(Inspection Proceeding) COLLEEN MOORE, BARRY DOUCETTE, RONALD X. AYOUB, KIM KRUK, DALE HEIN, PAMELA STONE, CAROLINE LEWANDOWSKY, ANNE LEFIER, GARRY McGINN, DAVID HAMILTON, JAMES MILLER, HELENE LAMADELEINE, MARY LOU FISHER, ALLAN BRETT, DONALD HUTCHINSON, GLORIA HUTCHINSON, RICHARD MELCER, STEPHEN CALDWELL, MICHELLE VEZEAU, DAVID KORNELSEN, KEVIN HARSH, COLLEEN MALTAIS, LUC MALTAIS, BOB MECH, A.A.N.T. SOFTWARE CORPORATION, TERRENCE FINNIGAN v. JAMES JOSS, 2013 ONSC 5168

CITATION : Moore v. Assaly, 2013 ONSC 5168 COURT FILE NO.: 13-56663 DATE: 2013/10/08 SUPERIOR COURT OF JUSTICE – ONTARIO BETWEEN: (Inspection Proceeding) COLLEEN MOORE, BARRY DOUCETTE, RONALD X. AYOUB, KIM KRUK, DALE HEIN, PAMELA STONE, CAROLINE LEWANDOWSKY, ANNE LEFIER, GARRY McGINN, DAVID HAMILTON, JAMES MILLER, HELENE LAMADELEINE, MARY LOU FISHER, ALLAN BRETT, DONALD HUTCHINSON, GLORIA HUTCHINSON, RICHARD MELCER, STEPHEN CALDWELL, MICHELLE VEZEAU, DAVID KORNELSEN, KEVIN HARSH, COLLEEN MALTAIS, LUC MALTAIS, BOB MECH, A.A.N.T. SOFTWARE CORPORATION, TERRENCE FINNIGAN and JAMES JOSS Applicants AND THOMAS G.

ASSALY, ASSALY INVESTMENT PROGRAM CORPORATION, ASSALY FINANCIAL CORPORATION, ACT 1 CORP., ASSALY CREDIT & TRADE CORP., ASSALY ASSET MANAGEMENT CORPORATION, MILLENNIUM SPRINGS DEVELOPMENT & CONSTRUCTION CORP. (aka MILLENNIUM SPRINGS PROPERTIES LTD.) and MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C. ASSALY CHARITABLE FOUNDATION) Respondents AND BETWEEN: (Receivership Proceeding) COURT FILE NO.: 13-57904 ONTARIO SUPERIOR COURT OF JUSTICE IN THE MATTER OF AN APPLICATION PURSUANT TO

SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990, c. C.43, AS AMENDED AND IN THE MATTER OF SECTION 248(3)(

b) OF THE ONTARIO BUSINESS CORPORATIONS ACT , R.S.O. 1990,

CHAPTER B.16 AND IN THE MATTER OF SECTION 241(3)(

b) OF THE

CANADA BUSINESS CORPORATIONS ACT , R.S.C. 1985, c. C-44 AND IN THE MATTER OF SECTION 253(3)(

b) OF THE CANADA NOT-FOR-PROFIT CORPORATIONS ACT , S.C. 2009, c.23 AND IN THE MATTER OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3 BETWEEN: LILY BACIC, RONALD AYOUB, SANDRA AYOUB, DONALD HUTCHINSON, GLORIA HUTCHINSON, KIM KRUK, DALE HEIN, PAMELA STONE, CAROLINE LEWANDOWSKY, LIM LEWANDOWSKY, ANNE LEFIER, GARY McGINN, DAVID HAMILTON, JAMES MILLER, HELENE LAMADLEINE, MARY LOU FISHER, ALLAN BRETT, RICHARD MELCER, STEPHEN CALDWELL, WENDY CALDWELL,BARRY DOUCETTE, COLLEEN MOORE, MICHELLE VEZEAU,DAVID

KORNELSEN, KEVIN HARSH, LUC MALTAIS, COLLEEN MALTAIS, BOB MECH, A.A.N.T. SOFTWARE CORPORATION, TERRANCE FINNIGAN, JAMES JOSS, DAVID WISKOWSKI, MOE LITWACK, TOMY ISSA and GEORGE BOSZORMENY Applicant(

s) AND MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C. ASSALY CHARITABLE FOUNDATION), ASSALY INVESTMENT PROGRAM CORPORATION, ASSALY FINANCIAL CORPORATION, ACT 1 CORP. and MILLENNIUM SPRINGS DEVELOPMENT & CONSTRUCTION CORP. (aka MILLENNIUM SPRINGS PROPERTIES LTD.) THOMAS G. ASSALY, KAREN FLOYD-ASSALY, and FRANK H. FEE, III Respondents AND BETWEEN: (Bankruptcy Proceeding) Court File No. : 33-165343 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY IN THE MATTER OF THE BANKRUPTCY OF MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C.

ASSALY CHARITABLE FOUNDATION) a registered charity carrying on business in the City of Ottawa, in the Province of Ontario BEFORE: Mr. Justice Paul Kane COUNSEL: Justin Fogarty and Pavle Masic, counsel for the Applicants in the Inspection Proceeding John E. Smith, counsel for the Respondent, Thomas G. Assaly, in the Inspection Proceeding Jason Dutrizac, counsel for Doyle Salewski, in capacity as Interim Receiver Martin Black, counsel for Robert G.

Assaly Estate Shael Eisen, counsel for Millennium Educational & Research Charitable Foundation (“the Foundation”) Andrew Matheson, counsel for TD Bank and TD Waterhouse Christopher Morris, counsel for Doyle Salewski HEARD: August 6, 2013 ENDORSEMENT INSPECTION PROCEEDING [ 1 ] Mr. Matheson on behalf of TD Bank and TD Waterhouse advised the court that it may be necessary for his clients to bring a motion as to the issue whether the reports of the Inspector and the Statement of Facts contained therein are admissible as such into evidence in other proceedings involving TD Bank and TD Waterhouse.

RECEIVERSHIP PROCEEDING [ 2 ] In this proceeding, none of the respondents have to date filed affidavits or factums in response to or opposing the existing orders or the extension or enlargement thereof. It was only upon the conclusion of argument that counsel for Mr. Assaly elected to file copies of an affidavit from Frank H.

Fee, III [“Fee Affidavit”] sworn July 30, 2013 [exhibit “A”] and an affidavit from Thomas Assaly dated August 5, 2013, which lists the style of cause as Millennium Educational & Research Charitable Foundation [the “Foundation”] in a proceeding in the United States Bankruptcy Court, Southern District of Florida, case #13-25913 [exhibit “B”] [the “Assaly Affidavit”]. [ 3 ] No counsel or representative appeared and no material was filed today on behalf of the respondents Assaly Investment Program Corporation, Assaly Financial Corporation, Act 1 Corp., Millennium Springs Development & Construction Corp. [the Other Respondent Corporations] and Karen Floyd-Assaly.

No counsel or representative was in attendance on behalf of Frank H. Fee, III. [ 4 ] The applicants seek the full appointment of a Receiver against the Other Respondent Corporations and an extension of the Interim Receivership Order against the Foundation. The applicants further seek an extension of the existing order restraining dissipation of assets against the Foundation, Thomas G. Assaly, Karen Floyd-Assaly and Frank H. Fee, III. [ 5 ] Thomas G.

Assaly submits that a full Receivership Order not be granted against the Other Respondent Corporations and that this court simply extend the existing Interim Receivership Order and existing Restraining Order against all respondents without further relief. [ 6 ] The respondent corporations are separate legal entities. The Inspection Proceeding began in February, 2013. The respondent corporations were represented by legal counsel in that action but not in this Receivership Proceeding which began in early June, 2013.

JUNE 19, 2013 [ 7 ] This court on June 19, 2013, appointed this Interim Receiver solely to seek recognition of that interim appointment under the U.S. Bankruptcy Code.

That order provides that that interim appointment will continue to a date to be fixed in August of 2013. [ 8 ] The above Interim Order dated June 19, 2013, permits the respondents the right to use assets of the Foundation for the payment of reasonable legal fees and representation in relation to the Receivership Proceeding, the Inspection Proceeding and the pending Bankruptcy Proceeding. [ 9 ] The above Interim Order dated June 19, 2013, also restrains the respondent corporations as well as Thomas G. Assaly from dissipating assets. JULY 2, 2013 – INTERIM RECEIVERSHIP [ 10 ] This court on July 2, 2013: (

a) Expanded the grounds of the Receivership Application to include the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3; (

b) Added Karen Floyd-Assaly, Thomas G. Assaly and Frank H. Fee, III as respondents; (

c) Expanded the powers of the Interim Receiver; and (

d) Extended the Restraining Order prohibiting the dissipation of assets against the above three individuals added as respondents. [ 11 ] This July 2, 2013 order permitted Thomas G. Assaly and Karen Floyd-Assaly to use their personal assets for their ordinary living expenses as well as the payment of reasonable legal advice and representation in the Receivership Proceeding and Inspection Proceeding. [ 12 ] The July 2, 2013 order permitted the respondents, other than Frank H.

Fee, III, to use the assets of the Foundation for the payment of reasonable legal fees and representation in the Inspection Proceeding, the Receivership Proceeding and the Canadian Bankruptcy Proceeding. [ 13 ] The July 2, 2013 order declared that the May 24, 2013 transfer of 2611 S. Indian River Drive, Fort Pierce, Florida USA from the Foundation, prima facie , appeared on the evidence to be void pursuant to ss. 95 and 96 of the Bankruptcy and Insolvency Act and would be so declared unless the respondents provided contrary evidence on the return of the motion on July 9, 2013.

JULY 9, 2013 [ 14 ] This court on July 9, 2013, [paras. 5-6] ordered that the applicants’ motion to extend the Restraining Order and for the appointment of the Receiver was adjourned to proceed peremptorily on August 6, 2013. Dates were set for the filing of materials in relation thereto.

AUGUST 6, 2013 [ 15 ] August 6, 2013 was set to argue and determine the applicants’ request for the appointment of a Receiver of the respondent corporations and for continuation as applicable of the Restraining Order. [ 16 ] Based upon the above timeline, the absence of representation and without opposing material being filed by the respondent corporations; this court appointed Doyle Salewski Inc. as Receiver of the respondents, Assaly Investment Program Corporation, Assaly Financial Corporation, Act 1 Corp., and Millennium Springs Development & Construction Corp. [aka Millennium Springs Properties Ltd.] on August 6, 2013. [ 17 ] This court on August 6, 2013 also continued the interim: (

a) Receivership Order against the Foundation and assets held by Mr. Fee III; and (

b) Restraining Order against Mr. and Mrs. Assaly, the Foundation and Mr. Fee III and restricted their use of money for living and legal expenses.

RESTRAINING ORDER AND INTERIM RECEIVERSHIP OF FOUNDATION [ 18 ] The Foundation today does not oppose and this court therefore extends the terms of the Interim Receivership of the Foundation and extends the Restraining Order against the Foundation as contained in the restraining order dated July 2, 2013, as amended. [ 19 ] This court is satisfied on the evidence previously presented as well as the Receiver’s third report herein that appropriate grounds exist which require and justify the extension of the Restraining Order and Interim Receiving Order.

RESTRAINING ORDER AGAINST RESPONDENTS [ 20 ] The Receiver in its third report advises that the U.S. Bankruptcy Court on August 1, 2013, granted an interim order restraining the Foundation and related entities from disposing of any real estate and income therefrom. That court apparently further restrained Frank Fee from disposing of funds held in trust respecting the Foundation. Mr.

Assaly requests this court to similarly limit this court’s existing Restraining Order. [ 21 ] I am unwilling to limit the court’s restraining order to the limits in the Florida restraining order for the following reasons. [ 22 ] Neither the materials before nor the August 1, 2013 Interim Restraining Order of the U.S. Bankruptcy Court are in evidence before me.

I am not prepared to speculate as to why that court so limited its Interim Order. [ 23 ] In the Inspection Proceeding, this court was satisfied that it appeared that some of the monies invested by the applicants in Ontario real estate development projects had been delivered on the instructions of Thomas G.

Assaly to the Foundation. [ 24 ] It appeared that the Foundation in order to finance some $700,000 renovations of Canada House in the State of Florida, whether by way of loan or otherwise, used some money invested in Ontario real estate projects by the applicants. [ 25 ] There is no contrary evidence that the Foundation is affiliated to and controls Millennium Springs Development & Construction Corp. and Assaly Investment Program Corporation and that the latter two corporations defaulted in payment obligations to investors in the three Ontario projects. [ 26 ] There is no contrary evidence that the Foundation, being a registered Canadian Charitable Corporation, failed to make any charitable contributions during the previous 18 months. [ 27 ] There is no contrary affidavits refuting that the Foundation itself, or through its wholly own subsidiaries corporations, purchased a number of investment properties in the State of Florida. [ 28 ] Five of the seven directors of the Foundation appear to have resigned leaving Thomas G.

Assaly and Karen Floyd-Assaly as the only remaining directors. [ 29 ] This court in the Inspection Proceeding granted an Interim Order appointing Doyle Salewski Inc. as Inspector on February 6, 2013, and directed the investigation of MSTC, Assaly Financial Corporation, Assaly Credit & Trade Corp., Act 1 Corp. and the Foundation. [ 30 ] The Foundation acknowledged receipt of the February 6, 2013 order in the Inspection Proceeding on February 7, 2013. On February 8, 2013, Mr. Assaly instructed his account manager to transfer all residual funds from the Foundation accounts in Canada to the State of Florida.

Those instructions were thereupon acted upon by TD Waterhouse. [ 31 ] There is no contrary evidence that Mr. and Mrs. Assaly, as the two remaining directors of the Foundation, transferred title ownership of Canada House to themselves on May 24, 2013. [ 32 ] May 24, 2013, is some two weeks after the May 7 th order of this court in the Inspection Proceeding scheduling June 19, 2013 to decide the applicants’ motion to freeze the assets of the Foundation and the appointment of a Receiver. That order further scheduled July 9, 2013 to decide a number of issues including whether the respondents, including Mr.

Assaly and the Foundation, had breached an

order of this court by their disbursement or transfer of money or property. [ 33 ] The evidence before this court justifies the continuance of this court’s existing Restraining Order. For greater certainty, this court hereby extends the terms of its Restraining Order granted July 2, 2013, as amended. EXPENDITURES OF RESTRAINED ASSETS [ 34 ] The respondents, including Mr. and Mrs.

Assaly, pursuant to the endorsement of this court released on July 11, 2013, [para. 10] in the Receivership Proceeding were required to file an accounting of all expenditures made from the restrained assets by August 1, 2013, for the period commencing June 19, 2013. The respondents failed to comply with that requirement. That obligation is hereby repeated together with an ongoing obligation to provide the same beyond August 1, 2013, and to do so no later than August 15, 2013. CONTEMPT BY ASSALYS [ 35 ] The Receiver requested an order that Thomas G.

Assaly and Karen Floyd-Assaly be held in contempt of court for their failure to provide the books and records referred to in paras. 9 and 11 of this court’s order dated July 4, 2013. [ 36 ] This court is not prepared to deal with that issue unless a motion on notice is brought seeking such relief. OFFER BY MEUSE TO PURCHASE FOUNDATION’S INTEREST IN ASSALY MEUSE LLC [ 37 ] The third report of the Interim Receiver [para. 30] states that Mr. Meuse on August 1, 2013, presented an offer to the Interim Receiver to purchase the Foundation’s 50% interest in Assaly Meuse LLC for $215,000.

The Receiver seeks an order authorizing it to accept the offer from Meuse and sell the Foundation’s 50% interest in Assaly Meuse LLC for that consideration. [ 38 ] The above third report of the Interim Receiver is dated August 2, 2013. No motion has been brought to authorize the Interim Receiver to accept that offer or supporting that level of consideration. [ 39 ] A motion and affidavit material in relation to that issue must be served and filed in which case that issue may be dealt with on Friday, August 9, 2013, at 2 p.m. Kane J. Released: October 8, 2013 CITATION : Moore v. Assaly, 2013 ONSC 5168

ONTARIO SUPERIOR COURT OF JUSTICE RE: Moore et al v. Assaly et al (Inspection Proceeding) AND Bacic et al v. Millennium Educational & Research Charitable Foundation et al (Receivership Proceeding) AND Millennium Educational & Research Charitable Foundation (Bankruptcy Proceeding) BEFORE: Kane J. ENDORSEMENT Kane J. Released: October 8, 2013