Décision

[1]           On appeal from the judgment rendered on July 6, 2015 by the Court of Québec, District of Montreal (the Honourable Diane Quenneville), dismissing Appellant’s motion to homologate a decision of the disciplinary committee of the Chambre de la sécurité financière.

[2]           For the reasons of Justice Schrager, with which Justices C. Gagnon and Marcotte concur, THE COURT:

[3]           GRANTS the de bene esse motion for leave to appeal without legal costs;

[4]           DISMISSES the appeal, with legal costs.

[5]           Appellant has appealed and sought leave de bene esse to appeal the judgment rendered on July 6, 2015 by the Court of Quebec, District of Montreal (the Honourable Diane Quenneville),[1] which dismissed Appellant's motion to homologate a decision of the disciplinary committee of the Chambre de la sécurité financière (the “Appellant").

[6]           The issue before this Court is whether a fine imposed by a professional disciplinary committee after the date of Mr. Thibault’s (the “Respondent") bankruptcy constitutes a claim provable in bankruptcy within the meaning of the Bankruptcy and Insolvency Act[2] ("BIA"). If the fine is a claim provable, Respondent would be discharged from the obligation to pay such debt by the effect of his bankruptcy.

FACTS

[7]           It is not contested that Respondent was at the relevant times subject to Appellant's disciplinary jurisdiction. On March 14, 2011 a disciplinary complaint was lodged against Respondent before the disciplinary committee of the Appellant.

[8]           The hearing was held on October 17, 18 and 20, 2011 and February 6, 2012. At the commencement of the hearing, Respondent's attorney filed a written plea of guilty to certain of the counts of the complaint, conditional on other counts being withdrawn. The committee, relying on dicta of this Court[3] refused to find Respondent guilty because he did not admit the facts alleged and that gave rise to the complaint. His attorney then left the room and the proceedings continued by default.

[9]           On the following day, the Respondent appeared with his attorney with a view to pleading guilty. According to the decision of the disciplinary committee,[4] in answer to the committee's questions, the Respondent did not admit the essential elements of the offences charged and so the committee, once again, refused the Respondent's guilty plea. Respondent and his attorney then left and the hearing continued in their absence.

[10]        After the presentation of the proof was completed, the parties were reconvened for argument on February 6, 2012 and Respondent's attorney made submissions based on the Quebec Charter of Human Rights and Freedoms.[5]

[11]        The disciplinary committee issued its decision on October 15, 2013, dismissing the Charter arguments and finding Respondent guilty of various (but not all) counts as charged and convening the parties to a hearing to make submissions on the sanction to be imposed. This hearing took place on February 26, 2014 and on July 2, 2014 a decision issued imposing fines aggregating $18,000 and a condemnation for costs as well as suspensions.

[12]        In the interim, on November 1^st, 2012, Respondent filed a voluntary assignment in bankruptcy from which he was eventually discharged on November 24, 2014.

[13]        The fines and costs have not been paid so that Appellant has sought enforcement through a homologation motion. That motion was dismissed by the judge who decided that Respondent was discharged from the debt by the effect of the bankruptcy. The judge held that the fines and costs constituted a claim provable in bankruptcy as described in Section 121 BIA since the hearing before the disciplinary committee took place prior to the date of the bankruptcy and the monetary sanction was imposed prior to Respondent's discharge from that bankruptcy.

[14]        The judge reasoned that the obligation to pay the fine was incurred prior to Respondent’s discharge so that it is a claim provable. In so stating the judge erred in law by misreading Section 121(1) BIA (quoted at length below), which requires that for a claim to be provable, the bankrupt must be subject to it prior to discharge by reason of an obligation incurred prior to bankruptcy. This error however does not determine the result as a correct reading of Section 121(1) BIA leads to the same conclusion as that reached by the judge, given the uncontested facts of this case.

[15]        For the reasons which follow, I propose to grant the de bene esse motion for leave to appeal. As will become evident in the following discussion, the issue arising from the facts and the subtleties of the recent jurisprudence of the Supreme Court of Canada dictate that the case be heard by this Court. However, I will also propose that the appeal be dismissed.

POSITION OF THE APPELLANT

[16]        Appellant contends that Respondent was not liable for the fines and costs until the decision imposing them was rendered, i.e. after the date of the bankruptcy. Appellant adds that contrary to that which is the case concerning future obligations of a contractual or extra-contractual nature, a debt arising from the contravention of professional standards comes into existence only when the fine is imposed and not when the offence occurs. Prior to such time, any monetary sanction is hypothetical since the disciplinary committee may acquit or, if it convicts, may impose a non-monetary penalty. Appellant thus concludes that given the uncertainty that a monetary penalty would be imposed, the claim was not sufficiently probable at the date of the bankruptcy to bring it within the definition of a claim provable under the BIA.

DISCUSSION

[17]        Section 178 (2) BIA establishes the principle that "… an order of discharge releases the bankrupt from all claims provable in bankruptcy."

[18]        It is common ground that none of the exceptions enumerated in Section 178 (1) BIA are applicable to this case and particularly the exception set forth in Section 178 (1) (a) BIA for fines and penalties. The Court has determined that this subsection does not refer to fines imposed by a professional disciplinary committee so that they are not excepted from the general rule.[6]

[19]        Sub-Section 121(1) BIA describes "claims provable" as follows:

[20]        It has been stated that in order to come within the definition of “claim provable”, the existence of the debt must be, at the date of the bankruptcy, probable and not hypothetical, or not too remote or speculative, as Appellant submits.[7]

[21]        In Chambre de la sécurité financière c. Harton,[8] this Court, citing the authors Houlden and Morawetz, noted that in order to satisfy Section 121 BIA, a future claim (i.e. not actually payable on the date of the bankruptcy) must not be too remote or speculative[9] while underlining that the purpose of Section 121 BIA is to include, as far as possible, every kind of claim so that upon discharge the bankrupt is in a position to make a fresh start. Rehabilitation of the debtor is recognized as a fundamental purpose of bankruptcy legislation.[10]

[22]        In the Harton judgment, this Court cited at length, with approval, the reasons of the judge of the Court of Quebec in Association des courtiers & agents immobiliers du Québec c. Fuoco,[11] a decision in which a monetary penalty imposed by a disciplinary committee after bankruptcy was held not to constitute a claim provable because its imposition was only hypothetical at the date of the bankruptcy and the professional could have been acquitted or, if found guilty, subjected to a non-monetary penalty. This is in essence, Appellant's argument before us. This Court decided in Harton that, because no disciplinary complaint had yet been lodged by the Appellant on the date of the bankruptcy, it was not sufficiently probable that the bankrupt was subject to such claim on the date of the bankruptcy. Accordingly, the Court concluded that the fine was not a claim provable in bankruptcy. I would add that in Fuoco, the professional was charged and pleaded guilty to disciplinary offences approximately one year after his discharge from bankruptcy and two years after the commencement of the bankruptcy. It was only the facts giving rise to the offences charged which had occurred prior to the date of the bankruptcy.[12]

[23]        The situation presented by the case at bar is significantly different from the fact patterns in Harton and Fuoco. As set forth above the facts giving rise to the complaint, the commencement of the disciplinary proceeding, the hearing and the offer to plead guilty all occurred before the date of the bankruptcy. That the committee chose not to accept the guilty plea because it felt that Respondent had not sufficiently acknowledged the facts alleged, does not change the fact that the plea could have been accepted and the penalty could have been imposed prior to bankruptcy so that Respondent could have been subject to the claim as at the date of the bankruptcy, or could have become subject to the claim prior to his discharge, to borrow the wording of Section 121 BIA. It was not hypothetical but rather, probable in October 2011 (at the commencement of the hearing) that Respondent would be found guilty given his plea and absence of contestation. Thus, the imposition of some penalty was not hypothetical or remote at the date of the bankruptcy so that the monetary penalties are a claim provable. The judgment is not erroneous in concluding that, given the chronology of events, particularly that the fines were imposed before the discharge from bankruptcy, the debt was one "to which the bankrupt was subject before the bankrupt's discharge by reason of any obligation incurred before bankruptcy", again to borrow the wording of Section 121 BIA.

[24]        Appellant has attempted to avoid this wording by suggesting that it applies to contractual or even extra-contractual liability but not to statutory liability in the nature of a sanction for a disciplinary matter. I disagree. The committee could have concluded that Respondent was guilty and imposed a penalty at or shortly following the initial hearing date (i.e. prior to the bankruptcy). In any event, I do not see a fundamental difference between this situation and one reflected in the cases where potential liability from litigation pending at the day of the bankruptcy was considered a provable claim;[13] or where a conditional contractual obligation becomes absolute immediately after bankruptcy;[14] or when a penal clause is triggered after bankruptcy but before discharge pursuant to a contract entered into prior to bankruptcy.[15] All these situations reflect obligations for which the debtor was liable prior to bankruptcy but crystallized after the date of the bankruptcy.

[25]        In Lotfi c. Québec (Procureur général)[16], referred to in Harton, a guarantor was bound conditionally for certain sums in virtue of an immigration sponsorship contract signed before bankruptcy but would only become liable to pay when and if the conditions stipulated in the contract were realized. This occurred after bankruptcy and was claimed from the sponsor after his discharge from bankruptcy. The Superior Court[17] found that since the indebtedness was conditional (as to its existence) and uncertain (as to the amount), it was not sufficiently probable to constitute a claim provable. While dismissing the appeal on other (procedural) grounds, our Court added that the debtor did not become liable to pay the amounts in question until they were claimed which occurred after his discharge from bankruptcy so that they did not constitute claims provable. This is not the case at bar where the penalties were imposed prior to discharge. The Court added that Re Schacter[18] did not apply. That was a case where an amount coming due after bankruptcy under a penal clause triggered after the bankruptcy but before discharge pursuant to a contract signed prior to bankruptcy was deemed a claim provable. Such a situation (Re Schacter) is analogous to the present one as I have indicated above.

[26]        In all cases, an inquiry should be made as to when the obligation was incurred. In this case, I believe the date was the hearing date when Respondent indicated that he was pleading guilty. However, even if that were not the precise date when the obligation was created, I believe that the long delay of the committee in rendering a decision finding Respondent guilty and then imposing the monetary sanction is relevant in determining that the fines imposed were claims provable. In this respect, the decision of the Supreme Court of Canada in Newfoundland and Labrador v. AbitibiBowater Inc.[19] is relevant. Speaking through Justice Deschamps, the Court indicated that, in order to determine whether a claim is a claim provable, a factual inquiry is required to determine whether the conditions for the inclusion of the claim as a claim provable are met.[20] Thus, in this case, it is facile to say that the fines had not yet been imposed on the date of the bankruptcy. The appropriate factual inquiry is whether, at the date of the bankruptcy, the conditions were met in order to affirm that a sanction would probably be imposed. In Harton (decided years prior to Abitibi) it could be said that the condition was not met. In the present case, not only was the hearing held before bankruptcy but the Respondent indicated that he would plead guilty thus making himself liable to a penalty. Once the committee would not accept his guilty plea, Respondent presented legal arguments based on the Charter, but that too occurred eight months prior to the bankruptcy. It is true that the imposition of a fine, as opposed to a purely non-monetary penalty, was discretionary. However, it is not erroneous to consider the imposition of a fine probable or at least more than hypothetical as at the date of the bankruptcy. As such, no palpable error of fact or mixed fact and law appears from the judgment of the Court of Quebec despite the judge’s inaccurate reading of Section 121(1) BIA.

[27]        One last point merits mention with regard to the lapse of time between the hearing and attempt to plead guilty (October 2011) and the decision (October 2013) and the imposition of the fines (July 2014). In Abitibi, the environmental regulatory body in Newfoundland issued environmental remediation orders against AbitibiBowater after its insolvency filing under the CCAA. The litigation focused on whether any of the claims were monetary and, if so, whether they arose prior to the insolvency filing so as to be characterized as claims provable. The industrial installations in respect of which the orders were issued had been closed and the contamination was known to the government prior to the insolvency filing, yet the orders were only issued after the insolvency filing. Justice Deschamps said this:

[37]      The exercise by the CCAA court of its jurisdiction to determine whether an order is a provable claim entails a certain scrutiny of the regulatory body's actions. This scrutiny is in some ways similar to judicial review. There is a distinction, however, and it lies in the object of the assessment that the CCAA court must make. The CCAA court does not review the regulatory body's exercise of discretion. Rather, it inquires into whether the facts indicate that the conditions for inclusion in the claims process are met. For example, if activities at issue are ongoing, the CCAA court may well conclude that the order cannot be included in the insolvency process because the activities and resulting damages will continue after the reorganization is completed and hence exceed the time limit for a claim. If, on the other hand, the regulatory body, having no realistic alternative but to perform the remediation work itself, simply delays framing the order as a claim in order to improve its position in relation to other creditors, the CCAA court may conclude that this course of action is inconsistent with the insolvency scheme and decide that the order has to be subject to the claims process. Similarly, if the property is not under the debtor's control and the debtor does not, and realistically will not, have the means to perform the remediation work, the CCAA court may conclude that it is sufficiently certain the regulatory body will have to perform the work.

[28]        Drawing on this by analogy, I am of the view that Respondent should not be deprived of his discharge because the disciplinary committee delayed conviction and sentencing for a period exceeding two years in a matter which was not contested on the facts and where at the outset the Respondent indicated that he would plead guilty. The matter could and should have been disposed of in a more timely fashion which would have obviated the debate before us.

[29]        The obligation was "incurred" before bankruptcy and the fines were imposed prior to discharge. This, as indicated by the Supreme Court of Canada, is a factual inquiry.[21] On the uncontested facts in this case, it cannot be said that there is reversible error. There is thus no justification for appellate intervention.

[30]        Accordingly, I propose that though the motion for leave to appeal should be granted (without legal costs), the appeal should be dismissed with legal costs.