Segal & Partners Inc. and Todd Y. Sheriff — February 12, 2003
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 the professional conduct of
Todd Y. Sheriff
holder of a trustee licence and
Segal & Partners Inc. Holder
of corporate trustee license for
the province of Ontario
Counsel for the Trustee:
Mr. Craig R. Colraine
Birenbaum, Steinberg, Landau, Savin & Colraine LLP
Counsel for the Senior Analyst:
Mr. Marcel Gauvreau
The trustees are seeking a stay of proceedings regarding their professional conduct to be stayed or alternatively that a new hearing be ordered because of the Senior Disciplinary Analyst's (hereinafter referred to as the SDA) failure to disclose material evidence in its possession prior to the commencement of hearing conducted under Section 14.02 of the Bankruptcy and Insolvency Act (BIA).
On , I issued a decision finding the trustees responsible for a number of wrongdoings regarding the administration of certain estates under their administration.
Following that decision and in the course of setting hearing dates for the parties to make representations on possible sanctions against the trustees' licences, counsel for the trustees advised that he would be seeking a reconsideration of the findings on the grounds of fresh evidence (eg. Letter dated , from Mrs. Godkewitsch to the undersigned.) As a result, a hearing took place on , to hear arguments regarding the remedies sought by the trustees.
It appears that the trustees learned, in late September 2002, of the existence of a report dated , from another trustee firm regarding Mrs. Lezette Armshaw's misconduct at that firm which lead to the termination of Mrs. Armshaw's relationship with that firm and the sending of the said report of the Hamilton Division Office of the Office of the Superintendent of Bankruptcy (hereinafter OSB Hamilton). The report indicated that some $10,533 of client funds had been misappropriated during the period of to . The report alleged that Mrs. Armshaw admitted to a partner appropriating about $6,000.
Mrs. Armshaw was the senior estate administrator at Segal & Partners Inc. and as such was Mr. Sheriff's right hand person dealing with personal insolvency estates. She was involved in all personal insolvency estates for the firm and more specifically was involved in various aspects in the files which were the subject of the SDA's report provided pursuant to Section 14.02 of the BIA.
It should be noted that from the various presentations made at the hearing and various submissions from counsels that as early as August 2001, Segal & Partners Inc. found out that receipts under the responsibility of Mrs. Armshaw were missing, and that her employment at Segal & Partners was terminated in October 2001.
It should be noted that Mrs. Armshaw was not called as a witness by either of the parties at the hearing held from to . The SDA's report of , contained a statement under oath from Mrs. Armshaw that was objected to by counsel for the trustees and was not considered by the undersigned in writing the , decision.
The trustees now claim that had they known about the existence of the other trustee firm's report on the alleged misappropriations by Mrs. Armshaw, they might have called Mrs. Armshaw as a witness and representatives of the other trustee firm to evidence the conduct and character of Mrs. Armshaw, and that such fresh evidence could reasonably be expected to have resulted in a different decision than the one issued on . The trustees therefore request that the whole proceedings be stayed or that alternatively, a new hearing be ordered before an appointed delegate.
At a pre-hearing conference call held on , the issues were determined to be the following:
- Was there a duty on the part of the SDA to disclose the report from the other trustee firm, a report that she had in her possession?
- Was there a breach of duty to disclose?
- If there was a breach, what are the consequences in the present case?
Arguments for the Trustees:
The trustees argue that the very nature of the proceedings at hand requires the highest standard of procedural fairness and that the full disclosure of all the material to be used at the hearing as well as the evidence which may assist the trustees in defending the case against them should be disclosed by the SDA. The standard of disclosure is well established in criminal proceedings, (R. v. Stinchcombe,  3 S.C.R. 326, (1991), 130 N.R. 277 (QL)) [Stinchcombe]) and administrative tribunals are required to approach, if not meet, the Stinchcombe standard for disclosure (Milner v. Registered Nurses Association of British Columbia,  B.C.J. No. 2743, (1999), B.C.L.R. (3d) 372 (B.C.S.C.) (QL) at para. 4 [Milner]).
It is up to the trustees to demonstrate that the duty to disclose was breached in such a way that there is a reasonable possibility that the reliability of the findings of the , decision is affected, or that the non-disclosure affected the overall fairness of the proceedings (eg. Bailey v. Saskatchewan Registered Nurses Association,  10 W.W.R. 536, S.J. No. 332 (Sask. Q.B.); R. v. Dixon,  1 S.C.R. 244, (1998) 222 N.R. 243 [Dixon]). The duty to disclose is not a matter of discretion for the prosecution (Stinchcombe, supra page 2; Krieger v. Law Society of Alberta 2002 SCC 65).
The trustees point out that, under Subsection 7, 24(1), and 32 of the Charter of Rights and Freedoms, a breach of duty to disclose may amount to an abuse of the process and be cause for a stay of proceedings. This is particularly true if the trustees' fundamental rights have been denied to the extent of clearly affecting the public sense of decency and fair play. (eg. R. v. L.V.N.,  O.J. No. 1294 (Gen. Div.) (QL).)
The trustees argue that in the circumstances of this case, the SDA had known since April 2002 about the other trustee firm's report, and that she also knew that Segal & Partners Inc. itself had filed a number of Section 205 reports under the BIA disclosing similar occurrences of funds misappropriations by Mrs. Armshaw.
The trustees point out that it is only at the hearing of , that they found out that Mrs. Armshaw had not been called as a witness even though they had been led to believe throughout various disclosure sessions that she would be called to testify.
The trustees argued that had they known about Mrs. Armshaw's conduct at the other trustee firm, they might have examined her and the other trustee firm's representatives, presumably with a view of showing a pattern of conduct. This, however, is not clear from the trustees' arguments. They suggest that examinations of these additional witnesses would have corroborated their effort to discredit any statement by Mrs. Armshaw and that the failure of the trustees to supervise their employees as casted in the , decision may have been looked upon from a different perspective had they had the opportunity to explore Mrs. Armshaw's role.
In conclusion, counsel for the trustees argues that the undisclosed report was known to the SDA well before the hearing, that she knew all along that the dishonesty of Mrs. Armshaw was central to the defence, and that, at a minimum, the strategy for meeting the case against the trustees would have been materially different had the report been disclosed. Counsel further argued that the SDA's conduct was deliberate and constituted an abuse of process, bringing these proceedings into disrepute and warranting a complete stay of proceedings.
Arguments for the Senior Disciplinary Analyst:
The SDA takes the position that the duty to disclose did not extend to the other trustee firm's report. Disclosure of the said report provides no evidence on how funds were misappropriated and no evidence that Mrs. Armshaw had stolen the missing funds.
The SDA argues that her investigation aimed at the professional conduct of Todd Sheriff and Segal & Partners Inc. and was triggered by a creditor's complaint about solicitation of proxies and that as such, her report focussed on the failure of the trustees to carry out their statutory duties properly.
The SDA points out that the deficiencies identified in her report are "all attributable to responsibility of the trustees". She argues that the other trustee firm's report was not disclosed for the same reason that Segal & Partners Inc.'s own Section 205 Report on alleged appropriation of funds by Mrs. Armshaw was not disclosed; that reason being that neither report was relevant to the conduct of proceedings in the present case.
Counsel for the SDA further argues that even if the report was subject to the duty of disclosure, the failure to disclose was of no consequence as, on the one hand, the decision of , did not rely on Mrs. Armshaw's statement and on the other, that the said report was not material in the investigation of the trustees. The SDA suggests that had the competence or character of Mrs. Armshaw been important in the defence of the trustees, they should have demonstrated due diligence by investigating Mrs. Armshaw's activities after her termination from Segal & Partners Inc. to determine if her new employer was satisfied with her performance. She further suggests that they should have cross-examined Mrs. Armshaw on her sworn statement and filed their own Section 205 reports.
Counsel for the SDA argues further that the trustees' motion is simply an attempt to introduce fresh evidence, but that in light of R. v. Palmer ( 1 S.C.R. 759) there are no grounds to allow fresh evidence, as the new evidence would not affect the result of the case and that in any case, if the trustees had displayed due diligence, they would have called Mrs. Armshaw as a witness and would have inquired as to her performance with her subsequent employer.
The SDA concludes by stressing that the trustees had more than a reasonable opportunity to meet the case set out in her report. The trustees were provided, in a timely manner, with all the information forming the basis of the SDA's report, and they had the opportunity to call any witness to explain their conduct and exonerate themselves.
Counsel for the SDA further concludes that in his opinion, the disclosure tests described in Stinchcombe, Milner, Dixon and all the other case law apply to criminal and civil cases but that "these tests do not apply to federal statutory laws." Counsel further takes the view that:
The standard for disclosure to which the Senior Disciplinary Analyst is subject is to disclose any information or documents that are obtained during her investigation which are relevant to facts cited in her report and to her findings relating to the responsibility of the trustees.
As a last point, counsel points out that even if there was duty to disclose, the non-disclosure of the other trustee firm's report was of no consequence to the defence of Mr. Sheriff and Segal & Partners Inc.
While the provisions of the BIA do not deal directly with the issue at hand, it is useful to review them and consider them as the context for extending the duty of disclosure which was initially developed as part of criminal law and extended to varying degrees into professional discipline matters under various provincial legislative frameworks.
Subsections 14.02 (1) and (2) of the BIA provide the following:
14.02 (1) Where the Superintendent intends to exercise any of the powers referred to in subsection 14.01(1), the Superintendent shall send the trustee written notice of the powers that the Superintendent intends to exercise and the reasons therefor and afford the trustee a reasonable opportunity for a hearing.
14.02 (2) At a hearing referred to in subsection (1), the Superintendent
- has the power to administer oaths;
- is not bound by any legal or technical rules of evidence in conducting the hearing;
- shall deal with the matters set out in the notice of the hearing as informally and expeditiously as the circumstances and a consideration of fairness permit; and
- shall cause a summary of any oral evidence to be made in writing.
These suggest that no decision (except of course in accordance with Section 14.03) affecting a trustee's licence can be made without the trustee being afforded a reasonable opportunity for a hearing. What is reasonable will depend on the circumstances of the particular case, but no doubt the concept of a hearing is entrenched in the BIA. Subsection 14.02 (2) provides guidance as to how those hearings shall be conducted: a) as informally and as expeditiously as the circumstances and consideration of fairness permit and b) at the hearings, the Superintendent or his adjudicating delegate is not bound by any legal or technical rules (or in French, "règle juridique ou procédurale") of evidence. Clearly the BIA suggests that in the conduct of hearings, consideration be given to fairness but that in doing so, those who conduct these hearings should also give consideration to formalities and timeliness.
I am pointing those out because it may be tempting from time to time to import concepts of criminal law with its well justified legal and technical rules of evidence and no less justified formalities, thereby losing sight of the framework under which the Superintendent or his adjudicating delegates are mandated to operate under the BIA. The same reasoning should be applied in referring to professional discipline bodies of law which are governed by various provincial legislations. Throughout the proceedings of this file, I also expressed caution to counsels of both parties in their references to the various sections of the Charter of Rights and Freedoms and their possible application to the current proceedings in light of the BIA; provisions. I concluded however that nothing before me in this case hinges on the application of the Charter, but much depends on how much principles of criminal and general administrative law apply to BIA; proceedings in light of Subsections 14.02 (1) and (2) of the BIA;.
There is no doubt in my mind that fairness is paramount at a hearing under Section 14.02 of the BIA;, and that fairness requires that hearings be conducted in accordance with the natural rules of justice unless the BIA; suggests that the rules should be departed from.
Keeping this in mind, in order to determine if the remedies sought by the trustees in this case should be granted, the following questions must be answered:
- Was there a duty of disclosure?
- Was there a breach of duty of disclosure?
- If yes, does the breach warrant the remedy sought by the trustees of staying the proceedings or alternatively ordering a new hearing?
1- Was there a duty of disclosure?:
As pointed out in R. v. Carosella by Mr. Justice Sopinka, for the majority:
The right to disclosure of material which meets the Stinchcombe threshold is one of the components of the right to make a full answer and defence which in turn is a principle of fundamental justice […].
It is immaterial that the right to disclosure is not explicitly listed as one of the components of the principles of fundamental justice. That is true as was the right to make full answer and defence and other rights. The components of the rights cannot be separated from the right itself. (R. v. Carosella,  1 S.C.R. 80, (1997), 31 O.R. (3d) 575 at para. 36–37 [Carosella].)
There is no doubt in my mind that the jurisdiction provided by Sections 14.01 and 14.02 of the BIA; is subject generally to rules of natural justice.
Therefore I would conclude that the general duty of disclosure provided by the rules of natural justice extends to the senior analyst presenting a report explaining why there is reason to take one or more of the measures described at Section 14.01 of the BIA; regarding the licence of a trustee.
2- Was there a breach of the duty to disclose?:
Counsel for the SDA argues that there was no such breach for two main reasons. Firstly, the undisclosed report was not part of the SDA's investigation. He argues that the applicable test for "federal statutory law" should be whether the undisclosed information was obtained during the investigation. Secondly, he suggests that the undisclosed report was not relevant to the facts cited in the senior analyst's report.
I find that the standards suggested by the SDA for disclosure fall short of the tests found in the case law on the subject matter, and that no persuasive arguments were advanced by counsel to detract from the tests.
In the context of criminal law, Mr. Justice Sopinka, in writing the decision for the Supreme Court, pointed out the following:
It is difficult to justify the position which clings to the notion that the Crown has no legal duty to disclose all relevant information. […]
The role of the prosecutor excludes any notion of winning or losing; his function is a matter of public duty than which in civil life there can be none charged with greater personal responsibility. It is to be efficiently performed with an ingrained sense of the dignity, the seriousness and the justness of judicial proceedings. I would add that the fruits of the investigation which are in possession of counsel for the Crown are not property of the Crown for use in securing a conviction but the property of the public to be used to ensure that justice is done. In contrast, the defence has no obligation to assist the prosecution and is entitled to assume a purely adversarial role toward the prosecution. (Stinchcombe, supra page 2 at para. 11.)
I believe that with the appropriate adaptation these standards apply to a senior analyst presenting a s. 14.02 of the BIA; report. The role of the SDA is to present all relevant information to the Superintendent or his adjudicating delegate so that he can determine if misconduct has occurred.
As to the scope of the duty to disclose Mr. Justice Sopinka, writing for the Court, stated that:
With respect to what should be disclosed, the general principle to which I have referred is that all relevant information must be disclosed subject to the reviewable discretion of the Crown. The material must include not only that which the Crown intends to introduce into evidence but also that which it does not. No distinction should be made between inculpatory and exculpatory evidence. (Ibid. at para. 29.)
And, further at paragraph 33 on the question of relevancy, Mr. Justice Sopinka wrote:
If the information is of no use then presumably it is irrelevant and will be excluded in the exercise of the discretion of the Crown. If the information is of some use then it is relevant and the determination as to whether it is sufficiently useful to put into evidence should be made by the defence and not the prosecutor. (Ibid. at para. 33 [emphasis added].)
The above statements leave no doubt in my mind as to the duty of the SDA to disclose all relevant information in her possession whether it was required directly as a result of her investigation or otherwise. In determining whether the information is relevant or not the test should not only be if information is useful to her case but whether it might be useful to the trustee. In case of any doubt, disclosure should prevail and the final decision to introduce the material as evidence (and when and how) should be left with the trustee.
Case law has generally set out 5 exceptions to the duty of disclosure which can be listed as follows:
- The information is clearly irrelevant;
- The non-disclosure is required by the rules of privilege;
- Delay in disclosure is necessary to protect witness;
- Delay in disclosure is necessary to complete investigation;
- The information not disclosed is not within the control of the prosecutor.
(R. v. Egger,  2 S.C.R. 451, (1993) 153 N.R. 272; R. v. Chaplin,  1 S.C.R. 727, (1997) 178 N.R. 118 [Chaplin]; Carosella, supra page 7; Dixon, supra page 3; Milner, supra page 2; Nuosci v. Canada (Royal Canadian Mounted Police),  F.C. 353 (T.D.) (QL).)
In the case at hand only the first exception might apply. The threshold of relevancy has been set quite low by the courts, (Stinchcombe, supra page 2) and has been referred to generally as anything that presents a reasonable possibility of being useful to the accused in making a full answer and defence (Chaplin, supra page 9 at para. 30). The reasonable possibility may reside in advancing a defence such as whether to call evidence. (See Dixon, supra page 3 at para. 20, 27.)
In the matter at hand was the other trustee firm's report relevant?
Counsel for the trustee argues that had he known about the report, he might have adopted a different strategy to meet the case of the senior analyst. He argues that the senior analyst knew perfectly well that for the trustee the character and competence of Mrs. Armshaw was central to their case. He further argues that if the trustees had known of the undisclosed report, they might have examined Mrs Armshaw and the representative of the other firm, and that such examinations may have supported the view of Mrs. Armshaw presented by Mr. Sheriff's testimony at the hearing and might have resulted in a more positive view of the attempt to discredit Mrs. Armshaw by the undersigned.
For his part, counsel of the SDA argues that the report was irrelevant to the defence of the trustees as nothing in the senior analyst's report hinges on Mrs. Armshaw's conduct. Counsel further argues that the trustees did not even produce at the hearing their own 205 reports on the alleged misappropriations of funds at their firm by Mrs. Armshaw and that they made no effort to call Mrs. Armshaw as a witness and to examine her on the content of the SDA's report.
With all due respect for the SDA's counsel, I find that his approach is not in accordance with the one suggested by the case law. The very fact that the SDA's report contained an "under oath" statement from Mrs. Armshaw is clear indication that she thought that Mrs. Armshaw's role was somewhat relevant at the time of the report as well as at the hearing on .
The SDA insisted on keeping Mrs. Armshaw's statements as part of the supporting material despite the objections of the trustees, and while knowing fully about the other trustee firm's report. In view of such insistence it is difficult to see how a report touching on the conduct of Mrs. Armshaw at another trustee firm could be seen as "clearly irrelevant" when it could easily be of some assistance in further undermining the credibility of any statement from Mrs. Armshaw to be used against the trustees by the SDA. The fact that the other trustee firm's report did not result from the investigation is irrelevant. The main issue is whether the senior analyst was aware of the existence of the report prior to the closing of the hearing. In the affirmative, it should have been disclosed to the trustees at the earliest possible time.
Therefore, I find that in the circumstances of this case, the failure to communicate the other trustee firm's report constituted a breach of the duty to disclose to the trustees all relevant information available to the SDA.
3- Does the Breach of the Duty Warrant the remedy Sought by te Trustees of Staying the Proceedings or Alternatively Ordering a New Hearing?:
The key decision on this point is found in Dixon (supra page 2 at para. 23), where Mr. Justice Cory wrote:
However, a finding that an accused's right to disclose has been violated does not end the analysis. As Sopinka J. wisely observed in Carosella, supra, at p. 100, an appellate court must be careful not to "confus[e] the obligation to establish a breach of right [to full answer and defense] with the burden resting on the appellant in seeking a stay". Similarly, the initial test which must be met in order to establish a breach of right to disclosure is analytically distinct from the burden to be discharged to merit the remedy of a new trial. The right to disclosure of all relevant material has a broad scope and includes material which may have only marginal value to the ultimate issue at trial. It follows that the Crown may fail to disclose information which meets Stinchcombe threshold, but which could not possibly affect the reliability of the result reached or the overall fairness of the trial process. In those circumstances there would be no basis for granting the remedy of a new trial under s. 24(1) of the Charter, since no harm has been suffered by the accused.
Therefore it is clear that a breach of the duty to disclose does not translate automatically into a breach of the right to full answer and defence. Trustees must demonstrate that the undisclosed information may have affected the reliability of the result reached or the overall fairness of the hearing. In absence of such a demonstration by the trustees, there would be no basis for the remedy sought as they would have suffered no prejudice.
As said by Mr. Justice Sopinka in Dixon (ibid. at para. 24):
[…] an appellate court may well find that an accused's Charter right to disclosure has been breached, and yet deny the remedy of a new trial if it is found that the trial process was fundamentally fair and that there was no reasonable possibility that the result of the trial might have been different had the undisclosed material been produced. The right to full disclosure is just one component of the right to make full answer and defence.
It is up to the trustees to prove on a balance of probabilities that their right to full answer and defence was impaired as a result of the failure to disclose. The trustee will discharge their burden if they demonstrate a reasonable possibility that the non-disclosure affected the outcome of the hearing or the overall fairness of the hearing process. "However, the reasonable possibility to be shown under this test must not be entirely speculative. It must be based on reasonable possible uses of the non-disclosed evidence or reasonably possible avenues of investigation that were closed to the accused as a result of the non-disclosure." (Ibid. at para. 34.)
As to what the "reasonable possibility" relates to, Mr. Justice Sopinka summarizes it as follows:
"In short, the reasonable possibility that the undisclosed information impaired the right to make full answer and defence relates not only to the content of the information itself, but also to the realistic opportunities to explore possible uses of the undisclosed information for purposes of investigation and gathering evidence." (Ibid. at para. 36.)
For the trustees to secure a stay of proceedings they must in addition, demonstrate an irreparable prejudice to that right to make full answer and defence. (Milner, supra page 2.)
Turning now to the case at hand and applying the various tests or standards described above, I must ask myself if there is a reasonable possibility that the undisclosed report might have affected the result of the hearing?
The undisclosed report discussed the discovery of missing funds at another trustee firm and the various procedures taken to establish the exact amount missing and avoid reoccurrence. It also refers to Mrs. Armshaw having made some admission to a third party other than the author of the report about taking the money because of gambling problems.
The undisclosed report has no direct bearing on any of the trustees' failures described in the SDA's report dated , which was the object of the hearing that led to the decision. The undisclosed report is limited entirely to events that occurred at the other trustee firm and have no relation to what happened at Segal & Partners Inc. The only common elements are that both firms employed the services of Mrs. Armshaw, they both were victim of fund misappropriations and they both allege that Mrs. Armshaw played a role in these misappropriations. Yet the misappropriation was not an issue at the hearing in the present case; it was not part of the SDA's report against the trustees.
I therefore conclude that there is not a reasonable possibility that the report itself might have affected my decision of .
But this does not end the matter. According to case law, I must go further and determine if the trustees have demonstrated on the balance of probabilities that there exist a reasonable possibility that they were denied possible avenues of investigation as a result of the non-disclosure.
The trustees argue that had they known about the undisclosed report, they may have investigated the matter further and may have called upon the other trustee firm's representatives and Mrs Armshaw to establish her role at the other trustees firm. Presumably such line of questioning might have served to reinforce the credibility of Mr. Sheriff's testimony at the hearing as well as possibly the testimony of Mrs. Won. It might also have served to undermine any evidence relying on Mrs. Armshaw's statement.
When asked specifically during his argumentation, counsel for the trustees indicated that had he pursued such a line of investigation it would have reinforced his line of defence that Segal & Partners were relying heavily on Mrs. Amshaw for the administration of consumer files, that she was largely responsible for the deficiencies. Counsel referred specially to the findings of the , decision on the issues of solicitation of proxies and of Mr. Sheriff's responsibility for supervising his staff as findings that might have been different if I had known about the undisclosed report as he would have had corroborating evidence about the character of Mrs. Armshaw and would probably have called her as a witness.
While I have sympathy for counsel's position, I find it difficult to conclude on the balance of probabilities that even with the added testimonies of Mrs. Armshaw and her former employer, there is reasonable possibility that my decision would have been different. I say so because nothing in my decision of September 3rd turned on the role or the statements of Mrs. Armshaw. Throughout my decision I accepted the evidence of Mr. Sheriff as to the role or credibility of Mrs. Armshaw. I set aside Mrs. Armshaw's statements under oath presented by the SDA. I accepted the testimony of Mr. Sheriff as to Mrs. Armshaw's misrepresentations of her qualifications to exercise certain delegated authorities (i.e. signing counselling certificates, conducting first interviews with debtors, representing the trustee at meetings of creditors, etc. …). I don't see what purpose would be served by ordering a new hearing to allow the trustees to bring into evidence the role of Mrs. Armshaw at another trustee firm when the trustees had all the opportunity, and used it, to describe the role of Mrs. Armshaw as she was employed by them.
The trustees had some corroborating evidence to support their assessment of Mrs. Armshaw's character and they did produce some, such as their own performance appraisals of Mrs. Armshaw, but chose not to introduce other corroborating evidence such as their own Section 205 of the BIA; reports that they had filed in Bankruptcy Court. Nor did they introduce the claim they had filed with the insurance adjusters regarding the funds misappropriated by Mrs. Armshaw.
I believe that the trustees would have been in a much better position if the September 3rd decision had relied on the role and/or credibility of Mrs. Armshaw in its findings against the trustees or if the trustees had called Mrs. Armshaw to testify and on the balance, I had given her more credibility than to Mr. Sheriff's testimony. But that is not what occurred. On anything that Mr. Sheriff testified regarding the role of Mrs. Armshaw, I accepted his testimony.
As to the solicitation of proxies, a review of the transcripts of the testimonies of Mrs. Won and of Mr. Sheriff show that clearly Mrs. Won was not instructed by Mrs. Armshaw to demand proxies from creditors. (Transcript vol 3 p. 95 to 103). I do not find any substantive difference between Mr. Sheriff's testimony and the written instructions that were written for Mrs. Won by Mrs. Armshaw and which were produced as exhibit T-4 by the trustees. The single point of variance was the reason why the proposal failed but nothing in the September decision turns on it. There is nothing in the testimonies that would suggest that Mr. Sheriff's initial instructions had been substantially ignored by Mrs. Armshaw or Mrs. Won, or that they had been significantly distorted.
The case law concludes persuasively that the law of disclosure generally applies to administrative tribunals, particularly when their decisions may affect the livelihood of individuals. As the law of disclosure constitutes one aspect of the right to full answer and defence which itself is a part of the right to a fair hearing and since fairness is the prevailing operating factor of Subsection 14.02 (1) of the BIA;, I can only conclude that the law of disclosure as it applies to administrative tribunals also applies to hearings conducted pursuant to Subsection 14.02 (1) of the BIA;.
In the case at hand I find that the undisclosed report meets the Stinchcombe test as information that was relevant to the trustees as it may have been useful to trustees in meeting the case of the senior analyst. This finding is based on the fact that the time of the hearing the SDA's report relied on a statement under oath of Mrs. Armshaw and that the SDA could not know then that the said statement would not be relied on in the final decision of .
In determining if the breach of duty of disclosure warranted a stay of proceedings, I found that the information contained with the report could not possibly have changed the outcome of the report since it did not contain any information directly related to the administration of files at Segal & Partners Inc.
However, that the undisclosed information would not itself have produced any different result is not enough. I also considered whether there was a reasonable possibility that the trustee might have pursued lines of inquiries with the witnesses or opportunities to garner additional evidence that may have produced a different result had they known about the undisclosed information. (Milner, supra page 2 at para. 102–111.)
In coming to a conclusion on this latter point, I reviewed the arguments put forward by the trustees, the transcript of the testimonies of Mr. Sheriff and Mrs. Won at the hearing, as well as the decision of September 3rd and found that in the circumstances of the case and on the balance of probabilities, there was no reasonable possibility that trustees were denied the opportunity to present a full answer and defence or that their right to a fair hearing was violated as a result of the failure to disclose the other trustee firm's report.
Accordingly, I find no reason to order a new hearing nor to stay proceedings in this matter.
I hereby order the trustees and the SDA, through their respective counsels, to submit written representations on the materiality of the various breaches found against the trustees in the decision and the sanctions that should be imposed on the trustees' licences. The written submissions should be sent no later than 30 days after the date of this ruling.
Unless either party seeks otherwise prior to the expiry of the said 30 day period, I will determine appropriate sanctions after receiving counsel's submission without supplementary hearing as was agreed with counsels at the , hearing.
Superintendent of Bankruptcy
- Date modified: