should send cheques to Yves Lemaire of Gérance Mauricie after learning of the instructions obtained from the National Bank of Canada by the latter;
    • and by authorizing the said Yves Lemaire of Gérance Mauricie to open the trustee's mail;
    thereby contravening section 13.5 and section 5(5) of the Act and section 5 of Directive No. 22 on realization of the property of the estate, issued by the Superintendent of Bankruptcy on , as well as Rules 36 and 52.

Section 13.5 of the Bankruptcy and Insolvency Act provides:

A trustee shall comply with such code of ethics respecting the conduct of trustees as may be prescribed.

As we have seen, section 5(5) of the Act provides:

Every person to whom a directive is issued by the Superintendent under paragraph (4)(b) or (c) shall comply with the directive in the manner and within the time specified therein.

Paragraph 5 of Directive No. 22 on realization of the property of the estate, issued by the Superintendent of Bankruptcy on , as we have seen, provides:

As it is a statutory obligation on the part of a trustee to realize on all assets for the benefit of the estate, it is therefore expected that a trustee will document his files as much as possible in support of the receipts, disbursements and actions taken on all the transactions. The Official Receiver may, at his discretion, request from the trustee a copy of that documentation.

Rule 36 provides as follows:

Trustees shall perform their duties in a timely manner and carry out their functions with competence, honesty, integrity and due care.

Rule 52 provides as follows:

Trustees, in the course of their professional engagements, shall apply due care to ensure that the actions carried out by their agents, employees or any persons hired by the trustees on a contract basis are carried out in accordance with the same professional standards that those trustees themselves are required to follow in relation to that professional engagement.

It was alleged on the trustee's behalf that there was no allegation that Yves Lemaire committed any dishonest act, converted any money or committed any illegality whatever. On the contrary, the evidence was that the National Bank of Canada gave him instructions, he collected money for the latter and he then turned it over to the Bank. According to the trustee, he gave Yves Lemaire no instructions regarding follow-up on the amounts owed by BCL. He said he only asked for follow-up for NBC, as he was accredited to the Bank. This was a verbal instruction. In a letter he wrote to Bombardier Capital on , the trustee asked it to forward to the trustee a cheque for $17,660.97, representing a deposit made by Distribution Sunliner (1985) Inc. with Bombardier Capital.

On , Bombardier Limited undertook to make payments to the trustee and not to Distribution Sunliner (1985) Inc.

At this, the trustee sent the file to Yves Lemaire of Gérance Mauricie, so he could follow up on the claim as it was necessary to await the sale of the boats. The trustee wrote the Deputy Superintendent on :

[TRANSLATION]

In preparing my final statement of receipts and disbursements on , I contacted Yves Lemaire to determine whether he had obtained amounts from this claim, and he indicated to me at the time that he had received nothing as of and had no idea when he would create be receiving any money in this connection. I therefore told him that I was closing my file and if any money was ever received, he should account for it to the National Bank of Canada since the latter held possible accounts receivable as security. I proceeded to close the file and subsequently closed my bank account in .

The trustee added:

[TRANSLATION]

In fact, Yves Lemaire received amounts in and in respect of this claim, that is, three and four years after the bankruptcy was opened, when my administration file had been closed.

What appears from the foregoing is that the amounts which should ordinarily have passed through his hands and then been forwarded to secured creditors were the subject of a delegation to Mr. Lemaire to collect them and then hand them over to the National Bank. There is no indication of this in the statement of receipts and disbursements.

Further, the trustee apparently instructed Mr. Lemaire to handle his mail at the trustee's secondary office in Trois-Rivières,[TRANSLATION] "where few cheques were received". The trustee testified that he learned that the cheques had been filed one or two years after they were deposited in Mr. Lemaire's account. In our opinion, it is clear the trustee should have documented his file on the instructions given to Mr. Lemaire of Gérance Mauricie regarding receipt of money from BCLand regarding Mr. Lemaire's status in relation to the National Bank of Canada so far as receipt of these amounts was concerned.

The evidence was that the National Bank of Canada was not informed that the cheques should be sent to Yves Lemaire. There was nothing to confirm Mr. Lemaire's authorization to open the trustee's mail, nor of course to deposit in his account cheques payable to the trustee.

We accordingly conclude that the trustee did not carry out his functions with due care:

  1. by not documenting his file on the instructions given by the trustee to Yves Lemaire of Gérance Mauricie to follow up on the trustee's behalf on collection of money from BCL; and by not documenting his file on the altered status of Mr. Lemaire, who according to the trustee was acting for the National Bank of Canada in the collection of these amounts;
  2. by not informing BCL that it should send the cheques to Yves Lemaire of Gérance Mauricie, after learning of the instructions obtained from National Bank of Canada by the latter;
  3. and by authorizing the said Yves Lemaire of Gérance Mauricie to open the trustee's mail;

contrary to section 13.5 and section 5(5) of the Act and paragraph 5 of Directive No. 22 on realization of the assets of the estate, issued by the Superintendent of Bankruptcy on , and to Rules 36 and 52.

  1. Further complaint
    [TRANSLATION]
    The trustee signed a statement of receipts and disbursements indicating that the entire estate had been realized, when he should reasonably have known that collection of the proceeds of sale of accounts receivable had not yet been realized, and he then signed an application for discharge supported by an incorrect affidavit, thereby contravening sections 13.5, 41(1) and 152(1) of the Act and Rules 45 and 64(2) (since , Rule 61(2)).
  2. Parallel complaint
    [TRANSLATION]
    The trustee signed a statement of receipts and disbursements indicating that the entire estate had been realized, when he should reasonably have known that realization of the amounts receivable from BCL was not complete, and he then signed an application for discharge supported by an incorrect affidavit, thereby contravening sections 13.5, 41(1) and 152(1) of the Act and Rules 45 and 64(2) (since , Rule 61(2)).

Section 13.5 of the Act provides:

A trustee shall comply with such code of ethics respecting the conduct of trustees as may be prescribed.

Section 41(1) of the Act provides as follows:

[Application to court] When a trustee has completed the duties required of him with respect to the administration of the property of a bankrupt, he shall apply to the court for a discharge.

Section 152(1) of the Act provides as follows:

[Statement of receipts and disbursements] The trustee's final statement of receipts and disbursements shall contain a complete account of all moneys received by the trustee out of the property of the bankrupted or otherwise, the amount of interest received by the trustee, all moneys disbursed and expenses incurred and the remuneration claimed by the trustee, together with full particulars, description and value of all property of the bankrupt that has not been sold or realized, setting out the reason why the property has not been sold or realized and the disposition made there of.

Rule 45 provides as follows:

Trustees shall not sign any document, including a letter, report, statement, representation or financial statement, or associate themselves with any such document, that they know, or reasonably ought to know, is false or misleading, and any disclaimer of responsibility set out therein has no effect.

Rule 64(2) (since , Rule 61(2)) sets out the conditions the trustee must show the Court have been met.

The balance sheet of the bankrupt Distribution Sunliner (1985) Inc., signed by its vice-president and sworn to on in accordance with the Bankruptcy Act, indicated that the debtor company held $75,000 in accounts receivable. Attached to the balance sheet was an explanatory note titled [TRANSLATION] "List H", indicating that the book value of the accounts receivable was $121,201.78, but their estimated realizable value was only $75,000.

Although the balance sheet also indicated an inventory of $120,000, [TRANSLATION] "List H" attached there to also showed that this amount was the estimated realizable value of the inventory, the book value of which was $442,914.

The final statement of receipts and disbursements prepared by the trustee on indicated under [TRANSLATION] "receipts" the collection of accounts receivable and various reimbursements of $16,506.92, and that the proceeds of sale of inventory amounted to $125,300.

Paragraph 21 of the final statement indicated: [TRANSLATION] "The entire estate has been realized".

According to the trustee, in order to show that the total disbursements equalled total receipts, he indicated that the amounts under the heading [TRANSLATION] "receipts" had been realized and there was nothing left to collect.

In his affidavit attached to his application for discharge on , the trustee stated that:

[TRANSLATION]
The statement of receipts and disbursements attached to the said application and marked Exhibit A is a true and accurate statement of the administration of the afore said estate, and the said statement has been approved by the bankruptcy inspectors and assessed by the court.

Each disbursement mentioned in the said statement was made in due and reasonable form.

To the best of my knowledge and belief, all the property of the debtor company which passed through my hands has been liquidated or disposed of in due form.

Accordingly, the note in paragraph 21 of the final statement of receipts and disbursements informed any interested party that there was nothing to be realized in the estate. Everything had been realized. The total receipts thus accurately represented the estate realized, in the total amount of $536,230.95.

It is clear from reading the balance sheet and the final statement of receipts and disbursements that the total collected for accounts receivable and various reimbursements was less than the accounts receivable shown in the balance sheet of the bankrupt company on . It is also clear that the trustee was able to realize $125,300 as proceeds of sale of inventory, contrary to the $120,000 shown as inventory in the balance sheet of .

Since the collection of accounts receivable and various reimbursements appearing in the final statement of receipts and disbursements was substantially below the accounts receivable ([TRANSLATION] "as declared and estimated by the authorized officer"), the trustee should have explained this discrepancy. It is easy to give an affirmative answer at this time, but in fact no one requested it of him up to the time of his discharge on .

Even if the statement of receipts and disbursements prepared by the trustee did not entirely meet the requirements of section 152(1) of the Bankruptcy Act, it did not in any way contravene Rule 45, according to which the trustee signed a document "that [he knew] or reasonably ought to know [was] false or misleading".

We refer the reader to the precedents cited above (page 7) on the need to prove that the trustee intended to mislead when he knew or should have known the contrary.

We consider that these two complaints should be dismissed.

  1. Further complaint
    [TRANSLATION]
    The trustee charged to the estate a bill of costs for $804.98, representing costs assessed against the respondents pursuant to the judgment by the Honourable Mr. Justice Robert Legris, thereby contravening section 197(4) of the Act.

Section 197(4) provides:

[When costs payable] No costs shall be paid out of the estate of the bankrupt, excepting the costs of persons whose services have been authorized by the trustee in writing and such costs as have been awarded against the trustee or the estate of the bankrupt by the court.

On counsel for the trustee caused a bill of costs for $804.98 to be taxed in the case of Jacques Roy v. Entreprises Isomur Inc., Georges Rivard and Jean-Yves Genest.

On the trustee supported the motion in the said case by affidavit. Accordingly, there is no question that the bankruptcy counsel had the trustee's written authorization.

By a resolution of the inspectors dated , the fee account of counsel for the trustee amounting to a total of $35,000 was approved. On , taking disbursements into account, this account was assessed at $35,113.38.

On the Registrar taxed the final statement of receipts and disbursements prepared by the trustee, including the sum of $35,918.36 already taxed by the Court. There was accordingly judgment for the total amount of $35,918.36 as taxed costs. So far as we are concerned here, therefore, the matter is res judicata as regards the trustee's entitlement to the total sum of $35,918.36 in costs taxed by the Court. It was supported by affidavit and thereby authorized by the trustee. The resulting bill of costs must be charged to the estate, unless the trustee is able to collect the amount from the respondents.

For these reasons, this final complaint is dismissed.

In view of the foregoing decisions, I invite the parties to send me the irrespective submissions in writing before as to the actions I should take in this matter.

Montréal,

Superintendent's Delegate


This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.

Date modified: