Jacques Roy — February 16, 2004

Professional Conduct Decision

Canada
Bankruptcy District
of the Province of Quebec

In re the Disciplinary File of Trustee Jacques Roy

Applicant
Jacques Roy, trustee

Respondent:
Marc Mayrand, Superintendent of Bankruptcy

Decision on motion by preliminary exception to find ss. 14.01, 14.02, and 14.03 of the Bankruptcy and Insolvency Act of no force or effect and to halt the disciplinary proceeding

On November 11, 2003 the trustee applied to the undersigned by preliminary exception to have ss. 14.01, 14.02 and 14.03 of the Bankruptcy and Insolvency Act ("B.I.A.") found to be of no force or effect as to him.

By a motion to dismiss made orally on behalf of the senior analysis, the latter argued that the delegate, the undersigned, had no jurisdiction to assess whether ss. 14.01 and 14.02 B.I.A. are consistent with the Canadian Charter or Rights and Freedoms and the Canadian Bill of Rights. By a decision on December 10, 2003 the undersigned dismissed the motion to dismiss made by counsel for the senior analysis and found that he had the necessary jurisdiction to hear the applicant's motion to have ss. 14.01, 14.02 and 14.03 B.I.A. found to be of no force or effect and to halt the disciplinary proceeding involving the applicant Jacques Roy, trustee.

At that time we concluded that the Superintendent's delegate was required to sit as an administrative tribunal, and as such was by implication authorized to dispose of points of law submitted to him, and had jurisdiction to do so. Accordingly, the delegate had jurisdiction to consider the applicant's motion by preliminary exception to the extent that the motion related to the applicant's right in the case before the delegate.

We ruled that we were available to hear the applicant's preliminary exception as soon as possible.

Preliminary exception and reasons

The applicant trustee's motion by preliminary exception was argued before the undersigned on February 2 and 3 and taken under advisement immediately after the hearing.

A ruling that ss. 14.01 and 14.02 B.I.A. cannot be set up against him and the proceeding should be halted was sought by the applicant pursuant to ss. 1(a) and 2 (e) of the Canadian Bill of Rights, s. 7 of the Canadian Charter of Rights and Freedoms and s. 52(1) of the Constitution Act, 1982. The applicant relied on several reasons, such as appointment during good behaviour and financial security, the constitution of the disciplinary tribunal, the makeup of the disciplinary tribunal, the nature of the decisions which could be made, the procedural guarantees at the hearing, the provisional relief ex parte and a legal argument in favour of a general finding of inopposability and a finding of inopposability based on the non-existence of adequate procedural guarantees in the conduct of the action.

The applicant further sought a finding of inopposability and stay of proceedings on the ground of a particular excess of jurisdiction in the instant case and a finding of inopposability and stay of proceedings under s. 1(a) of the Canadian Bill of Rights and s. 1(8) B.I.A.

In particular, the applicant maintained, the sections in question contained no structural guarantee that he would have a hearing before an independent and impartial tribunal consistent with the rules of fundamental justice guaranteed by ss 1(a) and 2(e) of the Canadian Bill of Rights and by s. 7 of the Canadian Charter of Rights and Freedoms. Their implementation would assure this.

To the extent that under ss. 14.01 and 14.02 B.I.A. the Superintendent of Bankruptcy's delegate has no financial security, these sections, he alleged, contravened [TRANSLATION] "the most elementary requirements as to the impartiality and independence of tribunals and courts".

He alleged there was a breach of ss. 1(a) and 2(e) of the Canadian Bill of Rights and s. 7 of the Canadian Charter of Rights and Freedoms, in as much as the Superintendent of Bankruptcy heard a disciplinary proceeding himself or did not instruct a delegate to do so until after he had considered the result of an investigation and decided that the charges against the trustee were valid, or appeared to be.

He maintained that to the extent that under s. 14.01(2) B.I.A., the Superintendent retained a measure of control over the actions of his delegate, when the Superintendent continued to be one of the parties in the disciplinary hearing, there was a flagrant infringement in the rights of the individual concerned.

As the Superintendent's representative, the delegate had power to order the trustee to repay to the bankruptcy file, thus indemnifying the Superintendent, an amount corresponding to the cost incurred as a result of the actions taken by the Superintendent himself.

In so far as s. 14.01(2) B.I.A. provided that the Superintendent "is not bound by any legal or technical rules of evidence in conducting the hearing", he said, the legislation is defective and of no force or effect under ss. 1(a) and 2(e) of the Canadian Bill of Rights and s. 7 of the Canadian Charter of Rights and Freedoms,

To the extent that s. 14.03 B.I.A. allows the Superintendent to himself create the conditions necessary for holding a hearing and decide himself on the action to be taken, without any judicial or administrative authorization, and to maintain that action in effect without any time limitation, he maintained, the act was contrary to the same constitutional provisions.

Applicant's stipulations

From the outset counsel for the applicant stipulated, for the purposes of the case, that (a) [TRANSLATION] "the challenge" against s. 14.03 B.I.A. was withdrawn; and (b) if s. 2(e) of the Canadian Bill of Rights was not infringed, the same would apply to s. 7 of the Canadian Charter of Rights and Freedoms; as a corollary, if s. 2(e) of the Canadian Bill of Rights had been infringed, s. 7 of the Canadian Charter of Rights and Freedoms had been also.

Sections 14.01 and 14.02 B.P.I

We take the liberty of reproducing the sections in question:

Key points

Before looking at the arguments made by and for the applicant, we feel it would be better to examine certain key points resulting from the Quebec Court of Appeal's judgment on October 30, 2003 in Métivier v. Mayrand, 200-09-004077-027 (C.A.) and J.E. 2003-2128 (summary) and from the Supreme Court of Canada's judgment in Martin (Nova Scotia (Workers' Compensation Board) v. Martin, 2003 C.S.C. 54 and 231 D.L.R. (4th) 385).

In Métivier, the Court was asked to find that ss. 14.01 and 14.02 B.I.A. were of no force or effect because they were contrary to s. 2(e) of the Canadian Bill of Rights.

Functioning in a very narrow jurisdiction of framework because it was limited solely to considering the validity of the legislation, the Court, although empowered to rule on the intrinsic validity of ss. 14.01 and 14.02, could not take any account of the practice established by the Superintendent to give effect to those sections.

Although warned that he could not use the practice laid down by the Superintendent to decide whether the sections in questions were consistent with s. 2(e) of the Canadian Bill of Rights, the Superior Court judge nevertheless referred to the practice established by the Superintendent in determining the validity of the sections in question, thereby usurping the exclusive jurisdiction of the Federal Court.

The Court was limited solely to the legislation conferring a disciplinary role on the Superintendent and could not extend its application to the way in which in practice the Superintendent exercised the powers deriving from the sections in question.

The Court of appeal recognized that ss. 14.01 and 14.02 B.I.A. set out the action which the Superintendent could take concerning the trustee, the grounds on which he could take that question and the procedure he must follow before imposing it, including the requirement that the trustee be given an opportunity to be heard. Further, s. 14.01(2) authorizes the Superintendent to delegate any or all of the powers conferred on him by ss. 14.01 and 14.02, while leaving great flexibility in the way he performs his function of supervising the disciplinary process. The Court considered it seemed clear that Parliament had deliberately assigned to the Superintendent the functions of investigation, prosecution and decision affecting everything involving the conduct of bankruptcy trustees.

The question remained whether this legislative structure was inconsistent with s. 2(e) of the Canadian Bill of Rights.

The Court of Appeal, per René Dussault J.A., considered that:

The Court considered that on its face the Bankruptcy and Insolvency Act did not support a conclusion that, regardless of the practice established, the Superintendent could not act as supervisor of the system for disciplining bankruptcy trustees conferred on him by s. 14.01 and 14.02 without infringing their right to an impartial hearing protected by s. 2(e) of the Canadian Bill of Rights.

René Dussault J.A. concluded:

In other words, the Superior Court, and by extension the Court of Appeal, could not rule on the way in which the sections in question were applied in practice, and the wording of ss. 14.01 and 14.02, as it stood, was consistent with the Canadian Bill or Rights.

In Martin, supra, Charles D. Gonthier J. stated as a premise in para. 48:

At para. 33, he wrote:

As a general rule, he added at para. 34:

At para. 31, Gonthier J. pointed out:

By a decision on December 10, 2003 the undersigned, as the person appointed to an administrative tribunal, dismissed the motion to dismiss made by the analyst and found that he had the necessary jurisdiction to hear the merits of the motion by the applicant Jacques Roy to have ss 14.01, 14.02 and 14.03 B.I.A. declared to be of no force or effect.

It follows from Martin and Métivier, supra, and from the conclusions in the decision by the undersigned on December 10, 2003, that in exercising the functions which he performs in accordance with Martin, supra, the delegate clearly cannot disregard, ignore or distinguish already existing precedents in this area, and in particular Métivier, finding ss. 14.01 and 14.02 B.I.A. to be valid.

Any challenge to the neutral sections in question, the wording of which was found in Métivier, supra, to be consistent with the Canadian Bill of Rights, could not be upheld by the undersigned as a delegate and within the limits of his jurisdiction in the matter, as set forth in Martin, supra.

Five practical considerations

Accordingly, that leaves only five "practical" considerations on which the applicant relied in his motion by preliminary exception. First, the applicant argued that in practice the delegate does not enjoy the necessary independence as the contract covering him does not give him security during good behaviour and/or sufficient financial security: the delegate's position may be cancelled without valid reason.

Secondly, the applicant maintained that in practice the delegate's impartiality was compromised as a result of a decision by the late François Rioux, the former delegate in the instant case, who allegedly [TRANSLATION] "on his own initiative, without informing the trustee in question or his counsel … decided to reconsider a prior decision and grant the complainant Marcel Paris the status of intervener".

Thirdly, as in the circumstances the applicant was relieved of his duties as trustee in respect of the assets of the debtor company Distribution Sunliner (1985) Inc. on July 23, 1997, the undersigned, in view of the fact that on September 30, 1997 a new provision of the Bankruptcy and Insolvency Act came into effect stating that the discharge of a trustee "does not have the effect of preventing the holding of a hearing or taking of measures covered by subsection 14.01(1)", clearly could not still hold the hearing.

Fourthly, the tribunal has no power of constraint.

Fifthly, the Superintendent clearly cannot order the trustee to repay any amount whatever to the bankruptcy file, [TRANSLATION] "thus indemnifying the Superintendent".

Security of tenure and financial security of delegate.

The applicant alleged that the contract of service signed between Her Majesty the Queen and the undersigned on October 15, 2003, although consistent with ss. 14.01 and 14.02 B.I.A., provided that the delegate would exercise the powers delegated to him by the Superintendent and contained in the instrument of delegation given to him. He maintained that the delegate had no financial security either for the complete performance of the contract he was awarded or for the obtaining of later contracts, the awarding of which depended entirely on the discretion of the Superintendent of Bankruptcy himself, appointed by the privy council during pleasure.

Noting that a contract appointed on September 20, 1993 appointing Robert Archambault as delegate had subsequently been cancelled and that an action brought by Mr. Archambault for reimbursement of the full amount of the contract was dismissed by the Superior Court on August 2, 1996 on the grounds that the contract could be revoked at any time during its life and that Mr. Archambault could only claim for the work done up to the date of its revocation, the applicant argued that the undersigned had no financial security either for complete performance of the contract awarded or for the obtaining of later contracts, the awarding of which depended entirely on the discretion of the Superintendent of Bankruptcy.

We feel that, unlike the contract applicable to Mr. Archambault, which stated that [TRANSLATION] "the Minister may, by giving notice in writing to the contractor, halt or suspend the performance of all or any part or parts of the work", the contract appointing the undersigned provides in clause 5.1 of Appendix A:

We see nothing in this phraseology that promotes insecurity or is likely to work against the delegate's security of tenure, so that a reasonable person would be likely to conclude that a trustee would of necessity be deprived of his right to a fair and impartial hearing. Most importantly, the removal of an adjudicator or delegate must not simply be at the pleasure of the executive.^{Footnote 1}

Impartiality of delegate

The applicant also questioned the decision made by the late François Rioux, as delegate, without his knowledge to allow Marcel Paris to be heard as a witness at the hearing [TRANSLATION] "so I can undertake a complete assessment of the public interest at issue in this case".

Mr. Rioux's letter of July 2, 2003 speaks for itself. If any party has an objection to make to all or part of Mr. Paris' testimony, or wishes to make representations following that testimony, they retain the right to do so at the hearing. We consider that in this way the rules of procedural fairness will remain intact and will be observed. Clearly a party cannot in this regard ask that a disciplinary process held under neutral sections be completely and finally halted even before the case is heard. The argument is premature and hypothetical.

Discharge of trustee

The applicant noted that he was discharge from his duties as trustee in respect of the assets of the debtor company Distribution Sunliner (1985) Inc., and under the Bankruptcy and Insolvency Act in effect at the time, the discharge of a trustee by the Court carried with it immunity against any charge or subsequent action regarding his administration. Thus, under s. 41(8):

A new provision of the Bankruptcy and Insolvency Act was inserted into s. 41 on September 30, 1997, to read as follows:

The applicant argued that s. 41(8.1) is inapplicable here since the discharge of the applicant in Distribution Sunliner (1985) Inc. was made before it came into effect.

According to the applicant, the Superintendent of Bankruptcy has absolutely no authority to circumvent the peremptory provisions of the Bankruptcy and Insolvency Act so as to reopen a case which was considered, disposed of and commented on by the official receiver at the proper time, that is, before the date of discharge of the trustee. Accordingly, the only exception that could be applicable to revoke his discharge would be that the discharge was obtained by fraud. The addition of s. 41(8.1) in 1997 created a second exception beginning on September 30, 1997, which should be added to that of fraud dealt with in s. 41(8). Accordingly, in the applicant's submission, the trustee's immunity based on the judgment of discharge by the Quebec Superior Court sitting in bankruptcy on July 23, 1997 was an estoppel to the holding of any disciplinary proceeding regarding the trustee Jacques Roy in the case of Distribution Sunliner (1985) Inc.

The authorities are clear regarding non-retroactivity in criminal matters. There is no doubt about this.^{Footnote 2} At the same time, it is also clear that if legislation makes specific provisions for an offence which formerly was only covered in general terms, the accused cannot plead that the new legislation is not retroactive.^{Footnote 3} In a judgment in Friedman & Friedman, Harry Bick et al. (FCTD-1600-99), on January 25, 2001, J.E. Dubé J. of the Federal Court of Canada Trial Division wrote the following:

In that case, the Quebec Superior Court had allowed the trustee's application for discharge on March 19, 1997. On November 12, 1997, and so after the new provision, s. 41(8.1), came into effect, the Superintendent announced his intention of holding an inquiry into the administration of the bankruptcy pursuant to ss. 10 et seq. of the Act. The trustees argued that s. 41(8.1) of the Act did not apply to the matter, since it was not in effect at the time the trustees were discharged and it was not retroactive in its application. The Federal Court judge considered that s. 41(8.1) was not retroactive in effect and could not be applied. However, the judge concurred in the view of the Superintendent that s. 41(8.1) of the Act only clarified the rule that the Superintendent had disciplinary jurisdiction over the conduct of trustees and that discharge of the administration of the assets of a bankruptcy (even before September 30, 1997) did not have the effect of prohibiting conduct of the proceeding covered by s. 41(8.1) of the Act.

As a delegate to an administrative tribunal, I clearly cannot ignore what appears to be the only decision on the point by a court of record. My interlocutory decision is to allow the evidence presented regarding the management by the trustee of the property of the debtor Distribution Sunliner (1985) Inc.

Delegate's inability to compel witnesses

Once again, the applicant raised what in his view could present a problem although in practice the question is not raised in this case. Further, the Attorney General of Canada referred us to Re First Investors Corp. Ltd. (No. 2), 46 D.L.R. (4th)) 687, in which Berger J. wrote:

Under s. 3 of the Act Respecting the Federal of Canada, vol. VI, c. F-7, the Federal Court is confirmed as "a superior court of record having civil and criminal jurisdiction". As such, the Federal Court of Canada has the power to assist federal boards and if necessary to issue a subpoena directing a person to appear before the Superintendent's delegate.

In the meantime, the trustee can only raise a hypothetical problem which will probably not arise at the hearing of the case on the merits.

Reimbursement to estate

Although Métivier, supra resolve the question of the consistency of ss. 14.01 and 14.02 B.I.A. with the Canadian Bill or Rights, and hence with the Canadian Charter of Rights and Freedoms, we cannot pass over without comment the trustee's allegation that under s. 14.01 B.I.A. the delegate has power to order to make restitution [TRANSLATION] "to the bankruptcy file, thereby indemnifying the Superintendent" of an amount corresponding to the cost incurred as a result of actions taken by the Superintendent himself.

If any doubt persists as to the meaning of para. (f), it is quickly resolved by reading the English version of the section, indicating that the trustee may be required to make restitution to the estate of such amount of money as the estate has been deprived of as a result of the trustee's conduct. For the undersigned, the French version is equally clear: the restitution is not made even indirectly to the Superintendent.

The question of whether the Superintendent is entitled to ask the trustee to make restitution will not have to be considered by us until such time as the Superintendent requests that this be done.

For all these reasons, the applicant's motion by preliminary exception to have ss. 14.01, 14.02 and 14.03 of the Bankruptcy and Insolvency Act found to be of no force or effect is dismissed. The case will accordingly be heard on the merits as soon as possible.

Montréal, February 16, 2004

Hon. Lawrence A. Poitras, Q.C.
Superintendent's delegate