Black v. NSC Diesel Power (Trustee of)

Black v. NSC Diesel Power (Trustee of) Court (s) Database Federal Court of Appeal Decisions Date 2003-07-07 Neutral citation 2003 FCA 300 File numbers A-371-00 Notes Digest Decision Content Date: 20030707 Docket: A-371-00 Citation: 2003 FCA 300 CORAM: ROTHSTEIN J.A. PELLETIER J.A. MALONE J.A. BETWEEN: FREDERICK W. L. BLACK APPELLANT (Applicant) - AND - THE CREDITORS OF THE ESTATE OF NsC DIESEL POWER INCORPORATED as represented by the TRUSTEE of the Estate - and - THE INSPECTORS OF THE ESTATE OF NsC DIESEL POWER INCORPORATED Respondents - and - THE SUPERINTENDENT OF BANKRUPTCY as the Court directed Respondent on the Appeal Respondent REASONS FOR JUDGMENT PELLETIER J.A. This is an appeal by Frederick W. L. Black from an order of MacKay J. dismissing his application for an order of mandamus against the Office of the Superintendent of Bankruptcy (the "Superintendent"). The order under appeal was made as a result of a motion brought by the Superintendent to strike the appellant's application for judicial review on the ground that it was vexatious, represented an abuse of process and was essentially devoid of any hope of success. HISTORY OF PROCEEDINGS These proceedings arise out of a complicated series of transactions relating to the refit of a Canadian naval vessel. The appellant, through companies in which he was the controlling shareholder, was to be the Canadian partner in a multi-party proposal to supply diesel engines, parts and service, as well as a test facility for the engines, to the Navy. For various reasons, the proposal did not proceed as planned and the appellant's company was forced into bankruptcy. A firm of consultants retained by the appellant or his company, as well as a firm of chartered accountants played various roles in the unravelling of the transaction. The member of the accounting firm which the appellant implicates in the failure of his company was then appointed trustee of the corporation's estate. The gist of the various proceedings undertaken by the appellant was to compel the Superintendent and the Official Receiver to supervise the administration of the estate, and to take steps to remedy the appellant's allegations of impropriety. A first application brought by the bankrupt company and the appellant was dismissed without objection on a finding that mandamus did not lie against the Crown. A second proceeding brought by the bankrupt company against the Superintendent of Bankruptcy and the Official Receiver was dismissed on its merits by MacKay J. in reasons dated September 20, 1995. Subsequent to that dismissal, the appellant, who represented the bankrupt company in the proceedings, wrote to the court advising that new information had come to hand which was relevant to the determination made by MacKay J. He was advised by the registry that a direction had been made to the effect that he must comply with the new Federal Court Rules, 1998, SOR/98-106 (the "Rules") and commence a proceeding under Rule 300. That resulted in the application which was struck by the order under appeal, application T-610-99. In the interim, the appellant decided to abandon the appeal which had been taken from MacKay J.'s decision dated September 20, 1995, since he was pursuing the matter in application T-610-99. No sooner was application T-610-99 made than counsel for the Superintendent of Bankruptcy brought a Notice of Motion for Directions in which he sought the dismissal of the application on six grounds as well as an order restricting the appellant from representing anyone other than himself without order of the Court. After a certain amount of preliminary skirmishing, the matter came on for hearing before MacKay J. in Halifax. The first issue raised was the status of the Superintendent to take part in the proceedings since he had not been named as respondent. The named respondents were the Creditors of the estate of the bankrupt company and the Inspectors of the Estate of the bankrupt company. The appellant advised that this was done in purported compliance with the Rules, and in particular Rule 303(1)a) which requires an applicant to name as respondent every person directly affected by the order sought, other than the tribunal in respect of which the application is brought. The Superintendent took the position that his Office was entitled to intervene pursuant to subsection 5(4) of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3 (the "Act"). Rather than proceeding on the basis of the Superintendent's claim to statutory intervener status, MacKay J. indicated that he would be prepared to entertain an oral motion to grant the Superintendent of Bankruptcy intervener status. Such a motion was made orally by counsel for the proposed intervener, with the consent of the appellant, and was allowed by MacKay J. Thereafter, the Superintendent of Bankruptcy's status in the proceedings was that of intervener by order. APPELLANT'S ARGUMENTS The appellant argued that the learned motions judge's order should be set aside because of certain factual errors. The appellant argued that the judge erred in criticizing him for purporting to represent parties other than himself by making them applicants in these proceedings, when it is clear that the appellant is the sole applicant. He alleged that the judge also erred in finding that the present application was the fourth application seeking the same relief when in fact it was the first seeking the specific relief pleaded. Consequently, the appellant argued that the learned motions judge's conclusion that this proceeding was vexatious and abusive could not be supported. The appellant also took issue with the status of the Superintendent, a mere intervener, to bring an application to strike his application. The appellant relied upon the decision of this Court in Canadian Union of Public Employees, Airline Division v. Canadian Airlines International, [2000] F.C.J. No. 220, as authority for the proposition that the rights of interveners are very circumscribed and do not extend to the bringing of motions to strike. Finally, the appellant argued that the decision of this Court in David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588, was to the effect that interlocutory motions to strike ought not to be made in the case of applications. Since the latter are intended to be summary proceedings, interlocutory motions such as a motion to strike are to be avoided and arguments as to the merits, or lack thereof, should be reserved to the hearing of the application itself. While there is an exception to the rule for applications which are totally devoid of merit, that is not the case with respect to this application. Anticipating the Superintendent's argument that the application was bound to fail, the appellant maintained that the doctrine of issue estoppel did not apply because the whole purpose of the application was to lay before the Court new facts which were not before the Court when it made its decision of September 20, 1995. The fact that the proceeding took the form of a new application was the result of the direction made by the Court. SUPERINTENDENT'S ARGUMENTS The Superintendent conceded that the learned motions judge had erred in finding that the appellant purported to represent parties other than himself. However, that did not detract from the fact that the appellant was essentially attempting to relitigate an issue which had already been the subject of an adjudication. The doctrine of issue estoppel operated to deprive this application of any prospect of success. The bringing of successive applications in respect of the same subject matter in the name of different entities was abusive and vexatious. The Superintendent maintained that the fact that he was an intervener in these proceedings did not mean that he could not bring an application to strike the application. As for the argument that interlocutory motions ought not to be brought in the course of applications for judicial review, it was the Superintendent's position that where the matter in dispute had already been decided in other proceedings between essentially the same parties, the application in question was so bereft of any possibility of success that the learned motions judge was fully justified in granting the motion to strike the application. ANALYSIS Intervener Status I will deal first with the status of the Superintendent, as intervener, to bring a motion for dismissal of the application. Rule 109 of the Rules deals with the granting of intervener status: 109. (1)The Court may, on motion, grant leave to any person to intervene in a proceeding. (2) Notice of a motion under subsection (1) shall (a) set out the full name and address of the proposed intervener and of any solicitor acting for the proposed intervener; and (b) describe how the proposed intervener wishes to participate in the proceeding and how that participation will assist the determination of a factual or legal issue related to the proceeding. (3) In granting a motion under subsection (1), the Court shall give directions regarding (a) the service of documents; and (b) the role of the intervener, including costs, rights of appeal and any other matters relating to the procedure to be followed by the intervener. 109. (1) La Cour peut, sur requête, autoriser toute personne à intervenir dans une instance. (2) L'avis d'une requête présentée pour obtenir l'autorisation d'intervenir : a) précise les nom et adresse de la personne qui désire intervenir et ceux de son avocat, le cas échéant; b) explique de quelle manière la personne désire participer à l'instance et en quoi sa participation aidera à la prise d'une décision sur toute question de fait et de droit se rapportant à l'instance. (3) La Cour assortit l'autorisation d'intervenir de directives concernant : a) la signification de documents; b) le rôle de l'intervenant, notamment en ce qui concerne les dépens, les droits d'appel et toute autre question relative à la procédure à suivre. The learned motions judge was correct in resisting the notion that the Superintendent was entitled to intervene in the proceedings as of right pursuant to paragraph 5(4)a) of the Act, the relevant provisions of which are reproduced below: "court", except in paragraphs 178(1)(a) and (a.1) and sections 204.1 to 204.3 and subject to subsection 243(1), means the court having jurisdiction in bankruptcy or a judge thereof, and includes a registrar when exercising the powers of the court conferred on a registrar under this Act; ... 5(4) The Superintendent may (a) intervene in any matter or proceeding in court, where the Superintendent considers it expedient to do so, as if the Superintendent were a party thereto; ... 183. (1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers: ... (c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court; « _tribunal_ » Sauf aux alinéas 178(1)a) et a.1) et aux articles 204.1, 204.2 et 204.3 et sous réserve du paragraphe 243(1), la juridiction compétente en matière de faillite ou un de ses juges, y compris un registraire lorsqu'il exerce les pouvoirs du tribunal qui lui sont conférés au titre de la présente loi. ... 5(4) Le surintendant peut_: a) intervenir dans toute affaire ou dans toute procédure devant le tribunal, lorsqu'il le juge à propos, comme s'il y était partie; ... 183. (1) Les tribunaux suivants possèdent la compétence en droit et en equity qui doit leur permettre d'exercer la juridiction de première instance, auxiliaire et subordonnée en matière de faillite et en d'autres procédures autorisées par la présente loi durant leurs termes respectifs, tels que ces termes sont maintenant ou peuvent par la suite être tenus, pendant une vacance judiciaire et en chambre_: ... c) dans les provinces de la Nouvelle-Écosse et de la Colombie-Britannique, la Cour suprême; While the Act gives the Superintendent the power to intervene as a party in any proceeding in the court, "court" is defined as the court having jurisdiction in bankruptcy in the geographic jurisdiction. With respect to Nova Scotia, where this estate is being administered, in accordance with paragraph 183(1)c) of the Act, the court having bankruptcy jurisdiction is the Supreme Court. Consequently, the Superintendent of Bankruptcy cannot intervene in proceedings in the Federal Court as of right but must comply with Rule 109 of the Rules. The learned motions judge was right to require the Superintendent to make a motion for intervener status. It was open to the judge to allow that motion to be made orally, particularly when the appellant was prepared to consent. It is clear from the registry officer's minutes of the proceedings that the Superintendent was granted the status of intervener, even though no formal order was ever issued. The next question is whether, in the absence of an order giving him the right to do so, the Superintendent, a mere intervener, was entitled to bring a motion to strike the appellant's application. The critical factor is the circumstances in which the order was made. When the learned motions judge granted the Superintendent intervener status, he did so on the basis of the motion which was pending before him. Since that motion sought to have the application struck on a number of grounds, it is a fair inference that the judge intended the Superintendent to have the right to make a motion to strike the application. If it were otherwise, the learned motions judge would have granted the Superintendent intervener status but without the right to make the very motion for which he sought that status. Consequently, I find that the learned motions judge granted the Superintendent intervener status for the purpose of allowing him to make the motion to strike the appellant's application. As will be seen, the Superintendent was effectively the only party adverse in interest to the appellant, and thus, the only party with an interest in bringing such a motion. Representation of Other Parties The next issue is the learned motion judge's finding that the appellant purported to represent parties other than himself by adding them as applicants in these proceedings. This allegation is not a new one in so far as this appellant is concerned (see paragraphs 4 to 16 of NsC Diesel Power Inc. (Officer of) v. Canada (Superintendent of Bankruptcy), [1995] F.C.J. No. 1229. But in these proceedings, the appellant is the sole applicant and to that extent, the appellant's criticism is accurate. On the other hand, the parties who were named as respondents are not adverse in interest to the appellant. It is open to question whether the Inspectors can be parties, as opposed to the individual Inspectors being named in their capacity as Inspectors. Be that as it may, the Inspectors filed, through the appellant, a document indicating their support for the application. They did not appear on the motion, and were not represented by counsel. The other named party is "The Creditors of the Estate of NsC Diesel Power Incorporated as represented by the TRUSTEE of the Estate". Such a party is unknown to law. Section 15 of the Act provides that the Trustee's official name is "The Trustee of the Estate of [name], a bankrupt". On the other hand, the creditors have no juridical status as a group, even though each of them individually may be a legal entity. There is no provision in the Act or in the Rules for service of the "creditors" by service upon the Trustee in bankruptcy. The appellant's answer to this is that the Rules require him to name all persons who are directly affected by the application, and the creditors are directly affected. But the Inspectors represent the interests of the creditors; they have no other claim to be interested in the outcome of these proceedings. There is no justification for purporting to name both the Inspectors and the creditors. The naming of the creditors as a party was ineffectual. On the other hand, there is a party who was directly affected by the application but who was not named as a party, the Trustee. This is significant because by naming as respondents parties who supported his position, or who had no legal status, and not naming the party who had an interest in opposing his application, the appellant created the appearance of adversarial proceedings when, in fact, only a single interest was represented. Multiplicity of Proceedings In so far as the multiplicity of proceedings is concerned, the learned motions judge identified the following applications initiated by the appellant, either in his personal capacity or as the representative of the bankrupt company: - application T-2700-94, brought by the bankrupt company and the appellant against Her Majesty the Queen. This application was struck without adjudication on the merits, and without objection, because mandamus does not lie against the Crown. - application T-724-95, brought in the name of NsC Diesel Power Inc. (Officer of) and named as respondents the Superintendent of Bankruptcy and the Official Receiver as Agents of the Crown. That application was struck on its merits, and was the subject of an appeal which was later abandoned. - a third application for mandamus which was not accepted for filing because it failed to comply with the rules. - the application underlying this appeal, application T-610-99. The appellant says that the learned motions judge erred in his characterization of the "third application for mandamus". He says that this was the letter which he wrote to the Court advising of new facts which were relevant to dismissal of the application T-724-95 and asking for directions as to how to proceed. The only response he received was a direction advising him that he would have to bring an application. He then brought the application which underlies this appeal, application T-610-99. As a result, the appellant says that there has only been one prior adjudication on the merits, not three as suggested by the learned motions judge. There has also been an appeal but the appellant discontinued that appeal in favour of application T-610-99. However, application T-610-99 is, in fact, an application seeking mandamus against the Superintendent of Bankruptcy and the Official Receiver requiring them to fulfill their duties pursuant to a series of sections of the Act, the same relief which was sought in application T-724-95. The appellant justifies this application by saying that it is founded on facts which were not before the Court when it disposed of the application T-724-95. Furthermore, the appellant says that he could not have known those facts which only became known to him through the discovery process in another proceeding. The basis on which the appellant claims to be entitled to make a fresh application for mandamus is an alleged misrepresentation to the Court in the following passage taken from submissions made by counsel for the Superintendent to the judge who heard application T-724-95: The facts of this case as disclosed in the Affidavit of Mr. Black do not demonstrate a refusal to act by the Superintendent of Bankruptcy or the Official Receiver. The facts show a continuing process of inquiry, audit and review by the office of the Superintendent of Bankruptcy and the RCMP. A portion of the investigation by the RCMP has now been completed and the RCMP have confirmed that there will be no charges laid against Ernst & Young Inc. relating to the administration of the Estate of NsC Diesel Power Incorporated. The RCMP are continuing their investigation concerning other matters relating to the operation and business of the Bankrupt. (emphasis added) (Appeal Book, at p. 101) In his reasons dismissing application T-724-95, MacKay J. said the following: [para. 30] There is no evidence before this Court of the required belief on the part of any of those officials which would direct or authorize them to act under any of those provisions. There is evidence, from the affidavit of the officer of the applicants, that complaints by him on behalf of the applicants and others were made to the respondents about the administration of the estate of the bankrupt company. It is said that an investigation has been instituted, at the request of the respondents, by the R.C.M.P., an investigation which is apparently ongoing and not yet concluded. There is also reference to, and copies of letters from Mr. Black about, numerous complaints concerning administration of the estate, complaints directed to the Commercial Crime Section of the R.C.M.P. as addressee. (emphasis added) (NsC Diesel Power Inc. (Officer of), supra) The appellant claims that the Court was misled by the information provided by counsel. He has attached to his affidavit a series of documents which are evidence of the following: - the firm of Ernst & Young was not investigated by the RCMP (Appeal Book, at p. 72) - the administration of the estate of the Bankrupt was not investigated by the RCMP (Appeal Book, at p. 91) - the Office of the Superintendent of Bankruptcy commissioned an outside review of the circumstances surrounding the bankruptcy of NsC Diesel Power Inc. and received a lengthy report containing the results of that review (Appeal Book, at pp. 38-68) The investigator who undertook the review mentioned above came to a number of conclusions including, inter alia, the following: (7) This file requires immediate referral to the RCMP with respect to the following matters: (a) The probable fraud on ABN Bank and ACOA to about $10 million premised on the deceit of $5 million in equity stated as having been injected into Diesel which was a condition precedent to any loan advances. (b) The probable fraud on the government of Canada by way of a tax scam involving Investment Tax Credits to a total of some $1.1 million. Note [sic] the technology agreement is stated in legal pleadings to be a creation without substance for this purpose. Further the memorandum of Ron Benn indicates that Krupp had no idea was [sic] a tax credit was. (c) The potential misappropriation of funds from Diesel of about $1.7 million. See point (1) above (d) The defrauding of Diesel of $50,000 by way of a raised [inflated] invoice as prepared by Ron Benn on Richard Black's instructions. The $50,000 was paid to the benefit of Mr. Black to the prejudice of Diesel. (Appeal Book, at p. 67) Among the documents put before the Court by the appellant is a letter from the Superintendent of Bankruptcy forwarding the investigation report to the RCMP for their consideration, and requesting a meeting to discuss it further (Appeal Book, at p. 69). I see no inconsistency between the submissions made by counsel for the Superintendent to MacKay J., the conclusions expressed by MacKay J. in application T-724-95 and the documents supplied by the appellant in application T-610-99. Counsel for the Superintendent did not represent to MacKay J. that the RCMP were investigating the administration of the estate. He did represent that a review was undertaken and, in fact, one was undertaken. MacKay J. did not indicate that he believed that the administration of the estate was under investigation, only that the matter had been referred to the RCMP and that an investigation of some sort was underway. The investigator's conclusions cited above provide ample grounds for an investigation, quite apart from any issue of the administration of the estate. The basis of the claim for relief in application T-724-95 was as follows: [para. 31] There are a number of "affidavits of truths" sworn by Mr. Black filed in these proceedings, and others are referred to in documents in the record. The affidavit filed April 10, 1995 in support of the original Originating Notice of Motion is the document to which I turn for an evidentiary basis, the facts, for considering the relief claimed by the applicants. It is the only affidavit dealing with the relief sought by Originating Motion. That affidavit makes reference to a number of occurrences or concerns that are related to alleged failures of public duties owed by the respondents under the Act. Thus, for example, reference is made to Mr. Black's concerns respecting the propriety of the bankruptcy petition, to the removal of solicitors of the estate, to complaints filed by the affiant about the conduct of administration of the estate by the trustee, to the concerns of inspectors under the Act in relation to administration of the estate, to the withdrawal of a personal trustee from the administration of the estate, to reported investigation(s) in relation to the administration of the estate and resulting reports to the respondent Superintendent, and to affidavits filed in proceedings before the Nova Scotia Supreme Court in Bankruptcy upon which the applicants propose to rely in these proceedings. (NsC Diesel Power Inc., supra) There is here another reference to "reported investigation(s) in relation to the administration of the estate and resulting reports to the respondent Superintendent" but it is drawn from the affidavit filed by the appellant. If MacKay J. was misled, it may have been by the appellant himself whose affidavit contained matters which the learned motions judge said "can hardly be said to be within the knowledge of the affiant, though they may be within his belief". The basis on which application T-724-95 was struck is set out in paragraph 40 of MacKay J.'s reasons: [para. 40] To do only that would not serve the interests of the parties or the Court, in my view. In the circumstances of this case, as I have noted, the Amended Originating Notice of Motion and the affidavit filed in support provide no grounds for consideration of the relief sought. Moreover, in my view the case amply demonstrates, on the record, proceedings initiated on behalf of the applicants which can only be described as vexatious, however well intended they may have been. In these circumstances this Court is prepared, on its own motion, to strike out the Amended Originating Notice of Motion filed herein by the applicants and, since that is essentially a replacement for the original Originating Notice of Motion, the latter document would implicitly be struck as well. In application T-610-99, the appellant was attempting to persuade the Court that the dismissal of application T-724-95 was obtained by a misrepresentation, i.e that there had been a fraud upon the Court. He sought to demonstrate the misrepresentation by means of documents which he obtained in other proceedings. He sought to put those documents before the Court as new evidence which would justify a reconsideration of the Court's decision in T-724-95. The fact that the appellant's initiative took the form of a fresh application for judicial review does not change the nature of the underlying objective. The documents tendered by the appellant do not demonstrate that misrepresentations were made by the representatives of the Superintendent. Consequently, there is no new evidence, and therefore no basis for reconsideration or for revisiting the issues which were canvassed in T-724-95. As a result, the application is bound to fail. Consequently, notwithstanding the admonition with respect to interlocutory motions in applications in David Bull Laboratories, supra, this was an appropriate case in which to make an order dismissing an application for judicial review in interlocutory proceedings. CONCLUSION Consequently, this appeal must be dismissed for the reasons articulated above, notwithstanding the learned motions judge's error with respect to the appellant's purported representation of other parties. The appeal will be dismissed with costs to the respondent. J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-371-00 STYLE OF CAUSE: Frederick W. L. Black v. The Creditors of the Estate of NsC Diesel Power Incorporated as represented by the Trustee of the Estate et al. PLACE OF HEARING: HALIFAX, NOVA SCOTIA DATE OF HEARING: March 20, 2003 REASONS FOR JUDGMENT: PELLETIER J.A. CONCURRED IN BY: ROTHSTEIN J.A. MALONE J.A. DATED: July 7, 2003 APPEARANCES: Mr. Frederick W. L. Black ON HIS OWN BEHALF Mr. Bruce Clarke FOR THE RESPONDENTS SOLICITORS OF RECORD: Mr. Frederick W. L. Black ON HIS OWN BEHALF Burchell Green Hayman Parish Halifax, Nova Scotia FOR THE RESPONDENTS Date: 20030707 Docket: A-371-00 Citation: 2003 FCA 300 CORAM: ROTHSTEIN J.A. PELLETIER J.A. MALONE J.A. BETWEEN: FREDERICK W. L. BLACK APPELLANT (Applicant) - AND - THE CREDITORS OF THE ESTATE OF NsC DIESEL POWER INCORPORATED as represented by the TRUSTEE of the Estate - and - THE INSPECTORS OF THE ESTATE OF NsC DIESEL POWER INCORPORATED Respondents - and - THE SUPERINTENDENT OF BANKRUPTCY as the Court directed Respondent on the Appeal Respondent Heard at Halifax, Nova Scotia, on March 20, 2003 JUDGMENT delivered at Ottawa, Ontario, July 7, 2003 REASONS FOR JUDGMENT BY: PELLETIER J.A. CONCURRED IN BY: ROTHSTEIN J.A. MALONE J.A.