Segal & Partners Inc. and Todd Y. Sheriff (Ontario) — June 23, 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 Trustees:
Mr. Craig R. Colraine
Birenbaum, Steinberg, Landau, Savin & Colraine LLP
Counsel for the Senior Analyst:
Mr. Marcel Gauvreau
Whereas this is further to my decision of , finding the trustees responsible for a number of wrongdoings regarding the administration of certain insolvency estates;
Whereas this is also further to my decision of February 12, 2003, rejecting the trustees' motion to stay proceedings for failure on the part of the Senior Disciplinary Analyst's (hereinafter referred to as the SDA) to disclose evidence;
Whereas subsequent to my February decision, both the trustees and the SDA agreed to submit written submissions as to the appropriate sanction to be imposed in this matter without further oral hearing. Counsel for the trustees submitted written representations on , followed by counsel for the SDA on March 14th and with a subsequent reply from the trustees on ;
Whereas by the decision dated , the following findings were arrived at against the trustees (the particulars of which can be found in the September decision):
- That in the matter of Bruce Michael Grayson:
- the trustee did not demonstrate the due care, competence and diligence expected of trustees in assessing the affairs of the debtor nor in determining that a proposal was viable under the circumstances known to them; and
- the lack of due care, competence and diligence on behalf of the trustees in reviewing and verifying the debtor's financial affairs caused the latter to engage in costly proceedings which were doomed to fail.
- That in the matter of John Gordon Sargant:
- the trustees did not display the competence and diligence expected of a trustee in overseeing the preparation of a consumer proposal documentation and more specifically, in adequately verifying the affairs of the debtor; and
- the trustees advised and assisted the debtor to proceed with a proposal to repay in full the only two listed creditors for a total of $4,800 plus fees of $2,800 while the trustees knew the debtor had secured a loan of $4,000 the day before filing the proposal and never did disclose the existence of such a loan to the creditors.
- That in the estates of Grayson and Sargant:
- the trustees and their staff failed to properly conduct an assessment of the debtor as required by Directive no. 6R; and
- the failure to conduct such proper assessment resulted in both debtors initiating proceedings which, had they been properly assessed, would never have been filed.
- That the trustees failed to comply with Directive 4 – Delegation of Tasks, in allowing a non-licensed trustee staff member to sign the report to creditors on a consumer proposal. That failure was mitigated however, by the representations of the staff member that she was authorized to sign the said report.
- That the trustees solicited proxies for a meeting of creditors. Such solicitation by the trustees is mitigated by the fact that it failed to secure the required votes to resist an anticipated motion for substitution that in the end was not pursued.
- That the trustees deliberately and knowingly attempted to obtain from the bankruptcy estate of Bruce Michael Grayson, the payment of fees for work done in relation to the failed proposal without disclosing to the inspectors the true nature of the fee claimed until challenged by the inspectors.
- That in the bankruptcy estate of Sargant, the trustee inadvertently filed a false proof of claim, having failed to deduct from his claim the interim fees already collected.
Whereas the SDA recommends that:
- the licence of Todd Y. Sheriff be suspended for a period of 8 months;
- the licence of the corporate trustee Segal & Partners Inc. be restricted for a period of 4 months from accepting and filing new appointments under the Bankruptcy and Insolvency Act (BIA);
- the corporate trustee be ordered to restitute the amount of $168.00 and $90.95 to the estate of Bruce Michael Grayson;
- the licence of Todd Y. Sheriff remain suspended until he has successfully completed a requalification process; and
- that trustee Todd Y. Sheriff be required to enroll in and complete a course in professional ethics within a period of 12 months.
Whereas the trustees submits the following as a suitable penalty:
- a recorded reprimand in respect of the findings against them;
- reimbursement of all fees expended by Grayson and Sargant on their consumer proposals;
- the completion of any reasonable course of continuing education as required by the Superintendent; and
- an order that the trustees' office be monitored on a periodic basis and for such length of time as determined to be appropriate.
Whereas the findings against the trustees point out a general lack of understanding of their role in administering small personal insolvency estates;
Whereas the findings point out a severe lack of diligence in reviewing and verifying the affairs of a debtor in a personal insolvency file;
Whereas the findings point out negligence and a lack of concern in ensuring that creditors receive complete and accurate information on the debtor's financial affairs;
Whereas the trustees' failings have resulted in debtors entering proceedings which prima facia had no chance of being successfully completed;
Whereas the trustees' failings have caused excessive and expensive time and effort by creditors that could have been easily avoided had the trustees carried out their duties with due diligence and been forthcoming in the provision of information to creditors;
Whereas the trustees' failings resulted in both Mr. Grayson and Mr. Sargant not receiving the professional, objective and independent quality services they were entitled to receive;
Whereas the failings of the trustees showed disregard for the importance and significance of conducting a thorough assessment interview and proper verification of the debtor's financial affairs;
Whereas the trustees' failings in these matters bring disrepute to the insolvency system and lend credit to those who advocate that trustees are in a conflict of interest at the time of assessment and that such an assessment should be conducted by an independent party;
Whereas trustee Todd Y. Sheriff has failed to demonstrate a full appreciation of the wrongdoings found against the trustees, opting to see these wrongdoings as a series of errors rather than breaches of the fundamental responsibilities of trustees to be thorough, accurate and forthcoming in performing their statutory duties under the BIA; and
Whereas I take notice that the corporate trustee has, since these incidents, hired two new individual trustees who had nothing to do with the present matter.
I, Superintendent of Bankruptcy, hereby order that:
- the licence of Segal and Partners be restricted for a period of one month from filing any estates under the BIA;
- the licence of Todd Y. Sheriff be suspended for a period of 6 months;
- the licence of Todd Y. Sheriff be, upon the expiration of the six month suspension, restricted thereafter to the filing and administration of corporate estates for a minimum of 18 months before the trustee can apply to appear before an Ad Hoc Oral Board to have the restriction lifted in total or in part and until such restriction is lifted;
- that the Ad Hoc Oral Board referred to previously be tasked with assessing Todd Y. Sheriff's knowledge, competence and professional ethics in relation to the administration of personal insolvencies;
- that within the next year, the trustee Todd Y. Sheriff successfully pass a business ethics course at a recognized school of business acceptable to the National Director — Compliance and Investigation of the Office of the Superintendent of Bankruptcy;
- that Segal & Partners Inc. must restitute to the estate of Bruce Michael Grayson the sum of $168.00 and of $90.95 and provide satisfactory evidence to that effect to the Toronto Division Assistant Superintendent within 10 days; and
- that this order be served on the Official Receiver to allow for full consideration of the particulars upon taxation of the Sargant and Grayson estates should the trustees seek any fees for work performed in these estates.
This order takes effect on .
Superintendent of Bankruptcy
- Date modified: