Sydney H. Pfeiffer and Pfeiffer & Pfeiffer Inc. (Quebec)—July 13, 2005

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.

Canada
Province of Quebec

In the Matter of Professional Disciplinary Proceedings Under the Bankruptcy and Insolvency Act ("the act")

District of Montreal

Opposing: Ms. Sylvie Laperrière
Senior Analyst in the Sainte-Foy District Office of the Office of the Superintendent of Bankruptcy
(hereinafter "the Senior Analyst")
and
Sydney H. Pfeiffer
(hereinafter the "Trustee")
and
Pfeiffer & Pfeiffer Inc.
(hereinafter "the Corporate Trustee")
(the Trustee and 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,

Decision on the Merits and the Sanctions

  1. Pursuant to section 5(1) of the act, Me 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 , 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 to the superintendent respecting their conduct (hereinafter, together with the 53 Exhibits annexed thereto, called "the report"), giving "(…) grounds for the Superintendent to choose to exercise the powers provided in subsection 14.01(1) of the Act".
  5. Pursuant to the report, the senior analyst recommended to the superintendent that he 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 her said recommendations to the superintendent, 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 , 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. At a Preliminary Conference presided by the undersigned and held on , there were also present Mtre Allan Matte, counsel for the senior analyst, and Mtre Aaron G. Rodgers, counsel for the trustees.
  10. Formal minutes of that Preliminary Telephone Conference were thereafter prepared by the undersigned and transmitted to counsel on . A copy of same are annexed as Appendix "A" to this decision.
  11. At that Preliminary Conference, we provisionally fixed the Merits Hearing for the two weeks of and .
  12. However, by his letter submission of , Me Rodgers filed his Motion for a Stay of the Proceedings herein "pending final judgment by the Federal Court of Canada concerning docket number T-1094-04 and the Superior Court of Quebec, Commercial Division concerning the taxation of receipts and disbursements".Footnote 2
  13. The Federal Court proceeding filed by the trustees and referred to above attacked the validity of the decision of the superintendent to appoint the senior analyst to carry out the investigation leading to the proceedings herein.
  14. Counsel for the trustees argued that should the Federal Court ultimately rule that the decision to investigate the trustees was invalid or illegal, the same invalidity or illegality would apply to the delegations by the superintendent both to the senior analyst and the undersigned DELEGATE.
  15. Moreover, based on the legal principle of lis pendens, Me Rodgers evoked the "clear possibility of conflicting judgments" as between, on the one hand, the undersigned and the Federal Court of Canada and, on the other hand between the undersigned and the Quebec Superior Court.
  16. In his written submission, Me Rodgers also reviewed the jurisprudence which established the threefold test to determine if a request for a stay of proceedings should be granted, namely:
    1. is there a serious issue to be tried;
    2. will the applicant suffer irreparable harm if the stay is not granted; and
    3. the balance of convenience.
  17. In his written response dated Mtre Matte advanced his arguments. He cited the judgment in Anheuser-BuschFootnote 3 to the effect that, although as part of his inherent authority to control the process before him the superintendent or his delegate has the right to adjourn a hearing on procedural grounds, he does not have the authority to grant a stay of proceedings pending the conclusion of related litigation.
  18. Mtre Matte also contested the argument advanced by the trustees based upon lis pendens, for which there is also a threefold test:
    1. identity of parties;
    2. identity of object; and
    3. identity of cause.
  19. At the Hearing of Me Rodgers' Motion for a Stay of Proceedings that was held on , Mtre Matte argued that although here there is identity of parties and the same facts, there is no identify of object between, on the one hand, these proceedings and, on the other hand, those before the Federal Court and the Quebec Superior Court. Each one seeks different relief.
  20. An analogy to the situation here would be a case of a criminal assault charge against A for having assaulted B and a civil claim by B against A for the damages sustained by him as a result of the assault. Although both legal processes stem from the same set of facts, each one seeks different relief in a different legal jurisdiction and there would be no lis pendens.
  21. For all those reasons, in our interlocutory decision dated , we agreed with the position of counsel for the senior analyst in regard to the question of lis pendens.
  22. As to our jurisdiction to grant a Stay of Proceedings, we had studied in depth the decisions of delegates Kaufman, Meyer and Poitras.Footnote 4
  23. Generally, these decisions held that a delegate of the superintendent does not have the jurisdiction to grant a Stay of Proceedings since to do so would be a refusal to exercise his jurisdiction under the act and his delegation.
  24. We agreed and therefore concluded that we do not have that jurisdiction.
  25. If it should be determined by higher judicial authority that we indeed had the jurisdiction to grant a Stay of Proceedings, in view of the directive in Section 14.02 of the act which calls for a "speedy and expeditious" hearing, we would in any event have exercised our said jurisdiction by refusing a Stay of Proceedings in the circumstances of this case.
  26. At the Oral Hearing referred to in footnote 2 above, Me Rodgers presented a subsidiary motion, should we refuse to grant a Stay of Proceedings. That is, he requested an adjournment (postponement) of the Merits Hearing until the final decision of the Federal Court concerning the trustees.
  27. After study and consideration, we concluded that such a request for an adjournment (postponement) was a disguised request for a Stay of Proceedings and must also be refused.
  28. However, we were of the view that when such an adjournment is requested, a delegate can always grant less, i.e. an adjournment to a given date, as part of the exercise by the delegate of his unchallenged authority to control the process before him.
  29. Because of the schedules and commitments of both counsel and the undersigned, we believed that as at that late date (i.e. , in relation to the then scheduled Hearing on the Merits in late November, 2004) it would have been unfair to counsel for the trustees to force on the Merits Hearing on the dates referred to in paragraph 11 above.
  30. Seeing those schedules and commitments, we undertook to fix the Merits Hearing, based on the availability of counsel, the parties and the witnesses, to any two consecutive weeks during the five-week period from to . We indicted that we would consult with counsel to determine the exact dates for the two week Merits Hearing within that five-week timeframe.
  31. Thereafter, on , we consulted with both counsel as to the fixing of the exact dates for the Merits Hearing within the period described in paragraph 30 above. On , both counsel requested that the Merits Hearing be held during late March or in April 2005, whereupon we fixed that Hearing for the two weeks of and .
  32. Subsequently, on , the Hearings Co-ordinator of the Federal Court of Canada informed Me Rodgers and his adversary in another case that the said case was peremptorily fixed for Hearing before that Court on and .
  33. As a result of the foregoing, the Hearing dates herein were modified such that the Merits Hearing would take place on , , to  and  to .
  34. On , the Trustees' counsel, Me Aaron Rodgers filed their Reply to the report.
  35. On , we wrote to both counsel regarding Section 14.02(3) of the act, which refers to the public nature of the Hearing and the Record herein, unless the Trustees could satisfy us that the indicated exception should apply in this case.
  36. Subsequently, after a joint voice mail message from both counsel received on , it was stipulated that Me Rodgers would provide his written submissions, if any, concerning that Section 14.02(3) of the act by and that if he did, that Mtre Matte would reply on or before .
  37. The Merits Hearing was then re-scheduled to take place on to 15, 18 to 22, 26 and 27, 2005.
  38. However on , Me Rodgers sent a long letter to us in which he complained about the "… tactics adopted by counsel to the Superintendent …", which "… give rise to serious misgivings concerning the fairness of the process …", adding that "(Our) decision of did nothing to alleviate these misgivings." Me Rodgers' letter of is attached as Appendix "B" to this decision.
  39. At the same time, Me Rodgers sent to us a copy of the Judgment issued in another case on by Madam Justice Danièle Grenier of the Superior Court of Quebec. He also decried "… the tactics adopted by the Superintendent to date …" and then concluded "… the Trustees have no confidence in the independence or impartiality of the tribunal or its proceedings …" and that "As a result of all of the foregoing, the Trustees will not participate."
  40. Me Rodgers also sent to us, along with his letter of , a copy of the confidential letter of sent by the Senior Analyst herein to the Trustees, in which the former set out the Sanctions that she would seek against the Trustees. A copy of that letter is attached as Appendix "C" to this decision.
  41. That letter would normally not have been made known to us unless and until we would determine that either or both trustees had breached or violated provisions of act, the Rules thereunder and/or the Superintendent's Directives.
  42. Consequently, there was no longer any raison d'être to conduct the proceedings in two stages, i.e. first the liability stage and then, if required, the sanction stage.
  43. Thereafter, counsel for the Senior Analyst requested that the Hearing proceed ex parte and that we proceed on both liability and, if applicable, the sanction(s) at the same Hearing.
  44. As we advised counsel in our letter of April 5, 2005:

    "The raison d'être for the previous separation into two phases of the liability and, if applicable, the sanction processes is that, unless and until the Delegate has made a finding of liability, the "written notice" pursuant to Section 14.02(1) of the Act (in this instance, the letter of ) is normally not revealed by the Senior Analyst to the Superintendent or, where applicable, to his Delegate. That procedure is followed in order to assure fairness to the affected trustee(s) by separating the investigative function of the Superintendent or his representative from his adjudicatory function.

    However, by sending to me a copy of the Senior Analyst's letter of , the Trustees themselves have made me aware of its contents and consequently there is no further purpose to proceed in two stages. Thus, at the upcoming Hearing, the Senior Analyst will be permitted to present evidence and submissions regarding both liability and sanction(s).

    In my letter of , a copy of which is also transmitted herewith for ease of reference, I indicated that Me Rodgers' group have been assigned the B.C. boardroom on our 41st floor for their use throughout the Hearing. I am today cancelling my reservation of that boardroom, but it can be re-instated at any time if Me Rodgers and/or his clients change their position and he and/or they decide to attend at and participate in the Hearing.

    Me Rodgers and his clients are invited to change their position and participate in the Hearing, which he (they) may do at any point during the Hearing."

    Our letter of is attached hereto as Appendix "D" to this decision.

  45. Moreover, we determined that a trustee who (which) is the object of disciplinary proceedings under the act cannot be permitted to undermine and derail those proceedings simply by refusing to participate in them.
  46. Consequently, at the request of counsel for the Senior Analyst, we decided to proceed ex parte.
  47. The entire Hearing proceeded ex parte and neither of the trustees nor their counsel made any appearance thereat.
  48. At the ex parte Hearing, the Senior Analyst testified and moreover called the following persons as witnesses:
    1. Mr. Robert Massé, Senior Evaluation Officer with the Office of the Superintendent of Bankruptcy (hereinafter "the OSB");
    2. Mr. Patrick Kabrita, Legal Affairs Analyst at National Bank Financial Inc.;
    3. Mr. Robert M. Malo, Trustee in Bankruptcy, formerly employed by the firm Samson Belair Deloitte & Touche, the Guardian Trustee with regard to the files of the trustees herein; and
    4. Mr. Louis Nolet, Senior Evaluation Officer with the OSB.
  49. Also, Mr. Marco Garberi, an employee of the Royal Bank of Canada, was heard as a witness pursuant to an Order addressed to him by Mr. Justice Blanchard of the Federal Court of Canada dated and an accompanying subpoena issued to that witness by C.H. Beaulieu, Registry Officer at the Federal Court.
  50. After the Hearing, on we addressed a further letter to Mes A. Rodgers and Matte. In the case of Me Rodgers, we delivered that letter to him together with the Procès-verbaux and the Court Stenographers' transcripts regarding those four days of Hearing.
  51. In that letter, we invited Me Rodgers to submit to us by any comments/legal arguments in regard to the Hearing that he would wish to bring to our attention and stating that we would maintain the Argument Phase open until that date. That letter is attached as Appendix "E" to this decision.
  52. We received no comment whatsoever from Me Rodgers and we now proceed to consider the Merits of this case.

The Merits

  1. The trustee has been a Chartered Accountant since and is also a member of the Quebec Bar since .
  2. The OSB first issued a bankruptcy trustee licence to the trustee on . It has been renewed periodically since that date and is still in force and active, all fees having been paid to date.
  3. The corporate trustee received its licence on . It is has not been renewed since as a consequence of the non-payment of the requisite fees and for the reason indicated in paragraphs 70 and 71 below.
  4. As of , Mr. Robert Massé conducted an audit of the professional practice of the trustees.
  5. During that audit, Mr. Massé learned from the trustee that surplus funds in the consolidated trust account for summary administration bankruptcy files, No. 160–560–9, maintained at the Royal Bank of Canada (hereinafter "the CSA"), were being invested with National Bank Financial Inc. (hereinafter "national"), which is an investment dealer.
  6. In consequence thereof, Mr. Massé requested that the trustees produce copies of the portfolio statements of that account, which the trustee did in part.
  7. However, Mr. Massé noticed that certain key elements of those statements had been removed from the photostated copies furnished to him, particularly with regard to the statement dated .
  8. Mr. Massé accordingly asked the trustee to produce to him the original portfolio statements as issued by national or that the corporate trustee authorize Mr. Massé to obtain copies of same directly from national. The trustees refused to do so.
  9. As a result of the foregoing, Mr. Massé suspended the audit.
  10. Notwithstanding such refusal, on , Messrs. Massé and Nolet did obtain copies of the portfolio statements directly from national.
  11. Those statements confirmed that the funds held by the corporate trustee in account No. 1ATT5H-E at national, being surplus amounts from the CSA, had been pledged to national as security for amounts owed to it by the corporate trustee personally.
  12. Consequently, given the deficiencies noted by Mr. Massé in the trustees' management of funds held in trust and their non-cooperation in providing requested information and documents, Mr. Alain Lafontaine, a Deputy Superintendent of Bankruptcy, issued instructions for the first conservatory measures against the trustees on in regard to the copying of all data recorded in the "NEWVIEWS" software employed by the trustees, as well as all computerized data related to Estate files contained in the trustees' computer system and to turn all such data over to Mr. Massé.Footnote 5
  13. As well, on that same date, further conservatory measures were issued directing the Official Receiver not to appoint the trustees to administer any new files.Footnote 6
  14. Moreover, also on , still further conservatory measures were issued against the trustees to the Royal Bank of Canada directing that no funds be withdrawn from the trustees' trust accounts without the signature of a designated OSB representative.Footnote 7
  15. Upon further conservatory measures being issued against the trustee by the OSB on , on and the Official receiver took possession of the trustees' files and the assets related thereto and turned them over to Samson Belair Deloitte Touche, as Guardian Trustee to continue and complete the administration of those files.Footnote 8
  16. At that time, the trustees had 1,087 files open, composed of the following:
    1. 119 Ordinary Administration Bankruptcy files, of which 91% were older than 36 months;
    2. 874 Summary Administration Bankruptcy files, of which 49% were older than 36 months;
    3. 13 Division I Proposal files; and
    4. 81 Consumer Proposal files.
  17. Finally in regard to conservatory measures, further such measures were issued on regarding the accounts of the corporate trustee of the Bank of MontrealFootnote 9 and the Guardian TrusteeFootnote 10 and on regarding the re-direction of mail.Footnote 11
  18. In December 2002, the corporate trustee changed its name to 177751 Canada Inc., without informing the superintendent, thereby violating Directive 13 on Trustee Licensing which requires approval by the superintendent of the choice of name of a corporate trustee.
  19. The trustee was informed on that the licence of the corporate trustee would not be renewed for 2004 unless it changed its name to one approved by superintendent no later than . That has not been done.
  20. The Senior Analyst alleged in the report and then proved many breaches by the trustees in regard to the act, the Rules thereunder and the Directives. We will not analyse all of them in detail here, since our conclusions finding liability are adequately supported by several major breaches committed by the trustees, even without going into the numerous further lesser breaches.
  21. The offences which have been alleged and generally made out by the senior analyst are grouped as follows:
    1. False documents and refusal to co-operate;Footnote 12
    2. Use of an unauthorized bank account to deposit funds administered under the act;
    3. Offences associated with the operation of the CSA;
    4. Offences associated with the operation of the consolidated trust account for consumer proposal files;
    5. Unauthorized fee withdrawals and non-permitted reimbursement of expenses in ordinary administration files;
    6. False trustee Statements of Receipts and Disbursements in ordinary administration bankruptcy files;
    7. Failure to repay money to an Estate following taxation lowering the trustee's fees;
    8. Failure to comply with a Court decision with regard to the payment of disbursements in an ordinary administration file; and
    9. Offences related to the administration of a Division I proposal.
  22. In regard to item 5 of paragraph 73 above, namely that in several ordinary administration Bankruptcy files the corporate trustee withdrew substantial fees and took reimbursement of expenses, either, as regards the fees, without the required authorization in the form of a resolution of a duly constituted meeting of creditors or of a majority of the inspectors or of an order by the Court, or, as in CDV Packaging Inc., an overpayment of expenses of $8,129 together with an unauthorized withdrawal of $75,000 in fees, for a total of $83,129; or, as in André Robitaille, the withdrawal of fees and expenses in excess of the amounts permitted by the act; or, as in the Calfund, Calpen and Fundcal Estates, the amount of $10,000 was received by the trustees from a third Party, was never recorded in the ledgers for those Estates and was never accounted for; all those allegations have been clearly established by the evidence adduced by the senior analyst.
  23. Those unauthorized withdrawals of fees and non-permitted expenses are accurately set out as follows at paragraph 61 of the report, as follows:
    Those unauthorized withdrawals of fees and non-permitted expenses are accurately set out as follows at paragraph 61 of the report, as follows:
    File name Amount withdrawn without authorization
    125851 Canada Inc. (El Paso Restaurant) 30,000.00
    3004368 Canada Inc. (J & T International) 30,000.00
    CDV Packaging Inc. 83,129.00
    André Robitaille 548.00
    Calfund Realty Inc.
    Calpen Realty Inc.
    Fundcal Realty Inc.    		 10,000.00
    2753-8735 Québec Inc. (Etcetera Dépanneur Plus Enr.) 6,567.45
    Total $160,244.45Footnote 13
  24. Moreover, the trustees failed to furnish to the representatives of the OSB the national portfolio statements for the account entitled "Pfeiffer & Pfeiffer Inc., in trust No. 2" and for the national margin accounts 1ATT5G-E and 1ATT5G-F, which indicated a total of $1,294,422.51 owing by the corporate trustee to national.Footnote 14
  25. Generally speaking, over several years, the trustees exhibited a cavalier disregard for their obligations as Trustees in Bankruptcy. The trustee dealt with trust funds in the various Estates under the administration of himself and the corporate trustee as if they were his personal funds.
  26. The evidence adduced by the senior analyst has convinced us of the veracity and accuracy of paragraphs 104, 105, 106 and 107 of the report, which declare:

    "104. In his capacity as designated individual trustee, Mr. Sydney H. Pfeiffer failed to perform his duties with respect to the administration of estates, and failed to comply with the Act, Rules and Directives of the Superintendent.

    105. The trustee demonstrated a lack of honesty and integrity in his management of estate and insolvency funds held in trust. He caused prejudice to hundreds of creditors by depriving them of money that should have been used to pay dividends to them.

    106. The total amount of money missing from the CSA, as of , was $1,034,447.78. In the ordinary administration files discussed in this report, unauthorized fees drawn by the trustee total $160,244.45.

    107. The trustee must assume full responsibility for all the unauthorized fees drawn in estate and insolvency files of the corporate trustee and for the altered and incomplete documents related to the portfolio statements that were submitted to the representatives of the Superintendent and filed in Federal Court."

  27. In addition to the CSA, which had been authorized by and was known to the officials of the OSB, the corporate trustee opened unauthorized accounts at the Bank of Montreal and at national.
  28. Insofar as the accounts at the Bank of Montreal, they were a vehicle that the trustees adopted to illegally circumvent the conservatory measures imposed on and after . Since those measures put in place tight controls on the CSA, unbeknownst to the officials of the OSB, the corporate trustee opened accounts at the Bank of Montreal and illegally deposited there funds received in trust with regard to Estates under the administration of the trustees.
  29. It should be emphasized that the trustee was the only bankruptcy trustee within the corporate trustee and that he was the sole shareholder, sole Director/and the controlling mind of the latter. In those capacities, the trustee controlled all the operations of the corporate trustee, and particularly its banking operations.
  30. Moreover, pursuant to paragraphs 33 and 34 of Directive No. 13, the corporate trustee is responsible for all the actions and omissions of the trustee.
  31. Insofar as national, the trustees pledged trust funds belonging to Estates under their administration to guarantee the personal indebtedness of the corporate trustee to national.
  32. Moreover, when during the audit Mr. Massé learned of the existence of the account at national and requested portfolio statements in regard thereto, the trustee presented him with photostated copies of such statements that had been illegally altered ("doctored") by him in order to conceal the fact that the principal trust account there was a "margin" account.
  33. The trustees tendered that same illegally altered and false ("doctored") statement when, on Footnote 15, the trustees responded to the letter of sent to the trusteeFootnote 16 by Mr. Raymond Villemure, Assistant Superintendent, Audit East.
  34. Moreover, on the trustees filed in Federal Court an "Application for Judicial Review" in regard to the decision of the superintendent to undertake an investigation of the trustees and thereafter to issue conservatory measures.Footnote 17
  35. In support of that Application, the trustees had the temerity to file an Affidavit by the trustee dated , in which paragraph 16 refers to and files as Exhibit "H" the letter dated described in paragraph 85 above, together with the documents that accompanied that letter, including in particular the said "doctored" portfolio statement.Footnote 18
  36. Following the issuance of the first conservatory measures on , on the trustees applied to the Federal Court for an "Order Suspending the Effect of the Conservatory Measures".
  37. In connection with that Application as well, the trustees again had the audacity to tender that same "doctored" portfolio statement.
  38. On , the Honourable Mr. Justice Beaudry rejected that Application, Reasons to Follow. Those reasons were issued on .Footnote 19
  39. In his reasons for order, Justice Beaudry wrote the following at paragraphs 18 to 21:

    "18. In the motion before this Court, the public interest is in the ability of the Superintendent to carry out thorough investigations in order to police trustees and ensure the integrity of the administration of bankruptcy matters in Canada. When the public interest is viewed in light of the present case, it is as important to protect parties involved in future bankruptcy files from being affected by the alleged malpractice of the Applicants as it is to protect current clients of the Applicants by ensuring that their interests are not compromised by the assumption by the Applicant of new files pending the investigation.

    19. The most compelling factor which tilts the balance of convenience in favour of the Respondents is the conduct of the Applicants. The record indicates that the Applicants have altered some of the financial records which they were asked to produce and of which the Respondents ultimately had to retrieve true copies directly from financial institutions owing to the lack of cooperation on the part of the Applicants.

    20. An example of such discrepancies can be seen by comparing of statements from National Bank Financial Inc. provided by the Applicants (pp. 79, 80 and 81 of the Respondents' Record, Vol. 1) with copies of the same statements provided directly by that institution (pp. 82, 83 and 84 of the Respondents' Record, Vol. 1). It is evident that the Applicants were attempting to conceal information about the nature of the interests that they had in their portfolio holdings. Assets which have been pledged as collateral for margin loans to the Applicants have been represented as being owned by the Applicants without being charged with such pledges.

    21. In addition to discrepancies found in statements from financial institutions and manipulation of the internal records of the Pfeiffer Inc., the investigation by the Superintendent indicates a difference of over $1,000,000 between the amount that, according to the register kept by the Applicants, is supposed to be in the trust funds of the Applicants and the amount that in fact is currently present in those funds. There is clearly a public interest in limiting further opportunities for misconduct by the Applicants and for a thorough investigation of their past conduct."

  40. We concur entirely with those reasons articulated by Justice Beaudry.
  41. At the end of the day, after national applied Estate trust funds to cover the corporate trustee's personal indebtedness, and all the remaining available trust funds were recovered by the Guardian Trustee from national, from the Royal Bank and from the Bank of Montreal, there resulted a shortfall of over $1,000,000 in trust funds, which in turn caused substantial losses to the creditors of the various Estates under administration by the trustees, which creditors were for all practical purposes deprived of the dividends that they should have received.
  42. That immense shortfall in the funds that the corporate trustee should have been holding also explains why the trustees could not close files as they did not have the required trust funds to pay the dividends to creditors.
  43. Consequently, we can understand why such a very high proportion of the trustees' files were older than 36 months, as described in paragraph 68 above.
  44. In brief, the trustees repeatedly breached the provisions of the following:
    1. Sections 5(5), 13.5, 25(1), 25(1.3), 26(1), 152(1) and 197(4) of the act;
    2. Articles 34, 36, 37, 39, 45, 48, 61(2)(c) and 61(2)(e) of the Rules under the act; and
    3. Various provisions of Directives 5, 13 and 24.

The Sanctions

  1. In the confidential letter of referred to in paragraphs 40 and 41 above, which is Appendix "C" to this decision, the senior analyst had recommended that the Sanctions to be imposed on the TRUSTES be comprised as follows:
    1. that the corporate license of Pfeiffer & Pfeiffer Inc. be cancelled;
    2. that the licence of Sydney H. Pfeiffer be cancelled;
    3. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily ("jointly and severally" in the terminology of the Common Law Provinces) make restitution to the CSA in the amount of $1,034,447.78, being the amount missing in the CSA on July 5, 2002;
    4. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Estate of 125851 Canada Inc. (El Paso Restaurant) in the amount of $30,000 withdrawn by the trustees, without the required permission;
    5. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Estate of 3004368 Canada Inc. (J & T International) in the amount of $30,000 withdrawn by the trustees, without the required permission;
    6. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Estate of CDV Packaging Inc. in the amount of $83,129 withdrawn by the trustees, without the required permission;
    7. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Estate of André Robitaille in the amount of $548 withdrawn by the trustees, without the required permission;
    8. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Calfund Realty Inc., Calpen Realty Inc. and Fundcal Realty Inc. in the amount of $10,000 withdrawn by the trustees, without the required permission;
    9. that the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, be ordered to solidarily make restitution to the Estate of 2753-8735 Québec Inc. (Etcetera Dépanneur Plus Enr.) in the amount of $6,567.45 withdrawn by the trustees, without the required permission.
  2. At the Hearing, without giving any reasons or explanation for same, the senior analyst withdrew her request in reference to sub-paragraph (c) of paragraph 97 aboveFootnote 20
  3. Insofar as the remaining recommended Sanctions, they are all provided for in Section 14.01 (1) of the act, which decrees:
    "Where, after making or causing to be made an investigation into the conduct of a trustee, it appears to the Superintendent that
    1. a trustee has not properly performed the duties of a trustee or has been guilty of any improper management of an estate,
    2. a trustee has not fully complied with this Act, the General Rules, directives of the Superintendent or any law with regard to the proper administration of any estate, or
    3. it is in the public interest to do so, the Superintendent may do one or more of the following:
    4. cancel or suspend the licence of the trustee;
    5. place such conditions or limitations on the licence as the Superintendent considers appropriate including a requirement that the trustee successfully take an exam or enrol in a proficiency course, and
    6. require the trustee to make restitution to the estate of such amount of money as the estate has been deprived of as a result of the trustee's conduct.
  4. In the context of that Section 14.01(1) of the act, as the DELEGATE of the superintendent, the undersigned stands in his shoes and acts in his stead.
  5. As for the licences of the trustee and the corporate trustee, the senior analyst is seeking their outright cancellation, which, in analogous terms of the criminal law, is tantamount to "capital punishment" in the context of Bankruptcy Trustee Disciplinary Proceedings.
  6. The outright cancellation of a Bankruptcy Trustee's licence effectively puts him (it) out of business. That has already happened here as a result of the conservatory measures that have been issued against the trustees, as described in paragraphs 64 to 67 and 69 above, all of which are still in effect.
  7. To pursue the analogy drawn from the criminal law in paragraph 100 above, where a range of penalty is designated by the legislator, the adjudicator should reserve the maximum penalty provided for the worst offenders in the worst cases.
  8. After due deliberation, and for all the reasons recited above in this decision, we have concluded that the trustees are to be considered as the worst offenders and this case as a worst case.
  9. In the public interest, in order to protect the public and to maintain the integrity of the administration of, and the image of, the Canadian Bankruptcy/Insolvency system, it is imperative that the licences of both the trustee and the corporate trustee be cancelled.
  10. Consequently, the SANCTIONS recommended by the senior analyst, as recited at sub-paragraphs (a) and (b), of paragraph 97 above will be granted.
  11. As for the restitution SANCTIONS recommended by the senior analyst, as recited at sub-paragraphs (d) to (i), inclusive, of paragraph 97 above, we must be mindful of the fact that the creditors in each of those Estates have been deprived of their dividends that the funds misappropriated by the trustees would otherwise have yielded to them.
  12. Consequently, each of the SANCTIONS recommended by the senior analyst, as recited in those sub-paragraphs (d) to (i), inclusive, of paragraph 97 above, will also be granted.

Conclusions

  1. for all the above reasons, we hereby:
    1. cancel the corporate licence of Pfeiffer & Pfeiffer Inc.;
    2. cancel the licence of Sydney H. Pfeiffer;
    3. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily, to make restitution to the Estate of 125851 Canada Inc. (El Paso Restaurant) in the amount of $30,000, withdrawn by the trustees without the required permission;
    4. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily, to make restitution to the Estate of 3004368 Canada Inc. (J & T International) in the amount of $30,000, withdrawn by the trustees without the required permission;
    5. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily, to make restitution to the Estate of CDV Packaging Inc. in the amount of $83,129, being the total improperly withdrawn by the trustees, $75,000 as fees without the required permission and $8,129 as an overpayment of expenses;
    6. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily, to make restitution to the Estate of André Robitaille in the amount of $548, withdrawn by the trustees in excess of the amounts permitted by the act;
    7. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily, to make restitution to the Calfund Realty Inc., Calpen Realty Inc. and Fundcal Realty Inc. in the amount of $10,000, being the amount received by the trustees from a third Party, never recorded in the Estate ledgers for those Estates and never accounted for;
    8. ORDER the trustees, Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer solidarily to make restitution to the Estate of 2753-8735 Québec Inc. (Etcetera Dépanneur Plus Enr.) in the amount of $6,567.45, withdrawn by the trustees without the required permission.

Closing Provision

  1. Each duplicate original of this decision on the merits and on the sanctions signed by the DELEGATE is equally valid and authentic and may serve as such for all legal purposes.

The Honourable Benjamin J. Greenberg, Q.C.
delegate of the superintendent

Mtre Allan Matte
Counsel for the senior analyst;

Mtre Aaron G. Rodgers
Counsel for the trustees.

Appendices to the Decision for Sydney H. Pfeiffer and Pfeiffer & Pfeiffer Inc. — July 13, 2005

This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.

PDF version

Appendices to this decision

597 KB, 19 pages

This is Appendix "A" to the
Decision on the Merits and on the Sanctions
in the case of Sydney H. Pfeiffer and Pfeiffer and Pfeiffer Inc.
issued by the Honourable Benjamin J. Greenberg, Q.C. on

Canada
Province of Quebec
Judicial District of
Montreal

Disciplinary Matter

In the Matter of
The Superintendent of
Bankruptcy

Ms. Sylvie Laperrière
The Senior Analyst
in the Quebec Office of the Superintendent of Bankruptcy
(hereinafter "the SENIOR ANALYST")
and
Sydney H. Pfeiffer
and
Pfeiffer & Pfeiffer Inc.
(hereinafter together referred to as "the TRUSTEES")

Minutes of the Preliminary Organizational Conference held at Montreal office of Stikeman Elliott LLP, 1155 René-Lévesque Blvd. West, 40th Floor, on June 9, 2004 at 4:00 P.M.

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

Present were:
Mtre Allan Matte counsel for the SENIOR ANALYST
and
Mtre Aaron Rodgers, counsel for the TRUSTEES

  1. THE PURPOSE OF THIS PRELIMINARY ORGANIZATIONAL CONFERENCE

    The DELEGATE informed the attorneys that this Preliminary Organizational Conference was not held in order to discuss the facts or merits of this case, but rather to discuss process and planning.

  2. MANNER IN WHICH THE DELEGATE PERCEIVES THESE PROCEEDINGS

    We may assimilate these proceedings to a Civil Court Action, in that the "REPORT" filed by the SENIOR ANALYST can be considered as a "Declaration" or "Statement of Claim"

  3. FURTHER WRITTEN PLEADINGS

    The DELEGATE offered to the TRUSTEES the right to Answer the "REPORT" in writing, which would function as a "Statement of Defence". Should the TRUSTEES wish to do so, their counsel will advise the DELEGATE to that effect on or before June 30, 2004 or alternatively, advise the DELEGATE within the same delay of their decision not to do so. Moreover, in view of the very numerous court proceedings concerning the TRUSTEES pending before the Quebec Superior Court, Bankruptcy Division and the Federal Court of Canada, counsel for the TRUSTEES will also inform the DELEGATE by the 30th of June 2004 as to any requests or Motions that he wishes to present in that connection or, within the same delay, if he has no such request or Motion to present.

    If the TRUSTEES decide to file a Statement of Defence, it was agreed the Mtre Allan Matte would then have until July 21, 2004 in order to inform the DELEGATE as to whether or not he will file a "Response".

  4. THE HEARING

    1. Date and place of Hearing, as well as expected duration thereof;

      The Hearing will be held at the Montreal offices of Stikeman Elliott LLP.

      The two weeks of November 22-26 and November 29 – December 3, 2004 were provisionally fixed for that purpose, to be reviewed as this case progresses and to be revised if and when necessary.

    2. Witnesses – number and identity;

      It was agreed by all the participants in the Preliminary Organizational Conference that it is premature at this point to determine the exact number of witnesses who would be called by each side. It was, however, directed that the Hearing would be taken by stenography and transcribed thereafter.

    3. The method of calling witnesses;

      As to the calling of witnesses, since the applicable legislation does not provide for compelling the attendance of witnesses, it will be agreed that the method to be adopted will be by way of "Notice of Convocation" (avis de convocation) from each Attorney to any witness which he wishes to call and have heard before the DELEGATE. It will be understood that, with respect to any recalcitrant witness or witnesses after the foregoing process is effected, the Party requiring the attendance of any such witness shall seek an Order from the Registrar in Bankruptcy.

    4. The division of the Hearing into two phases was discussed and it was decided as follows:

      Phase 1: Determine whether or not the TRUSTEES have been in violation of or have breached any relevant provisions of the Bankruptcy and Insolvency Act, or of the Bankruptcy and Insolvency Rules, including the Code of Ethics for Trustees in Bankruptcy and/ or of any DIRECTIVES issued by the SUPERINTENDENT OF BANKRUPTCY.

      Phase 2: If the TRUSTEES are found to have been in violation of any of the foregoing, the presentation of the evidence and/or legal submissions of the parties with regard to the determination of the sanction to be imposed.

  5. MINUTES OF THIS PRELIMINARY ORGANIZATIONAL CONFERENCE

    The DELEGATE advised the Attorneys that he will shortly have prepared and transmit to each of them the present MINUTES of the Preliminary Organizational Conference.
  6. MEANS OF COMMUNICATION AMONG the DELEGATE AND COUNSEL

    It was directed by the DELEGATE that each proceeding and communication sent by on counsel to the DELEGATE must simultaneously be sent to opposing counsel. As to written communications between counsel, the DELEGATE will only be copied as each counsel wishes. As regards any communication between counsel indicated to be "Without Prejudice", the DELEGATE will not be copied. Written communications from one counsel to the other or to the DELEGATE may be sent by mail, e-mail or fax or be delivered by messenger.
  7. MISCELLANEOUS AND/OR OTHER MATTERS RAISED BY COUNSEL

    1. Mtre Rodgers revealed that one of his partners, Mtre Janice Naymark, is married to a partner of Stikeman Elliott LLP, Mtre Stephen Hamilton. After discussion, the DELEGATE directed both counsel to confer regarding that question and advise the DELEGATE.
    2. Mtre Rodgers informed the DELEGATE that for the purpose of the present Disciplinary Matter, he will require access to the files of the TRUSTEES, which are presently in the possession of the Replacement Trustee Sampson Bélair/Deloitte & Touche Inc. After discussion, the DELEGATE directed Mtre Rodgers to attempt to obtain such access with the consent of the Replacement Trustee, failing which he was directed to present an Application to the DELEGATE.
    3. The DELEGATE furnished to both counsel for their guidance a copy of his INTERLOCUTORY DECISION issued on May 29, 2001 in the Disciplinary Matter concerning Henry Sztern and Herny Sztern & Associés Inc.

There being no further business to discuss, the Preliminary Organizational Conference was concluded at 5:00 P.M.

Signed at Montreal, Quebec, this

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

This is Appendix "B" to the
DECISION ON THE MERITS AND ON THE SANCTIONS
in the case of Sydney H. Pfeiffer and Pfeiffer and Pfeiffer Inc.
issued by the Honourable Benjamin J. Greenberg, Q.C. on July 13, 2005

April 1, 2005

The Honourable Benjamin J. Greenberg Q.C.
Stikeman Elliott
Barristers & Sollicitors
1155 René-Lévesque West
Montreal, QC, H3B 3V2

Re: Professional Conduct Matter

Sydney Pfeiffer and Pfeiffer and Pfeiffer Inc.

Dear Sir:

We are writing in response to your request for submissions concerning the application of section 14.02(3) of the Bankruptcy and Insolvency Act (The "Act") and in particular the possibility of a decision on your part that it would be in the public interest or the interest of some third party that the record not be public.

We are also writing to notify you and Me Matte of out intentions concerning in the hearing.

You will recall that on October 29, 2004, you issued an interlocutory decision refusing a stay of this matter. The grounds advanced for this stay included the existence of proceedings before other tribunals concerning the legality of the decision to investigate take by the Superintendent, the existence of criminal charges (which are part of the documents supplied by the Senior Disciplinary Analyst ("SDA") at Tab 53) and the existence of civil proceedings claiming the allegedly missing funds as well as the bankruptcy estates which remained to be finalized. In coming to you conclusion that a stay could not be granted, you nevertheless granted a short adjournment.

The proceedings pending before the other tribunals remain unresolved.

As a result, the legal existence of an investigation is still challenged before the Federal Court (Files No. T-1093-04 and T-1094-04). The proceedings you now oversee are a tributary to the decision to investigate. Under section 14.01 of the Act, nothing can done unless the Superintendent has made or caused to made an investigation.

The proceedings for the recovery of the alleged missing sums are still before the Superior Court. A motion to dismiss these proceedings as premature in the absence of a complete taxation of all of the estates administered by the Trustees was dismissed. In doing so, Justice Guilbault noted that taxation of the estates should be finalized on an expedited basis before the action continued so that a clear picture was available. You are now being asked to condemn the Trustee make restitution to the estates, which is exactly what is being sought before the Superior Court. We enclose a copy of the letter of the SDA dated December 16, 2003, setting out the recommendations being made by the Superintendent. You did not have this letter when you issued your decision of October 29, 2004. Upon reviewing same together with the Superior Court proceedings, you will note that paragraph 20 of the reasons you issued is clearly wrong and that you have been misled.

The taxations of summary administration and ordinary estates are not complete. As a result, nearly three years after the Superintendent took possession of the file, the reality of the financial situation remains unknown, hampering the trustee in that there is nothing to be gained by hiring a forensic accountant to review incomplete information.

Finally, and most importantly, the criminal proceedings are not yet resolved. In his documents Me Matte included the cross-examinations of Mr. Pfeiffer, presumably with a view to making these examinations part of a public record. This was done notwithstanding the agreement of counsel to the Superintendent at the examinations that the provisions of the Canada Evidence Act were properly invoked and that the answers given could not be used in other proceedings.

Now the matter will become public, as that is the clear intention of section 14.02(3) of the Act. As a result, the protections afforded by the Canadian Evidence Act are rendered completely useless. No order you could make concerning the public nature of the proceeding can undo this harm.

Moreover, given the lack of any rules of evidence or discipline concerning the admissibility of documents illegally obtained, it is completely foreseeable that this is but the tip of the iceberg.

This tactic adopted by counsel to the Superintendent is symptomatic of the approach used by the Superintendent and evident from the course of proceedings in Federal Court. Taken together with the clear series of misstatements by Alain Lafontaine in the Federal Court proceedings these events give rise to serious misgivings concerning the fairness of the process. Your decision of October 29, 2004 did nothing to alleviate these misgivings.

The decision of Madame Justice Grenier in the matter of Raymond Chabot Inc, et al vs. Marc Mayrand et al of February 8, 2005 (copy attached) clearly establishes that a trustee has no reason to have any confidence in the independence of the process based solely on the legislation.

In light of your decision not to suspend or adjourn these proceedings pending the outcome of related proceedings before property constituted courts and in light of the fact that no urgency exists concerning the licenses is issue, which have not been used since July 2004 as a result of conservatory measures issued by the Superintendent, and in light of the tactics adopted by the Superintendent to date which include refusal to deliver relevant documents in a timely manner in breach of the Federal Court Rules, misleading the Federal Court concerning police investigations, stalling the preparation of statements of receipts and disbursements, frustrating access to information requests, conducting warrantless searches and effectively deciding to shut down the Trustees' operations before the audit began, the Trustees have no confidence in the independence or impartiality of the tribunal or its proceedings.

As a result of all the foregoing, the Trustees will not participate.

Yours truly,

Spiegel Sohmer Inc.

Per: Aaron Rodgers

cc. Me A. Matte, Justice Canada

This is Appendix "C" to the
DECISION ON THE MERITS AND ON THE SANCTIONS
in the case of Sydney H. Pfeiffer and Pfeiffer and Pfeiffer Inc.
issued by the Honourable Benjamin J. Greenberg, Q.C. on July 13, 2005

Office of the Superintendent
of Bankruptcy Canada
An Agency of
Industry Canada
1141, Route de l'Église, 4th Floor
Sainte-Foy (Québec) G1V 3W5
Telephone: 418–648–4280
Fax: 418–648–4120

December 16, 2003

Confidential

Mr. Sydney H. Pfeiffer
Pfeiffer & Pfeiffer Inc.
400-1085 St-Alexandre Street
Montreal (Quebec)
H2Z 1P4

Subject: Investigation concerning your administration as trustee

Sir,

I am writing to follow up on my letter of July 4, 2002, advising you of the commencement of an investigation into your conduct as trustee.

You will find attached a copy of the report and appendices that I have prepared with respect to Pfeiffer & Pfeiffer Inc. and your administration as trustee. The report sent to the Superintendent of Bankruptcy does not contain my recommendations on sanctions.

Those recommendations, which will be provided to the Superintendent at the time of the hearing provided for under subsection 14.02(1) of the Bankruptcy and Insolvency Act, are as follows:

  • that the corporate license of Pfeiffer & Pfeiffer Inc. be cancelled;

  • that the license of Sydney H. Pfeiffer be cancelled;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the consolidated trust account for summary administration in the amount of $1,034,447.78 which was missing in that account on July 5, 2002;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of 125851 Canada Inc. (El Paso Restaurant) in the amount of $30,000.00 withdrawn without the required permission;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of 3004368 Canada Inc. (J & T International) in the amount of $30,000.00 withdrawn without the required permission;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of CDV Packaging Inc. in the amount of $83,129.00 withdrawn without the required permission;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of André Robitaille in the amount of $548.00 withdrawn without the required permission;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of Calfund Realty Inc., Calpen Realty Inc. and Fundcal Realty Inc. in the amount of $10,000.00 withdrawn without the required permission;

  • that trustees Pfeiffer & Pfeiffer Inc. and Sydney H. Pfeiffer, jointly and severally, make restitution to the estate of 2753-8735 Québec Inc. (Etcetera Dépanneur Plus Enr.) in the amount of $6,567.45 withdrawn without the required permission.

I am also attaching a copy of the document entitled "File General Information", which provides the Superintendent with the information required for a professional conduct hearing.

I am available to discuss this report and my recommendations prior to the hearing provided for in subsection 14.02(1) of the Act.

Yours truly,

Sylvie Laperrière,
Senior Analyst, Professional Conduct

encl.

This is APPENDIX "D" to the
DECISION ON THE MERITS AND ON THE SANCTIONS
In the case of Sydney H. Pfeiffer and Pfeiffer and Pfeiffer Inc.
issued by the Honourable Benjamin J. Greenberg, Q.C. on July 13, 2005

The Honourable Benjamin J. Greenberg, Q.C.
Direct: 514–397–3051
Fax: 514–397–3631
Email: bgreenberg@stikeman.com

BY FACSIMILE
April 5, 2005

Mr. Allan Matte
JUSTICE DEPARTMENT
INDUSTRY CANADA LEGAL SERVICES
235, Queen Street
1st Floor, East Tower
Ottawa, Ontario K1A 0H5

Me Aaron Rodgers
SPIEGEL SOHMER
5 Place Ville-Marie
Suite 1203
Montreal, Quebec
H3B 2G2

Re: Professional Disciplinary Proceedings under the Bankruptcy and
Insolvency Act ("the Act") respecting Sydney H. Pfeiffer and
The Associated Corporate Trustee Pfeiffer & Pfeiffer Inc.
Our file: 105918-1008

Gentlemen:

I confirm receipt on April 1, 2005, of Me Rodgers' faxed letter comprising his clients' Submissions, accompanied by the Senior Analyst's letter to the Trustees of December 16, 2003 and a copy of Madam Justice Grenier's Judgement of February 8, 2005. I also received yesterday Mr. Matte's faxed letter of that date and have studied and considered the contents of both of those communications.

In my letter to both of you of March 16, 2005, in view of the upcoming Merits Hearing then scheduled to commence on April 7, 2005, I raised the matter of Section 14.02(3) of the Act and invited counsel to furnish submission in that regard. In Mr. Matte's letter to me of March 21, 2005, he informed me of the agreement between counsel to have the Merits Hearing commence on April 11, 2005, because of another commitment of Me Rodgers on April 7th, and also informed me of their understanding to reschedule their respective Submissions in regard to that Section 14.02(3), as follows:

  1. Me Rodgers would provide his written submissions on or before April 1st; and,
  2. Mr. Matte would reply on or before April 5th.

All the foregoing was confirmed in my letter to counsel dated March 22, 2005. For ease of reference copies of those letters are transmitted herewith.

Me Rodgers' letter of April 1st, 2005 does not address the Section 14.02(3) question and, consequently, since I do not have before me a request by the Trustees as permitted by that Section, the default provisions thereof will apply and the Hearing itself, and all documents and evidence tendered thereat and prior thereto, will be public.

Moreover, in his letter of April 1st, Me Rodgers voices various elements of complaint as to the "tactics" adopted by the Superintendent and his representatives in this matter as well as in the proceedings brought by the Trustees and still pending before the Federal Court of Canada. With the exception of the matter of Section 5. (2) of the Canada Evidence Act ("CEA"), those complaints fall under the jurisdiction of the Federal Court and not of the undersigned in my capacity as Delegate of the Superintendent of Bankruptcy and I consequently will not comment upon them.

Insofar as the matter of Me Rodgers' complain that the Senior Analyst has filed before us the Transcripts of the out-of-court examination of Mr. Sydney H. Pfeiffer in regard to those Federal Court proceedings and the fact that at that examination Section 5. (2) of the CEA was invoked on each occasion, my observation in that regard is that, pursuant to Section 5. (2) of the CEA:

"…the answer so given shall not be used or admissible in evidence against him in any criminal trial or other criminal proceeding against him thereafter taking place, other than a prosecution for perjury in the giving of that evidence."(Emphasis added.)

The process before the undersigned in my capacity as the Delegate of the Superintendent is a disciplinary process regarding professional conduct and is clearly not a criminal trial or other criminal proceeding.

Finally, we note Me Rodgers' assertion, because "…the Trustees have no confidence in the independence or impartiality of the tribunal or its proceedings", "…the Trustees will not participate." at the upcoming Hearing.

In the face of that assertion, Mr. Matte has requested that his client be permitted to proceed ex parte before me. He also requested that I consider proceeding on both liability and, if applicable, the sanction(s) at the same upcoming Hearing.

The raison d'être for the previous separation onto two phases of the liability and, if applicable, the sanction processes is that, unless and until the Delegate has made a finding of liability, the "written notice" pursuant to Section 14.02(1) of the Act (in this instance, the letter of December 16, 2003) is normally not revealed by the Senior Analyst to the Superintendent or, where applicable, to his Delegate. That procedure is followed in order to assure fairness to the affected trustee(s) by separating the investigative function of the Superintendent or his representative from his adjudicatory function.

However, by sending to me a copy of the Senior Analyst's letter of December 16, 2003, the Trustees themselves have made me aware of its contents and consequently there is no further purpose to proceed in two stages. Thus, at the upcoming Hearing, the Senior Analyst will be permitted to present evidence and submissions regarding both liability and sanction(s).

In my letter of March 30, 2005, a copy of which is also transmitted herewith for ease of reference, I indicated that Me Rodgers' group have been assigned the B.C. boardroom on our 41st floor for their use throughout the Hearing. I am today cancelling my reservation of that boardroom, but it can be re-instated at any time if Me Rodgers and/or his clients change their position and he and/or they decide to attend at and participate in the Hearing.

Me Rodgers and his clients are invited to change their position and participate in the Hearing, which he (they) may do at any point during the Hearing.

As for Mr. Matte, I again invite him to advise me forthwith as to exactly who will be in attendance other than his witnesses, who, I assume will be present in rotation from day to day.

Also, if the Trustees maintain their present position and if the Hearing proceeds ex parte, I will re-adjust the schedule to an expected duration of no more than 7 days instead of the previous scheduling of 12 days.

Yours very truly,

The Honourable Benjamin J. Greenberg, Q.C.

BJG/ggg
Encl.

This is APPENDIX "E" to the
DECISION ON THE MERITS AND ON THE SANCTIONS
In the case of Sydney H. Pfeiffer and Pfeiffer and Pfeiffer Inc.
issued by the Honourable Benjamin J. Greenberg, Q.C. on July 13, 2005

The Honourable Benjamin J. Greenberg, Q.C.
Direct: 514–397–3051
Fax: 514–397–3631
Email: bgreenberg@stikeman.com

BY MESSENGER (Me Rodgers) April 28, 2005

BY MAIL (Mr. Matte)

Me Aaron Rodgers
SPIEGEL SOHMER
5 Place Ville-Marie
Suite 1203
Montreal, Quebec
H3B 2G2

Mr. Allan Matte
JUSTICE DEPARTMENT
INDUSTRY CANADA LEGAL SERVICES
235, Queen Street
1st Floor, East Tower
Ottawa, Ontario K1A 0H5

Re: Professional Disciplinary Proceedings under the Bankruptcy and
Insolvency Act ("the Act") respecting Sydney H. Pfeiffer and
The Associated Corporate Trustee Pfeiffer & Pfeiffer Inc.
Our file: 105918-1008

Gentlemen:

Further to my letter of April 5, 2005, I wish to inform Maître Rodgers that the Merits Hearing was held ex parte on April 11, 12, 13 and 19, 2005. With respect to a witness heard on April 19th, Mr. Marco Garberi of the Royal Bank of Canada, counsel for the Senior Analyst had obtained an Order addressed to Mr. Garberi from Mr. Justice Blanchard of the Federal Court dated April 15, 2005 and an accompanying subpoena issued to that witness by C.H. Beaulieu, Registry Officer at the Federal Court. I note that when Mr. Matte faxed those documents to me on April 15, 2005, he sent copies of them and of his letter to Maître Rodgers.

In order to permit Maître Rodgers to advance any Comments/Legal Arguments he may wish to make in regard to the Merits Hearing, I enclose herewith for Maître Rogers the Procès-verbaux and the Court Stenographers' transcripts regarding those four days of Hearing.

The Evidence Phase has been closed. However, I hereby maintain the Argument Phase open until the end of the two-week period specified below and invite Maître Rodgers, should he wish to do so, to submit to me his Comments/Legal Arguments in regard to the Hearing, no later then the close of business Friday May 13, 2005. Should he send any such Comments/Legal Arguments by that date, I will consider them in arriving at my Decision.

Whether Maître Rodgers makes a Submission or not, this case will be taken en délibéré on May 13, 2005.

Insofar as Mr. Allan Matte, since he either has received or will be receiving the Transcripts directly from the Court Stenographers, I enclose for him only copies of the four Procès-verbaux.

Yours very truly,

The Honourable Benjamin J. Greenberg, Q.C.

BJG/ggg

This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.

 Report a problem
Date modified: