Henry Sztern and Henry Sztern & Associés Inc. — May 11, 2009

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
province of quebec
district of montréal

NO: 03-02

Before delegate André Deslonchamps

In the matter of:

Sylvie laperrière (Senior analyst)

-and-

Henry sztern

-and-

Henry sztern & associés inc.

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Appearances:

Garry wetzel
michel ohayon

Counsel for the Senior Analyst

Mr. Henry sztern
Self-respresented

Émilio monaco
(absent)

Counsel for Henry Sztern & Associés Inc.

RE: Professional Conduct Proceedings pursuant to subsection 14.02(1) of the Bankruptcy and Insolvency Act on the conduct of Henry Sztern and Henry Sztern & Associés Inc.

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Decision

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[1] On , the undersigned, in his capacity as delegate of the Superintendent of Bankruptcy (Sec. 14.01(2) of the Bankruptcy and Insolvency Act, hereinafter the "BIA"), handed down his decision with regard to the thirty-five (35) allegations of offenses purportedly committed by Henry Sztern and Henry Sztern & Associés Inc. (hereinafter "Sztern").

[2] The undersigned concluded, inter alia, that there was to be restitution to the assets of the files that were the subject of the decision.

[3] The undersigned set the date of for purposes of calculating the said restitutions, considering the proceedings initiated in the Quebec Superior Court and their outcome.

[4] The parties respectively have submitted written arguments with respect to the claims for restitution being sought.

[5] The Senior Analyst, Sylvie Laperrière, in her letter of , served on Henry Sztern and Henry Sztern & Associés Inc., stated the recommendations sought in the following terms:

"Those recommendations, which will be provided to the Superintendent at the time of the hearing provided for under subsection 14.02(1) of the Bankruptcy and Insolvency Act, are as follows:

that the corporate licence of Henry Sztern & Associés Inc. be cancelled;

that the licence of Henry Sztern be cancelled;

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the trust accounts of 399 summary administration estates in the total amount of $463,056.85; (ref. allegation B.2)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the trust accounts of 201 consumer proposal files in the total amount of $577,452.62; (ref. allegation B.3)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Pisos Inc. in the amount of $2,000.00; (ref. allegation F.8)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Création Liboria Ltée in the amount of $3,500.00; (ref. allegation F.8)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Linh Khan Nguyen in the amount of $84,000.00; (ref. allegation G.9)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of L.C.T. Metal Inc. in the amount of $32,522.88; (ref. allegation H.10)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of 176984 Canada Inc. in the amount of $82,018.89; (ref. allegation I.11)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Meco Limited in the amount of $492,957.82; (ref. allegation J.15)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Eric Lacroix in the amount of $18,133.73; (ref. allegation K.17)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of 9084-8144 Quebec Inc. in the amount of $20,000.00; (ref. allegation L.18)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Service de Mini-Remorque H.C.H. Inc., in the amount of $46,107.40; (ref. allegation M.19)

that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Kenneth Roy Sinclair in the amount of $77,423.67;" (ref. allegation N.20)

(References added by the undersigned)

[6] In her letter of , the Senior Analyst, Sylvie Laperrière amended the recommendations sought in the following terms:

"In my letter of , I listed fourteen sanctions that would be recommended to the Superintendent at a hearing. The last five of the listed sanctions relate to restitution of money to five estates: Meco Limited, Eric Lacroix, 9084-8144 Quebec Inc., Service de Mini-Remorque HCH Inc. and Kenneth Roy Sinclair. Subject to the paragraph below, those five proposed sanctions are hereby removed from the proposed sanctions that will be recommended to the Superintendent.

The removal of these five restitution sanctions is related to the "Requête en recuperation de deniers et en inopposabilité" initiated by H.H. Davis & Assoc. Inc. in the Quebec Superior Court (500-11-005714-973 et als.) in the matters of the bankruptcy of Kenneth Roy Sinclair, Eric Lacroix, Meco Limited, 9084-8144 Quebec Inc. and Service de Mini-Remorque HCH Inc. In the event that this proceeding is concluded without a decision, I intend to reinstate the five restitution sanctions listed above at a hearing ordered by the Superintendent."

[7] The judgment on these five files was handed down on by the Honourable Robert Mongeon: (files nos: 540-11-002078-006, 700-11-005818-028, 705-11-001837-997, 500-11-000016-929 and 500-11-005714-973. I shall come back to them further on.

OffenceS B.2 and B.3

[8] Following the amendments and subsequent to the evidence adduced, the restitution claimed is for $461,423.21 (summary administrations B.2 – see the corrected table at Attachment 11 and the details provided on ) and for $574,687.92 (consumer proposals B.3 – see the list accompanying Attachment 12, as corrected).

[9] We believe these restitution claims are well founded.

[10]As indicated in the undersigned's decision dated , the evidence adduced before us is linked to the state of the files of Henry Sztern and of Henry Sztern & Associés Inc. as of , which is the date when guardian trustee H. H. Davis & Associates Inc. took possession of the said files.

[11]Contrary to Sztern's claims, this evidence indicates that the honorariums due to Sztern pursuant to the BIA as of were taken into consideration and/or computed in the figures that were presented to us.

[12]As for the jurisdiction of the Superior Court over the said files, it is not up to the undersigned to determine its scope nor to presume what its decisions and their impact might be on the claims for restitution, except for what concerns the judgments that were presented to us.

[13]Consequently, Henry Sztern and Hennry Sztern & Associés Inc., solidarily, must make restitution to the various files, as listed in Attachments 11 and 12 as amended, of the sums of $461,423.21 (summary administrations) and of $574,687.91 (consumer proposals).

OffenceS F.8 – A AND B

[14]The evidence has shown us that the sums received in cash — $2,000 in the Pisos Inc. file and $3,500 in the Création Liboria Ltée file — were given directly to Sztern and that he never deposited them into a bank account as provided for in the BIA.

[15]No matter the reason for which these sums were paid and no matter the state of the file as of , the appropriation of these monies by Sztern contravenes the provisions of the BIA.

[16]Consequently, Henry Sztern and Henry Sztern & Associés Inc., solidarily, must make restitution of the sum of $2,000. to the Pisos Inc. file and the sum of $3,500. to the Création Liboria Ltée file.

Offence G.9

[17]With regard to offence G.9, counsel for the Senior Analyst submitted to us that pursuant to a judgment handed down by the Honourable Wilbrod Décarie of the Superior Court on , in file number 500-11-001995-971, where the parties involved are: H. H. Davis & Associates Inc., guardian trustee to the rights of Linh Khan Nguyen v. Compagnie d'assurances St-Paul Garantie, the latter standing as plaintiff in warranty against Henry Sztern. The said Compagnie d'assurances St-Paul Garantie was condemned to pay to the said guardian trustee, H. H. Davis & Associates Inc., the amount of the bond provided, namely the sum of $70,000. and that the defendant in warranty, Henry Sztern, was condemned in particular to pay to the Compagnie d'assurances St-Paul Garantie the said sum of $70,000.

[18]Considering the possibility that there might be overlap between this sentence and the claim for restitution in this file, at least in part since the sentence in the Superior Court is for $70,000. while the claim for restitution here is for $84,000.

[19]Considering that no arguments were presented by Sztern with regard to this claim for restitution, the undersigned accepts in regard to this matter the claim for restitution as formulated by the Senior Analyst:

"- that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution in the amount of $84,000.00 to the estate of Linh Khan Nguyen, but that amount of restitution will be reduced by any amount paid by the trustees or la Compagnie d'assurances St-Paul Garantie: i) pursuant to the Quebec Superior Court order issued on in file 505-11-001995-97-1, or ii) pursuant to any subsequent appeal judgement relating to that file"

[20]Concerning offence H.10 which relates to L.C.T. Métal, Sztern holds that it is up to the Superior Court to dispose of it since in his opinion, the file was ready for taxation in .

[21]There again, and for the same reasons stated earlier to the effect that for purposes of these matters the date to be considered by the undersigned is , and considering the state of the L.C.T. Métal file at that date, the claim for restitution seems to us to be well founded.

Offence I.11

[22]This is a matter of a claim for restitution in the amount of $82,018.89 to the 176984 Canada Inc. file.

[23]Sztern, in his e-mail of , tried to present as evidence the fact that four out of five inspectors would have authorized payment of the said honorariums. On this subject, he refers to copies of resolutions apparently signed by four inspectors, resolutions that would have been annexed to the final statement of receipts and expenses dated May 1998 without specifying the day. This final statement refers to Sztern's honorariums in the amount of $138,099.62 and shows that the number of inspectors on the file is five.

[24]Even if the undersigned accepted such evidence, examination of the file shows that the transfer of honorariums was not done in accordance with the procedure specified in the BIA. It must be remembered that only four of the five inspectors would have authorized the transfer of honorariums and that Sztern's admission (see his letter of S-1, which refers to par. I.11 c) of the letter of counsel for the Senior Analyst dated , A-1) is to the effect that:

"There were no Court orders issued approving the withdrawal of money from the bankruptcy estate trust account of 176984 Canada Inc."

[25]The claim for restitution is therefore well founded.

OffenceS J.14, J.15, K.17, L.18, M.19 AND N.20

[26]With regard to these offences, we refer to the letter of the Senior Analyst, Sylvie Laperrière, of , in which she withdrew claims for restitution with the following restriction:

"The removal of these five restitution sanctions is related to the "Requête en recuperation de deniers et en inopposabilité" initiated by H.H. Davis & Assoc. Inc. in the Quebec Superior Court (500-11-005714-973 et als.) in the matters of the bankruptcy of Kenneth Roy Sinclair, Eric Lacroix, Meco Limited, 9084-8144 Quebec Inc. and Service de Mini-Remorque HCH Inc. In the event that this proceeding is concluded without a decision, I intend to reinstate the five restitution sanctions listed above at a haring ordered by the Superintendent."

[27]As previously mentioned, on , the Honourable Robert Mongeon S.C.J. handed down his judgment in the files in question. The relevant conclusions can be found at pages 69 ff. and read as follows:

"A) GRANTS the Motion of Plaintiff H.H. Davis & Assoc. Inc. to recover assets with respect to the five Estate Files as follows:

a) In the matter of the bankruptcy of Eric Lacroix
S.C. Joliette, no.705–001837–997

Condemns Defendants Henry Sztern & Associés Inc. and Henry Sztern severally to pay to H.H. Davis & Assoc. Inc. ès qualité the sum of $18,133.73 together with interest at the legal rate plus the additional indemnity provided by law calculated as of the date of service of the said Motion;

With costs against the said Defendants.

b) In the matter of the bankruptcy of Kenneth Roy Sinclair
S.C. Montreal, no. 500-11-005714-973

Condemns Defendants Henry Sztern & Associés Inc. and Henry Sztern severally to pay to H.H. Davis & Assoc. Inc. ès qualité the sum of $77,423.67 together with interest at the legal rate plus the additional indemnity provided by law calculated as of the date of service of the said Motion;

With costs against the said Defendants.

c) In the matter of the bankruptcy of Service de Mini-Remorque H.C.H. Inc.
S.C. Laval, no. 540-11-002078-006

Condemns Defendants Henry Sztern & Associés Inc. and Henry Sztern severally to pay to H.H. Davis & Assoc. Inc. ès qualité the sum of $46,107.40 together with interest at the legal rate plus the additional indemnity provided by law calculated as of the date of service of the said Motion;

With costs against the said Defendants.

d) In the matter of the bankruptcy of 9084-8144 Québec Inc.
S.C. Terrebonne, no. 700-11-005818-028

Condemns Defendants Henry Sztern & Associés Inc. and Henry Sztern severally to pay to H.H. Davis & Assoc. Inc. ès qualité the sum of $20,000.00 together with interest at the legal rate plus the additional indemnity provided by law calculated as of the date of service of the said Motion;

With costs against the said Defendants.

e) In the matter of the bankruptcy of Meco Inc.
S.C. Montreal, no. 500-11-000016-929

Condemns Defendants Henry Sztern & Associés Inc. and Henry Sztern severally to pay to H.H. Davis & Assoc. Inc. ès qualité the sum of $492,957.82 together with interest at the legal rate plus the additional indemnity provided by law calculated as of the date of service of the said Motion;

With costs against the said Defendants."

[28]The sums for which Henry Sztern and Henry Sztern & Associés Inc. must make restitution according to the said judgment are the same as those determined in the undersigned's decision of with regard to offences J.14, J.15, K.17, L.18, M.19 and N.20.

[29]There is therefore possibility of overlap. However, this overlap would only occur at the moment that the Robert Mongeon judgment becomes final, which is not the case at the time of this decision since an appeal is possible.

[30]Consequently, the recommendations made by counsel for the Senior Analyst, Sylvie Laperrière, with regard to the claims seem to us to be justified.

[31]For these reasons, the undersigned orders :

a) that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the trust accounts of 399 summary administration estates in the total amount of $461,423.21 as listed in the amended attachment 11;

b) that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the trust accounts of 201 consumer proposal files in the total amount of $574,687.92 as listed in the amended attachment 12;

c) that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Pisos Inc. in the amount of $2,000.00;

d) that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of Création Liboria Ltée in the amount of $3,500.00;

e) that the trustees Henry Sztem & Associés Inc and Henry Sztern solidarily make restitution in the amount of $84,000 to the estate of Linh Kanh Nguyen, but that amount of restitution will be reduced by any amount paid by the trustees or la Compagnie d'assurances St-Paul Garantie: i) pursuant to the Quebec Superior Court order issued on in file 505-11-001995-971, or ii) pursuant to any subsequent appeal judgement relating to that file;

f)  that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of L.C.T. Metal Inc. in the amount of $32,522.88;

g) that trustees Henry Sztern & Associés Inc. and Henry Sztern solidarily, make restitution to the estate of 176984 Canada Inc. in the amount of $82,018.89;

h) that the trustees Henry Sztern & Associés Inc and Henry Sztem solidarily make restitution in the amount of $492,957.82 to the estate of Meco Limited unless the Quebec Superior Court, the Quebec Court of Appeal or the Supreme Court of Canada makes a final determination in regard to money of that estate claimed in Quebec Superior Court file #500-11-005714-973; if one of those courts makes a final determination in regard to the plaintiffs claim for repayment to the Meco Limited estate, the trustees will not be required to make any restitution to this estate pursuant to my order as Delegate of the Superintendent of Bankruptcy;

i)  that the trustees Henry Sztern & Associés Inc and Henry Sztern solidarily make restitution in the amount of $18,133.73 to the estate of Erie Lacroix unless the Quebec Superior Court, the Quebec Court of Appeal or the Supreme Court of Canada makes a final determination in regard to money of that estate claimed in Quebec Superior Court file #500-11-005714-973; if one of those courts makes a final determination in regard to the plaintiffs claim for repayment to the Eric Lacroix estate, the trustees will not be required to make any restitution to this estate pursuant to my order as Delegate of the Superintendent of Bankruptcy;

j)  that the trustees Henry Sztern & Associés Inc and Henry Sztem solidarily make restitution in the amount of $20,000.00 to the estate of 9084-8144 Quebec Inc unless the Quebec Superior Court, the Quebec Court of Appeal or the Supreme Court of Canada makes a final determination in regard to money of that estate claimed in Quebec Superior Court file #500-11-005714-973; if one of those courts makes a final determination in regard to the plaintiffs claim for repayment to the 9084-8144 Quebec Inc estate, the trustees will not be required to make any restitution to this estate pursuant to my order as Delegate of the Superintendent of Bankruptcy;

k) that the trustees Henry Sztern & Associés Inc and Henry Sztern solidarily make restitution in the amount of $46,107.40 to the estate of Service de Mini-Remorque HCH Inc unless the Quebec Superior Court, the Quebec Court of Appeal or the Supreme Court of Canada makes a final determination in regard to money of that estate claimed in Quebec Superior Court file #500-11-005714-973; if one of those courts makes a final determination in regard to the plaintiffs claim for repayment to the Service de Mini-Remorque HCH Inc estate, the trustees will not be required to make any restitution to this estate pursuant to my order as Delegate of the Superintendent of Bankruptcy; and

l)  that the trustees Henry Sztem & Associés Inc and Henry Sztern solidarily make restitution in the amount of $77,423.67 to the estate of Kenneth Roy Sinclair unless the Quebec Superior Court, the Quebec Court of Appeal or the Supreme Court of Canada makes a final determination in regard to money of that estate claimed in Quebec Superior Court file #500-11-005714-973; if one of those courts makes a final determination in regard to the plaintiffs claim for repayment to the Kenneth Roy Sinclair estate, the trustees will not be required to make any restitution to this estate pursuant to my order as Delegate of the Superintendent of Bankruptcy.

[32]I will remain seized of this matter (possible restitution to the estates of Meco Limited, Eric Lacroix, 9184-8044 Quebec Inc, Service de Mini-Remorque HCH Inc, Kenneth Roy Sinclair and Linh Kanh Nguyen) until a final court determination has been made in regard to the claims made, on behalf of these estates, by the Court of Appeal or the Supreme Court of Canada, pursuant to any subsequent appeal of the judgement rendered on by the Honourable Robert Mongeon, J.C.S, in the file # 500-11-005714-973, and the judgment rendered on by the Honorable Wilbrod Décarie in the file # 505-11-001995-971.

[33]If, by , a final court determination has not been made in Quebec Court of Appeal or in the Supreme Court of Canada in regard to any of the estates identified in the preceding clauses, the parties are requested to file further submissions to this proceeding with respect to the order that I should make.

[34]Given in Montréal, Québec, pursuant to section 14.01 (2) of the BIA.

André Deslongchamps, Delegate of the Superintendent of Bankruptcy


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

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