Judgments

[1997] 2 F.C. 719

T-1918-95

Groupe G. Tremblay Syndics Inc. and Louis Drolet, Trustee (Applicants)

v.

Superintendent of Bankruptcy, Georges R. Redling and Deputy Superintendent, Policy, Programs and Standards, Marc Mayrand (Respondents)

and

Attorney General of Canada and François A. Gouin, Trustee (Mis-en-cause)

T-1952-95

Gilles M. Tremblay, Trustee (Applicant)

v.

Superintendent of Bankruptcy, Georges R. Redling and Deputy Superintendent, Policy, Programs and Standards, Marc Mayrand and Pierre Lecavalier in his capacity as Deputy Administrator of the Office of the Superintendent of Bankruptcy and Attorney General of Canada (Respondents)

Indexed as: Groupe G. Tremblay Syndics Inc. v. Canada (Superintendent of Bankruptcy) (T.D.)

Trial Division, Tremblay-Lamer J.—Montréal, January 20; Ottawa, March 12, 1997.

Federal Court jurisdiction — Trial Division — Judicial review of Deputy Superintendent of Bankruptcy’s decision to seize records administered by applicants, entrust them to guardian until completion of investigation, disciplinary hearing — “Decision” within Federal Court Act, s. 18.1 — Having final effect on applicants’ rights as seized records not likely to be returned until end of disciplinary process — Administration of seized records probably complete by end of that process.

Administrative law — Judicial review — Deputy Superintendent of Bankruptcy seizing records administered by applicants, entrusting them to guardian until completion of investigation, disciplinary hearing — Not exercising discretion for improper purposes, in bad faith, or in arbitrary, unfair, unreasonable manner — Bankruptcy and Insolvency Act, s. 14.03 authorizing conservatory measures to protect public interest — Duty to act quickly to protect estates — Applicants not taking any of numerous opportunities to provide explanations of misconduct — Federal Court Act, s. 18.1(4) authorizing review of findings of fact not supported by evidence or that assessment of evidence as whole show to be unreasonable — In light of evidence of serious misconduct in administration, decision to take conservatory measures reasonable.

Bankruptcy — Judicial review of Deputy Superintendent of Bankruptcy’s decision under Bankruptcy and Insolvency Act, s. 14.03 to seize records administered by applicants, entrust them to guardian until completion of investigation, disciplinary hearing — Auditor’s report disclosing serious misconduct — RCMP also investigating applicants’ conduct — Given seriousness of alleged irregularities, seizure intended to preserve estate records — Once relationship of trust disintegrated, Deputy Superintendent compelled to seize all records given fiduciary relationship between trustees, clients — Power to “preserve” estates in s. 14.03 not used to “recover” estate records — Conservatory measures taken to prevent further misconduct.

Constitutional law — Charter of Rights — Life, liberty and security — Judicial review of Deputy Superintendent of Bankruptcy’s decision pursuant to Bankruptcy and Insolvency Act, s. 14.03, to seize records administered by applicants, entrust them to guardian until completion of investigation, disciplinary hearing — Right to liberty including right to practice profession — Not at issue herein as conservatory measures not affecting existence, validity of trustee licence — S. 14.03 not affecting right to practice profession — Doctrine of vagueness inapplicable as circumstances, purpose of conservatory measures specified, sufficient guidance for legal debate provided.

Constitutional law — Charter of Rights — Criminal process —Judicial review of Deputy Superintendent of Bankruptcy’s decision, pursuant to Bankruptcy and Insolvency Act, s. 14.03, to take possession of records administered by applicants, entrust them to guardian until completion of investigation, disciplinary hearing — Taking of possession constituting seizure — As applicant not consenting freely, voluntarily to seizure, not waiving s. 8 guarantee — Purpose of ss. 14.01, 14.02, 14.03 supervision of trustees’ administrative conduct — Documents administered by trustees public — Expectation of privacy lower than that associated with private, personal documents — Not requiring strict application of criteria established by S.C.C. in Hunter et al. v. Southam Inc. for determining whether seizure reasonable — Necessary to balance reasonable expectation of privacy, seriousness of intrusion — Since search of private premises, not part of regulatory inspection, degree of intrusion greater — Must be reasonable grounds to believe conservatory measures involving search, seizure will make it possible to “preserve” records of estates — To extent authorizing conservatory measures in nature of seizure where no reasonable grounds to believe measures enabling preservation of records, s. 14.03(1)(b) infringing Charter, s. 8 — Reasonable grounds herein to believe conservatory measures enabling preservation of records of estates.

Construction of statutes — Bankruptcy and Insolvency Act, s. 14.03(1)(b) found to have infringed Charter, s. 8 to extent authorizing conservatory measures in nature of seizure where no reasonable grounds to believe measures enabling preservation of records — S. 14.03(1)(b) “read down” so that conservatory measures in nature of “seizure” not authorized unless Superintendent of Bankruptcy or delegate having reasonable grounds to believe measures enabling preservation of records of estates.

This was an application for judicial review of the Deputy Superintendent of Bankruptcy’s decision to seize records administered by the applicants and entrust them to a guardian until the completion of the investigation and disciplinary hearing into the applicants’ conduct and administration. Louis Drolet was a trustee in bankruptcy against whom the Office of the Superintendent of Bankruptcy in Québec had received numerous complaints of professional misconduct. While an investigation and disciplinary proceedings were pending, Drolet proposed the creation of a new corporate trustee, Groupe G. Tremblay Syndics Inc., with Mr. Tremblay. He agreed that his licence would be suspended for one year. The proposal was accepted, but was not yet approved by the Superintendent when records were transferred to Groupe G. Tremblay. A subsequent audit revealed deficiencies in the manner in which some of the records had been handled, but these were not disclosed to Mr. Daviault, the Superintendent’s delegate to decide the fate of Drolet’s trustee licence, who subsequently ratified the 1994 agreement. On April 6, 1995 a disciplinary committee was formed to investigate Groupe G. Tremblay’s administration and activities. As well, the RCMP began investigating the administration and activities of Mr. Drolet, Mr. Tremblay and Groupe G. Tremblay. On August 31 search warrants issued authorizing the seizure of 18 of Groupe G. Tremblay’s records. The same day the applicants received a letter informing them of the Deputy Superintendent’s decision to issue a direction to protect all the estates administered by Groupe G. Tremblay until the completion of the investigation and to entrust the estate records to a guardian. The direction was issued under paragraphs 14.03(1)(b) and (2)(b) which provide that where there is an investigation pursuant to paragraph 5(3)(e), the Superintendent may direct any person to take the necessary steps to preserve the records of estates.

The issues were: (1) whether the Deputy Superintendent’s decision was a decision within Federal Court Act, section 18.1; (2) whether he had gone beyond the inherent limitations of the discretion conferred on him by section 14.03; (3) whether he had exercised that discretion for improper purposes, in bad faith or in an arbitrary, unfair or unreasonable manner; (4) whether he was required to comply with the rules of natural justice; (5) whether the seizure infringed the applicants’ Charter, section 7 rights by depriving them of their liberty in a manner not in accordance with the principles of fundamental justice; (6) whether section 14.03 was contrary to Charter, section 7 because it was too vague; (7) whether the taking of possession was a seizure within Charter, section 8; (8) whether section 14.03 contravened the Charter, section 8 right to be secure against unreasonable search and seizure and, if so, whether this infringement was saved by section 1; and (9) what was the appropriate remedy.

Held, the applications should be allowed in part. Bankruptcy and Insolvency Act, paragraph 14.03(1)(b) is declared of no force or effect to the extent that it authorizes the taking of conservatory measures in the nature of a “seizure” where there are no reasonable grounds to believe that the measures will make it possible to “preserve” the records of estates. They were, in the instant case, reasonable grounds for the conservatory measures taken.

(1) The Deputy Superintendent’s decision was a decision within the meaning of Federal Court Act, section 18.1. It had a final effect on the applicants’ rights, because the seized records were administered by a representative of the Superintendent and could not, in all likelihood, be returned to them until the end of the disciplinary process. Moreover in most instances the administration of the seized records would probably be complete by the time the disciplinary process ended.

(2) The Deputy Superintendent did not exceed his jurisdiction in exercising his discretion. Given the seriousness of the alleged irregularities, the seizure was intended to ensure that debtors and creditors did not suffer any harm pending completion of the investigation. The sole purpose of the conservatory measures was to preserve estate records. Because of their fiduciary role, trustees must be as transparent as possible in administering the records entrusted to them. They manage the property of others for the benefit of all creditors. Once the relationship of trust had disintegrated, the Deputy Superintendent had no choice but to take possession of all the records. It was impossible to select certain records that the applicants could have continued to handle without jeopardizing the administration of property belonging to others. Such a decision was not unreasonable.

The power to “preserve” estates set out in section 14.03 was not used to “recover” estate records. The alleged actions endangered estates under the administration and control of the trustees, and conservatory measures were taken to prevent the occurrence of further misconduct.

The conservatory measures direction did not rescind Mr. Daviault’s decision. While Mr. Daviault’s decision concerned Mr. Drolet’s conduct the seizure was necessitated by the misconduct of Mr. Tremblay and the corporate trustee that he headed. The events on which the two decisions were based occurred at two different times.

(3) The applicants will have an opportunity for a hearing as part of the disciplinary proceedings and they can raise all their defences during that hearing. In the meantime it was the Superintendent’s duty to act quickly to protect estates. The applicants were given numerous opportunities to provide explanations of the misconduct alleged against them, but neglected to do so. They had only their own carelessness to blame.

(4) Federal Court Act, subsection 18.1(4) authorizes the Court to review findings of fact that are not supported by the evidence or that an assessment of the evidence as a whole shows to be unreasonable. The evidence showed that the Deputy Superintendent had evidence of serious misconduct in their administration. In light of this evidence and the seriousness of the misconduct noted in various reports, the Deputy Superintendent’s decision to take conservatory measures to protect the estates administered by the applicants was reasonable.

(5) Charter, section 7 guarantees the right not to be deprived of life, liberty or security of the person except in accordance with the principles of fundamental justice. Only the right to liberty could have been at issue herein. While the right to liberty includes the right to practice a profession, the issue did not arise herein because the conservatory measures ordered by the Superintendent did not affect the existence or validity of the applicants’ trustee licence.

(6) The doctrine of vagueness is applicable under Charter, section 7 only if the sanction provided for in the provision may deprive someone of life, liberty or security of the person. The measures provided for in section 14.03 do not affect the right to practice a profession. In any event, paragraph 5(3)(e) and section 14.03 provide “sufficient guidance for legal debate”. Although the Superintendent has the discretion to decide what conservatory measures are needed in each situation, the circumstances in which such measures may be taken and the goal to be achieved, namely preserving the records of estates, are specified. The doctrine of vagueness was inapplicable.

(7) Charter, section 8 provides that everyone has the right to be secure against unreasonable search or seizure. The essence of a seizure under section 8 is the taking of a thing from a person by a public authority without that person’s consent. The taking of possession on September 1, 1995 was a “seizure” within the meaning given to that term in section 8. For a true waiver, the person purporting to consent must be possessed of the requisite informational foundation. The applicant Tremblay felt that he had no choice; he simply submitted to the requirements of the representatives of the Office of the Superintendent who appeared at his place of business accompanied by bailiffs. Moreover, they had been preceded that day by RCMP officers, who had search warrants issued by a justice of the peace. As Mr. Tremblay saw it, the search conducted by the representatives of the Office of the Superintendent came within the scope of the police operation of the same morning. He did not consent freely and voluntarily to the seizure thereby waiving the guarantee conferred on the applicants by section 8.

(8) The purpose of the set of provisions including sections 14.01, 14.02 and 14.03 is the supervision of trustees’ administration and conduct. Parliament’s primary aim was to protect third parties, whether debtors or creditors. Such rules were necessary because trustees act as fiduciaries and as such are responsible for administering property owned by others. The documents administered by trustees are, according to law, public documents. The expectation of privacy associated with documents produced in the course of operating a regulated business, is lower than the expectation of privacy associated with documents that are strictly personal and private. The balance to be struck between society’s interests and the applicants’ expectation of privacy, which in the circumstances was low, did not require a strict application of the criteria established by the Supreme Court of Canada in Hunter et al. v. Southam Inc. to determine whether a search and seizure was reasonable. It is necessary to strike a balance between the reasonable expectation of privacy and the seriousness of the intrusion resulting from the search or seizure. The reasonable grounds requirement will not be applicable when the case involves checks and inspections that a person in a regulated activity must expect or when it would be unjustified given the low degree of intrusion. Since this case involved a search of private premises that was not conducted as part of a regulatory inspection, the degree of intrusion was greater than it would be in a case involving a request for the production of documents. When conservatory measures involve a search or seizure within the meaning of Charter section 8, those measures cannot be taken unless there are reasonable grounds to believe that they will make it possible to “preserve” the records of estates. In so far as it authorizes conservatory measures in the nature of a “seizure” where there are no reasonable grounds to believe that the measures will make it possible to “preserve” the records of an estate, paragraph 14.03(1)(b) infringes the guarantee set out in Charter, section 8. That infringement was not saved by section 1, no evidence having been adduced in this regard.

(9) The appropriate remedy was to “read down” paragraph 14.03(1)(b) so that the conservatory measures in the nature of a “seizure” are not authorized unless the Superintendent or his delegate has reasonable grounds to believe that they will make it possible to “preserve” the records of estates. Reading down satisfied Parliament’s legitimate concerns for effective law enforcement without offending the reasonable seizure requirement under Charter, section 8. Judicial review was available after the fact to verify the existence of reasonable grounds and that provides an adequate guarantee against an abuse of the statutory power. In the case at bar, the Deputy Superintendent had reasonable grounds to believe that the conservatory measures would make it possible to “preserve” the records of estates. There was evidence of very serious misconduct which called for effective and prompt action to protect the estates of third parties.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (as am. by S.C. 1992, c. 27, s. 2), ss. 5(3)(a) (as am. idem, s. 5), (c),(e), 10 (as am. idem, s. 7), 14.01 (as enacted idem, s. 9), 14.02 (as enacted idem), 14.03 (as enacted idem).

Canadian Bill of Rights, R.S.C., 1985, Appendix III.

Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], ss. 1, 7, 8, 12.

Federal Court Act, R.S.C., 1985, c. F-7, s. 18 (as am. by S.C. 1990, c. 8, s. 4).

Tobacco Tax Act, R.S.O. 1980, c. 502, s. 15.

CASES JUDICIALLY CONSIDERED

APPLIED:

Slaight Communications Inc. v. Davidson, [1989] 1 S.C.R. 1038; (1989), 59 D.L.R. (4th) 416; 26 C.C.E.L. 85; 89 CLLC 14,031; 40 C.R.R. 100; 93 N.R. 183; Homex Realty and Development Co. Ltd. v. Corporation of the Village of Wyoming, [1980] 2 S.C.R. 1011; (1980), 116 D.L.R. (3d) 1; 13 M.P.L.R. 234; 33 N.R. 475; Bunn v. Law Society of Manitoba (1990), 63 Man.R. (2d) 210 (Q.B.); Maple Lodge Farms Ltd. v. Government of Canada, [1982] 2 S.C.R. 2; (1982), 137 D.L.R. (3d) 558; 44 N.R. 354; Re B.C. Motor Vehicle Act, [1985] 2 S.C.R. 486; (1985), 24 D.L.R. (4th) 536; [1986] 1 W.W.R. 481; 69 B.C.L.R. 145; 23 C.C.C. (3d) 289; 48 C.R. (3d) 289; 18 C.R.R. 30; 36 M.V.R. 240; 63 N.R. 266; R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606; (1992), 114 N.S.R. (2d) 91; 93 D.L.R. (4th) 36; 313 A.P.R. 91; 74 C.C.C. (3d) 289; 43 C.P.R. (3d) 1; 15 C.R. (4th) 1; 10 C.R.R. (2d) 34; 139 N.R. 241; Ontario v. Canadian Pacific Ltd., [1995] 2 S.C.R. 1031; (1995), 125 D.L.R. (4th) 385; 99 C.C.C. (3d) 97; 17 C.E.L.R. (N.S.) 129; 41 C.R. (4th) 147; 30 C.R.R. (2d) 252; 183 N.R. 325; 82 O.A.C. 243; R. v. Borden, [1994] 3 S.C.R. 145; (1994), 92 C.C.C. (3d) 404; 33 C.R. (4th) 147; 24 C.R.R. (2d) 51; 171 N.R. 1; R. v. Nielsen, [1988] 6 W.W.R. 1; (1988), 66 Sask. R. 293; 43 C.C.C. (3d) 548; 39 C.R.R. 147 (C.A.); R. v. Fitzpatrick, [1995] 4 S.C.R. 154; (1995), 129 D.L.R. (4th) 129; 65 B.C.A.C. 1; 102 C.C.C. (3d) 144; 18 C.E.L.R. (N.S.) 237; 43 C.R. (4th) 343; 32 C.R.R. (2d) 234; 188 N.R. 248; 106 W.A.C. 1; Schachter v. Canada, [1992] 2 S.C.R. 679; (1992), 93 D.L.R. (4th) 1; 92 CLLC 14,036; 10 C.R.R. (2d) 1; 139 N.R. 1; R. v. Dyment, [1988] 2 S.C.R. 417; (1988), 73 Nfld. & P.E.I.R. 13; 55 D.L.R. (4th) 503; 229 A.P.R. 13; 45 C.C.C. (3d) 244; 66 C.R. (3d) 348; 38 C.R.R. 301; 10 M.V.R. (2d) 1; 89 N.R. 249; Johnson v. Ontario (Minister of Revenue) (1990), 75 O.R. (2d) 558; 73 D.L.R. (4th) 661; 1 C.R.R. (2d) 293; 25 M.V.R. (2d) 78; 41 O.A.C. 129; 3 T.C.T. 5289 (C.A.).

DISTINGUISHED:

Szczecka v. Canada (Minister of Employment and Immigration) (1993), 116 D.L.R. (4th) 333; 25 Imm. L.R. (2d) 70; 170 N.R. 58 (F.C.A.).

CONSIDERED:

R. v. Morgentaler, [1988] 1 S.C.R. 30; (1988), 44 D.L.R. (4th) 385; 37 C.C.C. (3d) 449; 62 C.R. (3d) 1; 31 C.R.R. 1; 82 N.R. 1; 26 O.A.C. 1; Reference re ss. 193 and 195.1(1)(c) of the Criminal Code (Man.), [1990] 1 S.C.R. 1123; [1990] 4 W.W.R. 481; (1990), 68 Man.R. (2d) 1; 56 C.C.C. (3d) 65; 77 C.R. (3d) 1; 48 C.R.R. 1; 109 N.R. 81; Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145; (1984), 55 A.R. 291; 11 D.L.R. (4th) 641; [1984] 6 W.W.R. 577; 33 Alta. L.R. (2d) 193; 27 B.L.R. 297; 14 C.C.C. (3d) 97; 2 C.P.R. (3d) 1; 41 C.R. (3d) 97; 9 C.R.R. 355; 84 DTC 6467; 55 N.R. 241; Korponay v. Attorney General of Canada, [1982] 1 S.C.R. 41; (1982), 132 D.L.R. (3d) 354; 65 C.C.C. (2d) 65; 26 C.R. (3d) 343; 44 N.R. 103; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; (1990), 65 D.L.R. (4th) 161; 54 C.C.C. (3d) 417; 29 C.P.R. (3d) 97; 76 C.R. (3d) 129; 47 C.R.R. 1; 106 N.R. 161; 39 O.A.C. 161.

REFERRED TO:

Syndicat des employés de production du Québec et de l’Acadie v. Canada (Canadian Human Rights Commission), [1989] 2 S.C.R. 879; (1989), 62 D.L.R. (4th) 385; 11 C.H.R.R. D/1; 89 CLLC 17,022; 100 N.R. 241; Wilson v. British Columbia (Medical Services Commission) (1988), 53 D.L.R. (4th) 171; [1989] 2 W.W.R. 1; 30 B.C.L.R. (2d) 1; 34 Admin. L.R. 235; 41 C.R.R. 276 (B.C.C.A.); Howard v. Architectural Inst. of B.C. (1989), 40 B.C.L.R. (2d) 315; 39 Admin. L.R. 277; 47 C.R.R. 328 (S.C.); Richardson v. Assn. of Prof. Engineers, [1990] 1 W.W.R. 709; (1989), 41 B.C.L.R. (2d) 130 (S.C.); Harvey v. Law Society of Newfoundland (1992), 93 Nfld. & P.E.I.R. 339; 88 D.L.R. (4th) 487; 2 Admin. L.R. (2d) 306; 292 A.P.R. 339 (S.C.); R. v. Plant, [1993] 3 S.C.R. 281; (1993), 145 A.R. 104; [1993] 8 W.W.R. 287; 12 Alta. L.R. (3d) 305; 84 C.C.C. (3d) 203; 24 C.R. (4th) 47; 17 C.R.R. (2d) 297; 157 N.R. 321; 55 W.A.C. 104; Belgoma Transportation Ltd. and Director of Employment Standards, Re (1985), 51 O.R. (2d) 509; 20 D.L.R. (4th) 156; 85 CLLC 14,033; 17 C.R.R. 78; 10 O.A.C. 11 (C.A.); R. v. Ezzeddine (M.) (1996), 183 A.R. 37; [1996] 6 W.W.R. 684; 38 Alta. L.R. (3d) 385 (Q.B.); R. v. Grant, [1993] 3 S.C.R. 223; [1993] 8 W.W.R. 257; 35 B.C.A.C. 1; 84 C.C.C. (3d) 173; 24 C.R. (4th) 1; 17 C.R.R. (2d) 269; 159 N.R. 161; 57 W.A.C. 1; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; (1990), 68 D.L.R. (4th) 568; 55 C.C.C. (3d) 530; 76 C.R. (3d) 283; 47 C.R.R. 151; [1990] 2 C.T.C. 103; 90 DTC 6243; 106 N.R. 385; 39 O.A.C. 385.

AUTHORS CITED

Garant, P. Droit administratif, vol. 1, 3^e éd. Cowansville (Qué.): Yvon Blais, 1991.

APPLICATIONS for judicial review of the Deputy Superintendent of Bankruptcy’s decision to seize records administered by the applicants and entrust them to a guardian until completion of an investigation and disciplinary hearing. Applications allowed only in so far as Bankruptcy and Insolvency Act, paragraph 14.03(1)(b) was declared of no force and effect to the extent that it authorizes the taking of conservatory measures in the nature of a “seizure” where there are no reasonable grounds to believe that the measures will make it possible to “preserve” the records of estates.

COUNSEL:

Daniel Des Aulniers, Raymond Gagnon and Jean-Philippe Gervais for applicants.

Robert Monette and Alain Lafontaine for respondents and mis-en-cause.

SOLICITORS:

Jolin, Fournier, Morisset, Sainte-Foy, Quebec and Gervais & Associés, Montréal, for applicants.

DeBlois & Associés, Québec, and Deputy Attorney General of Canada for respondents and mis-en-cause.

The following is the English version of the reasons for judgment rendered by

Tremblay-Lamer J.:

INTRODUCTION

This case raises the issue of whether section 14.03 of the Bankruptcy and Insolvency Act[1] (BIA) is constitutional. That section authorizes the Superintendent, in certain expressly stated circumstances, to take the necessary steps to preserve the records of estates.

In the fall of 1995, in the exercise of that power, the Deputy Superintendent took possession of records administered by the applicants and entrusted them to a guardian until the completion of the investigation and disciplinary hearing into the applicants’ conduct and administration.

These applications for judicial review relate to that taking of possession.

THE FACTS

Louis Drolet is one of the applicants in application for judicial review No. T-1918-95. He began working as a trustee with Gingsberg, Gingras & Associés, a corporate trustee, on February 2, 1990. From 1991 to 1993, numerous complaints were made against him, primarily to the Office of the Superintendent of Bankruptcy in Québec. He was alleged to have committed improper acts in administering estate records, which is what led to the end of his association with Gingsberg, Gingras & Associés.

At that time, Ginette Trahan was the Official Receiver and Assistant Superintendent for the district of Québec. After receiving the complaints about Mr. Drolet’s activities, she informed Marc Mayrand, the Deputy Superintendent (Policy, Programs and Standards). In view of the seriousness of the improper acts alleged against Mr. Drolet, the Deputy Superintendent announced that a disciplinary committee would be formed.

While the committee was considering his case, Mr. Drolet contacted the Deputy Superintendent to tell him of a plan to create a new corporate trustee. He submitted the proposal in order to settle the dispute associated with his disciplinary case. Mr. Drolet and Mr. Tremblay planned to work together for Groupe G. Tremblay Syndics Inc. (Groupe G. Tremblay). Mr. Drolet agreed to transfer all the records he had handled while working for Gingsberg, Gingras& Associés to the newly formed corporate trustee. Mr. Tremblay was to do the same with his own records. Mr. Drolet further agreed that his licence as a trustee in bankruptcy would be suspended for a period of one year, from September 1, 1994 to September 1, 1995.

In September 1994, the proposal was finally accepted. An agreement was entered into with respect thereto by Mr. Drolet, Mr. Tremblay, the Deputy Superintendent and Gingsberg, Gingras & Associés. Although Mr. Tremblay had been audited in 1992, the Deputy Superintendent said he was satisfied that Mr. Tremblay was competent. To be fully executory, however, the agreement had to be approved by the Superintendent of Bankruptcy, Georges Redling (the Superintendent). To this end, the Deputy Superintendent filed a report with the Office of the Superintendent recommending that the agreement be ratified. On receiving the report and the recommendation, the Superintendent, under sections 14.01 [as enacted idem] and 14.02 [as enacted idem] of the BIA, delegated his powers, duties and functions in dealing with the matter to François Daviault, who was to hear the parties and render a decision on the trustee licence of the applicant Mr. Drolet.

Although, to become executory, the agreement had to be ratified subsequently by the Superintendent, or in this case his delegate, it was nevertheless applied as soon as it was concluded. Thus, records began to be transferred to Groupe G. Tremblay in the fall of 1994. From that time on, the records administered by Groupe G. Tremblay were as follows: (1) records on which Mr. Drolet had worked while with Gingsberg, Gingras & Associés; (2) new records of Groupe G. Tremblay; (3) Québec records handled pursuant to Mr. Tremblay’s personal licence; and (4) Montréal records handled pursuant to Mr. Tremblay’s personal licence.

In October 1994, the Assistant Superintendent for the district of Québec, Ms. Trahan, decided to audit the Québec records handled pursuant to Mr. Tremblay’s personal licence. Laurent Lachance, an auditor, was assigned to do the work. In spite of the deficiencies reported by the auditor, the Assistant Superintendent and the Deputy Superintendent decided not to say anything to Mr. Daviault, the delegate, before he rendered his decision.

By mid-March 1995, the new Assistant Superintendent for the district of Québec, Denis Gilbert, had already informed the Deputy Superintendent that numerous complaints had been filed against the corporate trustee Groupe G. Tremblay. The complaints referred not only to administrative deficiencies, such as slowness in issuing certificates of discharge, but also to much more serious misconduct.

On March 27, 1995, Mr. Daviault rendered his decision, at the end of which he ratified the September 1994 agreement.

On April 6, 1995, the Deputy Superintendent called a special meeting, at which, relying on paragraph 5(3)(e) of the BIA, he announced the formation of a committee to investigate Mr. Tremblay’s administration of estates. The committee was also given the more general mandate to investigate Groupe G. Tremblay’s administration and activities. It was in that context that the Office of the Superintendent first contacted François A. Gouin, a trustee. Subsequently, in May 1995, at a conference of the Canadian Insolvency Association, the Deputy Superintendent approached Mr. Gouin personally to discuss the same mandate.

As well, in the weeks following the decision of the delegate, Mr. Daviault, the Royal Canadian Mounted Police (RCMP) began a number of investigations into the administration and activities of Mr. Drolet, Mr. Tremblay and Groupe G. Tremblay. Some of those investigations were initiated after the issuance of investigation mandates by the Office of the Superintendent.[2] The rest were begun at the initiative of the RCMP itself, which was acting in response to complaints it had received from debtors and creditors involved in the records managed by the applicants.

Throughout August 1995, the auditor, Mr. Lachance, audited Groupe G. Tremblay’s records. The investigation corroborated the information that had already been gathered, which showed that serious offences had been committed.

On August 28, 1995, the auditor submitted his report on Groupe G. Tremblay’s administration to his superiors. The report recounted all the disturbing facts that he had noted in the audit, namely: misappropriation of funds, estates that had not been realized or had been realized at a very low price, misrepresentations to the courts and the Official Receiver and the preparation of false statutory documents.

On August 31, 1995, RCMP officers submitted a number of informations to Judge Choquette of the Court of Quebec, Penal Division, in order to obtain search warrants. Judge Choquette issued the warrants the same day. He authorized the officers to seize eighteen (18) of Groupe G. Tremblay’s records.[3] The search took place the next morning.

The same day, the applicants received a letter prepared by the Deputy Superintendent informing them of the decision he had made, based on a progress report (by the auditor, Mr. Lachance), to issue a direction to protect all the estates administered by Groupe G. Tremblay until the completion of the investigation under way. Notices that conservatory measures had been directed were sent the same day to, inter alia, trustees in bankruptcy in the Québec region, financial institutions with which Groupe G. Tremblay did business, Bell Canada and Canada Post. The recipients of the notices were told that the estate records formerly administered by Groupe G. Tremblay would now be administered by François A. Gouin, trustee.

The direction for conservatory measures was issued by Deputy Superintendent Mayrand under paragraphs 14.03(1)(b) and 14.03(2)(b) of the BIA, which provide that where an investigation is being made pursuant to paragraph 5(3)(e) of the BIA, the Superintendent may direct any person to take the necessary steps to preserve the records of estates.

The Deputy Superintendent has admitted that he thought the BIA did not require him to obtain judicial authorization before taking possession of the records. Given the seriousness of the alleged misconduct and the search conducted that morning by the RCMP officers, he considered it reasonable to take possession of all of Groupe G. Tremblay’s records.

RELEVANT STATUTORY PROVISIONS

The relevant statutory provisions for the purposes of the case at bar are all found in the BIA. They are as follows:

5. …

(3) The Superintendent shall, without limiting the authority conferred by subsection (2),

(a) receive applications for licences to act as trustees under this Act and issue licences to persons whose applications have been approved;

…

(c) where not otherwise provided for, require the deposit of one or more continuing guaranty bonds as security for the due accounting of all property received by trustees and for the due and faithful performance by them of their duties in the administration of estates to which they are appointed, in such amount as the Superintendent may determine, which amount may be increased or decreased as he may deem expedient, and the security shall be in a form satisfactory to the Superintendent and may be enforced by the Superintendent for the benefit of the creditors;

…

(e) from time to time make or cause to be made such inspection or investigation of estates as he may deem expedient and for the purpose of the inspection or investigation the Superintendent or any person appointed by him for the purpose shall have access to and the right to examine all books, records, documents and papers pertaining or relating to any estate;

(f) receive and keep a record of all complaints from any creditor or other person interested in any estate and make such specific investigations with regard to such complaints as the Superintendent may determine; and

(g) examine trustees’ accounts of receipts and disbursements and final statements.

…

14.01 (1) The Superintendent, after making or causing to be made an investigation into the conduct of a trustee, may, where it is in the public interest to do so,

(a) cancel the licence of a trustee;

(b) suspend the licence of a trustee; or

(c) place such conditions or limitations on the licence of a trustee as the Superintendent considers appropriate.

(2) The Superintendent may delegate by written instrument, on such terms and conditions as are therein specified, any or all of the Superintendent’s powers, duties and functions under paragraphs (1)(a) to (c) or section 14.02 or 14.03.

(3) Where the Superintendent delegates in accordance with subsection (2), the Superintendent or the delegate shall

(a) where there is a delegation in relation to trustees generally, give written notice of the delegation to all trustees; and

(b) whether or not paragraph (a) applies, give written notice of the delegation of a power to any trustee who may be affected by the exercise of that power, either before the power is exercised or at the time the power is exercised.

14.02 (1) Where the Superintendent intends to exercise any of the powers set out in paragraphs 14.01(1)(a) to (c), the Superintendent shall send the trustee written notice of the powers that the Superintendent intends to exercise and the reasons therefor and afford the trustee a reasonable opportunity for a hearing.

(2) At a hearing referred to in subsection (1), the Superintendent

(a) has the power to administer oaths;

(b) is not bound by any legal or technical rules of evidence in conducting the hearing;

(c) shall deal with the matters set out in the notice of the hearing as informally and expeditiously as the circumstances and a consideration of fairness permit; and

(d) shall cause a summary of any oral evidence to be made in writing.

(3) The notice referred to in subsection (1) and, where applicable, the summary of oral evidence referred to in paragraph (2)(d), together with such documentary evidence as the Superintendent receives in evidence, form the record of the hearing.

(4) The decision of the Superintendent after a hearing referred to in subsection (1), together with the reasons therefor, shall be given in writing to the trustee not later than ninety days after the conclusion of the hearing and may, where the Superintendent considers it in the public interest to do so, be made public after the decision has been given to the trustee.

(5) A decision of the Superintendent given pursuant to subsection (4) is deemed to be a decision of a federal board, commission or other tribunal that may be reviewed and set aside pursuant to the Federal Court Act.

14.03 (1) The Superintendent may, for the protection of an estate in the circumstances referred to in subsection (2),

(a) direct any person to deal with the property of the estate described in the direction in accordance with the terms of the direction;

(b) direct any person to take such steps as the Superintendent may deem necessary to preserve the records of the estate; and

(c) direct a bank or other depository not to pay out funds on deposit to the credit of the estate except in accordance with the direction.

(2) The circumstances in which the Superintendent is authorized to exercise the powers set out in subsection (1) are where

(a) an estate is left without a trustee by the death, removal or incapacity of the trustee;

(b) the Superintendent makes or causes to be made any investigation pursuant to paragraph 5(3)(e);

(c) the Superintendent exercises any of the powers set out in section 14.01; or

(d) the fees referred to in subsection 13.2(2) have not been paid in respect of the trustee’s licence.

(3) A direction given pursuant to subsection (1)

(a) shall state the statutory authority pursuant to which the direction is given;

(b) is binding on the person to whom it is given; and

(c) is, in favour of the person to whom it is given, conclusive proof of the facts set out therein.

(4) A person who complies with a direction given pursuant to subsection (1) is not liable for any act done by the person only to comply with the direction.

ISSUES

Administrative law issues:

1. Did the Deputy Superintendent exceed his jurisdiction by going beyond the inherent limitations of the discretion conferred on him by section 14.03 of the BIA?

2. Did he exercise that discretion for improper purposes, in bad faith or in an arbitrary, unfair or unreasonable manner?

3. Was he required to comply with the rules of natural justice?

Charter [Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]] issues:

1. Did the taking of possession on September 1, 1995 infringe section 7 of the Canadian Charter of Rights and Freedoms by depriving the applicants Drolet and Tremblay of their liberty in a manner not in accordance with the principles of fundamental justice?

2. Is section 14.03 of the BIA contrary to section 7 of the Canadian Charter of Rights and Freedoms because it is too vague?

3. Was the taking of possession on September 1, 1995 a search or seizure within the meaning of section 8 of the Canadian Charter of Rights and Freedoms?

4. Was the taking of possession on September 1, 1995 an unreasonable seizure and hence constitutionally prohibited by section 8 of the Canadian Charter of Rights and Freedoms?

5. Is section 14.03 of the BIA contrary to the guarantee set out in section 8 of the Canadian Charter of Rights and Freedoms? If so, is this infringement saved by section 1?

ANALYSIS

A.        PRELIMINARY ISSUE

The respondents began by arguing that the “direction for conservatory measures” issued by the Deputy Superintendent on September 1, 1995 was not a decision within the meaning given to that term in section 18 of the Federal Court Act.[4] In the respondents’ submission, it was not a measure that had a final effect on the applicants’ rights and was binding on the parties.

The rule being relied on in this regard was formulated by the Federal Court of Appeal in Szczecka v. Canada (Minister of Employment and Immigration).[5] In that case, the Court, per Létourneau J.A., held that unless there are special circumstances, there should not be any immediate judicial review of an interlocutory decision. The decisions in respect of which judicial review is available are those that make a final ruling on the merits of a case.

In my view, the Deputy Superintendent’s decision was not an interlocutory decision within the meaning that the courts have given that term. It was not a decision made in the course of an action by an administrative tribunal. It was a decision that had a final effect on the applicants’ rights, because the seized records were administered by a representative of the Superintendent and could not, in all likelihood, be returned to them until the end of the disciplinary process. Moreover, in most instances, the administration of the seized records will probably be complete by the time the disciplinary process ends. For these reasons, it seems to me that the Szczecka[6] rule is not applicable to this case.

B.        ADMINISTRATIVE LAW ISSUES

1.         Excess of jurisdiction

The applicants submitted that the decision to initiate an investigation into a trustee’s administration (paragraph 5(3)(e) BIA) and the decision to issue a direction for conservatory measures (paragraphs 14.03(1)(b) and 14.03(2)(b) BIA) are decisions that fall within the Superintendent’s discretion. The courts have consistently held that a discretion is never absolute. In the case at bar, the Deputy Superintendent’s decision to issue a direction for conservatory measures was contrary to the three legal limitations on any discretion.

According to the applicants, the Deputy Superintendent exercised his discretion for improper purposes, because his decision was intended not to preserve estate records but rather to permanently and irrevocably prevent the applicant Mr. Drolet from working as a trustee. If the Superintendent’s objective was really to preserve estate records, why did he take possession of all the records administered by Groupe G. Tremblay, without exception?

The applicants further submitted that a direction for conservatory measures can be issued only to preserve future estate records. The “preservation power” set out in section 14.03 of the BIA can, by definition, be exercised only to prevent an imminent, future threat to an estate. In so far as an act has already been done, it is no longer a question of “preserving” estate records, but rather of “recovering” estates because of past actions or misconduct.

Moreover, the applicants argued that his decision was made in bad faith. Not only did the Deputy Superintendent, without reason, deem it appropriate to take greater exceptional measures than had even been taken before, but he applied those measures in an excessive manner.

Finally, the applicants submitted that the Superintendent’s decision was unfair, arbitrary and discriminatory. While he claimed to have made it on the basis of the “progress” report prepared by the auditor, Mr. Lachance, the evidence showed that his actions had in fact been planned for a long time.

As for the respondents, they argued that since the Deputy Superintendent simply applied the principles found in paragraph 5(3)(e) and section 14.03 of the BIA, he in no way exceeded his jurisdiction. The Deputy Superintendent exercised his discretion in an appropriate manner, that is, within the limits set out in the BIA.

I agree with the applicants that the statutory discretion exercised by the Superintendent is not absolute. The courts have held on numerous occasions that every discretion is subject to certain general legal limitations.[7] For example, it is established that a discretion cannot be used for improper purposes that are contrary to the applicable legislation. Furthermore, a discretion cannot be exercised in bad faith or in an arbitrary, unfair or unreasonable manner.

As noted by Lamer J. (as he then was) in Slaight Communications:[8]

Parliament cannot have intended to authorize such an unreasonable use of the discretion conferred by it. A discretion is never absolute, regardless of the terms in which it is conferred. This is a long-established principle. H. W. R. Wade, in his text titled Administrative Law (4th ed. 1977), says the following at pp. 336-37:

For more than three centuries it has been accepted that discretionary power conferred upon public authorities is not absolute, even within its apparent boundaries, but is subject to general legal limitations. These limitations are expressed in a variety of different ways, as by saying that discretion must be exercised reasonably and in good faith, that relevant considerations only must be taken into account, that there must be no malversation of any kind, or that the decision must not be arbitrary or capricious. (Emphasis added.)

What is the situation in the case at bar? Did the Deputy Superintendent disregard the general legal limitations to which he was subject in exercising his discretion? I do not think so.

Section 14.03 authorizes the Superintendent to take conservatory measures for the protection of bankruptcy estates. Given the seriousness of the irregularities alleged against the applicants, the taking of possession was intended to ensure that debtors and creditors did not suffer any harm pending the completion of the investigation under way.

In these circumstances, I cannot conclude that the conservatory measures ordered by the Deputy Superintendent had any purpose other than preserving estate records.

As for the argument that he should not have taken possession of all the records, when the situation had become urgent, I have difficulty seeing how he could have sorted through them and decided which records he could have left to be administered by the applicants. It must be recalled that what was at issue was their ability to fulfil their responsibilities as trustees with integrity. Because of their fiduciary role, trustees must be as transparent as possible in administering the records entrusted to them. They manage the property of others for the benefit of all creditors, and this is true for each record of a bankruptcy. Once the relationship of trust had broken down, the Deputy Superintendent had no choice but to take possession of all the records. Given the seriousness of the alleged misconduct, it seemed impossible to him to select certain records that the applicants could have continued to handle without jeopardizing the administration of property belonging to others. I cannot conclude that such a decision was unreasonable.

As for the conservatory measures involving Bell Canada and Canada Post, since they were cancelled a few days after they were taken, this Court no longer has to consider their validity and thus determine whether taking them was consistent with the power conferred by the BIA.

Moreover, I do not accept the argument that the power “to preserve” estates set out in section 14.03 was used in this case to “recover” estate records. The alleged actions endangered estates under the administration and control of the trustees, and it was precisely to prevent the occurrence of further misconduct that the conservatory measures were taken.

The applicants also submitted that, for all practical purposes, the direction for conservatory measures of September 1, 1995 rescinded the decision of the delegate, Mr. Daviault. According to the applicants, by ordering that possession be taken of all of Groupe G. Tremblay’s records, the Deputy Superintendent made it impossible to implement Mr. Daviault’s decision. By taking possession of the records, the Deputy Superintendent prevented the applicant Mr. Drolet from resuming his activities as a trustee in bankruptcy as planned. It should be recalled that the suspension of Mr. Drolet’s licence was to end on September 1, 1995. The decision of the delegate, Mr. Daviault, was binding on Deputy Superintendent Mayrand. The applicants argued that because the Deputy Superintendent disregarded that decision, his exercise of the power to issue a direction for conservatory measures was unlawful.

In my view, this argument carries no weight. The decision of the delegate, Mr. Daviault, and that made by the Deputy Superintendent on September 1, 1995 related to two different matters. While Mr. Daviault’s decision concerned Mr. Drolet’s conduct when he worked for Gingsberg, Gingras & Associés, the taking of possession on September 1, 1995 was made necessary by the misconduct of Mr. Tremblay and the corporate trustee that he headed, namely Groupe G. Tremblay. The events on which these two decisions were based occurred at two different times.

2.         The principles of natural justice

The applicants criticized the Deputy Superintendent for not giving them any notice before ordering the conservatory measures. They were never able to learn what misconduct the auditor was alleging they had committed, nor were they aware of the possible consequences thereof. They had no meaningful opportunity to respond to the auditor’s allegations.

The respondents argued that the principles of natural justice are flexible and that, in the case at bar, those principles did not require that the applicants be given advance notice of the possible consequences. The applicants will have a hearing as part of the disciplinary proceedings and can raise their defences at that time.

I want to begin by noting that the Office of the Superintendent gave these trustees a number of opportunities to explain the shortcomings in their administration.[9] They neglected to respond, and they have only themselves to blame if they feel that they were not heard.

The courts have long recognized that the rules of natural justice and the duty of fairness are variable standards. As Sopinka J. has said, their content will depend on the circumstances of the case, the statutory provisions and the nature of the matter to be decided.[10]

In the case at bar, the applicable statutory provisions authorize the taking of conservatory measures to protect the public interest involved. It was imperative in such circumstances for the Superintendent to act quickly.

In this regard, I consider it appropriate to refer to the following passage from the Supreme Court of Canada’s decision in Homex Realty and Development Co. Ltd. v. Corporation of the Village of Wyoming:[11]

There are instances where the omission of the prerequisite notice is not supplied by the courts, as, for example, where the statute in question, by its very nature and by the legislative framework there adopted by the Legislature, must be read as precluding the requirement of prior notice. The Ontario Court of Appeal, for example, in Bishop v. Ontario Securities Commission ([1964] 1 O.R. 17), so construed s. 19 of The Securities Act, R.S.O. 1960, c. 363. Roach J.A., in speaking for the Court, stated:

The whole purpose of the Act might be defeated if the chairman could make an order or ruling under that section only on notice to the person or company affected and after a hearing. Many days might elapse between the giving of the notice to the persons or company sought to be affected and the conclusion of the hearing during which time those persons or that company if dishonest and disreputable could continue to prey upon the public and plunder and fleece many people. For that reason it was essential to the purpose of the Act that the chairman should be empowered to act promptly and without notice to the person or company sought to be affected. The chairman’s first duty is to the public and in empowering him to discharge that duty the Legislature has by appropriate legislation at the same time protected the person or company affected by the order by giving to him on [sic] it at their election the right to have the order reviewed by the Commission. (at p. 23) [Emphasis added.]

Similarly, in Bunn,[12] the Court held that the public interest involved was pressing and required that the Law Society act promptly. The Court ruled that the object of the provisions in issue would be frustrated if it were impossible to take action until after notice had been given and a full hearing held. Hanssen J. stated the following:[13]

The legislation seeks to strike a balance between the rights of an individual member and the public interest. However, it recognizes, on the question of whether to suspend or not, the interest of the individual lawyer must be subordinate to the public interest. The object of s. 50(1)(a) is to protect the public interest. In many cases, that object would be frustrated if the action contemplated in that section could only take place after notice and a hearing.

In the instant case, the applicants will have an opportunity for a hearing as part of the disciplinary proceedings, and they can raise all their defences during that hearing. In the meantime, it was the Superintendent’s duty to act quickly to protect estates.

Finally, as noted above, the evidence shows that the applicants were given numerous opportunities to provide explanations of the misconduct alleged against them. They neglected to do so. They have nothing to complain of now but their own carelessness.

3.         Erroneous finding of fact made in a perverse or capricious manner

Subsection 18.1(4) of the Federal Court Act[14] authorizes the Court to review findings of fact that are not supported by the evidence or that an assessment of the evidence as a whole shows to be unreasonable.

The evidence shows that Mr. Mayrand had evidence of serious misconduct in their administration. That evidence was from a number of sources, and more specifically:

[translation] (i) the first report of the auditor, Laurent Lachance, dated May 13, 1995, concerning the records administered by the applicant Gilles M. Tremblay;

(ii) the report of the Official Receiver, Sylvie Laperrière, dated June 14, 1995;

(iii) the second report of the auditor, Laurent Lachance, dated August 28, 1995;

(iv) the reports on the RCMP investigations;

(v) the judgments of the Superior Court—Bankruptcy Division, which were sent to him by the judges and other interested persons;

(vi) the informations prepared by the RCMP, which led to the issuance of search warrants on August 31, 1995;

(vii) the many complaints that were constantly being filed at the Superintendent’s offices in Québec, Montréal and Ottawa;

— transcript, examination of Marc Mayrand, January 31, 1996, p. 145 et seq.

The reports submitted were subjected to a strict internal verification process to determine their accuracy. The alleged acts raised serious doubts about the trustees’ integrity. Contrary to what the applicants argued, the reports submitted were not interpreted in a discretionary or arbitrary manner.

In light of this evidence and the seriousness of the misconduct noted in the reports, Mr. Mayrand’s decision to take effective conservatory measures to protect the estates administered by the applicants was reasonable.

In conclusion, I have found no reason to intervene as far as the administrative law issues are concerned. Although I imagine that the Deputy Superintendent could have taken less drastic conservatory measures, it is a clearly established rule that a superior court should not interfere with the exercise of a discretion by an administrative agency merely because the court might not have reached the same decision. This rule of curial deference has been stated many times by the Supreme Court, inter alia in Maple Lodge Farms Ltd.,[15] in which McIntyre J. summarized the principle as follows:

Where the statutory discretion has been exercised in good faith and, where required, in accordance with the principles of natural justice, and where reliance has not been placed upon considerations irrelevant or extraneous to the statutory purpose, the courts should not interfere.

That is the case here. It is therefore not appropriate to vary the Deputy Superintendent’s decision.

C.        CHARTER ISSUES

1.         Section 7 of the Charter

(a)       The right to liberty and the principles of fundamental justice

Section 7 of the Canadian Charter of Rights and Freedoms reads as follows:

7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

Since Re B.C. Motor Vehicle Act,[16] it has been accepted that section 7 does not guarantee the right to life, liberty and security per se. Section 7 guarantees that subjects of law to whom the section is applicable will not be deprived of their life, liberty or security except in accordance with the principles of fundamental justice. Thus, in determining the scope of section 7, it is necessary to define both the right to life, liberty and security and the principles of fundamental justice.

For the purposes of these proceedings, attention should be focused specifically on the right to liberty.

The applicants argued that the right to liberty includes the right to practice a profession and that the cancellation of a professional licence must be seen as infringing the right to liberty. Canadian courts seem to be divided on this subject at the present time. A number of decisions have found that the right to liberty includes the right to practice a profession.[17]

In my opinion, this issue does not arise in the case at bar, because the conservatory measures ordered by the Superintendent did not affect the existence or validity of the applicants’ trustee licence. The issue can still be raised on judicial review of any disciplinary proceeding that cancels their licence without giving them an opportunity to assert their rights.

(b)       The doctrine of vagueness

It was in R. v. Morgentaler[18] that the Supreme Court of Canada first associated the defect of vagueness with the principles of fundamental justice.[19] In that case, Dickson C.J. held that the impugned legislative provision violated the principles of fundamental justice because of its “failure to provide an adequate standard for therapeutic abortion committees”.[20] Subsequently, in the Reference re ss. 193 and 195.1(1)(c) of the Criminal Code (Man.),[21] Lamer J. (as he then was), with whom a majority of judges concurred, expressed his views in terms similar to those used by Dickson C.J. in Morgentaler.[22]

It is clear that the doctrine of vagueness does not require Parliament and the provincial legislatures to enact legislation that provides absolute certainty. The courts are responsible for interpreting legislation. A legislative provision establishing a sanction that may deprive a person of life, liberty or security must not be unacceptably vague. The test to be applied was established by the Supreme Court of Canada in R. v. Nova Scotia Pharmaceutical Society.[23] A legislative provision becomes unacceptably vague when it “does not provide an adequate basis for legal debate”.[24]

The applicants argued that paragraph 5(3)(e) and section 14.03 of the BIA are so vague as to infringe section 7 of the Canadian Charter of Rights and Freedoms (the Charter). An investigation under paragraph 5(3)(e) is all that is required for the seizure power set out in section 14.03 to be exercised. Under section 14.03, the Superintendent may direct any person to take such steps as the Superintendent may deem necessary to preserve the records of estates. In the applicants’ submission, these are vague terms that confer an unlimited discretion on the Superintendent. The wording of paragraph 5(3)(e) and section 14.03 is so vague that it becomes impossible for a court to interpret it as limiting the Superintendent’s discretion in any way. Nor do these provisions give individuals any reasonable notice of the circumstances in which the legislation applies or the types of consequences that result from violating it.

The respondents argued only that, in light of the context of section 14.03 of the BIA, the issue of its vagueness simply does not arise because what is involved is perfectly clear. The Superintendent is made responsible for supervising trustees’ administration. The wording of paragraph 5(3)(e) and section 14.03 is not so vague as to justify a finding by me that they cannot provide guidance for legal debate.

It is important to recall that the doctrine of vagueness is applicable under section 7 only if the sanction provided for in the provision in question may deprive someone of life, liberty or security of the person.

In the case at bar, however, as noted above, the measures provided for in section 14.03 do not affect the right to practice a profession—here the profession of trustee—a right which, according to some cases, may make section 7 of the Charter applicable. In any event, I am of the view that paragraph 5(3)(e) and section 14.03 provide “sufficient guidance for legal debate”.[25] The applicable test is a very strict one. As noted by Gonthier J. in Ontario v. Canadian Pacific Ltd.,[26] at page 1071:

In particular, a deferential approach should be taken in relation to legislative enactments with legitimate social policy objectives, in order to avoid impeding the state’s ability to pursue and promote those objectives.

In the instant case, although it is true that the Superintendent has the discretion to decide what conservatory measures are needed in each situation, the circumstances in which such measures may be taken and the goal to be achieved, namely preserving the records of estates, are specified. The doctrine of vagueness is inapplicable in the circumstances.

2.         Section 8 of the Charter

The applicants argued essentially that the conservatory measures taken in this case were in the nature of a seizure. Since that seizure was carried out without the prior authorization of a neutral and impartial arbiter, it was unreasonable within the meaning of section 8 of the Charter. They also argued that paragraph 5(3)(e) and section 14.03 of the BIA are constitutionally invalid.

It was in Hunter et al. v. Southam Inc.[27] that the Supreme Court of Canada first ruled on the scope of section 8 of the Charter, which reads as follows:

8. Everyone has the right to be secure against unreasonable search or seizure.

In dealing with the basis for this constitutional guarantee, Dickson J. (as he then was) wrote the following:[28]

This limitation on the right guaranteed by s. 8, whether it is expressed negatively as freedom from “unreasonable” search and seizure, or positively as an entitlement to a “reasonable” expectation of privacy, indicates that an assessment must be made as to whether in a particular situation the public’s interest in being left alone by government must give way to the government’s interest in intruding on the individual’s privacy in order to advance its goals, notably those of law enforcement.

In defining the terms “search” and “seizure” in section 8, reference must be made to the Supreme Court of Canada’s decision in R. v. Dyment.[29] In that case, the Court held that the essence of a seizure under section 8 is the taking of a thing from a person by a public authority without that person’s consent.

In the instant case, the respondents argued that there was no seizure because the applicants do not own the estate records entrusted to them. In the alternative, they argued that the applicants consented to the seizure.

I do not share this view. Since Plant,[30] it has been accepted that ownership of the seized items is not a relevant consideration. Because section 8 is essentially concerned with the expectation of privacy, its focus is above all on individuals, not property. The taking of possession on September 1, 1995 was undoubtedly a “seizure” within the meaning given to that term in section 8 of the Charter.

Before examining the nature and scope of the guarantee provided by section 8 of the Charter, I should consider whether the guarantee can be waived by a person to whom it applies.

In criminal cases, the Supreme Court of Canada applied the following test for waiver before the advent of the Charter:

… [it must be] clear and unequivocal that the person is waiving the procedural safeguard and is doing so with full knowledge of the rights the procedure was enacted to protect and of the effect the waiver will have on those rights in the process.[31]

In R. v. Borden,[32] the Supreme Court made a definitive ruling on the question of what conditions must be met for a waiver of the section 8 guarantee to be valid. It confirmed the approach put forward by the Saskatchewan Court of Appeal in R. v. Nielsen,[33] namely that the waiver of the section 8 right must, at a minimum, be subject to the conditions applicable to the waiver of a statutory procedural right like that in issue in Korponay.[34]

For a true waiver, the person purporting to consent must be possessed of the requisite informational foundation. In Borden,[35] Iacobucci J., writing for the majority, stated the following:

… the person purporting to consent must be possessed of the requisite informational foundation for a true relinquishment of the right. A right to choose requires not only the volition to prefer one option over another, but also sufficient available information to make the preference meaningful. This is equally true whether the individual is choosing to forego consultation with counsel or choosing to relinquish to the police something which they otherwise have no right to take.

In the case at bar, rather than risk having physical force used against him or proceedings brought against him for hindering government representatives in the performance of their duties, the applicant Mr. Tremblay preferred to act prudently and complied with their demand, on the assumption that the “direction for conservatory measures” pursuant to which they were acting was lawful. The applicant Mr. Tremblay felt that he had no choice; he simply submitted to the requirements of the representatives from the Office of the Superintendent, who, it should be noted, showed up at his place of business accompanied by bailiffs.

Moreover, I consider it important to point out that the representatives of the Office of the Superintendent were preceded that day by RCMP officers, who had search warrants issued by a justice of the peace, namely Judge Choquette of the Court of Québec, Criminal and Penal Division. As Mr. Tremblay saw it, the search conducted by the representatives of the Office of the Superintendent came within the scope of the police operation of the same morning. In these circumstances, I cannot conclude that he consented freely and voluntarily to the seizure and thus waived the guarantee conferred on the applicants by section 8 of the Charter.

Applicability of the Hunter criteria in a regulatory context

To determine whether a statute that authorizes a search or seizure is unreasonable, it is first necessary to ascertain whether the criteria formulated by Dickson J. (as he then was) in Hunter are applicable. Those criteria were summarized as follows by Wilson J. in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission):[36]

(a) a system of prior authorization, by an entirely neutral and impartial arbiter who is capable of acting judicially in balancing the interests of the State against those of the individual;

(b) a requirement that the impartial arbiter must satisfy himself that the person seeking the authorization has reasonable grounds, established upon oath, to believe that an offence has been committed;

(c) a requirement that the impartial arbiter must satisfy himself that the person seeking the authorization has reasonable grounds to believe that something which will afford evidence of the particular offence under investigation will be recovered; and

(d) a requirement that the only documents which are authorized to be seized are those which are strictly relevant to the offence under investigation.

However, in Thomson Newspapers Ltd.[37] and R. v. McKinlay Transport Ltd.,[38] the Supreme Court stated that the development of less stringent criteria for administrative or regulatory searches and seizures may be consistent with the spirit of section 8.

The standard of review must be reasonable and take account of the regulatory nature of the legislation and the scheme enacted.[39] For example, prior authorization is not required for a search or seizure that is aimed not at detecting criminal activities but rather at ensuring compliance with regulatory provisions adopted to protect the public interest.[40] It is thus necessary to balance a group of factors.

What is the purpose of the legislation? What is the degree of intrusion? What expectation of privacy should exist in light of the purpose of the legislation? What is the nature of the seized documents? These are a few of the questions that must be asked.[41]

Sections 14.01, 14.02 and 14.03 of the BIA are part of a set of provisions whose essential purpose is the supervision of trustees’ administration and conduct. In authorizing such supervision by the Superintendent, Parliament’s primary aim is to protect third parties, whether they be debtors or creditors. The nature of the role played by trustees makes the existence of such rules necessary. Trustees act as fiduciaries and as such, as we have seen, they are responsible for administering property owned by others. For this reason, the duties and obligations of trustees in bankruptcy are highly regulated. Such trustees are subject to constant audits, by means of which the Superintendent assures himself of their integrity.

Moreover, the documents administered by trustees are, according to law, public documents. It has been found that the expectation of privacy associated with such documents, that is, documents produced in the course of operating a regulated business, is lower than the expectation of privacy associated with documents that are strictly personal and private.

As noted by La Forest J. in R. v. Fitzpatrick:[42]

In my view a similar standard should be applied to the use in a regulatory prosecution of records that are statutorily compelled as a condition of participation in the regulatory area. Little expectation of privacy can attach to these documents, since they are produced precisely to be read and relied upon by state officials. [Emphasis added.]

In light of these various factors, I do not think that the balance to be struck between society’s interests and the applicants’ expectation of privacy, which in the circumstances is low, requires a strict application of the Hunter criteria.

Our courts have recently developed less stringent criteria for cases in which the Hunter criteria are inapplicable. In this regard, I consider the Ontario Court of Appeal’s decision in Johnson v. Ontario (Minister of Revenue)[43] to be relevant. In that case, the Court had to determine whether subsections 15(3) and (4) of the Tobacco Tax Act[44] were constitutional. Those subsections authorized the seizure of motor vehicles used in the tobacco trade and the contents thereof.

Since the measures authorized by subsections 15(3) and (4) of the Tobacco Tax Act were administrative or regulatory in nature, the parties acknowledged that the strict criteria formulated in Hunter were inapplicable. It was in that context that Arbour J.A. wrote the following:[45]

However, the fact that legislation is merely regulatory rather than criminal in nature does not in itself determine what standard of reasonableness will be required. This depends largely on the second step in the analysis which consists of identifying the privacy interest which is at stake under the search and seizure provision and the severity of the intrusion on that privacy interest.

It is therefore necessary to strike a balance between the reasonable expectation of privacy and the seriousness of the intrusion resulting from the search or seizure. She concluded as follows:[46]

Against this limited privacy claim, the intrusion permitted by s. 15 is serious …. The section contains no requirement of reasonable and probable grounds or even of reasonable suspicion. It allows a person authorized by the Minister of Revenue to stop and detain for any purpose related to the administration or enforcement of the Tobacco Tax Act, any commercial vehicle, to search the contents thereof, to seize documents that may afford evidence of a contravention of the Act and to seize cargo if it consists of more than 10,000 cigarettes.

She noted, however, that persons engaged in a regulated activity, such as the tobacco trade, must expect that the authorities will make certain inspections and checks. In other words, persons involved in a regulated activity must expect a certain amount of intrusion by administrative authorities. However, the measures authorized by subsections 15(3) and (4) went much further than what such persons were obliged to expect. Such measures would not be consistent with the section 8 guarantee unless the reasonable grounds test were met. She stated the following:[47]

A requirement of reasonable and probable grounds to believe that a commercial vehicle contains evidence of a contravention of the Tobacco Tax Act will, in my opinion, reduce the scope of the search sufficiently to recognize the privacy interest at stake. While not unduly impairing the enforcement of the Act, such a requirement would also satisfy the s. 8 Charter standard required for regulatory type searches.

The Johnson[48] test must, however, be applied only in cases in which the significance and severity of the intrusion so require. The reasonable grounds requirement will not be applicable when the case involves monitoring-type measures such as those discussed by Arbour J.A., namely checks and inspections that a person engaged in a regulated activity must reasonably expect. Likewise, the test will not be applied when doing so would be unjustified given the low degree of “intrusion”.

In my view, since this case involves a search of private premises that was not conducted as part of a regulatory inspection, the degree of intrusion is greater than it would be, for example, in a case involving a request for the production of documents. For this reason, I feel that when conservatory measures involve a search or seizure within the meaning given to those terms in section 8 of the Charter, the measures cannot be taken unless there are reasonable grounds to believe that they will make it possible to “preserve” the records of estates.

Thus, in so far as it authorizes conservatory measures in the nature of a “seizure” where there are no reasonable grounds to believe that the measures will make it possible to “preserve” the records of an estate, paragraph 14.03(1)(b) of the BIA infringes the guarantee set out in section 8 of the Charter. That infringement is not saved by section 1, no evidence having been adduced in this regard by the Attorney General of Canada.

In so far as it infringes section 8 of the Charter, paragraph 14.03(1)(b) of the BIA is of no force or effect. I must therefore consider what remedy would be appropriate. In Schachter v. Canada,[49] Lamer C.J. set out the range of remedies and the principles applicable to selecting the appropriate one:

A court has flexibility in determining what course of action to take following a violation of the Charter which does not survive s. 1 scrutiny. Section 52 of the Constitution Act, 1982 mandates the striking down of any law that is inconsistent with the provisions of the Constitution, but only “to the extent of the inconsistency”. Depending upon the circumstances, a court may simply strike down, it may strike down and temporarily suspend the declaration of invalidity, or it may resort to the techniques of reading down or reading in…. In choosing how to apply s. 52 … a court will determine its course of action with reference to the nature of the violation and the context of the specific legislation under consideration.[50]

For the following reasons, I am satisfied that the appropriate remedy in the circumstances is to “read down” paragraph 14.03(1)(b) of the BIA so that conservatory measures in the nature of a “seizure” are not authorized unless the Superintendent or his delegate has reasonable grounds to believe that they will make it possible to “preserve” the records of estates. This was the type of remedy chosen by the Supreme Court of Canada in a similar context in R. v. Grant.[51]

The advantage of such a remedy is that it means that a mechanism that is absolutely essential for the protection of third parties can be maintained. In my view, the reading down involved here satisfies Parliament’s legitimate concerns for effective law enforcement without offending the reasonable seizure requirement under section 8 of the Charter.

The existence of reasonable grounds can be verified by this Court through judicial review after the fact. In Thomson Newspapers Ltd.,[52] La Forest J. noted the importance of such judicial review where the requirement of prior judicial authorization is found to be inapplicable:

The opportunity to challenge, by way of judicial review, the relevancy of any particular use of s. 17 to matters in respect of which the Director or Commission can conduct inquiries, provides adequate guarantee against potential abuse of the power s. 17 confers. No evidence of any such abuse is apparent in the case before this Court.

I now turn to the question of whether, in the case at bar, the Deputy Superintendent had reasonable grounds to believe that the conservatory measures would make it possible to “preserve” the records of estates. In my view, an affirmative answer must be given to this question. As I noted above, the evidence in the record refers to very serious misconduct, which called for effective and prompt action to protect the estates of third parties.

As for the applicants’ argument with respect to section 12 of the Charter, I need only say that the conservatory measures taken in the case at bar do not amount to “cruel and unusual treatment”. Section 12 is therefore inapplicable.

I also reject the arguments based on the Canadian Bill of Rights [R.S.C., 1985, Appendix III] on the basis that they are without merit.

CONCLUSION

For these reasons, the applications for judicial review are allowed in part. Paragraph 14.03(1)(b) of the BIA is of no force or effect in so far as it authorizes the taking of conservatory measures in the nature of a “seizure” where there are no reasonable grounds to believe that the measures will make it possible to “preserve” the records of estates.

The applicants’ conclusions seeking to reserve their right to claim damages are dismissed.

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