Date: 20010302
Docket: A-300-97
2001 FCA 46
MONTRÉAL, QUEBEC, FRIDAY, MARCH 2, 2001
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
GILLES M. TREMBLAY
Applicant/APPELLANT
AND:
THE SUPERINTENDENT OF BANKRUPTCY
- and -
FRANÇOIS A. GOUIN
- and -
MARC MAYRAND
- and -
PIERRE LECAVALIER
- and -
THE ATTORNEY GENERAL OF CANADA
Respondents/RESPONDENTS
JUDGMENT
The appeal is allowed solely to replace the first paragraph of the order made on March 12, 1997 by the following:
The applications for judicial review are allowed in part. Section 14.03(1)(b) of the Bankruptcy and Insolvency Act is invalid in so far as it authorizes conservatory measures in the nature of a seizure without reasonable grounds to believe that the assets concerned in the said measures are threatened and it is necessary to safeguard them by conservatory measures.
As the respondents were successful, the appellants are ordered to pay them the appeal costs.
Certified true translation
Suzanne M. Gauthier, LL.L. Trad. a.
Date: 20010302
Docket: A-300-97
Neutral reference: 2001 FCA 46
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
GILLES M. TREMBLAY
Applicant/APPELLANT
AND:
THE SUPERINTENDENT OF BANKRUPTCY
- and -
FRANÇOIS A. GOUIN
- and -
MARC MAYRAND
- and -
PIERRE LECAVALIER
- and -
THE ATTORNEY GENERAL OF CANADA
Respondents/RESPONDENTS
Hearing held at Montréal, Quebec
on Thursday, March 1, 2002
Judgment rendered at Montréal, Quebec
on Friday, March 2, 2001
REASONS FOR JUDGMENT BY: LÉTOURNEAU J.A.
Date: 20010302
Docket: A-300-97
2001 FCA 46
CORAM: DESJARDINS J.A.
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
GILLES M. TREMBLAY
Applicant/APPELLANT
AND:
THE SUPERINTENDENT OF BANKRUPTCY
- and -
FRANÇOIS A. GOUIN
- and -
MARC MAYRAND
- and -
PIERRE LECAVALIER
- and -
THE ATTORNEY GENERAL OF CANADA
Respondents/RESPONDENTS
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec
on Friday, March 2, 2001)
LÉTOURNEAU J.A.
[1] The appellants in cases A-290-97 and A-300-97 are challenging a decision by Tremblay-Lamer J. on March 12, 1997 which allowed their applications for judicial review in part. That decision contained a carefully reasoned, proper, well-organized and well expressed discussion of the issues and the appellants did not persuade this Court that it was subject to any error.
[2] The reasonable grounds which the Superintendent of Bankruptcy had for taking the action to safeguard asset files was fully supported by the seriousness of the actions and the offences alleged against the appellants, as indicated by this extract from the affidavit of Deputy Superintendent Marc Mayrand, Appeal Book, vol. 1, at 107 to 109:
[TRANSLATION]
40. The report and its appendices indicated inter alia:
(a) unrealized assets;
(b) assets realized at a low price;
(c) money collected and not deposited in asset accounts and appropriation of money;
(d) misrepresentations to a secured creditor as to the offer received for purchase of encumbered property;
(e) inventory devalued following repeated requests by the trustee;
(f) misrepresentations to the courts;
(g) misrepresentations to the Official Receiver;
(h) fraudulent representations to debtors and to creditors;
(i) false statutory documents;
(j) numerous and repeated administrative discrepancies;
(k) bookkeeping and accounting records deficient and not in accordance with law and other shortcomings, irregularities and deficiencies set out in the report and its appendices.
43. In view of the seriousness, frequency and nature of the deficiencies observed in the trustees' administration, injury caused to debtors and creditors and the lack of success by the Superintendent's representatives in obtaining complete and satisfactory replies, it became urgent and necessary to take conservatory measures to preserve the estate records pursuant to and in accordance with s. 14.03 of the Act.
44. The facts complained of indicated a lack of integrity in handling several files and repeated injurious administration in a number of files which completely undermined the trust the Superintendent should at all times have in the applicants in the carrying out of their statutory duties.
46. In late August 1995, accordingly, it appeared necessary to take conservatory measures that would effectively protect the assets subject to the applicants' administration.
47. In view of the seriousness, nature and frequency of the discrepancies involved in the administration of the assets under the applicants' control, it seemed clearly inadequate to use the traditional conservatory measures such as an audit of trust bank accounts or even closer supervision of the applicants themselves, even if this had meant permanent presence of representatives of the Superintendent of Bankruptcy at the applicants' places of business. However close such supervision might be it would not have been able to completely prevent the repetition of the alleged acts and incidents. Further, repetition of the acts and incidents would have the effect of associating the Superintendent of Bankruptcy with the said acts and incidents, and this would have irremediably and irreparably damaged the credibility and trust of the public in the bankruptcy system and its institutions.
48. The said traditional measures accordingly seemed to me to be clearly inadequate as the acts alleged against the applicants involved misrepresentation and the fact that property or sums of money were simply not credited to the assets under the applicants' control.
49. Accordingly, it appeared that the only means of culminating the alleged misconduct and effectively protecting the assets under the applicants' control was to appoint a custodian to take control of the said assets and be responsible for administration until the administrative inquiry was complete pending a decision on the applicants' licences.
Further, these acts resulted in a criminal investigation by the RCMP and led to the issuing of search warrants by the Court of Quebec. This fact and the reasons justifying the issuing of the warrants were drawn to the Superintendent's attention.
[3] There is also overwhelming evidence in the record of a flagrant lack of cooperation by the appellants with the Superintendent, to say nothing of a systematic failure to carry out undertakings given to him or to attend meetings to discuss problem files being audited. This is how one of the auditors employed by the Bankruptcy Branch, Laurent Lachance, describes in his affidavit the problems he encountered with the appellants, Appeal Book, vol. 1, at pp. 131 to 132:
[TRANSLATION]
4. In the course of this audit I observed several deficiencies and discrepancies, which are set out at greater length in my audit report filed by the trustee Gilles Tremblay as No. R-1 in case T-1952-95;
5. At the initial interview it was agreed that there would be weekly meetings with Gilles M. Tremblay to discuss the files audited;
6. During the audit the trustee Gilles M. Tremblay was rarely in his office and, before the preparation of my audit report which was filed as No. R-1 by the applicant, Gilles M. Tremblay, in case T-1952-95, I several times verbally requested meetings with him so as to obtain necessary explanations;
7. I even asked the applicant Gilles M. Tremblay's secretary at least two or three times to put our meetings down in the latter's diary;
8. For a number of reasons, the applicant Gilles M. Tremblay either did not attend the meetings arranged or cancelled them at the last minute, alleging sudden and urgent travel or sudden illnesses;
9. My superior Michael Luftglass had to intervene: he contacted Gilles M. Tremblay himself to arrange a meeting between the latter and myself;
10. The said meeting actually took place on April 13, 1995 but the documents promised earlier were not submitted and several questions went unanswered; however, the details I obtained have all been set out in my report filed as No. R-1;
11. At the conclusion of the meeting on April 13, 1995 the applicant Gilles M. Tremblay gave me an undertaking to provide the further particulars and missing documents within one month;
12. Within that month the applicant Gilles M. Tremblay in fact wrote to me, but only to confirm information regarding a particular file which had previously been given to me orally, and as to the remainder no further information was received; I never obtained the particulars and missing documents relating to the portion of my audit report on the files located at 1170 Lebourgneuf in Québec;
13. On July 4, 1995 at a meeting with Messrs. Gilles M. Tremblay and Louis Drolet, Mr. Tremblay admitted that he had not carried out his promise to answer my questions at the meeting of April 13, 1995 and would ensure that this was done, but he never did so;
14. On July 4, 1995 I started an audit of the Groupe G. Tremblay Syndics Inc. files at the office located at 70 Rue Dalhousie, bureau 20, at Québec, province of Quebec;
15. At the initial interview it was agreed with Gilles M. Tremblay and Louis Drolet that there would be weekly meetings to discuss the files audited;
16. Following this meeting of July 4, 1995 Louis Drolet personally came to speak to me alone in the office which had just been assigned to me and told me that he would not act as Gilles M. Tremblay had done, since he assured me he would provide his complete cooperation in discussing the files I was auditing, in accordance with the agreement we had just made;
17. An employee of Groupe Gilles M. Tremblay Syndics Inc., Aline Finn, had been instructed to give me the files and documents requested;
18. During this audit I also listed discrepancies and anomalies which I mentioned to Ms. Finn and for which she provided explanations, which were all set down in my report filed as No. R-1;
19. Ms. Finn herself several times referred to the trustees Louis Drolet or Gilles M. Tremblay to obtain answers for questions which she could not explain to me, but I was never able to meet with Louis Drolet to discuss them;
20. In fact, I arranged several meetings with the said Louis Drolet, on July 27 and August 2, 7, 14, 28 and 30, 1995, but all these meetings were cancelled by him because, he said, of vacation or illness . . .
[4] In such circumstances, it is hardly surprising that the Superintendent thought it necessary to take conservatory measures to protect the assets which, objectively, on the evidence before him, seemed to be at risk at the time.
[5] We consider that there is no merit in the appellants' argument that the Superintendent failed to observe the rules of natural justice in dealing with them. The appellants were aware of the audits taking place in their offices. They knew that a number of complaints had been filed against them and they knew the nature of the complaints. As the motions judge properly pointed out, they had several opportunities to be heard and to provide explanations about the alleged deficiencies, but chose to ignore them. They are hardly in any position to complain now.
[6] Finally, the appellants argued that the Superintendent taking control of the estate records was a disguised revocation of their trustee licence without their having an opportunity to be heard as required in s. 14.02 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended ("the Act"). This argument is without basis in the case at bar and is founded on a misapprehension, not to say distortion, of the action taken by the Superintendent. The taking control of the estate records, which was made necessary by the appellants' conduct, was a measure taken to protect a third party's property involved in an administrative and disciplinary inquiry. This inquiry is now concluded, disciplinary proceedings have been initiated and the appellants may exercise the rights conferred on them by s. 14.02, if that has not already been done.
[7] At the hearing, we pointed out to counsel for the respondents the discrepancy existing between the reasons for judgment of the motions judge and the order she made accordingly.
[8] That order provided that s. 14.03(1)(b) of the Act was invalid in so far as it authorized conservatory measures in the nature of a seizure "without reasonable grounds to believe that such measures will be able to preserve the estate records".
[9] As worded, the order requires that whoever takes responsibility for the estate records be reasonably justified in believing that the measures taken will effectively protect the assets. As appears from the reasons for decision, it is not the conservatory measure itself and its effectiveness that must be judged on reasonable grounds but the right and power to use it and to impose or order it. A person using or wishing to use conservatory measures must have reasonable grounds to believe the estate is threatened and it is necessary to preserve it. In other words, that person must have reasonable grounds to believe that the seizure is necessary, not believe that the measures taken to give effect to the seizure will be effective. Once this test is met, the choice of protective measures as such is in the discretion of the person vested with this power by the Superintendent for, as s. 14.03(1)(b) of the Act indicates, the latter may take whatever steps he considers necessary to preserve the records of the estate.
[10] The appeal is allowed solely to replace the first paragraph of the order made on March 12, 1997 by the following:
The applications for judicial review are allowed in part. Section 14.03(1)(b) of the Bankruptcy and Insolvency Act is invalid in so far as it authorizes conservatory measures in the nature of a seizure without reasonable grounds to believe that the assets concerned in the said measures are threatened and it is necessary to safeguard them by conservatory measures.
[11] In all other respects the appeal will be dismissed in each of the two cases with all costs to the respondents. A copy of these reasons will be filed in case A-290-97.
Certified true translation
Suzanne M. Gauthier, LL.L. Trad. a.
FEDERAL COURT OF CANADA
APPEAL DIVISION
Date: 20010302
Docket: A-300-97
BETWEEN:
GILLES M. TREMBLAY
Applicant/APPELLANT
AND:
SUPERINTENDENT OF BANKRUPTCY
- and -
FRANÇOIS A. GOUIN
- and -
MARC MAYRAND
- and -
PIERRE LECAVALIER
- and -
THE ATTORNEY GENERAL OF CANADA
Respondents/RESPONDENTS
REASONS FOR JUDGMENT
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
FILE: A-300-97
STYLE OF CAUSE: GILLES M. TREMBLAY
Applicant/APPELLANT
AND
SUPERINTENDENT OF BANKRUPTCY et al.
Respondents/RESPONDENTS
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: March 1, 2001
REASONS FOR JUDGMENT BY: Létourneau J.A.
DATED: March 2, 2001
APPEARANCES:
Jean-Philippe Gervais for the appellant
Robert Monette for the respondents
René Leblanc for the Attorney General of Canada
SOLICITORS OF RECORD:
Gervais & Gervais for the appellant
Montréal, Quebec
DeBlois & Associés for the respondents
Québec, Quebec
Morris Rosenberg for the Attorney General of Canada
Deputy Attorney General of Canada
Ottawa, Ontario
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