r v. DAVID GOTTLIEB, 2012 QCCA 1877

Marciano (Séquestre de) 2012 QCCA 1877 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-022041-115 (500-11-041322-112) DATE: October 23, 2012 CORAM: THE HONOURABLE ANDRÉ ROCHON, J.A. PIERRE J. DALPHOND, J.A. NICHOLAS KASIRER, J.A. IN RE: GEORGES MARCIANO GEORGES MARCIANO APPELLANT - Debtor v. DAVID GOTTLIEB RESPONDENT – Trustee/Petitioner and PRICEWATERHOUSECOOPERS INC.

IMPLEADED PARTY - Receiver JUDGMENT [ 1 ] On appeal from a Judgment of the Superior Court, District of Montreal, rendered on September 15, 2011 (the Honourable Madam Justice Chantal Corriveau), granting ex parte the respondent's motion for recognition of a foreign main bankruptcy proceeding and appointing a receiver under s. 272 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c.

B-3. [ 2 ] For the reasons of Dalphond, J.A., with which Rochon and Kasirer, JJ.A. agree; THE COURT de bene esse : [ 3 ] ALLOWS the appeal in part, without costs; [ 4 ] SETS ASIDE paras. 9, 10 and 13 of the Recognition of a Main Foreign Proceeding Judgment; and [ 5 ] REPLACES paras. 11 and 12 by the following: [11] APPOINTS PricewaterhouseCoopers as interim receiver of Georges Marciano's property located in Canada; [12] EMPOWERS PricewaterhouseCoopers to seize any moveable assets that belong or could have been under the control of Marciano and that could easily be moved or otherwise disposed of, and RESERVES to PricewaterhouseCoopers the right to apply to this Court for any further orders that may be necessary or appropriate to protect the rights of Marciano's creditors.

ANDRÉ ROCHON, J.A. PIERRE J. DALPHOND, J.A. NICHOLAS KASIRER, J.A.

Mtre Jean-Yves Fortin Mtre Mélanie Martel Mtre Hubert Sibre Davis For the appellant Mtre Bernard Boucher Mtre Réal A.

Forest Mtre Caroline Dion Blake, Cassels & Graydon For the respondent Mtre Martin Desrosiers Mtre Alexandre Fallon Osler, Hoskin & Harcourt For the impleaded party Date of hearing: March 28, 2012 REASONS OF DALPHOND, J.A. [ 6 ] These reasons deal with an appeal by Georges Marciano from a judgment rendered by the Honourable Madam Justice Chantal Corriveau of the Superior Court, District of Montreal, on September 15, 2011, granting ex parte the respondent's motion for recognition of a foreign main bankruptcy proceeding and to appoint a receiver under s. 272 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c.

B- 3 (BIA). [ 7 ] The facts are summarized in a related judgment released concurrently, Fahs, Chapnick and Tagle v. Marciano et al. , 500-09- 022220-115. [ 8 ] For the purpose of this appeal it suffices to say that a group of creditors pursuant to civil judgments of the California Superior Court condemning the appellant to pay them over US$260,000,000 have petitioned him into bankruptcy.

On December 28, 2010, their petition was granted by a US bankruptcy judge despite the fact that the civil judgments were subject to pending appeals and could thus be considered subject to a bona fide dispute. [1] On March 10, 2011, the respondent Gottlieb was appointed trustee by the US Bankruptcy Court and took over the conduct of the pending civil appeals as legal representative of Marciano, then a bankrupt in the United States. [ 9 ] In September 2011, Gottlieb petitioned the Montreal Superior Court to have the US bankruptcy judgment recognized as a foreign main proceeding under the BIA , him as the foreign representative and PricewaterhouseCoopers inc. (PWC) as receiver to the Canadian assets with full power to control and realize all of them.

His motion was presented ex parte on September 14 and 15, 2011 and granted on September 15, 2011. [ 10 ] Past behaviour of the appellant in California, namely the surreptitious removal of moveable assets worth tens of millions of dollars and important documents could justify to proceed ex parte to have a court officer appointed with specific powers to prevent the disappearance of easily moved assets.

For the moveable assets like cars, jewellery, watches, etc., the bank account and the cash, there was an apparent need for a seizure, including search warrants in order to have them placed in the hands of justice pending the final outcome of the US bankruptcy proceeding.

By necessity such orders had to be made ex parte. [ 11 ] Based on the facts alleged, Corriveau J. was right to appoint PWC to assist the US representative in order to protect the interest of the US creditors. [ 12 ] However, before determining the extent of the powers to be granted ex parte to PWC, she had to take into consideration not only the fears expressed by the US trustee and his allegations about Marciano past behaviour, but also the followings: - the claims of the creditors were not yet final.

As said by the dissenting judge of the appeal panel of the Bankruptcy Court, "if ever there were a case in which the debtor [Marciano] could claim a dispute, this would be it"; - the likelihood that the Civil Judgments will be considerably reduced by the California Court of Appeal and the fact that Marciano had substantial assets in California, two details that Gottlieb, trustee since March 2011, had to know very well as a representative of Marciano in the civil appeals pending before the California Court of Appeal; - once she had recognized the US bankruptcy proceeding as a foreign main proceeding, s. 271 BIA provides for an automatic stay of proceedings in Canada and an interdiction for Marciano to sell or otherwise dispose of any property; - the fact that there was no allegation that Marciano was running his business in Montreal in an inadequate manner and that his Canadian creditors were not paid in due course or their interests at risk.

[ 13 ] In these circumstances, the person appointed should have been considered as the equivalent of an interim receiver under the BIA and the powers granted ex parte should have been limited to the search and seizure of moveable that could be easily disposed or transferred.

There was no need to authorize ex parte examination of Marciano and third parties, seizure of 18 buildings located in Montreal, management and control over Marciano's assets by the receiver, including the hotel, authority to solicit offers to purchase the property or any part or parts thereof and abandon or surrender all or any part of the property and removal of valuable paintings and piece of arts exposed in the hotel or nearby, a public place that could easily be monitored pending the next step of the Quebec proceedings. [ 14 ] These overreaching aspects of the initial orders should be annulled. [ 15 ] If all the circumstances described above were properly disclosed to Justice Corriveau, she erred in granting the whole respondent's motion. [ 16 ] For these reasons, I propose to allow de bene esse the appeal in part, without costs, to annul paras. 9, 10 and 13 of the Recognition of a Main Foreign Proceeding Judgment and to replace paras. 11 and 12 by the followings: [11] APPOINTS PricewaterhouseCoopers as interim receiver of Georges Marciano's property located in Canada; [12] EMPOWERS PricewaterhouseCoopers to seize any moveable assets that belong or could have been under the control of Marciano and that could easily be moved or otherwise disposed of, and RESERVES to PricewaterhouseCoopers the right to apply to this Court for any further orders that may be necessary or appropriate to protect the rights of Marciano's creditors.

PIERRE J. DALPHOND, J.A.