Georges E. Marchand, Bruno Marchand and Marchand Syndic Inc. — July 17, 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.

Final Decision at Stage of Determining Questions of Ethical Liability of Trustees

Table of Contents

  1. Introduction
  2. Burden of Proof
  3. Kienapple Rule in General
  4. Application of Kienapple Rule to Offences Relating to Question of GST/QST and Determination of Counts Selected for Consideration on Their Merits
  5. Application of Kienapple Rule to Specific Cases
  6. Interpretation of Act, Rules and Superintendent's Directives
  7. What is Desirable, Acceptable and Unacceptable
  8. Counts Concerning Banking Matters, Internal Controls, Summaries of Estate Balances and Documentation of Files
  9. Counts Concerning Delays in Concluding Files
  10. Counts Cited as Concerning Conclusion of Files Falling Within Categories (A), (B) and (D) in Paragraph 60 and Other Types of Offences
  11. Offences Which Add to Lack of Timeliness in Concluding Files, Charge of Failing to Follow Directions Issued by Court or Tribunal Setting Specific Deadline for Conclusion
  12. Non-Payment of GST and QST on Sales of Bankruptcy Property – Counts 102 and 103
  13. Counts 54, 56 and 70
  14. Counts Arising Out of Nina Benchaya File
  15. Other Counts Resulting Out of Kuggi File
  16. Five Counts Concerning Non-Payment of Dividends to Creditors and one Count Concerning Non-Closure of Account
  17. Counts Alleging Excessively Long Delays in Preparing Statement of Receipts and Disbursements
  18. Final Provisions
  19. Disposition

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I. Introduction

  1. The individual TRUSTEES, the father (Georges) and son (BRUNO), practise as trustees in bankruptcy under the corporate trustee MSI.
  2. Georges currently has 39 years' experience as a trustee in bankruptcy, initially with Price Waterhouse from 1970 to 1983. In 1983 he left Price Waterhouse and set up his own trustee firm with another trustee who had previously been with Price Waterhouse, Paul Daoust. Paul Daoust then left the firm a year after it was created.
  3. BRUNO currently has 15 years' experience as a trustee in bankruptcy, all with MSI.
  4. MSI initially operated under the corporate name "Marchand Daoust Inc." The current corporate name (MSI) is simply the result of a change in the corporate name of the same artificial person formerly known as "Marchand Daoust Inc."
  5. At the start of the subject disciplinary proceedings, the SENIOR ANALYST filed 140 counts against one or other of the individual TRUSTEES and against MSI. Exceptionally, in the case of counts 117.Footnote 1, 118, 119 and 120, only Georges was concerned as he had opened the files under his personal trustee licence.
  6. Apart from these four counts, in all the others, under the provisions of sections 33 and 34 of Directive No. 13 of the Superintendent of Bankruptcy (hereinafter "the SUPERINTENDENT"), dated , the counts were laid against one or other or both individual trustees, and against MSI in all cases.
  7. Under the provisions of sections 33 and 35 of SUPERINTENDENT'S Directive No. 13, an individual trustee appointed pursuant to section 33 may not open a bankruptcy file under his or her personal licence.
  8. Every such file must necessarily be opened in the name of a corporate trustee, which must appoint an individual trustee who will also be responsible for administering the file.
  9. Then, in each count where the individual trustee is held liable or not liable, the same will follow for MSI. The same is true for each count in which we will be ordering a conditional stay of proceedings.
  10. Before proceedings were filed in the instant case, the disciplinary files of the TRUSTEES, father, son and artificial person, were clean. However, over the years, and this was squarely admitted by the TRUSTEES, they encountered fundamental and systemic problems of excessive delays in concluding files, which caused them to be involved in disputes with the SUPERINTENDENT and his officers following periodic inspections by representatives of the official receiver to whom the TRUSTEES were responsible.
  11. Over the years, the TRUSTEES and SUPERINTENDENT'S officers agreed on no less than seven file [TRANSLATION] "Closure Plans". The TRUSTEES carried out only one of these plans.
  12. During the instant disciplinary proceeding, and even in the hearing on the merits, either the SENIOR ANALYST withdrew counts or some were regarded as struck out pursuant to the decision rendered by the undersigned at the hearing of .
  13. In this way 31 counts disappeared, namely 24, 26, 39, 44, 48, 57, 58, 67, 94, 95, 115, 117 and 121 to 139 inclusive.
  14. What is more, at the hearing of November 5, 2008 the three TRUSTEES admitted their liability on count 140, which after being revised by the SENIOR ANALYST covered all three and read as follows:

    The trustee did not proceed promptly with the closing of its files for a number of years, thereby contravening section 13.5 of the Act and section 36 of the Rules.

  15. There are thus still 108 counts to consider, analyse and decide on in this FINAL DECISION, six of which involve the three TRUSTEES, three involve only Georges, and 99 involve an individual TRUSTEE together with MSI.
  16. On the said six counts involving the three TRUSTEES, it must also be decided whether one of the two individual TRUSTEES is liable, or both. In this way, a total of 114 [TRANSLATION] "person/counts" remains to be decided.
  17. During the proceeding, we held hearings on preliminary applications and accordingly rendered two preliminary decisions: one on , revised on ; and the other on .
  18. The hearing on the merits was held in November 2008 and lasted for 12 days, nine and a half days of evidence and two and a half days of argument. We heard four witnesses: the SENIOR ANALYST and an auditor, Louis Nolet, a member of the National Audit Group reporting to the SUPERINTENDENT, for the prosecution, and the two individual TRUSTEES for the defence.
  19. During the testimony the SENIOR ANALYST and Mr. Nolet filed 179 exhibits, Georges filed 46 and BRUNO 31, for a total of 256, some of which consisted of over 100 pages.
  20. By mutual agreement between the parties, the "conclusion of the hearing" for the purposes of section 14.02(4) of the Act was set at April 30, 2009.
  21. During the hearing on the merits two written Agreements were made in which the parties agreed as follows:

    AAgreement dated , in which it states:

    [TRANSLATION]
    AGREEMENT REGARDING CERTAIN COUNTS

    Through their counsel the parties agree as follows:

    1. the decision to be rendered by the Delegate on the count having No. 16 in the Table of Offences will apply mutatis mutandis to the offences identified by Nos. 8, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, 21, 22, 23, 25, 27, 28, 29, 30, 31, 32, 33, 34 and 35;

    2. the decision to be rendered by the Delegate on the count having No. 46 in the Table of Offences will apply mutatis mutandis to the offences identified by Nos. 36, 37, 38, 40, 41, 42, 43, 47, 49, 50, 51, 52, 53, 55, 59, 60, 61, 62 and 63;

    3. the decision to be rendered by the Delegate on the count having No. 2 in the Table of Offences will apply mutatis mutandis to the offences identified by Nos. 3 and 4 …

    BAgreement dated , which states:

    [TRANSLATION]
    AGREEMENT REGARDING COUNTS 96 TO 100 INCLUSIVE

    Through their counsel the parties agree as follows:

    the decision to be rendered by the Delegate on the count having Nos. 96 in the Table of Offences will apply mutatis mutandis to the offences identified by No. 97, 98, 99 and 100.

  22. As counsel for either side did in their submission of evidence and in their argument, we will divide the remaining 108 counts to be decided into groups as similar as possible. However, before proceeding we will deal with certain fundamental points which will later affect the consideration and disposition of the individual counts.

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II. Burden of Proof

  1. It is well established that disciplinary law applicable to professionals, in the areas of both provincial and federal jurisdiction, is sui generis law. Both counsel in the instant case were of this opinion, and what is more this conclusion is universally accepted, so much so that it is no longer even necessary to cite commentary or precedents in support of it.
  2. As sui generis law, disciplinary law has adopted concepts from both the civil law and criminal law. One sometimes sees disciplinary law described as [TRANSLATION] "quasi-criminal".
  3. On careful consideration, we now feel that the said term is inappropriate and ill-chosen. The law regarding the discipline of a "licensed trustee"Footnote 3 under the Act has often adopted concepts from both the civil and criminal law.
  4. Then, as to the burden of proof that rests with the SENIOR ANALYSTS when one of them alleges one or more offences against a trustee, that burden is clearly not that of the criminal law, that is, beyond all reasonable doubt.
  5. Accordingly, as regards the weight of the evidence the burden is fundamentally that of the civil law, that is on a balance of probabilities. However, because a disciplinary proceeding against a trustee could ultimately have a negative effect on his or her professional reputationFootnote 4 and ability to earn a living, counsel for the TRUSTEES argued that the level of evidence should be at a higher standard than cases generally existing in civil law, but not as high as required in criminal law.
  6. Counsel for the SENIOR ANALYST argued that his client's burden was to show that each offence was committed on a balance of probabilities.
  7. He also admitted that depending on the nature of the fault with which the TRUSTEES were charged and/or the penalty which might be imposed upon them, the evidence should be reliable and [TRANSLATION] "particularly persuasive".
  8. However, he insisted that [TRANSLATION] "this has more to do with the quality of the evidence" than the burden of proof and the DELEGATE does not have to be persuaded beyond all reasonable doubt of the professional's guiltFootnote 5.
  9. He further submitted that in disciplinary law the prosecutor does not have to prove that the accused had a guilty intent (mens rea), unless the wording of the regulatory provision or the count implies this.
  10. Consequently, we consider that the burden of proof imposed on the SENIOR ANALYST here is that of the balance of probabilities. However, such evidence must have the quality of being reliable and very persuasive.
  11. In view of the very serious consequences to which the TRUSTEES would be exposed if they were found ethically liable we consider that, as in the field of provincial professional disciplinary law, the evidence presented by the SENIOR ANALYST should establish all the essential points of each count in a clear and convincing way and include evidence which is cogent and of high quality, but not in the sense of being [TRANSLATION] "beyond all reasonable doubt" in criminal lawFootnote 6.
  12. Counsel for the TRUSTEES objected that the SENIOR ANALYST had not consulted any of the bankruptcy files directly at issue at the TRUSTEES' premises, simply consulting those in the possession of the SUPERINTENDENT and the TRUSTEES' client cards for the bankruptcies in question.
  13. We concede that in the cases involving conclusion delays it would have been a better approach to check the files in the TRUSTEES' possession, as otherwise the SENIOR ANALYST could not really know the true reasons that may have explained and in some cases justified the delays by the TRUSTEES.
  14. In other types of offence, the failure to consult the files at the TRUSTEES' premises does not appear to be as problematic as for offences involving conclusion delays.
  15. However, it is the SENIOR ANALYST who must prove the offences and we have to decide on the evidence laid before us, regardless of whether better or more extensive evidence existed and could have been put forward by the ANALYST. Clearly, we must also analyse and apply the evidence submitted to us by the TRUSTEES, which we have of course done.
  16. For the reasons stated in paragraphs 27 and 33, the rule on disclosure of evidence known in criminal law by the term "Stinchcombe"Footnote 7 applies, mutatis mutandis, in a disciplinary proceeding involving a trustee under the Act. We have ruled to this effect in our Preliminary Decisions in the instant case.
  17. However, it should be said in clarification that here, in the great majority of counts, the basic facts underlying them are established by various kinds of material evidence, such as judgments of the Court of Appeal, Superior Court or Registrar in Bankruptcy, and/or other documents that are not in dispute, followed by lapses of time in accordance with the wording of the provisions of the Act, the rules under the Act (hereinafter "the RULES") or the SUPERINTENDENT'S DirectivesFootnote 8.
  18. That said, this is not a situation here, as is often the case in legal proceedings, of hearing the witnesses for Party A who say X and those for Party B who say Y about the same situation of fact, and the decision-maker has no other objective indications to support one or other version.
  19. In such a case, the decision-maker has no grounds or justification for accepting one version and rejecting the other. In such a situation, the party with the burden of proof must lose.
  20. In the instant case, in nearly all the counts the basic facts are really not in dispute, but we have to choose between two contradictory viewpoints as to the law and decide what legal conclusions should be drawn from facts which are not really the subject of contradictory versions.
  21. In such cases the discussion, and the conclusions stated above which are drawn on the burden of proof, become a somewhat academic or sterile discussion, otherwise known as "moot".

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III. KienappleFootnote 9 Rule in General

  1. Briefly, in the criminal law the effect of the Kienapple rule is to bar multiple convictions when two or more offences derive from the same act. In such a case, the criminal courts order a conditional stay of proceedings on the duplicated offences.
  2. To begin with, the question was argued in the courts as to the applicability of the Kienapple rule in professional disciplinary law under the Quebec Professional Code. However, this point is now resolved.
  3. For some time, it has been held that the Kienapple principle applies to professional disciplinary law under provincial jurisdictionFootnote 10.
  4. quaere: Does the Kienapple rule apply in the same way to disciplinary law regarding a trustee under the Act, Rules and/or superintendent's Directives?
  5. When we questioned Mr. Gervais, counsel for the trustee, as to whether he knew of any decision in which Kienapple had been applied to a disciplinary proceeding against a trustee under the Act, his reply was in the negative. This was also true for Mr. Tremblay, counsel for the senior analyst.
  6. On careful consideration, as with the Stinchcombe rule, we see no reason why the Kienapple rule should not apply in proceedings against trustees under the Act. The issues are the same, including the possible or even probable harmful consequences in the event of a negative ruling.
  7. Accordingly, based on the special status of the quality of evidence required in a disciplinary proceeding against a trustee under the Act and the concern to ensure that he is treated with procedural fairness, in addition to importing the Stinchcombe rule from the criminal law the same is true of the Kienapple rule.
  8. We will accordingly apply it to offences where both a factual and a legal connection exist.
  9. Another variant of the Kienapple principle mentioned by Mr. Gervais concerns the situation in which there is a general offence alleged and also one or more others alleging the same conduct, but more specifically.
  10. This is the situation set out in the case of the dentist Kenny mentioned in the reference in footnote 10. What is more, this is what the Tribunal des Professions du Québec contended in this regard in the judgment in the said case, citing the Supreme Court of Canada in Prince at p. 219 in Kenny:

    In general, the particularization in one offence of an element of another offence should not be regarded as a distinguishing feature that renders Kienapple inapplicable. Parliament may create offences of varying degrees of generality, with the objective (vis-à-vis the more general offence) of ensuring that criminal conduct will not escape punishment because of a failure of the drafters to think of each individual circumstance in which the conduct might be committed, or with the objective (vis-à-vis the more specific offence) of addressing with certainty particular conduct in particular circumstances. In the absence of some indication of Parliamentary intent that there should be multiple convictions or added punishment in the event of an overlap, the particularization of an element ought not to be taken as a sufficient distinction to preclude the operation of the Kienapple principle.

  11. Then, counsel for the trustees argued that because his three clients had admitted their liability in general with respect to offence 140Footnote 11 the effect of the Kienapple rule should be that each count alleging the same conduct in a specific case should yield and be the subject of a conditional stay of proceedings, though he admitted that these more specific counts could subsequently have a part to play in deciding on penalties.
  12. If we accept this approach, it would mean a conditional stay of proceedings in nine specific offences for not proceeding promptly with the conclusion of a specific file, namely the following offences:
    A. Offences involving georges and MSI:
    File Count No.
    1847–0641 Québec Inc. 85
    Lunair Architecture Inc. 86
    Matériaux de plomberie et chauffage du Côteau Inc. 87
    Vide & Traitement Canada Inc. 88
    Cloutier, Paul-Henri 91
    Kuggi Inc. 92
    Multivan D.B. Inc. 93
    B. Offences involving bruno and MSI
    File Count No.
    Rochon, Raymond 89
    Poulin, Normand 90
  13. Needless to say, counsel for the senior analyst objected to this argument.
  14. On reflection, we feel bound by the dictum ad rem of Dickson J. in PrinceFootnote 12. and feel that Mr. Gervais is right. We will accordingly grant the conditional stay of proceedings sought by Mr. Gervais on the said nine counts.
  15. In another variant of the same Kienapple rule, counsel for the trustees argued that when in a single bankruptcy file the trustees are charged with two offences involving the same conduct of failing to act in a timely manner in concluding the file, one of them should be subject to a conditional stay of proceedings.
  16. An example of this: in the bankruptcy of 1847–0641 Québec Inc., georges and MSI were charged with counts 76 and 85: 76 with having failed to prepare the statement of receipts and disbursements despite the fact that the administration of the file was complete, thereby contravening section 151 of the Act, and 85 with failing to conclude the file promptly, thereby contravening section 13.5 of the Act and section 36 of the Rules.
  17. Mr. Gervais considered that the "conclusion" of a bankruptcy file begins with preparing the statement of receipts and disbursements and ends with the release of the trustee. In his submission, this involves more than one act and in fact consists of five separate acts:
    1. Preparing the final statement and sending it to the SUPERINTENDENT;
    2. after receiving the official receiver's letter of comment, applying to the taxation officer for a date for hearing of taxation of the summary within 30 days of receipt of the letter of comment;
    3. the taxation process when the letter of comment requires it;
    4. issuing and payment of dividends, if any; and
    5. an application for release of the trustee or issuing of a compliance certificate.
  18. He then considered that these five acts are all included in an offence of failure to act in a timely manner in concluding the file.
  19. Accordingly, counsel for the trustees felt that when an offence concerning acts (A), (B), (C), (D) or (E) is duplicated in a bankruptcy file with an offence of failure to act in a timely manner in concluding the file, the first offence should yield and be the subject of a conditional stay of proceedings.
  20. Setting aside our decision mentioned in paragraphs 51 and 57, and in the event that a higher judicial authority does not quash the said decision, which would allow the counts in question to subsist, if we accepted his approach here it would be necessary in each of the following bankruptcy files to accept one count for decision and order a conditional stay of proceedings in the other:
A. Offences involving georges and MSI
FILE to be accepted conditional stay of proceedings
1847–0641 Québec Inc. 85 76
Lunair Architecture Inc. 86 77
Matériaux de plomberie et chauffage du Côteau Inc. 87 78
Vide et Traitement Canada Inc. 88 79
Cloutier, Paul-Henri 91 82
Kuggi Inc. 92 83
Multivan D.B. Inc. 93 84
B. Offences involving bruno and MSI:
FILE to be accepted conditional stay of proceedings
Rochon, Raymond 89 80
Poulin, Normand J. 90 81
  1. However, if our decision mentioned in paragraphs 51 and 57 subsisted, it is counts 85, 86, 87, 88, 89, 90, 91, 92 and 93 that would be subject to a conditional stay of proceedings and counts 76, 77, 78, 79, 80, 81, 82, 83 and 84 which would be substituted.
  2. Mr. Tremblay put forward another approach, referring us to paragraphs 1, 2 and 4 of section 41 of the Act, which provide:

    Section 41:

    (1) [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.

    (2) [Discharge of trustee] The court may discharge a trustee with respect to any estate on full administration thereof or, for sufficient cause, before full administration.

    (4) [When estate deemed fully administered] When a trustee's accounts have been approved by the inspectors and taxed by the court and all objections, applications and appeals have been settled or disposed of and all dividends have been paid, the estate is deemed to have been fully administered.

  3. The argument made on this point by Mr. Gervais, and summarized in paragraphs 58 to 62, is at first sight attractive, but with respect does not stand up to analysis.
  4. If it were accepted, to be consistent why not go back step by step to the very start of the case? — namely, following the assignment or issuing of a receiving order, each step after that is an advance towards conclusion of the file, such as the taking possession of the bankrupt's property, making an inventory of the assets, receiving and processing creditors' claims, calling for tenders for the sale of the assets, sale of the assets and so on.
  5. We feel it would be absurd to consider each such step as being part of the conclusion of the file.
  6. Consequently, of the five actions listed in paragraph 60, in our view it is the agreement by the Court to the first alternative or the doing of the second in paragraph (E) which constitutes conclusion of a file.
  7. Accordingly, we will not order a conditional stay in the case of the offences covered by this argument and theory put forward by counsel for the trustees.

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IV. Application of Kienapple Rule to Offences Relating to Question of GST/QST and Determination of Counts Selected for Consideration on their Merits

  1. This concerns 47 counts distributed among 26 bankruptcy files. Of the 47 counts, four concern georges and MSI and 43 bruno and MSI. These 47 counts consist of 21 pairs in 21 bankruptcy files and five individual counts in five other bankruptcy files.
  2. We may take as an example the case of Louise Bissonnette, where we find counts 35 and 37 which read as follows:
    translation

    Count 35

    In the case of Louise Bissonnette, the trustee filed a statement of receipts and disbursements in which he claimed disbursements he had not incurred, thereby contravening section 152(1) of the Act. (para. 64, p. 13)

    Count 37

    In the case of Louise Bissonnette, the trustee unlawfully cashed funds corresponding to disbursements that he had not incurred, thereby contravening section 25(1.3) of the Act. (para. 65, p. 13)

  3. The same applies to the other 20 pairs of counts that have the same wording as counts 35 and 37. As bruno explained in his testimony, it was he who prepared the statements of receipts and disbursements in the 26 files in question, even in the two that were the responsibility of georges.
  4. It was all the result of an honest, ordinary mistake in calculation which concerned the CTF which provided the second consultation with individual bankrupts in certain summary files, for fees of $85 in each one.
  5. The first similar consultation provided by one of the individual trustees also was for fees in the same amount and was taxable as GST and QST.
  6. However, in the case of the ACEF the fees were not taxable, which bruno did not take into account, also calculating the GST and QST.
  7. In each such case the result of overpayment to the trustee amounted to some $11.00.
  8. It was thus the miscalculation which distorted the claim in the statement of receipts and disbursements and so the payment to MSI.
  9. Mr. Gervais claimed this was a two-step procedure. The result of the calculation error was that MSI claimed an excessive amount and so deposited the said amount.
  10. We agree that proceeding with two offences in each similar case, one of claiming a disbursement not incurred and the other of depositing funds corresponding to a disbursement not incurred, would be absurd.
  11. So, a person cannot deposit money corresponding to a disbursement not incurred without claiming such undisbursed money in the statement of receipts and disbursements.
  12. We therefore feel that the Kienapple rule should be applied and that one count in each similar pair of counts should be subject to a conditional stay of proceedings.
  13. What is more, considering paragraph 1 of Agreement A cited in paragraph 21, counts 8, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, 21, 22, 23, 25, 27, 28, 29, 30, 31, 32, 33, 34 and 35 will have the same fate as count 16.
  14. Thus:
    A. Offences involving georges and MSI:
    file to be accepted conditional stay of proceedings
    Bissonette, Louise 37 35
    Lisée, Pierre 36 34
    B. Offences involving bruno and MSI:
    file to be accepted conditional stay of proceedings
    Barbeau, Annie 55 25
    Beauchamp, Benoît 46 16
    Binette, Michel 41 11
    Boismenu, René 43 13
    Brassard, Marc 28 N/A
    Brûlé, Patrice 14 N/A
    Cardinal, Pierre 60 30
    Charbonneau, Sylvain 62 32
    Collin, Louise 45 15
    Desjardins, Paul 49 19
    Dupuis, Gaston 27 N/A
    Fortin, Jean-Pierre 63 33
    Huerta, Christian 50 20
    Lauzon, Alain 18 N/A
    Lepage, Réjane Pilon 53 23
    Lessard, Daniel 40 10
    Maillé, Jean-Pierre 61 31
    Ouellet, Éric 59 29
    Parisé, Daniel 47 17
    Pistoia, Poger Paul 38 8
    St-Pierre, Gisèle 42 12
    Therrien, Serge 52 22
    Turcotte, Jean 9 N/A
    Wilhemy, André 51 21
  15. On the 26 counts listed under the column "accepted" in paragraph 84, the facts are set out in paragraphs 73 to 78 and, as we mentioned in paragraph 78, it was all the result of an ordinary, honest mistake in calculation.
  16. Once the said error was discovered by Mr. Nolet, the trustees corrected it in the bankruptcy files that were affected by itFootnote 13.
  17. In our view, this does not come up to the level of ethical misconduct and the trustees affected by these 26 counts will be held not liable on these counts. Further, in accordance with paragraph 2 of Agreement A cited in paragraph 21, counts 36, 37, 38, 40, 41, 42, 43, 47, 49, 50, 51, 52, 53, 55, 59, 60, 61, 62 and 63 must have the same fate as count 46.

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V. Application of Kienapple Rule to Specific Cases

  1. In the bankruptcy of Nina Benchaya the two counts 108 and 109 concern the same conduct by georges, namely refusing to submit the statement of receipts and disbursements to the Registrar for taxation on .
  2. On count 109, it was alleged that georges refused to submit it and so failed to comply with the judgment of the Quebec Court of Appeal ordering him to submit the said statement to the Registrar for taxation on , the date which was postponed to by consent between georges and Patricia Alfarez, Deputy Superintendent.
  3. On , in room 16.10 of the Montréal Courthouse, the Registrar Chantal Flamand in view of his recalcitrance verbally ordered him forthwith to comply with the Court of Appeal's judgment and submit the statement for taxation.
  4. georges persisted in his refusal and this is the subject of count 108.
  5. What is more, following the making of the verbal order by Ms. Flamand in the presence of georges and his counsel, P. Gamelin Vadeboncoeur, the latter simply left the hearing room while the hearing before Registrar Flamand was still ongoing.
  6. In his testimony, georges explained that his counsel had decided to leave and asked him to go with him, which georges did, without really thinking about the consequences of doing so.
  7. Certainly, from the standpoint of the Kienapple rule, georges is charged with two counts which overlap because they were committed by a single act.
  8. Leaving the hearing room while the Registrar was presiding is not the subject of a count. At the same time, such an action would be an aggravating factor if georges was found liable on one or other of counts 108 and 109.
  9. In consequence, under the Kienapple rule, with respect to georges count 109 is retained and count 108 subject to a conditional stay of proceedings.
  10. It should be noted that bruno was charged on the same two counts 108 and 109, as the Nina Benchaya file was opened under his responsibility, though he was not present in room 16.10 on .
  11. georges' actions on in hearing room 16.10 of the Montréal Courthouse had nothing to do with bruno, apart from the fact that the Nina Benchaya file was opened under the latter's responsibility.
  12. In his testimony before this tribunal, bruno explained that at the time in January 2000, and even since the end of spring 1999, it was georges, his senior partner and father, who had taken over management of the Nina Benchaya file.
  13. What is more, bruno was not consulted and so did not instruct either georges or the lawyer Vadeboncoeur as to what should be done or not done before the Registrar on that day, nor answer the latter's questions as to the course of action to adopt.
  14. We accept Mr. Gervais' argument that, as a general rule, ethical misconduct must be personal to the professional concerned in the alleged offence.
  15. Accordingly, if the latter had entrusted responsibility for the file to another experienced and competent trustee, and bruno had thus acted reasonably, he should be completely exonerated. He will thus be held not liable on counts 108 and 109.
  16. On counts 104, 105, 106, 107, 110, 111, 112 and 116, all having to do with the Nina Benchaya bankruptcy and all involving bruno, Mr. Gervais maintained that each is a specific aspect of count 116, which is worded as follows:
    COUNT 116
    In the Nina Benchaya file the trustee, by his dilatory actions and lack of due care, penalized the debtor and the only creditor in the file, thereby contravening section 13.5 of the Act and sections 34 and 36 of the Rules. (para. 199, p. 33)
  17. On counts 113 and 114 Mr. Gervais cited the same Kienapple rule, claiming that either one was subject to a conditional stay of proceedings as they were only two different facets of the same action, i.e. not having concluded the Nina Benchaya file promptly.
  18. These two counts involve, primo (113), not having acted in a timely manner in filing his amended statement of receipts and disbursements pursuant to the Court of Appeal's judgment on , and secundo (114), failing to contact the taxing official within 30 days of receipt of the letter of comment issued on .
  19. For the reasons indicated in paragraphs 58 to 70, mutatis mutandis, we do not accept the said application on counts 113 and 114.
  20. Mr. Gervais further claimed that only count 116 should be taken under consideration and counts 104, 105, 106, 107, 110, 111 and 112 should be subject to a conditional stay of proceedings.
  21. We have carefully examined the wording of all these counts. In short, both for the reasons given in respect of the pairs of counts 108/109 and 113/114 and because each of counts 104, 105, 106, 107, 110, 111, 112 and 116 concerns specific actions by bruno which were not part of the conclusion of the file as such, we do not accept the argument of counsel for the TRUSTEES regarding all of these counts from the standpoint of the Kienapple rule.

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VI. Interpretation of Act, Rules and Superintendent's Directives

  1. According to counsel for the TRUSTEES, the Act is special as legislation and our courts have often described it as "a businessmen's Act". In this vein, de Grandpré J. said the following in Mercure v. Marquette & Fils Inc.Footnote 14 :

    Before going on to another point it is perhaps not inappropriate to recall that the Bankruptcy Act, while not business legislation in the strict sense, clearly has its origins in the business world. Interpretation of it must take these origins into account. It concerns relations among businessmen, and to interpret it using an overly narrow, legalistic approach is to misinterpret it.

  2. Mr. Gervais felt that this applied not only to the substantive provisions of the Act regarding the debtor, the creditors and their claims, and so on, but also to the provisions of the Act (and so the Rules and the SUPERINTENDENT's Directives) which apply to the trustees.
  3. He did admit that perhaps another approach should be adopted with regard to rules 34 to 53, referred to as the "Code of Ethics for Trustees". This does not apply generally to the man in the street, but is designed with a single specific purpose, namely governing the conduct of trustees.
  4. He further maintained in support of his argument that when the Act, Rules or SUPERINTENDENT's Directives requires that a trustee do something within a given time, unless the provision in question indicates otherwise the deadline is not a strict one.
  5. This results from section 187(11) of the Act, which provides that a deadline may always be extended by the Court, even retroactively. That section states:

    (11) Court may extend time Where by this Act the time for doing any act or thing is limited, the court may extend the time either before or after the expiration thereof on such terms, if any, as it thinks fit to impose.

  6. However, even under the said provision relied on by Mr. Gervais, the person seeking an extension of time must apply to the "court", which in Quebec means the Superior Court sitting in bankruptcy.
  7. Speaking in his turn on this point, Mr. Tremblay objected to Mr. Gervais' opinion. He felt that this approach only applies to substantive provisions of the Act, but certainly not to the provisions of the Act, the Rules and the SUPERINTENDENT's Directives concerning trustees' duties and ethics.
  8. He believed that when the Act and these other provisions give indications or specific periods of time for a trustee to perform a function, failure to do so automatically constitutes an ethical offence.
  9. After considering this point, we feel that neither counsel has the absolute truth regarding it.
  10. We do not accept that the interpretation of the Act suggested by Mr. Gervais applies to trustees' ethics, or even Mr. Tremblay's viewpoint.
  11. We feel that not every technical fault committed by a trustee will automatically constitute ethical misconduct. It also depends on the frequency of repetition of the said faultFootnote 15 and whether it is accompanied by the existence of one or more other types of fault.
  12. Accordingly, it is up to the SUPERINTENDENT, and if applicable each of his Delegates, to use his discretion and judgment, to carefully weigh and assess all the material and circumstances in each case: we will do this here.
  13. Later in this Decision, we will have to find one or other of the individual TRUSTEES liable on a count as to which his counsel submitted that the nature of the count was technical or minor and did not come up to the level of ethical misconduct.
  14. We will agree that this was an isolated case. However, in the case of the TRUSTEES in this matter repetition of the commission of technical or minor faults was ever-present.
  15. In such a case, when he has been held liable the technical or minor nature of the offence will be considered, weighed and assessed when the stage of PENALTIES is reached.

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VII. What is Desirable, Acceptable and Unacceptable

  1. Mr. Gervais referred to a method of trial in cases of professional discipline and ethics which are subject to the Quebec Code des Professions, according to which a "trustee" of a professional order which is prosecuting a member of the order for ethical misconduct must initially establish what the standard is regarding conduct in the same circumstances for members of the professional order in question.
  2. In his submission, the said standard is what is [TRANSLATION] "desirable" in the professional subject to a disciplinary proceeding. However, he told us, the said professional is not held to the level of the desirable as there is the level of the [TRANSLATION] "acceptable", which falls below desirable conduct.
  3. Accordingly, in Mr. Gervais' submission conduct falling in this area, between desirable and acceptable, is not ethically blameworthy conduct.
  4. Finally, Mr. Gervais argued, ethical misconduct only results if the professional's actions fall below the level of acceptable conduct and are thus regarded as [TRANSLATION] "unacceptable"Footnote 16.
  5. On careful consideration we feel that the said trial method in the field of disciplinary law under the Quebec Professional Code is not applicable in the field of trustee discipline under the Act, Rules and/or SUPERINTENDENT's Directives.

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VIII. Counts Concerning Banking Matters, Internal Controls, Summaries of Estate Balances and Documentation of Files

(a) banking matters

  1. Count No. 1 charges the two individual trustees and MSI with having operated several consolidated bankruptcy accounts without authorization for summary administration files (nine such accounts, one for files opened before 1994 and one per year for those opened from 1994 to 2001), thereby contravening section 5(5) of the Act and paragraph 5 of superintendent's Directive No. 5.
  2. In the on-site audit conducted between May 28 and at MSI (at the time operating under its previous corporate name "Marchand Daoust Inc.") by Réal Langlois, it was found that the firm was using a consolidated bankruptcy account for all summary files and individual accounts for ordinary files.Footnote 17
  3. In summary supervision conducted in September 2000, the official receiver Nicole Lachance for the first time noted the problem of proliferation of consolidated accounts at MSI. The trustees had then gone to eight such accounts.Footnote 18
  4. She described it as a translation "minor problem" and recommended a translation 'special audit"Footnote 19. This led to the inspection by Louis Nolet.
  5. In the audit carried out by Louis Nolet between September 10 and , he noted the existence of nine consolidated accounts as stated in paragraph 129.
  6. It accordingly appears that the multiplicity of consolidated accounts at MSI began in 1994.
  7. Both in the written replies provided by the trustees and in the testimony of georges, the latter gave it as their opinion that it was more efficient to use a new consolidated account for all the summary files opened annually.
  8. Through Mr. Nolet, they even sought to persuade the superintendent that the said method which they were recommending and using was better than that required by the legislation in this area.
  9. After the superintendent's final refusal to try and have the Act's requirements in this regard amended was passed on to the trustees, they finally complied and merged all their consolidated accountsFootnote 20 into one and have subsequently continued on that basis.
  10. The words translation "without authorization" occurring in count No. 1 would have had an effect on our decision if in fact the trustees had only operated one of the said accounts, as georges (on behalf of "Marchand et Compagnie") on January 9, 1989 sought and obtained in his own name leave to operate one consolidated account.Footnote 21
  11. However, in view of the tolerance shown and the absence of any reaction by the superintendent and his officers to the fact that MSI appeared to be operating the account in question under the authorization given to georges personally, we would have found the trustees not liable if the question was only that MSI was operating one consolidated account under the authorization that had been given to georges.
  12. Although a trustee may have authorization to operate one such account, this certainly does not mean the right to operate nine of them.
  13. Consequently, the three trustees will be held liable on count No. 1.
  14. On counts 2, 3 and 4, namely failing to deposit translation "forthwith", in a separate trust account in a bank, monies received for asset accounts in the bankruptcies of Sylvain Boisvert (count 2), Michel Lapierre (count 3) and Michel Fleury (count 4), georges (in the case of count 2) and bruno (in the case of counts 3 and 4) allegedly contravened section 25(1) of the Act and paragraph 4 of superintendent's Directive No. 5.
  15. Neither the Act nor the Rules gives a further definition of the meaning of "forthwith" in the context of section 25(1) of the Act or paragraph 4(1)(b) of Directive No. 5.
  16. In the Boisvert caseFootnote 22, there was the sum of $195 received in cash on December 10, 1998 and deposited in the bank on . In Lapierre, the sum was also $195, received on January 28, 1999 and deposited on . In the case of Michel Fleury, the amount was $200, received on and deposited on Footnote 23: thus, 26 days, 14 days and 20 days.
  17. Evidence was presented to our satisfaction that only when large sums were received were they deposited forthwith.
  18. Mr. Gervais argued that the senior analyst filed no evidence as to the standard generally recognized and followed by practitioners in such a matter.
  19. If Parliament had intended to set a specific deadline, it would have done so. Accordingly, we feel it left the matter to the considered discretion of the decision-maker.
  20. Mr. Nolet conducted a translation "test on receipts issued" regarding 20 receipts of moneyFootnote 24, three of the 20 (or 15%) being selected for analysis because the time between receipt and deposit attracted attention and exceeded even established policy at MSI.
  21. The policy at MSI was to make bank deposits of small amounts on the 10th, 20th and 30th of each monthFootnote 25, which means generally within ten days.
  22. We have considered the period of the year in Boisvert and the specific facts in the other two cases.
  23. We cannot say otherwise with the necessary degree of conviction and so do not find the policy of depositing small amounts within ten days unreasonable.
  24. Each of the three deposits concerned in counts 2, 3 and 4 exceeded the said ten-day deadline: 14 days in the case of Lapierre, 20 days in the case of Fleury and 26 days in the case of Boisvert.
  25. We therefore find that in Boisvert (count 2) the delay was too long, even exceeding by a considerable margin the policy followed by the trustees. georges and MSI will accordingly be held liable on this count.
  26. What is more, in view of paragraph 3 of Agreement A cited in paragraph 21, bruno and MSI will have the same fate on counts 3 and 4.

b) internal controls

  1. On count 5 involving bruno and georges, they are charged with failing to set up internal controls for banking procedures, thereby contravening section 5(5) of the Act and paragraph 3 of superintendent's Directive No. 5.
  2. The issue is that between 1995 and 2000 they did not cancel 19 cheques which MSI had issued, totalling the sum of $4,851.88, which expired as they were not cashed within six months of the date of issueFootnote 26.
  3. Mr. Gervais questioned the idea that a cheque expired if not cashed within six months. However, the said notion is valid and is based on a rule of the Canadian Payment Association established by chartered banks in Canada and governing the daily processing of all cheques cashed in Canada. Accordingly, a cheque that is not cashed within six months of its date does then become outdated.
  4. Some of the cheques involved had been in circulation without being cashed for over five years. This is well beyond what would ordinarily be allowed and indicates some laxity by the trustees. bruno, georges and MSI will accordingly held liable on count No. 5.
  5. Count No. 6 involves failure to correct within 30 days of the monthly bank reconciliation errors found therein, thereby contravening section 5(5) of the Act and paragraph 11 of superintendent's Directive No. 5. There was a total of 29 such errors not corrected in nine bank reconciliations considered.Footnote 27
  6. The evidence showed that when Mr. Nolet did his audit and noted the errors in the reconciliations, these errors had already been noted by hand on the bank statements. They had thus been identified by the trustees or their employees, but not corrected.
  7. The said paragraph 11 of superintendent's Directive No. 5 states:

    Errors discovered in the reconciliation of an account shall be corrected within 30 days of the date of the discovery.

  8. This requirement is thus mandatory and bruno, georges and MSI will be held liable on count No. 6.

C) summaries of estate balances

  1. Count 7 charges that georges, bruno and MSI failed to maintain a list of all individual estates held in a consolidated bank account for the month which was the subject of the (bank) reconciliation, thereby contravening section 5(5) of the Act and paragraph 9 of superintendent's Directive No. 5.
  2. In fact, the trustees never printed such a list (known in English as a "Summary of Estate Balances") and, of necessity, never kept such a printed list.
  3. However, they contended that the information in question was and still is available in their computer system and can be printed out at any time, taken out and made available in hard copy.
  4. The senior analyst's reply was that it is simply not possible to validly go back for more than a month or two, for as a bankruptcy file with the trustees is concluded and closed, the information on it disappears forever and can no longer be reproduced.
  5. However, bruno explained in his testimony that this would be the case only if the "archive" function was used in concluding a file.
  6. He stated, and we have no reason not to believe him on this point, that this "archive" function was never used by the trustees (and is still not used)Footnote 28, and that therefore all the necessary information is still in their computer system and can be located and printed out at any time.
  7. This is what we wrote on this point at paragraphs 54, 55 and 56 of our Decision on the Merits in the case of a New Brunswick trustee, rendered on in Ann Speers, Senior Analyst v. JGT and JGT & Associates Ltd..:

    54. The auditor and the senior analyst took the position that in order to effect a proper reconciliation, even though DIRECTIVE NO. 5 does not explicitly require itFootnote a, the monthly bank statement had to be matched, in the first place, to items still in transit and, secondly, to the Summary of Estate Balances (hereinafter "SEB").

    55. The raison d'être advanced by the senior analyst for that proposition is that there must at all times be sufficient funds on deposit in the Trust CBA'sFootnote 29 in order to meet the corporate trustee's obligations to the creditors of each estate under its administration. Hence, the requirement as well that a Trustee maintain on an ongoing basis a monthly list of all individual estates for which funds are held in a CBA. See at Section 9(e) of Directive 5.

    56. In that regard, the trustees argued that a monthly list did exist on an ongoing basis in the corporate trustee's computer system, even though they did not maintain physically a file of hard copies of such lists. We are of the view that, in this day and age, to "maintain a list" does not require that a hard copy be maintained. An ongoing monthly list found in a computer system fulfills the obligation in that regard set out in Section 9(e) of Directive 5.

  8. Our view on this point has not changed since then: on the contrary. Accordingly, the three trustees will be held not liable on count 7.

d) documentation of files

  1. This concerns counts 68 regarding Multivan D.B. Inc. ("multivan") and 71 concerning Kuggi Inc. ("kuggi"), both involving georges as individual trustee officially responsible for the multivan file and individual trustee actually responsible for the kuggi file.
  2. In Multivan, the first meeting of the creditorsFootnote 30 took place on and an inspector was appointed. This was one Charles Massicotte, who represented the chartered accounting firm Price Waterhouse Ltd. in that official capacity.
  3. As to multivan's assets, a bid was made by Encanteurs Nova Auctioneers Inc. and received by MSI (under its earlier corporate name) on : on MSI accepted it and the bidder countersigned MSI's acceptance on March 5, 1997.Footnote 31 The sale subsequently took place.
  4. The selling price was $81,090 plus tax. However, the multivan bankruptcy file with MSI contains no transcript of the resolution adopted at the inspector's meeting which approved acceptance of the said bid.
  5. There is in the trustees' file a handwritten memo prepared by georges at the said inspector's meeting which recorded approval by the single inspector of the assets being sold in accordance with the said bid.
  6. The senior analyst did not dispute the trustees" assertion that such approval was given, and counsel for the trustees argued that section 26 of the Act does not require any specific format for a meeting transcript.
  7. However, there has to be some form of transcript in the file and it must be translation "signed by the trustee". Here, there was none.
  8. We therefore cannot accept Mr. GERVAIS' submission that a handwritten document prepared by georges was the equivalent of the latter's signature, even if it did not expressly contain authorization for accepting a particular offer.
  9. Consequently, georges and MSI will be held liable on count 68.
  10. In the kuggi file Mr. Gervais argued that the services rendered to the secured creditor, the Caisse Populaire du Domaine St-Sulpice ("the caisse") were provided outside the bankruptcy, not as officer or trustee but only in the context of giving assistance to the caisse, in return for fees.Footnote 32
  11. This is why, georges explained in his testimony, the documentation on his relations with the caisse was not in the kuggi bankruptcy file as such, but in a separate folder.
  12. We therefore agree with Mr. GERVAIS that although these documents were "estate documents", it was actually a problem of "filing" rather than "documentation", as the documents in question were held by the trustees but were filed elsewhere than in the kuggi bankruptcy file as such.
  13. In the case of count 71, in view of the burdens of proof and persuasion resting with the senior analyst, we consider that georges and MSI must be held not liable.
  14. In the files of Roger Beauchamp (count 69), Les Cuisines M.S. Inc. (count 65), Normand Poulin (count 64) and Raymond Rochon (count 66) the counts are the same as counts 68 and 71 relating to the files of multivan and kuggi, except that there bruno was responsible for the files.
  15. In the case of Roger Beauchamp, in return for the payment to MSI of the sum of $1,500, there was an assignment to the bankrupt's spouse Rosanne Tanguay of his joint half of the house held by them in co-ownership.Footnote 33 There were a large number of documentsFootnote 34 on this count in the trustees" file which explained and justified the transaction with Ms. Tanguay.Footnote 35
  16. No further discussion is even necessary. bruno and MSI will be held not liable.
  17. The same is true for count 66, which concerns the file of Raymond Rochon. Here too, the file contained the documentation sought.Footnote 36
  18. Here, the SENIOR ANALYSIT testified that the said documentation was sufficient for the Act and superintendent's Directive 22, but bruno should have drawn it to his attention long before.
  19. However, in their reply to the auditor Nolet, the trustees stated:Footnote 37

    translation

    5.4.1 As to Rochon, Raymond
    The material for decision is in the file and is quite sufficient
    for the decision.
    (1) Municipal evaluation of $125,600.
    (2) Two mortgages totalling at least $136,000.
    (3) Notice of exercise of hypothecary right already
    served at time of bankruptcy.

  20. Here again, there is no need to say anything further. bruno and MSI will be held not liable on count 66.
  21. On the file of Normand Poulin, count 64, this concerned an old car transferred to his nephew before the bankruptcy.Footnote 38 The question therefore was not to document a transaction concerning a "bankruptcy asset", but rather to decide if the "fraudulent" transaction would be cancelled.
  22. bruno testified he decided not to prosecute the recipient of the auto transfer based on its value at the relevant time according to the Canadian Black Book, generally referred to in the used car field.
  23. The senior analyst did not dispute the fact that bruno relied on the value of the Canadian Black Book, but objected that no photocopy was made and kept in the file of the relevant page of the Book.
  24. Mr. Gervais argued that in any event superintendent's Directive No. 22 was not designed for the review of fraudulent transactions, but as explained in its paragraph 1:
    1. The purpose of this Directive is to outline the position of the Superintendent with regard to realization of estate assets, especially in summary administrations. The practice of not realizing estate assets by some trustees might create a tendency for other trustees to do the same in order to remain competitive.
  25. What is more, section 2 of the said Directive 22 states that it concerns "property of the bankrupt … at the date of bankruptcy". Accordingly, paragraph 5 of Directive 22 relied on in count 64 does not apply here.
  26. The same is true for sections 5(5) and 26 of the Act. bruno and MSI will be held not liable on count 64.
  27. That leaves, under this heading VIII (D), count 65 concerning the file of Les Cuisines M.S. Inc. In the instant case, except for one important point the file was similar to that of Normand Poulin, except that here there was a sale shortly before the bankruptcy of all the bankrupt's equipment.
  28. The exception referred to is that the bankrupt's principal handed over to the trustees a bank draft for $8,318.72, the price of the sale in question, as reflected in the balance sheet.Footnote 39
  29. Accordingly, here too bruno had to consider whether the price agreed on between the bankrupt and the buyer represented fair value for the property sold, or whether it was sold at a reduction. In the latter case, bruno had to consider whether MSI should review the transaction as a fraudulent one.
  30. What we wrote in paragraphs 194, 195 and 196 applies here too and we must also hold bruno and MSI not liable on count 65.

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IX. Counts Concerning Delays in Concluding Files

  1. The TRUSTEES admitted their liability on general count 140. On the counts involving specific bankruptcy files, as explained in paragraphs 52 to 57, there will be a conditional stay of proceedings for counts 85, 86, 87, 88, 91, 92 and 93 relating to GEORGES and 89 and 90 relating to BRUNO.
  2. Once again, for the reasons stated in paragraphs 58 to 70, the counts listed in paragraph 204, which Mr. Gervais described as concerning delays in conclusion of files in the handwritten notes which he gave us, titled [TRANSLATION] "Notes concerning offences involving Georges E. Marchand and notes concerning offences involving Bruno Marchand", are not that.
  3. These counts relate to categories designated (A), (B) or (D) in paragraph 60 or other types of offences.

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X. Counts Cited as Concerning Conclusion of Files Falling Within Categories (A), (B) and (D) on Paragraph 60 and Other Types of Offences

  1. Counts 76, 77, 78, 79, 82, 83 and 84 for georges and 80, 81 and 113 for bruno fall in category (A); counts 107 and 114 regarding bruno fall in category (B); and counts 96, 97, 98, 99 and 100 regarding bruno fall in category (D).
  2. Count 116 concerning bruno, which Mr. Gervais described as having to do with conclusion of the Nina Benchaya file, has nothing to do with conclusion of the said file or offence categories (A), (B), (C), (D) or (E) in paragraph 60, as it reads as follows:

    translation

    In the Nina Benchaya file the trustee, by his dilatory action and lack of timeliness, penalized the debtor and the only creditor in the file, thereby contravening section 13.5 of the Act and sections 34 and 36 of the Rules. (para. 119, p. 33)

  3. Accordingly, count 116 will be dealt with below in connection with all the other counts involved in the said bankruptcy file.

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XI. Offences Which Add to Lack of Timeliness in Concluding Files, Charge of Failing to Follow Directions Issued by Court or Tribunal Setting Specific Deadline for Conclusion

  1. This heading involves five counts in four bankruptcy files, as followsFootnote 40:
    Benchaya, Nina
    108 and 109
    Larouche, Caroll
    118
    Paradis, Sylvain
    119
    Décarie, Richard
    120
  2. Counts 108 and 109 have already been discussed from the standpoint of the Kienapple rule in paragraphs 88 to 96, and as there indicated count 108 will be subject to a conditional stay of proceedings and 109 is retained and will have to be decided.
  3. The facts alleged against GEORGES and the evidence filed by the SENIOR ANALYST on count 109 easily meet the burden and quality of evidence required, as discussed in paragraphs 23 to 43: accordingly, GEORGES and MSI will be held liable on count 109.
  4. On counts 118, 119 and 120, the explanation given by GEORGES was that each such bankrupt had previously disappeared from the scene, and when GEORGES and his employees were getting ready to prepare the three statements of receipts and disbursements in their cases each one resurfaced and indicated a desire to again submit an application for discharge to the Registrar.
  5. Accordingly, GEORGES decided to suspend preparation of the statements in order to proceed with the discharge of the three bankruptsFootnote 41.
  6. In the cases of Caroll Larouche (count 118), Sylvain Paradis (count 119) and Richard Décarie (count 120), in view of the plausible explanation given by GEORGES in his testimony, in light of the burden and quality of the evidence required from the SENIOR ANALYST, GEORGES will be held not liable on counts 118, 119 and 120.

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XII. Non-Payment of GST and QST on Sales of Bankruptcy Property – Counts 102 and 103

  1. Count 102 alleged that in the MULTIVAN file GEORGES failed to promptly remit to the Department of Revenue taxes collected on the sales of assets, thereby contravening section 13.5 of the Act and sections 36 and 48 of the Rules.
  2. Sections 13.5, 36 and 48 provide the following:

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

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

    48 : Trustees who hold money or other property in trust shall

    (a) hold the money or property in accordance with the laws, regulations and terms applicable to the trust; and

    (b) administer the money or property with due care, subject to the laws, regulations and terms applicable to the trust.

  3. In selling the MULTIVAN assets to Encanteurs Nova Auctioneers on Footnote 42, MSI received $5,676.30 in GSTFootnote 43 and $5,639.81 in QSTFootnote 44 from the buyer, making a total of $11,316.11. When the inspection was carried out by Louis Nolet in September/October 2001 (four and a half years later), these sums received by MSI and held by it in trust for government tax authorities had still not been paid to the Quebec Ministère du Revenu.
  4. The same applies to the sale of the assets of KUGGI by MSI to Encans Expert on Footnote 45. This is count 103.
  5. In this regard, MSI received $560 in GST and $556.40 in QST, making a total of $1,116.40. In this case too, at the inspection by Mr. Nolet in September/October 2001 (five and a half years later), these amounts received by MSI and held in trust for government tax authorities had still not been paid to the Quebec Ministère du Revenu.
  6. The statutory and regulatory provisions regarding GST and QST are a matter of judicial knowledge and we must take them into account. Every holder of a licence for GST and QST may choose to submit his or her returns to the Ministère and pay the amounts owed as GST and QST either every three months, every six months or annually.
  7. Here again, it is absolutely clear that the TRUSTEES failed in their duty to make payments to the Ministère. What explanations were given them in this regard? It appears to us that the explanations they gave sought to use every possible means available.
  8. Mr. Gervais submitted that the government tax authorities had not requested their money from the TRUSTEES. As to this, we wonder how the Ministère could have known that the sales of bankruptcy assets by the TRUSTEES had taken place.
  9. As with income tax, our GST and QST system is a [TRANSLATION] "self-regulatory" one and so requires taxpayers to take the initiative by filing their returns and making their payments.
  10. Mr. Gervais further objected that the SENIOR ANALYST had not proven what the policy of the Ministère du Revenu was regarding trustees. We feel that the opposite is the case.
  11. First, it is up to the SENIOR ANALYST to prove that a trustee has not complied with legislation on the matter, and that has been fully established here.
  12. If further a trustee argues in defence that in a bankruptcy matter the Ministère allows trustees not to make their returns and payments until the administration of a bankruptcy is concluded, this must be proven by the trustee. Here, the TRUSTEES did not in any way establish this apart from the speculation submitted.
  13. We also do not find to be valid Mr. Gervais's argument that the caretaker trustee appointed by the SUPERINTENDENT and responsible for concluding the files of the TRUSTEES, the firm H. H. Davis & Associés Inc., made a more serious error since its statement of receipts and disbursements in the MULTIVAN file [TRANSLATION] "did not even mention the payment of such taxes to Revenu Québec"Footnote 46.
  14. There is no greater validity to the argument made by Mr. Gervais regarding the taxpayer's right to deduct input taxes received and to be paid in making its return and payment. The returns and payments must still be made.
  15. In conclusion, GEORGES and MSI will be held liable on counts 102 and 103.

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XIII. Counts 54, 56 and 70

(a) 54 and 56 – proportionately allocating to disbursements entered in final statement of interest accumulated in bank account after date said final statement was filed

  1. This concerns the bankruptcies of Serge Langlois and Nettoyage de Tapis Granada Inc. In Langlois, the trustee had prepared a supplementary statement, which was commented on by the official receiver and then taxed by the Court.Footnote 47
  2. The fact that the trustees subsequently delayed concluding the file and deducted their fees and disbursements meant that the money in the bank, which at the end of the day was theirs since there were no dividends to be paid, continued to earn interest.
  3. It was then necessary to distribute the interest earned subsequent to the sending of the statement of receipts and disbursements. Accordingly, we do not see where there was any offence and the trustees bruno and MIS will be held not liable on count 54.
  4. The Granada bankruptcy concerned an amount of $64.06, and as the trustees explained in their reply to Mr. Nolet,Footnote 48 translation "this was interest received on amounts belonging to the trustees, from their allocation to the statement of receipts and disbursements of until payment".
  5. All the money in the bank relating to this bankruptcy belonged to the trustees. Accordingly, interest produced after the filing of the statement of receipts and disbursements belonged to them as there were no dividends to be paid.
  6. Consequently, on count 56 as well bruno and MSI will be held not liable.

(a) 70 – failing to prepare preliminary report in writing

  1. Here the bankruptcy was that of Les Cuisines M.S. Inc. and in fact the trustees bruno and MSI did not prepare and issue the preliminary report.
  2. Mr. Gervais made an argument here which was similar to that known by the tag de minimus non curat praetor. He maintained that throughout the practice of the trustee bruno it was the only file in which the senior analyst could find such an omission.
  3. Counsel for the trustees suggested that the senior analyst should have considered it a minor oversight in an isolated case and let the matter alone instead of laying a charge against the trustee.
  4. He further argued that at the time the official receiver did not regard it as a grave or serious oversight, as he never insisted that the trustee correct his omission.
  5. In Mr. Tremblay's submission, it does not matter whether the official receiver took action. The trustee has his legal duties to perform without having to wait to be prodded by the official receiver.
  6. Because this is not a serious omission and it only occurred in one file, we exercise our discretion and find that the trustees bruno and MSI are not liable on count 70.

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XIV. Counts Arising out of Nina Benchaya File

  1. This bankruptcy created a highly confused situation, which in their arguments in the instant case both Mr. TremblayFootnote 49 and Mr. GervaisFootnote 50 baptized translation "a legal saga". Thirteen counts arose out of it, namely 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115Footnote 51 and 116.
  2. In his judgment of Dalphond J.Footnote 52 described georges's behaviour in Benchaya as "a sort of stubbornness".
  3. The facts are as follows. Ms. Benchaya and her late husband Albert filed a joint assignment on . Just a few days later, Albert Benchaya died. He left an RRSP worth $45,299.20 and Ms. Benchaya had an insurance policy on her husband's life in the amount of $10,000.Footnote 53
  4. To begin with, without consulting independent counselFootnote 54 or any other expert in the area, georges concluded that the RRSP in the estate of the deceased could not be attached. When the sum of $45,299.20 was received from the RRSP trustee, HSBC, georges had it deposited and credited to the account of the bankrupt Nina Benchaya.
  5. Subsequently, bruno handled the file. We should note that the Benchaya file was at all times formally under his responsibility.
  6. In 1999, georges took over the Benchaya file and undertook to revise the RRSP classification. In doing so, he concludedFootnote 55 that it could be attached to the estate of the late Albert Benchaya and so should not have been deposited to the estate of the bankrupt Nina Benchaya.
  7. From the sum of $45,299.20 received, as mentioned above, all Nina Benchaya creditors who had filed proofs of claims were paid 100%.
  8. There then followed what counsel in this proceeding described as a translation "judicial saga", but which we would be tempted to call translation "judicial and procedural guerrilla warfare". See the 50 exhibits relating to the bankruptcy of Nina Benchaya:
    A-88
    trustee's final statement of receipts and disbursements —
    A-89
    Certificate of compliance and deemed discharge of trustee —
    A-90
    trustee's final statement of receipts and disbursements (revised) —
    A-92
    Letter from Joanne Desjardins, Official Receiver, to Bruno Marchand, CIP, trustee, dated .
    A-95
    Letter from Joanne Desjardins, Official Receiver, to Bruno Marchand, CIP, trustee, dated .
    A-96
    Letter from Joanne Desjardins, Official Receiver, to Bruno Marchand, CIP, trustee, dated .
    A-97
    Confirmation by fax of letter sent to Bruno Marchand, CIP, trustee, dated .
    A-98
    Fax transmittal slip to Bruno Marchand, CIP, trustee, dated .
    A-99
    Letter from Bruno Marchand, CIP, trustee, to Joanne Desjardins, Official Receiver, dated .
    A-100
    Application for extension of time (187 (11)) —
    A-101
    Motion for directions (s. 37 of Bankruptcy and Insolvency Act and s. 60 of Bankruptcy and Insolvency Rules) —
    A-102
    Transcript of hearing — .
    A-103
    Notice of appeal (s. 31(1) of Bankruptcy and Insolvency Rules) —
    A-104
    Motion by respondent to dismiss appeal (art. 501.2 C.C.P.) — .
    A-105
    Endorsement of translation "motion to dismiss appeal" — conclusions, , by Judges Marc Beauregard, France Thibault and André Denis ad hoc.
    A-106
    Memorandum of telephone call of , stating that georges finally said he intended to obtain a legal opinion from counsel specializing in bankruptcy.
    A-107
    Letter from Georges E. Marchand to Patricia Alférez, Assistant Division Surintendent, Office of Superintendent of Bankruptcy, dated .
    A-108
    Order dated .
    A-145
    Motion for directions (s. 34(1) B.I.A.) — .
    A-146
    Motion to stay order for execution notwithstanding appeal (s. 192(4) B.I.A.) — .
    A-147
    Motion to appeal Registrar's order made by verbal motion of counsel for Superintendent (s. 192(4) B.I.A. and Rule 30) — .
    A-148
    Transcript of hearing — .
    A-149
    Transcript of hearing — .
    A-150
    Judgment — Pierre J. Dalphond J.S.C., dated .
    A-151
    Special order to appear on charge of contempt of court — .
    A-152
    Amended motion by plaintiff for special order to appear on charge of contempt of court (art. 53 C.C.P.) — .
    A-153
    Motion to dismiss by defendant (art. 165 C.C.P.) — .
    A-154
    Notice of appeal (s. 193 B.I.A. and 31(1) B.I.R.) — .
    A-155
    Transcript of hearing — .
    A-156
    Reasons and judgment — .
    A-157
    Letter from P. Gamelin Vadeboncoeur to Patricia Alférez, Assistant Division Superintendent, Office of Superintendent of Bankruptcy, dated .
    A-158
    Motion for leave to appeal — .
    A-159
    Motion by appellant to extend deadline for filing memorandum (art. 503.1 C.C.P.)
    A-160
    Endorsement translation "Motion to dismiss appeal: November 30, 2000. Present: Judges Paul-Arthur Gendreau, Marie Deschamps and Louise Otis. We unanimously consider that this appeal is doomed to failure. The motion is allowed with costs and the appeal is dismissed with costs".
    A-161
    Transcript of hearing, .
    A-162
    Letter from Katia Léontieff to Gamelin Vadeboncoeur dated .
    A-163
    Letter from P. Gamelin Vadeboncoeur to Alexander Pless dated .
    A-164
    Letter from Alexander Pless to P. Gamelin Vadeboncoeur dated .
    A-165
    Letter from Alexander Pless to P. Gamelin Vadeboncoeur dated .
    A-166
    Letter from Bruno Marchand to Alexander Pless dated .
    A-167
    Letter from Bruno Marchand to Alexander Pless dated .
    A-168
    Trustee's final amended statement of receipts and disbursements — .
    A-169
    Trustee's amended memorandum of fees — undated document.Footnote 56
    A-170
    Letter from Joanne Desjardins, Official Receiver, to Bruno Marchand, CIP, trustee, dated .
    A-171
    Letter from Joanne Desjardins, Official Receiver, to Bruno Marchand, CIP, trustee, dated .
    A-172
    Transcript of hearing — .
    A-173
    Transcript of hearing — .
    A-174
    Judgment of Chantal Flamand, Registrar — .
    A-175
    Trustee's reamended final statement of receipts and disbursements — .
    A-176
    Fax transmittal slip from Desrosiers, Turcotte, Marchand, Massicotte, Vauclair, to Alexander Pless dated .
  9. As indicated by these 50 exhibits in the Nina Benchaya file, georges made no less than seven motions in the Quebec Superior Court.
  10. He lost on six of the seven and appealed in two of these cases. In the Quebec Court of Appeal, each of the two appeals was dismissed by a motion to dismiss appeal as being translation "doomed to failure".
  11. What is more, Ms. Benchaya brought an action for contempt of court against georges for not complying with the judgment of the Registrar of Bankruptcy, Chantal Flamand, on Footnote 57.
  12. The said judgment was given effect by Pierrette Sévigny on pursuant to the motion filed by georges asking the Superior Court to stay the provisional order for execution notwithstanding appeal issued by the Registrar, which she dismissed.Footnote 58
  13. georges also submitted to the Quebec Court of Appeal a motion for leave to appeal the Guibault judgment and another motion to extend the time for filing his memorandum in the appeal from the Dalphond judgmentFootnote 59.
  14. On Guibault J. found him guilty of contempt of court and imposed a sentence of a fine of $1,000 and payment of costs.Footnote 60
  15. In the case of the Dalphond judgment, after a hearing on the merits in the Court of Appeal the appeal was dismissed on Footnote 61.
  16. georges's appeal against the Guibault judgment finding him guilty of contempt of court and ordering him to pay a fine and costs was dismissed on after a hearing on the merits in the Court of Appeal.Footnote 62
  17. Then, turning now to the 13 counts filed against bruno and MSI in respect of the Nina Benchaya file,
    1. count 115 was withdrawn;
    2. count 108 involving the three trustees will be subject to a conditional stay of proceedings;
    3. the trustees georges and MSI will be found liable on count 109Footnote 63; and
    4. counts 104, 105, 106, 107, 110, 111, 112, 113, 114 and 116 have still to be decided.
  18. Count 104 charges that the trustees bruno and MSI failed to send the report on the bankruptcy discharge application to the superintendent's office within eight months of the assignment, thereby contravening section 168.1(1) of the Act. The section uses the word "shall" and the requirement is therefore compulsory.
  19. In fact, no such report was sent to the superintendent's office within that deadline. bruno and MSI will thus be found liable on this count.
  20. On count 105, bruno and MSI are charged with failing to submit in a timely manner the memorandum of fees concerning their statement of receipts and disbursements, as requested by the official receiver on and , thereby contravening section 13.5 of the Act and section 36 of the Rules. bruno gave no valid explanation and so he and MSI will be held liable on count 105.
  21. In count 106 bruno is charged with failing to send the cash card to the official receiver as requested by the latter on the same dates as those mentioned in paragraph 259, thereby contravening section 28(2) of the Act. In this regard, we can only repeat what we said in paragraph 259 regarding count 105.
  22. On count 107, bruno and MSI are charged with failing to apply to the taxing officer for a hearing date for taxing of their statement within 30 days of receipt of the letter of comment, issued on , thereby contravening section 152(4) of the Act and section 60 of the Rules.
  23. The said rule 60, like the legislative provisions involved in counts 105 and 106, uses the imperative form of the verb "apply" (the English used is "the trustee shall") and is therefore compulsory.
  24. bruno and MSI failed to do this and provided no valid explanation. bruno and MSI will therefore be held liable on count 107.
  25. On count 110, bruno and MSI are charged with lacking competence and due care in investigating the allocation of the RRSP over three years after Mr. Benchaya's death, thereby contravening section 13.5 of the Act and section 36 of the Rules.
  26. For the reasons stated in paragraphs 97 to 102, the offender in terms of the facts cited in count 110 would be georges, but the senior analyst did not see fit to hold him responsible in this regard. For the same reasons, bruno and MSI will be held not liable on count 110.
  27. On count 111, bruno and MSI are charged with having, through their counsel on Footnote 64, sent an unwarranted and abusive letter to the official receiverFootnote 65 in which they threatened to hold her liable for any payment that might be made to Ms. Benchaya as a result of the judgment by the Registrar (Flamand, on ), thereby contravening section 13.5 of the Act and section 36 of the Rules.
  28. Section 13.5 of the Act simply states that the trustees shall comply with the Code of Ethics for Trustees. This is a direct reference to sections 34 to 53 of the Rules, which constitute the said Code. Count 111 refers specifically to section 36 of the Rules, cited in paragraph 214.
  29. The letter concerned in this count was sent to Patricia Alférez at the superintendent's office in Montréal, and read as follows:

    translation

    Montréal,

    Ms. Patricia Alférez
    Office of Superintendent of Bankruptcy
    Place Ville-Marie, 8ième étage
    Montréal, Quebec H3B 2G2

    Re: Albert Benchaya bankruptcy
    O/F: 41-179689
    _____________________________

    Dear Madam:

    My client Marchand Syndics Inc. has asked me to make you aware of the following.

    Despite the fact that my client told you that due among other things to more recent information the money paid to the estate of Nina Benchaya from the pension plan of Albert Benchaya belongs to the latter's estate, that he would shortly be filing a motion for directions and that consequently he now considered the final statement of receipts and disbursements already prepared to be inaccurate, you applied to the Court, by an aggressive intervention by your counsel, to have the said statement taxed and the money distributed notwithstanding appeal. In so doing, you arranged to have large amounts of money paid to Nina Benchaya without entitlement, money which cannot be recovered from her — you know her precarious financial situation — in the event that the Court confirms the entitlement of Albert Benchaya's estate to the money paid to Nina Benchaya.

    For this reason I have received instructions to hold you completely responsible for any damaging consequences that our client may incur both personally and in his capacity as trustee for the Albert Benchaya estate.

    Kindly act accordingly.

    P. Gamelin Vadeboncoeur

  30. For MSI to arrange for its counsel such a letter to the official receiver is clearly a lack of caution.
  31. We have already observed that the actions on behalf of MSI on were the fault of georges, not bruno. However, here it was bruno who was held responsible and not georges.
  32. The situation here is nevertheless different, as the letter on which count 111 is based was written by P. Gamelin Vadeboncoeur for translation "[his] client Marchand Syndics Inc.".
  33. As to MSI and the Nina Benchaya file, the individual trustee responsible for this file was bruno, not georges. Although in fact it is very likely that Mr. Vadeboncoeur wrote the letter at georges's request, citing MSI as his translation "client", as bruno was the individual trustee responsible for the file he was ipso facto involved and will therefore be held liable on count 111.
  34. On count 112, bruno and MSI are charged with failing to comply with the Registrar's order dated directing MSI to pay Ms. Benchaya the sum of $5,157.92, thereby contravening section 13.5 of the Act and section 36 of the Rules. These sections are cited above.
  35. The purpose of that order was discussed in the hearing room on with georges and the lawyer Vadeboncoeur present. bruno was not there. Nevertheless, according to the testimony in this proceeding georges, bruno and Mr. Vadeboncoeur then discussed events at the courthouse on that day in the trustees' office. bruno was accordingly aware of the matter.
  36. What is more, the order in question was written down on the same dateFootnote 66 and was certainly sent to the MSI office, even served.
  37. Marchand Syndics Inc. is referred to as the translation "trustee" in the heading of the order, and its provisions read:

    translation

    ORDERS the trustee Marchand Syndics Inc. to pay Nina Benchaya the sum of $5,157.92, the said sum payable on service of this order.

  38. In the context of the Nina Benchaya bankruptcy an order to MSI was an order to bruno, the individual trustee responsible for the file. bruno and MSI will therefore be held liable on count 112.
  39. Count 113 charged that bruno and MSI, following the Quebec Court of Appeal judgment dated , did not act promptly in filing their amended statement of receipts and disbursements on Footnote 67, thereby contravening section 13.5 of the Act and section 36 of the Rules.
  40. We find the delay between and , fourteen and a half months, too lengthy and so bruno and MSI did not act promptly. Further, they gave no valid excuse for this lengthy delay. They will therefore be held liable on count 113.
  41. As to count 114, bruno and MSI are charged with failing to apply to the taxing officer for a hearing date for the taxation of their statement within 30 days of receipt of the letter of comment issued on Footnote 68, thereby contravening section 152(4) of the Act and section 60 of the Rules.
  42. In view of bruno and MSI's inaction in this regard, the Official Receiver Joanne Desjardins sent a reminder letter to bruno on Footnote 69. bruno still did not react and on Mr. Gervais (for bruno and MSI) and Mr. Alexander Pless (for the superintendent) were at room 16.10 of the Montréal Courthouse.
  43. After submissions were made by both sides, Registrar Flamand ordered bruno translation "to file the original of the statement of receipts and disbursements no later than without fail, the taxation to proceed on "Footnote 70.
  44. Finally, the hearing was held on , eight months from the date of the letter of comment. Such a delay is much too long and bruno gave no valid explanation. bruno and MSI will therefore be held liable on count 114.
  45. In the Nina Benchaya bankruptcy, we come to the last count to be decided, count 116. In it bruno is charged that translation "by his dilatory action and lack of due care [he] penalized the debtor and the only creditor in the file", thereby contravening section 13.5 of the Act and sections 34 and 36 of the Rules.
  46. The wording of sections 13.5 and 36 is given above. Section 34 of the Rules states:

    Section 34. Every trustee shall maintain high standards of ethics that are central to the maintenance of public trust and confidence in the administration of the Act.

  47. In view of these sections and the facts stated in paragraphs 281, 282 and 283, the situation is obvious. The old Latin maxim res ipsa loquitur could be cited. bruno and MSI will be held liable on this count.

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XV. Other Counts Arising Out of Kuggi File

  1. These are counts 72, 73, 74, 75 and 83. We will deal with them in turn.
  2. Count 72 charges that GEORGES failed to mention in his preliminary report to the creditors that he was acting for a secured creditor, thereby contravening section 5(5) of the Act, section 39 of the Rules and paragraph 4 of SUPERINTENDENT's Directive 32.
  3. It appears that it was these counts involving the KUGGI file, especially 72, 73, 74 and 75, questioning GEORGES's good faith and honesty, that apparently poisoned the relationship between the TRUSTEES and the SENIOR ANALYST and prevented their arriving at an agreement on the instant dispute in discussions that were held with a view to a possible settlement.
  4. KUGGI's bankruptcy was a small ordinary file involving a very small SMB working in cabinetry, with very few assets, a modest turnover and on a small scale.
  5. The exhibits dealing with this count 72 are A-52, A-53, A-54, A-55, A-56, A-57, A-58, A-59, A-60 and A-61. We have studied them all carefully and have also re-read and studied the arguments by counsel for each side.
  6. We agree with Mr. GERVAIS in his submission that SUPERINTENDENT's Directive 32 does not in any way apply to cases in which there has been an agreement with a secured creditor regarding the latter's debt, but rather to security for a trustee's fees from third parties.
  7. We accept GEORGES's assertion and Mr. Gervais's argument that the weight of the evidence in this regard is that the service agreement between GEORGES and the CAISSE was concluded with Paul E. Ouellette immediately after the first meeting of the creditors on .
  8. Also, we have no good reason not to believe GEORGES when he testified that his preparation of the additional call for tenders on Footnote 71 and his letter to Mr. Ouellet on were done before the agreement with the CAISSE.
  9. What is more, GEORGES's explanation regarding the visit to the assets (meaning those mortgaged to the CAISSE and the encumbered assets) on , as well as the fact of combining two asset categories for possible bidders (resulting in more attractive bids), seems logical and reasonable and we accept it.
  10. However, section 13.4(1) of the Act is stated in the alternative, that is, "agir pour le compte de … ni lui prêter son concours".Footnote 72 We may note the English version of this sentence: "No trustee shall, while acting as a trustee of an estate, act for or assistFootnote 73 a secured creditor to assert any claim against the estate …" etc.
  11. Count 72 charges that GEORGES [TRANSLATION] "failed to disclose in his preliminary report to the creditors that he was acting for …",Footnote 74 and not that he had assisted. We consider that in view of all the evidence in the record regarding KUGGI and the CAISSE, it is the second part of the alternative wording that in fact applies here, not the first part.
  12. Accordingly, the SENIOR ANALYST's aim was off, and considering all that we have written in this decision regarding burdens of proof and persuasion, as well as the probable consequences of one or more convictions for one or more ethical faults, we must find GEORGES and MSI not liable on count 72.
  13. Count 73 charges that GEORGES acted for the secured creditor KUGGI without first obtaining a written opinion from a solicitor not acting for the said creditor as to the validity of the security, thereby contravening section 13.4(1) of the Act and section 39 of the Rules. The said sections 13.4(1) and 39 provide:

    13.4(1): Trustee may act for secured creditor on certain conditions: No trustee shall, while acting as the trustee of an estate, act for or assist a secured creditor of the estate to assert any claim against the estate or to realize or otherwise deal with the security that the secured creditor holds, unless the trustee has obtained a written opinion of a legal counsel who does not act for the secured creditor that the security is valid and enforceable as against the estate.

    39 Trustees shall be honest and impartial and shall provide to interested parties full and accurate information as required by the Act with respect to the professional engagements of the trustees.

  14. It should be noted that the wording of section 13.4(1) of the Act is "act for or assist a secured creditor of the estate to assert any claim against the estate to realizeFootnote 75 orFootnote 76 otherwise deal with the security that the secured creditor holds"Footnote 77. Accordingly, the section makes a clear distinction between "acting for" and "assisting". Even if GEORGES did not act for the CAISSE, his own explanation was that he assisted it in realizing its security.
  15. On count 73, acting for a secured creditor without first obtaining a written opinion of a solicitor who does not act for the secured creditor that the security is valid, it was established that GEORGES did not obtain such a written opinion.
  16. However, for the same reasons as stated in paragraphs 293 to 298 we find that GEORGES did not act for the CAISSE but assisted it. He will therefore be held not liable on count 73. The same is true for MSI.
  17. Count 74 charges that GEORGES acted for a secured creditor (KUGGI) without informing the SUPERINTENDENT, the creditors or the inspectors, thereby contravening section 13.4(1.1) of the Act and section 39 of the rules.
  18. The said section 13.4(1.1) of the Act was not in force at the time. What is more, though it is as clear as crystal that GEORGES never told anyone about his role with the CAISSE, since we have already concluded that GEORGES did not act for the CAISSE but assisted it, GEORGES and MSI must be held not liable on count 74 as well.
  19. Count 75 charges that GEORGES twice falsely told the auditor Nolet that he had not acted as an agent of the CAISSE, even stating that he had declined to act as such, whereas on or about he was instructed to realize the property pledged to the CAISSE and did in fact realize the said property and bill the CAISSE for his services, thereby contravening section 13.5 of the Act and sections 39 and 45 of the Rules.
  20. Section 13.5 of the Act has already been cited in paragraph 214 and the wording of Rule 39 in paragraph 299. The wording of Rule 45 follows:

    45. Trustees shall not sign any document, including a letter, report, statement, representation or financial statement that they know, or reasonably ought to know, is false or misleading, and shall not associate themselves with such a document in any way, including by adding a disclaimer of responsibility after their signature.

  21. We have already concluded that GEORGES did not [TRANSLATION] "act for the CAISSE" but rather "assisted it." His bill for fees to the amount of $2,292.21 sent to the CAISSEFootnote 78 and paid by itFootnote 79 was a bill for the services he rendered the CAISSE by assisting it.
  22. Consequently, we must find that GEORGES and MSI were not liable on count 75 as well.
  23. We now turn to count 83, which charged that GEORGES failed to prepare the statement of receipts and disbursements in the KUGGI file despite the fact that administration of this file was complete, thereby contravening section 151 of the Act. That section provides the following:

    151. Final dividend and division of estate: When the trustee has realized all the property of the bankrupt or all thereof that can, in the joint opinion of himself and of the inspectors, be realized without needlessly protracting the administration and settled or determined or caused to be settled or determined the claims of all creditors to rank against the estate of the bankrupt, he shall prepare a final statement of receipts and disbursements and dividend sheet and, subject to this Act, divide the property of the bankrupt among the creditors who have proved their claims.

  24. Here the facts are clear. The administration of the KUGGI file terminated in September 1996 and the statement of receipts and disbursements had not been prepared when the caretaker trustee H. H. Davis & Ass. Inc. took over on .Footnote 80 Accordingly, these facts speak for themselves. The delay was much too long and we must find GEORGES and MSI liable on count 83.

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XVI. Five Counts Concerning Non-Payment of Dividends to Creditors and one Count Concerning Non-Conclusion of Account

  1. The counts in question are 96, 97, 98, 99, 100 and 101, all involving BRUNO. Count 96 reads as follows:

    [TRANSLATION]

    COUNT 96:
    In the Benoît Beauchamp file, the trustee did not pay the dividends to the creditor … as prescribed … thereby contravening section 155(i) of the Act and Rule 65(1)(b) and (c) (para. 118, p. 23)
  2. The texts referred to in count 96, section 155(i) of the Act and Rule 65(1)(b) and (c), provide:

    155: Summary administration: The following provisions apply to the summary administration of estates under this Act:

    (i) notwithstanding section 152, the procedure respecting the trustee's accounts, including the taxation thereof shall be as prescribed…

    65(1) : If a trustee receives no notice of objection within the time limit set out in subsection 64(2), the trustee shall:

    … …

    (b) at the expiration of that time limit, if the trustee has not already done so, send a final dividend to each creditor to whom one is owed; and

    (c) within three months after the day on which the notice referred to in subsection 64(1) is sent,
    (i) close the bank account used in administering the estate of the bankrupt, if that account is not a consolidate account, or, if the account is a consolidated account, ensure that all estate funds have been withdrawn from it,
    (ii) remit any unclaimed dividends and undistributed funds to the Superintendent, and
    (iii) send to the Division Office a certificate of compliance and deemed discharge, in prescribed form.
  3. Counts 97, 98, 99 and 100 are identical to count 96, except that they concern the files of Daniel Parisé (97), Paul Desjardins (98), Christian Huerta (99) and André Wilhemy (100).
  4. In accordance with Agreement B cited in paragraph 21, counts 97, 98, 99 and 100 will have the same fate as count 96. On count 96 concerning the file of Benoît Beauchamp, the Notice of Deemed Taxation of Accounts and Deemed Discharge of the TRUSTEE is dated .Footnote 81
  5. Then, under the applicable provisions of the Act and Rules the TRUSTEE was required to pay dividends no later than August 15, 2001. When Mr. Nolet made his audit in September and October 2001, the dividends had still not been paid.
  6. Although when Mr. Nolet did his inspection the delay was not excessive, the TRUSTEE's duty was compulsoryFootnote 82 and BRUNO and MSI will be held liable.
  7. It should also be noted that BRUNO and MSI did not pay the dividends in the Benoît Beauchamp file until ,Footnote 83 that is two and a half years late.
  8. In addition to the effect of the said Agreement B, comparing the analogous dates to counts 97 (Daniel Parisé), 98 (Paul Desjardins), 99 (Christian Huerta) and 100 (André Wilhemy), the same applies.
  9. What is more, in the TRUSTEES' reply, Exhibit A-24, they admitted that the deadlines for the payment of dividends had not been observed.Footnote 84
  10. In his testimony BRUNO explained that the delays in payment of dividends to the creditors might perhaps be explained by the departure of an employee at the time and the hiring and transfer of another employee who had limited experience in this type of function.
  11. The latter employer allegedly sent these files to storage instead of sending them to another MSI employee for processing of the dividends. They then disappeared from sight and were relocated in fall 2001 in Mr. Nolet's audit, when he brought the problem to their attention.
  12. Even so, this may explain but does not excuse the situation. BRUNO and MSI will be held liable on the five counts 96, 97, 98, 99 and 100. When the stage of penalties is reached, each individual period of delay will be considered.
  13. In count 101, MSI is charged with failing to conclude its account and issue a certificate of compliance within the prescribed deadlines, thereby contravening section 155(j) of the Act and Rule 65(1)(c)(i) and (iii). This first provision states the following:

    155: Summary administration: The following provisions apply to the summary administration of estates under this Act:

    (j) notwithstanding subsections 41(1), (5) and (6), the procedure for the trustee's discharge shall be as prescribed.

    The wording of rule 65(1)(c)(i) and (iii) has already been cited in paragraph 312.

  14. In the file of Réjane Pilon Lepage (count 101), BRUNO and MSI sent the notice of deemed taxation of accounts and deemed discharge of the TRUSTEE on .
  15. At the date of the audit by Mr. Nolet on , BRUNO and MSI had still not closed their account or issued their certificate of compliance. What is more, a sum of $110.27 remained in the account.Footnote 85
  16. This delay is over four months and though this count is not covered by Agreement B between the parties regarding counts 96, 97, 98, 99 and 100, we feel it must suffer the same fate as the latter.

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XVII. Counts Alleging Excessively Long Delays in Preparing Statements of Receipts and Disbursements

  1. Count 76 is the counterpart of 83, except that it has to do with the file of 1847–0649 Québec Inc. The facts in the case are clear. The administration of the file concluded in March 1997, soon after the bankruptcy, and the statement of receipts and disbursements had not yet been prepared by MSI, neither when Mr. Nolet did his audit in fall 2001 nor when the custodial trustee H.H. Davis & Assoc. Inc. took over on Footnote 86. Here too, the delay was too long and GEORGES and MSI will be held liable.
  2. The following table shows dates corresponding to counts 76, 77, 78, 79, 82 and 84 and amounts which are of interest, as in September 2001 the administration in each case had long been completed and the statement of receipts and disbursements had not yet been prepared.
    Dates corresponding to counts 76, 77, 78, 79, 82 and 84 and amounts which are of interest, as in September 2001
    Count No. Bankrupt Name Date of Bankruptcy Balance in Bank at Date of Audit by M. Nolet (or other facts)
    76 1847–0649 Québec Inc. $119,902.84
    77 Lunair Architecture Inc. $140,415.77
    78 Matériaux de Plomberie et Chauffage du Coteau Inc. $143,676.77
    79 Vide & Traitement Canada Inc. $406,232.65
    82 Paul-Henri Cloutier Final transaction in file in July 1996 and bankrupt discharged .
    84 MULTIVAN Administration completed in March 1997.
  3. On count 84, despite the fact that there was no reply by Revenu Québec to letters sent to them by the TRUSTEES and this alone resulted in a delay of two years, this does not in any way excuse the total time lapse of seven years between the first letter sent by the TRUSTEES to Revenu Québec and the time the SUPERINTENDENT's officials took possession of the MULTIVAN file along with several others pursuant to provisional measures implemented on .
  4. Accordingly, in view of the much too lengthy delay GEORGES and MSI will be held liable on count 84. However, the additional delay occasioned by Revenu Québec will be regarded as a mitigating circumstance when the stage of penalties is reached.
  5. The same is true for counts 77, 78, 79 and 82 as for counts 76 and 84, all involving GEORGES and MSI.
  6. The table covering counts 80 and 81 involving BRUNO and MSI is as follows, with salient facts:
    BRUNO et Marchand Syndic Incorporée, counts 80 and 81, with salient facts
    Count No. Bankrupt Name Date of Bankruptcy Date Administration Completed
    80 Raymond Rochon January 2001
    81 Normand Poulin April 1998
  7. Accordingly, the same charges as those involving GEORGES are made against BRUNO and MSI in counts 80 and 81, and in view of the facts expressed in paragraph 332, BRUNO and MSI will in this regard suffer the same fate as GEORGES on counts 76, 77, 78, 79, 82 and 84.

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XVIII. Final Provisions:

  1. We should thank for their consistent support all the counsel who worked on this case from the beginning, and in particular Stéphane Tremblay and Jean-Philippe Gervais for their professionalism and excellent preparation and presentation of the case at the hearing on the merits.
  2. We draw to the attention of counsel and of the parties section 4(d) of the transcript of the preliminary organizational teleconference, held on  a.m. (Eastern Standard Time), which states at pages 2 and 3:

    [TRANSLATION]

    4. HEARING ON THE MERITS

    (a) The dates and location of the hearing and its duration:

    ….

    (b) Number and names of witnesses:

    … …

    (c) Method of calling witnesses to bar:

    … …

    (d) Possible division of hearing into two stages as follows:

    Stage 1: Determining whether each of the TRUSTEES was in breach of or contravened the relevant provisions of the Bankruptcy and Insolvency Act and Rules, including the Code of Ethics for Trustees and/or any directive issued by the SUPERINTENDENT OF BANKRUPTCY;

    Stage 2: If any of the TRUSTEES contravened the foregoing, deciding on penalties to be imposed.

    Counsel agreed on this method of proceeding and the DELEGATE accepted it.

  3. The questions of the TRUSTEES' liability have been decided. At this stage, we wish to urge the SENIOR ANALYST, the TRUSTEES and their counsel to negotiate in a final attempt to agree on penalties.
  4. We accordingly ORDER that the penalty stage be suspended until . If the parties agree between now and then on the penalties to be imposed, retaining our discretion in this regard we will receive and consider their mutual recommendations.
  5. If however there is no agreement between the parties by next, counsel will have to inform us and we will set up a schedule for written submissions by the parties on penalties.
  6. If after the written submissions are filed one or other party wishes it, we would arrange a hearing on penalties.
  7. At the very start of the disciplinary proceeding in the case at bar, the SENIOR ANALYST gave the TRUSTEES a notice indicating the penalties sought by him against the TRUSTEES, which we have still not received.
  8. So far, the outcome on all counts having been determined and notified to the parties, we direct the SENIOR ANALYST to submit a copy of the notice on next.
  9. If in addition the TRUSTEES had some objection in this regard, they should make it known to counsel for the SENIOR ANALYST and the DELEGATE within eight days and before next, in which case the SENIOR ANALYST will send us a copy of this notice so long as the said objection has not been decided by the DELEGATE.
  10. Each copy of this FINAL DECISION AT THE STAGE OF DETERMINING QUESTIONS OF THE TRUSTEES' ETHICAL LIABILITY signed by the DELEGATE is also valid and may serve for all legal purposes.

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XIX. Disposition:

  1. for all the foregoing reasons:
    1. We find that counts 24, 26, 39, 44, 48, 57, 58, 67, 94, 95, 115, 117, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138 and 139 have been considered as deleted or withdrawn by the senior analyst;
    2. We ORDER a CONDITIONAL STAY OF PROCEEDINGS against the three trustees on each of counts 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 85, 86, 87, 88, 89, 90, 91, 92, 93 and 108 (the last involving georges only);
    3. We FIND and DECLARE THE THREE TRUSTEES NOT LIABLE on count 7;
    4. We FIND and DECLARE GEORGES NOT LIABLE on counts 118, 119 and 120;
    5. We FIND and DECLARE GEORGES and MSI NOT LIABLE on counts 36, 37, 71, 72, 73, 74 and 75;
    6. We FIND and DECLARE BRUNO and MSI NOT LIABLE on counts 38, 40, 41, 42, 43, 45, 46, 47, 49, 50, 51, 52, 53, 54, 55, 56, 59, 60, 61, 62, 63, 64, 65, 66, 69, 70, 108, 109 and 110;
    7. WE APPROVE their admission of liability and FIND THE THREE TRUSTEES LIABLE on count 140;
    8. We FIND and declare the three trustees liable on counts 1, 5 and 6;
    9. We FIND and declare georges and msi liable on counts 2, 68, 76, 77, 78, 79, 82, 83, 84, 102, 103 and 109; and
    10. We FIND and declare bruno and msi liable on counts 3, 4, 80, 81, 96, 97, 98, 99, 100, 101, 104, 105, 106, 107, 111, 112, 113, 114 and 116.

      Signed at Montréal, Quebec, on .

      space to insert signature
      Hon. Benjamin J. Greenberg, Q.C.
      SUPERINTENDENT's Delegate

      Stéphane Tremblay
      McCarthy Tétrault, S.E.N.C.R.L., s.r.l.
      Counsel for the senior analyst

      Jean-Philippe Gervais
      Gervais & Gervais

      Counsel for the trustees


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


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