Ontario appeal court ruling marks substantial shift in enforcement of termination clauses

Investors in a defunct Toronto asset management firm, the subject of an on-going court battle, have until late September to file compensation claims.

In a decision from the Ontario Superior Court of Justice, investors in Bridging Finance Inc. must submit claims before Sept. 19, 2022. The judgement also directs the asset’s custodian, PricewaterhouseCoopers, to distribute $67.7 million to Blue Cross Life Insurance Co. of Canada and $10.3 million to Canassurance Hospital Services Association, two institutional investors that held assets in the company’s SMA2 fund.

It also instructs PwC to publish notices in the Globe and Mail’s national edition and on Newswire informing investors of the deadline. Claims submitted after the claim bar date will be summarily dismissed.

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“Other than a person holding an excluded claim, any person that may have a claim against Bridging as at the appointment date or that arose after the appointment date but prior to the claims bar date, is required to prove their claim pursuant to the claims and unit holdings identification procedure,” wrote the judges in the decision.

In operation from 2012 to 2021, Bridging was a privately held Canadian investment fund providing middle-market Canadian companies with alternative financing options. Its funds were used to address short-term needs, including debt restructuring and acquisitions.

Bridging’s legal troubles began on April 30, 2021, when the the Ontario Securities Commission issued complaints against its top executives, David Sharpe, chief executive officer, Natasha Sharpe, chief investment officer, and Andrew Mushore, chief compliance officer.

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David and Natasha Sharpe defrauded institutional and retail investors out of millions of dollars through their dishonesty and deceit,” wrote the OSC in a statement. “The Sharpes exploited their positions of trust for their own personal gain. . . . The Sharpes were registrants and the most senior leaders at Bridging Finance Inc., which managed investment vehicles focused on making shortterm loans to borrowers.

“Through their relationships with three borrowers and with the assistance of Bridging’s chief compliance officer, Andrew Mushore, the Sharpes funnelled investor funds to themselvesThe Sharpes then obstructed staff’s investigation to try to cover their tracks. Together with Mushore, they destroyed, concealed and altered Bridging records, misled staff after swearing to tell the truth and, in the case of David Sharpe, intimidated witnesses.”

Following the allegations, Bridging’s assets were placed in the care of PwC. The firm was later instructed to liquidate its existing assets. According to its estimates, the assets are expected to be sold for about a third of their $2.1 billion value.

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