Allen W. MacLeod, Donald A. MacLeod and D. & A. MacLeod Company Ltd.—

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.

In the matter of the bankruptcy and insolvency act
R.S.C. 1985, c.B-3

In the matter of the Superintendent of Bankruptcy

And in the matter of the alleged allegation of professional misconduct as against Allen W. MacLeod, Donald A. MacLeod and D. & A. MacLeod Company Limited

Proceedings heard before the honourable james b. Chadwick, q.c.

Appearances:
Julie Martin and Alden Christian for the Trustees
Gary Wetzel and Mark Taggart for the Superintendent of Bankruptcy


Decision on sanctions and costs

[1] Further to the release of my written reasons dated dealing with the merits of the claims by OSB against MacLeod, I invited counsel to provide me with written submissions relating to the issues of sanctions and costs. Counsel provided me with the submissions along with a number of authorities to support their positions.

Authorities referred to and considered:

Law Society of Upper Canada v. Ricardo Max Aguirre, 2008 ONLSHP 0084
Law Society of Upper Canada v. Melva Janet Aarons, 2007 ONLSHP 0016
Re Blais 2003 CarswellQue 124 (Quebec Superior Court)
Boudreau c. Avocats (Ordre professionnel des) 2006 QCTP 41
Me Francine Massy-Roy c. M. Daniel Dubois No. 06–00–01494
Law Society of Upper Canada v. Patricia Anne Hamilton, 2007 ONLSHP 0116
Re Haramboure 2002 CarswellBC 1812 (B.C.S.C.)
Re Los 2000 CarswellBC 1309 (B.C.S.C.)
McKee v. College of Psychologists (British Columbia) 1994 CarswellBC 356
Me Daniel Mandron c. M. Serge Ouellette 06–02–01668
Law Society of Upper Canada v. John Pichelli, 2007 ONLSHP 0009
Law Society of Upper Canada v. Pretam Kaur Purewal, 2006 ONLSHP 0036
In the Matter of Edward Bryce Quon Holder of a Trustee Licence for Ontario
Mr. Peter Wolkove – Decision on the Merits
Mr. Peter Wolkove – Decision on the Sanction
Re Wright 2005 CarswellBC 2759 (B.C.S.C.)
Mr. Frank Sheldon Kisluk — Decision on the Sanction
Appendix A — sampling of 10 evaluations from bankrupts
Page from OSB website regarding qualities of OSB employees
College of Physicians and Surgeons (Ontario) v. Boodoosingh (1990), 73 O.R. (2d) 478 (Ont. Div. Ct.)
Ratsoy v. Architectural Institute (British Columbia) (1980), 113 D.L.R. (3d) 439 (B.C.S.C.)
College of Physicians and Surgeons v. Gillen (1990), 1 O.R. (3d) 710 (Ont. Div. Ct.)
Conforzi v. Association of Professional Engineers (1987), (Ontario) 25 OAC 276 (Ont. Div. Ct.)
Camgoz v. College of Physicians and Surgeons (Sask)(1993), 114 Sask R. 161 (Q.B.)
Jawsal v. Newfoundland Medical Board (1996) 43 Admin. L.R. (2d) 233
Hussein v. College of Pharmacists (Ontario) (1990), 41 O.A.C. 373 (Ont. Div. Ct.)
Professional Conduct Decision, OSB v. Guy Loslier,
Professional Conduct Decision, OSB v. Pierre Guay,
Directions for Conservatory measures in the matter of Sidney Charles Schiff
Directions for Conservatory measures in the matter of John Brock Hobbs.

Statutes, Regulations and Rules considered and cited:

The Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
The Law Society Act, R.S.O. 1990 Chapter L.8

Sanctions initially proposed by the senior compliance investigator

[2] The senior compliance investigator forwarded to the Macleod's a report dated . By way of separate letter, of which I did not receive a copy, she set out the sanctions that would be proposed if the Macleod's were found to have committed the contraventions specified in the report. The letter read in part as follows:

Please be advised that my recommendation, which will be provided to the Superintendent or his delegate at the time of a hearing provided for under subsection 14.02(1) of the Bankruptcy and Insolvency Act, will be as follows:

For the individual trustee licence of Allen W. MacLeod, a period of suspension of the licence of the Trustee, during which time the trustee may not perform the duties and functions of a Trustee in Bankruptcy;

For the individual trustee licence of Donald A. MacLeod, a period of suspension of the licence of the Trustee, during which time the trustee may not perform the duties and functions of a Trustee in Bankruptcy;

For the corporate trustee licence of D. & A. MacLeod Company Ltd.:

1) a period of restriction of the licence of the corporate trustee, during which time the corporate trustee will not be permitted to accept new appointments under the Bankruptcy and Insolvency Act, but will be limited to the administration of estates for which they are already appointed.

2) jointly and severally with the individual trustees, Allen W. MacLeod and Donald A. MacLeod, that the corporate trustee make restitution to:

  • the estates, listed in Attachment 21 of the Report, a total of $3,877.02 withdrawn without the required permission and deposited in the "Interest Account";
  • the estate of Stephanie Marion Smith in the amount of $138.37 withdrawn without the required permission;
  • the consumer proposal David Andrew Henry Clarke in the amount of $230.95 withdraw without the required permission;
  • the estate of Mildred Colleen Fischer in the amount of $278.26, a GST refund which was to be remitted to the debtor but the cheque payable to the debtor was voided and the funds transferred to the "Clearing Account" of the consolidated trust account for summary administrations;
  • the estate of Andrew Roger Perrin in the amount of $14.14, a GST refund which was to be remitted to the debtor but the cheque payable to the debtor was voided and the funds transferred to the "Clearing Account" of the consolidated trust account for summary administrations;
  • the estate of William John Rowsome in the amount of $375.00 withdrawn as fees for services that were also charged as disbursements, regarding the preparation of tax returns.

[3] In addition to the suspension there was also a recommendation or an order of restitution in six matters which in total would not exceed $5000.

[4] In my reasons I found that the trustees were in breach of the provision of the Act and Rules in that they did not complete two estates in a timely manner. These estates were the Ruda estate and 595880 Ontario Limited estate.

Recommended sanctions

[5] Based upon my findings in regards to the two above mentioned estates, the special compliance investigator recommends the following sanctions:

Recommended Sanction

In view of the aggravating circumstances identified above and the sanctions imposed on other trustees and lawyers for similar contraventions, the Special Compliance Investigator recommends that the Delegate impose the following sanctions:

  • that the corporate trustee licence of D. & A. MacLeod Company Ltd. be restricted for a period of four (4) weeks, during which time the corporate trustee will not be permitted to accept new appointments under the Bankruptcy and Insolvency Act, but will be limited to the administration of estates for which they are already appointed;
  • that the licence of trustee Allen W. MacLeod be suspended for a period of four (4) weeks, during which time he may not act in the capacity of trustee, nor accept any mandate pursuant to the Act, either in his own name or that of the corporate trustee;
  • that the suspension of the trustee licence of Allen W. MacLeod begin four (4) weeks after the date of the decision to allow the trustee to find a trustee that will administer the estates of D. & A. MacLeod Company Ltd. during the period of the suspension of his licence;
  • that the trustee Allen W. MacLeod, before the end of that four (4) weeks period starting from the date of the decision, inform the Office of the Superintendent of Bankruptcy the name of the trustee who will administer the estates during the period of the suspension of his licence;
  • that if the trustees fail to respect this order, they will be considered not to have met one of the conditions of their licence within the meaning of paragraph 13.2(5)b) of the Act.

Mr. Wetzel, in his written submissions, describes the impact of a delay in the administration of an estate. It affects the debtor, creditors and the whole bankruptcy system. Mr. Wetzel also refers to a number of court decisions where the court has been very critical of trustees who have delayed the administration of an estate. In the cases referred to, the courts have drastically reduced the fees of the trustee. I agree that the delay in the administration of an estate can have serious consequences.

Position of the trustee

[6] Counsel for the trustee argue that there should be no sanctions imposed against the trustee for the following reasons:

(a) The senior compliance investigators initial report contained 12 separate headings of allegations. At the conclusion of all of the evidence, productions and procedures there were only two infractions proven this being the delay in the administration of the two estates. They point out the major allegation against the trustee related to the interest account and is also took up the majority of the hearing time.

(b) The senior compliance investigator along with the OSB staff carried out a seven-year investigation including audits, special audits and interviews with the trustees. As such, trustees were required to devote a great deal of time and effort in satisfying investigators and producing documentation to support their positions.

(c) That the senior compliance investigator and the OSB staff lacked impartiality and objectivity in carrying out their investigation.

(d) That the proposed sanctions also lacked objectivity and impartiality and are inappropriate and disproportionate to the findings.

(e) The impact of this investigation upon Donald MacLeod and Allen MacLeod and their profession as trustees has been disastrous. The reputation in the community has suffered over the past seven years. They both suffered emotionally and financially. Donald MacLeod had practiced as a trustee for six decades. He died after the commencement of the hearing but before release of the final decision. It was only after two requests counsel for OSB stayed proceedings against Donald MacLeod.

Mitigating factors

[7] Counsel for Allen MacLeod and D. & A. MacLeod Company Ltd. emphasize the fact that clients have never before been subjected to a professional conduct hearing. Also during the hearing and in his reply, Allen MacLeod admitted that he took too long in winding up the two estates.

[8] In his evidence Allen MacLeod outlined a number of professional and community activities in which he had been involved.

Factors to be considered in discipline matters

[9] Counsel have referred me to a number of discipline cases involving various professions, including lawyers, physicians, architects, engineers, and others. There are also a number of court decisions dealing with trustees in bankruptcy and fees being reduced as a result of delay in the administration of estates.

[10] There is also a reference to a number of decisions involving OSB and sanctions under the Bankruptcy and Insolvency Act.

[11] Although most of these cases turn on their own fact scenario, there is a common thread that runs through the discipline cases. In the cases dealing with self regulatory bodies they set forth some of the criteria that must be considered. They can be summarized as:

(a) the interest of the public,

(b) general deterrence to other members of the profession, and

(c) specific deterrence to the member.

[12] In cases under the Bankruptcy and Insolvency Act you are dealing with a statutory authority that has the responsibility for licensing, supervising, prosecuting, and recommending sanctions involving trustees. The statute is for the benefit of creditors, debtors, trustee's and, more importantly, the general public.

[13] The fact that the trustee insisted on an inquiry is not a factor to be considered in dealing with sanctions. I adopt reasoning of my former judicial colleague Montgomery J. in College of Physicians and Surgeons of Ontario v. Boodoosingh 73 O.R. (2d) 1 where he stated:

This is an appeal from a decision of the Discipline Committee of the College of Physicians and Surgeons of Ontario, in which the committee found the appellant guilty of professional misconduct and ordered that his licence to practice be revoked.

We are not persuaded that there was any error made by the committee in its finding of professional misconduct. There was evidence upon which the factual finder could be made.

???????Dr. Boodoosingh, a psychiatrist, commenced treatment of a 30-year old female patient. He knew his patient was vulnerable and that the very depression and anxiety he was to treat was, in part, the result of prior sexual affairs. By the third session, flirtation and words of mutual attraction were exchanged. The doctor told the patient he found her body attractive. By the fourth visit, they discussed the possibility of having intercourse. The doctor was aware from the patient's hospital records that she was apt to form a physical attachment to a male therapist. Petting led to a mutual agreement to a single act of intercourse.

We are satisfied that there was evidence upon which the committee could find that a doctor-patient relationship existed at the time intercourse occurred. In any event, intercourse occurred within several weeks of the last therapy session. There is evidence of influence by the doctor over the patient at the time of intercourse even if the doctor-patient relationship had ceased.

We therefore conclude that the issue of guilt was correctly decided.

The board's decision covers both the conviction and penalty. It is unfortunate that in serious cases, such as this, the hearing is not divided into two states. The result is that the board and this court were deprived of the benefit of evidence and meaningful submissions on penalty.

Counsel for the respondent argues that this doctor has shown no remorse and that by failing to admit his guilt it is unlikely that he can ever be rehabilitated. The argument, if followed to its logical conclusion, results in the message that a plea of not guilty will result in a higher penalty than that imposed where there is a plea of guilty.

This discipline proceeding is quasi-criminal in nature. The maximum penalty of revocation is more serious than many penalties imposed for criminal offences. A reprimand alone is devastating to the recipient. A person charged with a serious offence under the Health Discipline Act, R.S.O. 1980, c. 196, is entitled to have the case against him proved by cogent evidence and he or she is entitled to make full answer and defence without fear of the threat of increased penalty.

Sanction

[14] In considering what is the appropriate sanction for Allen MacLeod and D. & A. MacLeod Company Ltd., I have taken into consideration the following factors:

(a) the nature and gravity of the allegations relating to the two estates as set forth in my reasons of ;

(b) the need to maintain the publics' confidence in the integrity of the Office of the Superintendent of Bankruptcy and his responsibilities for the licensing supervision and other duties as relates to trustees;

(c) general deterrence;

(d) specific deterrence;

(e) previous complaints.

[15] This is by no means an exhaustive list of the factors to be considered in dealing with the appropriate sanction.

[16] In my findings at I found that there was no legitimate excuse for the long delay in administering these two estates. Mr. MacLeod, in his evidence, also acknowledges that there is no excuse. Notwithstanding, Mrs. Rudda testified on behalf of Mr.  MacLeod. I'm sure if the estate had been wound up faster she may have obtained more benefit, although this is speculative.

[17] In regards to 595880 Ontario Limited, this estate also should have been wound up faster. It would almost appear that Mr. MacLeod had a mental block relating to this estate. Notwithstanding all the letters of complaint from Justice Manton he did not wind up the estate in an appropriate period of time.

[18] Counsel has provided me with a series of professional conduct decisions issued by the office of the Superintendent of Bankruptcy. The decisions are Kisluk, Loslier, Russell, Khan, Guay, Wolkove, and Quon. I note that most of these decisions had proceeded on an agreed statement of facts. A number of them have joint submissions as to the sanction. Most of them have an element of misappropriation or breach of trust where there is nothing that is on all fours with the fact situation in our case.

[19] If I turn to my previous experience as a Bencher of the Law Society of Upper Canada, and past chairman of discipline, there were a series of sanctions provided for under the Law Society Act. The most serious would be that of disbarment with the least serious being a reprimand in committee. In between there is a suspension for a fixed period, reprimand in Convocation, along with the imposition of a substantial fine, more serious sanctions involve misappropriation or in those cases where the member has proven to be unmanageable and a great risk to the public and the profession. That is not the case with Mr. MacLeod.

[20] In my view the sanction to be imposed upon Mr. MacLeod and D. & A. MacLeod Company Ltd. should be in the form of a reprimand. The reprimand is set out in my reasons and findings of . In my view, it does not require any further reprimand or sanction. I am sure what the trustee has experienced will serve as a general deterrence to other trustees. Having spent over $150,000 to defend himself, along with all the time and effort expended over the years he does not need any more of a specific deterrence.

Costs

[21] I invited counsel to provide me with written submissions as to whether I had jurisdiction to award costs in this matter. Ms. Martin on behalf of the trustee conceded that I had no jurisdiction to award costs under the provisions of the Bankruptcy and Insolvency Act. In her submission she states that the only way I would have jurisdiction to make an order of costs would be if I had found a breach of the Charter, which I did not do.

[22] Mr. Wetzel agrees with that position.

Dated at Ottawa this .

The Honourable James B.Chadwick, Q.C.
Delegate


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

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