Sam Lévy & Associés Inc. v. Lafontaine, 2005 FC 621

                                                                                                                                Date:    20050504

                                                                                                                             Docket: T-1616-04

                                                                                                                        Citation: 2005 FC 621

Ottawa, Ontario, May 4, 2005

PRESENT:     THE HONOURABLE MR. JUSTICE BLANCHARD

BETWEEN:

                                                SAM LÉVY & ASSOCIÉS INC. and

                                                       SAMUEL S. LÉVY, trustee

                                                                                                                                           Applicants

                                                                         - and -

                                                           ALAIN LAFONTAINE

                                                                                                                                        Respondent

                                            REASONS FOR ORDER AND ORDER

INTRODUCTION

[1]                This is a motion to obtain an order overruling the objections raised by the respondent during a cross-examination on affidavit.

[2]                By means of this motion, the applicants ask this Court to

(1)        allow the motion;

(2)        allow the applicants to cross-examine the respondent on all paragraphs of his affidavit and, more specifically, on the reasons for and circumstances surrounding the conservatory measures issued on May 10, 2004;

(3)        grant the applicants an extension of time to file their record at a later date to be determined by the Court; and

(4)        make no order as to costs, unless contested.

BACKGROUND

[3]                The respondent is acting in his capacity as a delegate of the Superintendent of Bankruptcies. The applicants are trustees in bankruptcy. On July 14, 2000, the respondent instructed Michel Leduc to investigate the applicants' activities and prepare a report to determine if breaches of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the BIA) justified holding a hearing into the trustees' conduct.

[4]                On May 10, 2001, the respondent, pursuant to the authority granted to him by the BIA, directed the applicants to take six distinct conservatory measures. These measures were primarily aimed at preserving the assets under the applicants' administration.

[5]                On January 16, 2004, the applicants asked the respondent to lift or amend the conservatory measures, which the respondent refused to do on February 12, 2004. The applicants are therefore applying for judicial review of this decision.

[6]                On February 17, 2005, the respondent was cross-examined on his affidavit. Respondent's counsel raised several objections. The applicants are asking this Court to overrule those objections.

ANALYSIS

[7]                The right to cross-examination on affidavit is provided for under section 83 of the Federal Court Rules, SOR/98-106, as amended by SOR/2002-417 and SOR/2004-283 (the Rules).

[8]                The applicable case law has established a number of basic rules governing the scope of a cross-examination on affidavit.

[9]                First of all, a cross-examination on affidavit should not be confused with an examination for discovery, since the former is much more restricted in its scope. Hugessen J.A., in Merck Frosst Canada Inc. v. Canada (Minister of Health), [1997] F.C.J. No. 1847 (QL)), named the most important points distinguishing the two proceedings:

It is well to start with some elementary principles. Cross-examination is not examination for discovery and differs from examination for discovery in several important respects. In particular:

(a)           the person examined is a witness not a party;

(b)           answers given are evidence not admissions;

(c)           absence of knowledge is an acceptable answer; the witness cannot be required to inform him or herself;

(d)           production of documents can only be required on the same basis as for any other witness i.e. if the witness has the custody or control of the document;

(e)           the rules of relevance are more limited.

[10]            Hugessen J.A. added that, in the context of an application for judicial review, it is the affidavits filed by the parties that define the formal relevance of the issues. He wrote:

Formal relevance is determined by reference to the issues of fact which separate the parties. In an action those issues are defined by the pleadings, but in an application for judicial review, where there are no pleadings (the notice of motion itself being required to set out only the legal as opposed to the factual grounds for seeking review), the issues are defined by the affidavits which are filed by the parties. Thus, cross-examination of the deponents of an affidavit is limited to those facts sworn to by the deponent and the deponent of any other affidavits filed in the proceeding.

[11]            Hugessen J.A. went on to explain that the questions asked on cross-examination must also meet the requirement of legal relevance:

Over and above formal relevance, however, questions on cross-examination must also meet the requirement of legal relevance. Even when a fact has been sworn to in the proceeding, it does not have legal relevance unless its existence or non-existence can assist in determining whether or not the remedy sought can be granted. (I leave aside questions aimed at attacking the witness's personal credibility which are in a class by themselves). Thus, to take a simple example, where a deponent sets out his or her name and address, as many do, it would be a very rare case where questions on those matters would have legal relevance, that is to say, have any possible bearing on the outcome of the litigation.

[12]            The ability to object to questions is necessarily related to the scope of a cross-examination on affidavit and limited by the context of this proceeding. With reference to the scope of the cross-examination, the deponent is entitled to refuse to answer if the proper scope of the cross-examination is exceeded: Global Television (Global Lethbridge, a Division of CanWest Global Communication Corp.) v. Communications, Energy and Paper Union of Canada, 2002 FCA 376.

[13]            In the case at bar, the respondent's arguments clearly indicate that the objections relate to relevance. Thus, according to the case law, to determine if an objection based on relevance has merit, we must

(1)        consider the question's formal relevance, that is, whether it regards facts set out in the deponent's affidavit or in another affidavit filed in connection with the case; and

(2)        consider the question's legal relevance, that is, whether it regards a fact whose existence or non-existence could contribute to determining if the remedy sought can be granted or not.

[14]            The applicants submit that it is very important that the respondent be cross-examined on the way in which the investigations that led to the conservatory measures were carried out. The applicants are particularly concerned about the conduct of investigator Michel Leduc, the author of one of the reports which the respondent used as a basis for issuing the conservatory measures, for the following reasons:

(1)        on January 19, 2005, in a similar case, Superintendent Mayrand, the delegated authority, rendered a decision to the effect that investigator Michel Leduc should no longer be allowed to investigate the professional conduct of trustees;

(2)        the same investigator, Michel Leduc, investigated the present case, so it is therefore important, according to the applicants, to know how Mr. Leduc conducted his investigation; and

(3)        Michel Leduc was acting on behalf of the respondent.

[15]            The applicants feel that they need to know the reasons and circumstances that led to the conservatory measures in order to understand the decision to maintain those measures. They argue that prohibiting them from asking the respondent questions about the respondent's affidavit is contrary to the Rules and to the principle of a cross-examination on affidavit. The applicants say that, if the facts raised by the respondent cannot be contradicted or explained, they will be unable to file their records.

[16]            In reply, the respondent submits that the 31 objections raised during his cross-examination on affidavit have merit. The respondent contends that the dispute before this Court with regard to the judicial review sought by the applicants consists in determining if there are grounds to review the respondent's February 12, 2004 decision to refuse to lift the conservatory measures.

[17]            The respondent points out that the applicants chose not to contest the May 10, 2001 decision before this Court, even though this avenue was open to them. Therefore, they cannot try to do the same thing indirectly by means of judicial review.

[18]            It is helpful to consider the remedy sought by the applicants in connection with their application for judicial review. They claim the following remedies:

(1)        allow the application for judicial review;

(2)        set aside the February 12, 2004 decision of respondent Alain Lafontaine upholding all of the conservatory measures issued against the applicants on May 10, 2001;

(3)        say and declare that there is no objective threat to the integrity of the assets administered by trustees Samuel S. Lévy and Sam Lévy & Associés Inc. as at February 13, 2004, and that consequently section 14.03 does not apply in the present case, and set aside for all intents and purposes the conservatory measures directions given on May 10, 2001, by the respondent Alain Lafontaine;

(4)        declare that upholding the conservatory measures issued pursuant to section 14.03 of the Bankruptcy and Insolvency Act violates paragraphs 1(a) and 2(e) of the Canadian Bill of Rights; and

(5)        declare the conservatory measures upheld by Alain Lafontaine in his February 12, 2004 decision to be null.

[19]            It was agreed at the hearing that the questions and objections at issue in this motion raise two fundamental questions:

(1)         Can the applicants cross-examine on every paragraph of the affidavit?

2)          Can the applicants cross-examine on the paragraphs relating to the investigation carried out by investigator Michel Leduc?

[20]            With regard to the first question, I am of the opinion that the principles set out by Hugessen J.A. in Merck Frosst, supra, apply. The applicants may cross-examine on the facts set out in the affidavit, provided the questions are legally relevant.

[21]            The legal relevance of the questions must be determined in light of the legal debate regarding the judicial review application before this Court, that is, whether there are grounds to review the respondent's February 12, 2004 decision not to set aside or amend the conservatory measures directions issued on May 10, 2001. That these measures are in dispute is not contested; in fact, the respondent concedes this point. At paragraph 15 of his affidavit, he states the following:

[translation] At issue in this case are the conservatory measures that I issued on May 10, 2001, and my February 12, 2004 decision to have them remain in force; the disciplinary report, meanwhile, is currently before the Superintendent of Bankruptcies delegate, the Honourable Mr. Justice Fred Kaufman, retired, of the Quebec Court of Appeal. [Emphasis added.]

[22]            However, the respondent does indicate in his affidavit that his decision to refuse to lift or amend the conservatory measures was in no way based on the interim report of investigator Michel Leduc; rather, it was based on the respondents' failure to provide explanations relating to their professional conduct.

[translation]

17.           The events subsequent to the issuance of the conservatory measures on May 10, 2001, show that, despite the numerous occasions when the trustees could have explained their conduct and in so doing have said conservatory measures lifted, the trustees deliberately avoided any sort of debate before a court of law or administrative tribunal that would allow them to explain their version of events and their actions as trustees in bankruptcy.

18.          Thus, since May 10, 2001, the applicants have still not explained the misconduct upon which the conservatory measures are based or the acts mentioned in the disciplinary report.

. . .

31.          To this day, the applicants have made no attempt to explain how I erred in my assessment of the facts set out at paragraph 23 of this affidavit or how my "reasonable grounds to believe" that the assets should be preserved were baseless.

32.          I might very well have decided to lift the conservatory measures if I had been provided with satisfactory explanations for the omissions, irregularities and misconduct set out at paragraph 23 of this affidavit, thus avoiding the array of proceedings filed by the applicants in Superior Court, the Quebec Court of Appeal and the Supreme Court of Canada, as well as with the delegate of the Superintendent of Bankruptcy and, now, before this honourable Court.

. . .

48.          At any rate, and as mentioned in the preceding, the applicants never provided me with any explanation whatsoever for the deficiencies in their administration as set out at paragraph 23.

. . .

79.          Rather than exercise their right to be heard and argue their position as provided for under subsection 14.01(1) of the BIA and possibly put an end to the conservatory measures by explaining their conduct, the trustees instead chose to initiate an array of proceedings aimed at avoiding this hearing, which could have taken place as early as 2002.

. . .

92.          I issued the conservatory measures, including those named in this application, on May 10, 2001, because I had reason to believe that the assets administered by the applicants were at risk, given the applicants' conduct and, more specifically, the facts set out at paragraph 23 of this affidavit. Since that time, two avenues have been open to the trustees to lift or terminate the conservatory measures. On the one hand, the trustees could have marshalled supporting evidence to demonstrate to the undersigned that the grounds on which said measures were issued were erroneous, in which case the undersigned would have gladly considered lifting them. On the other hand, in proceeding with the hearing on their professional conduct, they would have had an excellent opportunity to explain to delegate Kaufman why the allegations upon which the conservatory measures were based were incorrect.

93.          Neither of these avenues was taken by the trustees, such that, to this day, there are still reasonable grounds to believe that action on my part was required to preserve the assets, and there is nothing to warrant making any changes in this regard.

[23]            It is important to note that the applicants did not contest the May 10, 2001 decision to issue conservatory measures. The subject of judicial review is the February 12, 2004 decision not to lift or amend the conservatory measures. These measures, which are set out at paragraph 23 of the respondent's affidavit, are thus still in force.

[24]            To meet the requirement of legal relevance, the applicants, in conducting their cross-examination on affidavit, must ask questions about facts whose existence or non-existence can help determine if the remedy sought can be granted or not. In this case, these facts concern the February 12, 2004 decision and the conservatory measures still in force, but not the issuance of those measures, which arose out of the May 10, 2001 decision. The latter decision is not the subject of the judicial review in this case.

[25]            Consequently, and subject to the ultimate ruling of the reviewing judge, the questions concerning the conservatory measures themselves and the February 12, 2004 decision not to lift or amend them are allowed, and the objections raised against them are overruled. The questions concerning the facts surrounding the issuance of the conservatory measures on May 10, 2001, are not legally relevant; therefore, those questions are disallowed, and the objections raised against them are sustained.

[26]            More specifically, the objections sustained include, but are not limited to, those raised by the respondent to the questions posed by the applicants with regard to the following facts:

(a)        the respondent's authority to intervene to have legislative provisions amended;

(b)        the training offered to investigator Michel Leduc;

(c)        the respondent's professional history;

(d)        the name of the person who decided to appeal delegate Kaufman's decision to postpone the disciplinary hearing;

(e)        whether investigator Michel Leduc met with one of the applicants;

(f)         whether the respondent collaborated with other individuals in issuing the conservatory measures;

(g)        other cases under the respondent's responsibility;

(h)        the events that occurred after the conservatory measures were issued and that are the subject of a dispute before the Quebec Superior Court; and

(i)         whether the respondent stated that delegate Kaufman would not be assigned any more cases.

In my view, these questions have no legal relevance, in that they could not have any bearing on the outcome of the dispute. These objections are sustained.

ORDER

THE COURT ORDERS:

1.          The motion is granted in part.

2.          The questions regarding the conservatory measures themselves and the February 12, 2004 decision not to lift or amend them are allowed, and the objections to them are overruled. The questions regarding the facts surrounding the issuance of the conservatory measures on May 10, 2001, are not legally relevant and will not be allowed. The objections against them are therefore sustained.

3.          More specifically, the objections sustained include, but are not limited to, those raised by the respondent to the questions posed by the applicants with regard to the following elements of the affidavit:

(a)        the respondent's authority to intervene to have legislative provisions amended;

(b)        the training offered to investigator Michel Leduc;

(c)        the respondent's professional history;

(d)        the name of the person who decided to appeal delegate Kaufman's decision to postpone the disciplinary hearing;

(e)        whether investigator Michel Leduc met with one of the applicants;

(f)         whether the respondent collaborated with other individuals in issuing the conservatory measures;

(g)        other cases under the respondent's responsibility;

(h)        the events that occurred after the conservatory measures were issued and that are the subject of a dispute before the Quebec Superior Court; and

(i)         whether the respondent stated that delegate Kaufman would not be assigned any more cases.

4.         An extension of time is granted to the applicants so that they may file their record at a time agreed upon by the parties in accordance with a schedule to be drawn up jointly by the them and filed with the Court within 15 days following the date of this order.

5.          There is no order as to costs.

                                                                                                                        "Edmond P. Blanchard"         

                                                                                                                                                   Judge                   

Certified true translation

Michael Palles

                                                             FEDERAL COURT

                                                      SOLICITORS OF RECORD

DOCKET:                                           T-1616-04

STYLE OF CAUSE:               Sam Lévy & Associés Inc. and Samuel S. Lévy v. Alain Lafontaine

PLACE OF HEARING:                     Montréal, Quebec

DATE OF HEARING:                       April 25, 2005

REASONS FOR ORDER BY:         The Honourable Mr. Justice Edmond P. Blanchard

DATED:                                              May 4, 2005

APPEARANCES:

Daniel Des Aulniers                                                                   FOR THE APPLICANTS

Robert Monette                                                                         FOR THE RESPONDENT

SOLICITORS OF RECORD:

Grondin, Poudrier, Bernier                                                         FOR THE APPLICANTS

500 Grande-Allée East, Suite 900

Québec, Quebec G1R 2J7

Deblois & Associés                                                                   FOR THE RESPONDENT

2875 Laurier Blvd., 10th Floor

Ste. Foy, Quebec G1V 2M2