Georges Marchand, Bruno Marchand and Marchand Syndics Inc.—April 8, 2008

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
District of Montréal

in re disciplinary proceedings under the bankruptcy and insolvency act (hereinafter "the act")

adverse claimant:

MR. michel leduc
senior analyst in the Montréal
Regional Office of the Superintendent of Bankruptcy hereinafter "the senior analyst")

and

georges marchand (hereinafter "georges")

and

bruno marchand (hereinafter "bruno")

and

marchand syndics inc. (hereinafter "inc.") (hereinafter jointly "the trustees")

presiding:

the honourable benjamin j. greenberg, q.c. (hereinafter "the >delegate"

Montréal,

Decision on Certain Preliminary Motions by the Trustees

  1. Subsections 5(2) and paragraph 5(3)(e) of the ACT direct the superintendent to supervise the administration of all estates and matters to which the Act applies, and impose on him a duty to make or cause to be made "such inspection or investigation of estates or other matters to which this Act applies, including the conduct of a trustee or a trustee acting as a receiver or interim receiver, as the Superintendent May deem expedient…"
  2. On , the superintendent, in carrying out this duty pursuant to subsection 14.01(2)Footnote 1 of the Act, delegated to the senior analyst certain of his powers, duties and functions, except for the requirement to provide the Trustees with an opportunity to be heard.
  3. The senior analyst subsequently held an investigation into the conduct of the Trustees, and after completing it, filed a report dated (hereinafter referred to as "the report", with its 111 appendices) recommending that the superintendent take one or more of the disciplinary actions mentioned in subsection 14.01(1) of the ACT, which is/are unknown to us.
  4. Following the report, the superintendent decided to take one or more of these disciplinary actions against the Trustees.
  5. Consequently, as the superintendent's delegate, the senior analyst sent the Report to the Trustees, to take the place of the written notice required in section 14.02(1) of the Act.
  6. Subsequently, the superintendent decided that in the interests of natural justice, and to allow the Trustees an opportunity to be heard as promptly as possible, it would be advisable to delegate some of his decision-making powers and related powers to an independent lawyer.
  7. Accordingly, on , pursuant to subsection 14.01(2) of the Act, the superintendent delegated the said powers, duties and functions bearing on the instant disciplinary proceedings to the undersigned.
  8. The first series of preliminary applications from the Trustees was in four parts:
    1. an application that the report be declared null and void, with a consequent non-definitive stay of the proceedings;
    2. an alternative application to stay the instant proceedings pending the judgment on the merits by the Federal Court of Appeal in cases T-75-04 and T-547-04: this is the trial judgment of the Honourable Luc Martineau J. dated , in the cases of the trustees Lévy and Roy (hereinafter "the martineau judgment"). Mr. Gervais is appearing for the trustees Lévy and Roy in the said cases;
    3. an application to disclose evidence;
    4. an application by bruno to separate his disciplinary hearing from that of his father, georges.
  9. The first preliminary application was rejected in my revised decision of .
  10. As for the second preliminary application, calling for a stay of proceedings pending the Federal Court of Appeal's decision on the merits of the martineau judgment, these proceedings should be consistent with the clear consequences of the outcome of said appeal.
  11. Then if the appeal from the martineau decision was successful, the Trustees' third and fourth preliminary applications would become moot.
  12. On the other hand, if the appeal from the martineau judgment was not successful, we would then proceed to rule on the Trustees' third and fourth preliminary applications. If necessary, we would have already heard the evidence and the submissions by counsel on these preliminary applications.
  13. We therefore allowed the second preliminary application.
  14. In the end, the appeal of the martineau judgment was not successful, and we will therefore now rule on the Trustee's third and fourth preliminary applications.
  15. In the meantime, the third application was settled and the senior analyst delivered ten boxes of documents to the Trustees. All that is left in that part is a question of privilege put forward by the senior analyst with regard to 28 of the 132 documents that were marked 1A, i.e., as being protected by solicitor-client privilege and/or litigation privilege, out of the 1798 documents provided to the Trustees.
  16. These documents are included in the 172-page list prepared by the senior analyst dated . The 28 documents in question are:
    • A-72 E-mail from Bernadette Blain to Pierre Lecavalier et al. dated (re: List of files that are more than 10 years old)
    • A-73 E-mail from Pierre Lecavalier to Lorraine Provost et al. dated (re: Marchand — draft reply to receive)
    • A-74 E-mail from Bernadette Blain to Pierre Lecavalier et al. dated (re: Marchand Syndics Inc. — georges e. marchand/Bruno Marchand)
    • A-86 E-mail from Pierre Lecavalier to Alain Lafontaine et al. dated (re: Marchand — chronology of the problem with closing files)
    • A-88 E-mail from François Leblanc to Pierre Lecavalier to Alain Lafontaine et al. dated (re: List of SRDs as of )
    • E-3 E-mail from Pierre Lecavalier to Lorraine Provost et al. dated (re: Marchand Files)
    • E-4 E-mail from Pierre Lecavalier to Lorraine Provost et al. dated (re Marchand Files)
    • E-57 E-mail from Pierre Lecavalier to Lorraine Provost et al. dated (re: Conference call)
    • E-165 E-mail from Sylvie Laperrière to Pierre Lecavalier et al. dated (re: 53 Marchand files)
    • E-212 Handwritten notes —  — taken during a meeting with Mr. Lecavalier.
    • E-215 Handwritten notes (re: Marchand Syndics Inc. — ) — taken during a meeting with Mr. Lecavalier.
    • E-220 Handwritten notes — — taken during a meeting with Mr. Lecavalier.
    • E-226 E-mail from Bernadette Blain to Pierre Lecavalier: List of files —
    • E-229 E-mail from Pierre Lecavalier to Alain Lafontaine re Diligence in closing files —
    • E-230 Handwritten notes —  — taken during a meeting with Mr. Lecavalier.
    • Q-35 Handwritten notes taken during a meeting with Mr. Lecavalier.
    • Q-57 Letter from Pierre Lecavalier (Justice Canada) to Alain Lafontaine et al. dated (re: History of Marchand Files)
    • R-10 E-mail from Michel Leduc to Alexander Pless et al. regarding the Benchaya complaint dated
    • S-2 Minutes (re: Professional Conduct Advisory Committee Meeting — ) of a meeting attended by Mr. Delage and Mr. Matte.
    • S-17 E-mail from Pierre Lecavalier to Lorraine Provost et al. (re: Marchand Files — )
    • W-5 E-mail from Pierre Lecavalier to Ginette Trahan dated
    • W-7 E-mail from Pierre Lecavalier to Ginette Trahan et al. dated
    • W-8 Memorandum from Pierre Lecavalier (re: georges marchand, Bruno Marchand, Marchand Syndics Inc.) dated
    • W-12 E-mail from Lorraine Provost to Pierre Lecavalier et al. dated
    • DD-50 E-mail from Pierre Lecavalier to Alain Lafontaine, Patricia Alférez, Lorraine Provost, Karina Fauteux, Bernadette Blain and François Leblanc (re: Marchand Syndic Inc. — )
    • DD-56 Letter from Pierre Lecavalier to Industry Canada (re: History of the Marchand File — )
    • HH-8 E-mail from Bernadette Blain to Lorraine Provost (re: results of the Marchand hearing 41–167355) dated and written following a telephone conversation with Mr. Desgens.
    • HH-10 Note to file by Bernadette Blain taken following a telephone conversation with Mr. Desgens —
  17. First of all, the senior analyst produced an Affidavit made by Pierre Lecavalier dated , which covered 24 of the 28 documents, as produced, i.e., most but not all of the 28 documents in question;
  18. Despite that, rather than cross-examining Mr. Lecavalier on his Affidavit, counsel for the Trustees preferredFootnote 2 to have the undersigned examine the 28 documents and then rule on whether or not they were protected by professional or litigation privilege.
  19. On we received 28 files from the Counsel for the senior analyst containing the 28 documents in question.
  20. After reviewing these "28 documents", we note that there are in fact only 24, because:
    1. A-86 and DD-50 are identical;
    2. Q-57 and DD-56 are identical; and
    3. A-72, A-73 and E-226 can be summed up as follows:
      1. A-72 is an e-mail dated , without the two attachments that are indicated in it by the two icons;
      2. E-226 contains the same e-mail, but with the two attachments; and
      3. A-73 is another e-mail dated , accompanied by the same two attachments.

    Analysis

  21. Clarification should first be made of the distinction between the two types of privilege mentioned in paragraph 15 above. Solicitor-client privilege applies to all confidential communications between the client and his or her lawyer.
  22. Litigation privilege, on the other hand, applies even to non-confidential communications. Here is what the Honourable Justice Fish wrote for the majority in the Supreme Court of Canada ruling on this subject in Minister of Justice v. Sheldon Blank:Footnote 3

    "The Minister contends that the solicitor-client privilege has two "branches", one concerned with confidential communications between lawyers and their clients, the other relating to information and materials gathered or created in the litigation context. The first of these branches, as already indicated, is generally characterized as the "legal advice privilege"; the second, as the "litigation privilege".

    Bearing in mind their different scope, purpose and rationale, it would be preferable, in my view, to recognize that we are dealing here with distinct conceptual animals and not with two branches of the same tree. Accordingly, I shall refer in these reasons to the solicitor-client privilege as if it includes only the legal advice privilege, and shall indeed use the two phrases — solicitor-client privilege and legal advice privilege — synonymously and interchangeably, except where otherwise indicated.

    As a matter of substance and not mere terminology, the distinction between litigation privilege and the solicitor-client privilege is decisive in this case. The former, unlike the latter, is of temporary duration. It expires with the litigation of which it was born. Characterizing litigation privilege as a "branch" of the solicitor-client privilege, as the Minister would, does not envelop it in a shared cloak of permanency.

  23. It should be added that the two types of privilege analyzed by Justice Fish belong to the client, and are there to protect the client's interests. They were not designed in the interests of the solicitor. Therefore, only the client is qualified to waive them.
  24. In the case at hand, the senior analyst did not waive these privileges. Therefore both are still intact and we have no choice but to apply them.
  25. Therefore, for the few documents among the 24 that May not be protected by solicitor-client privilege but are protected by litigation privilege, it is abundantly clear that the litigation in the context of which they were gathered or created, i.e., this case, is still ongoing.
  26. The remaining documents out of the 24 protected documents are protected by solicitor-client privilege.
  27. Therefore, after an in-depth review of all 24 documents, there are only three that are not protected by either type of privilege. These are documents E-3, E-57 and S-17.
  28. The senior analyst is therefore ordered to provide certified copies of these three documents to counsel for the Trustees within thirty days of this decision.
  29. We now turn to the fourth preliminary application in the original series, that submitted by bruno to separate his hearing from that of his father, georges.
  30. We agree with what counsel for the Trustees wrote in a letter addressed to us on : [translation]

    "There is not a separate hearing for the corporate trustee, because by definition, the corporate trustee only acts through the individuals with which it is associated."

  31. So counsel for the Trustees is asking not only that there be separate hearings for bruno and inc. and georges and inc., but also that we make two separate rulings, one for bruno and inc. and the other for georges and inc.
  32. Counsel for the senior analyst opposes this application, and is insisting on one hearing for all three Trustees, followed by a single ruling on the merits.
  33. However, she suggests, as found in her letter addressed to us on : [translation]

    "As for the issue of separation, we suggest that, without formally separating the case, we schedule separate days for the hearing on the allegations against Bruno Marchand and Marchand Syndics Inc., separate hearing days for the allegations against Georges E. Marchand and Marchand Syndics Inc., and separate hearing days for the allegations against Bruno Marchand, Georges Marchand and Marchand Syndics Inc. These various hearing days should be consecutive, however."

  34. We looked at this issue based on the applicable rules and practices, and even more so, based on our decision on the Trustees' new motion, which is dealt with further on.
  35. After reflection, and giving consideration not only to the applicable rules and practices and issues such as time and expenses, but also to our decision on the trustee's motion regarding the senior analyst's preparation of a detailed list of offences, we are of the opinion that there should be a single hearing on the merits for the three Trustees, followed by a single decision on the merits of the case.

    New Motion by the Trustees

  36. This application arose for the first time in this file through a letter sent to us by the Trustees' counsel, in which he wrote: [translation]

    "On another front, the hearing in the Lévy file also highlighted the importance of precision with regard to the offences alleged against the trustee.

    In fact, after one day of hearings, it quickly became clear that proceeding based solely on the disciplinary report would lead to chaos, because neither the parties nor the court were able to link the evidence that was produced, or the testimony, to a specific offence.

    It was at that point that Mr. Leduc and his counsel took a few days to identify the offences, file by file, with reference to the provisions that had been breached.

    About two weeks ago, Mr. Tardif sent us a document that we view as an interesting work tool.

    We suggest, however, that he verify with Mr. Leduc the nature of his preparations in the Lévy file, so that a similar effort can be made in our file, which will make things easier for everyone." (our underlining)

  37. It should be noted that counsel for the senior analyst later provided a more detailed schedule of the offences to counsel for the Trustees. Each referred to this new schedule as a "work tool", and Mr. Gervais also called it "interesting".
  38. However, as in the Lévy case, the Trustees' counsel is requesting an exhaustive list of offences, which will constitute the "indictment", with all the consequences thereof.
  39. As for the senior analyst, first Mr. Tardif and then Ms. Béland expressed their opinions as follows:

    Mr. Tardif in his letter: [translation]

    "We undertake to determine over the next few days whether any additional clarification can be provided with regard to the schedule of offences that we provided to Mr. Gervais."

    Ms. Béland in her letter: [translation]

    In addition, you will find attached a much more detailed schedule of the offences alleged against Bruno Marchand, Georges E. Marchand and Marchand Syndics Inc. We are providing this schedule to you solely as a work tool. We in no way intend for this document to serve at any time as indictments against Bruno Marchand, Georges E. Marchand or Marchand Syndics Inc.

  40. In his letter sent to us on , counsel for the Trustees stated the following on the subject: [translation]

    3. Production of an exhaustive list of accusations:

    Given that Ms. Béland expressed her opposition to our requests in this regard, which were aimed solely at obtaining the same thing as in the Lévy file, we have prepared an application, which you will find appended to this letter.

    By setting out our position in writing in this request, we are submitting a formal application to the court. Should Ms. Béland continue to argue against this, it will be appropriate to set a date to appear before you."

  41. A hearing was therefore held on in order to give counsel for the Parties an opportunity to express their respective viewpoints on the issue. This followed the filing of an application by the Trustees dated and an Objection written by the senior analyst dated .
  42. In support of his request, Mr. Gervais filed as exhibit R-1 the "List of Offences" that had been produced by the same senior analyst acting in the Lévy file, where the Superintendent's delegate was the Honourable Fred Kaufman, as well as exhibit R-2, which was a list of offences in the Roy file where the Superintendent's delegate was the Honourable Lawrence Poitras. It will hereinafter be referred to as the "roy schedule".
  43. Exhibit R-1 contains 519 offences covering 998 pages; i.e. impressive work. It will hereinafter be referred to as the "lévy schedule".
  44. With her written Objection, Ms. Béland filed the 11-page Schedule that she had already provided to the Trustees' counsel with her letter of letter, setting out the 38 offences. It was entitled "trustee responsibility by offence", but was not marked as an exhibit. It will hereinafter be referred to as the "marchand schedule". This is the document that Mr. Gervais had referred to as an "interesting work tool" in his letter.
  45. A review of the lévy and roy schedule, i.e., exhibits R-1 and R-2, as well as the marchand schedule, reveals that the latter includes essentially all the details on each alleged offence, just like the first two, except that the first two have two columns indicating in each case the name of the debtor and the file number. For each offence, the marchand schedule also identifies which trustee(e)) is/are involved, an element that did not apply in the Lévy and Roy files.
  46. However, the left-hand column of the marchand schedule, entitled "offence", in each case, provides an indication of the associated paragraph and page of the report.
  47. Therefore, the marchand schedule includes essentially the same information as the lévy and roy schedules, aside from the file numbers of the bankruptcies/proposals involved.
  48. The debate therefore essentially revolves around the intent of counsel for the senior analyst that the marchand schedule only be considered a "work tool", while the Trustees' counsel is requesting an exhaustive schedule enumerating the offences, which would also be used as an indictment in terms of its description of the allegations against one or other of the Trustees.
  49. As indicated in his letter sent to the senior analyst's counsel on , Mr. Gervais is basically seeking (the): [translation]

    "preparation of a detailed list of offences, exactly like the one prepared by Mr. Leduc in the Lévy file (with identification of files, legislative provisions in question, and reference to the page in the Leduc report).

  50. He was even more explicit in his letter to us, in which he wrote: [translation]

    "Therefore, for each individual trustee (Bruno Marchand/Georges E. Marchand), an exhaustive list of offences should be prepared, separated by estate, referring to the page in the report where it is mentioned, with reference to the legislative provisions or administrative directives breached."

  51. As for Ms. Béland, her intent as to the characterization of such a table was quoted in paragraph 39, above.
  52. It should be recalled that in the Lévy file, the levy schedule listed 519 offences covering 98 pages, and it took four-five days for the senior analyst to complete it.
  53. In this case, we only have 38 offences (in 11 pages), alleged against one or the other of two or three Trustees, and revising the marchand schedule to comply with Mr. Gervais' request appears to be a much less onerous task than in the Lévy case.
  54. We acknowledge that this request from the Trustees does not flow from either the ACT or the Bankruptcy and Insolvency Rules, but originates in what Superintendent's delegates required of the senior analysts in the Lévy and Roy cases.
  55. The concept of stare decisis is rarely applied to decisions of delegates in this area, and we do not consider ourselves to be bound by the decisions in Lévy and Roy.
  56. However, in seeking to be practical and fair towards the Trustees in view of the particular circumstances in this case, and given that minimal effort would be required of the senior analyst to prepare such a schedule, we are going to allow this request, but without any intention of creating a precedent in this area.
  57. In conclusion, we are therefore of the opinion that it is reasonable and appropriate (and as far as the Trustees are concerned, consistent with the wording "a consideration of fairness" and "équité" found in paragraph 14.02(2)c) of the ACT) that the marchand schedule be revised and used as an exhaustive list of the offences alleged against the Trustees in the same manner as an indictment would be in other fields, mutatis mutandis.
  58. Final Disposition:

    Each copy of this Decision on Certain Preliminary Motions by the Trustees signed by the delegate is also valid and authentic and may serve for all legal purposes.

  59. For all These Reasons:
    1. With regard to the issue of privilege claimed by the senior analyst as pertains to the 28 documents listed in paragraph 16, we order the senior analyst to provide to the Trustees certified copies of the three documents marked E-3, E-57 and S-17 within thirty (30) days of this ruling.
    2. The motion by trustee bruno marchand to separate his hearing from that of trustee georges e. marchand is rejected. We will hold a single hearing for the three Trustees, and will then make one ruling on the merits of the case.
    3. However, as Ms. Béland suggested, there will be separate days for the hearing on the offences alleged against bruno marchand and marchand syndics inc., separate hearing days for the offences alleged against georges e. marchand and marchand syndics inc. and separate hearing days for the offences alleged against bruno marchand, georges e. marchand and marchand syndics inc. These various hearing days should nevertheless be consecutive; and
    4. The trustees' motion regarding the marchand schedule is granted. we order the senior analyst to prepare and provide to counsel for the trustees, within thirty (30) days of this ruling, a revised version of the marchand schedule, which will serve as an indictment and will be an exhaustive list of the offences, separated by estate, with reference to legislative provisions or directives breached.

signed in montréal, quebec, .

the honourable benjamin j. greenberg, q.c.
superintendent's Delegate

mr. alain n. tardif
ms. mélanie béland
mccarthy tétrault, s.e.n.c.r.l., s.r.l.
Counsel for the senior analyst;

mr. jean-philippe gervais
gervais & gervais
Counsel for the Trustees

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

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