CANADIAN ASSOCIATION OF INSOLVENCY AND RESTRUCTURING PROFESSIONALS ASSOCIATION CANADIENNE DES PROFESSIONNELS DE L INSOLVABILITÉ ET DE LA RÉORGANISATION Ms. Sheila Westerink Robin National Manager Policy and Regulatory Affairs Office of the Superintendent of Bankruptcy 155 Queen Street, 4 th Floor Ottawa, ON K1A 0H5 Dear Ms. Westerink Robin: Re: Consultation on the Overview of Trustee Professional Conduct Proceedings and the related draft Directive No. 31, Procedure Governing Trustee Professional Conduct Proceedings, (draft Directive) (dated December 21 st 2012). On behalf of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the present constitutes our comments on the Overview of Trustee Professional Conduct Proceedings and the related draft Directive No. 31, Procedure Governing Trustee Professional Conduct Proceedings, (draft Directive) (dated December 21 st, 2012). CAIRP, a national professional organization representing some 929 general members acting as Trustees in Bankruptcy, receivers, agents, monitors and consultants in insolvency matters, as well as 417 articling members, and 212 corporate, life, and inactive members, is a not-for-profit corporation, created in 1979 to advocate a fair, transparent, and effective system of insolvency and restructuring administration throughout Canada. CAIRP, as part of its governance and under its bylaws concerning professional conduct, conducts investigations of complaints and holds formal, public discipline hearings of certain of its members when appropriate under its particular rules and regulations. CAIRP is familiar with the considerations for balancing fair and efficient hearings and wishes to commend the Office of the Superintendent of Bankruptcy (OSB) for developing this document to ensure a transparent, fair and efficient hearing process. CAIRP s submission is divided into two parts. Firstly, it discusses what it considers significant policy issues that go to the fundamental fairness of the process and; secondly, it identifies additional issues and provides suggestions for enhancing this document. /2 Canadian Association of Insolvency and Restructuring Professionals / Association canadienne des professionnels de l'insolvabilité et de la réorganisation 277 Wellington St. W., Toronto, ON M5V 3H2 Tel./Tél.: (416) 204-3242 Fax: (416) 204-3410 E-mail/courriel: info@cairp.ca - Internet: http://www.cairp.ca
Page 2 Significant Policy Issues CAIRP is cognisant that it is essential that professional conduct proceedings be defensible in court and be perceived as fair by other stakeholders, including Trustees. Otherwise, the confidence in the system that is essential for successful regulation of any professionals, including Trustees, will disappear. For these reasons CAIRP urges the OSB to seriously consider the following suggestions regarding significant policy issues. 1. Separating the Investigative and Prosecutorial Functions. This document in general and the definition of «applicant» more particularly, supports an amalgamation of roles in that the same person (the applicant) is charged with the investigation of a complaint, the determination of the appropriateness of a hearing and then the prosecution of the matter before an adjudicator. It is CAIRP s submission that this combination of functions undermines the neutrality and objectivity expected of those participating in the process. As an example, in the criminal justice system, the separation of function between the police and crown attorneys is viewed as essential to achieve justice. In addition, the vast majority of bodies that regulate professionals have separate committees or individuals to do the investigation and the prosecution. Failing to do so results in the prosecutor having a stake in the outcome. Indeed, even the impartiality of the investigator can be questioned when the investigator knows that he or she will also have a screening or prosecutorial function. It is critical that, at a minimum, the investigation and prosecution functions be separated. 2. Notice Requirements. The professional conduct report, referred to in sections 14 to 16 of the draft Directive, contains a detailed description of the investigation or inquiry into the conduct of the Trustee. These reports tend to be long and frequently refer to numerous matters, some of which may be of serious concern, some of which may be of minor concern and some of which are of no concern at all. CAIRP believes that it is important for this document not to constitute also the particulars of the allegations against the Trustee. Relying solely on the professional conduct report could be viewed as unfair to the Trustee in certain circumstances when it is difficult to ascertain, for both the adjudicator and the trustee, which sections of the report are genuine issues for the hearing. In addition, providing such a detailed document to the adjudicator in advance of the hearing can create the impression of tainting the adjudicator. Finally, the hearing will have the potential to have an overly broad and ambiguous scope (e.g., decisions about what evidence is and is not relevant will be difficult to make) because of the lack of focus in the allegations. CAIRP strongly suggests that a statement of allegations be prepared to form the basis of the scope of the hearing. This is a standard requirement for hearings and is separate and distinct from the disclosure of evidence. 3. Mutual Disclosure. In conduct hearings it is unusual to require mutual disclosure, as provided for in section 25 of the draft Directive. The OSB, as the prosecutors with significant resources, has to as a matter of law disclose all relevant information unless such information is protected by privilege. While CAIRP strongly supports that
Page 3 the Trustee should disclose any evidence he or she will rely upon at the hearing (even though that is still not universal for conduct hearings before other tribunals), it is quite inappropriate to require Trustees to disclose any information they have that might help incriminate them. It is the investigator s duty to obtain the evidence necessary for proving the allegations once the matter has been referred to discipline. Trustees, on the other hand, have the duty to cooperate with the investigation or inquiry. However, it is not the Trustee s duty to complete the prosecution s case once the matter has been referred to discipline. Such an obligation could be perceived as quite unfair to Trustees, and fair-minded members of the public will perceive this as an unbalanced approach, thus damaging the credibility of the process. In addition, disclosure by the OSB to the Trustee should take the form of providing a copy of the OSB information to the Trustee. Providing a list and providing an opportunity to examine the documents is unwieldy to the Trustee and will constitute a barrier to the Trustee s ability to make full answer and defence. We strongly suggest that where documents can be copied and sent electronically, there is limited cost involved to the OSB. 4. Written and Electronic Hearings. Sections 28 to 30 of the draft Directive gives the adjudicator unfettered discretion to fix the method of the hearing (i.e., in-person, electronic, written) without any consultation with the parties. It is CAIRP s suggestion that at a minimum there should be criteria for which method of hearing is selected (e.g., where there are credibility issues, an in-person hearing should be the usual process as the evaluation of credibility may be difficult if not almost impossible to determine in an electronic or written hearing, thus creating circumstances where the credibility of the process is questioned). In addition, CAIRP would like to suggest that the parties should either be consulted or be given the opportunity to request an alternative method of hearing. 5. Recording the Evidence at the Hearing. Sections 39 to 41 of the draft Directive deal with recording the evidence at a hearing. Recording the evidence is crucial to enabling a party to challenge or appeal a hearing result. Without this recording such a challenge would be almost impossible. Considering the low cost involved in the recording of the hearing, CAIRP suggests that all hearing should be recorded and that the party requiring a copy of the recorded evidence be the one to pay for this expense. Most hearing tribunals record their proceedings automatically without the requirement to be asked to do so. CAIRP believes that to require the Trustee to object to the fact that the evidence is not being recorded will be quite prejudicial to Trustees who are not being represented by an attorney and consequently might not understand the importance of being able to have such a recording for the purpose of a challenge or an appeal. CAIRP has difficulties in understanding the reasons why the adjudicator has the power to refuse to allow the evidence to be recorded considering that this effectively would mean a denial of a potential appeal. Finally, with respect to the cost of recording the evidence at a hearing, CAIRP believes that this cost should be borne by the OSB. In summary, CAIRP submits that the evidence should be recorded automatically at the OSB s expense at every hearing but that the party who requires a copy of the transcript could obtain it at its own cost.
Page 4 6. Role of the Adjudicator at the Pre-Hearing Conference. Section 22 indicates that the adjudicator presides at the pre-hearing conference. CAIRP respectfully submits that the most common approach is for a neutral, third party (perhaps someone who acts as an adjudicator in other OSB cases) to preside at the pre-hearing conference. Having the same person who will preside at the hearing also preside at the prehearing conference will, for all practical purposes, limit the pre-hearing conference to scheduling the hearing. Resolution and settlement discussions cannot fairly occur with the person who will preside at the hearing. For example, this will eliminate any admission of allegations, because that would taint the adjudicator if no agreement could be reached and the matter went to a hearing. The presiding officer at the prehearing conference should be a neutral individual who will not be adjudicating at the hearing. Many administrative tribunals have found pre-hearing conferences in which resolution discussions occur to be invaluable in resolving matters; it is in everyone s best interest to structure the pre-hearing conference in a way that will maximize its effectiveness. While the Directive only addresses hearing procedures, CAIRP respectfully suggest that some of these principles should in addition apply to its investigations. For example, frivolous and vexatious complaints should be screened out so as not to consume OSB resources or unnecessarily disrupt the practice of the Trustee. In addition, complaints should be clarified before the investigation commences so that the scope of the investigation is clear. Finally, the Trustee should be notified promptly (e.g., within 15 days) of any investigation so that he or she does not learn of it indirectly (e.g., through a witness approached by the OSB) and so that he or she can preserve evidence and record his or her recollection promptly. Other Suggestions to Improve the Directive CAIRP has a number of other suggestions that it is confident will enhance the Directive by clarifying its meaning and ensuring that a fair and efficient process respecting all principles of natural justice is followed: 1. Section 9(b) determines the powers of the adjudicator. Clarifying or correcting clerical-type errors is appropriate and standard practice for tribunals. However, the last phrase in the section: or otherwise requires clarification is outside the natural scope of such powers, in CAIRP s view. This could potentially lead to the interpretation or the perception that the adjudicator has the power to make substantive changes to the decision or reasons which undermines the very important principle of finality for adjudicative decisions. As an example, this wording could justify an adjudicator adding additional reasons once the losing party has filed an application to challenge the adjudicator s decision; something that would be inherently unfair. 2. Section 10(b) indicates that the summary of the oral evidence constitutes part of the registry. CAIRP strongly agrees with this principle and in addition submits that it is of the utmost importance that such a summary be neutral and accurately summarize the evidence in order to ensure that the right to challenge the decision is not
Page 5 compromised. CAIRP suggests that it reinforces our previous submission that the evidence actually be recorded automatically in every case. 3. Section 11 (and throughout the document). The passive voice is used throughout the document. A document, such as this, needs to be written in the active voice so that it is clear who has to do what. Section 11 is an example where the passive voice is used and it is not clear whether the author of the correspondence or the registry is responsible for sending the correspondence to the other parties. Another example of the use of the passive voice is Section 15 where it is again not clear who has to do what (in this case, serve the professional conduct report). 4. Section 13(b) should be reviewed to ensure that the wording is clear that any communication with the adjudicator, even if done in writing, is done through the registry and not directly to the adjudicator s home or office. 5. Section 15 requires service of the initiating document (currently the professional conduct report) to be only by a method that requires the signature of the Trustee. CAIRP submits that service by a process server should be added as another means of achieving service in order to prevent a trustee from frustrating the service by refusing to sign for the receipt of the document. 6. Section 16 specifies that the Trustee must request a hearing and failure to do so will mean that the hearing can proceed in the Trustee s absence based solely on the professional conduct report (Section 17). CAIRP recommends that the cover letter containing the professional conduct report state very clearly and prominently that if the Trustee does not respond within 30 days the hearing will proceed without him or her. Even if the Trustee does not respond, he or she should still be given notice of the upcoming hearing. 7. Section 19 describes the method of giving notice of a pre-hearing conference. CAIRP recommends that a subsection be added to indicate which party (i.e., the applicant, the Trustee, the adjudicator or a combination of them) can initiate the prehearing conference. CAIRP respectfully submits that the pre-hearing conference should be mandatory in every case (unless the adjudicator determines that it will not be useful) or, in the alternative, should be at the request of either party. 8. Section 22(g) determines the power of the presiding officer at a pre-hearing conference to make orders and give directions. This section should be removed, if the recommendation of separating the investigative and Prosecutorial Functions mentioned above is accepted. CAIRP reiterates that only the adjudicator should make orders or give directions. 9. Section 25 specifies the disclosure obligations of the parties. CAIRP recommends that the provision whereby any privileged information (e.g., discussions with one s lawyer, settlement proposals) need not be disclosed be clearly indicated within the Directive. While this is a basic legal principle, not everyone reading the Directive (e.g., a Trustee who is representing himself or herself) will interpret the current wording to reflect this legal principle.
Page 6 10. Section 27 determines the process with respect to agreed facts and recommendations. CAIRP submits that the adjudicator should be required to accept any agreed upon facts. The required acceptance of agreed upon fact is standard and it is inappropriate for an adjudicator to investigate facts on his or her own initiative where the parties have agreed to the facts. However, CAIRP submits that the adjudicator is not bound by recommendations by the parties (even though the case law indicates that the adjudicator should give great weight to joint submissions). CAIRP recommends that for better clarity, the section needs to be separated into two parts: one dealing with agreed facts and one dealing with joint recommendations. 11. Section 33 requires the party asking for an adjournment to consult with the other party prior to the presentation of the motion for adjournment. CAIRP respectfully submits and recommends that the adjudicator should be given some discretion for situations (e.g., a sudden death in the family) where prior consultation is not feasible. On behalf of all members of CAIRP, thank you again for the opportunity to participate in this consultation. If you or any member of your team has any questions regarding our submission, please do not hesitate to contact the undersigned. Yours truly, Guylaine Houle, BCL, FCIRP Chair