Professional Conduct Decision
What is a professional conduct decision?
An investigation into a Licensed Insolvency Trustees (LIT)'s professional conduct is initiated when there is information to suggest that the LIT has not properly performed the duties of a trustee or there has been improper administration of an estate or lack of compliance with the Bankruptcy and Insolvency Act (BIA).
In some cases, the findings are sufficiently serious to support a recommendation for sanctions against the LIT's licence (cancel or suspend a LIT's licence (subsection 13.2(5) of the BIA) or impose conditions or limitations (subsection 14.01(1) of the BIA)).
The professional conduct decision is deemed to be a decision of a federal board, commission or tribunal and may be judicially reviewed by the federal court.
Gérald Robitaille and Raymond Marcoux,
Holders of a Trustee Licence
For the Province of Quebec
Gérald Robitaille & Associés Ltée,
Holder of a Corporate Trustee Licence
For the Province of Quebec
Order to Suspend
Trustee Licence of Gérald Robitaille
Order to Limit
Trustee Licence of Raymond Marcoux
Pursuant to the Bankruptcy and Insolvency Act
— R.S.C. 1985, c. B-3 —
By a letter dated August 7, 2002 the undersigned was appointed Superintendent's delegate to conduct and carry to completion disciplinary proceedings pursuant to the Bankruptcy and Insolvency Act against Gérald Robitaille and Raymond Marcoux, holders of individual trustee licences, and Gérald Robitaille & Associés Ltée, holder of a corporate trustee licence.
Concurrently, we received a copy of the investigation report and disciplinary recommendations of the senior analyst in the Bankruptcy Office for the district of Sainte-Foy, Quebec, regarding the actions of the trustees.
The report prepared by Sylvie Laperrière on July 4, 2002 is some 46 pages long and supported by 93 exhibits. The report constitutes the written notice with reasons mentioned in s. 14.02 (1) of the Bankruptcy and Insolvency Act.
Briefly, the report indicates that Gérald Robitaille has held a trustee licence since October 1971. In 1988 he obtained a corporate licence for Gérald Robitaille & Associés Ltée.
At the time the notice of intention to make a proposal was filed by Sonerco on December 11, 1995, Mr. Robitaille was the individual trustee appointed to be responsible for administering all the files listed under the corporate licence. There were 553 files.
On July 3, 2002 Mr. Robitaille was still the individual trustee responsible for 309 files under the corporate licence. All these files were listed before April 13, 2001. From that date onward, Mr. Robitaille ceased to be appointed as individual trustee responsible for the files listed by Gérald Robitaille & Associés Ltée.
Raymond Marcoux has held a trustee licence since 1976. He joined the firm of Gérald Robitaille & Associés Ltée on February 1, 1996. On July 3, 2002 Mr. Marcoux was the individual trustee responsible for administering 131 files under the corporate licence. As of July 4, 2002 Mr. Marcoux was still an active trustee with Groupe Thibault Van Houtte & Associés Ltée (formerly Gérald Robitaille & Associés Ltée).
After April 13, 2001 Mr. Robitaille ceased to be the individual trustee responsible for administering the files listed by Gérald Robitaille & Associés Ltée. As of that date, the individual trustees responsible were one of the other trustees working in that firm, including Mr. Marcoux.
On February 6, 2002 Patrice Van Houtte, one of the trustees in the Québec office, asked Henri Massüe-Monat, Assistant Superintendent, Licences, to confirm acceptance by the Superintendent of the change in the name of the corporate licence to that of "Groupe Thibault Van Houtte & Associés Ltée". Pierre Delisle, director, held the position of president and 40% of the shares. The trustees Patrice Van Houtte, André Thibault and Brian Fiset respectively held the positions of vice-president, treasurer and secretary, and each held 20% of the shares.
On March 5, 2002 Mr. Massuë-Monat notified Mr. Van Houtte that the name change application had been approved by the Superintendent of Bankruptcy. A new corporate licence certificate was accordingly issued in the name of Groupe Thibault, Van Houtte & Associés Ltée, and the files have been listed under this new name since that date.
At the time the report was prepared, three other trustees were working with Mr. Marcoux in Québec. The firm also has offices in Montréal and Trois-Rivières.
On July 3, 2002 1,534 files were open under the corporate licence Groupe Thibault, Van Houtte & Associés.
Complaint to Superintendent
The report indicated that on September 6, 1996 Alain Pard, acting for five unsecured creditors of Sonerco, namely Gestion Clément Bernier Inc., 9002–8705 Québec Inc., 113509 Canada Inc., Les Distributions Pierre Grandmaître Inc. and Les Pétroles M.R. Inc. (the co-applicants), filed a complaint with the Superintendent of Bankruptcy, George Redling.
According to Mr. Pard, several strange incidents had occurred: the trustee took partisan actions favouring a creditor who was also a shareholder in the debtor. This was the secured creditor Financière Micadco Inc., in which the sole shareholder and president was Michel Cadrin.
In fact, on December 11, 1995 Sonerco, whose president was Michel Cadrin, had filed a notice of intention to make a proposal to its creditors. After four motions for extensions of time, the bankruptcy went forward following the failure to file a proposal before the cutoff date of June 11, 1996 (the maximum period of time authorized by the Act). Gérald Robitaille & Associés Ltée was the trustee in the bankruptcy and Mr. Robitaille was the individual trustee.
On February 6, 1998 the co-applicants withdrew their application to quash the bankruptcy but maintained the application to remove the corporate trustee. Julie Dutil J., allowing the application to remove, appointed Éric Pronovost to take charge of the file.
On May 24, 2000 the Court of Appeal dismissed the corporate trustee's appeal and Éric Pronovost, trustee of Belhumeur, Pronovost et Associés Inc., took over administration of the file.
During her investigation of the actions of the former trustees the senior analyst Sylvie Laperrière consulted documents forwarded by the former corporate trustee, following his removal by the Court, to the new trustee Éric Pronovost.
On November 6, 2001 she sent counsel for the former trustees, Pierre Jolin, a letter asking them to provide answers to a list of questions regarding administration of the Sonerco file (Appendix 15).
On January 23, 2002 Mr. Jolin sent her his replies to the questions asked.
- Trustee's participation in preparing proposal
We learned, again briefly, from the senior analyst's report that Mr. Robitaille was not particularly involved in preparing the proposal. The supervisory work was done by Mr. Delisle, with Mr. Thibault and his group. However, Mr. Delisle did not hold a trustee licence, nor at that time did André Thibault. She accordingly concluded that Mr. Robitaille had not carried out his duty to participate in preparing the proposal. He could not delegate his work to people who did not hold a trustee licence.
- Review of cash flow statement
The corporate trustee's reports on the cash flow statements were prepared by Mr. Thibault, although review of the cash flow statements was not among the duties which could be delegated to him.
- Taking possession of assets
One of a trustee's first duties when a proposal is not filed is to take possession of the assets. This was not done, especially in respect of monies held by Sonerco.
- Taking inventory
At the earliest possible time after the filing of a report that a proposal had not been filed by the trustee, on June 13, 1996, the trustee should have prepared an inventory of the Sonerco property. This was not done.
- Checking balance sheet
The corporate trustee, acting through Mr. Robitaille, should have checked Sonerco's balance sheet. At the same time, the statutory balance sheet of June 18, 1996 filed by the corporate trustee disclosed significant differences from the monthly balance sheets filed by Sonerco with the non-filing of a proposal to its creditors (Appendices 25 and 35).
- Trustee's report to creditors on preliminary administration
The trustee's report to the creditors on preliminary administration mentioned in the Superintendent of Bankruptcy's Directive No. 32 is prepared for creditors. It is also entered in the estate file at the Office of the Superintendent of Bankruptcy and in the Court file with the minutes of the first meeting of the creditors.
Discrepancies were noted in the disclosure of information to creditors by the preliminary report prepared when the proposal was not filed, signed by Mr. Marcoux. There were also certain questions.
Nowhere did the preliminary report indicate that the secured creditor Micadco was a "related" company within the meaning of s. 4 of the Act, which had the securities held by Ultramar transferred to it during the period of the notice of intention. At the time the notice of intention was filed, Micadco and Sonerco were not dealing at arm's length.
- Agreement for management and custody of assets
On June 13, 1996, the day on which the corporate trustee filed the report on non-filing of a proposal, Mr. Marcoux, with the approval of the secured creditor Micadco, signed an agreement for management and custody of assets with 3146332 Canada Inc. (Axco, a company 100% owned by Micadco). Accordingly, the trustee made Axco responsible for management and custody of all Sonerco's assets as of June 10, 1996. The agreement provided for the payment of the sum of $19,000 to the corporate trustee by Axco for the benefit conferred under the agreement, regardless of the operating results of the business. This agreement was never approved by the inspectors appointed at the first meeting of the creditors on July 4, 1996 and there was no document to indicate the date on which the agreement terminated.
- Review of legal opinion on validity of securities
On April 10, 1996, during the period of the notice of intention, Mr. Marcoux asked for an opinion on the validity of the securities held by Micadco and Ultramar. In August 1996, following the bankruptcy and the questions raised by Mr. Pard, he obtained a supplementary opinion.
In reply to his letter of April 10, 1996 William Noonan, who was retained for this opinion, wrote Mr. Marcoux on April 24, 1996 that he understood that the opinion was requested in connection with possible bankruptcy of the debtor, so that the trustee could rule on the validity and enforceability of the Micadco and Ultramar securities.
- 8.1 Examination of minute book
Mr. Noonan indicated that he had not examined the debtor's minute book and assumed that the persons who put their signatures on the documents were duly authorized to do so by the debtor. At the first meeting of the inspectors on August 8, 1996 Mr. Pard questioned whether Mr. Cadrin was able to grant a second mortgage to one of his companies. Mr. Noonan had given a supplementary opinion on this point. It was only when Mr. Pard raised questions that the trustee ensured that the minutes were checked in the Sonerco book. This is when Mr. Noonan found that Mr. Cadrin was not a Sonerco director at the time he signed the mortgage deed to Micadco on February 24, 1995.
- 8.2 Inaccuracy in opinion on universal movable hypothecary deed;
In his opinion of April 24, 1996 Mr. Noonan indicated that the hypothecary deed concluded between the debtor and Micadco on February 24, 1995 mentioned a demand loan made to the debtor by Micadco and created a hypothec to Micadco of up to $1,000,000 on the property. Since the deed was made over a year before the date of the bankruptcy and at a time when Micadco had given value, there was no reason for the trustee to challenge it as a fraudulent preference.
As the date of the bankruptcy was the date the notice of intention was filed, namely December 11, 1995, the hypothec signed by the debtor on February 24, 1995 was a deed granted less than a year before the bankruptcy. The trustee stated that he had not read the opinion, though he was aware of it.
In a supplementary opinion obtained on August 28, 1996 at the trustee's request, Mr. Noonan indicated that his view was unchanged.
- 8.1 Examination of minute book
- Paragraph 20 of challenge to motion to quash bankruptcy
In their motion to quash the bankruptcy on September 6, 1996 the co-applicants alleged that Mr. Noonan's opinion was [TRANSLATION] "entirely favourable" to Micadco. In its written challenge the corporate trustee indicated that there was no favouritism, though it was true that Mr. Noonan's opinion included an inaccuracy regarding the statement that the deed was made over a year before the Sonerco bankruptcy.
On February 4, 1998, during the hearing of the motion to quash the bankruptcy, Mr. Noonan admitted that there had been an error in his opinion of April 24, 1996: the deed had in fact been granted in the year of the bankruptcy. However, he said, that did not change his opinion as the hypothec was made for value.
- Analysis of reviewable transactions and preferential payments
In his letter of September 6, 1996 to the Superintendent of Bankruptcy, Mr. Pard wrote that the trustee's actions suggested he had not acted as a reasonable man would, as well as having taken several actions which were clearly partisan in favour of a creditor who was also a shareholder in the debtor.
In the motion to quash the bankruptcy, it was alleged that the trustee had allowed or closed his eyes to the transfer by Micadco, to its benefit and that of other entities owned by Mr. Cadrin, of large sums of money taken from the debtor's accounts both before and after the date of the bankruptcy.
On August 8, 1996 Mr. Pard said he believed that certain income was used to cover Ultramar's debt and asked that the trustee undertake a check of the accounts.
On August 28, 1996, in the supplementary opinion requested by the trustee from Mr. Noonan, the latter stated that the question was more of an accounting nature. According to Mr. Noonan and the information he had obtained, a very small part of the sum of $740,000 paid to Ultramar came from the debtor's operations, and there was therefore no reason for the trustee to make too extensive an inquiry into the validity or enforceability of the purchase of the debt.
This statement by Mr. Noonan was not based on an audit of the figures by the trustee. In reply, Mr. Thibault told Mr. Noonan he had no idea how Mr. Noonan obtained that information.
At the examination after defence Mr. Robitaille replied that he had not personally made an audit of the books, but he was aware of certain monies paid to Micadco by Sonerco. He added that the decision not to challenge the proceedings had been based on the opinion, on an audit of the figures and the value of the assets, and on the fact that no purchaser was interested in paying an amount higher than the amounts owed to Micadco and Ultramar.
The trustee was not able to say whether the monies paid to Micadco were used to pay Ultramar. On January 23, 2002 the trustee stated that the inspectors had clearly indicated that they did not wish any more exhaustive analysis of the books with regard to the secured debts, because of the opinion given by Mr. Noonan and the costs resulting from such an analysis, at a time when funds were not available in the bankruptcy.
At the same time, according to the minutes of the first meeting of the inspectors on August 8, 1996, it was agreed that the trustee would undertake a check of the accounts jointly with Mr. Pard. The minutes of the inspectors' meeting of September 18, 1996 did not mention that the inspectors had clearly indicated they did not wish any more extensive analysis of the books with respect to the secured debts.
The trustee indicated that a preliminary audit was carried out by Mr. Bernier and the representatives of the trustee accompanying him. However, in view of the amount of work and the fact that the inspectors did not want to spend the necessary money, the audit was never completed.
Nonetheless, on November 29, 1996 Messrs Robitaille and Thibault testified that they were doing some research and that an audit report would be prepared on all Sonerco's operations in its first year of operation. The analyst found in the estate file, in connection with a review of the books by the trustee, a list of cheques issued by Sonerco for the period January 1995 to June 11, 1996. This list contained a series of errors in dates, carrying over to 1996 cheques which actually dated from 1995.
Under the agreement for repayment of debts and sale of debts concluded between Ultramar, Sonerco and Micadco on April 25, 1995, it was provided that Sonerco would repay Ultramar a minimum of $20,000 a month beginning on March 31, 1995 and make payments of $250,000 on August 31, 1995 and March 31, 1996 at the latest, for a total of $740,000 before April 1, 1996.
During that period it was Micadco who made these payments to Ultramar. Once the payments had been completed, Ultramar had assigned and transferred to Micadco in April 1996 the remaining debts held by Sonerco and the rights, title and interest held under immovable hypothecary deeds granted by Agathe Hébert, Marc and Nathalie Létourneau, Les Placements Immobiliers Arthabaska and Pétroles Sonerco on four immovable properties located in Victoriaville. Correcting the dates on the cheques, the table on the audit list of cheques indicated that Micadco had received $442,996.22 from Sonerco between January 1995 and June 11, 1996, including $409,426.96 during the period of the notice of intention. The table also indicated amounts paid by Micadco to Ultramar during the period of the notice of intention, namely $300,259.45, to complete the payments mentioned in the agreement of April 25, 1995, and obtain assignment of the balance of the Ultramar debt in April 1996 for the sum of $1.
It was not possible to find in the file any documentary support for the amounts received by Micadco, namely $442,996.22 from January 9, 1995 to June 11, 1996. Nonetheless, during the notice of intention Micadco received nearly $410,000, including $208,000 withdrawn from Sonerco's account the day before and on the same day the deadline for filing a proposal with the creditors expired, that is, June 10 and 11, 1996.
The trustee could not identity any document establishing that Micadco could withdraw $20,000 a month and $140,000 a month to repay its debt. The trustee also could not say what authority there was for the withdrawal of $208,000 from the bank account on June 10 and 11, 1996. He had never personally asked any questions about these figures.
A review of the estate files by the analyst disclosed that there were no written explanations obtained from Mr. Cadrin or his counsel, analyses or accounting studies by the trustee to determine the documentary support for the amounts received by Micadco from Sonerco during the year preceding the bankruptcy: yet during the period of the notice of intention, Micadco had received nearly $410,000, including $188,000 withdrawn from the Sonerco account the day before expiry of the deadline for filing a proposal to the creditors, and $20,000 on the same day the deadline expired, namely June 11, 1996.
In a judgment removing the trustee on May 27, 1998 (Arthabaska 415–11–000091–956), Dutil J. of the Quebec Superior Court concluded from the evidence that the trustee had simply made superficial checks, that he should have acted differently and that he should have taken his inquiries further, as his counsel advised him to do on August 28, 1996.
- Hearing of September 16, 1996 and motion for compulsory surrender and authorization of court sale
On September 16, 1996 the motion to quash the bankruptcy was heard before Jules Allard J. This hearing took place the day before the hearing of the motion for compulsory surrender and authorization of a court sale filed by Micadco. The trustee's arguments and explanations were then submitted and analyzed, and the conclusion reached that the corporate trustee, acting through Mr. Robitaille, had committed certain wrongful acts.
Ms. Sylvain of the corporate trustee's office had written Mr. Noonan telling him of the motion by Micadco for compulsory surrender, to be heard in Québec on September 17, 1996, and the motion to quash the bankruptcy served by counsel for the co-applicants, to be heard in Arthabaska on September 16, 1996. On September 16, 1996 Mr. Noonan appeared at Victoriaville without the trustee for the hearing of the motion to quash the bankruptcy before Jules Allard J. At the hearing Mr. Noonan did not tell the judge that the trustee had decided not to object to the proceeding initiated by the secured trustee Micadco, namely the motion for compulsory surrender and authorization of a court sale of the Sonerco assets, to be submitted in Québec the following day. Accordingly, Micadco had obtained judgment on the motion while Jules Allard J. took under advisement the co-applicants' application to suspend the bankruptcy, and its consequences.
At his examination after defence Mr. Robitaille told Mr. Pard that he was aware of the motion to quash the bankruptcy and it did not bother him to allow Micadco to proceed by default on its motion, since Mr. Pard had been informed of the position taken by the inspectors at the meeting of August 8, 1996.
On October 4, 1996, when Allard J. ordered suspension of any transaction involving the debtor's property, and specifically involving Micadco and 3146332 Canada Inc., the motion for compulsory surrender and authorization of a court sale had already been granted and the property sold by Micadco to 3146332 Canada Inc. on September 17, 1996. Consequently, the co-applicants filed a motion to revoke this judgment, after the trustee informed Mr. Bernier on September 25, 1996 of the judgment rendered on the motion.
On October 15, 1996 the corporate trustee appealed the judgment by Allard J. of October 4, 1996. Subsequently, at the inspectors' meeting of October 18, 1996 Mr. Thibault, who chaired the meeting, obtained confirmation from the inspectors of the decision taken to appeal the case and to retain Mr. Noonan as counsel responsible for the proceeding. As according to the reasons stated in the amended inscription in appeal of October 21, 1996 the appeal concerned the rights of the secured creditor Micadco, the estate would pay the additional fees.
- Inspectors' authorization
- 12.1 Appeal regarding contempt of court charge
On August 26, 1997 Mr. Noonan informed the inspectors of a proceeding served by Mr. Pard on August 15, 1997, a special order to appear on a charge of contempt of court following a motion filed by the co-applicants. Mr. Noonan was retained to represent the trustee in respect of the acts alleged against the trustee. At the hearing Mr. Noonan submitted a motion to dismiss, which was dismissed by Bruno Bernard J.
On September 15, 1997, without obtaining the inspectors' permission, the trustee filed a motion for leave to appeal the judgment by Bruno Bernard J.
- 12.2 Inscription in appeal of judgment removing corporate trustee
On May 27, 1998 Julie Dutil J. removed the corporate trustee and referred the dismissed claims to the new trustee Éric Pronovost. The counsel Hickson, Martin, Blanchard had appealed without the inspectors' permission.
On August 25, 1998 McCarthy, Tétreault also appeared for the trustee without the inspectors' permission. The two firms were replaced by Joli-Coeur, Lacasse, Lemieux, Simard, St-Pierre without the inspectors' permission.
- 12.1 Appeal regarding contempt of court charge
- Corporate trustee's accounts
The evidence showed that the corporate trustee had not deposited the amounts received from Sonerco and Les Pétroles Cadrin Inc. to pay its fees, as well as certain disbursements to a trust account on behalf of the estate. The corporate trustee, acting through Mr. Robitaille, had not had its fees authorized by the inspectors and had not told them that Mr. Cadrin had agreed to pay the said fees.
- Agreement on corporate trustee's fees and disbursements
The corporate trustee, acting through Mr. Robitaille, placed itself in a conflict of interest situation by indicating to Mr. Cadrin on May 26, 1998 that the amounts received for fees and disbursements in the Sonerco file would be treated as advances to the corporate trustee and guaranteeing him that they would be repaid if the bankruptcy received money from the bankruptcy assets or as a consequence of judgments or settlements against appropriations of funds or reviewable transactions.
The sole secured creditor, Micadco, and Axco were both artificial persons related to Sonerco, since they belonged to Mr. Cadrin's companies. These two companies had received money from Sonerco during the year preceding the bankruptcy. The trustee thus placed himself in a situation where his fees and disbursements were paid by Mr. Cadrin, while companies related to the latter were likely to be concerned in proceedings to recover money on behalf of the estate. Such an agreement was contrary to the interests of unsecured creditors.
By a letter on March 21, 2003 the undersigned received the joint recommendation of the trustees and the senior analyst, disciplinary affairs, in the Office of the Superintendent of Bankruptcy regarding the offences on which the parties had agreed in the file.
The senior analyst's report also contained a series of 26 offences resulting from the report.
The conclusions, agreed to by the trustees and the senior analyst in their joint recommendation, were sometimes different from the conclusions arrived at by the senior analyst in her report.
Objection to agreement
Once counsel for the two parties had made their representations at the hearing of the case on March 18, 2003 Alain Pard, acting for the co-applicants, intervened to put forward reasons why his clients objected to the agreement concluded between the parties respecting the offences noted and the conclusions sought. In short, Mr. Pard, whose services in civil liability were retained by his clients, objected to the penalties recommended because they were insufficient as to the trustees, and he claimed the right to intervene in the matter to present further evidence.
As the dispute was essentially between the senior analyst and the trustees, the undersigned agreed to allow counsel to submit arguments, first inviting the senior analyst to comment on the whereas clauses in the agreement concluded between herself and the trustees in light of the offences noted in her report of July 4, 2002.
It follows that except for four of the 26 offences noted by the senior analyst the whereas clauses contained in the agreement concluded between the parties remain essentially the same, though consolidated or worded differently.
Offences not covered
Accordingly, which are the offences alleged to have been committed by the trustees that supposedly were not included in the whereas clauses of the agreement made between the parties, and what influence would their absence have on the agreed penalties?
- Paragraph 115 of the senior analyst's report alleged by an offence charged that the individual trustees, consistent with a legal opinion, did not examine the debtor Sonerco's minute book to ensure that Michel Cadrin, sole shareholder and president of Micadco, was authorized to sign a universal movable hypothecary deed between Sonerco and Financière Micadco Inc. (hereinafter "Micadco").
As appears from paragraph 114 of the senior analyst's report, William Noonan had issued the opinion that Mr. Cadrin was authorized to grant the hypothec in question. This allegation was not included in the whereas clauses.
- Paragraph 192 of the senior analyst's report alleged by an offence charged that the trustee for the estate did not inform the judge of a motion the following day for compulsory surrender and authorization of a court sale of Sonerco's assets filed by Micadco, and blamed the trustee Robitaille for this.On the basis that the trustee clearly cannot be responsible for his counsel's negligence, this allegation was not included in the whereas clauses.
- Paragraph 209 of the senior analyst's report alleged by an offence charged that certain counsel were retained by the corporate trustee to appeal a Superior Court judgment removing him, without permission from the inspectors.The senior analyst regarded this deficiency as of small importance and this allegation was not included.
- Paragraph 248 of the senior analyst's report alleged by an offence charged that the trustee Robitaille did not disclose to the inspectors that the advances made by Mr. Cadrin [TRANSLATION] "for fees and disbursements of the trustees" would be repaid to him if the bankruptcy received money from the bankruptcy estate.
The senior analyst noted that the inspectors had asked the trustee to obtain a security or surety from Mr. Cadrin or his companies for payment of his fees and disbursements. This allegation was therefore not included.
Judgment of March 27, 1998Footnote 1
In her judgment of May 27, 1998,Footnote 2 Julie Dutil J. concluded that:
- during the period of the notice of intention the trustee Robitaille took no serious steps to prepare a proposal;
- in administering the bankruptcy the trustee did not follow the advice of his lawyer and should have taken his research further regarding the administration of the bankruptcy property;
- the trustee and his counsel, both officers of the court, deliberately chose not to inform Jules Allard J. of the Quebec Superior Court on September 16, 1996, when he was hearing an application to stay for the purpose of preventing the sale of the debtor's property until judgment was rendered on the application to quash the bankruptcy, that an application for a court sale would be made the following day to the special prothonotary in Québec.
Further, on the grounds that (a) the trustee Gérald Robitaille & Associés Ltée had been lax in agreeing to sign affidavits in support of motions for extensions of time without checking whether Sonerco was really able to make a viable proposal; (b) the trustee had failed in its duty by conducting no audit to see whether the payment of money to Micadco, as well as the transfer of a debt from Ultramar to Micadco for $1, were reviewable transactions or fraudulent preferences between related persons; and (c) the trustee had seriously failed in his duty as an officer of the court by not informing the court that a motion for a court sale would be filed the following day in Quebec, the Court removed the respondent trustee as trustee in the bankruptcy and appointed a trustee from another firm to take charge of the file.
We examined a series of ordersFootnote 3 filed by counsel for the co-applicants in which serious omissions, maladministration, illegal receipts or payments or other offences were noted, and we see that in the three cases in which the Superintendent of Bankruptcy's delegate cancelled the licence of a particular trustee, that is in Miller, Rainville and Rusinek, the latter had already announced their intention not to renew their licences. In Bick, the latter suffered a two-year licence suspension, and in Samson Bélair, the corporate trustee repaid the sum of $64,671.63 as undistributed funds. It also had to pay an amount for costs of the investigation and undertook to make a donation to the CTF.
In Noubar BoyadjianFootnote 4, filed in reply, the particular trustee suffered a licence limitation of one month, and in PinskyFootnote 5, the latter's individual licence was suspended for six months with a limitation for six more months, and the corporate licence was limited for three months.
In ChatignyFootnote 6, where the individual and corporate trustees were guilty of major, serious, unacceptable and inexplicable misconduct in their administration of the bankruptcy, a three-month suspension was ordered against the individual trustee only, as his record as a trustee up to that time was impeccable.
The licence of Gérald Robitaille and Raymond Marcoux as a corporate trustee is now held under another name. We consider that the suspension of the corporate trustee licence would necessarily have the direct consequence of affecting several of the latter's employees, although the misconduct alleged against the individual trustees was primarily a matter of their individual management.
Additionally, we understand that the careers of the individual trustees have been irreproachable since they have held the position and that the complaint in this matter is the only formal complaint which has been made against them or against the corporate trustee.
In light of the offences included by the parties in their agreement of March 21, 2003, the reasons and conclusions of the judgment by Julie Dutil J. of the Quebec Superior Court on May 27, 1998 and the authorities submitted to the undersigned by either side, we consider that the conclusions recommended by the parties are within the measures generally taken in such matters on behalf of and as delegate of the Superintendent of Bankruptcy.
Whereas Gérald Robitaille and Raymond Marcoux, trustees, and Gérald Robitaille & Associés Ltée, corporate trustee, have an office in the city of Québec, province of Quebec;
Whereas a complaint has been filed against the corporate trustee and its representatives by the creditors regarding administration of the file in the bankruptcy of 3087–6346 Québec Inc. (hereinafter "Sonerco";
Whereas the senior analyst, disciplinary affairs, of the Office of the Superintendent of Bankruptcy, in accordance with the general delegation received from the Superintendent of Bankruptcy for implementation of s. 14.02(1) of the Bankruptcy and Insolvency Act (hereinafter "the Act") on July 4, 2002 submitted a report to the Superintendent of Bankruptcy on the administration of a notice of intent filed by Sonerco and the latter's subsequent bankruptcy by Messrs Gérald Robitaille and Raymond Marcoux, trustees, and by Gérald Robitaille & Associés Ltée, corporate trustee;
Whereas Messrs Robitaille and Marcoux, trustees, and Gérald Robitaille & Associés Ltée have been able to respond to the aforesaid report, though they no longer had the estate file in their possession, as it was in the possession of the substituted trustee;
Whereas the trustee Mr. Robitaille, when the notice of intention was filed, did not personally participate with the Sonerco representative in the preparing of a proposal and the applicable negotiations, though he took part in discussions in this connection with members of his firm, contrary to s. 50.5 of the Act, s. 5(5) of the Act and para. 6(g) of the Superintendent of Bankruptcy's Directive No. 4 on delegation of tasks;
Whereas Messrs Robitaille and Marcoux, trustees, signed reports on the cash flow statement without setting out probable and hypothetical assumptions in the notes, without documenting the results of their inquiries, analyses and discussions dealing with information provided by management, contrary to s. 50.4(2)(b) of the Act as well as s. 13.5 of the Act and s. 45 of the Rules;
Whereas Messrs Robitaille and Marcoux, trustees, delegated to one of their employees, though under their supervision, the task of conducting the inquiries, analyses and discussions concerning the information provided by management in support of probable assumptions and evaluation of the relevance of hypothetical assumptions, contrary to s. 5(5) of the Act and s. 6(g) of the Superintendent of Bankruptcy's Directive No. 4 on delegation of tasks;
Whereas Mr. Robitaille, trustee, did not perform his statutory obligations by failing to take possession of the bank balances within a reasonable time after the Sonerco bankruptcy, even though as a result of security documents the trustee could not have any right to these amounts, contrary to s. 16(3) of the Act as well as s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Robitaille, trustee, did not obtain a statement from an employee or director of Sonerco at the time of the bankruptcy confirming the accuracy of the inventory of standard lamps, signs and oil facilities, as appeared in the company's books, contrary to ss. 5(5) and 16(3) of the Act and para. 7 of the Superintendent of Bankruptcy's Directive No. 31 on taking an inventory of the bankrupt's property (Directive No. 7 since February 3, 1997);
Whereas Mr. Robitaille, trustee, did not perform his duties with care and diligence by filing a statutory balance sheet for the bankrupt company, indicating real property as well as standard lamps, signs and oil facilities, contrary to ss. 5(5) and 19(3) of the Act and paras. 5 and 10(f) of the Superintendent of Bankruptcy's Directive No. 16R on preparation of the statutory balance sheet and s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Marcoux, trustee, issued an incomplete written preliminary report, since it contained no specific assessment of all the tangible assets and all the relevant stages in handling the file, contrary to s. 5(5) of the Act and para. 4 of the Superintendent of Bankruptcy's Directive No. 32 on the trustee's report to creditors on preliminary administration, as well as s. 13.5 of the Act and s. 39 of the Rules;
Whereas Messrs Robitaille and Marcoux, trustees, did not obtain the inspectors' approval of the agreement for management and custody of assets made with 3146332 Canada Inc., although the trustees stated that the inspectors were informed of its existence, contrary to s. 30(1)(c) of the Act;
Whereas Messrs Robitaille and Marcoux, trustees, did not perform their duties with care and diligence by not reviewing with the inspectors the consideration arranged in the agreement for management and custody of assets and not requesting the inspectors' approval for not obtaining the charge-and-discharge statement mentioned in the agreement, contrary to s. 13.5 of the Act and s. 36 of the Rules;
Whereas Messrs Robitaille and Marcoux, trustees, did not read the legal opinion carefully, as this would have enabled them to see the inaccuracy regarding the date when a security was given to Financière Micadco Inc., a secured creditor, and not ensuring that the supplementary opinion dealt with the question of the hypothec granted to Financière Micadco Inc. less than a year before the bankruptcy, contrary to s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Robitaille, trustee, did not admit in his written objection to the motion to quash the bankruptcy that it was wrong to say that the universal movable hypothec was granted to Financière Micadco Inc. by Sonerco over a year before the bankruptcy, contrary to s. 13.5 of the Act and s. 39 of the Rules;
Whereas Mr. Robitaille, trustee, did not perform his duties with care and diligence by not fully documenting his analysis of reviewable transactions and preferential payments, in particular transactions made with related persons, although the trustee said he did such an analysis, contrary to s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Robitaille, trustee, did not fulfil his obligations within a reasonable time by not immediately informing the inspectors of the motion to quash the bankruptcy and not obtaining their authorization to employ counsel to represent the corporate trustee at the hearing of that motion, contrary to s. 30(1)(e) of the Act as well as s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Robitaille, trustee, did not perform his duties with care and diligence by not notifying the inspectors that the judge had taken under advisement the application to suspend the bankruptcy proceeding, and all its consequences, although they had already given the trustee instructions not to object to a motion for surrender by the secured creditor, contrary to s. 13.5 of the Act and s. 36 of the Rules;
Whereas Mr. Robitaille, trustee, did not obtain authorization from the inspectors to:
- appeal the judgment dismissing the motion to dismiss on a charge of contempt of court, although the trustee stated he informed the inspectors about this;
- appeal the judgment removing the corporate trustee;
- appeal the judgments referring to the new trustee of the estate the three claims initially dismissed by the corporate trustee, contrary to s. 30(1)(e) of the Act;
Whereas Mr. Robitaille, trustee, did not fulfil his obligations within a reasonable time by failing to notify the inspectors that he had been removed by the Court and by failing to convene the inspectors to give them a final accounting of his administration of the file, contrary to s. 13.5 of the Act and ss. 36 and 39 of the Rules;
Whereas Mr. Robitaille, trustee, failed to deposit in the estate's trust account monies received as fees during the notice of intention and the bankruptcy, contrary to s. 25(1) of the Act as well as s. 5(5) of the Act and paras. 4, 15, 16 and 17 of the Superintendent of Bankruptcy's Directive No. 5R on third party deposits and guarantees;
Whereas Mr. Robitaille, trustee, made payments of disbursements totalling $1,712.70, namely miscellaneous disbursements amounting to $215.50, as well as travel costs of $295.20, $635.00 and $567.00, by cheques which were not drawn on the estate account, contrary to s. 25(2) of the Act;
Whereas Mr. Robitaille, trustee, failed to indicate at the meeting of inspectors approving his fees, and in his draft receipts and disbursements statement, all the monies received and disbursed as well as any salary claimed by the corporate trustee during the period of the notice of intention, contrary to s. 13.5 of the Act and s. 39 of the Rules;
Whereas Mr. Robitaille, trustee, did not fulfil his obligations by not submitting a final statement of receipts and disbursements to the inspectors and by not immediately submitting the corporate trustee's accounts to the Court, contrary to s. 13.5, ss. 36(1) and 152(2) of the Act and s. 36 of the Rules;
Whereas , although the administration of the file by the trustees in the notice of intention and bankruptcy of Sonerco contains the aforementioned offences, the senior analyst, disciplinary affairs, noted no indication of dishonesty or breach of trust;
Whereas , pursuant to s. 14.02(1) of the Act, the senior analyst, disciplinary affairs, of the Office of the Superintendent of Bankruptcy sent the trustees and the corporate trustee a written notice, with reasons in support, of the powers the Superintendent could exercise;
Whereas , in view of all the aforementioned facts and circumstances, the undersigned does not think it advisable or in keeping with the public interest to vary or reject the recommendations of the senior analyst, disciplinary affairs, giving rise to the penalties accepted by either side and described herein;
The undersigned, as delegate of the Superintendent of Bankruptcy, pursuant to the powers conferred on him under s. 14.01(2) of the Act, approves the agreement made in this file and makes the following order:
- the licence of Gérald Robitaille, trustee, is suspended for six months as of May 1, 2003, and during that period the trustee may not act or appear as trustee in bankruptcy or receiver in other files;
- the licence of Raymond Marcoux, trustee, is limited for one and a half months as of May 1, 2003, during which period he may only act as trustee in summary administration files, both personally and on behalf of a corporate trustee;
- failure to observe the conditions and restrictions imposed in this order on the trustee licences of Gérald Robitaille and Raymond Marcoux shall constitute an offence pursuant to s. 13.2(5)(b) of the Act;
- each duplicate original of this ORDER signed by the undersigned delegate has the same validity and the same effect and may be used as such for all legal purposes.
The undersigned reserves all the Superintendent of Bankruptcy's rights pursuant to s. 14.01(1)(c) (French version) of the Bankruptcy and Insolvency Act.
Signed at Montréal on April 14, 2003
Hon. Lawrence A. Poitras, Q.C.
Delegate of Superintendent of Bankruptcy
(signed)Lawrence A. Poitras
This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.