Marchand syndics nc. v. Laperrière

Marchand syndics nc. v. Laperrière
Court (s) Database
Federal Court of Appeal Decisions
Date
2006-11-10
Neutral citation
2006 FCA 368
File numbers
A-658-04
Notes
Digest
Decision Content
Date: 20061110
Docket: A-658-04
Citation: 2006 FCA 368
CORAM: LÉTOURNEAU J.A.
NOËL J.A.
PELLETIER J.A.
BETWEEN:
MARCHAND SYNDICS INC., trustee
GEORGES E. MARCHAND, trustee
BRUNO MARCHAND, trustee
Appellants
and
SYLVIE LAPERRIÈRE
Respondent
Hearing held at Ottawa, Ontario, on October 18, 2006.
Judgment delivered at Ottawa, Ontario, on November 10, 2006.
REASONS FOR JUDGMENT: LÉTOURNEAU J.A.
CONCURRED IN BY: NOËL J.A.
PELLETIER J.A.
Date: 20061110
Docket: A-658-04
Citation: 2006 FCA 368
CORAM: LÉTOURNEAU J.A.
NOËL J.A.
PELLETIER J.A.
BETWEEN:
MARCHAND SYNDICS INC., trustee
GEORGES E. MARCHAND, trustee
BRUNO MARCHAND, trustee
Appellants
and
SYLVIE LAPERRIÈRE
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
ISSUES
[1] The appellants are challenging a decision by Madam Justice Tremblay-Lamer of the Federal Court (judge) dated November 10, 2004. They raised three grounds for appeal including one regarding the judge’s refusal to hear a motion for her disqualification. They wisely withdrew this ground of appeal at the hearing.
[2] At the hearing, the two issues that we accepted and regarding which we invited counsel to submit their arguments, are the following:
(a) Did the appellants have the right to be heard before conservatory measures were taken with respect to the estate managed by the appellants pursuant to section 14.03 of the Bankruptcy Act, R.S.C. 1985, c. B-3 (Act), such that there was a breach of procedural fairness?
(b) Was there a rational connection between the facts giving rise to the decision to use conservatory measures and the conservatory measure directing the official receiver not to appoint the appellants to administer any new ordinary administration estates until further notice or until a decision had been made under section 14.01 of the Act?
[Emphasis added.]
[3] The appellants state that, in the absence of a rational connection, the measure was legally unfounded and is therefore void because it breaches section 14.03 of the Act and paragraphs 18.1(3)(b) and 4(a), (c) and (f) of the Federal Courts Act, R.S.C. 1985, c. F-7.
[4] I refer to the provisions of the Act as well as the directions on conservatory measures relevant to the resolution of the dispute:
PART I
ADMINISTRATIVE OFFICIALS
Superintendent
5.
. . .
Extent of supervision
(2) The Superintendent shall supervise the administration of all estates and matters to which this Act applies.
. . .
Powers of Superintendent
(4) The Superintendent may
(a) intervene in any matter or proceeding in court, where the Superintendent considers it expedient to do so, as if the Superintendent were a party thereto;
(b) issue, to official receivers, trustees, administrators of consumer proposals made under Division II of Part III and persons who provide counselling pursuant to this Act, directives with respect to the administration of this Act and, without restricting the generality of the foregoing, directives requiring them
(i) to keep such records as the Superintendent may require, and
(ii) to provide the Superintendent with such information as the Superintendent may require;
(c) issue such directives as may be necessary to give effect to any decision made by the Superintendent pursuant to this Act or to facilitate the carrying out of the purposes and provisions of this Act and the General Rules, including, without limiting the generality of the foregoing, directives relating to the powers, duties and functions of trustees, of receivers and of administrators as defined in section 66.11;
(d) issue directives governing the criteria to be applied by the Superintendent in determining whether a trustee licence is to be issued to a person and governing the qualifications and activities of trustees; and
(e) issue directives prescribing the form of any document that is by this Act to be prescribed and the information to be given therein.
13.2
. . .
Suspension or cancellation
(5) A licence may be suspended or cancelled by the Superintendent
(a) if the trustee is convicted of an indictable offence;
(b) if the trustee has failed to comply with any of the conditions or limitations to which the licence is subject;
(c) if the trustee has ceased to act as a trustee; or
(d) at the request of the trustee.
Code of ethics
13.5 A trustee shall comply with such code of ethics respecting the conduct of trustees as may be prescribed.
Decision affecting licence
14.01 (1) Where, after making or causing to be made an investigation into the conduct of a trustee, it appears to the Superintendent that
(a) a trustee has not properly performed the duties of a trustee or has been guilty of any improper management of an estate,
(b) a trustee has not fully complied with this Act, the General Rules, directives of the Superintendent or any law with regard to the proper administration of any estate, or
(c) it is in the public interest to do so,
the Superintendent may do one or more of the following:
(d) cancel or suspend the licence of the trustee;
(e) place such conditions or limitations on the licence as the Superintendent considers appropriate including a requirement that the trustee successfully take an exam or enrol in a proficiency course, and
(f) require the trustee to make restitution to the estate of such amount of money as the estate has been deprived of as a result of the trustee’s conduct.
Application to former trustees
(1.1) This section and section 14.02 apply, in so far as they are applicable, in respect of former trustees, with such modifications as the circumstances require.
Delegation
(2) The Superintendent may delegate by written instrument, on such terms and conditions as are therein specified, any or all of the Superintendent’s powers, duties and functions under subsection (1), subsection 13.2(5), (6) or (7) or section 14.02 or 14.03.
Notification to trustees
(3) Where the Superintendent delegates in accordance with subsection (2), the Superintendent or the delegate shall
(a) where there is a delegation in relation to trustees generally, give written notice of the delegation to all trustees; and
(b) whether or not paragraph (a) applies, give written notice of the delegation of a power to any trustee who may be affected by the exercise of that power, either before the power is exercised or at the time the power is exercised.
Notice of proposed decision to trustee
14.02 (1) Where the Superintendent intends to exercise any of the powers referred to in subsection 14.01(1), the Superintendent shall send the trustee written notice of the powers that the Superintendent intends to exercise and the reasons therefor and afford the trustee a reasonable opportunity for a hearing.
Procedure at hearing
(2) At a hearing referred to in subsection (1), the Superintendent
(a) has the power to administer oaths;
(b) is not bound by any legal or technical rules of evidence in conducting the hearing;
(c) shall deal with the matters set out in the notice of the hearing as informally and expeditiously as the circumstances and a consideration of fairness permit; and
(d) shall cause a summary of any oral evidence to be made in writing.
Record
(3) The notice referred to in subsection (1) and, where applicable, the summary of oral evidence referred to in paragraph (2)(d), together with such documentary evidence as the Superintendent receives in evidence, form the record of the hearing and the record and the hearing are public, unless the Superintendent is satisfied that personal or other matters that may be disclosed are of such a nature that the desirability of avoiding public disclosure of those matters, in the interest of a third party or in the public interest, outweighs the desirability of the access by the public to information about those matters.
Decision
(4) The decision of the Superintendent after a hearing referred to in subsection (1), together with the reasons therefor, shall be given in writing to the trustee not later than three months after the conclusion of the hearing, and is public.
Review by Federal Court
(5) A decision of the Superintendent given pursuant to subsection (4) is deemed to be a decision of a federal board, commission or other tribunal that may be reviewed and set aside pursuant to the Federal Courts Act.
Conservatory measures
14.03 (1) The Superintendent may, for the protection of an estate in the circumstances referred to in subsection (2),
(a) direct a person to deal with property of the estate described in the direction in such manner as may be indicated in the direction, including the continuation of the administration of the estate;
(b) direct any person to take such steps as the Superintendent considers necessary to preserve the books, records, data, including data in electronic form, and documents of the estate;
(c) direct a bank or other depository not to pay out funds held to the credit of the estate except in accordance with the direction; and
(d) direct the official receiver not to appoint the trustee in respect of any new estates until a decision is made under subsection 13.2(5) or 14.01(1).
Circumstances
(2) The circumstances in which the Superintendent is authorized to exercise the powers set out in subsection (1) are where
(a) an estate is left without a trustee by the death, removal or incapacity of the trustee;
(b) the Superintendent makes or causes to be made any investigation pursuant to paragraph 5(3)(e);
(c) the Superintendent exercises any of the powers set out in section 14.01;
(d) the fees referred to in subsection 13.2(2) have not been paid in respect of the trustee’s licence;
(e) a trustee becomes insolvent;
(f) a trustee is convicted of an indictable offence or has failed to comply with any of the conditions or limitations to which the trustee’s licence is subject; or
(g) a circumstance referred to in paragraph 13.2(5)(c) or (d) exists and the Superintendent is considering cancelling the licence under subsection 13.2(5).
PARTIE I
FONCTIONNAIRES ADMINISTRATIFS
Surintendant
5.
…
Surveillance
(2) Le surintendant contrôle l’administration des actifs et des affaires régis par la présente loi.
…
Pouvoirs du surintendant
(4) Le surintendant peut :
a) intervenir dans toute affaire ou dans toute procédure devant le tribunal, lorsqu’il le juge à propos, comme s’il y était partie;
b) donner aux séquestres officiels, aux syndics, aux administrateurs au sens de la section II de la partie III et aux personnes chargées de donner des consultations au titre de la présente loi des instructions relatives à l’exercice de leurs fonctions, et notamment leur enjoindre de conserver certains dossiers et de lui fournir certains renseignements;
c) donner les instructions nécessaires à l’exécution de toute décision qu’il prend en vertu de la présente loi ou susceptibles de faciliter l’application de la présente loi et des Règles générales, et notamment en ce qui touche les attributions des syndics et des séquestres et celles des administrateurs au sens de l’article 66.11;
d) donner des instructions régissant les critères relatifs à la délivrance des licences de syndic, les qualités requises pour agir à titre de syndic et les activités des syndics;
e) prescrire, par instruction, la forme de documents requis pour l’application de la présente loi, ainsi que les renseignements à y porter.
13.2
…
Suspension ou annulation
(5) Une licence peut être suspendue ou annulée par le surintendant :
a) si le syndic a été reconnu coupable d’un acte criminel;
b) si le syndic n’a pas observé l’une des conditions ou restrictions de sa licence;
c) si le syndic a cessé d’agir à ce titre;
d) à la demande du syndic.
Codes de déontologie
13.5 Les syndics sont tenus de se conformer aux codes de déontologie régissant leur conduite qui peuvent être prescrits.
Décision relative à la licence
14.01 (1) Après avoir tenu ou fait tenir une enquête sur la conduite du syndic, le surintendant peut prendre l’une ou plusieurs des mesures énumérées ci-après, soit lorsque le syndic ne remplit pas adéquatement ses fonctions ou a été reconnu coupable de mauvaise administration de l’actif, soit lorsqu’il n’a pas observé la présente loi, les Règles générales, les instructions du surintendant ou toute autre règle de droit relative à la bonne administration de l’actif, soit lorsqu’il est dans l’intérêt public de le faire :
a) annuler ou suspendre la licence du syndic;
b) soumettre sa licence aux conditions ou restrictions qu’il estime indiquées, et notamment l’obligation de se soumettre à des examens et de les réussir ou de suivre des cours de formation;
c) ordonner au syndic de rembourser à l’actif toute somme qui y a été soustraite en raison de sa conduite.
Application aux anciens syndics
(1.1) Dans la mesure où ils sont applicables, le présent article et l’article 14.02 s’appliquent aux anciens syndics avec les adaptations nécessaires.
Délégation
(2) Le surintendant peut, par écrit et aux conditions qu’il précise dans cet écrit, déléguer tout ou partie des attributions que lui confèrent respectivement le paragraphe (1), les paragraphes 13.2(5), (6) et (7) et les articles 14.02 et 14.03.
Notification
(3) En cas de délégation aux termes du paragraphe (2), le surintendant ou le délégué doit :
a) dans la mesure où la délégation vise les syndics en général, en aviser tous les syndics par écrit;
b) en tout état de cause, aviser par écrit, avant l’exercice du pouvoir qui fait l’objet de la délégation ou lors de son exercice, tout syndic qui pourrait être touché par l’exercice de ce pouvoir.
Avis au syndic
14.02 (1) Lorsqu’il se propose de prendre l’une des mesures visées au paragraphe 14.01(1), le surintendant envoie au syndic un avis écrit et motivé de la mesure qu’il entend prendre et lui donne la possibilité de se faire entendre.
Procédure de l’audition
(2) Lors de l’audition, le surintendant :
a) peut faire prêter serment;
b) n’est lié par aucune règle juridique ou procédurale en matière de preuve;
c) règle les questions exposées dans l’avis d’audition avec célérité et sans formalisme, eu égard aux circonstances et à l’équité;
d) fait établir un résumé écrit de toute preuve orale.
Dossier et audition
(3) L’audition et le dossier de l’audition sont publics à moins que le surintendant ne juge que la nature des révélations possibles sur des questions personnelles ou autres est telle que, en l’espèce, l’intérêt d’un tiers ou l’intérêt public l’emporte sur le droit du public à l’information. Le dossier de l’audition comprend l’avis prévu au paragraphe (1), le résumé de la preuve orale visé à l’alinéa (2)d) et la preuve documentaire reçue par le surintendant.
Décision
(4) La décision du surintendant est rendue par écrit, motivée et remise au syndic dans les trois mois suivant la clôture de l’audition, et elle est publique.
Examen de la Cour fédérale
(5) La décision du surintendant, rendue et remise conformément au paragraphe (4), est assimilée à celle d’un office fédéral et comme telle est soumise au pouvoir d’examen et d’annulation prévu à la Loi sur les Cours fédérales.
Mesures conservatoires
14.03 (1) Pour assurer la sauvegarde d’un actif dans les circonstances visées au paragraphe (2), le surintendant peut :
a) donner instruction à quiconque de s’occuper des biens de l’actif visé dans les instructions conformément aux modalités qui y sont indiquées, notamment d’en continuer l’administration;
b) donner instruction à quiconque de prendre les mesures qu’il estime nécessaires à la sauvegarde des livres, registres, données sur support électronique ou autre, et documents de l’actif;
c) donner instruction à une banque ou autre dépositaire de ne faire aucun paiement sur les fonds détenus au crédit de cet actif, si ce n’est conformément à l’instruction;
d) donner instruction au séquestre officiel de ne plus nommer le syndic en cause pour administrer de nouveaux actifs tant qu’une décision n’est pas rendue au titre des paragraphes 13.2(5) ou 14.01(1).
Circonstances
(2) Le surintendant peut exercer les pouvoirs visés au paragraphe (1) dans les circonstances suivantes :
a) le décès, la destitution ou l’empêchement du syndic responsable de l’actif;
b) la tenue par lui de l’enquête prévue à l’alinéa 5(3)e);
c) l’exercice par lui des pouvoirs visés à l’article 14.01;
d) le défaut de paiement de droits prévus au paragraphe 13.2(2) à l’égard de la licence du syndic;
e) l’insolvabilité du syndic;
f) le syndic a été reconnu coupable d’un acte criminel ou n’a pas observé l’une des conditions ou restrictions de sa licence;
g) le fait qu’il envisage d’annuler la licence du syndic au titre des alinéas 13.2(5)c) ou d).
CANADA
In the matter of: Bruno Marchand
Georges E. Marchand Marchand Syndics Inc.
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 with the general power to supervise the administration of all estates and matters to which the Act applies;
WHEREAS the exercise of the powers of the Superintendent of Bankruptcy set out in paragraph 5(3)e) of the Act revealed that the trustees have an abnormally high number of files that have been open more than three years;
WHEREAS the trustees are also the subject of an investigation under the provisions of section 14.01 of the Act;
WHEREAS on August 5, 2003 a letter was sent to the trustees giving them 15 business days in which to submit an acceptable closing plan intended, among other things, to reduce to 10% of their inventory the percentage of summary administration files open for more than 36 months and to 40% of their inventory the number of ordinary administration files open for more than 36 months, or to provide the Superintendent of Bankruptcy with a satisfactory explanation as to why the number of files older than three years exceeds these levels;
WHEREAS despite repeated requests, the trustees did not submit, within the prescribed time, a detailed closing plan in compliance with the requirements of the Superintendent of Bankruptcy;
WHEREAS the trustees effectively refused to submit a detailed closing plan, submitting only a plan that does not accord any priority to the oldest files, nor to those with large bank balances, and which plan does not even set time lines for the various stages of closing, the trustees in question instead chose to challenge the authority of the Office of the Superintendent to require such a closing plan;
WHEREAS moreover the trustees did not even respect their own closing plan, which had not, for the reasons set out above, been accepted by the Office of the Superintendent;
WHEREAS the trustees lacked diligence in closing their files, of which the number of ordinary administration estate files open for more than three years, as of February 3, 2004, was 69 administered by the corporate trustee and Bruno Marchand (99% of his total inventory of ordinary administration files), and 133 by the corporate trustee and Georges E. Marchand, 35 of which were under the personal licence of Georges E. Marchand (98% of his total inventory of ordinary administration files);
WHEREAS some of these estates contain large sums of money which the trustees are not distributing to the creditors;
WHEREAS the trustees’ conduct is prejudicial to the creditors, who are being subjected to undue delays in the payment of their dividends;
WHEREAS the trustees refuse or neglect to complete the administration of these files, and in so doing, are not rendering their accounts as required by the Act;
WHEREAS it is not permissible for a fiduciary, such as a bankruptcy trustee, to refuse or neglect to account for his administration;
WHEREAS the Superintendent of Bankruptcy has reasonable grounds to believe that the estate files require protection and that the administration of these files should be completed as soon as possible;
WHEREAS the Superintendent of Bankruptcy may, in order to protect estates, exercise the powers set out in subsection 14.03(1) of the Act, under the circumstances anticipated in subsection 14.03(2) of the Act;
WHEREAS the Superintendent of Bankruptcy has delegated to the undersigned, in accordance with subsection 14.01(2) of the Act, in certain situations mentioned in subsection 14.03(2), the Superintendent’s powers as specified at subsection 14.03 (1) of the Act, copies of which delegation are attached, along with copies of subsections 14.01(2) and 14.03(1) to (4) of the Act;
WHEREAS subsections 14.03(1)a) and b) and (2)b) of the Bankruptcy and Insolvency Act apply;
I, the undersigned, Sylvie Laperrière, in my capacity as Senior Analyst, Professional Conduct, direct:
The Official Receiver to not appoint Bruno Marchand, Georges E. Marchand and Marchand Syndics Inc. to administer any new ordinary administration estates;
These directions take effect immediately and will stay in place until further notice or until a decision is rendered under section 14.01 of the Act.
In accordance with subsection 14.03(3) of the Act, these directions bind their addressees, who must comply with them;
In accordance with subsection 14.03(4) of the Act, a person who complies with these directions is not liable for any act done by the person only to comply with them.
SIGNED, in the City of Sainte-Foy, Quebec
February 10, 2004
Sylvie Laperrière
Senior Analyst, Professional Conduct
[Emphasis added.]
[5] I have not referred to the provisions relied on from the Federal Courts Act because they are not necessary to the resolution of the dispute.
[6] Some background is required regarding the issuance of this conservatory measure, which was not the only one. Others were issued, withdrawing the appellants’ administration of 48 files and entrusting them to the official receiver to ensure their conservation, and then to an agent of the Office of the Superintendent for Bankruptcy, for their administration and settlement: see the appeal book, volumes 5 and 6, pages 969 to 972 and 997 to 1,000.
THE FACTS AND THE PROCEDURE
[7] The judge properly summarized the factual background of this case and the circumstances leading ultimately to the issuance of the conservatory measures. We need not review all of them even though they are very informative and enlightening in regard to the appellants’ conduct. I will simply refer to paragraphs 2 to 5, 7 to 23 and 28 to 31 of her decision.
[2] The applicants were the subject of a number of reports of the Office of the Superintendent of Bankruptcy (OSB) for more than a decade because their administration displayed some chronic deficiencies in the time taken to close files. An audit report in January 1992 indicated, for example, that a file opened in February 1973 had never been closed. In February 2004, this file was still open and the monies had still not been distributed to the creditors, when the balance of the trust account in this case amounted to $575,505.30.
[3] That may represent the most extreme case, but other supervision and audit reports, in October 2000 and March 2003, indicate the same problems.
[4] Seven agreements in relation to closure plans were developed during the period from 1993 to 2001 by the OSB in collaboration with the applicants under which they would proceed to close their files that were more than three years old. Only one of these seven plans (the 1996 one) was implemented by the applicants.
[5] Moreover, during this period, many creditors complained about the slowness with which the applicants were completing the administration of their file and a number of judgments of the Superior Court of Quebec denounced their negligence.
. . .
[7] In July 2003, the OSB began the Initiative for the Orderly and Timely Administration of Insolvency Estates (IAPO) throughout the country. Pursuant to paragraph 5(3)(e) of the Act, the OSB conducted a general investigation to identify all the trustees in Canada who had not managed to close their files in less than three years at an acceptable level. To be identified by this program, the ordinary administration files dating back more than three years had to make up more than 60% of the trustee’s inventory, and summary administration files had to make up more than 15%.
[8] The goal of the IAPO was to lower these levels to less than 40% and 10% respectively. Ninety-nine trustees were identified in this investigation, and the applicants were included in this group.
[9] On August 5, 2003, Ms. Lorraine Provost, the OSB representative, wrote to the 99 trustees who had been identified urging them to provide, within 15 business days, a closure plan acceptable to the OSB and to demonstrate regular progress throughout the year. The monthly reports were to list, at minimum, the files closed in the preceding month and the files that would be closed in the current month, as well as provide any further information concerning the status of the other files that were to be closed under the plan. She explained that the OSB considered a file to be closed only when the trustee obtained his or her discharge, and not earlier.
[10] In the letter she sent to the applicants, she noted that 94.29% of the ordinary files and 57.76% of the summary files of Georges Marchand, and 97.70% of the ordinary files and 62.63% of the summary files of Bruno Marchand had been open for more than three years.
[11] The applicants and all the other trustees identified in the IAPO program were also informed that failure to produce the documents or comply with the requests for a closure plan acceptable to the OSB within the time allotted would expose them to conservatory measures under section 14.03 of the Act.
[12] On August 26, 2003, the applicants submitted to the OSB a table in which they indicated the number of files they planned to close for each of the following four quarters commencing September 1, 2003.
[13] The exchange of correspondence between the parties during this period is crucial, since it is at the heart of the litigation. It is important, therefore, to relate its content in some detail.
[14] On September 4, 2003, Mr. Georges Marchand sent a letter to Mr. François Leblanc of the OSB in which he stated that he had understood that the closure plan was to be more detailed, and further details were provided on September 8, 2003.
[15] In a letter sent on the same date, Ms. Provost explained that the suggested plan was not acceptable. To be acceptable, the plan had to indicate:
- the number of summary administration files of more than three years for which receipts and disbursements returns would be produced;
- the number of summary administration files of more than three years for which the trustee’s discharge would be obtained;
- the number of ordinary administration files of more than three years for which receipts and disbursements returns would be produced;
- the number of ordinary administration files of more than three years for which the trustee’s discharge would be obtained.
[16] The OSB also asked that the applicants supply a detailed list of the files that were to be closed within the next quarter.
[17] In a letter dated September 10, 2003, the applicants asked the OSB for clarifications as to all of the comments exchanged in the letter of August 5, 2003, and more particularly the reference to section 14.03 of the Act. The applicants further explained that in their opinion the decision of the Superior Court in Abderrazik (Syndic de), [2002] J.Q. No. 2241 (S.C.) (QL), the OSB did not have authority to demand a detailed list of the files to be closed.
[18] On September 19, 2003, in reply to this letter, Ms. Provost informed the applicants that the plan submitted was not accepted by the OSB. She explained that the expression [translation] “the files closed” meant that the OSB would receive, before the deadline, a document showing that the trustee had been discharged, i.e. the certificate of compliance or order of discharge.
[19] On September 25, 2003, the applicants’ counsel wrote a further letter to Ms. Provost. He repeated that the plan submitted was acceptable and that the request for a detailed list went beyond the OSB’s administrative authority. He suggested a meeting within 90 days, should that prove necessary, to discuss this matter.
[20] In a letter dated October 24, 2003, the OSB counsel again notified the applicants that the plan submitted was not acceptable and requested a written undertaking to close on a priority basis files dating back ten years or more with a bank balance of $25,000 or more, that is, a total of 17 ordinary administration files, a list of which was provided to them.
[21] On October 31, 2003, the applicant’s counsel replied to the letter of October 24, 2003, providing some figures in respect of the closure of files and objectives to be achieved within the period in question. He suggested a meeting in early January 2004 to describe and review the efforts made for that purpose over a represented period of several months.
[22] On November 7, 2003, the OSB counsel stated that the case was very serious. He said that the OSB request in relation to the file closure plan remained unchanged.
[23] That same day, the applicant’s counsel renewed his request for a meeting in early January 2004 and asked once again what statutory authority the OSB had to demand a sequential order of closure of the files.
…
[28] He also mentioned that the process of closing a bankruptcy file is subject to some delays over which the trustee has no control. That is why the IAPO program normally gives the trustees 12 months in which to present their evidence. It was not fair that the respondent was suggesting the imposition of conservatory measures after only six months. The applicants were available to discuss the actual and meaningful progress in the closure process and thereby to avoid conservatory measures being taken.
[29] It was at that point, in view of the repeated refusal of the applicants to comply with the OSB requirements, that the respondent’s decision to impose two series of conservatory measures directions crystallized. These measures were taken only in regard to the 48 files with large bank balances ($10,000 or more) since those are the files that are likely to produce a dividend for the creditor.
[30] The first series, which took effect on February 10, 2004, provided:
- that 48 active ordinary administration files opened for several years would be withdrawn from the applicants until the official receiver wound up their administration or a custodial trustee was appointed for that purpose; and
- that the applicants could not be assigned any new ordinary administration files by the official receiver.
[31] The second series, issued on February 24, 2004, resulted in the firm of H.H. Davis & Associés Inc. being instructed to wind up the administration of the 48 files withdrawn from the applicants.
[8] As the judge states, the Office of the Superintendent did not take the conservatory measures capriciously. They were taken following a history of inexcusable delays sanctioned by the Court: see Société Chapichou Inc., Georges Marchand et Procureur général du Canada, S.C. No. 500‑11‑002944‑862, March 16, 1995, where the judge determined that there was no valid excuse for the trustee’s failure to finalize the matter and that the trustee was solely responsible for the delays described as unacceptable; Dubois (Re), [1995] A.Q. No. 1684, where the judge stated that it seemed difficult to justify prolonging the management of a small estate for eight years; Benchaya et Marchand Syndics Inc. et Surintendant des Faillites, S.C. No. 500-11-006335-976, January 17, 2000; Benchaya et Marchand Syndics Inc., S.C. No. 500-11-006335-976, July 6, 2000, where the trustee, in the same matter, was fined $1,000 for contempt of court because he refused to obey an order of the Superior Court directing him to pay the debtor the amount of $5,157.92; Blais et Marchand Syndics Inc. et Surintendant des Faillites, S.C. No. 405-11-000158-897, January 15, 2003, where Sénécal J. determined that there was no justification for the matter to have dragged on for 10 years.
[9] The appellants challenged the validity of these measures before both the Superior Court of Québec and the Federal Court on practically the same basis, however without elaborating the argument of unconstitutionality based on paragraph 2(e) of the Canadian Bill of Rights in their written memorandum before us. They were successful in the Superior Court: see Marchand Syndics Inc. v. Procureur général du Canada et H.H. Davis et associés Inc., [2005] R.J.Q. 2094. The Superior Court declared that paragraphs 14.03(1)(a) and (d) of the Act were inoperative because they were inconsistent with paragraphs 1(a) and 2(e) of the Canadian Bill of Rights. The respondents appealed and the matter is now pending before the Court of Appeal of Québec.
[10] By contrast, the Federal Court dismissed the appellants’ arguments accepted by the Superior Court of Québec. Hence the appeal before us by Marchand Syndics Inc. as well as the trustees Georges and Bruno Marchand.
[11] On appeal before us, I must say that the appellants were in no rush to move their case forward. On July 15, 2005, the Court awarded them an extension of time to file a reply to a motion to dismiss their appeal for failing to proceed diligently, without costs: see docket A-658-04, order dated July 15, 2005. In a decision dated August 25, 2005, the Court observed that more than eight months had elapsed since the motion had been filed and that the appellant had not taken any steps to advance the matter. The Court nevertheless dismissed the motion to dismiss the appeal, but ordered the appellants to pay $1,000 in costs, payable immediately: see docket A-658-04, order dated August 25, 2005.
[12] Finally, on July 18, 2006, the Court dismissed an unfounded application by the appellants to suspend the hearing of this appeal. It ordered them to pay $1,500 in costs, payable immediately regardless of the outcome of the litigation. The Court also ordered the judicial administrator to schedule the hearing of this appeal, which had already dragged on enough, as soon as possible. Accordingly, it was heard on October 18, 2006, i.e. three months after the order: see docket A‑658‑04, order dated July 18, 2006.
ANALYSIS OF THE APPELLANTS’ SUBMISSIONS AND OF THE DECISION BY THE JUDGE OF THE FEDERAL COURT
The alleged breach of procedural fairness
[13] The appellants submit that the directions for conservatory measures were issued in breach of the rules of procedural fairness and fundamental justice. Three grounds were raised at the hearing in support of this argument. First, the appellants contend that they had the right to be heard, in an oral hearing, on the advisability of issuing conservatory measures. Second, the measures are measures of indefinite duration and they seriously compromise their right to practice. Third, the measures were issued by a person who was both judge and a party, thereby breaching the rule of Nemo judex in causa sua: no one can be a judge in their own case.
[14] I will examine each of these arguments, beginning with the right to be heard. I must point out though, as with the unconstitutionality argument based on the Canadian Bill of Rights, this procedural fairness argument, as pleaded at the hearing, does not appear in the notice of appeal as a ground of appeal or in the appellant’s written memorandum. The only breach of procedural fairness that they raised is the one relating to the refusal to receive the motion to disqualify the judge. And that is a ground for appeal that they withdrew. The appellants’ counsel simply referred us to paragraph 20 of their written memorandum, where it states that their memorandum of fact and law filed at first instance supplements the arguments set out therein. Yet, there was no such argument. Nevertheless, section 337 indeed provides that the notice of appeal must set out a complete and concise statement of the grounds intended to be argued. These are the grounds normally elaborated in the memorandum of fact and law. The appellants’ notice of appeal is twenty (20) pages long and reflects everything but the complete, concise, and precise grounds of appeal. It is in fact a veiled, deficient memorandum of fact and law.
The right to be heard before conservatory measures are directed under section 14.03 of the Act
[15] At the hearing, the appellants claimed that they were entitled to an oral hearing on the conservatory measures, presumably before a third party, probably a judge, to decide whether such measures should be issued. It is difficult to know the appellants’ exact position because, as I said, their memorandum of fact and law did not refer to this issue, much less the issue of the right to be heard by a third party. The respondent’s counsel, in relying on this same procedural fairness that the appellants so ardently claimed, objected to a new ground of appeal being raised for the first time on appeal, at the hearing, when it did not appear in the written memorandum or in the notice of appeal. The oral arguments of the appellants’ counsel were not much more enlightening on the issue, as they simply stated that the hearing could not take place before the same person, nothing more.
[16] In fact, the appellants challenge our Court’s decision in Tremblay v. Canada (Superintendent of Bankruptcy), 2001 FCA 46, where our Court dismissed a similar claim to a right to an oral hearing when resorting to conservatory measures. At paragraphs 4 to 6, the Court writes:
[4] In such circumstances, it is hardly surprising that the Superintendent thought it necessary to take conservatory measures to protect the assets which, objectively, on the evidence before him, seemed to be at risk at the time.
[5] We consider that there is no merit in the appellants’ argument that the Superintendent failed to observe the rules of natural justice in dealing with them. The appellants were aware of the audits taking place in their offices. They knew that a number of complaints had been filed against them and they knew the nature of the complaints. As the motions judge properly pointed out, they had several opportunities to be heard and to provide explanations about the alleged deficiencies, but chose to ignore them. They are hardly in any position to complain now.
[6] Finally, the appellants argued that the Superintendent taking control of the estate records was a disguised revocation of their trustee licence without their having an opportunity to be heard as required in s. 14.02 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (“the Act”). This argument is without basis in the case at bar and is founded on a misapprehension, not to say distortion, of the action taken by the Superintendent. The taking control of the estate records, which was made necessary by the appellants’ conduct, was a measure taken to protect a third party’s property involved in an administrative and disciplinary inquiry. This inquiry is now concluded, disciplinary proceedings have been initiated and the appellants may exercise the rights conferred on them by s. 14.02, if that has not already been done.
[Emphasis added.]
[17] In this case, as in Tremblay, the appellants had many opportunities to express their point of view regarding the requests by the Office of the Superintendent. They were well aware of the allegations against them. They provided explanations in that regard on more than one occasion. They knew they had been asked to provide a detailed plan for the closing of files that had been long drawn out to the detriment of the creditors, failing which they would face conservatory measures. They refused to do so on the grounds that in their opinion, the Office of the Superintendent did not have the authority to demand such a plan from them.
[18] In passing, the appell