James Gordon Touchie — August 5, 2004
Province of New Brunswick
Judicial District of Moncton
In the Matter of Professional Disciplinary Proceedings under the Bankruptcy and Insolvency Act (the "Act")
Ms. Ann Speers,
Senior Analyst in the Toronto District Office of the Office of the
Superintendent of Bankruptcy (hereinafter "the Senior Analyst")
James Gordon Touchie
(hereinafter "the Trustee") and
J.G. Touchie & Associates Ltd.
(hereinafter "the Corporate Trustee")
(hereinafter together referred to as "the Trustees")
The Honourable Benjamin J. Greenberg, Q.C.
Delegate of the Superintendent of Bankruptcy
(hereinafter sometimes referred to as "the Delegate")
Montreal, August 5, 2004
Decision on the Sanctions
- Whereas in this case the Trustees were reproached with:
- Issues in regard to the administration by the Corporate Trustee of the related bankruptcies of Perfection Dairy Foods Limited. (hereinafter "Perfection") and McKay's Dairy Ltd. (hereinafter "Mckay's"). The Perfection and Mckay's Bankruptcies are herein collectively referred to as "the Dairy Estates");
- Complaints related to the CBA's operated by the Corporate Trustee and particularly the issue of bank reconciliations and failing to efficiently and expeditiously deal with NSF cheques, stale-dated cheques and the posting and allocation of interest earned to individual estates; and
- Complaints alleging that the Trustees failed to cooperate with the representatives of the Superintendent, namely the Auditor and the Senior Analyst, during the course of, respectively, the Audits and the Investigation; and
- Whereas the Hearing on the Merits on the matter of the complaints regarding the professional conduct of the Trustees was held in Moncton, New Brunswick on September 16, 17, 18, 19 and 22, 2003; and
- Whereas in his Decision on the Merits dated January 30, 2004, the undersigned found that several of the complaints which had been brought against the Trustees were established and maintained; and
- Whereas each of the terms defined in the said Decision on the Merits shall be taken to have the same meaning in the present Decision on the Sanctions; and
- Whereas, of the complaints maintained, there was included the second most serious one, that of having failed to co-operate with the representatives of the Superintendent; and
- Whereas, however, other than that latter complaint which involved wilful misconduct, the evidence at the Merits Hearing failed to establish any morally culpable conduct on the part of the Trustees, but rather administrative failings, to which the Trustees candidly admitted during the Merits Hearing; and
- Whereas the Parties, their counsel and the Delegate met again in Moncton, New Brunswick on May 18, 2004 in order to permit counsel to lead evidence and make their representations on the appropriate sanctions to be imposed; and
- Whereas of those not maintained, one complaint was withdrawn at the opening of the Merits Hearing and two were not proven and were consequently dismissed; and
- Whereas the complaint withdrawn was that of having improperly netted bank service charges against the interest earned on the CBA's, because several years ago the Halifax District office of the Superintendent had explicitly authorized that practice by a letter addressed to the Corporate Trustee; and
- Whereas the evidence at the Sanctions Hearing revealed that although the Senior Analyst decided to withdraw that complaint approximately one month before the Merits Hearing, neither the Trustees nor their counsel were advised of that decision until the start of the Merits Hearing; and
- Whereas it behoved the Senior Analyst to inform or have her counsel inform the Trustees or their counsel of that decision as soon as it was made and thereby dispense the Trustees from having to needlessly prepare to meet that complaint at the Merits Hearing; and
- Whereas the two complaints not proven and dismissed were, firstly the most serious complaint involving moral culpability reproached to the Trustees, that of having taken large unauthorized draws of fees from the Dairy Estates, and secondly, that of not maintaining on an ongoing basis a monthly list of all individual estates; and
- Whereas, even though pursuant to the Decision on the Merits, the latter three complaints were off the table, and in spite of the undersigned having put that issue squarely to her and her counsel at the Sanctions Hearing, the Senior Analyst persisted in not moderating her recommended sanctions as per her letter to the Trustees of November 8, 2001 (see at TAB 4 of the Senior Analyst's pre-Sanctions Hearing Submission dated April 7, 2004), which obviously had been predicated on the supposition that all the complaints reproached to the Trustees would be proven and maintained; and
- Whereas those originally recommended sanctions, maintained by the Senior Analyst until after the Sanction Hearing, were to the effect that the licence of the Trustee be suspended for twelve months, that the licence of the Corporate Trustee be restricted for a period of six months from accepting and filing appointments under the ACT, and that for a twelve month period, an independent accountant acceptable to the OSB be put in place to supervise certain aspects of the Corporate Trustee's functioning and report quarterly to the Halifax District office of the Superintendent; and
- Whereas it was only by her unsolicited letter of June 18, 2004, one month after the Sanctions Hearing that the Senior Analyst unilaterally modified her recommendations by adding the requirement that the Trustee close and tax the Dairy Estates within 120 days of the date of the present Decision, and by deleting the requirement that an acceptable independent accountant supervise the functioning of the Corporate Trustee, and moreover as follows:
- "With respect to J.G. Touchie & Associates two months full restriction on accepting new files, with a further two months restriction accepting new files but limited to the Moncton judicial district;
- With respect to James Gordon Touchie, a four month suspension, and a requirement that the Dairy Estates be closed and taxed within 120 days of Your Lordship's decision."
- Whereas in their pre-Sanctions Hearing Brief, counsel for the Trustees recommended that, since our finding in the Decision on the Merits with respect to the Trustee related to administrative failings rather than moral failings, that any restriction imposed by us on him should be "measured in days or at most two weeks and that a suspension of any sort would be wholly inappropriate"; and
- Whereas at paragraphs 20, 21 and 22 of our Decision on the Merits, we declared:
"20. We wish firstly to comment upon the fact that the Report is replete with references in regard to the Trustees such as "shortages", "shortfalls", and "missing funds". Those references could not but give the impression to a reasonable and informed reader that the Senior Analyst believed that some element of dishonesty existed, involving misappropriation or defalcation of funds, or worse. More appropriate language would have been "variances", the term used by Mr. Sherrard, or "differences", the term used by the Auditor.
21. Yet, at the opening of the Hearing in Moncton, on September 16, 2003, in his preliminary comments, Mr. Tim Hill, counsel for the Senior Analyst, declared:
"… (the) report deals with, amongst other things, trust accounts and money and words are used from time to time, missing or shortage. I want to make it absolutely clear on behalf of the Department that there is no indication of, and no suggestion that, there has been any defalcation or anything other than or that Mr. Touchie is in any way, or any of his staff, in any way done anything dishonest. It's simply not suggested and I want to make that clear now."
22. The Trustees, their firm and its associated trustees laboured under a cloud of suspicion of dishonesty from November 6, 2001, the date of the Report, until September 16, 2003. That surely caused the Trustee considerable anxiety, stress and sleepless nights. That cloud of suspicion could and should have been lifted much earlier and it was unfair not to do so. When the time comes to determine the Sanction(s) to be imposed on the Trustees, we will be mindful of that unfairness."
- Whereas the time has now come for us to be so mindful; and
- Whereas the Senior Analyst emphasized the fact that the sanctions must be representative of the seriousness of the wrongdoing and underline the concept of exemplarity and deterrence; and
- Whereas the Trustees pleaded that the undersigned should consider the following attenuating circumstances which have been established in evidence:
- during his entire career spanning 34 years, the Trustee has otherwise demonstrated good conduct and has an unblemished disciplinary record, both before and after the events of the present case;
- he is consequently to be considered and treated as a first-time offender;
- the Trustees did not personally benefit or gain in any way as a result of the issues in this case and in fact the Trustee was obliged to deposit approximately $19,700 of his personal funds into the CBA's in order to make up the "differences" ("variances") between the corrected bank reconciliations and the actual balances in those CBA's, which sum it appears will never be repaid to him;
- the complaints for which the Trustees are to be sanctioned herein did not result in any loss or negative consequences to the creditors of the various bankruptcies concerned; and
- Whereas one of counsel for the Trustees, Mr. David T. Hashey, Q.C., pleaded for compassion for the Trustee, taking into account the serious detrimental consequences to his health already occasioned by these disciplinary proceedings; and
- Whereas, in order to preserve the privacy of the Trustee's personal life, we will refrain from describing those health problems here as they are known to the Parties and their counsel; and
- Whereas that submission has struck a responsive chord in our thinking; and
- Whereas in special cases where the facts and circumstances permit, such as this one, it would not be inappropriate, in consideration of such a submission, to temper justice with mercy as one element to be factored into a decision by a delegate of the Superintendent; and
- Whereas, however, a disciplinary sanction must not be tailored to reflect only the specific needs and situation of each trustee, but should also take into account the integrity of the bankruptcy and insolvency system; and
- Whereas in professional conduct matters, the purpose of the sanction is not primarily to punish the professional, but also to have the effects of exemplarity and deterrence, so as to also protect the public and the integrity of the profession of bankruptcy trustee; and
- Whereas, on the other hand, the principle of exemplarity and deterrence must not be over emphasized to the point where it becomes oppressive to the offender; and
- Whereas, although the principal office of the Corporate Trustee is in Moncton, New Brunswick, in order to better serve the francophone population of Northern New Brunswick and Prince Edward Island, it also operates seven satellite offices located in Bathurst, Edmunston, Caraquet, Miramichi and Grand Falls, New Brunswick and Charlottetown and Summerside, Prince Edward Island; and
- Whereas during any period of a restriction placed on the licence of the Corporate Trustee, that population would be deprived of the services of Mr. Ronald Arsenault, a very competent and experienced bankruptcy trustee in the employ of the Corporate Trustee, who regularly travels to serve those seven satellite offices; and
- Whereas in regard to trustees in bankruptcy generally, some of the complaints established herein constitute serious infractions which strike at and undermine the core of a trustee's responsibilities, directly impact the integrity of the bankruptcy and insolvency system and negatively affect the general public's perception of and confidence in that system; and
- Whereas we have evaluated and weighed all the above-described facts and considerations; and
- Whereas we have also examined the jurisprudence submitted by counsel for both Parties, including some of our Decisions in other bankruptcy trustee disciplinary cases, and we have taken them all into consideration in the determination and fixing of the Sanctions in the present case.
Each duplicate original of this Decision on the Sanctions, signed by the Delegate, is equally valid and authentic and may serve as such for all legal purposes.
I, the Delegate of the Superintendent of Bankruptcy pursuant to the statutory powers delegated to me under Subsection 14.01(2) of the Act, having weighed and considered all of the foregoing and all of the facts and circumstances in this case, Do Hereby Order as Follows:
- That the Licence of Mr. James Gordon Touchie, Trustee in Bankruptcy, be and it is Hereby Suspended for a period of six weeks, from September 1, to October 15, 2004, during which time he will not be permitted to be appointed and/or act in matters under the Act;
- That the Trustee, Mr. James Gordon Touchie, be and he is Hereby Required to CLose and Tax the Dairy Estates within 120 days of the date of the present Decision on the Sanctions;
- That the Licence of J.G. Touchie & Associates Ltd., the Corporate Trustee, be and it is Hereby Restricted, for a period of One Month, from August 15 to September 15, 2004, to the Administration of Estates to which the Corporate Trustee has been appointed prior to August 15, 2004;
- That for a further period of One Month from September 15 to October 15, 2004, that the Licence of J.G. Touchie & Associates Ltd.. be and it is Hereby Restricted to the Administration of Estates to which the Corporate Trustee has been appointed prior to August 15, 2004. However, the present restriction shall be limited to the Judicial District of Moncton.
- The various provisions of this Order will come into effect on each of the dates stipulated above.
The Honourable Benjamin J. Greenberg, Q.C.
Delegate of the Superintendent
Mr. Tim Hill
Counsel for the Senior Analyst;
Messrs. George L. Cooper and David T. Hashey, Q.C.
Counsel for the Trustees.
This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.