Directions for Conservatory Measures to the National Bank of Canada, 500 Place d'Armes, Ground Floor, Montréal, Quebec H2Y 2W3 (April 16, 2012)
In the matter of:
Sam Lévy and
Sam Lévy & Associés Inc.
Directions for Conservatory Measures
(Section 14.03 of the Bankruptcy and Insolvency Act)
Whereas the Bankruptcy and Insolvency Act (the Act) provides the Superintendent of Bankruptcy (the Superintendent) with the general power to supervise the administration of all estates and matters to which the Act applies;
Whereas Sam Lévy (the trustee) is the holder of an individual licence as trustee in bankruptcy;
Whereas Sam Lévy & Associés Inc. is the holder of a corporate licence as trustee in bankruptcy;
Whereas the trustee is the only holder of an individual licence as trustee in bankruptcy at Sam Lévy & Associés Inc.;
Whereas an investigation conducted by the Superintendent pursuant to paragraph 5(3)(e) of the Act revealed that the trustee’s administration presented numerous deficiencies, including those listed below:
- the trustee had failed to verify bankrupts’ statements of affairs;
- the trustee lacked transparency in the process for selling assets;
- the trustee did not maximize the realization of assets;
- the trustee signed Section 170 reports in which he did not include all the information that had been brought to his attention;
- the trustee did not provide accurate and complete information to the interested parties in his correspondence with the OSB and during his testimony at a hearing on the taxation of a statement of receipts and disbursements;
- the trustee mandated a lawyer to perform tasks that normally fall within the purview of the trustee;
- in ten (10) files, it was shown that the debtors had all granted immovable hypothecs on their properties or residences some time prior to filing their procedures under the BIA, and the trustee did not challenge these transactions;
- the trustee advised a debtor to grant an immovable hypothec in favour of her mother the day before filing her notice of intention. This transaction resulted in eliminating all of the equity that would have been available to the mass of creditors;
- in this same file, the trustee indicated in the minutes that he represented, by proxy, a secured creditor who was owed $350,000, whereas in reality, the proxy had been given to Mtre. Sarto Brisebois, and this creditor had filed a proof of claim for $340,000 secured and $10,000 unsecured;
- in this same file, at the first meeting of creditors, the trustee did not disclose to the creditors present the existence of this proof of claim, nor the fact that this creditor was represented by a proxyholder;
- after the first meeting of creditors, a creditor discovered the existence of this hypothec, and the creditors had to substitute the trustee in order to protect their rights. The new trustee realized more than $398,000 of equity for the creditors by challenging the transaction that the trustee had advised the debtor to perform;
- in another file, the bankrupt’s statement of affairs included a residence encumbered by two (2) hypothecs that showed no equity for the mass of creditors. The trustee did not disclose the fact that he had met with the debtors about six (6) months before the bankruptcy and that at the time, they had equity of about $125,000 in their residence; the second mortgage was granted to a related person about 3 and a half months before the bankruptcy;
- in the same file, a creditor was obliged to challenge the transaction pursuant to section 38 BIA because the trustee refused to act. The creditor settled his motion of non-opposability of a hypothec in the amount of $29,000 in capital and costs;
Whereas a summary analysis of recent files indicates that there are reasons to believe that the situation persists;
Whereas I believe on reasonable grounds that the estates require protection;
Whereas the Superintendent may, for the protection of an estate, exercise the powers set out in subsection 14.03(1) of the Act, in the circumstances referred to in subsection 14.03(2) of the Act;
Whereas the Superintendent has delegated to me, in accordance with subsection 14.01(2) of the Act, the powers of the Superintendent as specified at subsection 14.03(1) of the Act, in the circumstances referred to in subsection 14.03(2), a copy of which delegation is attached, along with copies of sections 14.01, 14.02 and 14.03 of the Act;
Whereas paragraphs 14.03(1)(a), 14.03(1 )(b) and 14.03(2)(b) of the Act apply;
I, the undersigned, Robert Massé, in my capacity as Delegate for the Superintendent, direct the branch of the National Bank of Canada located at 500 Place d'Armes, Ground Floor, Montréal, Quebec H2Y 2W3, pursuant to subsections 14.03(1)(b) and (c) of the Act:
- to consider upon receipt of the present directions, Maurice Roy, trustee, as the only authorized signatory for any transactions relating to the funds credited to the estates of bankruptcies and proposals administered by Sam Lévy and Sam Lévy & Associés Inc.;
- to make no debit, payment or transfer of funds credited to, or which ought to have been credited to, the estates of bankruptcies and proposals administered by Sam Lévy and Sam Lévy & Associés Inc., unless these cheques, debits, payments or transfers are co-signed by Maurice Roy;
- to not pay out of these accounts any cheques, bills of exchange, bank drafts or other such instruments, issued prior to receipt of these directions but presented for payment after receipt of these directions, unless said cheques, bills of exchange, bank drafts or other instruments are co-signed by Maurice Roy;
- to provide, before closing of business on April 18, 2012, the list of all estate trust bank accounts that are under the name of or controlled or administered by Sam Lévy and Sam Lévy & Associés Inc., trustee in bankruptcy, to Mr. Maurice Roy, trustee, 5 Place Ville Marie, 8th floor, Montréal, Quebec H3B 2G2;
- to provide all statements of account, accepted cheques and other documents or information having to do with the abovementioned estate trust bank accounts to Mr. Maurice Roy, trustee, 5 Place Ville Marie, 8th floor, Montréal, Quebec H3B 2G2;
These directions take effect immediately and will remain in effect until such time as the undersigned is satisfied that the estates no longer require protection.
In accordance with subsection 14.03(3) of the Act, these directions bind the National Bank of Canada, which must comply with them.
Pursuant to subsection 14.03(4) of the Act, a person who complies with these directions is not liable for any act done by that person only to comply with these directions.
Signed in the City of Montréal in the Province of Quebec, this 16th day of April, 2012.
Assistant Superintendent, Trustee Compliance
This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.
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