Impact Tool & Mould Inc. (Re)

Impact Tool & Mould Inc. (Re) Collection Decisions of the Court of Appeal Date 2006-03-15 Docket numbers C42042 Judges Simmons, Janet M.; Blair, Robert Ashley; Rouleau, Paul S. Subject Civil Decision Content DATE: 20060315 DOCKET: C42042 COURT OF APPEAL FOR ONTARIO SIMMONS, BLAIR and ROULEAU J.J.A. IN THE MATTER OF THE BANKRUPTCY OF IMPACT TOOL & MOULD INC., OF THE CITY OF WINDSOR B E T W E E N : BDO DUNWOODY LIMITED, TRUSTEE OF THE ESTATE OF IMPACT TOOL & MOULD INC., A BANKRUPT Appellant Frank Bennett, for the appellant - and - DOYLE SALEWSKI INC., in its capacity as Court-Appointed Interim Receiver of IMPACT TOOL & MOULD INC., IMPACT TOOL & MOULD (WINDSOR) INC. and THE SUPERINTENDENT OF BANKRUPTCY Respondents Ronald G. Slaght and Dena Varah, for the respondent Impact Tool & Mould (Windsor) Inc. No one appearing for Doyle Salewski Inc. or for the Superintendent of Bankruptcy Heard: November 9, 2005 On appeal from the order of Justice S. Rogin of the Superior Court of Justice, dated March 29, 2004, affirming the order of Deputy Registrar in Bankruptcy R. Stevens dated October 10, 2003. R.A. BLAIR J.A.: Background [1] The issue on this appeal is whether, and if so to what extent, the court may restrict the ability of a trustee in bankruptcy to provide the inspectors and creditors of the bankrupt estate with access to, or information from, the books, records and other documents of the bankrupt where there is a concern that the inspectors or creditors may use the information they obtain for purposes collateral to the administration of the bankrupt estate. [2] Underlying the appeal is the following commercial dynamic. The bankrupt, Impact Tool & Mould Inc., and its largest unsecured creditor, Unique Tool & Gauge Inc., were rivals. Each engaged in the highly competitive business of manufacturing plastic injection moulds in the Windsor area. The purchaser of Impact Tool’s assets and undertaking, Impact Tool & Mould (Windsor) Inc. – a company owned and controlled by the same three principals who owned and controlled Impact Tool – continues to carry on its same business out of the same premises and in the same fashion. [1] [3] Unique obtained a judgment against Impact Tool, which with interest and costs, now stands at over $600,000. Impact Tool became insolvent as a result of the judgment and other financial difficulties that it was experiencing. Faced with this situation, two of the company’s shareholders (who were also secured creditors) arranged for a court-appointed interim receiver to be put in place and approximately a month later the company’s assets were sold, again with court approval, to Impact Tool & Mould (Windsor). Immediately after the asset sale was completed, the interim receiver assigned Impact Tool into bankruptcy. [4] Four inspectors were appointed in the bankruptcy proceedings. Kevin O’Brien, a representative of Unique, was one of them. Impact Tool (Windsor), and the three former principals of Impact Tool, demonstrated a marked reluctance to cooperate with the Trustee in bankruptcy in providing access to and producing the books, records and other documents of the bankrupt (“the Documents”) [2] . The interim receiver, in whose possession many of the Documents remained, adopted their position. This reluctance was based upon the concern of the purchaser – founded on an earlier incident in the interim receiver proceedings – that Mr. O’Brien and Unique would use the information they obtained in Mr. O’Brien’s capacity as inspector for their own competitive purposes rather than for purposes of the administration of the bankrupt estate. As the purchaser of the assets and undertaking of the bankrupt, Impact Tool (Windsor) was obviously anxious to protect its investment and the confidential competitive information of Impact Tool underlying that investment. [5] As a result of these difficulties, the Trustee applied to the Deputy Registrar for an order requiring the interim receiver and Impact Tool (Windsor) to produce the Documents. The Trustee also sought an order permitting it to share with, disclose and distribute to the inspectors the information that it acquired in its review of those materials, and that it be at liberty to report to the creditors in the normal course, without any restrictions in relation to the knowledge it acquired in its review of the Documents. [6] The Deputy Registrar made an order that the Documents be produced to the Trustee, but he restricted the Trustee from providing them to the inspectors and creditors of the bankrupt estate without further order of the court on notice to Impact Tool (Windsor). Justice Rogin, the appeal judge, upheld the decision of the Deputy Registrar, concluding that the order was reasonable and that it properly balanced all the competing interests and addressed the privacy issues at play. [7] The Trustee appeals the restrictive nature of the orders below. [8] In my view, the appeal must be allowed. Respectfully, the Deputy Registrar and the appeal judge erred in principle in precluding the inspectors and creditors from having access to the Documents in the circumstances of this case. In brief, the Deputy Registrar and the appeal judge confused two important concepts, namely, access by the inspectors and Trustee to the Documents of the bankrupt – which they require in order to carry out their essential functions that lie at the heart of the regulatory scheme under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (“ the BIA”) – and the use to which the inspectors and creditors may put the information they acquire. It is permissible to restrain the latter. Generally, however – and except in the rarest of cases – inspectors, in particular, and the creditors they represent, should not be barred from access to the bankrupt’s documents. Other controls, such as orders restraining the use to which the documents may be put or, in proper circumstances, removing the offending inspector, will normally suffice to protect other interests that need protection. [9] My reasons for this view follow. Facts [10] Impact Tool operated as a tool and mould shop, manufacturing plastic injection moulding in the Windsor area. Its directors, officers and shareholders were Jeff Andrews, Roberto Santarossa and John Sabelli. [11] In 2002, Impact Tool was experiencing financial difficulties. In January of that year, Unique obtained its judgment. An appeal was unsuccessful. In the meantime, judgment debtor proceedings occurred, and in the course of those proceedings Impact Tool refused to release certain financial information and trade-related reports to Unique. It did so on the ground that the information would provide Unique with a competitive advantage. Unique moved for production, and in January 2003, Brockenshire J. ordered the documents to be produced unless Impact Tool deposited sufficient funds to pay an independent expert to examine them and to report to Unique’s counsel “but bearing in mind the continuing interest of [Impact Tool] in protecting proprietary information not directly relevant to the issues on a judgment debtor examination”. Impact Tool deposited the funds. [12] In March 2003, however, Andrews and Santarossa – as secured creditors of Impact Tool – requested the court to appoint the respondent, Doyle Salewski Inc., as interim receiver of the company. Patterson J. granted the order, effective March 10. The interim Receiver took possession of the property, assets and undertaking of Impact Tool, and continued to operate it as a going concern. As part of this process, the interim receiver took possession of the Documents. [13] On April 23, 2003, Brockenshire J. granted an order approving the sale of Impact Tool’s undertaking and assets to Impact Tool (Windsor) for a purchase price of approximately $4.8 million. As noted earlier, Andrews, Santarossa and Sabelli are also the shareholders, directors and officers of Impact Tool (Windsor). The sale transaction was completed on May 15, 2003. [14] On May 20, 2003, the interim receiver assigned Impact Tool into bankruptcy – a move clearly contemplated in advance as part of the process of reorganizing the Impact Tool business. The appellant, BDO Dunwoody Limited (which had been advising Unique in the receivership process), was appointed the Trustee in bankruptcy. By all accounts Unique is funding the bankruptcy. [15] At the first meeting of creditors, four inspectors were appointed. One of those inspectors, Mr. O’Brien, is a representative of Unique. [16] When the Trustee sought production of the bankrupt’s Documents, the competition/confidentiality issue resurfaced. Driven by the concerns of the purchaser and its principals that Unique, through its representative O’Brien, would misuse information that O’Brien would obtain in his capacity as inspector, both the interim receiver and Impact Tool (Windsor) resisted production. There is extensive correspondence on the record about this. Before the closing of the sale transaction, Unique’s solicitors wrote to the interim receiver requesting that it protect the Documents of Impact Tool for review by the Trustee, once appointed. The interim receiver took the position that the Trustee would only be provided with the information requested if it gave an undertaking not to disclose anything except the books records and documents relating to Impact Tool’s accounting and bookkeeping. Eventually, the Trustee provided such an assurance, without prejudice to its right to move before the court for directions. [17] In due course, the Trustee did bring its motion and, as indicated at the outset of these reasons, the Deputy Registrar made the order directing that the Documents be produced to the Trustee, but prohibiting the Trustee from disclosing them to the inspectors or creditors without further court order. Analysis [18] The central issue on this appeal is the extent to which, if at all, restrictions may be placed on the ability of a trustee in bankruptcy to provide inspectors and, to a lesser extent, creditors with access to the books, records and documents of a bankrupt. The case does not involve the production of documents that belong to third parties (such as the purchaser here, or the solicitors or auditors of the bankrupt). [19] The Deputy Registrar’s decision to prohibit such access was premised upon the concerns of the pre-bankruptcy purchaser of the bankrupt’s assets and undertaking. The concerns were that the inspector, Mr. O’Brien, had previously used Impact Tool-related customer information obtained from the interim receiver’s first report in an attempt to dissuade customers from doing business with Impact Tool prior to the asset sale, and therefore – presumably, it seems – that he would abuse his position as inspector in the bankruptcy to make collateral use of information again for purposes extraneous to the administration of the bankruptcy. This would enable his company – the creditor and competitor, Unique – to steal a competitive advantage on the new purchaser’s business. In this case, the asset purchase was not at arms length, but it was nonetheless sanctioned by a court order from which no appeal has been taken. The principles at play are equally applicable, it seems to me, to a situation where the insolvent company’s assets have been acquired by a third-party purchaser for value. [20] There was some evidence to support the conclusion that during the interim receivership, after receiving a copy of the interim receiver’s first report, Mr. O’Brien had contacted at least two of Impact Tool’s suppliers, disparaging Impact Tool, encouraging the suppliers to put the company on a C.O.D. basis, and expressing disappointment that they continued to do business with it. Mr. Santarossa and Mr. Doyle (representing the interim receiver) certainly took from this intelligence that Mr. O’Brien and Unique were using information obtained through the interim receivership in order to gain a competitive advantage in the market place. There is no direct evidence linking Mr. O’Brien’s alleged contacts with the suppliers to his access to the interim receiver’s report, but even if the allegations are true, it is not proof that he would necessarily flout his fiduciary duties to the general body of creditors and his statutory obligations as an inspector of the bankrupt estate, once those responsibilities were explained to him. [3] [21] I have a more substantial difficulty with the order of the Deputy Registrar and the affirming order of the appeal judge, however. Respectfully, they are founded on an error in principle. [22] As a general rule the inspectors and creditors of a bankrupt estate are entitled to access to the books, records and documents of the bankrupt because they require that access to be able to carry out their important functions under the bankruptcy legislation. The use to which they may put the information obtained through that access is restricted to matters relating to the administration of the bankrupt estate. In focusing on whether the inspectors and creditors should be denied access to the Documents, rather than on whether the problem he faced could have been resolved by restraining the use to which the inspectors and creditors could put the information they obtained, the Deputy Registrar lost sight of this guiding principle. He was wrong in doing so. [23] I have come to this conclusion for the reasons that follow. In analyzing the proper approach to be taken to the type of problem the Deputy Registrar faced, there may be some distinction between the position of inspectors and that of the creditors, however. I shall therefore deal with the case of inspectors and creditors separately. Inspectors [24] Because of the scheme of the bankruptcy regime, and the distinct role and responsibilities of inspectors in it, considerations governing the production of the bankrupt’s documents to them differ from the normal considerations concerning the production of private and confidential documents, and the protection of third party interests, in a lawsuit. I would not say there can never be situations where an order prohibiting access to inspectors might be appropriate, but such circumstances will, of necessity, be rare. Here, there was no suggestion that the Documents sought by the Trustee were not relevant to the inspectors’ duties. [25] In my opinion, the proper approach to the conflict facing the Deputy Registrar was to recognize the general rule outlined above and to ask, not whether the inspectors should be deprived of access to the bankrupt’s documents, but whether the circumstances require them to be restrained in the use to which they may put them (or, if appropriate, to consider whether they should be removed as inspectors). That was not the approach followed in this case, however. [26] A brief examination of the role and responsibilities of inspectors in the bankruptcy scheme underscores the reason for the different approach in principle that I favour. [27] Apart from its rehabilitative goals with respect to personal bankrupts, the purpose of a bankruptcy is to gather in and realize upon the assets of the bankrupt and to distribute those assets amongst the creditors on an equitable basis, subject to their priorities. In that sense, bankruptcy is a creditor-driven process, with the creditors pursuing their claims by collective action through the trustee in bankruptcy: see Dartmouth (City) v. Barclays Bank of Canada (1996), 40 C.B.R. (3d) 1 (N.S.C.A.). The inspectors – appointed by the creditors under s. 116 of the BIA – are the creditors’ representatives in this exercise. [28] The inspectors’ role is integral to the operation of the bankruptcy regime. As the creditors’ representatives in the administration of the bankrupt estate, they owe a fiduciary duty to the general body of creditors, collectively: Re Bryant, Isard and Co; Ex parte Higginson (1923), 4 C.B.R. 41 (Ont. S.C.). While the trustee in bankruptcy is vested with the assets of the bankrupt and is responsible for the day-to-day administration, it is the inspectors who have the primary supervisory role in the administration of the bankrupt estate. They have an obligation to be proactive and to keep watch on the trustee to ensure that assets are realized to the best advantage of the estate: Taylor v. Davies, (1919), 51 D.L.R. 75 (P.C.); Re Paul-Emile Roy Inc. (1968), 13 C.B.R. (N.S.) 244 (Que. S.C.). In Re Fishman (1985), 56 C.B.R. (N.S.) 316 (Ont. S.C. in Bankruptcy) at 317, Henry J. said: The inspectors are the supervisors of the trustee and it is their function to instruct the trustee to take whatever steps they consider appropriate in order to protect the estate and the creditors. [29] Earlier, in Re Hess (1977), 23 C.B.R. (N.S.) 215 (Ont. S.C. in Bankruptcy), Henry J. had outlined the role of the inspectors in more detail. At p. 217 he said: [The general duty of the trustee] is to get in and administer the estate for the benefit of the creditors. Many of the duties he performs under statutory authority alone. In matters of judgment, where the interests of the estate and creditors may be adversely affected, he is required to obtain the permission of the inspectors, as for example in the matters set out in s. 14 of the Act, [4] which is not exhaustive. The inspectors of the estate are also statutory officials appointed under s. 94 of the Act. [5] They represent the interests of the creditors. They must be and must act independently of the trustee in the sense that they are not in a conflict of interest with the affairs of the estate, especially as to the matters set out in s. 94. They are required to supervise the trustee’s administration of the estate generally and in matters specified in s. 14 of the Act and elsewhere. The inspectors are themselves subject to control and direction by the creditors by virtue of s. 94(9). The fundamental concept is that the creditors are the final supervising authority in the administration of the estate, the inspectors represent their interest, the trustee’s conduct is supervised by both; the overall administration of the estate is subject to the supervision of the superintendent by s. 5; in cases of dispute or doubt the court is resorted to for adjudication or direction for the purpose of the proper application of the law [emphasis added]. [30] Although there is no specific provision in the bankruptcy legislation giving inspectors the general supervisory powers referred to above, the propositions arise from the scheme of the legislation and from the many and varied powers and supervisory duties invested in the inspectors throughout the BIA. The general nature of the inspectors’ pivotal supervisory role is well-embedded in the jurisprudence. In addition to the foregoing authorities, Masten J.A. put the position very succinctly in Re Feldman (1932), 13 C.B.R. 313 (Ont. S.C., App. Div.), at 314: In other words the whole scope and foundation of The Bankruptcy Act is that in the practical administration of the estate of the bankrupt the governing authority shall be the inspectors and not the Court, the inspectors being practical men named by the creditors, and unless it is shown they are acting fraudulently or in some way not in good faith for the benefit of the estate, the administration of the affairs of the estate is to be governed according to their directions. [underlining added] This passage was approved by this court in Re Rizzo & Rizzo Shoes Limited (1998), 38 O.R. (3d) 280 (C.A.), per Charron J.A. at 287. See also Re Melnitzer (1991), 9 C.B.R. (3d) 30 (Gen. Div. in Bankruptcy). [31] A review of the BIA reveals a wide variety of inspector powers and responsibilities that underpin this overarching supervisory role. For instance, s. 30 gives the trustee a broad list of powers that are essential to the administration of the bankrupt estate, but which can only be exercised with the permission of the inspectors. These powers include the power to sell, lease, carry on the bankrupt’s business as a going concern, institute or defend litigation, and settle debts owing to the bankrupt or any claims made by or against the estate. Proposals in bankruptcy must be approved by the inspectors: s. 50(3). The trustee in bankruptcy must call a meeting of creditors if requested to do so by a majority of inspectors and if the trustee fails to do so a majority of the inspectors may convene such a meeting themselves: s. 103. Section 119 mandates that the trustee “shall have regard to any directions that may be given by resolution of the creditors at any general meeting or by the inspectors” [6] . [32] The duties imposed upon inspectors by subsections 120(3) and (4) of the BIA bear citing in full: 120(3) The inspectors shall from time to time verify the bank balance of the estate, examine the trustee’s accounts and inquire into the adequacy of the security filed by the trustee and, subject to subsection (4), shall approve the trustee’s final statement of receipts and disbursements, dividend sheet and disposition of unrealized property. (4) Before approving the final statement of receipts and disbursements of the trustee, the inspectors shall satisfy themselves that all the property has been accounted for and that the administration of the estate has been completed as far as can reasonably be done and shall determine whether or not the disbursements and expenses incurred are proper and have been duly authorized, and the fees and remuneration just and reasonable in the circumstances [underlining added]. [33] How can inspectors carry out their overall supervisory role in the administration of the estate, and the specific duties assigned to them, without access to the bankrupt’s books, records and documents? How, in particular, can they “satisfy themselves that all the property has been accounted for and that the administration of the estate has been completed as far as can reasonably be done”? The answer is that they cannot. That is why, in my respectful view, the broad limit to access imposed by the order of the Deputy Registrar and the order of the appeal judge upholding it cannot stand. [34] At the same time, the jurisprudence is clear that inspectors have a fiduciary duty to the body of creditors generally, as well as the statutory duties imposed under the legislation. Inspectors must perform their duties impartially and in the interests of the creditors who appoint them: Re Bryant, Issard & Co.; ex parte Higginson, supra. They may not use their position as inspector for purposes extraneous to the administration of the bankruptcy. It follows that access to the books, records and documents of the bankrupt must not be used for any such extraneous purposes. See Re Taylor Ventures Ltd. (1999), 9 C.B.R. (4th) 136 (B.C.S.C.); GMAC Commercial Credit Corp.- Canada v. TCT Logistics Inc. (2002), 37 C.B.R. (4th) 267 (Ont. Sup. Ct., Comm. List). [35] The respondents rely heavily upon Taylor Ventures and GMAC in support of the Deputy Registrar’s order. Neither case stands for the proposition that the bankrupt’s books, records and documents may be withheld from the inspectors, however. In addition, both are distinguishable on the basis that each involved the production of third party documents and not the books, records and documents of the bankrupt itself [7] . [36] In Taylor Ventures, Burnyeat J. applied what in my view is the proper approach to addressing a problem of the type confronting the Deputy Registrar here. He granted the Trustee and the inspectors “complete and unrestricted access” to all of the Taylor files received from the former solicitors of the bankrupt (to which privilege did not attach), but ordered that “they may use those files and the information contained [in them] only in relation to the affairs of the Bankrupt” (para. 34). [37] Farley J. did not apply Taylor Ventures to preclude inspectors from having access to the documents of the third party auditors in GMAC. In fact, he said he agreed with Burnyeat J.’s analysis. He ordered that the documents be produced to the trustee, but limited the trustee’s right to provide access to the creditors in that case. I shall return to GMAC in relation to creditors in a moment. [38] The respondents rely upon two additional authorities – Re Hickman Equipment (1985) Ltd., (2003), 44 C.B.R. (4th) 82 (Nfld. Sup Ct – TD in Bankruptcy), and Re St. Anne-Nackawic Pulp Co., (2005), 8 C.B.R. (5th) 142 (N.B.Q.B. in Bankruptcy). Like Taylor Ventures and GMAC, however, these cases do not relate to access to the documents of the bankrupt, but rather to auditors’ files and papers. I need not deal with them further. Suffice it to say that, to the extent they suggest that inspectors and creditors may be denied access to the bankrupt’s documents rather than being subject to restrictions of the use to be made of such documents, I prefer the approach articulated here. [39] The Deputy Registrar alluded to the possibility – asserted by counsel – that once the information has been released to the inspectors the phrase “let the cat out of the bag” may have application, in terms of inappropriate extraneous use that may be made of the information. I am satisfied, however, that the imposition of a restraining order on the use that may be made of information obtained is an adequate remedy in most cases. First, I am not prepared to assume as a default position, that individual inspectors will readily ignore their statutory and fiduciary obligations to use the information they receive only for purposes of administration of the estate or, when faced with a direct restriction compelling them to do so, they will be unable or unwilling to abide by it. Secondly, injunctive orders are commonly employed to prevent and control the misuse of confidential proprietary information in commercial competition cases. They are binding not only on the parties, but also on those who have knowledge of the order. They are effective and they may be enforced by the court’s contempt powers. [40] Moreover, there is an additional remedy available. Section 116(5) of the BIA provides for the removal and replacement of inspectors, at the instance of the trustee or a creditor. It is true that in this particular case Impact Tool (Windsor) is not a creditor of the bankrupt and therefore could not resort to s. 116(5). However, I note that both Messrs. Andrews and Santarossa are. Nonetheless, a party in the position of Impact Tool (Windsor) is not without a remedy in such circumstances. It can request the trustee to bring such an application and, if the trustee refuses, attack the trustee’s decision under s. 37, which enables the bankrupt, a creditor, or “any other person” aggrieved by a decision of the trustee to appeal to the court. [41] In summary, then, it is generally an error to preclude the inspectors in a bankruptcy from having access to the books, records and other documents of the bankrupt. To do so is to undermine their ability to carry out their functions under the bankruptcy scheme and legislation. Inspectors owe a fiduciary duty to the general body of creditors, and as a result – amongst other things – they may only use their access to the books, records and documents for purposes relating to the administration of the estate. They may be restrained from improperly using the information they obtain for collateral purposes, or they may be removed as inspectors, in appropriate cases. I am satisfied that these latter remedies provide adequate protection from the misuse of such information in most cases, without undercutting the inspectors’ ability to perform their statutory functions. Creditors [42] Creditors stand on a somewhat different footing, which may justify a more flexible approach, in some circumstances, to the general rule in favour of access. [43] For instance, in GMAC Farley J. restricted the trustee’s right to provide access to the documents in question to creditors. The facts were different from those of the present case, though. In GMAC the creditors had made it clear that they wished to have access to the auditor’s working papers in order to determine whether they (as opposed to the bankrupt company) might be able to advance a claim for auditors’ negligence outside of the bankruptcy. Thus, their motive was clear. They were not seeking access in order to exercise their duties under the BIA. The thrust of Farley J’s decision is found in the following comment, at para 13: In my view it would be inappropriate to allow these creditors here in their individual persona capacities to piggyback upon the Trustee’s s. 164 examination to get a leg up in non-bankruptcy litigation. [44] I agree. In such circumstances, I do not see anything wrong with limiting the access of creditors to the documents as long as the ability of their representatives, the inspectors, to carry out their functions in relation to the administration of the estate is not hampered. [45] While the bankruptcy process is creditor-driven, and while the creditors ultimately give directions to, and control, the trustee and the inspectors, creditors have more rights than duties under the bankruptcy scheme. They do not owe fiduciary duties to anyone in relation to the bankrupt estate and they do not have the same sort of statutory obligations with respect to the administration of the estate that the trustee and their representatives in the administration of the estate, the inspectors, have. This makes their position somewhat different than that of the inspectors in terms of needing access to the bankrupt’s documents in order to carry out their functions in the Act. Creditors are undoubtedly precluded from using, for purposes extraneous to the administration of the bankruptcy, any information they receive in their capacity as “the final supervising authority in the administration of the estate” [8] . That restriction may be founded more on an implied obligation not use the information they receive in that fashion – similar to the implied obligation that arises respecting production in civil proceedings – than on a statutory or fiduciary obligation, however. [46] For purposes of this appeal, I need not decide the rationale for the creditors’ restriction on the use of information or the issue of the extent to which creditors may be excepted from the general rule in favour of permitting access to the books, records and documents of a bankrupt. I note that, although the order of the Deputy Registrar deprived Impact Tool’s creditors of access to the Documents, the Trustee had not specifically requested an order allowing them access. It sought an order permitting it to report to the creditors in the normal course, without restrictions based upon what it learned in its review of the Documents. I am satisfied that the record before the Deputy Registrar in this case did not justify denying the Trustee the right to report to the creditors in that fashion. Standard of Review [47] Before the appeal judge the parties agreed that the standard of review of the Deputy Registrar’s decision was reasonableness. The appeal judge concluded that the decision was reasonable because there was evidence upon which the Deputy Registrar could have made his decision and because he addressed the issues of privacy and balanced all competing interests. The respondent argues this standard continues to apply. [48] I disagree. “Reasonableness” in this sense is a standard that is applied in the administrative law context. The Deputy Registrar in bankruptcy is not an administrative tribunal. Although not a judge, he or she exercises a judicial function in deciding issues such as those arising in this case. Applying the patently unreasonable/reasonable/correct spectrum that constitutes the standard of review in administrative law matters to the decisions of a deputy registrar in bankruptcy is not helpful. As Lane J. noted in Re Golden Mile Bowl Inc. (2005), 14 C.B.R. (5th) 187 (Ont. S.C.), at para. 13: An appeal of the registrar’s order will be allowed where it is demonstrated that the registrar erred in principle or in law or failed to take into account a proper factor or took into account an improper factor, which led to a wrong conclusion. See also Re Barukory Investments Limited (1979), 32 C.B.R. (N.S.) 185 (Ont. H.C.), at p. 186; Re Barrington and Vokey Limited (1996), 48 C.B.R. (3d) 270 (N.S.S.C.) at para. 18; Re Mengistu (2003), 45 C.B.R. (4th) 277 (Sask. Q.B.) at para. 4. [49] An appeal to this court under s. 193 of the BIA from an order of the nature in question here, should be determined on the same criteria. [50] The Deputy Registrar’s decision must be set aside. For the reasons outlined above, he erred in principle and thereby arrived at a wrong conclusion. In fairness to the Deputy Registrar, he felt that he was bound by the decision of Farley J. in GMAC, but, as I have explained, GMAC did not address the issue of depriving the inspectors of access to the bankrupt’s books, records and documents. Similarly, the decision of the appeal judge must be set aside, founded as it was upon the application of an erroneous standard of review (albeit at the urging of the parties) and upholding a decision based upon an error in principle. Disposition [51] For the foregoing reasons, then, I would allow the appeal, set aside the order of the appeal judge, and vary the order of the Deputy Registrar by deleting paragraph 3 thereof and substituting the following: 3. THIS COURT ORDERS that BDO Dunwoody Limited, in its capacity as Trustee of the Estate of Impact Tool & Mould Inc., is at liberty to share, disclose and distribute to the Inspectors of the Estate of Impact Tool & Mould Inc., any and all information which the Trustee now has or hereafter acquires in its review of the books, records and other documents relating to the Estate of Impact Tool & Mould Inc. 3A. THIS COURT ORDERS that BDO Dunwoody Limited, in its capacity as Trustee of the Estate of Impact Tool & Mould Inc., is at liberty to report to the creditors of the Estate of Impact Tool & Mould Inc., in the normal course, without restriction or reservation, of the knowledge the Trustee now has or hereafter acquires in its review of the books, records and other documents relating to the Estate of Impact Tool & Mould Inc. 3B. THIS COURT ORDERS that the Inspectors and the Creditors of Impact Tool & Mould Inc. are hereby restrained from using the books, records and documents of Impact Tool & Mould Inc. to which they may be provided access, and any information obtained from in relation to such books, records and documents, for purposes other than those relating to the administration of the bankrupt estate and the affairs of the Bankrupt. [52] The appellant is entitled to its costs of the appeal and of the application for leave to appeal, payable by the respondent Impact Tool & Mould (Windsor) Inc. I would fix costs in the amount of $3,500 in relation to the application for leave to appeal, and in the amount of $10,000 in relation to the appeal, all inclusive of fees, disbursements and GST. “R.A. Blair J.A.” “I agree J.M. Simmons J.A.” “I agree Paul S. Rouleau J.A.” RELEASED: March 15, 2006 [1] From this point on I shall refer to Impact Tool & Mould Inc., Impact Tool & Mould (Windsor) Inc. and Unique Tool & Gauge Inc., respectively as “Impact Tool” (or, “the Bankrupt”), “Impact Tool (Windsor)”, and “Unique”. [2] Although there may be some question whether all of the documents in question here are documents of the Bankrupt, the parties have approached these proceedings of the basis that they are. I have therefore considered this appeal on the same basis. [3] Trustees normally should make the inspectors familiar with the duties imposed upon them at their first meeting: see Houlden & Morawetz, Bankruptcy and Insolvency Law of Canada, 3d ed., vol. 2 (Toronto: Carswell, 1992) at 5-27. [4] Now s. 30 of the BIA. [5] Now s. 116 and following of the BIA. [6] In keeping with the legislative regime outlined by Henry J. in Re Hess, supra, s. 119 provides that, in cases of conflict, any directions given by creditors trump those given by inspectors, and that inspectors’ decisions are subject to court review. [7] In Taylor Ventures the documents were from the files of the bankrupt’s solicitors. In GMAC they were the files of the bankrupt’s accountants, including their working papers. [8] Re Hess, supra, at para. 4.