Date: 20110113
Docket: A-66-10
Citation: 2011 FCA 4
CORAM: BLAIS
C.J.
NOËL
J.A.
NADON
J.A.
BETWEEN:
Sylvie
Laperrière, in
her capacity as Senior Analyst –
Professional Conduct – of the Office of
the Superintendent of Bankruptcy
Appellant
and
Allen
W. MacLeod
and
D.
& A. MacLeod Company Ltd.
Respondents
REASONS FOR JUDGMENT
BLAIS C.J.
[1]
This
is an appeal from the decision of Justice Mainville (Judge), as he then was, of
the Federal Court, dated January 28, 2010 (Decision), which allowed, in part
only, the appellant’s application for judicial review of related decisions made
by the Honourable James B. Chadwick in his capacity as Delegate of the
Superintendent of Bankruptcy (Delegate). More specifically, this appeal is
concerned with the Delegate’s finding that the respondents had established a
defence of due diligence with respect to certain violations of professional
conduct provisions set out in the Bankruptcy and Insolvency Act, R.S.C.
1985, c. B-3 (BIA), the Bankruptcy and Insolvency General Rules, C.R.C.
1978, c. 368 (Rules) and the Directives of the Superintendent (Directives).
I. Background
[2]
The
respondents carry on activities as trustees in bankruptcy under licences issued
by the Superintendent of Bankruptcy (Superintendent) pursuant to the BIA.
[3]
In
2005, the appellant, in her capacity as a Senior Analyst (Professional Conduct)
with the Office of the Superintendent of Bankruptcy (OSB), was mandated to
conduct an investigation of the respondents’ professional conduct in the
administration of bankruptcy estates. This investigation culminated in a report
dated February 27, 2007 (Report), which identified over forty breaches of
professional conduct provisions set out in the BIA, the Rules and the
Directives.
[4]
Following
the receipt of the appellant’s report, the Superintendent appointed the
Delegate to conduct a hearing in order to determine whether the respondents had
committed the alleged contraventions and whether any disciplinary measures set
out in subsection 14.01(1) of the BIA were warranted.
[5]
The
Delegate described the alleged contraventions under the following 12 headings:
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Monies withdrawn for various uses from an "Interest Account".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.
[6]
In
his decision dated December 1, 2008, the Delegate first dismissed a motion for
a stay of proceedings filed by the respondents on grounds of delay, bias and
other improprieties with respect to the conduct of the appellant’s
investigation. Concerning the nature of the allegations, the Delegate found
that the alleged contraventions were strict liability offences which, as per
the Supreme Court of Canada’s decision in R. v. Sault Ste. Marie (City),
[1978] 2 S.C.R. 1299, allowed for a defence of due diligence.
[7]
The
Delegate rejected the allegations falling under headings A and D on the basis
that the “Interest Account” operated by the respondents had been authorized by
the OSB and had subsequently been closed when the OSB requested such a closure.
The allegations under headings C, F, G and I were rejected on the basis that no
contraventions of the BIA, the Rules or the Directives had occurred.
[8]
With
respect to headings B, E, H, J and K, the Delegate found that the respondents
had failed to fully comply with the relevant statutory and regulatory provisions.
However, having accepted the respondents’ submissions that the estates at issue
represented only a small fraction of their overall business and that the
infractions were the result of administrative errors which had caused no
prejudice to the estates or the creditors, the Delegate found that a defence of
due diligence had been established. The Delegate ultimately found that the
respondents were liable only with respect to the contraventions falling under
heading L, in respect of which he concluded in a separate decision dated
February 5, 2009, that the appropriate disciplinary measure was a reprimand.
[9]
The
appellant brought an application for judicial review challenging the Delegate’s
decision with respect to headings A, B, D, E, H, J and K, as well as the
sanctions decision.
II. Decision of the
Federal Court
[10]
The
Judge carried out the standard of review analysis established in Dunsmuir v.
New Brunswick, 2008 SCC 9, and characterized the issues before the Delegate
as principally involving questions of fact or mixed fact and law for which the
appropriate standard of review was reasonableness. (Decision, at paragraphs
52-59) However, the Judge identified two questions of law arising from the
Delegate’s decision, namely whether the allegations under headings B, E, H, J
and K could be characterized as strict liability offences and whether a
reprimand was an available form of sanction under subsection 14.01(1) of the
BIA, to which he applied the correctness standard. (Decision, at paragraph 60)
[11]
The
Judge identified the first issue in the application as whether the Delegate had
committed a reviewable error in finding, as a matter of fact, that the
operations of the Interest Account under Headings A and D had been authorized
by the OSB. The Judge stated that the record contained ample evidence to
support the Delegate’s finding on this issue, which was largely based on an
assessment of the credibility of various witnesses. (Decision, at paragraphs
70-82)
[12]
The
Judge identified the second issue in the application as whether the Delegate
had erred in law in finding that the allegations under headings B, E, H, J and
K were subject to a defence of due diligence. Relying on Gordon Capital
Corp. v. Ontario (Securities Commission), [1991] O.J. No. 934, 50 O.A.C.
258 (Div. Ct.), Carruthers v. College of Nurses of Ontario (1996), 31
O.R. (3d) 377 (Div. Ct.) and Canada (Attorney General) v. Roy, 2007 FCA
410, the Judge indicated that a contextual or sui generis approach was
appropriate to determine whether allegations of professional misconduct were
subject to a defence of due diligence: “If the legislative or regulatory
provision at issue shows that an element of reasonable care is involved, then
the defence of due diligence will generally be available (…).” (Decision, at paragraph
91) The Judge found that the provisions of the BIA and the Rules surrounding
the allegations under headings B, E, H, J and K, when read together, disclose
wording such as “due care” or “reasonably ought to know” and concluded that the
Delegate was correct in finding that a defence of due diligence was available
to the respondents. (Decision, at paragraphs 83-106)
[13]
The
Judge identified the third issue as whether the Delegate had erred in finding
that the respondents had established a defence of due diligence to counter the
allegations under headings B, E, H, J and K, which he described as a question
of mixed fact and law reviewable on a standard of reasonableness. (Decision, at
paragraph 107)
[14]
Of
particular importance for this appeal are the Judge’s findings with respect to
headings B, E and H. The Judge noted that the Delegate had accepted the
respondents’ evidence that the irregularities (i) represented a small segment
of their overall business, (ii) had been unintentional, (iii) were the result of
minor administrative errors on the part of their staff, (iv) had caused no
prejudice to the estates or the creditors and (v) had not resulted in any
benefits to the respondents. The Judge indicated that the Delegate must have
inferred from these findings that the respondents had successfully established
a defence of due diligence. (Decision, at paragraphs 111, 114 and 117) The
Judge refused to interfere with the Delegate’s conclusions, stating that they
fell “within a range of possible, acceptable outcomes which are defensible in
respect of the facts and the law.” (Decision, at paragraph 113) However, the
Judge reached a different conclusion with respect to allegations J and K,
remarking on “the absence of any evidence tendered by the respondents in regard
to a due diligence defence to these allegations, and the absence of
explanations by the Delegate (…) as to why a due diligence defence was held to
have been made out (…).” (Decision, at paragraph 121)
[15]
The
Judge identified the fourth issue in the application as whether the Delegate
had erred in law at the disciplinary stage of the proceedings in imposing a
reprimand on the respondents with respect to the infractions under heading L.
The Judge stated that while the Delegate’s determination of the appropriate
remedy fell within his expertise and was therefore reviewable on the
reasonableness standard, the determination of the spectrum of available
remedies was a question of law subject to the correctness standard. (Decision,
at paragraph 129) The Judge noted that while a “reprimand” was not an available
form of sanction under subsection 14.01(1) of the BIA, the decision to impose
or not to impose a sanction fell within the Delegate’s discretion (Jacques
Roy v. Sylvie Lapperière, 2006 FC 1386 at paragraphs 75-80). The Judge
interpreted the Delegate’s decision to impose a reprimand on the respondents as
a decision that no specific measure or sanction contemplated by subsection
14.01(1) was warranted and held that this decision was reasonable in the
circumstances. (Decision, at paragraphs 122-131)
[16]
The
Judge allowed the application in part and remitted the matter to the Delegate
in order for him to determine the appropriate disciplinary measure, if any, to
be imposed on the respondents with respect to headings J, K and L.
III. Issues and
Analysis
[17]
This
appeal raises only one issue, namely whether the Judge erred in upholding the
Delegate’s finding that the respondents had established a defence of due
diligence with respect to headings B, E and H.
A. Positions of the Parties
[18]
The
appellant argues that, in the context of a strict liability regime, due
diligence is established by showing on a balance of probabilities that the
accused took all reasonable care to avoid committing the illegal act or that he
reasonably believed in a mistaken set of facts which, if true, would render the
act innocent. (Sault
Ste. Marie, above at pages 1325-1326;
Corp. de l'École Polytechnique v. Canada, 2004 FCA 127 at paragraph 28) The
appellant submits that the Federal Court has set a high threshold for proving
the defence of due diligence (Cata International Inc. v. Canada (M.N.R.),
2004 FC 663 at paragraph 22; Samson v. Canada (M.N.R.), 2007 FC 975 at paragraph
35) and that the following principles have been established in the relevant case
law: (i) errors made in good faith are not tantamount to due diligence as this
defence requires affirmative proof that all reasonable care was exercised to
ensure that errors were not made; (ii) proof of reasonable care must be
established in relation to the particular contravention at issue and general
compliance with a statutory regime is not sufficient; (iii) an employer must
show that a system was in place to prevent the prohibited act from occurring
and that reasonable steps had been taken to ensure the effective operation of
that system; and, (iv) the fact that the contraventions did not cause prejudice
to third parties is not relevant in assessing whether due diligence was
exercised.
[19]
The
appellant submits that the Delegate erred in law in finding that the
respondents had successfully established a defence of due diligence with
respect to the allegations contained in headings B, E and H by showing, inter
alia, that the infractions were the result of administrative errors, had
caused no prejudice to the estates or the creditors and represented a small
fraction of the overall volume of their business. Further, the appellant argues
that the Judge erred in law in upholding a decision reached on the basis of an
unacceptably low standard for the defence of due diligence.
[20]
The
respondents argue that this appeal should be rejected on the basis that the
appellant is asking this Court to reweigh evidence pertaining to their defence
of due diligence. The respondents submit that the issue of whether a defence of
due diligence had been established was properly characterized by the Judge as a
question of mixed law and fact which should be reviewed on the reasonableness
standard. Alternatively, the respondents submit that, as per Dunsmuir, above
at paragraph 70, even if an extricable question of law could be identified, the
Delegate’s decision should nevertheless be reviewed on the reasonableness
standard on the basis that it has no significance to the legal system in
general and was within the Delegate’s expertise in matters of professional
discipline.
[21]
The
respondents reiterate their position that the infractions set out in the Report
did not result in any benefit to them or in any prejudice to the concerned
estates or creditors, and evidence that the concerned estates and transactions
represented a very small fraction of their overall business demonstrates that
an adequate system of oversight was applied and, therefore, that “all
reasonable care” had been exercised to prevent these infractions. In the
alternative, the respondents argue that, as per Sault Ste. Marie, above,
a defence of due diligence has also been established on the basis that the
infractions resulted from a reasonable belief on a mistaken set of facts.
B. Standard of Review
[22]
The
role of this Court is to determine whether the Judge selected and correctly
applied the appropriate standard of review to the Delegate’s decision: Telfer
v. Canada (Revenue
Agency),
2009 FCA 23 at paragraph 18; Mugesera v. Canada (Minister of
Citizenship and Immigration), 2005 SCC 40 at paragraph 35; Dr. Q v.
College of Physicians and Surgeons of British Columbia, 2003 SCC 19 at paragraph
43. The Judge’s selection of the appropriate standard of review is a question
of law subject to review on the standard of correctness: Shneidman v. Canada (Customs and
Revenue Agency), 2007 FCA 192 at paragraph 17; Davies v. Canada (Attorney
General),
2005 FCA 41 at paragraph 8; Housen v. Nikolaisen, 2002 SCC 33 at paragraph
8. If the correct standard of review was selected, the Judge’s application of
that standard constitutes a question of mixed fact and law reviewable on a
“palpable and overriding error” standard, unless an extricable error of law can
be identified in his reasons: Housen, above at paragraphs 26, 37.
C. Analysis
[23]
As
stated above, this Court must determine whether the Judge erred in finding that
it was reasonable for the Delegate to conclude that the respondents had met their
burden of proving a defence of due diligence with regard to the infractions
listed under headings B, E and H. The answer to this question requires this
Court to first determine whether the Judge selected the appropriate standard of
review: Telfer, above at paragraph 18; Mugesera, above at paragraph
35; Dr. Q, above at paragraph 43. The Judge stated his position on this
issue as follows:
107 Since the defence of due
diligence was open to the Respondents under headings B, E, H, J and K, the
Applicant submits that the Delegate made reviewable errors in finding that such
a defence had been properly made out by the Respondents to counter all these
allegations under these headings. This raises issues of mixed law and fact
which are to be reviewed on a standard of reasonableness.
[24]
The
Judge correctly characterized the issue as to whether the respondents had
established the defence of due diligence as a question of mixed fact and law,
as it required the Delegate to apply a legal standard to a set of facts: Democracy
Watch v. Campbell, 2009 FCA 79 at paragraph 21; Housen, above at paragraph
26; Canada (Director of
Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748
at paragraph 35. Further, the Judge correctly concluded that such questions, in
an application for judicial review, are generally subject to the reasonableness
standard: Dunsmuir, above at paragraph 53; Housen, above at paragraph
37.
[25]
However,
the judicial review of questions of mixed fact and law presents an additional
challenge for reviewing judges. If an extricable question of law can be
identified in the question of mixed fact and law put before the decision-maker,
this question must be reviewed on the appropriate basis. If the extricable
question of law is of “central importance to the legal system as a whole and
outside the adjudicator’s specialized area of expertise”, it must be reviewed on
the standard of correctness: Toronto (City) v. C.U.P.E.,
Local 79,
2003 SCC 63 at paragraph 62; Dunsmuir, above at paragraph 55.
Conversely, if the extricable question of law involves the decision-maker’s
interpretation of a statute “with which [he] will have particular familiarity”,
it will generally attract the application of the reasonableness standard: Dunsmuir,
above at paragraph 54.
[26]
The
question as to whether the respondents have successfully established a defence
of due diligence with respect to headings B, E and H clearly presents an
extricable question of law, namely the legal standard upon which such a defence
must be established. Further, I disagree with the respondents’ submission that
the Delegate’s interpretation of this standard should be reviewed on the
standard of reasonableness because, in what I interpret to be a reference to
the Supreme Court’s above-cited comments in CUPE and Dunsmuir,
“it has no significance to the legal system in general”. (Respondents’
Memorandum, at paragraph 77) The Supreme Court of
Canada’s affirmation in Sault Ste. Marie that the defence of due
diligence was available in the context of “strict liability” infractions has
impacted our legal system across many fronts, from quasi-criminal proceedings
involving breaches of work safety or environmental regulations (R. v. Rio
Algom Ltd. (1988), 66 O.R. (2d) 674 (C.A.); R. v.
Imperial Oil Ltd., 200 BCCA 553) to the context of professional discipline
(Re Ghilzon and Royal College of Dental Surgeons of Ontario (1979), 22
O.R. (2d) 756 (H.C.J.); Stuart v. British Columbia College of Teachers,
2005 BCSC 645). In addition, a plain reading of the case law shows that
developments in the interpretation of “due diligence” in one context will
influence the application of this standard in another. The Delegate’s
interpretation of the criteria required to establish a defence of due diligence
and, by extension, the Federal Court’s treatment of this issue in an
application for judicial review, transcends the interests of the parties and holds
significance to the Canadian legal system as a whole. Further, while courts
have considered the relative expertise of the Superintendent and his delegates
in the supervision of trustees to justify the application of the reasonableness
standard to liability and sanctions decisions under section 14.01 of the BIA (Roy
v. Poitras, 2006 FC 1386 at paragraphs 19-21; Sheriff v. Canada
(Attorney General), 2005 FC 305 at paragraphs 30-31), the Delegate does not
possess any comparative expertise on the standards required to establish a
defence of due diligence. The Judge was therefore required to apply the
standard of correctness to this aspect of the Delegate’s decision: CUPE,
above at paragraph 62; Dunsmuir, above at paragraph 55.
[27]
Although
the Judge’s standard of review analysis identified two questions of law raised
in the Delegate’s decision for which he applied the correctness standard
(Decision, at paragraph 60), his review of the Delegate’s decision with respect
to headings B, E and H failed to distinguish between the merits of the
Delegate’s findings and the legal standard against which these findings were
made. The Judge simply qualified the issue of whether a defence of due
diligence had been established by the respondents as a question of mixed fact
and law and felt it appropriate to generally show deference to the Delegate’s
findings on this point. (Decision, at paragraphs 107, 112) The Judge’s failure
to separately examine the Delegate’s interpretation of the standard required to
establish a defence of due diligence under the correctness standard was an
error of law: Democracy Watch, above at paragraph 26.
[28]
Further,
a review of the Delegate’s decision pertaining to headings B, E and H shows
that he misunderstood the burden falling upon the respondents with respect to
the establishment of a due diligence defence.
[29]
With
regard to allegation B, the Delegate noted that the respondents admitted to
having failed to comply with section 154 of the BIA and section 64(2) of the
Rules [now section 61(2)] by applying for a discharge before forwarding all
unclaimed dividends and undistributed funds to the Superintendent. Section 154
provides, inter alia, that before proceeding to a discharge, a trustee
shall forward to the Superintendent, for deposit with the Receiver General for Canada, unclaimed
dividends and undistributed funds. Completing section 154, section 64(2)
states, inter alia, that at the time of discharge a trustee shall
certify to the Court that he has forwarded all undistributed funds to the
Superintendent. The Delegate accepted the respondents’ submissions that the
infractions (i) were the result of administrative errors, (ii) had not resulted
in any prejudice to the creditors or benefit to them and (iii) that the amounts
in issue represented a small fraction of their overall business. The Delegate
concluded his analysis with the following statement: “Technically, there may be
a breach of [the Act] and Rules. However, it was certainly unintentional.”
(Appeal Book, Vol. I, Tab 4, “Liability Decision”, pages 103-104). For his
part, the Judge indicated that “[t]he Delegate obviously inferred from this
evidence that the Respondents has thus established a successful due diligence
defence (…).” (Decision, at paragraph 111)
[30]
The
Delegate’s findings with regard to headings E and H reflect a similar
decision-making process. The respondents admitted to having submitted
inaccurate Statements of Receipts and Disbursements (SRD) in contravention of
sections 151 and 152 of the BIA. Section 151 of the BIA imposes a duty on
trustees to prepare a SRD once all the property of a bankrupt has been realized
while section 152 indicates the mandatory information contained in a SRD. The
Delegate accepted the respondents’ submission that these infractions were the
result of administrative errors and had not resulted in any benefit to them or
prejudice to the creditors. The Delegate adopted the same approach with respect
to allegation H, which concerned the respondents’ failure to maintain separate
trust accounts for estates converted from a summary to an ordinary
administration in contravention of section 13 of Directive No. 5. Again, the
Delegate accepted the respondents’ submissions that the amounts at issue
represented a small fraction of their overall business and that the infractions
were the result of administrative errors which did not prejudice the creditors.
(Appeal Book, Vol. I, Tab 4, “Liability Decision”, pages 110-111) The Judge’s
comments on the Delegate’s findings also reflect the general deference he
showed to this aspect of the Delegate’s decision: “[T]he findings of fact and
the inferences drawn by the Delegate from the evidence (…) are reasonable since
they fall within an acceptable range of possible outcomes.” (Decision, at paragraph
117)
[31]
A
plain reading of the Delegate’s decision reveals that the following factors
were considered as supporting the respondents’ defence of due diligence: (i)
the lack of intentional wrongdoing on the part of the respondents; (ii) the
lack of any resulting prejudice to the creditors of benefit to the respondents;
and (iii) the fact that the infractions related to a small portion of the
respondents’ overall business. In my opinion, these were not relevant
considerations to the establishment of a defence of due diligence as
articulated in Sault Ste. Marie and subsequently developed in the
jurisprudence.
[32]
The
defence of due diligence was articulated in Sault Ste. Marie, at pages 1325-26
as follows:
The defence will be available if the
accused reasonably believed in a mistaken set of facts which, if true, would
render the act or omission innocent, or if he took all reasonable steps to
avoid the particular event.
[33]
While
the Delegate regarded the respondents’ diligence in the overall conduct of
their business as a relevant factor in assessing whether due diligence had been
established with respect to headings B, E and H, the jurisprudence is
well-settled that, as per Sault Ste. Marie, evidence presented to
support this defence must relate to the specific offence at issue. This
principle has notably been adopted by the Ontario Court of Appeal (R. v.
Raham, 2010 ONCA 206 at paragraph 48; R. v. Kurtzman (1991), 4 O.R.
(3d) 417 at paragraph 37; Rio Algom Ltd., above at paragraph 31), the
British Columbia Court of Appeal (R. v. Emil K. Fishing Corp., 2008 BCCA
490 at paragraphs 13, 19; Imperial Oil, above at paragraphs 23, 28) and
the Newfoundland and Labrador Court of Appeal (R. v. Alexander (1999),
171 Nfld. & P.E.I.R. 74 at paragraph 18 (C.A.)). The Ontario Court of
Appeal recently made the following comments on this particular aspect of the
due diligence defence in Raham, above at paragraph 48:
The due diligence defence relates to the
doing of the prohibited act with which the defendant is charged and not to the
defendant's conduct in a larger sense. The defendant must show he took
reasonable steps to avoid committing the offence charged, not that he or she
was acting lawfully in a broader sense.
[34]
Similarly,
with respect to heading B, the Delegate accepted the respondents’ submission
that the breach of the BIA and the Rules was “unintentional”. (Appeal Book,
Vol. I, Tab 4, “Liability Decision”, page 104). However, the lack of
intentional wrong-doing will not support a defence of due diligence in the
context of strict liability offences which, as stated in Sault Ste. Marie,
have as their defining characteristic the absence of any need for the
prosecution to prove the existence of a mens rea. In Pillar Oilfield
Projects Ltd. v. Canada, [1993] T.C.J. No. 764 at paragraph 27, the Tax
Court indicated that “innocent good faith in the making of unintentional errors
is not tantamount to due diligence.” More recently in Samson, above at paragraph
35, the Federal Court stated that “[i]t is not sufficient to plead
forgetfulness or an error made in good faith.”
[35]
The
fact that the infractions may have resulted from “administrative errors” on the
part of the respondents’ staff was also taken into consideration by the Delegate.
However, with respect to headings B and E, subsection 7(f) of Directive No. 4R
(Delegation of Tasks) specifically barred the respondents from delegating their
responsibility to ensure both the accuracy of SRDs (Heading E) and that an
application for discharge was not filed prior to forwarding all unclaimed
dividends and undistributed funds to the Superintendent (Heading B). Further,
as stated in Sault Ste. Marie at page 1331, en employer will not escape
“strict liability” on the sole basis that the alleged infraction was committed
by a staff member:
Where an employer is charged in respect
of an act committed by an employee acting in the course of employment, the
question will be whether the act took place without the accused’s direction or
approval, thus negating willful involvement of the accused, and whether the
accused exercised all reasonable care by establishing a proper system to
prevent commission of the offence and by taking reasonable steps to ensure the
effective operation of the system.
[36]
Finally,
while the Delegate accepted the respondents’ submissions that the infractions
had not resulted in any prejudice to the concerned creditors, there is no
reference in the case law pointing to the relevance of such considerations in a
due diligence analysis. The appellant refers this Court to the comments of the
Court of Quebec (Civil Division) in Millette c. Le Comité de surveillance de
l'Association des courtiers, [2004] J.Q.
no 8844 at paragraph 44 (Civ. Div.), aff’d 2006 QCCA 711, to the effect that
liability under a regime of professional conduct does not depend on whether a
prejudice was caused to third parties. On this issue, the Court was referred to
S. Poirier, La discipline professionnelle au Québec (Cowansville: Yvon
Blais, 1998) at 39:
Contrairement à la faute civile, la faute disciplinaire est
sans égard aux conséquences de l'acte posé. La conclusion recherchée en matière
disciplinaire sera la sanction de l'infraction et non la réparation du
préjudice causé.
[37]
In
light of these observations, it is clear that the Delegate determined that a
defence of due diligence had successfully been established by the respondents
on the basis of irrelevant criteria. The Delegate failed to hold the respondents
to the correct burden of proof, namely to demonstrate on a balance of
probabilities that they took all reasonable steps to avoid committing the specific
infractions listed under headings B, E and H. Further, even if the Delegate had
applied the appropriate criteria for assessing the respondents’ due diligence,
there is no evidence in the record which can support the finding that all
reasonable care was exercised to prevent these specific infractions from
occurring. Admittedly, the interpretation of the defence of due diligence in
the jurisprudence sets a heavy burden on the respondents: Samson, above at
paragraph 35; Cata International, above at paragraph 22. The
Ontario Court of Appeal has notably commented on the “nebulous” nature of the
notion of due diligence: R. v. Wholesale Travel Group Inc., [1989] O.J.
No. 1971 at paragraph 70 (C.A.).
[38]
The
respondents rightfully submit that, as per Sault Ste. Marie, a defence
of due diligence will also be established if the accused “reasonably believed
in a mistaken set of facts which, if true, would render the act or omission
innocent.” However, while the respondents invoke this alternative mode of defence,
they have failed to identify a precise “set of facts” which was reasonably
relied on to believe that their actions were lawful. Rather, the respondents’
argument on this point seems to relate to a reasonable belief that existing
control measures were adequate to prevent the infractions from occurring. In my
opinion, on the evidence before us, that argument cannot form the basis of a
due diligence defence.
IV. Disposition
[39]
I
would allow the appeal, set aside the Judge’s decision pertaining to the
contraventions listed under headings B, E and H and allow the application for
judicial review with respect to these contraventions. The Delegate’s decisions
pertaining to headings B, E and H, in addition to his decision pertaining to
the remedial measure under heading L, are thereby set aside. Given this
disposition, the matter is remitted to the Delegate in order to determine the
appropriate disciplinary measure, if any, under subsection 14.01(1) of the BIA
with regard to the contravention under heading L in addition to the
contraventions identified by the Judge (J and K) and on appeal (headings B, E
and H) as a whole. However, in light of the appellant’s failure to obtain a
stay of the Judge’s decision, and in the event the Delegate has already
rendered a new decision with respect to disciplinary measures under headings J,
K and L, I would remit the matter to the Delegate only with respect to headings
B, E and H.
[40]
The
Federal Court awarded no costs and I would not disturb that finding. I would
award the appellant its costs in this appeal.
“Pierre Blais”
“I
agree.
M.
Nadon J.A.”
NOËL J.A. (Concurring
Reasons)
[41]
I
have had the benefit of reading the reasons of the Chief Justice. Like him I
would allow the appeal. However, I reach that conclusion through a different
route.
[42]
The
role of this Court sitting on an appeal from a decision rendered by the Federal
Court further to an application for judicial review is to identify the correct
standard of review and determine whether the Judge applied this standard
correctly (Public Service Alliance of Canada v. Canada Post Corporation,
2010 FCA 56 at paragraph 84). In this case, the Delegate’s decision gave rise
to an extricable question of law which, by its nature, stood to be reviewed on
a standard of correctness, i.e. what are the legal parameters of the defence
of due diligence?
[43]
Had
the Judge assessed this question against the appropriate standard, he would
have been bound to allow the application for judicial review with respect to
the contraventions described under headings B, E and H because none of the
grounds identified by the Delegate in exculpating the respondents from these contraventions
come within the ambit of the defence of due diligence.
[44]
Specifically,
with respect to the contravention under heading B, the Delegate wrote at
paragraph 68 of his reasons:
I accept Mr. MacLeod’s
evidence that the irregularities as set fourth in these allegations were as a
result of administrative errors, and that there was no prejudice to the estates
or the creditors, nor any benefit to trustees. Technically, there may be a
breach of the Bankruptcy Act and Rules, it was certainly
unintentional.
[45]
As
for the contravention under heading E, the Delegate wrote at paragraph 75 of
his reasons:
The explanation given by Mr.
MacLeod was that allegation 46 and 47 was an error made by his staff, for which
he takes responsibility… At the time of signing the SRD he thought they were
correct and accurate. The trustees did not benefit from any of these
administrative errors…As has been pointed out, the trustees have not
financially benefited from any of these mistakes. They may have used some
creative accounting techniques to adjust the estates, but it would also appear
that no creditor or debtor has suffered.
[46]
With
respect to the allegation under heading H, the Delegate noted at paragraph 84
that:
Mr. MacLeod’s response to this
allegation was that it represented a very small portion of the estates, which
were administered by [the respondents].
[47]
Finally,
the Delegate at paragraph 87 added that:
[Mr. McLeod] points out that
the effect of opening these estates in the consolidated bank account was an
administrative error but did no prejudice or compromise the administration [of]
the estate nor did it prejudice the consolidated bank account for consumer
proposals.
[48]
In
short, the Delegate found that the defence of due diligence had been made out
because the contraventions were the result of administrative errors, the
creditors were not prejudiced, the respondents did not benefit and the amounts
involved represented a very small fraction of the total value of the estates
under the respondents’ administration.
[49]
However,
the case law establishes that errors made in good faith are not tantamount to
due diligence (Cata International Inc. v. Canada (Minister of National
Revenue, Customs, Excise and Taxation – M.N.R.), 2004 FC 663 at paragraph
22; Jean-Pierre Samson and the Minister of National Revenue, 2007 FC
975; Pillar Oilfield Projects Ltd. v. Canada, [1993] T.C.J. no 764 at
paragraphs 24 and 27); that proof of reasonable care in the general conduct of
one’s affairs is not sufficient to escape liability (R. v. Alexander,
(1999) 171 Nfld & P.E.I.R. 74 (C.A.); R. v. Imperial Oil Ltd.,
(2000) 144 B.C.A.C. 118; R. v. Kurtzman, (1991) 4 O.R. (3d) 417, 429
(C.A.); R. v. Emonts, [2007] O.J. no 1206; R. v. Pilen Construction
of Canada Ltd., [1999] O.J. No 5650; R. v. Cooke, (1989) 78 Sask. R.
141); that it is incumbent upon the person claiming due diligence to show that
a system was in place to prevent the prohibited act (R. v. Sault-Ste-Marie,
[1978] 2 S.C.R. 1299 at page 1331; Chauvin c. Beaucage, 2008 QCCA 922 at
paragraphs 88-91) and that the fact that the contraventions did not cause
prejudice to third parties is irrelevant (Millette c. Assoc. des Courtiers
d’Assurances de la Province de Québec, 2004 CanLII 7074 (CQ) at paragraphs
42-46; conf. at 2006 QCCA 711 (CanLII) at paragraph 59; Chauvin c. Sheehan,
2010 QCCQ, 1512 (CanLII); Latulippe c. Médecins, 1998 QCTP 1687
(CanLII); Poirier, S., La Discipline Professionnelle au Québec,
Cowansville, Les Éditions Yvon Blais inc., 1998 at pages 38-39).
[50]
Giving
effect to the defence of due diligence as defined by the case law, it is
apparent that none of the factors relied upon by the Delegate were capable of
establishing such a defence.
[51]
In
response to questions from the Court during the hearing, counsel for the
respondents (Mr. Christian) did not challenge the state of the law as I have
described it. However, he took the position that this line of cases does not
apply in assessing a due diligence defence in the context of this case.
[52]
In
particular, counsel noted that there are two branches to the due diligence
defence as it was articulated in Sault Ste Marie (at pages 1325 and
1326):
… The defence will be available
if the accused reasonably believed in a mistaken set of facts which, if true,
would render the act or omission innocent, or if he took all reasonable steps
to avoid the particular act. …
[53]
Insisting
on the first branch of this test counsel argued that the strict due diligence
standard which has been developed by the case law is appropriate with respect
to infractions under certain statutes which are based on self-compliance such
as the Income Tax Act. However, it is inappropriate in the case of the BIA.
[54]
I
can see no merit in this submission. First, although broken down into two
elements, the Supreme Court in the above quote from Sault Ste Marie
provides for a single test inasmuch as an accused who fails to take all
reasonable steps to avoid the commission of an infraction will not be able to
invoke the first element (i.e. reliance on others) in order to escape liability
(Sault Ste Marie at p. 1331).
[55]
Second,
there is no basis for the suggestion that the BIA calls for a more relaxed
approach. Trustees are expected to act in conformity with their statutory
obligations. Investigations are undertaken under the BIA from time to time in
order to ensure compliance just as they are under the Income Tax Act. This
does not detract from the fact that trustees are expected to comply on their
own volition as most do. The system could not function otherwise.
[56]
I
can see no basis for altering the standard of due diligence as it has been established
by the case law when dealing with contraventions under the BIA. Applying this
standard, it was not open to the Delegate to hold, on the record before him,
that the due diligence defence had been made out. It follows that the Judge was
bound to intervene and that he erred in failing to do so.
[57]
I
would allow the appeal on the terms proposed by the Chief Justice.
“Marc Noël”
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