



COURT OF APPEAL
        FOR BRITISH COLUMBIA




Citation:



Commonwealth
                Trust Co. (Re),









2005 BCCA
            13




Date: 20050112




Docket: CA031716

IN THE MATTER
      OF COMMONWEALTH TRUST COMPANY

AND IN THE MATTER OF THE
WINDING
        UP AND RESTRUCTURING ACT

Between:

Commonwealth Investors Syndicate Ltd.

Appellant

And

KPMG Inc.

Respondent

And

Deloitte
      Touche Inc.

Respondent









Before:



The Honourable
            Madam Justice Southin





The Honourable
            Madam Justice Prowse





The Honourable
            Mr. Justice Smith









S. R. Schachter, Q.C. and
G. B. Gomery



Counsel for the Appellant





A. I. Nathanson



Counsel for the Respondent, KPMG Inc.





H. Van Ommen



Counsel for the Respondent, Deloitte Touche
            Inc.





Place and
            Date of Hearing:



Vancouver, British Columbia





6th December, 2004





Place and
            Date of Judgment:



Vancouver, British Columbia





12th January, 2005









Written
              Reasons by
:





The Honourable
            Madam Justice Southin





Concurred
              in by:





The Honourable
            Mr. Justice Smith





Reasons
              Dissenting in part by:





The Honourable
            Madam Justice Prowse  (P. 15, para. 28)





Reasons for Judgment of the Honourable Madam Justice
        Southin:

[1]

During
      argument in this appeal, counsel for the appellant, Commonwealth Investors
      Syndicate Ltd. (CIS), the controlling shareholder of Commonwealth Trust
      Company (the Company), in response to a remark from the bench on the years
      these proceedings have continued, remarked that when they began he was
      in high school.

[2]

Counsel
      for the respondent, KPMG Inc., the liquidator of the Company, for his part,
      was able to "top" counsel for the appellant by remarking that
      these proceedings began before he was born.

[3]

On
      the 20th December, 1969, the Company resolved to wind up voluntarily, and
      immediately petitioned the Supreme Court of British Columbia for the appropriate
      order.  The shareholders and directors of the Company today are very different
      from the shareholders and directors of the Company in 1969.

[4]

What
      led to that resolution was an attack on a number of companies known as
      the "Commonwealth Group" by the Superintendent of Brokers pursuant
      to the
Securities Act
.  For one aspect of that attack, see
Smith
      v. Commonwealth Trust Co.
(1969), 72 W.W.R. 201 at 203.

[5]

On
      30th December, 1969, Aikins J. pronounced the winding-up order sought and
      appointed, provisionally, Yorkshire Trust Company as Official Liquidator
      of the Company.  Central Guaranty Trust Company (CGT) is the successor
      in title of the Yorkshire Trust Company.  It is, itself, now in liquidation
      and the respondent, Deloitte Touche Inc., is its liquidator.

[6]

In
      1990, consequent upon an application by the appellant for leave to sue
      the liquidator, CGT withdrew as liquidator and, as of the 6th June, 1990,
      Peat Marwick Thorne Inc., then known in the proceedings as "Peats",
      the predecessor in title of the respondent, KPMG Inc., became liquidator
      and so remains.

[7]

All
      the creditors of the Company have been paid.

[8]

By
the
Winding-up and Restructuring Act
,
      R.S.C. 1985, c. W-11:

18.
A court may, on the application of any creditor, contributory,
      liquidator or petitioner for the winding-up order, at any time after the
      order is made, and on proof, to the satisfaction of the court, that all
      proceedings in relation to the winding-up ought to be stayed, make an order
      staying those proceedings, either altogether or for a limited time, on
      such terms and subject to such conditions as the court thinks fit.

[9]

The
      learned judge below, who has been in charge of this winding-up and all
      its contortions for, I believe, some 14 years, in order that the proceedings
      should finally end, on 1st March, 2004, upon the application of KPMG Inc.,
      pronounced this order:

THIS COURT ORDERS
      THAT:

1.    The persons
      identified as the directors of Commonwealth Trust Company ("CTC")
      in Exhibit "B" to the Affidavit of John Allan Coles #1 sworn
      August 21, 2003: J. Allan Coles, Ian M. Adam, Allen M. Fowlis, Sawarne
      Sangara, and H. Nixon Scarfe, (the "Directors") are authorized,
      on behalf of CTC, to seek the consent of the Financial Institutions Commission
      under Section 24(1) of the
Financial Institutions Act
to enable
      CTC to apply to the proper officer under the
Canada Business Corporations
      Act
for an instrument of continuation continuing CTC as if CTC was
      incorporated under the
Canada Business Corporations Act
;

2.    Upon any one
      or more of the Directors filing an affidavit with the Court in these proceedings
      deposing that an instrument of continuation had been issued by the proper
      officer under the
Canada Business Corporations Act
with respect
      to CTC, allowing CTC to be continued as if it had been incorporated under
      the
Canada Business Corporations Act
, and exhibiting a certified
      true copy of such instrument of continuation, and provided that such affidavit
      and exhibit are filed by no later than 180 days from the date of this Order
      (and with liberty to apply for a further extension of time), and upon the
      final determination of the liquidator's pre-stay accounts pursuant to paragraph
      5 of this Order, the liquidation of CTC shall be stayed (the "Effective
      Date"), and as at the Effective Date:

(a)   all proceedings in relation to the winding-up
      of CTC shall be stayed without further order;

(b)   CTC shall be enjoined from initiating or pursuing
      any action proceeding or taking any step, including filing a claim in the
      liquidation of Central Guaranty Trust except for claims filed before January
      1, 2004, or commencing or proceeding with an action or proceeding against
      any person on the basis of anything which occurred, or which ought to have
      occurred, prior to the Effective Date;

(c)   the
      Liquidator:

(i)    shall be discharged as the Liquidator of CTC;

(ii)   shall have no further duties or obligations in relation to the
      liquidation, management or conduct of the affairs of CTC, except as provided
      herein; and

(iii)  shall be released from any claims
      which Canada Customs and Revenue Agency may have for or arising out of
      any unpaid taxes, interest or penalties of the estate in liquidation of
      CTC or the Liquidator's administration thereof;

3.    Within 45 days
      time after the Effective Date:

(a)   The
      Liquidator shall turn over to CTC, as per a direction signed by a majority
      of the Directors, the corporate records of CTC which consist of the documents
      contained in the Documents Inventory, as defined in and attached as Exhibit "C" to
      the Affidavit of Todd Martin #2, sworn September 15, 2003 and which are
      in the Liquidator's possession, provided that:

(i)    the Liquidator may make as part of the Liquidator's administration
      of the liquidation of CTC copies of those records of CTC or of the records
      of the former liquidators of CTC, and, for greater certainty, including
      any of the documents referred to in paragraph 3(a) of this Order, as the
      Liquidator considers necessary for the Liquidator to have a proper record
      of the liquidation of CTC;

(ii)   the Liquidator is not obliged to turn over to CTC the originals
      of any of the Liquidator's records relating to the liquidation of CTC which
      are enumerated in paragraph 23 of the Affidavit of Todd Martin #2, sworn
      September 15, 2003.

(iii)  the Liquidator shall, on receiving a written request on five business
      days' notice from the Directors, at any time prior to the Effective date,
      and from CTC, at any time subsequent to the Effective Date, provide reasonable
      access to, and at the Directors' or CTC's request and on payment of the
      Liquidator's reasonable expenses, copies of, the documents retained by
      the Liquidator as referred to in paragraph 3(a)(ii) of this Order.

(iv)   notwithstanding paragraph 3(a)(iii)
      above, the Liquidator shall be required to retain the documents referred
      to in paragraphs 3(a)(i) and (ii) of this Order for at least six years
      from the date of this Order but not thereafter.  Following six years from
      the date of this Order, if the Liquidator no longer wishes to retain the
      documents referred to in paragraphs 3(a)(i) and (ii) of this Order, it
      shall give CTC at least sixty days' written notice of its intention to
      dispose of those records, and CTC shall have liberty to apply, on notice
      to the Liquidator, for possession of the records.

(b)   after reservation of such sum as the Liquidator
      considers prudent for the purposes of concluding all matters relating to
      the liquidation of CTC, and to the stay of such liquidation including post-stay
      matters, and also including without limitation the obtaining of the approval
      of the Liquidator's accounts and the Liquidator's fees and disbursements
      (including legal fees and disbursements), and the preparation of all materials
      with respect thereto, the Liquidator shall pay all remaining monies in
      its possession which relate to the liquidation of CTC, and assign all the
      Liquidator's right, title and interest in and to the claim previously filed
      by the Liquidator with Deloitte & Touche Inc., the Liquidator of Central
      Guaranty Trust, to CTC, as per a direction signed by a majority of the
      Directors;

(c)   CTC shall send a copy of the instrument of continuation
      by regular mail to all known shareholders of CTC at their last known addresses,
      and place an advertisement in one edition of the Globe & Mail newspaper
      notifying shareholders of CTC that the instrument of continuation has been
      granted, and shall file with the Court a proof of having done so;

4.    If the affidavit
      and exhibit confirming the continuance of CTC under the
Canada Business
      Corporations Act
are not filed with the Court by the date referred
      to in paragraph 2 of this Order, then subject to a Court Order granted
      by no later than the date provided for in paragraph 2 of this Order or
      as extended if applicable, and directing the Liquidator to not proceed,
      the Liquidator shall take all necessary steps to conclude the liquidation
      of CTC, including without limitation disbursement of monies in its possession
      and effecting its discharge;

5.    With respect
      to approval of the Liquidator's and the Liquidator's counsel's accounts
      which have not been approved previously, the Liquidator and such counsel
      shall within a reasonable time after the filing of an affidavit deposing
      that an instrument of continuation referred to in paragraph 2 of this Order
      has been issued:

(a)   provide summaries of pre-stay accounts to the
      counsel for CIS; and

(b)   provide to a Registrar of the Court such materials
      as the Liquidator and its counsel consider appropriate in relation to such
      pre-stay accounts, including written submissions, and CIS is hereby granted
      liberty to also file submissions in that regard, and Registrar may approve
      such accounts in the amounts as presented, or in different amounts.  The
      stay of the liquidation is to be delayed and not to take place until the
      final resolution of the passing of the accounts of the Liquidator for all
      pre-stay matters including any appeals from the Registrar's decision.  Upon
      conclusion of all post-stay matters including matters referred to in paragraph
      3 of this Order, the Liquidator is to pass its accounts before the Registrar
      in the same manner as the pre-stay accounts.

6.    Nothing in this
      Order requires the Financial Institutions Commission to give its consent
      with respect to the application referred to in paragraph 1 of this Order,
      or the proper officer under the
Canada Business Corporations Act
to
      issue an instrument of continuation with respect to CTC.

7.    Any party affected
      by this Order shall be at liberty to apply to this Court for such further
      orders and directions as may be required to give effect to this Order or
      as the Court may deem appropriate.

8.    Subject to taxation,
      CIS is to recover its legal fees on a full indemnity basis for this application
      from the estate of CTC with liberty to apply for indemnity for legal fees
      between the date of this Order and the stay of the liquidation.

9.    CIS is to have
      its costs of the proceedings to date on a full indemnity basis in the same
      manner that costs were awarded to CIS in my Reasons for Judgment in these
      proceedings dated April 29, 1997.

10.   The Special General Meeting of CTC held August 15, 2003 is hereby
      authorized
nunc pro tunc
.

[10]

The
      reader will note that the stay under it is not immediate.  It is dependent
      upon an instrument of continuation and a determination of the liquidator's
      accounts.

[11]

When
      it does become effective, any claim that the company may have against anyone
      for any pre-stay matters is barred (clause 2(b)).

[12]

Until
      it is effective, the liquidator may retain the records of the Company.

[13]

CIS
      has three objections:

1.    It says that it is not
      right that once it retains control of its own affairs, it should not, if
      it can find something to sue about, be able to sue.

2.    In the circumstances,
      all the records of the Company should be returned to it.

3.    It is not right that
      the stay be postponed until the accounts of the liquidator are passed and
      all appeals there from are concluded.

[14]

The
      learned judge, in his reasons, 2004 BCSC 278, began by giving a history
      of this winding-up.  He said, in part:

[8]  ... The liquidation
      has been exceptionally acrimonious and litigious.

[9]  In the course of the winding-up, CIS has advanced or attempted to
      advance claims of conspiracy, breach of fiduciary duty and negligence against
      Canada Deposit Insurance Corporation ("CDIC"), which provided
      deposit insurance to Commonwealth's depositors, and against Yorkshire Trust
      Company and Central Guaranty Trust Company ("CGT"), both court-appointed
      liquidators of Commonwealth.  CIS sought to disqualify the law firm acting
      for CDIC, twice applied to disqualify the winding-up judge on the grounds
      of bias and has brought multiple appeals including an application for leave
      to appeal an order fixing costs in which the amount at issue was $260.00.  Toy,
      J.A. refused the application and characterized it as "a good example
      of trivialization of the process, which I would decline to encourage" (
Canada
      Deposit Insurance Corp. v. Commonwealth Trust Co.
(November 13,
      1992), [1992] B.C.J. No. 2672, 7 B.C.A.C. 161).

[15]

The
      learned judge then detailed the course of litigation since 1989.

[16]

Counsel
      for the appellant says that the reasoning of the chambers judge is "captured
      in the following passages":

[43]  In my view,
      considering the history of this liquidation, it is necessary that extensive
      measures be taken to safeguard the liquidator.  I expect that the future
      course of dealing between CIS, or Commonwealth under the control of CIS,
      and the liquidator will be characterized by the same level of acrimony
      and litigiousness as has been the case for the past 15 years of the liquidation.  That
      should not be permitted to take place outside the supervisory powers of
      the Court under the
Act
.

* * *

[46]
I do not agree
      with Mr. Shields' submission.  Any litigation relating to matters preceding
      a stay of the liquidation should take place within the liquidation.  I
      am confident that if the claims advanced or sought to be advanced by CIS
      in the liquidation had been brought in proceedings outside of the liquidation,
      it would have created the tangle of litigation that the
Act
seeks
      to avoid.  If there are matters of merit that should be dealt with, they
      are to be dealt with within the liquidation.  No such matters have been
      brought to my attention.

[17]

Counsel
      goes on to say that underlying his reasoning are erroneous propositions:

(a)   After the liquidation is stayed, the court must
      continue to exercise supervisory power under the
Winding-Up and Restructuring
      Act
because the court's customary powers to control its own process
      are wholly inadequate;

(b)   Through its past conduct, CIS has proven itself
      an unreasonable and vexatious litigant and, once the stay is lifted, Commonwealth
      will function as nothing more than a conduit for litigation desired by
      CIS;

(c)   Since
      CIS has not yet sought to bring or identify a claim against the Liquidator
      in the context of the present application, no such claim will exist.

[18]

Counsel
      then says:

26.   Staying the liquidation fundamentally changes the context in which
      the court must examine the possibility of claims against the Liquidator
      and others.  While the liquidation is on foot, the court concerns itself
      with the protection of the estate and the process by which the liquidation
      is to be concluded in an orderly and timely way.  These are not the considerations
      when the liquidation is stayed.  As a result of the stay, the estate is
      placed into the hands of the shareholders, acting through their elected
      board of directors, and it becomes the directors' task to decide whether
      litigation is in the company's best interests.  The chambers judge failed
      to take this change into account.

[19]

The
      fundamental issue is whether the learned judge had the power under s. 18
      to make this order.  That raises a question of construction.  Do the words, "on
      such terms and subject to such conditions as the court thinks fit" authorize
      a term preventing the Company from pursuing any claims it may have for
      wrongs done to the Company during the time when its affairs were in the
      hands of a liquidator?

[20]

The
      question is whether Parliament could have intended to confer such a power.  The
      words are, indeed, wide enough to encompass such a power.  But, as was
      said many centuries ago:

From which cases it appears, that the sages of the law heretofore have
      construed statutes quite contrary to the letter in some appearance, and
      those statutes which comprehend all things in the letter, they have expounded
      to extend but to some things, and those which generally prohibit all people
      from doing such an act, they have interpreted to permit some people to
      do it, and those which include every person in the letter they have adjudged
      to reach to some persons only, which expositions have always been founded
      upon the intent of the Legislature, which they have collected sometimes
      by considering the cause and necessity of making the Act, sometimes by
      comparing one part of the Act with another, and sometimes by foreign circumstances.
      So that they have ever been guided by the intent of the Legislature, which
      they have always taken according to the necessity of the matter, and according
      to that which is consonant to reason and good discretion.

(
Stradling v. Morgan
(1560), 1 Plowd.
      199 at 205, 75 E.R. 305)

[21]

I
      have no difficulty in holding that the words do confer a power to prevent
      claims against a liquidator.  The reason is that a liquidator must pass
      accounts and, if the liquidator has done anything which the liquidator
      ought not to have done, the remedy for the company is to pursue the matter
      in the accounting.

[22]

But,
      it seems to me highly improbable that Parliament could have intended to
      confer a power to prevent a company, upon recovering control of its own
      affairs, from bringing an action for a wrong done to it by a third party
      during the years that a company was in the hands of a liquidator.

[23]

I
      would allow the appeal to the extent of amending clause 2(b) to substitute
      for the words "against any person", the words "against the
      liquidator or previous liquidator, Central Guaranty Trust Company, or the
      liquidator of Central Guaranty Trust Company, Deloitte Touche Inc.".

[24]

The
      other two impugned provisions are, it seems to me, provisions which fall
      sensibly within the words at issue.  They are ancillary to the completion
      of the liquidator's duties and the release of the present liquidator from
      any further duties in connection with this liquidation.

[25]

Accordingly,
      I would allow the appeal only to the extent which I have indicated.

[26]

Although
      the appellant has succeeded in this appeal to the narrow extent indicated,
      I see no purpose in making any award of costs because, if such an award
      were made against the liquidator, the liquidator would have every right
      to charge the costs so ordered in its accounts.

[27]

The
      style of cause on the order of this Court, on its being drawn up, shall
      be as shown on these reasons for judgment.  The style of cause on the papers
      filed by the parties in this appeal was misleading.



The Honourable Madam Justice Southin



I agree:


The Honourable
      Mr. Justice Smith




Reasons for Judgment
        of the Honourable Madam Justice Prowse:

[28]

I
      have had the privilege of reading, in draft form, the reasons for judgment
      of Madam Justice Southin.  I agree with her that s. 18 of the
Winding
      Up and Restructuring Act
, R.S.C. 1985, c. W-11, provides the court
      with a very broad discretion to attach conditions to an order staying liquidation
      proceedings.  I also agree that the provisions of the order under appeal
      relating to the retention by the liquidator of the corporate records of
      Commonwealth Trust Company ("CTC"), and the taxing of the liquidator's
      accounts prior to the stay taking effect, are terms which properly fall
      within the exercise of that discretion.  Finally, I agree with Madam Justice
      Southin's comments at para. 22 of her reasons that it is:

... highly improbable that Parliament could have intended to confer a
      power to prevent a company, upon recovering control of its own affairs,
      from bringing an action for a wrong done to it by a third party during
      the years that a company was in the hands of a liquidator.

[29]

I
      would go further, however, and state that it is also highly improbable
      that Parliament could have intended to foreclose a company which had regained
      control over its own affairs in circumstances such as these from commencing
      action against a liquidator, or former liquidator, for fraud or misrepresentation
      of a material fact relating to the liquidation proceedings if such a cause
      of action were discovered subsequent to the effective date of the stay
      order.  In that regard, I note that counsel for the respondent KPMG Inc.,
      in a submission adopted by counsel for Deloitte & Touche Inc., stated
      that it was not the intention of the order to foreclose actions based on
      fraud or material misrepresentation and that such a term would likely be
      contrary to public policy.  It is clear, however, that the present wording
      of the order is sufficiently broad to foreclose such actions.

[30]

While
      I think it would have been preferable to frame this aspect of the order
      as one releasing the liquidators from all claims by CTC except claims for
      fraud or material misrepresentation discovered after the effective date
      of the stay, I am not prepared to find that framing the condition as one
      precluding CTC from suing the liquidators amounted to an error in law,
      given the lengthy and tortured history of these proceedings.

[31]

In
      the result, I would allow the appeal by amending para. 2(b) of the order
      as follows:

CTC shall be enjoined from initiating or pursuing any action or proceeding
      or taking any step, including filing a claim in the liquidation of Central
      Guaranty Trust except for claims filed before January 1, 2004, or commencing
      or proceeding with an action or proceeding against the liquidator or previous
      liquidator, Central Guaranty Trust Company, or the liquidator of Central
      Guaranty Trust Company, Deloitte Touche Inc., on the basis of anything
      which occurred, or which ought to have occurred, prior to the Effective
      Date, except for an action or proceeding based on fraud or material misrepresentation
      discovered after the Effective Date;

[32]

In
      all other respects, I would affirm the order under appeal.



The Honourable
Madam
      Justice Prowse






