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.
In the matter of Todd Y. Sheriff and Segal & Partners Inc. licensed trustees for the province of Ontario
WHEREAS Todd Y. Sheriff and Segal & Partners Inc. have operated as licensed trustees in bankruptcy in the Province of Ontario since and respectively (the "Trustees");
AND WHEREAS the Senior Analyst, Professional Conduct ("Senior Analyst") of the Office of the Superintendent of Bankruptcy ("OSB") has submitted a report dated , which was re-issued without a sanction recommendation on , (the "2002 Report"), on the administrative practices of the Trustees pursuant to a general delegation under subsection 14.01 (1) under the Bankruptcy and Insolvency Act ("BIA") which supplemented an earlier report by the Senior Analyst date ;
AND WHEREAS the 2002 Report has identified administrative deficiencies in the way the Trustees administered certain estates, including;
- failure to maintain an adequate internal control system and periodically review and evaluate that system and protect estates from loss or misappropriation contrary to (then) Directive 5 – Estate Funds and Banking; subsections 25(2) and 154(1) of the BIA and Rules 36 and 65 of the Code of Ethics for Trustees;
- failure to adequately administer Third Party Funds, including failing to maintain funds in trust and permitting individual deposits within the trust account to become overdrawn, contrary to Directive 5R – Third Party Deposits and Guarantees and Rule 48 of the Code of Ethics for Trustee;
- failure to reconcile individual estate trust accounts on a monthly basis contrary to (then) Directive 5 – Estate Funds and Banking;
- deficiencies relating to propriety of costs, including improper draws of fees from a Third Party Retainer trust account contrary to subsection 25(1) of the BIA; early draws of final fees in two summary bankruptcy estates contrary to Rule 65 (1)(a); excess draws of final fees in two summary bankruptcy estates contrary to Rule 128 and payment of untaxed legal fees in one estate contrary to Rule 18;
- deficiencies relating to the preparation and verification of Statements of Affairs, including failure to verify bankrupt's interest in real estate and other assets and failure to investigate potential preference payments contrary to subsection 19(3) of the BIA, Directive 16R — Preparation of the Statement of Affairs and Rule 36 of the Code of Ethics for Trustees;
- deficiencies relating to the administration of Proofs of Claims and payments of dividends and levy, including failing to pay dividends in respect of valid Proofs of Claim and amended Proofs of Claim and failure to pay levy contrary to Section 141 and subsection 147(2) of the BIA and the admission of a secured Proof of Claim with significant defects contrary to Directive 14R — Proof of Claim, Proxy and Quorum at the First Meeting of Creditors and Rule 36 of the Code of Ethics for Trustees;
- deficiencies in the administration of a consumer proposal, specifically the failure to identify the deemed annulment of said proposal or forthwith inform the Official Receiver or creditors of this fact contrary to subsection 66.31(1) of the BIA and Rule 36 of the Code of Ethics for Trustees;
AND WHEREAS the Trustees do not accept all the allegations and findings in the 2002 Report, but the Trustees do acknowledge that their conduct, in relation to certain administrative matters, fall below the standard expected of a licensed Trustee in Bankruptcy;
AND WHEREAS the parties have jointly drafted and submitted to me this proposed text of the present decision, duly approved by them in writing, and request that I issue an Order accordingly;
AND WHEREAS in the specific circumstances of this case the proposed draft appears to be reasonable and there does not seem to be any reason to derogate from it.
FOR THESE REASONS I, the undersigned Delegate of the Superintendent of Bankruptcy, by virtue by the powers delegated to me under Section 14.01 of the BIA, hereby order that:
- the trustee licence of Todd Y. Sheriff be suspended for a period of one month commencing immediately upon the fulfilment of the Licensing Order of the Superintendent of Bankruptcy, currently in force;
- the trustee licence of Todd Y. Sheriff subsequently be restricted for a further period of two month from accepting and filing appointments under the BIA;
- the corporate trustee licence of Segal & Partners Inc. be restricted from filing any new estates for a period of 4 weeks and upon the fulfilment of that restriction be restricted for a further 2 weeks to accepting and filing only summary bankruptcy and consumer proposal appointments under the BIA;
- the corporate trustee Segal & Partners Inc. shall allocate interest among the deposits in the third retainer account and (a) with respect to any estates that have been closed, where funds were not required to cover the cost of administration, the Corporate Trustee shall remit the interest to the Depositors if they can be located, and (b) where funds have been required to cover costs of administration, the trustees may not utilize these amounts to fund a deficiency of fees unless and until a supplementary Statement of Receipts and Disbursements has been issued and a Letter of Comment received, and (c) in all other cases, the funds shall be remitted to the Superintendent of Bankruptcy as undistributed assets;
- that the corporate trustee Segal & Partners Inc. shall (a) deposit to the Walter estate the sum of $ 11,333.00 in respect of unrealized equity in real estate, (b) submit an Amended Final Statement of Receipt and Disbursements, including Dividend sheet reflecting the correct amounts of the proven claims of the Canada Revenue Agency and the Royal Bank of Canada, to the Senior Analyst, and (c) make the required payments of dividends and levy; and
- that the Trustees submit their Final Statement of Receipts and Disbursements in the estate of Axsmith Shoes Limited for comment within 30 days of the date of this Order.
THAT IN THE EVENT that the Trustees do not comply with the Order herein, the Trustees shall be in default pursuant to paragraph 13.2(5)(b) of the BIA.
THAT THIS ORDER, except where otherwise specified, will come into force three business days after it is signed.
SIGNED at Toronto, on the province of Ontario,
Name FRED KAUFMAN
Title: Delegate of the Superintendent of Bankruptcy
Approved as to form and content this
Fluxgold Izsak Jaeger LLP
Bruce R. Jagger
Solicitors for the
This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.