Directions to the Bank of Montreal, 1111 Davis Drive, Newmarket, Ontario, L3Y 8K3
What is a conservatory measure?
The Superintendent of Bankruptcy puts in place conservatory measures when a bankruptcy or insolvency estate needs protection. It might be in cases of Licensed Insolvency Trustee (LIT) malfeasance or if serious wrongdoing on the part of a LIT puts estate files at risk. Conservatory measures may also be put in place if a LIT becomes ill or dies without a valid succession agreement. Finally, conservatory measures may be put in place if a LIT, for whatever reason, has allowed the administration of his or her practice to become substandard.
In the matter of: Donna M. Leitch
Amended Directions for Conservatory Measures
(Section 14.03 of the Bankruptcy and Insolvency Act)
Whereas the Bankruptcy and Insolvency Act (the Act) provides the Superintendent of Bankruptcy (the Superintendent) with the general power to supervise the administration of all estates and matters to which the Act applies;
Whereas Donna M. Leitch (the trustee) is the holder of an individual license as trustee in bankruptcy;
Whereas an audit in 2004 and a practice review in 2006 resulted in numerous deficiencies related to the trustee's practice being noted, including: a past failure to maintain an employee fidelity bond; a number of banking and financial deficiencies; a failure to comply with the minimum standards for accounting practices as required by Directive 5R; and, other operational deficiencies;
Whereas in March 2006 the trustee was placed under conservatory measures, in the form of the requirement for a co-signature from an official with the Office of the Superintendent of Bankruptcy (the OSB) and a prohibition on the appointment of the trustee to any new estates;
Whereas initial cooperation and progress was noted in correcting the deficiencies. As a result, in April 2007 the prohibition on the appointment of the trustee to new estates was modified to allow the trustee to be appointed to up to 30 estates within a 3 month period, commencing May 1, 2007;
Whereas the trustee failed to abide by the above licensing limitation in that, on three occasions between October 2008 and July 2009 she has filed, or attempted to file, in excess of 30 estates within a 3 month period. Initially, the OSB allowed the additional estates in order to avoid prejudice to the bankrupts, but negotiated a reduction in subsequent estate filing and/or warned the trustee that it was her responsibility to avoid the overages. On the last occasion, in July 2009, when the trustee attempted to submit an estate in excess of the 30 allowed, that submission was refused;
Whereas a practice review in the fall of 2008 identified a reoccurrence of some of the earlier noted deficiencies, including: deficiencies with the banking practices, including additional occurrences of outstanding cheques and deposits greater than six (6) months while under conservatory measures; failure to provide proof of professional liability insurance and a current employee fidelity bond; missing or late filing with respect to estates and proposals; and, the number of estates in the trustee's aged inventory of estates had increased, from 171 in 2006 to a total of 195.
Whereas the OSB has received complaints from bankrupts related to the performance of the trustee, including her failure to return telephone calls and that income tax returns for bankrupts are not being filed in a timely manner;
Whereas the Superintendent of Bankruptcy revised the Conservatory Measures limiting the filing of new estates, replacing it with a prohibition on filing any new estates or proposals. These amended Conservatory Measures were served on the Official Receiver on July 15, 2009. In addition, a Letter of Expectation dated July 22, 2009 was issued to the trustee which required that the trustee provide proof of professional liability insurance and an employee fidelity bond within 48 hours, and that, within 30 days:
- the trustee ensure all outstanding cheques and deposits greater than six (6) months, and all accompanying issues be dealt with and disposed of in a satisfactory manner; and,
- the trustee ensure that no estate accounts are placed in an overdraft position, and to reimburse those estates that were.
Whereas on August 18, 2009, the trustee indicated to Stefan Miskovsky that she had in her possession nine (9) assignments in bankruptcy that she had failed to file. The unfiled assignments date from February 19, 2009 to July 27, 2009. The trustee asked Mr. Miskovsky if there was a method to file these estates, as she had already advised the nine persons that their assignments had been filed. The trustee was advised that, given the restrictions imposed by the Conservatory Measures, the Official Receiver would not appoint Ms. Leitch as trustee of these nine (9) files.
Whereas Stefan Miskovsky of the Office of the Superintendent of Bankruptcy attended at the trustee's office on August 27, 2009 and ascertained:
- despite producing a list of outstanding items, with corresponding notations, according to the trustee indicating how the items were to be disposed of, that the trustee had failed to dispose of the outstanding cheques and deposits as required by the Letter of Expectation; and,
- despite demands from the Office of the Superintendent of Bankruptcy, the trustee has failed to provide confirmation that no estate accounts remain in an overdraft position.
Whereas on August 27, 2009, Stefan Miskovsky also ascertained the trustee continued to fail to meet the minimum standards for accounting practices as required by Directive 5R2, in that:
- deposit amounts were incorrectly recorded;
- trustee has failed to adequately account for adjustment entries related to the bank reconciliations;
- bank reconciliations were not being submitted within the time limits allowed, in that the May 31, 2009 reconciliation (due July 15, 2009) and the June 30, 2009 reconciliation (due August 15, 2009) remain outstanding; and,
- the trustee had failed to submit her annual banking review by May 31, 2009 as required by Directive 5R2, paragraph 10, “Estate Funds and Banking”.
Whereas I believe on reasonable grounds that the estates require additional protection;
Whereas the Superintendent may, for the protection of an estate, exercise the powers set out in subsection 14.03(1) of the Act, in the circumstances referred to in section 14.03(2) of the Act;
Whereas the Superintendent has delegated to me, in accordance with section 14.01(2) of the Act, the powers of the Superintendent as specified at section 14.03(1) of the Act, in the circumstance referred to in section 14.03(2), a copy of which delegation is attached, along with copies of sections 14.01, 14.02 and 14.03 of the Act;
Whereas paragraphs 14.03(1)(b) and (c) and 14.03(2)(b) of the Act apply;
I, Darrin Ulley, in my capacity as delegate for the Superintendent, direct the Bank of Montreal, 1111 Davis Drive, Newmarket, Ontario, L3Y 8K3 that, pursuant to sections 14.03(1)(b) and (c) of the Act:
- it consider upon receipt of the present directions, Jeremy Kroll or Diane Hessel or Melanie Wengle of A. Farber & Partners Inc., either alone or as co-signatories, as the only authorized signatories for any transactions relating to the funds credited to the estates of bankruptcies and proposals administered by Donna M. Leitch;
- it make no debit, payment or transfer of funds credited to, or which ought to have been credited to, the estates of bankruptcies and proposals administered by Donna M. Leitch without the signature of, at a minimum, one of Jeremy Kroll or Diane Hessel or Melanie Wengle;
- it not pay out of these accounts cheques, bills of exchange, bank drafts or other instruments, issued before the receipt of these directions that are presented for payment after the receipt of these directions, without these cheques, bills of exchange, bank drafts or other instruments being signed by, at a minimum, one of Jeremy Kroll or Diane Hessel or Melanie Wengle;
- it submit all statement of accounts, accepted cheques and other documents or information having to do with the above-mentioned estate trust bank accounts to A. Farber & Partners Inc., 1200 Sheppard Avenue East, Suite 300, North York, Ontario M2K 2R8, Attention: Sandy Sperdutti;
That these directions take effect immediately and will remain in effect until such time as the undersigned is satisfied that they are no longer required;
That in accordance with section 14.03(3) of the Act, these directions bind the Bank of Montreal, who must comply with them;
That, pursuant to section 14.03(4) of the Act, a person who complies with this direction is not liable for any act done by that person only to comply with this direction.
Signed at the City of Toronto, Ontario, this day of October, 2009
Office of the Superintendent of Bankruptcy
- Date modified: