p311. 16. 1925 -

April 8.,i;h.

‘HIE SUPREME COURT lih BANKRUPTCY-

mtnrr of. J. Stanley wedlock he Ltd, a Bankrupt.

, e Royal Bonk of Canada opposed motion for the discharge of the em Trust 00.. as trustee of the le of the above nauled bankrupt the ground that certain charges excessive.

e chief Justice delivered the fol- m; judgment. uil A-prll 8th instant, o; application onmc on to be d before me on -tbe 24th day of pry last, 1925.

_ Duffy, K. (1.. on behalf of The l ilauk of Canada. opposed the [cation on specified grounds hurc- er set forth.

a Petition in Bankruptcy herein prcsr-nted by the Bank of Nova in, a creditor. on tllo 27th July. , and on the same day an order nuulo zlppoinling the Eastern t Company, helm! an Authorized tee in tllls Province under “Tho in-uptcy Act." Interim Receiver o" property of the Bankrupt.

the 8th day of August, 1028, the J, Stanley Wedlock Limited was dgcd ‘bankrupt and the said inter- ltvceiv ' was constituted Receiv- f the estate of the bankrupt and

property of‘ the ‘baukru-pl was

eby Vested in the Trustee.

the 12th day of Septculbcr, 1923

"statement of affairs" of the bank-

fiicd showing total iIHfiOIH

total llwlliiitfcs

urplus of assets . . . . .. $ 8.10.80 o Chief Justice after copying tho. ntcs of the meeting of Creditors ‘ on the 22nd day'of August, 1023, lnncs as follows:-

o oliler meeting of creditors was" . notwithstanding the fact that - 8 out of the 60 creditors who aicly proved claims were pres- in person or by proxy at this ling,

lough it was not proved before that the minutes were reigned at meeting, I shall for the present mo. that they were so signed by chairman and that consequently tho vjisumption of validity sct in Sec. 77 of the Canada Bank- cy Act a-pply to that meeting. To rmine this ‘point the Trustee will fro to file an affidavit showing the e of signature.

shall also for the present assume validity 0f such resolutions (with- lle competency of the meeting) as ear by the nlinutes to have been sod; though it appears that per- s not qalified as voters 100k part the meeting, even moving and ondlng material renolutionspantl t urfb at learnt appointed. to he an "pet-tot" was n ilflli-Tllfllfllllll. 0f this villi-c.

'.' also note a tilscrcpancy oi over .000 ‘DOlWCOIl ihc amount of th»: lul of n creditor appearing in the ates an having been proven, and amoullt on which tho dividend was d. 'l‘llis would materially affect vollng power of that (2|'f3(lllUl' and aid he explained by affidavit, t was not cum-potent to tile meet- -_ to appoint n solicllor- that. power vested lll the trustee with the con- ‘~ l in writing of the inspectors, ' he meeting could not appoint a rsou to act as rcproselllatlvo of an |)(tl'.lt11‘——ll10 ofilcc of inspector can- t hc (lclegatod. The effect of this d other apparent lregulnrltles up- lllq validity of tho acts of the ill- colors will be reserved for further neidcration. 0n illc 15th day of March. 192i, the llslnc nlado nu order disallowing llle aim of The Iloyal Bank of Canada d on the 24th day oi‘ Murcil. 1024. v ilauk appealed zlgainst llw "I'll"? ille Judge lll Bankruptcy, 0n the h day oi May, 1924, ihc wllimlll ""5 ilowed and the order oi the trusle" l. aside with costs. (4 C. B. R. 7). . Against this (lecisltm an a-ppcal Was ken lhy the trustee to the Court o! lllfllll in Bankruptcy for this Pro- ucc and on the 14th day 0f Jilly- . the appeal was dismissed with is. (5 (18.11.1011).

o_

llnnllll mourn r r ~ ~ 1ii_SliPilEMlE nun

0 Delivered By Chief Justice Mathieson On

Afterwards tho trustee applied to “l9 Sllbreanle (luurt of Canada for ‘WW0 w whlieai against the decision of the Appeal Court here. but leave was refused, 1r. t‘, 1! 1i. low Tile trill-luau‘ ilfICUililL contains n1 chariles for costs except in respec. (If the first appeal, o" U“ llltillicalkvn the trustee ‘pro- duced b}; stair-nun: of rccc-lpn; and dislburrclalents and a dividend sheet llllflwlill-Z that a fir-st, and what ‘pur- ‘ilvrted to be a final dividend oi ap- proximately 71/5 cents on the dollar had born puid to the creditors 1t appeared, however, by the oral state- ment of ihc trustees‘ agent at the clono of the hearing that this divi- dcnd had not lhcn lil fact ‘been paid. Tile lfoyal Bani: of Canada t-n the 1611 41111’ "f 3111111111"). 1025, gave notice oi opposition l0 the application oi the trustee-on lhopollowlng grounds: 1. That flu‘, nun: of $105.11 was im- qiroperiy paid to J. Stanley Wedlock 12s a. witness on the nppcnl of The iloyal Bank oi Canada from thc order oi the trustee in Bankruptcy disal- lowing ils claim. l

That the sum of $300 was improper- ly paid to G. Jardluc as wiinc ‘a fee and cxpcnocs ill the same c: .2. '

3. Thai the sum of $175.21) was inl- properly paid W, la‘. lluniicv, solicitor for trustee,

4. 'i‘ilat fllillil‘. amounts are not pro- perly payable under ihc Bankruptcy Act.

5, That the Trustee's charge for commission, viz.. the sum oi‘ $1471.07 bclug 5 per cent on the lolai estate. is excessive ill view of separate churgts being ulude for services which should lhe included under the ullow- ance for Commission.

The total cost. of administration of

this estate is such as to challenge the attention of the Court. _- The title to the real estate appears from the bnnkrupfs statement oi/nf- fairs to have stood in the name of The Eastern Trust Company (the trustee) at the time of the bankruptcy and to have been subject to a luzgc encum- brancc.

1t upcpnrs in ihc trustee's account as a "receipt" for $16,700 though from what the accounts disclose it may have realized little (if anything) above the encumbrance.

The trustee's commission on this item at 5 ‘per con-t amounts to $835 as if the wllolc price were a “uusll receipt." Tho personal property real- ized $12,721.38. of which the greater ‘part was disposer: of by tender.

The costs of administration total approximately $4500 of which $1480,74 is charged for legal expenses and $1471.07 for trustee's . commission, leaving only 7% cents 0n the dollar for creditors. If proof is needed to I show thc necessity for strict super- vision over the cost oi administering bankrupt estates this case supplies it.

'l'"llc first question I have to decide is the extent of the Judge's power to au-pcrvlsc the administration and rec- tify errors in the circumstances which , this case discloses.

Sub-section (4) oi s. 40 of the Can- adian Bankruptcy Act provides: "Tile disbursements oi a trustee shall in all cases be taxed by the prescribed au- thority unless such taxation is waiv- cd clthcl‘ by creditors at a general meeting culled prior to the declara- tion of the filial dividend or by the inspectors."

The “proscribed authority" in this Proviu-ce 4s the Registrar of the Court

There was no waiver of taxation by a general meeting oi creditors nor was tllcro any express waiver shown to have been made by the inspectors acting as a Board.

Tho novice oi this application sent oat to the creditors was accompanied by n. "final statement oi affairs" bear- ing ihc following subscription: “Ex- amined and n-pproved by luspcctolu of above estate," and purporting to be signed by four inspectors.

‘Illlo statement put in evidence aub- scribed with the above signature does not contain ihc words fcxaunlued and approved by inspectors" ‘but instead thereof the letters -"0. K."

The variance might be material and would require to at» explained lf~ony

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‘weight were to he piacvtl upon it n5 ‘"1 llllhilcd WtllVUl‘ 01' taxation and din. bursenleats.

1n the view I take oi the matter however, the certificate of the in. flhectms ill either form would not er- lief! a waiver. It would ‘require m east to be shown that the Inspectors by resolutiurl ‘passed nt an iis-pcctors’ "leflllng had waived the taxation m llle trustees’ disbursements “my can in such a case only function as a ggllyh The ‘certificate therefore has Lax; 90 [in 98s to inform llle proper

g oillcor that individually the subscribing inspectors had no objec- tlmlll l" fill“? l0 the account» The filrhflequcnl submission of the hqgoum of disbursements to the itcglstrar for "X1100" clearly negatives llny intgn- tion to waive laxlltinn‘

Th” "ccllnnts of disbursements pro- seated to mo show a certificate of taxation by the lioglstrilr.

If this were an ordinary case and illv ltflglstrar ilali gone into the ac- counts item by item and had emmh lned tilcln critically i would hesitate to interfere with his derision, but upon reference lo llle ilcgiitrar a5 to, wilut action he took in regard to the accounts he has reported to me that he treated the certificate of the in- Bilcciors attached to the accounts as an implied waiver of taxation of the disburscnnvllis and considered that he llllll ll" .l\ll'l*'fll(?fl()i1 to question the “m” l" any of them, that ills tux- atlou was intended only to fix the amount to ‘be reqtrved by the trump to close the estate,

it lhus happens that the accounts of disburol-lncllis have not ‘been sanc- llmlPil ll)’ any of ihc competent au- thorities nor subjncteri to that thorough scrutiny ‘which the law con- templates. i

The next. question to he decided is: Has the (vbjocting trrcdlinr ‘shown sufficient grounds for re-openlng the taxation?

The first three items objected l0 m- lflts to one subject-the costs of op- poslug the first u/ppctll against, [he order of tlllc trustee disallowing the 321m of Tile Royal Bank of Canada.

1. J. S. Wclllock, witness $105.11.

2. G. Jardinc. witness expenses $300.

ti. W, ill. Bentley, Solicitor for Trus- lea, $176 20. X

(This last is ‘part ‘of a larger item charged for solicliofn costs),

J. S. Wcdloek was flu‘, managing director of the ‘imukrupt company and owner of practically all its stock, He wag cxaluinrlrl on ilchalf of tlm trustee on the appeal against. the said disallowanee but it. was not shown on this application how the charge ‘was made up nor that it was a necessary expenditure, in whole or in part,

Mr. G. Jardlne was one of the in- Bbcctnrs of the estate. Al. the hearing ‘he was examined as a witness on be- half of The Royal Bunk of Canada. There is nothing before me to show Why this or any amount should have been paid to him out of the estate.

Tho lilird item $176.20. costs of the. solicitor of ihc trustee rives ‘rise tn a question which also involves the two former items, vizw-Was tho trustee authorized to engage in tihis‘ litiga- tion? What should he have done when the qurstion of (llsallownnge arose upon the claim of The Royal Bank of (tanada?

Sec. 53 of "Tile llankruiptcy Act" provides;—

(1) "Tile trustee shall examine every -proof and the grounds of the debt and may require further evi-

.any laroof Wllfilly or ill part.”

deuce in support of it. if he consid- ers the claimant is not entitled to rank on the estate or not entitled to

BRINGING UP FATIIER—

THE cnaluorrnrown GUARDIAN I '1 v v A A ‘Paiinsllvnn

rank for the full amount of his claim. - or if directed ‘by a resolution passed nt any meeting of creditors or limpet-- tors he may disallow the claim in whole or In part."

In practice the trustee may quite prudently act alone in dzsaliowlng u claim where it is clearly wrong. if there is doubt or difficulty be should full buck for directions hnon a meet- ing 0f creditors or inspectors and in cur-ice of special difficulty it l< his right to apply t0 the Court for dino- tiorc and have his position fortified in advancuby a decision of the Court which will justify his subsequent, m;- tion taken pursuant to such dime-- tions

Tile question of disallowing mo. claim of ’l‘lle Royal Bank Wilg n surl- ous one ‘both in amount and complex- ily and the trustee Iheforc entering the field of litigation would have been well zidvkzrld to invoke nil the protec- tion and assistance which Lln- lawipr". video. Tile trustee might, however. act without any of those sanctions, as apepars to have been tlilllc in the case,

it disallowed the claim. ill doing so it acted irl a quasi judicial capa- city. it was not thereby made re- s-pnnnlblo for any costs that lulgilt arise u-pon all appeal against its or» der of (lioallolvaucc. ifulo.1l8 ex- pressly provides “that the trustee shall in no case lbc personally liable for costs ill relation to an appeal from ills decision repealing or dist-allowing

The trustee has no liability for costs in sllflll ease but it does not follow thatcf his own motion he may engage ill a conical ovcr the validity of his decision and take what funds llc pleases out of the bnnlrrupt trfilfllf} to support such litigation.

The trustee unless specially author- ized as hereinafter mentioned should

have taken no part in the appeal bo- \

yond submitting rights to the pro- tectlon of the Court, as was done lii Re Cos-silly 2 C. B. R. 459.

Sec. 20 of the Canada Bankru-ptcj‘ Act defines in clear terms the powers rud duties of the trustee as to. cu- izagnv; in litigation or enl-plrlying a solicitor‘. It provides: Sub soc, (ll “The 'i'rusteee may vvlih the pennin- wion in writing of the inspectors (cl “bl-lug. institute or deicml any action or other legal proceeding rela- ting to the property of the debtor."

"(d1 Elnploy a solicitor or other rlgent to take any proceedings or do any business which may be sanction- ed by tho inspectors" and by

Sub Sec, 2: “Tile Permission given for the purposes of this section shall not be n general permission to do all or any of the above mentioned tilings bllt shall only "he s permission to do tin,- particular thing or things or class of thin: or filings which tile ‘written permission specifies."

Now in the present case there is no evidence that the inspectors had sanc- tioned the proceedings taken thy the trustee ill defending against the ap- peal of The iloyal Bank of Canada. nor lllni the trustee had the permis- sion in writillg of the inspectors to employ a. solicitor for that purpose nor for any purpose. -

1n the case ln Re Geiger reported (1915) 1 K. B, C. A, ai. p, 456 Swlnfcn Eady, II. J., dealing with equivalent legislation under the English Bank- rupt-cy Act said: “in my Upinion the absence of tile necesssary permission to employ u solicitor is not n mere formal (infect or irregularity lull a matter of substance and of great inl- portanee. It is a material cileck and safeguard against costs ibeing un- necessarily or improperly incurred. in my opinion it would be m st lnex- ‘ pndlenl to introduce or sane ion any laxity of practice in ‘bankruptcy, or gloss. over irregularities anti-condone them as merely "formal defects." This would lbe tn abolish the safeguards

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Fraction 40 sub sec. ll of the Acl pro- vides illat "the i‘|‘lIi.lil(‘i‘1lll0n of illl? trustee. for nil cortices silali not under any circumstances exceed 5 per cent oi lilo cash receipts." _

in lln- Quebec case, Re iiricbund re- porlcllli C. i1. It. 490. it was held by Pauuelou .1, that lhe- trustee could

what has happened ilcro may rcadily occur." 1n lic Bryant, ISSHHl 1L ('11., rleportell 4 C.B ii.41,i"i.<;ller J. held 111.1 .. riicllllfs wlnployerl by the llnnkrupit, ’i'rustco are under s legal duty to sec that tin- trustee has bccll properly fllllll(1l'l7.t~fl by the inspectors in writing to cn-