Directions to the Royal Bank of Canada—April 10, 2017)
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.
Directions to the Royal Bank of Canada
700 D'Youville Place, Québec, Quebec, G1R 3P2
(April 10, 2017)
In the matter of:
Daniel Adam and
Adam & Cie Syndic Inc.
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 Daniel Adam (the trustee) is the holder of an individual licence as trustee in bankruptcy (1881);
Whereas Adam & Cie Syndic Inc. is the holder of a corporate licence as trustee in bankruptcy (3322);
Whereas the trustee is the sole employee of Adam & Cie Syndic Inc.;
Whereas to ensure compliance of the practices of the various trustees across the country, the Superintendent conducts audits to ensure that trustees administer estates in accordance with legal requirements and fulfill their responsibilities with care and diligence;
Whereas on May 10, 2016, the Office of the Superintendent of Bankruptcy (OSB) conducted such an audit by reviewing the aged estates of the trustee and found that more than one hundred of the trustee's estates were more than three (3) years old;
Whereas on May 12, 2016, a meeting was held between the OSB and the trustee to assess the situation and reduce, in the short term, the trustee's aged inventory, in order to help pre-reduce the scope of the closing plan that would be subsequently required by the OSB. A summary of this meeting was emailed the same day to the trustee;
Whereas further to these discussions, the trustee pledged to use the E-Filing system by May 31, 2016, to file compliance certificates for estates for which Statements of Receipts and Disbursements had been submitted and for which a Letter of Comment had been issued (60 estates), file the Notices of Default in the estates of Nicole Lachance (43-1371139) and Geoffrey Thomson (43-1676787), and provide forthwith the dividend sheet issued in December 2015 in the estate of TMI–Éducaction.com Inc.;
Whereas on the evening of May 31, 2016, the trustee informed the OSB by email that he could not locate the Inventory Report for the estates assigned to him by the OSB at the meeting of May 12, 2016, and requested an extension until June 2, 2016;
Whereas on June 1, 2016, given the trustee's failure to submit the necessary documents, the OSB required the trustee to submit a closing plan for the entire aged inventory of 125 estates by June 30, 2016;
Whereas on June 30, 2016, the trustee Adam wrote to the OSB to explain why he was unable to close the estates within the prescribed time, but would nonetheless provide a proposed closing schedule within the next few days. This draft closing plan was never submitted to the OSB;
Whereas on July 15, 2016, the OSB advised the trustee that requests for reports to the court under subsection 34(2) of the Act would be sent to him in respect of several estates;
Whereas on July 21, 2016, the OSB sent to the trustee a formal request to submit a report to the court under subsection 34(2) of the Act in respect of 125 estates by September 2, 2016, and on August 23, 2016, a courtesy letter was emailed and faxed by the OSB counsel reminding the trustee of the September 2, 2016, deadline;
Whereas on September 2, 2016, the trustee failed to submit to the court a report under subsection 34(2) of the Act;
Whereas on October 12, 2016, Mr. Louis Nolet, Assistant Superintendent of Bankruptcy, received a formal complaint about the trustee's actions in the administration of the TMI–Éducaction.com Inc. estate;
Whereas on October 20, 2016, the trustee agreed to meet with Mr. Nolet in his office, which Mr. Nolet found in a disorganized state with the desk buried under a mound of papers, in a seemingly haphazard fashion, and Mr. Nolet informed the trustee at that meeting that he was required to take the necessary steps to put his office in order;
Whereas on October 21, 2016, Mr. Nolet informed the trustee's counsel, Me Pierre Rivard, that an improvement plan had to be submitted to him by Friday, October 28, 2016, a request to which the trustee did not respond;
Whereas on November 4, 2016, Mr. Nolet hand-delivered a letter to Me Pierre Rivard and the trustee, in which he requested an improvement plan by November 14, 2016, and on that date, the trustee submitted said plan to Mr. Nolet, informing the latter that he had completed the sale of his 125 summary administrations to the licensed insolvency trustee firm of Roy Métivier Roberge (RMR), that he would not take on any new estates and that he would take short-term actions in some estates and close the remaining estates;
Whereas on November 17, 2016, Mr. Nolet accepted the trustee's improvement plan;
Whereas on December 16, 2016, a decision was rendered providing for the substitution of the summary administration estates;
Whereas further to this decision, multiple requests were made by RMR to the OSB to secure statutory documents that the trustee failed to provide for the estates covered by the ruling of December 16, 2016;
Whereas the estates were obviously not administered in due form and:
- RMR has not located the Counselling Certificates;
- the trustee failed to issue the Certificate of Discharge as required by subsection 168.1(6) of the Act; and
- no other objection to the discharge of the bankrupts was formulated by the trustee;
Whereas no action outlined in the trustee's improvement plan was taken in the estates that remained with the trustee, except one estate where the trustee filed a Certificate of Full Performance of Proposal dated December 13, 2016;
Whereas according to the trustee's correspondence dated November 14, 2016, of the 58 consumer proposals, there are:
- 15 proposals where conditions have been met and are under way;
- 13 proposals that are deemed annulled; and
- 30 proposals that should be closed;
Whereas in the majority of the estates observed, OSB records were not updated because the trustee failed to produce the Certificates of Full Performance of Proposal or the notifications and reports in the case of deemed annulments;
Whereas a visit to the trustee's office on March 3, 2017, found that the bank reconciliation for consumer proposals at January 31, 2017, included a list of outstanding cheques totalling $228,892.73, of which the majority are dividend cheques to creditors that were never sent and are stale, since some date back to September 2011;
Whereas the trustee recorded dividend payments to creditors although he had never sent creditors the cheques under the terms and conditions of proposals (subsection 66.26(1) of the Act);
Whereas with each distribution, the trustee levied, in respect of fees, an amount equal to 20% of the monies allegedly distributed to creditors, monies to which he was not entitled since he had not actually distributed the monies in question;
Whereas an approximate amount of $59,000, plus applicable taxes, was over-levied, contrary to paragraph 129(1)c) of the Bankruptcy and Insolvency General Rules;
Whereas during a visit of RMR's offices on March 7, 2017, we noted that the bank reconciliation for summary administration estates dated November 30, 2016, included a list of outstanding cheques totalling $20,413.11, of which most are dividend cheques to creditors that were never sent and are stale, some dating back to August 2012;
Whereas based on the tests applied, the trustee levied counselling fees of $1,595.23 plus applicable taxes in 11 estates, although he was unable to produce the duly signed Counselling Certificates;
Whereas a summary analysis of recent estates showed that there are reasons to believe that the situation persists;
Whereas on March 17, 2017, the trustee informed Mr. Nolet that he carried no professional liability insurance, contrary to the requirements of subsection 29(f) of Directive No. 13R6;
Whereas at March 22, 2017, the trustee's inventory included 75 open estates;
Whereas I have reasonable grounds to believe that the estates must be protected;
Whereas the Superintendent of Bankruptcy can, to protect an estate, exercise the authorities granted to him by subsection 14.03(1) of the Act under the circumstances described in subsection 14.03(2) of the Act;
Whereas under subsection 14.01(2) of the Act, the Superintendent of Bankruptcy delegated to me the powers and duties of the Superintendent, as defined in subsection 14.03(1) of the Act, under the circumstances prescribed by paragraph 14.03(2)b), through a delegation document of which a copy, as well as a copy of sections 14.01, 14.02 and 14.03 of the Act, are attached;
Whereas paragraphs 14.03(1)a), 14.03(1)b), 14.03(1)c) and 14.03(2)b) of the Act apply;
I, François Leblanc, in my capacity as delegate for the Superintendent, direct the branch of the Royal Bank of Canada located at 700 Place d'Youville, Quebec City, Quebec, G1R 3P2 that, pursuant to paragraphs 14.03(1)a), b) and c) of the Act:
- Upon receiving these directions, it consider Mr. Louis Nolet or Lyne Larocque, employed by the Office of the Superintendent of Bankruptcy, to be the sole authorized co-signers in respect of transactions involving the monies credited to the estates of bankruptcies and proposals administered by Daniel Adam and Adam & Cie Syndic Inc.;
- To make no debit and/or payment and/or transfers on funds credited to, or that ought to have been credited to, the estates of bankruptcies and proposals administered by Daniel Adam and Adam & Cie Syndic Inc. without those cheques, debits, payments or transfers being countersigned by Mr. Louis Nolet or Lyne Larocque;
- To not pay, out of these accounts, cheques, bills of exchange, bank drafts or other instruments, issued before the receipt of these directions which are presented for payment after the receipt of these directions without these cheques, bills of exchange, bank drafts or other instruments being countersigned by Mr. Louis Nolet or Lyne Larocque;
- To provide, by end of day on April 11, 2017, a list of all estate trust bank accounts that are under the name of, or controlled or administered by insolvency trustee Daniel Adam and Adam & Cie Syndic Inc., to Mr. Louis Nolet, CPA, CA, Assistant Superintendent, Office of the Superintendent of Bankruptcy, 1550 D'Estimauville Avenue, Suite 702, Quebec City, Quebec, G1J 0C4;
- To submit all statements of accounts, accepted cheques and other documents or information having to do with the above-mentioned estate trust bank accounts to Louis Nolet, CPA, CA, Assistant Superintendent, Office of the Superintendent of Bankruptcy, 1550 D'Estimauville Avenue, Suite 702, Quebec City, Quebec, G1J 0C4.
That these directions take effect immediately and will remain in effect until such time as the undersigned is satisfied that the estates no longer need to be protected.
That in accordance with subsection 14.03(3) of the Act, these directions bind the Royal Bank of Canada, who must comply with them.
That pursuant to subsection 14.03(4) of the Act, a person who complies with these directions is not liable for any act done by that person only to comply with these directions.
Signed at the City of Montreal, Quebec, this 10th day of April, 2017.
- Date modified: