Directions of the Official Receiver

Conservatory Measures

What is a conservatory measure?

The Superintendent of Bankruptcy puts in place conservatory measures when a bankruptcy or insolvency estate needs protection. It might be in cases of Licensed Insolvency Trustee (LIT) malfeasance or if serious wrongdoing on the part of a LIT puts estate files at risk. Conservatory measures may also be put in place if a LIT becomes ill or dies without a valid succession agreement. Finally, conservatory measures may be put in place if a LIT, for whatever reason, has allowed the administration of his or her practice to become substandard.

Canada

In the matter of: Donna M. Leitch


Amended Directions for Conservatory Measures
(Section 14.03 of the Bankruptcy and Insolvency Act)


Whereas the Bankruptcy and Insolvency Act (the Act) provides the Superintendent of Bankruptcy (the Superintendent) with the general power to supervise the administration of all estates and matters to which the Act applies;

Whereas Donna M. Leitch (the trustee) is the holder of an individual license as trustee in bankruptcy;

Whereas an audit in 2004 and a practice review in 2006 resulted in numerous deficiencies related to the trustee's practice being noted, including a past failure to maintain an employee fidelity bond; a number of banking and financial deficiencies; a failure to comply with the minimum standards for accounting practices as required by Directive 5R; and, other operational deficiencies;

Whereas in March 2006 the trustee was placed under conservatory measures, in the form of the requirement for a co-signature from an official with the Office of the Superintendent of Bankruptcy and a prohibition on the appointment of the trustee to any new estates;

Whereas initial cooperation and progress was noted in correcting the deficiencies, and as a result, in April 2007 the prohibition on the appointment of the trustee to new estates was modified to allow the trustee to be appointed to up to 30 estates within a 3 month period, commencing May 1, 2007;

Whereas the trustee failed to abide by the above licensing limitation in that, on three occasions between October 2008 and July 2009 she has filed, or attempted to file, in excess of 30 estates within a 3 month period. Initially, the Office of the Superintendent of Bankruptcy allowed the additional estates in order to avoid prejudice to the bankrupts, but negotiated a reduction in subsequent estate filing and/or warned the trustee that it was her responsibility to avoid the overages. On the last occasion, in July 2009, when the trustee attempted to submit an estate in excess of the 30 allowed, that submission was refused.

Whereas a practice review in the fall of 2008 identified a reoccurrence of some of the earlier noted deficiencies, including:

  • deficiencies with the banking practices, including a failure to reconcile bank accounts and an increase in the number of unexplained reconciling items;
  • failure to provide proof of liability insurance and a current employee fidelity bond;
  • missing or late filing with respect to estates and proposals; and,
  • the number of estates in the trustee's aged inventory of estates has increased, from 171 in 2006 to a current total of 195.

Whereas the Office of the Superintendent of Bankruptcy has received complaints from bankrupts related to the performance of the trustee, including her failure to return telephone calls and that income tax returns for bankrupts are not being filed in a timely manner;

Whereas attempts by the Office of the Superintendent of Bankruptcy to have the trustee correct the deficiencies noted in 2008 have been largely unsuccessful, cooperation from the trustee has been diminishing and the trustee has failed to respond to communications from the Office of the Superintendent of Bankruptcy in a timely manner;

Whereas I believe on reasonable grounds that the estates require additional protection;

Whereas the Superintendent may, for the protection of an estate, exercise the powers set out in subsection 14.03(1) of the Act, in the circumstances referred to in section 14.03(2) of the Act;

Whereas the Superintendent has delegated to me, in accordance with section 14.01(2) of the Act, the powers of the Superintendent as specified at section 14.03(1) of the Act, in the circumstance referred to in section 14.03(2), a copy of which delegation is attached, along with copies of sections 14.01, 14.02 and 14.03 of the Act;

Whereas paragraphs 14.03(1)(b) and (c) and 14.03(2)(b) of the Act apply;

I, Darrin Ulley, in my capacity as delegate for the Superintendent, direct:

That pursuant to sections 14.03(1)(d) of the Act, the Official Receiver not appoint Donna M. Leitch in respect of any new estates until a decision is made under subsection 13.2(5) or 14.01(1), or until such time as I am satisfied that the estates no longer require protection;

That these directions take effect immediately and will remain in effect until such time as the undersigned is satisfied that they are no longer required;

That in accordance with section 14.03(3) of the Act, these directions bind the Official Receiver, who must comply with them;

That, pursuant to section 14.03(4) of the Act, a person who complies with this direction is not liable for any act done by that person only to comply with this direction.

Signed at the City of Toronto, Ontario, this 15th day of July, 2009

space to insert signature
Darrin Ulley
Assistant Superintendent
Office of the Superintendent of Bankruptcy

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