Office of the Superintendent of Bankruptcy v. MacLeod

Office of the Superintendent of Bankruptcy v. MacLeod
Court (s) Database
Federal Court Decisions
Date
2010-01-28
Neutral citation
2010 FC 97
File numbers
T-327-09
Notes
Digest
Decision Content
Federal Court
Cour fédérale
Date: 20100128
Docket: T-327-09
Citation: 2010 FC 97
Ottawa, Ontario, January 28, 2010
PRESENT: The Honourable Mr. Justice Mainville
BETWEEN:
SYLVIE LAPERRIÈRE, in her capacity as
Senior Analyst – Professional Conduct of the
Office of the Superintendent of Bankruptcy
Applicant
and
ALLEN W. MACLEOD and
D&A MACLEOD COMPANY LTD.
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
[1] This concerns an application submitted by Sylvie Laperrière (the “Applicant”), a Senior Analyst – Professional Conduct with the Office of the Superintendent of Bankruptcy, seeking judicial review of related decisions made by the Honourable James B. Chadwick, acting in his capacity as Delegate of the Superintendent of Bankruptcy, and under which most of the allegations of misconduct against the bankruptcy trustees Allen W. MacLeod and D. & A. MacLeod Company Ltd. (the “Respondents”) were rejected, but however imposing a sanction in the form of a reprimand against the Respondents for delay in the administration of two estates.
Background
[2] The licencing and professional conduct of bankruptcy trustees are under the control and supervision of the Superintendent of Bankruptcy (the “Superintendent”). For these purposes, the Superintendent is entrusted with supervising the activities of bankruptcy trustees and disciplining them in appropriate circumstances. The powers of investigation and discipline of bankruptcy trustees must be carried out with due regard to the rules of fundamental justice. Consequently, a particular scheme has been established under the Bankruptcy and Insolvency Act , R.S., 1985, c. B-3 (the “Act”) to afford trustees a fair hearing and certain procedural safeguards prior to imposing a measure or sanction under the Act.
[3] This scheme is principally set out in sections 14.01 and 14.02 of the Act which read as follows:
14.01 (1) If, after making or causing to be made an inquiry or 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;
(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; and
(g) require the trustee to do anything that the Superintendent considers appropriate and that the trustee has agreed to.
(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.
(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.
(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.
14.02 (1) Before deciding whether to exercise any of the powers referred to in subsection1 4.01(1), the Superintendent shall send the trustee written notice of the powers that the Superintendent may exercise and the reasons why they may be exercised and afford the trustee a reasonable opportunity for a hearing.
(1.1) The Superintendent may, for the purpose of the hearing, issue a summons requiring and commanding any person named in it
(a) to appear at the time and place mentioned in it;
(b) to testify to all matters within their knowledge relative to the subject matter of the inquiry or investigation into the conduct of the trustee; and
(c) to bring and produce any books, records, data, documents or papers — including those in electronic form — in their possession or under their control relative to the subject matter of the inquiry or investigation.
(1.2) A person may be summoned from any part of Canada by virtue of a summons issued under subsection (1.1).
(1.3) Any person summoned under subsection (1.1) is entitled to receive the like fees and allowances for so doing as if summoned to attend before the Federal Court.
(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.
(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.
(4) The decision of the Superintendent after a hearing referred to in subsection (1), together with the reasons therefore, shall be given in writing to the trustee not later than three months after the conclusion of the hearing, and is public.
(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.
14.01 (1) Après avoir tenu ou fait tenir une investigation ou 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;
d) ordonner au syndic de prendre toute mesure qu’il estime indiquée et que celui-ci a agréée.
(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.
(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 et14.03.
(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.
14.02 (1) Avant de décider de prendre l’une ou plusieurs des mesures visées au paragraphe 14.01(1), le surintendant envoie au syndic un avis écrit et motivé de la ou des mesures qu’il peut prendre et lui donne la possibilité de se faire entendre.
(1.1) Il peut, aux fins d’audition, convoquer des témoins par assignation leur enjoignant :
a) de comparaître aux date, heure et lieu indiqués;
b) de témoigner sur tous faits connus d’eux se rapportant à l’investigation ou à l’enquête sur la conduite du syndic;
c) de produire tous livres, registres, données, documents ou papiers, sur support électronique ou autre, qui se rapportent à l’investigation ou à l’enquête et dont ils ont la possession ou la responsabilité.
(1.2) Les assignations visées au paragraphe (1.1) ont effet sur tout le territoire canadien.
(1.3) Toute personne assignée reçoit les frais et indemnités accordés aux témoins assignés devant la Cour fédérale.
(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.
(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.
(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.
(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.
[4] Under the scheme, the Superintendent has delegated authority to investigate the conduct of bankruptcy trustees to certain members of the staff of his office, including, in this case, the Applicant. Once the results of an investigation allow the investigator to conclude that a bankruptcy trustee should be subjected to remedial measures or sanctions under subsection 14.1(1) of the Act, the concerned bankruptcy trustee must be provided with a notice thereof and afforded a reasonable opportunity for a hearing, which hearing may be conducted by the Superintendent himself, but which more often than not is conducted by a delegate of the Superintendent designated for this purpose.
[5] In this case, various monitoring activities were carried out over the years by the Office of the Superintendent of Bankruptcy (the “OSB”) in regard to Allen MacLeod, his now deceased father Donald A. MacLeod, and their joint trustee in bankruptcy business D. & A. MacLeod Company Limited (collectively referred to as the “MacLeod bankruptcy trustees”). These monitoring activities revealed various alleged irregularities in the operations of these trustees, including particularly the operation of an interest trust account. The operation of this account, of which more will be discussed below, appears to have been the determining factor in pursuing further investigations into the MacLeod bankruptcy trustees.
[6] These monitoring activities eventually resulted in an investigation of the MacLeod bankruptcy trustees by the Applicant, culminating in a long report dated February 27, 2007 (the “Report”), in which the Applicant alleged numerous professional conduct breaches by the MacLeod bankruptcy trustees, and recommended that sanctions be taken against these trustees as a result thereof.
[7] The Superintendent appointed the Honourable James B. Chadwick to carry out hearings in order to adjudicate these allegations. These hearings were delayed by various procedural matters concerning principally the production of documents and the disclosure of evidence. Moreover, as a result of the ill health of Mr. Donald MacLeod, the allegations against him were stayed. Mr. Donald MacLeod subsequently passed away. The proceedings thus concern Mr. Allen W. MacLeod and
D. & A. MacLeod Company Limited.
[8] The hearings resulted in a first decision by the Honourable Chadwick dated December 1, 2008 (the “Liability Decision”) in which he found that almost all the allegations against the Respondents were without merit. He however found that the Respondents had not completed the administration of two estates in a timely manner, and called for written submissions from the parties regarding both the question of costs and the sanctions which would be appropriate in the circumstances.
[9] Following these submissions, the Honourable Chadwick issued a second decision on sanctions and costs dated February 5, 2009 (the “Sanctions Decision”), in which he imposed a reprimand on the Respondents and found that he had no jurisdiction to award costs under the provisions of the Act.
The Decisions
[10] In the Liability Decision dated December 1, 2008, the Delegate described the allegations against the Respondents under 12 headings, following the structure of the Report prepared by the Applicant. These headings are as follows and for purposes of consistency will be maintained throughout this judgment:
A. Bank balances of estate and insolvency files deposited in an “Interest Account”.
B. Applications for trustee discharge while having a bank balance in the estate account.
C. Surplus from the consolidated trust account for summary administrations deposited in an “Interest Account”.
D. Monies withdrawn for various uses from an “Interest Account”.
E. Statements of Receipts and Disbursements.
F. Unauthorized fee withdrawal in a consumer proposal.
G. “Clearing Account” used to post estate transactions.
H. Co-mingling of funds in consolidated trust accounts.
I. Disbursement claimed for services performed by a related person.
J. “Third Party Account” used to post estate transactions.
K. Monies not deposited forthwith.
L. Delay in the administration of estates.
[11] The Delegate first addressed in his decision a motion to stay the proceedings which had been submitted by the Respondents on the basis of alleged prosecutorial partiality and overzealousness by the Applicant. The Delegate dismissed this motion on the basis that the issues raised by it could be better dealt with on the merits of the case.
[12] At the outset, the first issue to address on the merits was deemed by the Delegate to be the application of strict liability as opposed to absolute liability in regard to the alleged misconduct of the Respondents. The Delegate was of the view (at para. 13 of the Liability Decision) that the allegations of misconduct pursuant to the Act, its regulations and any resulting directives were strict liability offences, and consequently it was open for the Respondents to prove that they took all reasonable steps under the circumstances in order to avoid a finding of misconduct.
[13] The Delegate then commented on the objectivity of the Applicant in carrying out her investigation and drafting her Report. He concluded that her Report “had been crafted to support the allegations and lacked both impartiality and objectivity” (at para. 44 of the Liability Decision). Consequently, the Report was to be “weighed and scrutinized very carefully” (at para. 47 of the Liability Decision). He also noted that there was some controversy within the OSB about the appropriateness of proceeding with disciplinary measures against the MacLeod bankruptcy trustees in the circumstances of this case (at paras. 48-49 of the Liability Decision).
[14] Concerning the merits of the allegations, the Delegate first addressed what appeared to be the principal allegation and which was described under heading A as bank balances of estate and insolvency files deposited in an “Interest Account”. The Delegate noted that the most serious alleged irregularity related to the operation of this Interest Account by the Respondents (at para. 36 of the Liability Decision). It indeed appears from the record that the operation of this account was the kingpin underlying the investigation by the Applicant and her subsequent Report.
[15] Some background explanation is required to properly understand the circumstances surrounding this allegation.
[16] Pursuant to subsection 25(1) of the Act, a trustee in bankruptcy must deposit in a bank all funds received for an estate in a separate trust account for each estate. Moreover, sections 151 and 152 of the Act provide that when the trustee has realized all the property of the bankrupt, he must prepare a final statement of receipts and disbursements and a dividend sheet and, subject to the Act, divide the property of the bankrupt among the creditors who have proved their claims. In light of delays in closing accounts between the time the final statement of receipts and disbursements is made and the discharge of the trustee pursuant to the Act, amounts in the estate trust accounts may accumulate interest.
[17] Subsection 154(1) of the Act provides that before proceeding to discharge, the trustee must forward to the Superintendent for deposit with the Receiver General, according to the directives of the Superintendent, the unclaimed dividends and undistributed funds that the trustee possesses. Consequently, the interest accumulated in the trust accounts between the final statement of receipts and disbursements and the discharge of the trustee may end up in the hands of the Receiver General rather than those of the creditors.
[18] This eventuality is specifically contemplated by Directive number 5 issued on November 17, 1994 by the Superintendent and concerning “Estate Funds and Banking”. Section 12 of this Directive 5 states that any amount of interest earned on a trust account and not apportioned to individual estate accounts shall be remitted to the Superintendent as an undistributed asset as provided in Directive 8 entitled “Unclaimed Dividends and Undistributed Funds”. However, this Directive 8 issued June 19, 1986 itself provides in its section 15 that where additional interest is received after the preparation of the statement of receipts and disbursements, the amount should be distributed to the creditors by way of an amended or additional dividend sheet where the amount available exceeds that set out in guidelines.
[19] The Respondents took an original approach to compliance with these provisions by operating an “Interest Account” in which surplus interest from the various estates would be deposited or paid out. At the time of the preparation of the final statement of receipts and disbursements, the Respondents would estimate the interest which would be earned up to the closing of the estate. If at the time of closing, the actual amount accumulated in the estate was more than the estimate, this excess amount would be transferred to the “Interest Account”. Conversely, if the amount was underestimated, then this sum would be transferred into the estate from the “Interest Account”. In this manner, the interest generated in the estates would, in principle, be returned to the creditors rather than end up in the hands of the Receiver General.
[20] Based on his assessment of the evidence, the Delegate found no impropriety or misconduct on the part of the Respondents in the operation of this account. He based this finding on the evidence submitted that the account had been authorized by the OSB pending a final decision as to its continued operation, and had been subsequently closed when the OSB requested such closure.
[21] In regard specifically to the allegations under heading D concerning monies withdrawn for various uses from the Interest Account, the Delegate found as follows at paragraph 73 of his decision: “In view of my decision in paragraph A relating to a finding that the trustees were authorized to maintain the interest account for a definite period and when directed to cease they closed the account. Since they did so, I find no misconduct on behalf of the trustees.”
[22] The allegations under headings B, E, H, J and K were all rejected on the basis that a strict liability defence had been made out by the Respondents. It was also found by the Delegate that these allegations resulted from minor administrative errors which were subsequently either corrected or had no real impact on any creditor. The Delegate however recognized at paragraph 102 of the Liability Decision that his conclusions in regard to these headings were premised on the applicability of strict liability:
With reference to the allegations B, E, H, J, and K, these were all as a result of administrative error. If I am wrong in the interpretation of the nature of the contraventions, and they are absolute, then the trustee’s are in contravention of the various sections of the Act. The fact the trustees made administrative errors would have to be taken into consideration under the sanction section of this hearing.
[23] The allegations under headings C, F, G, and I were rejected on the basis that no contravention of the Act or of its related Rules or Directives had occurred.
[24] It is useful to note that the Delegate stated in paragraph 67 of the Liability Decision that most of the allegations against the Respondents were minor technical issues which had been taken out of context by the Applicant:
Mr. MacLeod, in his evidence, testified as to the number of estates that their firm handled. Filed as an exhibit was a breakdown showing that they handled 2177 estates, which included 89,268 transactions and the dollars transacted were $21,595,694.41. When one looks at the volume of transactions and estates, the allegations against MacLeod appear to be taken out of context. It would almost appear that OSB is searching to find some irregularity, no matter how small, in order to support their allegations of misconduct.
This is a recurring theme throughout the Liability Decision, notably paragraph 84 thereof where the Delegate found that certain allegations concerned matters involving only 100th of 1% of the summary estate management of the Respondents.
[25] Finally, in regard to allegations under heading L, the Delegate found that the Respondents had not acted with celerity in the administration of two estates. The sanctions related to these two proven allegations of misconduct were dealt with under a separate decision on sanctions and costs dated February 5, 2009.
[26] Concerning sanctions, the Applicant requested that the corporate trustee licence of D. & A. MacLeod Company Limited be restricted for a period of four (4) weeks during which time it would not be permitted to accept new appointments under the Act but would be able to administer estates for which it had already been appointed. The Applicant also requested that the trustee licence of Allen W. McLeod be suspended for four (4) weeks.
[27] Conversely, the Respondents argued that no sanctions should be imposed based on the alleged lack of impartiality and objectivity of the investigation, on the impact the investigation and related proceedings had on their trustee business, their reputation in the community, and on their emotional and economic suffering resulting from all these proceedings.
[28] The Delegate concluded that a reprimand was appropriate in the circumstances and expressed himself as follows at paragraph 20 of the Sanctions Decisions:
In my view the sanction to be imposed upon Mr. MacLeod and D. & A. MacLeod Company Ltd. should be in the form of a reprimand. The reprimand is set out in my reasons and findings of December 1, 2008. In my view, it does not require any further reprimand or sanction. I am sure what the trustee has experienced will serve as a general deterrence to other trustees. Having spent over $150,000 to defend himself, along with all the time and effort expended over the years he does not need any more of a specific deterrence.
Position of the Applicant
[29] Those parts of the Liability Decision of the Delegate rejecting the allegation under headings C, F, G, and I are not challenged by the Applicant. The remaining parts of the Liability Decision as well as the Sanctions Decision are challenged by the Applicant on various grounds.
[30] As concerns the allegations described under heading A as bank balances of estate and insolvency files deposited in an “Interest Account”, the Applicant seeks to have this Court overturn the Delegate’s finding of fact that the Respondents had been authorized by the OSB to maintain such an account. The Applicant contends that this finding of fact runs contrary to the documentary evidence and the testimony in the record and is thus unreasonable and made without regard to the evidence.
[31] Concerning the allegations contained under heading D relating to monies withdrawn for various uses from the Interest Account, the Applicant argues that even if the Delegate did not err in finding that the authorization to operate the account was given, liability should still be found as the Respondents admitted that they did not use the Interest Account solely to maximize interests for creditors, and thus also used this account to replace monies missing in estates due to their own errors.
[32] Concerning the allegations contained under headings B, E, H, J and K, the Applicant contends that the Delegate made a reviewable error in law by applying strict liability principles to contraventions of the Act and of its related Rules and Directives. In a nutshell, the Applicant states that it is not appropriate to import the criminal law classification of offences into regulatory proceedings concerning the termination or suspension of a licence authorizing the performance of regulated activities. Consequently, the defence of due diligence should not apply to the allegations under these headings, and the Delegate erred in law in finding otherwise. For the Applicant, evidence of due diligence is only relevant at the stage of determining which measure or sanction, if any, should be issued in the exercise of the appropriate remedies set out in section 14.01 of the Act.
[33] As a subsidiary argument concerning the allegations contained under headings B, E, H, J and K, the Applicant adds that even if the Delegate was correct to hold that the defence of due diligence was available to the Respondents, he committed reviewable errors in fact and in law by concluding that the Respondents discharged their burden of proving due diligence.
[34] The Applicant also argues that the Delegate erred in law by issuing a reprimand against the Respondents for acting without celerity in the administration of two estates. The Applicant argues that a reprimand is not a measure provided for in section 14.01 of the Act.
[35] Finally, the Applicant argues that the Delegate erred both in law and in fact in finding that her Report lacked objectivity and impartiality. First, it is argued that it is an error in law to require an investigator to be impartial. Impartiality is a procedural guarantee required from an adjudicator and is a notion at odds with the functions performed by an investigator in disciplinary proceedings. In addition, the Applicant adds that the findings of partiality were not supported by the evidence.
[36] Consequently, the Applicant asks this Court to set aside both the Liability Decision and the Sanctions Decision and to refer the matter back to the Superintendent to be dealt with in conformity with section 14.01 of the Act, with costs being awarded in favour of the Applicant.
Position of the Respondents
[37] A few days prior to the hearing on the merits of this judicial review, the Respondents submitted a motion to the Court challenging the Applicant’s right to submit the Application in regard to the Liability Decision on the basis of tardiness and the fact that the Application concerned both the Liability Decision and the Sanctions Decision, thus contravening Rule 302 of the Federal Courts Rules. I have rejected these arguments for the reasons set out in a separate decision on the motion issued concurrently with this judgment.
[38] The Respondents note that they have been made to endure a seven year process of monitoring, auditing, and investigations characterized by delays, refusal to provide full disclosure, demonstrated bias and a lack of objectivity. They note the strong words used by the Delegate in criticising the OSB in the conduct of this investigation. They argue that this Court should thus consider this judicial review application against the same backdrop of unfairness, impropriety and inappropriate treatment of the Respondents by the OSB as found by the Delegate.
[39] As concerns the allegations described under heading A as bank balances of estate and insolvency files deposited in an “Interest Account”, the Respondents note that they did not believe they were contravening any rules when they opened the Interest Account, and they took no personal advantage from this account. The Interest Account was operated in an attempt to increase the return to the stakeholders in the bankruptcy system. When the OSB first questioned their operation of the Interest Account, the matter was discussed extensively with the concerned officials since the operation of the account was far from being viewed as inappropriate. The Respondents sought to continue to operate the account pending a final determination on the matter, and an authorization to proceed with the continued operation of the account was provided to them by the OSB. When the final decision was made by the OSB to close the account, they complied. The Respondents thus submit that the Applicant is barred from arguing that there was any impropriety in the manner in which the Interest Account was operated since it was operated with the knowledge and authorization of officials from the OSB.
[40] The Delegate made findings of fact concluding that the continued operation of the Interest Account had been authorized by the OSB. These findings of fact were based on the assessment of the credibility of the witnesses who testified and were reasonable given the totality of the evidence submitted. Consequently, the Respondents argue that this Court should not disturb such findings of fact in judicial review.
[41] Alternatively, even if the continued operation of the Interest Account was not approved, the Respondents argue that no impropriety was established in regard to its operation. The Applicant failed to adduce any evidence to prove that any creditor lost money as a result of the operation of the Interest Account. Moreover, subsection 154(1) of the Act requires the trustee to forward to the Superintendent the unclaimed dividends in estate accounts. When the Respondents were required to close the account, they complied and remitted the balance of $19,553.27 in the account to the Superintendent with the detail trial balance for the account when it was closed. Overall, taken as a whole, the operations of the account were not in contravention of the Act and were to the benefit of the estates. Consequently, no breach of conduct can be found to have occurred irrespective of whether or not the account had been authorized.
[42] Concerning the allegations contained under heading D relating to monies withdrawn for various uses from the Interest Account, the Respondents argue that the impugned transactions in the Interest Account were known to the OSB prior to its approval of the continued operation of this account. The Applicant refused to admit that the account approval had been provided; consequently the Applicant adduced no evidence of the parameters of this approval or establishing that the Respondents exceeded this approval. The Delegate was thus justified in concluding that these operations were within the ambit of the authorization provided, and he certainly committed no reviewable error in so finding.
[43] The Respondents argue that all the allegations, including those set out under headings B, E, H, J and K, are subject to principles of strict liability, and consequently a defence of due diligence is available to them to counter these allegations, and that consequently the Delegate did not err in so finding.
[44] The Respondents further argue that the Delegate did not err in finding that they had proved due diligence countering the allegations under headings B, E, H, J and K. They note that for the period of 1993 to 2007 covered by the allegations made against them, they would have managed approximately 9,954 estates representing close to $100 million in transactions. They also note that the average transaction size was $241.92 and that there were approximately 108,160 transactions. They further note that they did not benefit financially from any errors nor were the estates or creditors deprived of any monies.
[45] Finally, the Respondents argue that it was open for the Delegate to issue a reprimand as a sanction for the two minor offences he found them to have committed, since the range of sanctions set out in subsection 14.01 of the Act should not be construed as limited to those enumerated therein.
[46] Consequently, the Respondents ask this Court to dismiss the judicial review application with costs against the Applicant.
The Issues
[47] The principal issues to be dealt with in this judicial review can be stated as follows:
(a) What is the applicable standard of review?
(b) Did the Delegate commit reviewable errors in finding as a matter of fact that the
operations of the Interest Account had been authorized (allegations under headings
A and D)?
(c) Are the allegations under headings B, E, H, J and K subject to a due diligence
defence?
(d) If these allegations are subject to a due diligence defence, did the Delegate commit
reviewable errors in finding that such a defence had been made out to counter the allegations under headings B, E, H, J and K?
(e) Is a reprimand an available remedy or sanction under the scheme of the Act?
(f) Are prosecutorial partiality and overzealousness factors to take into account in
proceedings under sections 14.01 and 14.02 of the Act, and if so, did the Delegate commit reviewable errors in finding as a matter of fact that such factors were present in this case?
The Standard of Review
[48] The Applicant asserts on the basis of Jacques Roy v. Sylvie Laperrière, 2006 FC 1386, Canada (Attorney General) v. Jacques Roy, 2006 FC 1387 and Canada (Attorney General) v. Jacques Roy, 2007 FCA 410, that questions of law decided by the Delegate are reviewable on a standard of correctness, while questions of fact are to be reviewed on a standard of reasonableness.
[49] On the other hand, the Respondents asserts on the basis of Jacques Roy v. Sylvie Laperrière, supra, and Sheriff v. Canada (Attorney General), 2005 FC 305, that both questions of fact and mixed questions of fact and of law decided by the Delegate are reviewable on a standard of reasonableness. Moreover, the Respondents add, on the basis of Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190 (“Dunsmuir”), that certain questions of law are also reviewable on a standard of reasonableness, most notably questions of law in the interpretation of an administrative tribunal’s constitutive legislation or for which the administrative tribunal has special expertise. The Respondents argue that the determination of whether strict liability as opposed to absolute liability applies to trustee misconduct allegations under the Act is one of those issues of law reviewable on a standard of reasonableness, as is the issue of the availability of a reprimand as a remedy or sanction under the Act, since both these issues of law fall under the special expertise of the Delegate.
[50] Dunsmuir, at para. 62 established a two-step process for determining the standard of review. First, the Court ascertains whether the jurisprudence has already determined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question. Second, where the first inquiry proves unfruitful, the Court must proceed to an analysis of the factors making it possible to identify the proper standard of review.
[51] Prior jurisprudence has held that issues of jurisdiction, fundamental justice and procedural fairness arising out of proceedings before delegates of the Superintendent acting under section 14.01 of the Act are to be reviewed on a standard of correctness: Sam Lévy & Associés v. Canada (Superintendent of Bankruptcy), 2005 FC 702, at paragraphs 26-27; Sheriff v. Canada (Attorney General), 2006 FCA 139 at paragraph 24. Likewise, questions of law arising in such proceedings have also been held to be subject to review on a standard of correctness: Jacques Roy v. Sylvie Laperrière, 2006 FC 1386 at paragraph 70; Canada (Attorney General) v. Jacques Roy, 2006 FC 1387 at paragraph 21; Sheriff v. Canada (Attorney General), 2005 FC 305 at paragraph 32. However, questions of mixed law and fact have been held reviewable on the standard of reasonableness simpliciter: Jacques Roy v. Sylvie Laperrière, supra, at paragraphs 21 to 23; Canada (Attorney General) v. Jacques Roy, supra, at paragraph 19; Sheriff v. Canada (Attorney General), supra, at paragraph 30.
[52] Since this judicial review is the first to arise in the context of sections 14.01 and 14.02 of the Act since the decision of the Supreme Court of Canada in Dunsmuir, and since the Respondents are arguing that pursuant to Dunsmuir, a standard of reasonableness rather than that of correctness should be applied to the issues of law raised by these proceedings, it is appropriate to carry out a standard of review analysis in this case.
[53] Dunsmuir states at paragraph 64 that the standard of review analysis must be contextual and is dependent on the application of a number of relevant factors, including: (1) the presence or absence of a privative clause; (2) the purpose of the tribunal as determined by interpretation of enabling legislation; (3) the nature of the question at issue, and; (4) the expertise of the tribunal.
[54] Here the decision of the Delegate is not protected by a privative clause. This tends to imply that a lesser degree of deference, particularly on issues of law, is to be shown by a reviewing court. No appeal is provided for, however subsection 14.02(5) of the Act specifically sets out that a decision of the Superintendent, and by implication of his Delegate, concerning the professional misconduct of a bankruptcy trustee, may be reviewed and set aside pursuant to the Federal Courts Act. Though this provision may be inserted in the concerned section principally in order to clearly point out the exclusive jurisdiction of the Federal Court in reviewing decisions of the Superintendent or his delegate under sections 14.01 and 14.02 of the Act, it nevertheless indicates a clear intention by Parliament to subject such decisions to judicial review, and it constitutes to some extent an explicit legislative repudiation of any privative clause in regard to such decisions.
[55] The purpose of such proceedings under the Act is also instructive. The Superintendent is entrusted under paragraphs 5(3) (a) and (b) of the Act to issue a licence to a bankruptcy trustee and to monitor the conditions under which such licence has been issued, and to take appropriate action