Sztern v. Canada (Attorney General), 2010 FC 181

Federal Court

Cour fédérale

 

Date: 20100222

Docket: T-49-09

Citation: 2010 FC 181

Ottawa, Ontario, February 22, 2010

PRESENT:     The Honourable Mr. Justice Boivin

 

 

BETWEEN:

HENRY SZTERN and

HENRY SZTERN & ASSOCIÉS INC.

 

Applicants

 

and

 

THE ATTORNEY GENERAL OF CANADA

 

Respondent

 

 

 

REASONS FOR JUDGMENT AND JUDGMENT

 

[1]               This is an application for judicial review by Henry Sztern (the applicant) and Henry Stzern & Associés Inc. (together, the applicants) of an ongoing disciplinary decision of Delegate André Deslongchamps (the Delegate), in his capacity as a delegate of the Superintendent of Bankruptcy, pursuant to section 14.01 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the Act). The Delegate ordered that the trustee licences of Henry Sztern and Henry Sztern & Associés Inc. be cancelled.

[2]               Henry Sztern was self-represented at the hearing before the Court. For ease of reference, the Court will refer in its decision to Henry Sztern as the applicant and Henry Sztern & Associés Inc. as the applicants.

 

[3]               Henry Sztern has held a licence as an individual trustee since 1985 and Henry Sztern & Associés Inc. have held a licence as a corporate trustee since September 27, 1991. These two licences were not renewed by their holder in 2004.

 

[4]               The Office of the Superintendent of Bankruptcy (OSB) supervises the administration of all the estates and matters to which the Act applies, including trustees’ and debtors’ compliance with the Act (subsection 5(2) of the Act).

 

[5]               After an initial report on the administration of the Henry Sztern and Henry Sztern & Associés Inc., the Hon. Benjamin Greenberg approved the agreement reached between the Superintendent and the applicants on August 29, 2001. Pursuant to this order, Henry Sztern’s personal trustee licence was suspended from December 1, 2001 to June 30, 2002 and the corporate trustee licence of Henry Sztern & Associés Inc. was subject to limitations for a two-month period beginning December 1, 2001.

 

[6]               On April 2, 2003, following these disciplinary actions and as a result of several complaints received by the Office of the Superintendent of Bankruptcy, Alain Lafontaine, the Superintendent’s deputy, issued conservatory measures pursuant to section 14.03 of the Act.

[7]               Following new revelations, Alain Lafontaine issued new conservatory measures in order to safeguard the assets under the administration of the applicants on April 14, 2003. All open files were transferred to a guardian trustee, H.H. Davis & Associates Inc. (the Guardian Trustee), who was directed to take possession and control of the applicants’ files. The taking of an inventory on April 14, 2003 indicated the existence of 1,349 files under the Henry Sztern’s responsibility in his capacity as trustee.

 

[8]               Alain Lafontaine issued further conservatory measures on May 6, 2003 and appointed Gilles-Normand Lavallée and/or Bernadette Blain as official receivers to complete the administration of the applicants’ files.

 

[9]               Following an order by Justice Pinard of this Court dated June 27, 2003, representatives of the Superintendent’s deputy went to the residence of Henry Sztern on June 30, 2003 and took possession and/or obtained missing electronic data.

 

[10]           Following the issuance of the first conservatory measures, the OSB ordered an investigation into the conduct of the applicants pursuant to subsection 5(3)(e) of the Act. The mandate was first given to Senior Analyst Deborah Jazey in March 2003 and subsequently to Senior Analyst Sylvie Laperrière (the Senior Analyst) on April 23, 2004.

 

[11]           The investigation revealed numerous irregularities in the applicants’ conduct. Notice was given to the Superintendent of Bankruptcy by way of a written report prepared by the Senior Analyst on August 26, 2005 and later amended on December 6, 2007. A written notice was transmitted to Henry Sztern in a letter dated August 29, 2005. The report contained 35 allegations of offences against provisions of the Act, the Bankruptcy and Insolvency General Rules, C.R.C., c. 368 (the Rules) and the Superintendent’s Directives, allegedly committed by Henry Sztern and Henry Sztern & Associés Inc. The Senior Analyst’s allegations of offences are as follows:

A.        False and misleading accounting system

1.         The trustees maintained a second accounting system which did not indicate the unauthorized withdrawals made by the trustees. In doing so, the trustees maintained an accounting system that they knew or ought to have known to be false and misleading, thereby contravening section 13.5 of the Act and sections 36 and 45 of the Rules (attachment 10)

 

B.         Unauthorized withdrawals

2.         Between the months of February 1998 and April 2003, the trustees made premature draws totalling $305,217.73 (including taxes) from the trust accounts for 399 summary administration estates and withdrew amounts in excess of the tariff totalling $156,205.48 from the trust accounts for 187 of these summary administration estates, thereby contravening section 156 of the Act and section 128 of the Rules, section 13.5 of the Act and section 48 of the Rules (attachment 11)

           

3.         Between the months of June 1997 and April 2003, the trustees made withdrawals in excess of the tariff totalling $574,687.91 from the trust accounts for 201 consumer proposal files, thereby contravening section 66.26 of the Act and section 129 of the Rules, section 13.5 of the Act and section 48 of the Rules (attachment 12)

 

C.        Prohibited actions while the licence of trustee: Henry Sztern was suspended between December 1, 2001 and July 1, 2002:

4.         The trustee Henry Sztern exercised his powers as trustee while his licence was suspended by:

 

a) making 6 withdrawals totalling $3,300 from the consumer proposal file of Alain Germain between January 2002 and June 2002; (attachments 14 and 15)

 

b) making 7 withdrawals totalling $2,450 from the consumer proposal file of Benoît Kollar & Chantal Séguin between January 2002 and July 2002; (attachments 14 and 16)

 

c) making 6 withdrawals totalling $950 from the summary bankruptcy files of Alain Bazinet, Chet Rom, Duc Trong Nguyen, Jacques Rondeau & Dany Huppé, Sébastien Lamontagne & Sylvain Gagné, on or about March 12, 2002; (attachments 14 and 17)

 

d) making a withdrawal of $6,700 from the summary bankruptcy files of Duc Trong Nguyen on or about January 15, 2002; (attachments 13, 14, 17 and 18)

 

e) making a withdrawal of $450 on or about February 1, 2002 from the summary bankruptcy file of Jacques Rondeau & Dany Huppé; (attachment 17)

 

f) making a withdrawal of $100 from the summary bankruptcy file of Sylvain Gagné on or about March 22, 2002; (attachment 17)

 

g) making 6 withdrawals totalling $2,520 from the consumer proposal file of Jean-Jacques Vigier & Pierrette Laprade between January 2002 and June 2002; (attachment 10)

 

h) making a withdrawal of $2,500 on or about January 22, 2002 and a withdrawal of $850 on or about January 25, 2002 from the trust account of the bankruptcy file of Service de Mini-Remorque H.C.H. Inc.; (attachment 19)

 

i) making a withdrawal of $6,000 on or about April 4, 2002 and a withdrawal of $5,000 on or about April 5, 2002 from the trust account of the bankruptcy file of 176984 Canada Inc., (attachment 20);

 

thereby contravening the Trustee Suspension Order issued on August 29, 2001 by the Honourable Benjamin J. Greenberg, delegate of the Superintendent of Bankruptcy, section 13.5 of the Act and section 34 and 36 of the Rules (attachment 2).

 

5.         The trustee Henry Sztern, while his licence was suspended, predated cheques November 30, 2001 to:

 

a) make a withdrawal of $550 from the trust account in the consumer proposal file of Alain Germain on or about March 12, 2002; (attachments 14 and 15)

 

b) make a withdrawal of $350 from the trust account in the consumer proposal file of Benoît Kollar & Chantal Séguin on or about March 12, 2002; (attachments 14 and 16)

 

c) make 5 withdrawals totalling $2,095 from the consumer proposal file of Jean-Jacques Vigier & Pierrette Laprade between January 2002 and June 2002; (attachment 10)

 

d) make a withdrawal of $2,500 on or about January 22, 2002 and a withdrawal of $850 on or about January 25, 2002 from the trust account in the bankruptcy file of Service de Mini-Remorque H.C.H. Inc.; (attachments 13 and 19)

 

e) make a withdrawal of $6,000 on or about April 4, 2002 and a withdrawal of $5,000 on or about April 5, 2002 from the trust account in the bankruptcy file of 176984 Canada Inc., (attachment 20)

 

thereby contravening section 13.5 of the Act and sections 45 and 48 of the Rules.

 

E.         Moneys not deposited in estate and insolvency trust accounts

7.         Between 1999 and April 2003, the trustees did not deposit in a bank all moneys received for the account of each estate in the trust account, which amount totalled $89,782.43 received in 183 summary bankruptcy administration files and $43,648.62 received in 42 consumer proposals, thereby contravening subsections 5(5) and 25(1) of the Act and subsections 3b), 4(1)a) and 4(1)b) of Directive 5 of the Superintendent of Bankruptcy on Estate Funds and Banking issued on November 17, 1994 (attachment 22).

 

F.         Moneys received as indemnification not deposited in a proper account

            8.         The trustee did not deposit the funds received as indemnification:

- an amount of $2,000 received in the matter of the bankruptcy file of Pisos Inc. on or about October 24, 2001; (attachments 23, 25, 26 and 27)

 

- an amount of $1,500 received on or about October 22, 2001 and $2,000 received on or about October 24, 2001 in the matter of the bankruptcy file of Création Liboria Ltée; (attachments 24, 25, 26 and 27)

 

in the estate bank trust account, in a separate bank account clearly identified for that purpose or in a separate bank trust account containing the aggregate of all such funds held, thereby contravening subsection 25(1) of the Act, subsection 5(5) of the Act and sections 16 and 17 of Direction N^o 5R of the Superintendent of Bankruptcy on Third Party Deposits and Guarantees.

 

G.        Bankruptcy of Linh Khan Nguyen

9.         In April 1998, the trustees made an unauthorized withdrawal of $84,000 from the trust account of the estate of Linh Khan Nguyen, thereby contravening subsection 25(1.3) of the Act (attachments 28 and 29).

 

H.        Bankruptcy of L.C.T. Metal Inc.

10.       Between the months of January 2000 and May 2000, the trustees made unauthorized withdrawals totalling $32,522.88 (including taxes) from the trust account of the estate of L.C.T. Metal Inc., thereby contravening subsection 25(1.3) of the Act (attachments 30 and 31).

 

I.          Bankruptcy of 176984 Canada Inc.

11.       Between the months of August 1993 and May 2002, the trustees made unauthorized withdrawals totalling $82,018.89 (including taxes) from the trust account of the estate of 176984 Canada Inc., thereby contravening subsection 25(1.3) of the Act (attachment 32).

 

J.          Bankruptcy of Meco Limited

12.       Between the months of February 1992 and February 2001, the trustees made eight payments totalling $173,105.59 to the lawyer of the estate from the trust account of the estate of Meco Limited without previously submitting their bill of costs to the court for taxation, thereby contravening subsection 197(4) of the Act and subsection 18(1) of the Rules (attachments 33, 34 and 35).

 

13.       On or about July 7, 1998, the trustees wired a payment of $446,499.04 to “LORNE GOLDMAN ‘IN TRUST’” from the trust account of the estate of Meco Limited, even though this lawyer’s bill of costs was only taxed by order dated December 20, 2000, thereby contravening subsections 25(1.3), 25(2) and 197(4) of the Act (attachments 35 and 36).

 

14.       On or about February 13, 2001, the trustees deposited in their account No. 0301637, “HENRY SZTERN & ASSOCIES REG’D”, 42 GST refunds (input credits) issued in the name of the debtor, Meco Limited, and totalling $52,145.03, rather than depositing them in the estate trust account, thereby contravening subsections 25(1) and 25(3) of the Act (attachment 37, p. 5 and attachments 44 and 49).

 

15.       Between the months of January 1999 and March 2001, the trustees made unauthorized withdrawals totalling $492,957.82 (including taxes) of which $440,812.79 came from the trust account of the estate of Meco Limited and $52,145.03 from monies deposited to an account No. 0301637 opened under the name “H. SZTERN & ASSOCIES REG’D”, thereby contravening subsection 25(1.3) of the Act (attachment 37, p. 4-5 and 14, and attachments 44 and 49).

 

16.       The trustees signed false minutes from a meeting of inspectors dated January 1999 and associated themselves with two other false minutes from meetings of inspectors dated February 16, 1999 and April 1, 1999, by using them to withdraw fees totalling $212,658.51 (including taxes) from the trust account of the estate of Meco Limited, thereby contravening section 13.5 of the Act and sections 36 and 45 of the Rules (attachment 37, p. 5 and attachment 44).

 

K.        Bankruptcy of Eric Lacroix

17.       Between the months of June 2000 and October 2001, the trustees made unauthorized withdrawals totalling $18,133.73 (including taxes) from the trust account of the estate of Eric Lacroix, thereby contravening subsection 25(1.3) of the Act (attachment 37, p. 6-7, and attachments 45 and 49).

 

L.         Bankruptcy of 9084-8144 Quebec Inc.

18.       On or about December 12, 2002, the trustees made an unauthorized transfer of $20,000 from the trust account of the estate of 9084-8144 Quebec Inc. to their account No. 0301637, “H. SZTERN & ASSOCIES REG’D”, thereby contravening subsection 25(1.3) of the Act (attachment 37, p. 8 and attachments 46 and 49).

 

M.        Bankruptcy of Service de Mini-Remorque H.C.H. Inc.

19.       Between the months of February 2001 and February 2002, the trustees made unauthorized withdrawals totalling $46,107.40 (including taxes) from the trust account of the estate of Service de Mini-Remorque H.C.H. Inc., thereby contravening subsection 25(1.3) of the Act (attachment 37, p. 9-10, and attachments 47 and 49).

N.        Bankruptcy of Kenneth Roy Sinclair

20.       Between the months of July 2000 and March 2001, the trustees made unauthorized withdrawals totalling $77,423.67 (including taxes) from the trust account of the estate of Kenneth Roy Sinclair, thereby contravening subsection 25(1.3) of the Act (attachment 37, p. 10-11, and attachments 48 and 49).

 

O.        Submitting falsified bank statements to the Official Receiver

            22.       The trustee Henry Sztern, in the following consumer proposal files:

                       

Richard Archambault & Andrée Jean (41-235334/35),

                        Michel Jobin & Diane Bouchard Jobin (41-240676/77),

                        Denis Dufour & Linda Bouchard (41-241615/16),

                        Marcel Lavoie (41-270213),

 

falsified bank statements for the period from Nov. 29/01 to Dec. 31/02, copies of which were submitted on February 19, 2003 to representatives of the Office of the Superintendent of Bankruptcy, thereby contravening section 13.5 of the Act and sections 36, 39 and 45 of the Rules (attachment 38).

 

23.       The trustee faxed falsified bank statements on or about March 5, 2003 to representatives of the Office of the Superintendent of Bankruptcy in the following consumer proposal files:

 

                        Rachel Chartrand (41-240055), (attachments 39 and 40)

Michel Jobin & Diane Bouchard Jobin (41-240676/77), (attachments 38 and 39)

Marcel Lavoie (41-270213), (attachments 38 and 39)

                        Bernard Séguin (41-230928), (aattachments 39 and 40)

Richard Archambault & Andrée Jean (41-235334/35), (attachments 38 and 39)

Rémi Dumais & France Beauregard (41-239883/84), (attachments 39 and 42)

 

thereby contravening section 13.5 of the Act and sections 36, 39 and 45 of the Rules.

 

24.  The trustee faxed falsified bank statements for the consumer proposal file of Denis Dufour and Linda Bouchard on or about March 21, 2003 to representatives of the Office of the Superintendent of Bankruptcy, thereby contravening section 13.5 of the Act and sections 36, 39 and 45 of the Rules. (attachment 43)

 

[12]           In summary, the written notice of the Senior Analyst alleged that the applicants, while holding a trustee licence: maintained a false and misleading accounting system; made unauthorized withdrawals; made cash withdrawals in contravention with subsection 25(2) of the Act; failed to deposit moneys in trust accounts; made several unauthorized withdrawals from the trust account of several estates and falsified bank statements; and Henry Sztern exercised his powers as trustee while his licence was suspended.

 

[13]           The Senior Analyst recommended that the applicants’ licences be cancelled and that they make restitution in 14 estate files, representing a total of $1 899 173.86. These recommendations were amended in November 2005 and five restitution sanctions were removed because of a civil action filed by the Guardian Trustee against the applicants in the Superior Court in Montreal, having the same cause of action (“action en récupération de deniers”).

 

[14]           On November 1, 2005, the OSB decided that a disciplinary hearing would be held and the powers, duties and functions were delegated to the Hon. Lawrence A. Poitras. The Hon. Poitras asked to be excused and resigned from this delegation in February 2006. The OSB then delegated the powers and duties to the Hon. André Deslongchamps (the Delegate).

 

[15]           The parties held a first pre-hearing conference on April 19, 2006. The applicant requested to examine for discovery but this request was denied by the Delegate.

 

[16]           On May 15, 2006, the applicant filed a motion for particulars. Within a month, additional documents were provided to him by the Senior Analyst.

 

[17]           In July 2006, the applicant filed a motion to strike allegations which was dismissed by the Delegate on February 26, 2008.

 

[18]           In April 2007, the applicant filed a motion to obtain the services of an interpreter but this motion was dismissed by the Delegate on October 2, 2007.

 

[19]           In April 2007, the applicant filed a motion holding that he had reason to believe that the Delegate was in conflict of interest and there were reasonable grounds to apprehend bias on his part. The motion was dismissed by the Delegate on June 5, 2007. The applicant filed for judicial review of this decision, but leave was dismissed by this Court on February 7, 2008.

 

[20]           The actual disciplinary hearing began on February 12, 2008. There were 18 days of hearing and 16 witnesses were heard. Henry Sztern was self-represented and Henry Sztern & Associés Inc. was not represented. Henry Sztern testified but the applicant did not present any other witnesses. The hearing ended on June 3, 2008 and the parties were invited to submit their submissions in writing.

 

[21]           On December 15, 2008, the Delegate rendered his decision, which was translated by the OSB on February 3, 2009. On January 10, 2009, the applicants filed an application for judicial review requesting the decision of the Delegate be quashed.

 

Impugned Decision

[22]           The Delegate noted that the proceeding is disciplinary in nature and that the alleged offences have been treated by the courts in the past as similar to a quasi-penal offence. The recognition of the quasi-penal nature of the proof and the hearing before the Delegate does not make subsection 14.02(2) of the Act inoperative. The application of subsection 14.02(2) of the Act is subject to the rules of natural justice (Perrier v. Canada (Superintendent of Bankruptcy), (1995), 93 F.T.R. 127, 55 A.C.W.S. (3d) 902). The Delegate noted that the burden of rebutting the allegations or offences alleged by the Senior Analyst’s report rests on the applicants.

 

[23]           Moreover, on the applicants’ motion to dismiss the allegations, the Delegate on February 26, 2008, found that the disciplinary and/or quasi-penal nature of the allegations entailed a duty of disclosure or information by the Senior Analyst and that this duty had been performed.

 

[24]           Henry Sztern raised a specific objection, referring to subsection 5(2) of the Canada Evidence Act, R.S., 1985, c. C.-5 (the CEA) and section 13 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11 (the Charter) on the ground of possible self-incrimination to answering a specific question in the case of a specific offence (K.17).

[25]           In R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609 at paragraph 22, discussing the application of the Charter, the Supreme Court stated that section 13, which was adopted to expand the scope of the protection conferred by section 5 of the CEA, is designed “to protect individuals from being indirectly compelled to incriminate themselves”. On the other hand, the Supreme Court had previously found that a distinction is made between impeachment of credibility and incrimination in ways which have become unduly and unnecessarily complex and technical          (R. v. Mannion, [1986] 2 S.C.R. 272, 69 N.R. 189). Henry Sztern’s objection was dismissed as the Delegate noted two voluntary testimonies before him in cross-examination and in the Superior Court. He concluded that the only purpose of the cross-examination in the present proceedings was to impeach Henry Sztern’s credibility.

 

[26]           The Delegate analyzed the applicants’ operational method and noted that only Henry Sztern signed cheques. Certain banking transactions were made by “debit memos” sent to the Toronto-Dominion Bank (TD Bank). These cheques and these “debit memos” were used to make transfers of fees from “in trust accounts” opened for each of the debtors. These transfers were made either to the bank account of Henry Sztern & Associés Inc. (No. 301637) or to Henry Sztern’s personal account (No. 860407).

 

[27]           The Delegate then proceeded with a thorough analysis of each of the 35 alleged offences. The Delegate was persuaded from the evidence submitted as a whole that Henry Sztern & Associés Inc. and Henry Sztern personally disregarded the provisions of the Act and the Rules. By giving questionable and illegal accounting directions to their employees, the applicants knowingly converted large sums of money to their own use, without regard to those to whom they were accountable. By their actions, the Delegate found that they disregarded the required high standards of ethics, which are central to the maintenance of public trust in the administration of the Act (section 34 of the Rules). They used subterfuges and falsified documents, knowing they were false, in order to conceal the true state of files controlled or administered by them pursuant to the Act and Rules.

 

[28]           The Delegate found that, based on the overwhelming evidence submitted, there is no question that the applicants knew of the irregularities of the relevant transfers of funds. In the Delegate’s opinion, the applicants had systematically anticipated the fees to be earned, without the necessary authorizations under the Act and Rules by inspectors or by the Court.

 

[29]           The Delegate also noted there was no application to renew the trustee licences of Henry Sztern and Henry Sztern & Associés Inc.

 

[30]           The Delegate did not give much weight to Henry Sztern’s testimony, as he found that his testimony and his explanations were full of inaccuracies. His hesitation before admitting documentary evidence and his frequent lapses of memory in relation to specific operations undermined his credibility. The Delegate also found that the applicant sought to place responsibility on his employees.

 

[31]           The Delegate concluded that there should be reimbursement to the estates of the files discussed at the date the Guardian Trustee took possession of the files on April 14, 2003, and in accordance with the proceedings filed in the Superior Court of Montreal and their outcome. The Delegate cancelled the corporate trustee licence of Henry Sztern & Associés Inc., he cancelled the trustee licence of Henry Sztern and he reserved his decision on the other penalties sought by the Senior Analyst.

 

Issues

[32]           The applicants raise numerous issues which can be summarized as follows:

1.      What is the applicable standard of review of the Delegate’s decision?

2.      Did the Delegate err in failing to disclose relevant evidence and in displaying partiality and/or committing a breach of natural justice?

3.      Was the Delegate’s decision to cancel the applicants’ licences reasonable?

 

Relevant Legislation

[33]           Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 :

 

 

 

[34]           Canada Evidence Act, R.S., 1985, c. C.-5:

 

[35]           Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11:

 

 

Preliminary Issues

[36]           Prior to hearing the submissions of both parties, the Court addressed a number of preliminary issues raised by the respondent in his factum:

 

1-     The respondent brought to the attention of the Court the fact that the applicants named Sylvie Laperrière, es qualité Senior Analyst for the Office of the Superintendent of Bankruptcy, as respondent. The respondent alleged that the proper respondent should be the Attorney General of Canada and the style of cause should be amended in consequence. The Court agreed that the Attorney General of Canada be named as the respondent - instead of Sylvie Laperrière, es qualité Senior Analyst for the Office of the Superintendent of Bankruptcy - by virtue of Rule 303(2) of the Federal Courts Rules, SOR/98-106, as amended.

2-     The respondent also noted the memorandum of fact and law filed by the applicants exceeds the 30 pages authorized by Rule 70 of the Federal Court Rules, SOR/98-106. However, the Court noted that an Order dated May 5, 2009 by Prothonotary Morneau allowed the filing of the applicants’ memorandum of fact and law on an exceptional basis.

3-     The respondent finally alleged that Exhibits E-1 to E-8 provided by the applicants are inadmissible and should be struck from the record as they are not part of the tribunal record and they should have been submitted in a motion to file supplementary evidence. The Court indicated it was not prepared at this preliminary juncture to strike the above-mentioned exhibits from the record. The issue is therefore addressed in the Court’s decision at paragraphs 45-49.

 

1.         What is the applicable standard of review of the Delegate’s decision?

[37]           The Court agrees with the respondent that, prior to Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, the standard of review applicable to a disciplinary report and to a decision concerning the sanction of the Superintendent of Bankruptcy (and its delegate) was reasonableness simpliciter (Roy c. Poitras, 2006 FC 1386, 306 F.T.R. 83 at par. 19-21; see also Sheriff v. Canada (Superintendent of Bankruptcy), 2005 FC 305, 137 A.C.W.S. (3d) 1102 (Sheriff (FC)).

 

[38]           Considering the applicants’ main point of issue is the alleged lack of appreciation of the facts in evidence and the Delegate’s failure to consider the evidence and testimony in reaching his decision, the Court finds the applicable standard of review is reasonableness.

 

[39]           However, the Federal Court of Appeal noted in Sheriff v. Canada (Attorney General), 2006 FCA 139, [2007] 1 F.C.R. 3 (Sheriff (FCA)) at paragrah 24 that a common law duty of fairness is owed in proceedings under sections 14.01 and 14.02 of the Act. Accordingly, the standard of review on the disclosure issue is correctness (see Ellis-Don Ltd. v. Ontario (Labour Relations Board), 2001 SCC 4, [2001] 1 S.C.R. 221 at par. 65).

 

[40]           The standard of review on questions of law such as the scope of procedural fairness including procedural safeguards, impartiality of the investigation process and bias are reviewable on the standard of correctness (Sam Lévy & Associés Inc. v. Mayrand, 2005 FC 702, [2006] 2 F.C.R. 543 (Lévy (FC)), aff’d Sam Lévy & Associés Inc. v. Canada (Superintendent of Bankruptcy), 2006 FCA 205, 359 N.R. 145 (Lévy (FCA)).

 

2.         Did the Delegate err in failing to disclose relevant and material evidence and in displaying partiality and/or committing a breach of natural justice?

 

[41]           After filing their Notice of Application in this proceeding, the applicants discovered new evidence (filed as Exhibits E-1 to E-8 to the applicants’ memorandum of fact and law), which was found in February 2009 upon review of the volumes of evidence discovered by the RCMP in the criminal proceedings. The applicants submit that this new evidence confirms the Senior Analyst and her key witness, Lynda Lalande, the representative of the Guardian Trustee, knowingly withheld critical evidence which contradicts numerous unfounded allegations of the Senior Analyst.

 

[42]           According to the applicants, the Delegate erred in failing to consider Sheriff (FCA), where the Federal Court of Appeal held that the trial level Court erred in deciding that the Stinchcombe principles (R. v. Stinchcombe, [1991] 3 S.C.R. 326, 130 N.R. 277) do not apply as it pertains to requirements of full disclosure in proceedings under the Act.

 

[43]           The applicants also asserts that the alleged intentional non-disclosure of this evidence also confirms that both Lynda Lalande and Sylvie Laperrière, as officers of the Court, provided false testimony, obstructed justice and breached all rules of ethics by which they are bound.

[44]           The applicants further submit that the Delegate also erred when he summarily rejected his motion to strike allegations premised on the lack of particulars and full disclosure by the Senior Analyst. In so doing, the Delegate deprived Henry Sztern’s right to full answer and defence. The applicant argues numerous documents and improperly admitted evidence were only introduced during the proceedings before the Delegate. The applicant submits that he was not provided with the opportunity to examine all documents.

 

[45]           At the hearing before this Court, the applicants stressed that the non-disclosure of relevant material demonstrates a clear and cogent bias on the part of the Senior Analyst and the Guardian Trustee, who are duty bound as officers of the Court to truthfully and impartially communicate all information which is relevant and to submit their testimony in an impartial and unabusive manner.

 

[46]           As mentioned above at paragraph 36(3), the respondent replied that the new evidence (Exhibits E-1 to E-8) provided by the applicants is inadmissible and should be struck from the record as these exhibits are not part of the tribunal record. The respondent submitted that new evidence should have been the object of a motion to file supplementary evidence.

 

[47]           The Court acknowledges that the applicants must have access to all relevant material which may assist them. The Senior Analyst had a duty to disclose all documents unless they were clearly irrelevant. If it is established that relevant materials were not disclosed, it must be determined whether that failure to disclose impaired the applicants’ right to explore possible avenues of investigation and to have the opportunity to answer and defend themselves (Sheriff (FCA)). The procedural requirements for disciplinary proceedings under the Act give rise to a clear duty to afford the trustees fulsome disclosure, similar to the Stinchcombe principles.

 

[48]           After reviewing the record, the Court notes that the two pages of the “Trustee’s Final Statement of Receipts and Disbursements” dated May 15 1998, found at Exhibits E-7 and E-8 in the applicants’ Record, is also contained at Tab 100 under “Attachment 32” of Sylvie Laperrière’s affidavit on behalf of the respondent sworn March 23, 2009. Furthermore, in his decision, the Delegate mentions this same “Attachment 32” submitted by Senior Analyst Sylvie Laperrière at paragraph 162 of his decision. Thus, these two Exhibits (E-7 and E-8) do not constitute new evidence as contended by the applicants.

 

[49]           This leaves Exhibit E-1 to E-6. After reviewing Exhibits E-1 to E-6, the Court does not agree that the Senior Analyst withheld relevant information during the investigation as alleged by the applicants. As per the decision in Sheriff (FCA) and assuming without deciding that (i) Exhibits E-1 to E-6 were relevant but were not disclosed and (ii) a motion to file supplementary evidence was not required, the Court is nonetheless of the view that the signed authorizations from each individual inspector contained at Exhibits E-1 to E-6 do not open new lines of inquiry or change the result of the proceeding. The Delegate did not err or display personal bias and the Court finds there has been no failure by the respondent to disclose relevant evidence in the case at bar.

 

 

 

3.         Is the Delegate’s decision to cancel the Applicants’ licences reasonable?

[50]           The applicants argue that there was insufficient evidence upon which the Delegate could reasonably have extrapolated and rendered judgment on each offence alleged by the Senior Analyst against the applicants, as there was a lack of consideration and appreciation of key and relevant testimony, facts and evidence submitted. The applicants also argue that the Delegate erred in admitting evidence in contravention of the CEA and in violation of the principles of natural justice.

 

[51]           The applicants mention various examples where they contend the Delegate erred in his appreciation of the evidence and testimony before him. For example, the applicants argue that the Delegate erred in law when he allowed the introduction of all evidence, including copies of alleged banking printouts and copies of banking statements introduced by the Senior Analyst. These elements of illegal evidence breach section 29 of the CEA and the rules of natural justice. The applicants assert the Delegate improperly and incorrectly extrapolated the information on a limited number of estate bank accounts into all estates suggested by the Senior Analyst in her allegations of offences and, as a result, the Delegate’s decision is based on erroneous extrapolation and this is unreasonable.

 

[52]           The Court disagrees with the applicants. The Delegate’s decision, rendered on December 15, 2008, addresses all relevant arguments and provides a thorough analysis with respect to each of the alleged offences. Indeed, the Delegate evaluated the credibility of the witnesses, considered the evidence and arguments from both parties and applied the applicable legal principles before concluding that the offences should all be upheld.

[53]           Further, the Delegate analyzed the evidence following the rule that the burden of rebutting the allegations or alleged offences is on the applicants and he must be satisfied that the Senior Analyst’s report is credible, trustworthy and accurate (Perrier). The Delegate recognized the rules of natural justice applied to the disciplinary hearing, but also recognized that he had to consider subsection 14.02(2) of the Act.

 

[54]           Upon reviewing the record, the Court is of the view that the Delegate’s decision is not unreasonable or unsupported by evidence. The central issue of the Delegate’s decision rests on the credibility of the witnesses and the appreciation of the evidence. More particularly, the Delegate found at paragraphs 41 and 42 of his reasons that the applicant, Henry Sztern, lacked credibility: 

Henry Sztern a bien tenté, de par son témoignage et par le contre-interrogatoire de témoins appelés par l’analyste sénior, Sylvie Laperrière, de faire porter la responsabilité de l’ensemble des opérations, telles qu’elles nous ont été décrites, sur ses employés, y compris la possibilité que ses employés aient détourné, à leur propre profit, certaines des sommes d’argent.

 

Il n’a pas réussi. Ses nombreuses hésitations à admettre l’évidence, même de la preuve documentaire, et son manque de mémoire flagrant et fréquent concernant certaines opérations précises, tel qu’il appert de son contre-interrogatoire (transcription du 3 juin 2008, pages 66 et suivantes), font en sorte que sa crédibilité est grandement entachée.

 

[55]           At the hearing, the applicants repeatedly argued for a reassessment of the evidence by the Court. Suffice it to say that in a judicial review proceeding, the role of the Court is not to reassess the credibility of witnesses or the appreciation of the documentary evidence filed before the Delegate (Dunsmuir; Lake v. Canada (Minister of Justice), 2008 SCC 23, 373 N.R. 339 at par. 41; Canada (Minister of Citizenship and Immigration) v. Khosa, 2009 SCC 12). As noted in Dunsmuir, the function of judicial review is to ensure the legality, reasonableness and fairness of the administrative process and its outcome.

 

[56]           The Superintendent of Bankruptcy is appointed by the Governor in Council and is responsible for supervising the administration of all estates and matters to which the Act applies. The Act provides the Superintendent with powers related to the licensing and supervision of trustees in bankruptcy and allows the Superintendent to investigate complaints from the public concerning trustees. If deficiencies are found in their conduct, the Superintendent has the ability to impose disciplinary sanctions on a trustee (sections 14.01 and 14.02 of the Act).

 

[57]           In the present circumstances, the Superintendent, who by statute has the discretion to determine what is evidence and how it shall be weighed, did not err in law and his decision was entirely reasonable. In my opinion, the specific errors in law alleged by the applicants are not established, and those submissions provide no basis for the Court to intervene to quash the decision. The Court thus finds the Delegate’s conclusions were supported by ample facts and overwhelming evidence. It was open to him to exercise his discretion to cancel the licences of the applicants. His decision in that regard was not capricious, biased or unreasonable as to constitute a reviewable error.

 

Application of sections 11 and 13 of the Charter

[58]           During the hearing before the Delegate, the applicants objected to answering a question on the ground of possible self-incrimination because the Senior Analyst referred to his testimony in the Superior Court on the same file. The applicants submit that section 13 of the Charter reflects a long-standing form of statutory protection against compulsory self-incrimination in Canadian law and is best understood by reference to section 5 of the CEA. When a witness who is compelled to give evidence in a court proceeding is exposed to the risk of self-incrimination, the state offers statutory and constitutional protection against the subsequent use of that evidence against the witness in exchange for their full and frank testimony. If the evidence proffered is less than full and frank, the witness is subject to prosecution for perjury or for the related offence of giving contradictory testimony.

 

[59]           According to the applicants, the Delegate confirmed in his own judgment and was fully aware that the present proceeding is quasi-judicial and Charter protection does exist. They also argue that the Delegate erred when he concluded that subsection 5(2) of the CEA and section 13 together with section 11c) of the Charter have not been breached and that the Delegate incorrectly relies on Henry to support his decision. The applicant, Henry Sztern, argues he never stated during the previous Superior Court proceedings that unauthorized fees were withdrawn. According to him, the foundation of the Delegate’s understanding is false.

 

[60]           In order to decide whether sections 11 and 13 of the Charter apply to this case, the Court must first address the role and function of the Superintendent of Bankruptcy and determine whether they are criminal or disciplinary in nature. If the role and function are criminal, the Charter would apply. On the other hand, if the role and function are disciplinary, the next step is to identify whether the measures taken against the applicants are criminal or disciplinary in nature. In other words, the Court must determine whether the sanction amounts to a true penal consequence. The answer to this question will determine whether sections 11 and 13 of the Charter apply to the case at bar.

 

[61]           In Lévy (FC), my colleague Justice Martineau of this Court, in a well elaborated decision, wrote on the role and function of the Superintendent of Bankruptcy. The Superintendent exercises a general supervisory power over the administration of estates and affairs governed by the Act and thus regulates a professional and economic activity. The Superintendent is responsible for issuing licences to trustees and may suspend or cancel the licence of a trustee who does not comply with the appropriate legal requirements. The intention of Parliament was to guarantee a high degree of protection for creditors and public confidence in the bankruptcy system and the assignment of property by an insolvent debtor.

 

[62]           At paragraph 128, Justice Martineau turned to the role of the trustee and summarized its role. He noted that a trustee is a participant in the administration of property and estates and has legal obligations imposed on trustees such as competence, honesty, impartiality, integrity, due care.  These obligations “are positive, rather than prohibitory, in nature (as is generally the case in criminal law)”. He further explained the need for the Superintendent to suspend or cancel the licence of a trustee who does not comply with the legal requirements of the Act and ruled that it would be “presumptuous to seek to compare the disciplinary proceedings in question to proceedings of a penal or criminal nature”.

 

[63]           Finally, Justice Martineau also observed in Lévy (FC) that the purpose of subsections 14.01 (1) and 14.01(2) is different from a provision of a penal or criminal nature and stated the following at paragraph 154:

If we look at the organic nature of the tribunal, the institution of the Office of the Superintendant of Bankruptcy cannot be compared to a court of law, as for example is true of the Bankruptcy Court, a division of the Quebec Superior Court.  Further, remember that, originally, trustees were appointed by the Governor in Council:  the power to issue or cancel a trustee licence has never belonged to ordinary courts of law, even to the Bankruptcy Court.  The purpose of the provisions in question [subsections 14.01(1) and 14.01(2)] is different from provisions of a penal or criminal nature.”

                                                                                                            [Emphasis added]

 

[64]           I agree with my colleague Justice Martineau that the scheme of the act in general and the nature of the provisions in particular are not of a penal or criminal nature. Having decided that the purpose of subsections 14.01(1) and 14.01(2) of the Act is not penal or criminal in nature, the Court must now decide whether the measure taken against the applicants – the cancellation of their trustee licences – amounts to a true penal consequence. In order to address this issue, I now turn to the sections of the Charter relied upon by the applicants in their submissions.

 

[65]           Section 13 of the Charter provides for the right against the use of incriminating evidence given by someone in one proceeding to incriminate that same person in subsequent proceedings and it is closely related to the rights protected by sections 11(c) and 11(d) of the Charter. As noted by the Supreme Court of Canada in R. v. Dubois, [1985] 2 S.C.R. 350, 62 N.R. 50 at par. 9:

A plain reading of s. 13 indicates that the guarantee it provides is directed against self-incrimination through the use of one’s previous testimony. It is a very specific form of protection against self-incrimination and must therefore be viewed in the light of two closely related rights, the right of non-compellability and the presumption of innocence, set forth in ss. 11(c) and 11(d) of the Charter.

 

[66]           In terms of the nature of the proceedings to which these rights apply, the respective scopes of sections 11 and 13 of the Charter should generally be the same. In R. v. Wigglesworth, [1987] 2 S.C.R. 541, 81 N.R. 161 at par. 23, the Supreme Court of Canada discussed the characteristics which would bring an offence within the scope of section 11 of the Charter:

In my view, if a particular matter is of a public nature, intended to promote public order and welfare within a public sphere of activity, then that matter is the kind of matter which falls within s. 11. It falls within the section because of the kind of matter it is. This is to be distinguished from private, domestic or disciplinary matters which are regulatory, protective or corrective and which are primarily intended to maintain discipline, professional integrity and professional standards or to regulate conduct within a limited sphere of activity […]. There is also a fundamental distinction between proceedings undertaken to promote public order and welfare within a public sphere of activity and proceedings undertaken to determine fitness to obtain or maintain a licence. Where disqualifications are imposed as part of a scheme for regulating an activity in order to protect the public, disqualification proceedings are not the sort of “offence” proceedings to which s. 11 is applicable. Proceedings of an administrative nature instituted for the protection of the public in accordance with the policy of a statute are also not the sort of “offence” proceedings to which s. 11 is applicable.

 

 [Emphasis added]

 

[67]           Furthermore, section 13 of the Charter is only invoked regarding hearings where the penalty for the alleged offence or conduct involves true penal consequences (McDonald v. Law Society of Alberta, (1993), 44 A.C.W.S. (3d) 681, [1994] 3 W.W.R. 697 (Alta. Q.B.) at par. 13). The meaning of true penal consequences was assessed in Wigglesworth at par. 24:

 

“… a true penal consequence which would attract the application of s. 11 is imprisonment or a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.”

 

[68]           In Knutson v. S.R.N.A., (1990), 24 A.C.W.S. (3d) 706, [1991] 2 W.W.R. 327 (Sask. C.A.), the Saskatchewan Court of Appeal found the loss of a job as a result of disciplinary proceedings did not amount to a true penal consequence. The disqualification was an internal and private disciplinary matter imposed as part of a scheme for regulating an activity in order to protect the public. Similarly, following the application of the test in Wigglesworth to the case at bar, the Court is of the view that the disciplinary hearing undertaken by the Delegate resulting in the cancellation of the applicants’ licences does not amount to a true penal consequence. Consequently, sections 11 and 13 of the Charter do not apply to this case. The applicants’ argument on this point cannot be accepted.

 

Interpretation / Translation

[69]           The applicants also argue that the Delegate contravened and offended the Act, the Charter and the Official Languages Act, 1985, c. 31 (4^th Supp.), by not immediately providing an English translated version of his decision dated December 15, 2008. The English translated version of the Delegate’s decision was e-mailed to the applicant, Henry Sztern, on February 3, 2009. Mr. Sztern submits that the English version of the decision is not properly translated as many statements appear to be literally translated, resulting in nonsensical statements in English. The applicant submits the English translation was delivered too late for the appeal process to be initiated and it is of little value as a legible and understandable document. The applicant also argues that there was no interpreter available during his English testimony and during the English examinations and cross-examinations.

 

[70]           It is worth nothing that on April 3, 2007, Henry Sztern filed a motion requesting the services of an interpreter and the Delegate rejected this request on October 2, 2007. The Delegate found that section 14 of the Charter did not apply to the case at bar and that Henry Sztern had not established he did not have knowledge of French.

 

[71]           Furthermore, this very same issue had been previously decided by the Superior Court of Quebec and the Quebec Court of Appeal on April 16, 2007 (see Affidavit of Sylvie Laperrière sworn March 13, 2009 at Exhibit SL-11, pp. 2494-2498 of the respondent’s Record).

 

[72]           On the basis of this evidence, the Court finds that Henry Sztern had sufficient knowledge of French to file his application for judicial review pursuant to subsection 18.1(2) of the Federal Courts Act, R.S., 1985, c. F-7 and there has not been a breach of procedural fairness. There is no evidence on file that Henry Sztern made a specific request to the Delegate prior or during the disciplinary hearing for the decision to be rendered or translated in English. To the contrary, the evidence demonstrates that the Delegate issued his decision in French on December 15, 2008 and a request for a translation was sent to the Delegate on December 21, 2008, six days after the decision was rendered. The Delegate followed-up on the request and a translation of the decision was obtained by the applicants on February 3, 2009. In the present circumstances, the Court finds this was an acceptable delay. The applicants filed this application for judicial review on January 10, 2009, within the prescribed time limit, and they have not convinced the Court that they suffered any prejudice on this point.

 

[73]           The Court also notes that in spite of a ruling from the Delegate rejecting the request for translation, the respondent nonetheless made arrangements upon its own initiative during the disciplinary hearing before the Delegate to provide an interpreter to translate the testimonies rendered in French for Henry Sztern (see Sylvie Laperrière’s affidavit at paragraph 41). Most of the disciplinary hearing was conducted in English and the testimonies rendered in French were translated by an interpreter provided by the respondent for Henry Sztern. The Court is of the view that the applicants’ claims on this point are unfounded.

 

[74]           At the hearing before this Court, the applicants further alleged prejudice because the Delegate reserved his decision on the other penalties sought by the Senior Analyst. Firstly, the Court notes that this second decision of the Delegate is not before the Court. Arguments raised by the applicants with regard to the second decision of the Delegate are therefore not the subject of this application for judicial review. The applicants were not barred from requesting a stay of the Delegate’s first decision or from filing an application for judicial review of his second decision. They failed to do so.

 

[75]           The Court finds the Delegate’s decision reasonable. The Delegate conducted a full and thorough assessment of all the evidence and testimonies before him. His decision was not biased or unreasonable and it was made in accordance with the rules of procedural fairness. The Court’s intervention is not justified.

 

[76]           For these reasons, the application for judicial review is dismissed with costs.

 

JUDGMENT

 

THIS COURT ORDERS AND ADJUDGES that the application for judicial review is dismissed with costs.

 

 

“Richard Boivin”

 

 

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

 

DOCKET:                                          T-49-09

 

STYLE OF CAUSE:                          HENRY SZTERN et al

                                                            v. THE ATTORNEY GENERAL OF CANADA

 

 

 

PLACE OF HEARING:                    Montréal, Québec

 

DATE OF HEARING:                      January 26, 2010

 

REASONS FOR JUDGMENT:       BOIVIN J.

 

DATED:                                             February 22, 2010

 

APPEARANCES:

 

Henry Sztern	ON HIS OWN BEHALF
Vincent Veilleux	FOR THE RESPONDENT

 

SOLICITORS OF RECORD:

 

None	ON HIS OWN BEHALF
John H. Sims, Q.C. Deputy Attorney General of Canada	FOR THE RESPONDENT