Directions to the Royal Bank of Canada—July 30, 2021

What is a conservatory measure?

The Superintendent of Bankruptcy puts in place conservatory measures when a bankruptcy or insolvency estate needs protection. It might be in cases of Licensed Insolvency Trustee (LIT) malfeasance or if serious wrongdoing on the part of a LIT puts estate files at risk. Conservatory measures may also be put in place if a LIT becomes ill or dies without a valid succession agreement. Finally, conservatory measures may be put in place if a LIT, for whatever reason, has allowed the administration of his or her practice to become substandard.

CANADA

Directions to the Royal Bank of Canada
1025 West Georgia Street, Vancouver, BC V6E 3N9
(July 30, 2021)

In the matter of:
Lloyd Murphy
L.W. MURPHY LTD.


Directions for Conservatory Measures

(Section 14.03 of the Bankruptcy and Insolvency Act)


Whereas the Bankruptcy and Insolvency Act (the Act) provides the Superintendent of Bankruptcy (the Superintendent) with the general power to supervise the administration of all estates and matters to which the Act applies;

Whereas Lloyd Murphy is the holder of an individual licence as trustee under the Act (1067);

Whereas L.W. Murphy Ltd. is the holder of a corporate licence as trustee under the Act (3286);

Whereas Lloyd Murphy carries out his professional activities within L.W. Murphy Ltd.;

Whereas to ensure the practices of the various trustees across the country are compliant, the Superintendent carries out monitoring activities to ensure that trustees administer files in accordance with legal requirements and carry out their responsibilities with care and diligence;

Whereas the trustee operates individual and consolidated bank accounts with total inventory as at May 19, 2021 as follows: individual Division I proposal bank accounts consisting of 3 files; a consolidated Division II Proposal account consisting of 59 files; a consolidated summary administration bankruptcy bank account consisting of 16 files; and ordinary administration bankruptcy bank accounts consisting of 7 files;

Whereas paragraph 29(g) of Directive 13R7, Trustee Licencing, requires Licensed Insolvency Trustees (LIT) to have adequate facilities and personnel to administer professional engagements in the district(s) in which he or she is entitled to act;

Whereas paragraph 29(h) of Directive 13R7, Trustee Licencing, requires LITs to have adequate professional liability insurance and adequate employee dishonesty (also known as fidelity) insurance;

Whereas in March 2021, Mr. Amendra Singh, Senior Bankruptcy Analyst (the “SBA”), of the Office of the Superintendent of Bankruptcy conducted a Licenced Insolvency Trustee Office Visit (LITOV) in relation to the compliance of the trustee's practices;

Whereas subsequent to the LITOV the SBA prepared a LITOV report dated March 31, 2021 wherein it was noted that the trustee’s practice did not have a current Employee Fidelity Insurance policy, contrary to paragraph 29(h) of Directive No. 13R7 – Trustee Licencing which states that “The trustee shall have adequate professional liability insurance and adequate employee dishonesty (also known as fidelity) insurance;”

Whereas, the SBA requested that the trustee provide a copy of the previous Professional Liability and Employee Fidelity Insurance in order to determine if there were any lapses/gaps in coverage while conducting his professional engagements.  A response from the trustee was required by April 30, 2021, however, to date the requested information has not yet been provided;

Whereas on April 9, 2021, the trustee’s only full-time staff member and Estate Manager notified the SBA that he had resigned from the company due to unpaid wages with his last day in the office being March 31, 2021;

Whereas on April 13, 2021, a telephone conversation was held between the trustee, the SBA, and Mr. Si-Jie Liu (A/Assistant Superintendent) in which the trustee advised that he had limited knowledge and experience in operating the UBERBase insolvency software system. The trustee further advised that he was in negotiations with the Estate Manager to return to the firm and conceded that it would be an issue should the Estate Manager not return;

Whereas on April 14, 2021, the Estate Manager confirmed with the SBA via telephone that the trustee still had not paid him the outstanding wages owed, and that he had no intention to return to the trustee’s firm;

Whereas the trustee has yet to replace said full-time staff member and Estate Manager;

Whereas on April 14, 2021, the SBA emailed the trustee a request for a list of documents and information in relation to the trustee’s administration of estates, General chequing account, Statement of personal net-worth, Professional Liability and Employee fidelity insurance, to which the trustee failed to respond despite follow up requests sent on April 16 & 19, 2021;

Whereas on April 22, 2021, the SBA left a voicemail for the trustee for a call back, but the trustee did not respond;

Whereas on April 27, 2021, Si-Jie Liu (A/Assistant Superintendent) issued a letter to the trustee requesting the following information to be provided to the OSB by May 7, 2021:

  • Written response with details on how the trustee plans to continue administering existing files with no available staff and how the trustee  will address the staffing issue going forward.
  • A current copy of an Employee Dishonesty (also know as fidelity) insurance as instructed by Directive 13R7 (29)(h), including a copy of the previous Professional Liability and Employee Fidelity Insurance to determine if there was a lapse/ gap in coverage during his practice.
  • Information and supporting documentation to demonstrate his financial solvency including but not limited to: 3 months of bank statements for the Corporate General Chequing Account (January, February, March 2021), Statement of personal net-worth, Corporate Financial Statements for year 2020 and any other documents demonstrating cash flow, assets, and liabilities, Copy of recent personal credit bureau report and/or confirmation of an application for a credit bureau report.

Whereas on May 5, 2021, a courtesy email was sent to remind the trustee of the documents requested on April 27, 2021 and required by May 7, 2021;

Whereas the trustee, as of the date of this direction for conservatory measures, has failed to provide the requested information;

Whereas instead the trustee informed the SBA, in an email dated May 20, 2021, that it would be best to turn over the files to the OSB given that:

  1. It appears that the Estate Manager will not be returning to administer the ongoing operations of the Firm and will not communicate with the trustee;
  2. no other assistant is available with UBERbase experience to fulfill the role as the trustee’s assistant;
  3. the maintenance of business operations has been difficult since the estate manager’s departure; and
  4. the landlord has terminated the lease and is awaiting confirmation of arrangements to remove the files.

Whereas under the Conservatory Measures issued on May 26, 2021, the official receiver Mr. Amendra Singh, of the Office of the Superintendent of Bankruptcy, took possession and control of the property and assets of bankruptcy and proposal estates as well as the accounting and electronic data regarding the estates administered by Lloyd Murphy and L.W. Murphy Ltd.

Whereas the Superintendent deemed it expedient to transfer the estates at issue to a private sector trustee;

Whereas the Superintendent initiated a standing offer process which was created to establish a list of trustees willing to act as guardian trustees or as new trustees in situations where, to protect the estates, the OSB is required to take possession of estates administered by a trustee under the Act;

Whereas Boale Wood & Co. has consented to administer the estates formerly administered by Lloyd Murphy and L.W. Murphy LTD. pursuant to this direction issued under paragraph 14.03(1)(a) of the Act;

Whereas Boale Wood & Co. shall, until discharged or another LIT is appointed in Boale Wood & Co.’s stead, perform the duties required of an LIT under the Act, but notwithstanding its discharge, Boale Wood & Co. remains responsible for the performance of such duties as may be incidental to the full administration of the estates;

Whereas I believe on reasonable grounds that the estates require protection;

Whereas the Superintendent of Bankruptcy may, for the protection of an estate, exercise the powers set out in subsection 14.03(1) of the Act, in the circumstances referred to in subsection 14.03(2) of the Act;

Whereas the Superintendent of Bankruptcy has delegated to me, in accordance with subsection 14.01(2) of the Act, the powers of the Superintendent as specified at subsection 14.03(1) of the Act, in the circumstance referred to in subsection 14.03(2), a copy of which delegation is attached, along with copies of sections 14.01, 14.02 and 14.03 of the Act;

Whereas paragraphs 14.03(1)(a), 14.03(1)(b), 14.03(1)(c) and 14.03(2)(b) of the Act applies;

I, Zaeed Buksh, in my capacity as delegate for the Superintendent and pursuant to paragraphs 14.03(1)(b) and (c) of the Act, rescind the Conservatory Measures issued on May 27, 2021, to the Royal Bank of Canada, 1025 West Georgia Street, Vancouver, BC V6E 3N9, and direct the Royal Bank of Canada, 1025 West Georgia Street, Vancouver, BC V6E 3N9, to:

  1. consider, upon receipt of the present directions, Boale, Wood & Company Ltd. or their duly authorized representative, guardian trustee, as the sole authorized signatories as relates to any operations on the funds credited to the estates of bankruptcies and proposals administered by Lloyd Murphy and L.W. Murphy Ltd.;
  1. make no debit, payment or transfer of funds credited to, or which ought to have been credited to, the estates of bankruptcies and proposals administered by Lloyd Murphy and L.W. Murphy Ltd. without the countersignature of Boale, Wood & Company Ltd. or their duly authorized representative;
  1. not pay out of these accounts: cheques, bills of exchange, bank drafts or other instruments, issued before the receipt of these directions which are presented for payment after the receipt of these directions without these cheques, bills of exchange, bank drafts or other instruments being signed by Boale, Wood & Company Ltd. or their duly authorized representative;
  1. provide, as soon as possible, the list of trust bank accounts of Lloyd Murphy and L.W. Murphy Ltd. and submit all statement of accounts, accepted cheques and other documents or information having to do with the above-mentioned estate trust bank accounts, to Boale, Wood & Company Ltd. or their duly authorized representative, at Suite 480 - 800 West Pender St. Vancouver, BC, V6C 2V6;

That these directions take effect immediately and will remain in effect until such time as I am satisfied that the estates no longer require protection;

That in accordance with subsection 14.03(3) of the Act, these directions bind the Royal Bank of Canada, who must comply with them;

That, pursuant to subsection 14.03(4) of the Act, a person who complies with this direction is not liable for any act done by that person only to comply with this direction.

Signed at the City of Vancouver, British Columbia, this 30th day of July 2021.

Zaeed Buksh
Assistant Superintendent, Office of the Superintendent of Bankruptcy