BETWEEN:
and
TODD y. SHERIFF AND SEGAL AND PARTNERS INC.
Heard at Toronto, Ontario, on February 28, 2007.
Judgment delivered at Ottawa, Ontario, on March 6, 2007.
REASONS FOR JUDGMENT BY: MALONE J.A.
CONCURRED IN BY: RICHARD C.J.
SHARLOW J.A.
Date: 20070306
Docket: A-29-06
Citation: 2007 FCA 90
CORAM: RICHARD C.J.
SHARLOW J.A.
MALONE J.A.
BETWEEN:
Attorney General of Canada
Appellant
and
TODD y. SHERIFF AND SEGAL AND PARTNERS INC.
Respondents
MALONE J.A.
I. Introduction
[1] This is an appeal from an order of a Judge of the Federal Court (the Applications Judge) dated December 20, 2005 and reported as 2005 FC 1726. The Applications Judge dismissed the appellant’s application for judicial review of a decision of a Delegate of the Superintendent of Bankruptcy (the Delegate) to stay disciplinary proceedings against the respondents pursuant to the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3 (Act).
[2] The Delegate stayed the proceedings because of the ongoing failure of a Senior Discipline Analyst (SDA) within the Office of the Superintendent of Bankruptcy (OSB) to make timely and proper disclosure of documentation relevant to the disciplinary hearings. The Applications Judge was not prepared to find that this decision was unreasonable, given her conclusion that the Delegate applied the correct legal test and identified and weighed the factors relevant to a stay application.
II. Factual Background
[3] The Superintendent of Bankruptcy (Superintendent) is appointed by the Governor in Council and is responsible for supervising the administration of all estates and matters to which the Act applies. The Act provides the Superintendent with powers related to the licensing and supervision of trustees in bankruptcy and allows the Superintendent to investigate complaints from the public concerning trustees. If deficiencies are found in their conduct, the Superintendent has the ability to impose disciplinary sanctions on a trustee (see sections 14.01 and 14.02 of the Act).
[4] Todd Sheriff is a licensed Trustee in Bankruptcy who is employed by Segal and Partners Inc. Segal Partners Inc. is a Corporate Trustee (the Trustees).
[5] A complaint was made against the Trustees and an investigation was undertaken under the Act, which resulted in a report dated June 29, 2001 (the Initial Report) prepared by the SDA. An audit was then conducted by the National Audit Group of the OSB that resulted in a report dated October 25, 2001 (the Supplementary Report), which identified further deficiencies in the Trustees’ practices.
First Proceeding
[6] A disciplinary proceeding followed the Initial Report (the First Proceeding) wherein the OSB on September 2, 2002 found the Trustees to be responsible for several deficiencies in their handling of certain estates under their administration; deficiencies arising from the conduct of Ms. Armshaw, one of their former employees who was alleged to have had a gambling addiction. Ms. Armshaw had been terminated by the Trustees on the basis of an allegation of misappropriation of funds in October 2000.
[7] This liability determination was confirmed on judicial review before the Federal Court (reported as 2005 FC 305) and by this Court on appeal (reported as [2007] 1 F.C. 3, 2006 FCA 139). The decision of this Court, issued on April 18, 2006, settled certain long standing and contentious issues as to the OSB’s duty of disclosure. It established that the procedural requirements for disciplinary proceedings under the Act give rise to a clear duty on the part of the OSB to afford trustees fulsome disclosure similar to the principles set out in R. v. Stinchcombe, [1991] 3 S.C.R. 326 in the criminal law context.
Second Proceeding
[8] While the First Proceeding is not in issue on this appeal, disclosure problems from that proceeding are alleged to still be relevant to a second proceeding arising out of the Supplementary Report (the Second Proceeding) and which gives rise to the current appeal. This Supplementary Report alleged administrative deficiencies on the part of the Trustees that, while minor on their own, were collectively considered to indicate both a lack of internal control and incompetence. The Delegate was appointed on November 7, 2002 to hear this Second Proceeding.
[9] Between November 2002 and November 2003, counsel for both parties communicated with respect to scheduling and working toward an agreed statement of facts for the Second Proceeding. During that period, the SDA did not advise the Trustees that there was any other possible disclosure of documents. A date in May 2004 was set for the hearing of the Second Proceeding.
[10] Meanwhile, in October of 2003, the SDA was cross-examined on an affidavit that she had sworn in response to the Trustees’ application for judicial review related to the First Proceeding. During this cross-examination, the Trustees ascertained for the first time that additional relevant information related to the Supplementary Report had not been disclosed by the SDA. The Trustees accordingly requested production of certain specified documents relating to the Supplementary Report by letters dated February 13 and March 3, 2004.
First Disclosure Request
[11] The letter dated February 13, 2004, was the first request made by the respondents for production of additional documentation. At this time, the hearing with respect to the Second Hearing was scheduled to commence during the week of May 3, 2004. The respondents requested the following:
(a) Internal documentation maintained by the OSB with respect to the administration of third party funds;
(b) Any notes preparing by Ms. Speers regarding Ms. Armshaw
(c) Any notes made by Ms. Speers regarding the special audit prepared by Mr. Choy referred to in the Supplementary Report; and
(d) Any notes made by Mr. Choy regarding the special audit referred to in the Supplementary Report, which have not been disclosed to date.
[12] By a letter dated March 3, 2004, counsel for the respondents repeated this request. In response, counsel for the OSB produced a number of documents on March 16, 2004, including notes prepared by Ms. Speers’ which make reference to Ms. Armshaw and a note made by Ms. Speers regarding Mr. Choy’s audit, together with Mr. Choy’s working papers. By letter dated April 2, 2004, counsel for the appellant asked counsel for the respondent to be more specific regarding his request for any internal documentation maintained by the OSB with respect to the administration of third party funds.
Second Disclosure Request
[13] The Trustees then made a second request for additional documents from the SDA by letter dated April 14, 2004. Specifically, the Trustees requested all of Ms. Speers’ notes made in the course of the investigation, regardless of privilege issues. It was suggested that the privileged materials could be placed before the Delegate for a determination of whether they should be produced. The trustees also requested all notes, e-mails, letters, memoranda or similar documents regarding Ms. Speers’ communications with Mr. Choy. Finally, they indicated that they could not be more specific regarding the document which dealt with the treatment of third party funds.
[14] In response to this letter, the OSB produced another package of documents, which included the SDA’s notes made during the course of her investigation as well as a list and description of privileged documents, which would require an eventual disclosure ruling by the Delegate.
[15] On April 26, 2004, the Trustees brought a motion to stay the Second Proceeding on the basis of a persistent pattern of conduct by the SDA in failing to disclose material documents in this and the First Proceeding. They claimed that this failure compromised their ability to make full answer and defence to the allegations against them. In response, the OSB maintained that all relevant documents had already been disclosed and that, even if this was not the case, the appropriate relief would be an order for further disclosure and an adjournment, rather than a stay of proceedings. The Delegate dismissed the Trustee’s motion for a stay by order dated June 10, 2004, but did agree to adjourn the Second Proceeding.
Additional Disclosure
[16] In November 2004, the SDA sent the Trustees copies of e-mails that the SDA had previously concluded were irrelevant, primarily to ensure that no further allegations of a lack of disclosure would put the hearing of the Second Proceeding at risk.
[17] After receipt of this disclosure, the Trustees again moved for a stay of the Second Proceeding. The Delegate stayed the Second Proceeding by order dated January 6, 2005 stating in part that:
This is the second time the Trustees have sought a stay of proceedings. The first request was made on June 3, 2004, when the moving parties sought a stay “on the basis of a persistent pattern of conduct by the Senior Discipline Analyst … of failing to disclose material documents in this and a related discipline proceeding.” The “related discipline proceeding” is a complaint made by the same Senior Discipline Analyst against the same parties, which was heard and decided by the Superintendent. In that case, the Superintendent found, inter alia, that “a breach of the duty to disclose to the trustees all relevant information available to the SDA” had occurred. But he also found that, despite this breach, he could not conclude, on a balance of probabilities, that his decision would have been different had the undisclosed evidence been communicated to the Trustees prior to the hearing of the case. The decision is currently the subject of the judicial review application which is referred to in paragraph 2(a) of the principal motion.
I dismissed the Trustees’ first application for a stay of proceedings on June 10, 2004, noting that the Senior Discipline Analyst, in an affidavit dated May 26, 2004, had declared that she had complied with all requests for disclosure, even though some of the documents transmitted to the Trustees “have a lack of relevance to the matters in issue.” Based on this information, I held that “I have no evidence before me at this point that any further undisclosed material exists (Emphasis added.) As a result, applying the decision of the Supreme Court of Canada in Dixon v. The Queen (1998), 122 C.C.C. (3d) 1, I dismissed the motion, noting that the appropriate remedy, at trial, for failure to disclose relevant material is “an order for production or an adjournment.”
I also noted that while the case before me involved the same parties as the case heard by the Superintendent, the motion had to “stand or fall on the particular evidence,” and whatever may have occurred in the other case was not germane to the issue.
That was in June 2004. Yet, despite the SDA’s assurance that full disclosure had been made, additional disclosure was sent to the trustees in November 2004, shortly before the date fixed for the commencement of the hearing on the merits. The Trustees submit that this new material “contains significant additional evidence with respect to the involvement of the SDA in the audit process.” This may or may not be so – I have not examined the issue in detail – but, as the Trustees further submit, it heightens their fear that even now disclosure may not be complete. This, they suggest, has so undermined the integrity of the proceeds as to warrant a stay.
…
As the Supreme Court said in R. v. Taillefer; R. v. Dugay, [2003] S.C.J. No. 75, a stay of proceedings should only be granted in the clearest of cases. Is this such a case? At best, it is borderline, but when I balance the interests of the Trustees and the interests of the state in having the alleged misconduct punished, I find the scale tips in favour of the Trustees. The violations with which they are charged are not of the most serious kind. They have a judgment of the Superintendent attesting that they had not received full disclosure in a related case. They were assured in the present case that disclosure was complete, only to receive further disclosure at a later date. The integrity of the process is put in question, and so is their right and ability to make full answer and defence. In my respectful view, their application should succeed.
…
I wish to make one further comment. Nothing that is said above in any way calls in question the integrity of the Senior Discipline Analyst or her counsel and other advisors. I have no doubt that she carried out her duties to the best of her knowledge and ability. But the law of disclosure is strict and must be applied to the fullest [Emphasis added].
[18] The Attorney General of Canada then brought an application for judicial review of the Delegate’s decision before the Applications Judge.
III. Decision Below
[19] The Applications Judge reviewed the Delegate’s decision to stay the proceedings on a standard of reasonableness and any legal findings on a standard of correctness. She held that the Delegate was correct in his identification of the extent of the SDA’s duty to disclose, and was satisfied that the Delegate’s finding that the SDA failed to make timely disclosure was one that was reasonable open to him. She was also satisfied that the Delegate applied the correct legal test for granting a stay of proceedings.
[20] However, the central question in the judicial review application was whether the Delegate erred in staying the disciplinary proceedings. The Applications Judge was not satisfied that the Delegate made a reviewable error. At paragraphs 89 and 90 she stated:
The Delegate candidly acknowledged that the decision to grant a stay of proceedings in this case was a close call, and indeed, I am satisfied that others could have reasonably come to a different conclusion as to whether a stay was warranted in the present situation. That is not enough, however, to justify setting aside the decision under review.
For the reasons given, I am also satisfied that the Delegate applied the correct legal test, that he properly identified the relevant factors, and that he attributed to each factor the weight that he felt appropriate in balancing the competing societal interests at play in this case. While others might have weighed these factors differently, I cannot find that the decision of the Delegate was unreasonable.
[21] Accordingly, the Applications Judge dismissed the judicial review application.
IV. Standard of Review
[22] In Minister of Citizenship and Immigration v. Tobiass, [1997] 3 S.C.R. 391 [Tobiass], the Supreme Court held that a stay of proceedings is a discretionary remedy. Accordingly, an appellate court may not lightly interfere with a judge's decision to grant or not to grant a stay arising from a judicial review application. Citing from Elsom v. Elsom, [1989] 1 S.C.R. 1366, the Court stated that an appellate court will be justified in intervening in a judge’s exercise of his discretion only if the judge misdirects himself or if his decision is so clearly wrong as to amount to an injustice.
[23] Most recently, in Elders Grain Co. v. Ralph Misener (The), 2005 FCA 139, [2005] 3 F.C. 367, Richard C.J. speaking for a unanimous panel of this Court, examined its role in reviewing a judge’s exercise of discretion and held at paragraph 13 that:
An appellate court is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the trial judge. However, if the decision was based on an error of law or if the appellate court reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations or that the trial judge considered irrelevant factors or failed to consider relevant factors, then an appellate court is entitled to exercise its own discretion.
[24] In my view, the Applications Judge correctly identified the standard of review to be applied in this case. However, for the following reasons, I must respectfully disagree with her conclusion that the Delegate applied the correct legal test.
V. Analysis
[25] Two observations must be made at the outset. The first is that, while the complaints that gave rise to both lengthy proceedings arose in June of 2001, the duty of the OSB relating to its documentary disclosure was unsettled until the decision of this Court on April 14, 2006 (supra at para. 7). The second observation is that there was no bad faith allegation found against the SDA by the Delegate. He stated he did not question her integrity and that she carried out her duties to the best of her knowledge and ability (supra at para. 17).
[26] Before this Panel, counsel agreed that the law surrounding a stay of proceeding is well settled. It is not disputed that it was open to the Delegate to consider granting a stay of proceeding, on either of the following basis: (1) where the fairness of the Second Proceeding has been compromised (see R. v. Dixon, [1998] 1 S.C.R. 244) or (2) where the continuation with the Second Proceeding would undermine the integrity of the justice system so as to constitute an abuse of process (see R. v. O’Connor, [1995] 4 S.C.R. 411 [O’Connor]; Tobiass supra at 23). Here the Delegate invoked both grounds as he found “the integrity of the process is put in question and so is their right and ability to make full answer and defence” (supra at para. 17).
(1) Fairness of the Second Proceeding – The First Branch
[27] The Supreme Court of Canada has directed that a stay of proceedings may be granted in criminal cases where the conduct of the prosecutor in making disclosure affects the fairness of the trial or impairs other procedural rights enumerated in the Charter. As stated by Cory J. in the leading case of Dixon:
The right to disclosure is but one component of the right to make full answer and defence. Although the right to disclosure may be violated, the right to make full answer and defence may not be impaired as a result of that violation. Indeed, different principles and standards apply in determining whether disclosure should be made before conviction and in determining the effect of a failure to disclose after conviction. For instance, where the undisclosed material is available for review at trial, the presiding judge will evaluate it in relation to the Stinchcombe threshold to determine whether the Crown breached its obligation to disclose by withholding the material. If it has, an order for production or perhaps an adjournment will be the appropriate remedy.
[28] To this general statement, however, there is attached an overarching consideration as observed by Lebel J. in R. v. Taiffer; R. v. Dugay, 2003 SCC 70, [2003] 3 S.C.R. 307 at paragraph 117:
This Court has frequently underlined the draconian nature of a stay of proceedings, which should [page362] be ordered only in exceptional circumstances. A stay of proceedings is appropriate only "in the clearest of cases", that is, "where the prejudice to the accused's right to make full answer and defence cannot be remedied or where irreparable prejudice would be caused to the integrity of the judicial system if the prosecution were continued" ... It is a "last resort" remedy, "to be taken when all other acceptable avenues of protecting the accused's right to full answer and defence are exhausted."
(2) Abuse of Process – The Second Branch
[29] There is also a second basis for granting a stay of proceedings in what is termed the ‘residual category.’ This was established by the Supreme Court of Canada in O’Connor and was again confirmed by that Court in Tobiass. It arises in unforeseen circumstances where a prosecution is conducted in such a manner that the degree of unfairness contravenes society’s notion of justice thereby undermining the integrity of the judicial process.
[30] Again, there is an overarching consideration raised by that Court in Tobiass at paragraph 91 that must be noted:
The mere fact that the state has treated an individual shabbily in the past is not enough to warrant a stay of proceedings. For a stay of proceedings to be appropriate in a case falling into the residual category, it must appear that the state misconduct is likely to continue in the future or that the carrying forward of the prosecution will offend society’s sense of injustice. … But such cases should be relatively rare.
Burden on Trustees
[31] Under either branch of this analysis the Trustees were required to establish, on a balance of probabilities, that:
(a) the prejudice caused by the abuse in question will be manifested, perpetuated or aggravated through the conduct of the hearing, or by its outcome; and
(b) no other remedy is reasonably capable of removing that prejudice (see Tobiass at para. 90; O’Connor at para. 75).
(a) The prejudice caused by the abuse in question will be manifested, perpetuated or aggravated through the conduct of the hearing, or by its outcome
[32] While the record is somewhat muddled, hearing dates scheduled for the last week of October 2004 and the last week of November 2004 were at best tentative and dependant on both the schedules of counsel and the Delegate. On that basis, it is hard to see how the disclosure on November 22, 2004 could create a degree of prejudice so as to give rise to the level of procedural unfairness necessary to trigger a stay.
[33] In reaching his decision that the SDA had offended both branches of the stay of proceedings test, the Delegate was persuaded by the Trustees to take into consideration the conduct of the SDA in the First Proceeding. This was a concession he was not prepared to make in his earlier decision of June 10, 2004 where he refused to grant a stay. Taking that step, the Delegate then was able to observe a pattern of conduct which the Trustees asserted led inexorably to the conclusion that full disclosure remained doubtful. With this evidence in mind, the Delegate observed:
Indeed, disclosure seems to keep coming, although I must bear in mind the SDA’s assertion that some of the most recent items disclosed may not, in fact, be relevant or required. Nevertheless the facts leave me uneasy (Appeal Book at p.340).
[34] It seems to me that the Delegate was unduly influenced by the conduct of the SDA in the First Proceeding. In my respectful view, mere unease with the conduct of the SDA (a person acknowledged to be acting in good faith) cannot be elevated to the level of unfairness contemplated by the Supreme Court of Canada in the aforementioned cases. As noted in Tobiass, shabby treatment in the past is really of little consequence in the balancing of the various interests.
[35] Furthermore, while the Delegate acknowledged that a stay of proceedings should only be granted in the clearest of cases, his balancing of the Trustees and the OSB’s interests led him to acknowledge that this is a borderline case. Given the direction from the Supreme Court of Canada that such relief is only to be granted in the clearest of cases, in my respectful analysis, the Delegate fell into legal error by his incorrect application of the legal standard for granting a stay of proceeding in such an unclear case. In turn, the Applications Judge also compounded this legal error in allowing the Delegate’s order to stand based on what she acknowledged was a ‘close call’ but which is contrary to the Supreme Court of Canada’s teachings (see reasons at para. 89).
(b) No other remedy is reasonably capable of removing that prejudice
[36] I turn then to other possible remedies available to the Delegate. It was open to the Delegate to demand from the SDA or some other official in the OSB an affidavit to establish that they had conducted a diligent search of the Superintendent’s files with a view to identifying documents (other than those over which privilege is claimed) that should have been disclosed in accordance with the Stinchcombe standard and that the current production is complete based on that standard. Since bad faith is not alleged and the SDA’s integrity is acknowledged, such an affidavit together with an order of production should remedy any feeling of uneasiness that the ultimate disclosure is suspect.
Relevance of the Late Disclosures
[37] There was some debate at the hearing of this appeal as to the relevance of the documents disclosed in November of 2004. Since I have determined that this is not an exceptional case that would warrant a stay of proceeding, there is no need for me to address that issue.
VI. Conclusion
[38] I would allow the appeal and set aside the order of the Applications Judge dated December 20, 2005. I would vacate the order of the Delegate dated January 6, 2005 granting a stay of proceedings and would remit the matter to the Delegate with a direction that the Second Proceeding continue. The appellant should be entitled to costs on appeal and in the Federal Court.
"I agree
JR"
"I agree
KS"
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-29-06
STYLE OF CAUSE: The Attorney General of Canada
v.
Todd Y. Sheriff et al.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: February 28, 2006
REASONS FOR JUDGMENT BY: Malone J.A.
CONCURRED IN BY: Richard C.J.
Sharlow J.A.
DATED: March 6, 2007
APPEARANCES:
|
|
FOR THE APPELLANT
|
|
FOR THE RESPONDENTS |
SOLICITORS OF RECORD:
|
Deputy Attorney General of Canada
|
FOR THE APPELLANT |
|
Birenbaum, Steinberg, Landau, Savin & Colraine Barristers and Solicitors Toronto, Ontario |
FOR THE RESPONDENTS |