2014 NBCA 7, 2014 NBCA 7

COURT OF APPEAL OF COUR D’APPEL DU NEW BRUNSWICK NOUVEAU-BRUNSWICK 113-13-CA CYRENNUS DUGAS APPELLANT CYRENNUS DUGAS APPELANT - and - - et - PETER GAUDET, ADAM GAUDET, 508571 N.B. LTD. and 100167 PEI INC. RESPONDENTS PETER GAUDET, ADAM GAUDET, 508571 N.B. LTD. et 100167 PEI INC. INTIMÉS Dugas v. Gaudet et al., 2014 NBCA 7 Dugas c.

Gaudet et al., 2014 NBCA 7 CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Larlee The Honourable Justice Richard CORAM : l’honorable juge en chef Drapeau l’honorable juge Larlee l’honorable juge Richard Appeal from a decision of the Court of Queen’s Bench: October 29, 2013 Appel d’une décision de la Cour du Banc de la Reine : le 29 octobre 2013 History of Case: Historique de la cause : Decision under appeal: 2013 NBQB 355 Décision frappée d’appel : 2013 NBBR 355 Preliminary or incidental proceedings: [2013] N.B.J.

No. 350 Procédures préliminaires ou accessoires : [2013] A.N.-B. n o 350 Appeal heard: February 19, 2014 Appel entendu : le 19 février 2014 Judgment rendered: February 19, 2014 Jugement rendu : le 19 février 2014

Reasons for judgment by: The Honourable Chief Justice Drapeau Motifs de jugement : l’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Larlee The Honourable Justice Richard Souscrivent aux motifs : l’honorable juge Larlee l’honorable juge Richard Counsel at hearing: For the appellant: Charles A. LeBlond, Q.C. For the respondents: Eugene J. Mockler, Q.C. and Christian E. Michaud Avocats à l’audience : Pour l’appelant : Charles A. LeBlond, c.r. Pour les intim é s : Eugene J. Mockler, c.r. et Christian E. Michaud THE COURT The appeal is dismissed with costs.

LA COUR Rejette l’appel avec d é pens. The judgment of the Court was delivered by DRAPEAU, C.J.N.B. (Orally) [ 1 ] This is an appeal, with leave, from the refusal of a judge of the Court of Queen’s Bench to recuse himself as trial judge in a civil proceeding. The dispute between the parties is described as follows in the decision under appeal ( Gaudet v. Dugas , 2013 NBQB 355 , [2013] N.B.J. No. 342 (QL) : The dispute that is the subject of these proceedings arises out of an agreement to sell a crab fishing licence owned by Mr. Dugas, which agreement he made with the Plaintiffs on December 15, 1998.

A declaration of trust and indemnity signed by Mr. Dugas are at the centre of the dispute. This transaction was never closed. [para. 6] [ 2 ] The motion for recusal was based upon an allegation of reasonable apprehension of bias. In the appellant’s submission, that apprehension arose out of observations made by the judge

in the course of an application for the reappointment of PricewaterhouseCoopers Inc. as trustee forhis bankruptcy. On February 14, 2012, the judge rendered a decision with supporting reasonsgranting the order sought, however, our Court subsequently reversed, making, in passing, someincidental remarks regarding the respondents’ contention that the appellant had made improper useof the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (see PricewaterhouseCoopers Inc. v.Dugas, 2012 NBQB 48, 384 N.B.R. (2d) 98, rev’d 2012 NBCA 85, 395 N.B.R. (2d) 265; leave toappeal to SCC refused, [2012] S.C.C.A.

No. 521). [3] In his reasons for decision in the case at hand, the judge refers to the correct test,namely the one formulated by Justice de Grandpré in Committee for Justice and Liberty v. Canada(National Energy Board), (SCC), [1978] 1 S.C.R. 369, [1976] S.C.J. No. 118 (QL),which test the Supreme Court of Canada has reiterated in several decisions and our Court recentlyconsidered and applied in Lambert v. Lacey House, 2013 NBCA 48, 406 N.B.R. (2d) 346.

It is anobjective test, and the question at its core is the following: Having examined the situation in depthand viewing the matter “realistically and practically”, would a reasonable and well informedperson conclude it is “more likely than not that [the judge], whether consciously or unconsciously,would not decide fairly”? (see Committee for Justice and Liberty, at para. 40). [4] The judge answered that question in the negative for the following reasons: It is true that an apprehension of bias may be warranted when a judge makes findings of fact thatwould lead a reasonable person to conclude that the court is no longer capable of assessing awitness's evidence impartially.

I am of the opinion that having such an apprehension in this caseowing to my decision of February 14, 2012, is excessive. Paragraphs 34, 43 and 45 of my decision of February 14, 2012, read as follows:

(34) Mr. Dugas as we all know, consented to a judgment for over two million dollars in August2002, to settle a dispute. He filed for bankruptcy about 90 days later. Mr. Dugas having filed forbankruptcy six years earlier, knew or ought to have known that he would be able to retain the saidlicenses which were the object of a sale to the Creditors from which he had received approximately$1,300,000.00 for the licenses along with some other assets of negligible value.

(43) From the facts that have been presented, there is no basis to conclude that Mr. Dugas wasmislead in any regard. He took it upon himself and to a certain extent took advantage of theexisting law and act as if nothing had happened to prevent him from returning to commercialfishing.

(45) It is also clear from the record that the licenses have not been dealt with by the Trustee. Eventhough Mr. Dugas was not cross-examined on his affidavit, I nonetheless find the evidence of Mr.Jones more persuasive concerning the representation alleged by Mr. Dugas. I am not satisfied thatMr. Dugas relied on any representation of the Trustee. Mr. Dugas acted on his own premise andhis then counsel's advice, that he was home free with the licenses and had rid himself or got rid ofhis obligation under the Consent Judgment by his use of the BIA.

The findings in the reasons for that decision were stated objectively and without bias. In thoseparagraphs, I set out what seemed clear to me based on the evidence the parties presented at thehearing into the matter. I state my preferences for the Trustee's evidence over that of Mr. Dugas onthe issue of whether he was misled by the Trustee (paras. 43 and 45). Mr. Dugas' lawyer seems to suggest that the findings of fact set out in paragraphs 54, 55 and 56indicate that Mr. Dugas' actions were improper and fraudulent. That suggestion is incorrect. Thoseparagraphs read as follows:

(54) In the case at bar, Mr. Dugas fails to include in his Statement of Affaires dated October 27, 2002, the licenses. As earlier mentioned, the Registrar did not consider the licenses property of the Bankrupt subject to seizure. In my view, the law is clear and the licenses are "property" as defined under

section 2 of the BIA.

(55) Mr. Dugas argued that the facts at bar did not justify the reappointment of the Trustee as he should be allowed a fresh start. He submitted that the existence of the licenses was known to the Trustee and had it not been for his actions, the licenses would have been cancelled by DFO. He further submitted that his failure to finance his debt with the Gaudets rest upon the Creditors, their opposition to his discharge and so forth. Mr. Dugas submits in a nutshell that equity should prevail in his favor. This Court is of the view that equity is not with Mr. Dugas.

(56) In not exercising its discretion to reappoint the Trustee, the Court is of the opinion that it would result in an injustice to the Creditors. Equity in this matter as earlier mentioned, should go with the Creditors and the Trustee, not Mr. Dugas. In this context, the Court is of the opinion that in the circumstances of this case it should exercise its discretion and use its common sense and justice in a manner which does not create an injustice. To accomplish this, I believe its Trustee must be reappointed.

The subject of my observations in those paragraphs was the exercise of the Court's discretion, as the Supreme Court suggested in [ Saulnier v. Royal Bank of Canada , 2008 SCC 58 , [2008] 3 S.C.R. 166 ] as to whether or not the Trustee should be reappointed. In my decision, I simply state that Mr. Dugas took advantage of the law as he understood it at the material time by excluding the fishing licence from his bankruptcy, and the Registrar in Bankruptcy agreed with him concerning the applicable law.

The decision in Saulnier changed the state of the law concerning the fishing licences and in the event that Saulnier should apply in the case at bar. Equity in that scenario would have gone with the Trustee since the fishing licence was a significant asset and had to be included in Mr. Dugas' bankruptcy as his property. Mr. Dugas took advantage of the law, which was in his favour; it does not follow that he was acting improperly, much less fraudulently. Finally, there is no finding of fact or of law in either my decision or that of the Court of Appeal in PricewaterhouseCoopers that applies in the case at bar.

The parties are different. Moreover, I will inevitably have to issue a decision after hearing first the Plaintiffs, who have not finished filing their evidence, and then the Defendant. [paras. 33-40] […] In conclusion, the Court is of the opinion that a reasonable, informed person, viewing the matter realistically and practically, and having thought the matter through, would not conclude that there was a reasonable apprehension of bias.

Furthermore, I am satisfied that I will be able to consider the parties' evidence and render animpartial decision in the case at bar without any actual bias or prejudgment, and without theperception thereof. For these reasons, the motion is dismissed with costs of $1,500.00.

The parties will inform the clerk's office of their availability so that this matter can be put back onthe docket. [paras. 44-47] [5] The grounds giving rise to the apprehension of bias must be sufficiently serious torebut the presumption that the judge will abide by his or her oath of office and “[judge] a particularcontroversy fairly on the basis of its own circumstances” (see United States v. Morgan, 313 U.S.409 (1941), at p. 421, excerpt quoted with approval in R. v. S.(R.D.), (SCC),[1997] 3 S.C.R. 484, [1997] S.C.J. No. 84 (QL)).

In that regard, it bears emphasizing the judge’sobservations reveal he understands quite well that he is required to determine the underlyingdispute solely on the basis of findings of fact sourced in the parties’ admissions and the evidenceadduced at trial. No prior observation relating to the factual matrix, whatever its provenance, maybear upon the decision-making process at trial. In my view, a reasonable and well-informed personwould conclude the grounds upon which the appellant relies do not rebut the presumption ofimpartiality.

All things considered, I conclude the judge did not commit any error in his applicationof the test formulated by Justice de Grandpré in Committee for Justice and Liberty that couldjustify reversal of his decision. It follows that I would dismiss the appeal. [6] Finally, I would order the appellant pay one set of costs in the amount of $5,000 and refer tothe trial judge the issue of throw-away costs. ________________________________________ J. Ernest Drapeau Chief Justice of New Brunswick/ juge en chef du Nouveau-Brunswick WE CONCUR/ NOUS SOUSCRIVONS À L’AVIS : ____________________________________ M.E.L.

Larlee, J.A./j.c.a. ____________________________________ J.C. Marc Richard, J.A./j.c.a.