James Gordon Touchie and J.G. Touchie & Associates Ltd. — January 30, 2004

Professional Conduct Decision

Canada
Province of New Brunswick
Judicial District of Moncton

In the Matter of Professional Disciplinary Proceedings under The Bankruptcy and Insolvency Act (The "Act")

Opposing: 
Ms. Ann Speers,
Senior Analyst in the Toronto District Office of the Office of the Superintendent of Bankruptcy
(hereinafter "the Senior Analyst")

And
James Gordon Touchie
(hereinafter "the Trustee")
and
J.G. Touchie & Associates Ltd.
(hereinafter "the Corporate Trustee")
(hereinafter together referred to as "the Trustees")

Presiding: 
The Honourable Benjamin J. Greenberg, Q.C.,
Delegate of the Superintendent of Bankruptcy
(hereinafter sometimes referred to as "the Delegate")

Montreal, January 30, 2004

Decision on the merits

1. Pursuant to Section 5(1) of the Act, M^e Marc Mayrand, of Gloucester, Ontario, was by Order of the Governor-in-Council (P.C. 1997–693, April 26, 1997) appointed Superintendent of Bankruptcy, effective May 1, 1997. He is hereinafter referred to as the "Superintendent".
2. Sub-section (2) and sub-paragraph (e) of sub-section (3) of section 5 of the Act place upon the Superintendent the duty to supervise the administration of all estates and matters to which the Act applies and from time to time, as he may deem it expedient, to "make or cause to be made …" "inspection or investigation of estates …" "including the conduct of a trustee …".
3. Pursuant to the exercise of that duty, on May 28, 1998, in virtue of Section 14.01(2)^{Footnote 1} of the Act, the Superintendent delegated to the Senior Analyst certain of his powers, duties and functions, other than the duty to afford a trustee a reasonable opportunity for a Hearing.
4. Thereafter, the Senior Analyst conducted an investigation into certain conduct of the Trustees and, after completing such investigation, submitted a Report dated November 6, 2001 to the Superintendent respecting their conduct (hereinafter, together with the forty-nine Exhibits annexed thereto, called "the Report"), giving "(…) reasons why the Superintendent may choose to exercise any of the powers referred to in subsection 14.01(1) of the Act".
5. Pursuant to the Report, the Superintendent decided to exercise against the Trustees the former's powers set out in Sub-section 14.01(1) of the Act.
6. Consequently, acting as the Superintendent's delegate, the Senior Analyst gave written notice to the Trustees of the Superintendent's said intention, as well as the reasons for same, and furnished to the Trustees a copy of the Report.
7. Thereafter, the Superintendent determined that, in the interests of natural justice and of proceeding in a timely manner with the hearing of the herein disciplinary proceedings against the Trustees, it would be advisable to delegate certain of the adjudicative and associated conservatory measures powers, duties and functions of the Superintendent to an independent jurist.
8. Accordingly, on December 17, 2001, pursuant to Section 14.01(2) of the Act, the Superintendent delegated to the undersigned the aforementioned powers, duties and functions in respect of the herein disciplinary proceedings against the Trustees.
9. The Merits Hearing was held in Moncton, N.B. on September 16, 17, 18, 19 and 22, 2003.
10. The Senior Analyst was heard as a witness on her own behalf and also called to testify Mr. Richard Hunter, a "Senior Evaluation Officer" and a member of the National Audit Group of the Office of the Superintendent (hereinafter "the Auditor").
11. In their turn, the Trustees presented as witnesses the Trustee, Mr. Ronald Arsenault, a bankruptcy trustee in the employ of the Corporate Trustee and Mr. A. Gordon Sherrard, a retired Moncton Chartered Accountant, who was brought in as a consultant to the Corporate Trustee and worked specifically on the problem of the bank reconciliations with respect to the Consumer Proposals Consolidated Trust Bank Account (hereinafter "the Proposal CBA") and the Summary Bankruptcies Consolidated Trust Bank Account (hereinafter "the Bankruptcy CBA"). Those Bank Accounts are hereinafter collectively referred to as "the CBA's".

Factual History of this File

12. Prior to the Hearing, with the explicit or implicit consent of counsel for the Senior Analyst, the Trustee prepared and filed with the undersigned a voluminous Affidavit dated September 9, 2003, containing 103 paragraphs in 22 pages and, as well, 18 supporting Exhibits and an Addendum (hereinafter collectively referred to as "the Affidavit").
13. The Affidavit was to serve as the Trustee's direct examination at the Hearing and we accordingly consider it to be part of the evidence adduced thereat. However, at the Hearing, without objection from counsel for the Senior Analyst, the Trustees' counsel led additional testimony in direct by the Trustee to supplement the Affidavit.
14. Following the evidentiary portion of the Hearing which took place on September 16, 17, 18 and 19, 2003, and prior to the presentation of the legal submissions by counsel on September 22, 2003, under cover of Mr. George L. Cooper's letter to us dated September 19, 2003, the Parties filed by consent Exhibit T-15, comprising:
    1. the resignation letter of Mr. Paul G. Goodman as an Inspector in the Dairy Estates (defined in paragraph 19 below), dated May 26, 1992;
    2. a photocopy of the "Day-Timer" entries of May 4, 1993 by Mr. Barry George, a bankruptcy trustee employed by the Corporate Trustee, upon which Mr. George relied in making his affidavit dated September 28, 2000, which appears part of the Addendum to the Affidavit;
    3. the Agenda for a Meeting called for October 2, 1991 to discuss settlement of the claims of secured creditors in the Dairy Estates, prepared by the Trustee^{Footnote 2};
    4. a photocopy of the financial information sent by Peat Marwick Thorne Inc. (hereinafter "PMT") to the Solicitor of the Dairy Estates, Mr. Peter S. Glennie, now Mr. Justice Glennie of the New Brunswick Court of Queen's Bench, under cover of PMT's letter dated July 30, 1991, relating to the realization by the latter with respect to the Dairy Estates, together with covering correspondence from the Corporate Trustee to the Inspectors of the Dairy Estates dated August 2, 1991; and
    5. copies of the decisions of the New Brunswick Court of Queen's Bench and the New Brunswick Court of Appeal in McKay and the Dairy Estates.
15. The Trustee is a Chartered Accountant and became a licensed Trustee in Bankruptcy in 1970. He is the President of the Corporate Trustee.
16. The Corporate Trustee has operated since 1980 and its principal office and place of business is in Moncton, N.B. However, in order to better serve the francophone population of Northern New Brunswick and in Prince Edward Island, the Corporate Trustee has established and operates seven satellite offices located at:

    1122 St-Peter Avenue
    Bathurst, N.B.

    103 St-François Street
    Edmundston, N.B.

    259 boul. St-Pierre Ouest
    Caraquet, N.B.

    13 Henderson St.
    Miramichi, N.B.

    257 Broadway Blvd.
    Grand Falls, N.B.

    25 Queen St., Suite 21
    Charlottetown, P.E.I.

    292 Water Street
    2^nd Floor
    Summerside, P.E.I.

17. The Corporate Trustee did not have a bankruptcy trustee in residence in any of those seven cities. Rather, it was Mr. Ronald Arsenault, although he was based at the Moncton office, who performed the functions of itinerant trustee to serve those satellite offices. He would visit each satellite office once every two weeks in order to meet with clients of the Corporate Trustee and receive Consumer Proposals and Assignments in Summary Bankruptcies and also to dispense counselling to debtors.
18. The disciplinary investigation by the Senior Analyst which led to the bringing of the disciplinary complaints herein against the Trustees was itself triggered by a routine cyclical audit of the Trustees in January/February 2000 by the Auditor.
19. The disciplinary complaints levelled against the Trustees by the Senior Analyst are divided into three categories:
    1. Complaints in regard to the administration by the Corporate Trustee of the related bankruptcies of Perfection Dairy Foods Limited. (hereinafter "Perfection") and McKay's Diary Ltd. (hereinafter "McKay's"). The Perfection and McKay's Bankruptcies are herein collectively referred to as "the Dairy Estates");
    2. Complaints related to the CBA's operated by the Corporate Trustee and particularly the issue of bank reconciliations; and
    3. Complaints alleging that the Trustees failed to cooperate with the representatives of the Superintendent, namely the Auditor and the Senior Analyst, during the course of, respectively, the Audits and the Investigation.

The Disciplinary Complaints Brought by the Senior Analyst Against the Trustees

20. We wish firstly to comment upon the fact that the Report is replete with references in regard to the Trustees such as "shortages", "shortfalls", and "missing funds". Those references could not but give the impression to a reasonable and informed reader that the Senior Analyst believed that some element of dishonesty existed, involving misappropriation or defalcation of funds, or worse. More appropriate language would have been "variances", the term used by Mr. Sherrard, or "differences", the term used by the Auditor.
21. Yet, at the opening of the Hearing in Moncton, on September 16, 2003, in his preliminary comments, Mr. Tim Hill, counsel for the Senior Analyst, declared:

    "… (the) report deals with, amongst other things, trust accounts and money and words are used from time to time, missing or shortage. I want to make it absolutely clear on behalf of the Department that there is no indication of, and no suggestion that, there has been any defalcation or anything other than or that Mr. Touchie is in any way, or any of his staff, in any way done anything dishonest. It's simply not suggested and I want to make that clear now."

22. The Trustees, their firm and its associated trustees laboured under a cloud of suspicion of dishonesty from November 6, 2001, the date of the Report, until September 16, 2003. That surely caused the Trustee considerable anxiety, stress and sleepless nights. That cloud of suspicion could and should have been lifted much earlier and it was unfair not to do so. When the time comes to determine the Sanction(s) to be imposed on the Trustees, we will be mindful of that unfairness.
23. In fairness to Mr. Hill, however, it must be recalled that he only came into this file on behalf of the Senior Analyst on March 26, 2003.
24. The Dairy Estates concerned two related companies. Prior to their Bankruptcies, Perfection owned 100% of the issued and outstanding shares of McKay's.
25. Petitions for Receiving Orders were filed against both of those companies on April 12, 1991 and Receiving Orders were issued against both of them on June 7, 1991; with effect retroactive in both cases to April 12, 1991. See Tab 11 of the Report.
26. The first meeting of creditors for McKay's and Perfection were held, respectively, in Moncton, New Brunswick on July 15, 1991 and in Fredericton, New Brunswick on July 17, 1991. See at Tab 13 of the Report.
27. At each of those First Meetings of Creditors, the same three persons were named Inspectors in both Estates. They were: Mr. Wayne Thomas, Mr. Paul G. Goodman and Mr. James B. Chase. See at Tab 13 of the Report.
28. On May 26, 1992, Mr. Goodman resigned as an Inspector in both Dairy Estates because of a conflict of interest which had emerged. Mr. Goodman was a partner in PMT, the Receiver/Manager appointed by the Royal Bank of Canada, which was the primary secured creditor in both Dairy Estates. He was never replaced as an Inspector and the administration of both Dairy Estates carried on to the end with only the remaining two Inspectors.
29. Moreover, in his Order, Mr. Justice Higgins directed PMT, in its quality as the Receiver-Manager of the Dairy Estates, as well as Agent of the Royal Bank of Canada, to forthwith pay and deliver to the Corporate Trustee, in its quality as the Bankruptcy Trustee in both Dairy Estates, " … all funds in its control or possession". See Exhibit C to the Affidavit.
30. As a result of that Order, the Corporate Trustee received from PMT one cheque in the amount of Two Million Two Thousand Seven Hundred Twenty-Two Dollars and Fifty-Six Cents ($2,002,722.56), without distinction as to which portion of same related to each of the two Dairy Estates. There were other lesser amounts received by the Corporate Trustee from other sources and they were dealt with in the same manner. See at Tab 22 of the Report.
31. As well, the Higgins Order directed the Corporate Trustee to set aside out of the funds to be received from PMT One Million Nine Hundred Sixty-Three Thousand Five Hundred Ninety-Eight Dollars and Forty-Two Cents ($1,963,598.42) and place that amount in certain permitted investments in order to eventually satisfy the secured claim of the Royal Bank of Canada against the assets of the Dairy Estates. Here again, no distinction was made in the Order as to which portions of that amount related to each of the two Dairy Estates.
32. On the other hand, paragraph no. 4 of the Higgins Order decreed:

    "Peat Marwick Thorne Inc., in its capacity as receiver of McKay's Dairy Ltd. and Perfection Dairy Foods Limited, and in its capacity as agent of Royal Bank of Canada under its security, shall provide a full accounting to the Trustee."

33. During the evidentiary portion of the Hearing (September 16 – 19, 2003), the Trustee moreover affirmed that no such accounting was ever provided by PMT, nor did the Corporate Trustee ever request such an accounting. The Trustee acknowledged, however, that, had the Corporate Trustee done so and received such an accounting, it would have been in a position to establish two separate bankruptcy administrations, open two separate trust bank accounts and thereafter administer each of the two Dairy Estates separately.
34. Yet, during the week-end which separated the evidentiary portion of the Hearing (September 16 – 19, 2003) from the day of the legal submissions by counsel (September 22, 2003), while searching for documentation on other matters, the Trustees found and, among other documents which Mr. Cooper furnished under cover of his letter to the undersigned of September 19, 2003, there was a form of accounting which PMT had in fact furnished to counsel for the Corporate Trustee on July 30, 1991. It is now included in the documentation filed by consent as Exhibit T-15.
35. That "Statement of Surplus" accounting reveals that, as at May 15, 1991, the Surplus was Two Million One Hundred Fifteen Thousand Seven Hundred Fifty-Eight Dollars ($2,115,758), of which Nine Hundred Thirteen Thousand Six Hundred and Six Dollars ($913,606) belonged to McKay's and One Million Two Hundred Two Thousand One Hundred Fifty-Two Dollars ($1,202,152) belonged to Perfection; i.e. respectively in the proportions of 43.18% and 56.82%.
36. It should also be clarified that at no time did the Corporate Trustee apply to the Court to consolidate the two Dairy Estates. It was probably just as well that it did not, since the circumstances of the two Dairy Estates would probably not have met the criteria for consolidation set out in Re. A. & F. Baillargeon Express Inc.^{Footnote 3}

A. Complaints Re: the Dairy Estates

37. The complaints advanced against the Trustees in regard to the Dairy Estates were that:
    1. The Corporate Trustee's administration of the Dairy Estates was deficient in that, contrary to Section 25(1) of the Act, it co-mingled the receipts and disbursements of the two Dairy Estates in one trust bank account, as though they were one single bankruptcy. The Corporate Trustee also maintained only one estate ledger for both Dairy Estates. Section 25(1) of the Act decrees:

       Section 25(1) "[Trust account] Subject to subsection (1.1) and (1.2), a trustee shall forthwith deposit in a bank all moneys received for an estate in a separate trust account for each estate."

    2. The Corporate Trustee failed to prepare and maintain in its possession Minutes of the Meetings of the Inspectors, contrary to Section 26(1) of the Act, which declares:

       Section 26(1) "[Books to be kept by trustee] The trustee shall keep proper books and records of the administration of each estate to which he is appointed, in which shall be entered a record of all moneys received or disbursed by him, a list of all creditors filing claims, the amount and disposition of those claims, a copy of all notices sent out, the original signed copy of all minutes, proceedings had, and resolutions passed at any meeting of creditors or inspectors, court orders and all such other matters or proceedings as may be necessary to give a complete account of his administration of the estate." (Emphasis added.)

    3. The Corporate Trustee took unauthorized interim draws of fees, One Hundred and Fifty Thousand Dollars ($150,000) on July 21, 1993 and Seventy-Five Thousand Dollars ($75,000) on September 2, 1994, contrary to Section 25(1.3) of the Act and Section 4 of Directive 24. Those Sections provide:

       The Act

       Section 25(1.3) "[Permission need for certain acts] The trustee shall not withdraw any money from the trust account of an estate without the permission in writing of the inspectors or, on application, the court, except for the payment of dividends and charges incidental to the administration of the estate."

       Directive 24

       Section 4 "To withdraw an advance on his remuneration the trustee must obtain proper authorization in the form of a resolution of a duly constituted meeting of creditors or of a majority of the inspectors or make application to the Court for an order approving payment of the advance."

    4. The Corporate Trustee failed to allocate to a ledger for each of the Dairy Estates and to deposit in a separate trust account for each of the Dairy Estates, the interest earned on the two Treasury Bills which the Corporate Trustee held on behalf of the two Dairy Estates, contrary to Section 25(1) of the Act, Sections 3(a), 4(4) and 4(5) of Directive 5 and Rule 48 of the Code of Ethics for Trustees, all of which provide:

       The Act

       Section 25(1) Already cited above.

       Directive 5

       Section 3(a) " A trustee shall maintain an internal control system for the recording of receipts and disbursements of trust funds …"

       Section 4(4) "All interest earned on estate funds forms part of the assets of the estate. A trustee shall make reasonable efforts to obtain a competitive rate of return on estate funds invested."

       Section (4(5) "The statement of receipts and disbursements shall, in each estate, disclose separately the amount of interest earned."

       Code of Ethics for Trustees in Bankruptcy

       Rule 48

       "Trustees who hold money or other property in trust shall:

       1. hold the money or property in accordance with the laws, regulations and terms applicable to the trust; and
       2. administer the money or property with due care, subject to the laws, regulations and terms applicable to the trust."
    5. The Corporate Trustee failed to hold those Treasury Bills "In Trust", contrary to Section 25(1) of the Act, already cited above; and
    6. The Corporate Trustee failed to disclose the interest receipts in the Statements of Receipts and Disbursements of each of the Dairy Estates, contrary to Section 152(1) of the Act and Section 4(5) of Directive 5, which stipulate:

       Act

       Section 152(1) "[Statement of receipts and disbursements] The trustee's final statement of receipts and disbursements shall contain a complete account of all moneys received by the trustee out of the property of the bankrupt or otherwise, the amount of interest received by the trustee, all moneys disbursed and expenses incurred and the remuneration claimed by the trustee, together with full particulars, description and value of all property of the bankrupt that has not been sold or realized, setting out the reason why the property has not been sold or realized and the disposition made thereof."

       Directive 5

       Section 4(5) Already cited above.

38. With respect to Complaint I described above, from all of the evidence, including even the admission by the Trustee, it is clear that for most purposes the Corporate Trustee treated the two Dairy Estates as though they were a single Bankruptcy. In some respects, however, such as, for example, the calculation of fees payable to the Inspectors for attendances at Meetings, the Trustees evidently knew and recognized that they were dealing with two separate Bankruptcies. See, for example, the Corporate Trustee's Draft Response of July 14, 2000 to the Preliminary Audit Report, at page 4 of Annex B of Tab 2 of the Report, where it wrote:

    "Our point was that two estates with two sets of creditors and two sets of inspectors constitute two meetings. There were 42 such meetings allowing for Mr. Chase to claim for 84 attendances."

39. In otherwise treating the Dairy Estates as if they were a single bankruptcy, the Trustees were following the manner in which, in certain respects, the Court treated them. Counsel for the Trustees argued that to have done otherwise would have exposed the Corporate Trustee to contempt of court. With respect, we do not agree.
40. It is exact that a trustee in bankruptcy is legally bound to conform to and follow the Judgments and directions of the appropriate Superior Court of a Province sitting in Bankruptcy Matters. In New Brunswick, that court is the Court of Queen's Bench.
41. In the case of the two Dairy Estates, it is evident that, even though the two Receiving Orders were necessarily issued by the Registrar on behalf of the Court in two separate files on June 7, 1991, with effect in both cases retroactive to April 12, 1991, the date of the filing of both Petitions for a Receiving Order (see at Tab 11 of the Report), thereafter the said Court dealt with and treated the two Dairy Estates as if they were one and the same Bankruptcy. See:
    1. The Order issued by Mr. Justice Robert Higgins on August 29, 1991, Exhibit C to the Affidavit, covering both Dairy Estates in a combined manner; and
    2. The Order issued on July 12, 1993 by Mr. Justice John Jones, Exhibit E to the Affidavit, giving effect to the settlement reached between the Corporate Trustee and the Royal Bank of Canada, again affecting both Dairy Estates without distinction or separation.
42. Moreover, both the Corporate Trustee (with the implicit consent and approval of the Trustee, as the individual Bankruptcy Trustee personally responsible for the two Dairy Estates) and the various legal counsel involved in the Dairy Estates, generally continued and perpetuated that methodology of treating the two Dairy Estates as if they constituted one single Bankruptcy. That was so notwithstanding the fact that, at the time the two Receiving Orders were issued on June 7, 1991 with effect retroactive to April 11, 1991, each of the two bankrupt Dairy Companies had its own distinct assets and, save the secured claims of the Royal Bank of Canada and Mr. Ronald McKay, its own, and mostly different, list of creditors. See:
    1. The letter of September 20, 1991 from Mr. Patrick J. P. Ervin, an attorney at the Saint John office of Clark Drummie & Company sent to the persons designated in the "Distribution List" attached to same, concerning a meeting scheduled for October 2, 1991 among the Trustee, Mr. Ronald McKay (eventually recognized by the Courts as a secured creditor against the assets of both Dairy Estates) and the representatives of the Royal Bank of Canada and Roynat Inc., together with counsel for each of the foregoing. See Exhibit D to the Affidavit;
    2. The letter from the Corporate Trustee on November 25, 1993 to the two Inspectors in both Dairy Estates, Mr. James Chase and Mr. Wayne Thomas. See Exhibit B to the Affidavit;
    3. Pages 9–11, 35–39, 43, 44, 49–66 and 70–72 (all inclusively) of Tab 3 of the Report;
    4. Pages 116–139, inclusively of Tab 4 of the Report;
    5. Tabs 22 and 23 of the Report;
    6. Tab 29 of the Report; and
    7. The Trustee's testimony: See from line 6 at page 474 to line 15 at page 475 and at lines 2 to 16 at page 482, of the Hearing Transcript.
43. All of the foregoing and the evidence as a whole explain why and how, save as to the calculation of the Inspectors' attendance fees, the Corporate Trustee treated the two Dairy Estates as if they constituted one single Bankruptcy. It does not, however, justify that treatment.
44. As to the complaint regarding the unauthorized draws of fees, considering all the evidence globally and that the burden of proof is on the Senior Analyst in that regard, as with respect to all of the complaints levied against the Trustees, we are satisfied that, after the resignation of Mr. Goodman, even leaving aside the retroactive authorization by the Court, the two remaining Inspectors had authorized those draws at the time they were made, thereby meeting the requirements of Section 25(1.3) of the Act and Section 4 of Directive 24.
45. Moreover, exhibiting intellectual honesty, the Trustee admitted, both in his Affidavit and in his testimony, that the Corporate Trustee failed to comply with its duty and obligation to prepare, have signed and maintain in its possession minutes of the meetings of Inspectors. With respect, we cannot accept the argument of the Trustees' counsel to the effect that the possession of the minutes of Inspectors' meetings by the solicitor to the Dairy Estates is equivalent to possession of those minutes by the Corporate Trustee.
46. Based upon all of the evidence, we have concluded that the Senior Analyst's complaints regarding the failure to allocate and post the interest earned on the Treasury Bills, and the failure by the Corporate Trustee to disclose interest receipts in its Statements of Receipts and Disbursements, have all been made out against the Corporate Trustee.
47. As to the complaint regarding the fact that the two Treasury Bills at a certain point in time no longer indicated "in trust" on their face, we accept the Trustee's testimony. In other words, we accept that both Treasury Bills were originally issued under an "in trust" notation and that, as a result of an error by the bank, that notation was dropped at a certain point in time.
48. However, the Corporate Trustee had a duty to see to it that its employees and/or representatives were on top of the situation and checked those Treasury Bills each time they were rolled over.
49. That was not done and, consequently, that complaint as well has been made out against the Corporate Trustee.
50. In the result, the Senior Analyst has in the main made out her case against the Corporate Trustee in regard to the Dairy Estates. Moreover, as the individual Bankruptcy Trustee who was responsible for the two Dairy Estates, the Trustee was equally in breach in that regard and as well in respect of the Heads of Complaints B. and C. discussed below.

B. Complaints Related to the Trust CBA's Operated by the Corporate Trustee

51. During the first audit in January/February 2000, the Auditor revealed that the two trusts CBAs were out of balance and had not balanced for quite some time.
52. Following the January/February 2000 Audit, during many months over the time period in issue, the two CBAs did not balance and were not properly reconciliated. The Trustee attributed that problem to the use by the Corporate Trustee of the "Insolvency Manager Program", devised and marketed by Insolvency Software Systems Inc. (hereinafter "ISS")^{Footnote 4}.
53. Mr. Ronald Arsenault, the Bankruptcy Trustee who worked for the Corporate Trustee, had been responsible for the bank reconciliations and, to do so each month, he simply used the bank reconciliation function of the Insolvency Manager Program.
54. The Auditor and the Senior Analyst took the position that in order to effect a proper reconciliation, even though Directive No. 5 does not explicitly require it^{Footnote 5}, the monthly bank statement had to be matched, in the first place, to items still in transit and, secondly, to the Summary of Estate Balances (hereinafter "SEB").
55. The raison d'être advanced by the Senior Analyst for that proposition is that there must at all times be sufficient funds on deposit in the Trust CBA's in order to meet the Corporate Trustee's obligations to the creditors of each Estate under its administration. Hence, the requirement as well that a Trustee maintain on an ongoing basis a monthly list of all individual estates for which funds are held in a CBA. See at Section 9(e) of Directive 5.
56. In that regard, the Trustees argued that a monthly list did exist on an ongoing basis in the Corporate Trustee's computer system, even though they did not maintain physically a file of hard copies of such lists. We are of the view that, in this day and age, to "maintain a list" does not require that a hard copy be maintained. An ongoing monthly list found in a computer system fulfills the obligation in that regard set out in Section 9(e) of Directive 5.
57. Despite the assiduous efforts of the Trustee and his staff, primarily Mr. Ronald Arsenault and, when the latter abandoned that task in August 2000, briefly Mr. George, and also working on the problem with ISS (see Exhibits K and L to the Affidavit, as well as Exhibits T-12 and 13), the Corporate Trustee simply could not manage to bring that problem under control.
58. It was only when Mr. Sherrard came into the picture as a consultant in February 2001 and put into place a manual accounting system for those two Trust CBA's that the "beast was tamed" and the Trust CBAs finally were brought into balance as at May 17, 2001.
59. Even so, the Trustees have not been able, even up until the Hearing in September 2003, to explain the differences discovered by the Auditor of $14,711.25 and $4,955.94, respectively in the Summary Bankruptcies Trust CBA and the Consumer Proposals Trust CBA. The Trustee was obliged to deposit his personal funds into those two accounts in order to bring them into balance. The Trustee is still unaware of what caused those differences and he is still seeking an answer. Understandably so, as he would like to be reimbursed those two sums totalling almost $20,000.00 which he personally advanced.
60. The same complaint about the allocation of interest described in part IV of paragraph 37 above insofar as the two Dairy Estates was also advanced by the Senior Analyst as regards the present category of complaints relating to the various Summary Administration Bankruptcies and Consumer Proposal Estates implicated in the CBA's.
61. The comments made by us in that regard at paragraph 46 above apply equally here, mutatis mutandis.
62. The Senior Analyst also complained that the Corporate Trustee did not adequately deal with cheques given to it by debtors and then returned N.S.F. The Trustees defended on this point by invoking the fact that the Banks did not operate in the same way for their customers in the Maritimes as for those in Central Canada. In other words, the Corporate Trustee did not receive timely notification from its Bank of cheques returned N.S.F.
63. Yet, after the filing of the Report, the Corporate Trustee did succeed in arranging with its Bank for same-day notification of cheques returned N.S.F. Consequently, that complaint by the Senior Analyst was also well-founded.
64. As to stale-dated cheques i.e. those issued by the Corporate Trustee to creditors and not cashed within six months, the Senior Analyst reproached the Corporate Trustee with not dealing with them in the appropriate manner in conformity with Sections 154(1) of the ACT, 3(a) of Directive 5 and 10(d) of Directive 8, i.e. either to find the payee and re-issue a replacement cheque in each case or to remit the funds in question to the Receiver General as unclaimed dividends and undistributed assets. Those Sections provide as follows:

    The Act

    Section 154(1) "Before proceeding to discharge, the trustee shall forward to the Superintendent for deposit, according to the directives of the Superintendent, with the Receiver General the unclaimed dividends and undistributed funds that the trustee possesses…"

    Directive 5

    Section 3(a) "A trustee shall maintain an internal control for the recording of receipts and disbursements of trust funds."

    Directive 8

    Section 10(d) "Trustees, when proceeding to the discharge phase of their administration in those estates where a dividend will be payable, should:

    (a), (b), (c) …

    (d) upon expiration of the above period and before proceeding to his discharge, the trustee must, in conformity with subsection 154(1) of the Act, forward to the Superintendent all outstanding dividends remaining in his account."

65. The Corporate Trustee did neither. It simply left those items open in its accounting system. Hence, this complaint also was well-founded.
66. However, the Senior Analyst's complaint regarding the netting of service charges was withdrawn by her.
67. Hence, we find that the Senior Analyst has established almost all of her complaints against the Corporate Trustee under the present Head of Complaints.
68. It should also be mentioned that, after several months of not obtaining satisfaction as to the monthly reconciliations of the two Trust CBAs, the Senior Analyst imposed conservatory measures on the Corporate Trustee on April 30, 2001. They were lifted on June 19, 2001. Other than considering same at the Sanctions phase to come, we need say nothing further about it at the Merits stage of this case. If the Trustees had wished at the time to contest the imposition of those measures or seek redress in that regard, there was another jurisdiction open to them to do so, but they did not act.

C. Failure by the Trustees to Co-operate with the Representatives of the Superintendent

69. Rule 37 of the Code of Ethics for Trustees decrees:

    "Trustees shall co-operate fully with representatives of the Superintendent in all matters arising out of the Act, these Rules or a directive."

70. The Senior Analyst reproached the Trustees that they failed to co-operate with her investigation. She suggests that the Trustee frequently promised to comply with the Senior Analyst's requests for information or documents and consistently failed to do so or failed to do so within the delay promised.
71. Even though "la perfection n'est pas de ce monde", and it is not perfection which is expected from a Bankruptcy Trustee, any more than from any professional, it (he/she) must comply substantially and consistently with the requirements of the Act, the Regulations enacted thereunder (particularly the "Code of Ethics for Trustees in Bankruptcy", Bankruptcy Rules 34 to 53) and the Directives of the Superintendent.
72. We are of the view that we need not go into chapter and verse of each specific situation of lateness and/or failure to co-operate. Generally, we are convinced by the evidence adduced at the Hearing and our subsequent study of this file that, in the carrying on of their practice, the Trustees often displayed a careless, laisser faire and casual attitude with regard to the requirements of the Act, the Regulations & Rules thereunder and the Directives of the Superintendent, the non-fulfillment of which has been reproached to them here.
73. Even subsequent to the first audit and the commencement of the disciplinary investigation herein, several requests by the Senior Analyst for information, explanations and documentation made to the Trustees were frequently ignored or delayed and generally were treated by the Trustees in a somewhat cavalier manner.
74. It is therefore our conclusion that the Senior Analyst has also made out her complaints under the present rubric.

Closing Provision

75. Each duplicate original of this Decision on the Merits signed by the Delegate is equally valid and authentic and may serve as such for all legal purposes.

Therefore, for all the above reasons, several of the complaints under each of Heads A., B. and C. brought against the Trustee, Mr. James Gordon Touchie, and the Corporate Trustee, J.G. Touchie & Associates Ltd., by the Senior Analyst, Ms. Ann Speers, in the latter's Report dated November 6, 2001, are Hereby Declared to be Established and Maintained.

(We will next proceed to hear the representations of counsel and the evidence, if any, which either of them may wish to present with regard to the Sanction(s) to be imposed on the Trustees.)

The Honourable Benjamin J. Greenberg, Q.C.
Delegate of the Superintendent

Mr. Tim Hill
Counsel for the Senior Analyst;

Messrs. George L. Cooper and David T. Hashey, Q.C.
Counsel for the Trustees.