Engagements

Hutchens et al

Background

Interim Receivership

On February 28, 2019 by Order (the “Interim Receiver Order”) of the Ontario Superior Court of Justice (Commercial List) (the “Court”), A. Farber & Partners Inc. (“Farber”) was appointed as interim receiver (the “Interim Receiver”), pursuant to section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, without security, of all of the assets, undertakings and properties of Sandy Hutchens, Tanya Hutchens and entities referred to in Schedule “A of the Interim Receiver Order (defined as the “Debtors”) including the real property attached in Schedule “B” acquired for, or used in relation to a business carried on by the Debtors, including all proceeds thereof (the “Property”).

Among other matters, the Interim Receiver’s powers were investigatory and monitoring in nature.

Receivership Status Updates

On March 18, 2019, Farber’s appointment as receiver (the “Receiver”) was confirmed to continue by Order of the Court (the “March 18 Order”).

The March 18 Order provided for, among other things, the authority and discretion to take possession of, and exercise control over, various real properties in the Greater Sudbury Area, Ontario and Innisfil, Ontario (the “Income Producing Property”).  Accordingly, all tenants of the Income Producing Property are required to forward all rents to the Receiver, or its duly authorized agent, from March 18, 2019 onward.

On April 25, 2019, the Court issued an Order providing for, among other things, the Receiver’s authorization to list and sell certain parcels of the Income Producing Property and an additional residential real property of the Debtors.

On June 7, 2019, the Court issued an Order that provided for, among other things, the Receiver’s authority and discretion to take possession of, and exercise control over, various additional real properties located in the Greater Toronto Area and in Innisfil, Ontario (the “Additional Properties”). Any references to the Income Producing Property shall include the Additional Properties.

On July 5, 2019, the Court issued a Judgment (the “July 5 Judgment”) providing for, among other things, the declaration of certain judgments of the United States District Court for the Eastern District of Pennsylvania against Sandy Hutchens and Tanya Hutchens, jointly and severally in the amount of US$26,774,736.09 (the “US Judgments”), as recognized and enforceable in Ontario.

The July 5 Judgment also provided for, among other things, the continuation of the receivership administration and the stay of certain provisions of the July 5 Judgment until after certain appeals from the US Judgments have been decided by the United States Court of Appeals for the Third Circuit.

On August 19, 2019, the Court issued Orders providing for, among other things:

  • sales approval and vesting provisions for the transactions involving 1889 Simcoe, 1779 Cross and 1790 Cross (as defined in the Receiver’s Fourth Report);
  • the Receiver’s authorization to list and sell the real properties municipally known as 1479 Maple Road, Innisfil, Ontario and 1573 Houston Avenue, Innisfil, Ontario (together, the “Secondary Innisfil Properties”); and
  • the authorization for the Receiver to apply any proceeds of sale of the Secondary Innisfil Properties to acquire an assignment of the mortgages registered by Meridian Credit Union against title to other Income Producing Property and of the underlying debt obligations.

On September 3, 2019, the Court issued an Order approving fees and disbursements of the Receiver and its counsel. On October 15, 2019 the Court issued an Order providing for, among other things, sale approval and vesting provisions in respect of transactions involving the Secondary Innisfil Properties.

On October 15, 2019 the Court issued an Order providing for, among other things, sale approval and vesting provisions in respect of transactions involving the Secondary Innisfil Properties.

On October 16, 2019, the Court issued an Order removing the lawyer of record for Sandy Hutchens and confirming address for service until Mr. Hutchens retains new counsel.

The December 18, 2019 Endorsement of Justice Penny provided that the Receiver can continue to market and sell the Trust properties, however, are not to complete sale without consent of parties or Court Order.

The February 18, 2020 Endorsement of Justice Hainey adjourned the Motion to determine whether “legal advice and representation” in the July 5 Judgment includes legal advice and representation respecting the U.S. litigation. A new hearing date for this motion has not been set.

On May 22, 2020, the Court issued an Order providing for, among other things, the sales approval and vesting provisions for the transactions involving: 110-114 Pine Street and 367-369 Howey Street (as defined in the Receiver’s Seventh Report); and 29 Laren, 3415 Errington and 3419 Errington (as defined in the Receiver’s Eighth Report).

On June 29, 2020, the Court issued an Order providing for, among other things, the sale approval and vesting provisions for the transaction involving 17 Serpentine (as defined in the Receiver’s Ninth Report).

On September 22, 2020, the Court issued an Order providing for, among other things, (i) the sale approval and vesting provisions for the transaction involving 1760 Cross (as defined in the Receiver’s Tenth Report); and (ii) the fees and disbursements of the Receiver and its counsel up to July 31, 2020.

On November 20, 2020 the Receiver filed the Eleventh Report to advise the Court and the parties of the results of its investigation into the Debtors’ affairs, including its findings as of the date of this report regarding their known assets and its observations relevant to the issue of whether or not a number of real properties and mortgages thereon are held in trust for the Hutchens’ children as they have asserted.

This Eleventh report focuses on the following observations made by the Receiver in the course of its investigation:

  1. The identification and tracing of proceeds of private lending businesses operated by Sandy and Tanya in the United States, which gave rise to certain judgments against them for fraud in American courts;
  2. The identification of assets of the Debtors; and
  3. Evidence reviewed by the Receiver relevant to the assessment of the validity of Sandy’s and Tanya’s assertions that substantially all of the Debtors’.

Effective this reporting no hearing date has been scheduled but the Receiver anticipates a date will be set in the coming weeks.

On January 6, 2021, the Receiver filed the Twelfth Report to the Court to seek approve the sale of the 331 Regent and 175 Hilda properties. On January 18, 2021, the Court issued an Order providing for, among other things, (i) the sale approval and vesting provisions for the 331 Regent Transaction and 175 Hilda Transaction (as defined in the Receiver’s Twelfth Report); and (ii) the activities of the Receiver as set out in the Twelfth Report.

On January 29, 2021, the Respondent Sandy Hutchens made a motion to a Judge of the Commercial List to be heard on April 20, 2021. The motion is for, among other things:

  1. An order in the nature of directions or a declaration enforcing the Order of the Honourable Justice Penny dated April 28, 2019 (the “April 28, 2019 Order“) and the Judgment of the Honourable Justice Penny dated July 5, 2019 (the “July 5, 2019 Judgment”) declaring that the provision for payment of expenses for legal advice and representation in the April 25, 2019 Order and the July 5, 2020 Judgment includes legal advice and representation in litigation involving one or both of the respondents in the United States, including appeals;
  2. In the alternative, an order varying the April 28, 2019 Order and the July 5, 2019 Judgment to include such expenses;
  3. Costs of the motion if opposed; and
  4. Such further and other relief as to This Honourable Court may seem just.

The motion record can be found below.

On January 29, 2021, the trust entities JBD Hutchens Family Holdings Inc. aka JBD Hutchens Holdings Inc., 29 Laren Street Inc., 3415 Errington Avenue Inc., 367-369 Howey Drive Inc., 3419 Errington Avenue Inc., 17 Serpentine Street Inc., 720 Cambrian Heights Inc., 331 Regent Street Inc., 789 Lawson Street Inc., 110-114 Pine Street Inc., 15-16 Keziah Court Inc., 193 Mountain Street Inc., 625 Ash Street Inc., 364 Morris Street Inc., and 146 Whittaker Street Inc. (collectively, the “Trusts”) made a motion to the court to be heard on April 20, 2021. The motion is for, among other things:

  1. An Order, pursuant to s. 12 the Order of Justice Penny dated July 5, 2019, directing the Receiver, to pay the outstanding fees of the Trusts and to confirm that the Trusts are entitled to reasonable legal fees going forward;
  2. An Order requiring the Receiver to release to the Trusts funds in the amount of $100,000.00 CAD, for the purposes of retaining counsel in the State of Colorado and for rendering payment for the Trusts’ legal expenses in the Colorado Remand;
  3. An Order requiring the Receiver to release to the Moving Parties funds in the amount of $100,000.00 CAD, for the purpose of retaining an independent forensic accounting expert to, inter alia, re-conduct the tracing of funds performed by the Receiver, as detailed in the Eleventh Report, as well as to analyze and critique the Receiver’s methods and conclusions;
  4. An Order striking the Eleventh Report of the Receiver, dated November 20, 2020 from the record and preventing the Receiver from providing evidence related to the matters referred to therein, or collecting its fees for the preparation of the Report;
  5. The costs of this motion; and
  6. Such further and other relief as the Moving Parties may request and this Honourable Court may permit.

The motion record can be found below.

On February 12, 2021, the Receiver filed its thirteenth report (the “Thirteenth Report“) to address the Corporate Debtors’ motion to strike the Eleventh Report, as well as additional relevant updates. The report also addresses certain matters raised in the Debtors’ cross-motions for payment of expenses.

The Thirteenth Report and the Responding Motion Record can be found below.

On March 31, 2021, the Applicants filed an application seeking discontinuation of payment of living expenses to Tanya and Sandy Hutchens and legal expenses of the trusts that was also scheduled to be heard on April 20, 2021.

On April 20, 2021, the motion of the Trusts, inter alia, to strike the Eleventh Report and the motion of the Applicants to discontinue payment of Sandy and Tanya Hutchens’ living expenses and legal expenses of the Trusts was heard by the Court.

The April 20, 2021 Endorsement of Justice Gilmore provided, among other things, that:

  1. there are no grounds to strike the Receiver’s Eleventh Report;
  2. Sandy and Tanya Hutchens are no longer entitled to either living or legal expenses; and the Trusts are not entitled to legal fees;
  3. The issue with respect to the validity of the Trusts will have to be scheduled, and the judge presiding over that hearing should have the benefit of the findings in this Ruling and the Eleventh Report.

A copy of the April 20, 2021 Endorsement can be found below.

On May 19, 2021, the Receiver filed its Fourteenth Report along with a motion to Justice Gilmore returnable on May 28, 2021 in support of the Receiver’s request for orders:

  1. restraining Dina Brik and Semion Brik (the “Brik Respondents”) from dealing with the funds and securities in the joint account (Account # 16RWR6A) at TD Waterhouse Canada Inc. (the “TD Wealth Account”) or any funds/securities traceable from the TD Wealth Account until further order of the Court;
  2. In the alternative, require the TD Bank to transfer any funds and securities in the TD Wealth Account to the Receiver for preservation until further order of this Court; and
  3. requiring the Brik Respondents to provide the specified information and records by no later than June 4, 2021;
  4. requiring TD to produce any requested records pertaining to accounts related to the Brik Respondents to the Receiver;
  5. approving the Fourteenth Report and the Receiver’s activities described in it.

The motion record and the Receiver’s Fourteenth Report can be found below.

The order issued by the Court on May 28, 2021 provided, among other things, preservation of the TD Wealth Account, production of information and records by the Brik Respondents by no later than June 11, 2021, and supplementary production of information by TD related to the Brik Respondents.

A copy of the May 28, 2021 order can be found below.

Please find below a link to the motion record of the Applicants for the motion regarding certain mortgages held by Adroit Advocates LLC. The motion is returnable December 16, 2021 before Justice Gilmore via Zoom.

On October 22, 2021, the Receiver filed a motion to Justice Gilmore returnable December 26, 2021. This motion is for:

  1. an order granting possession of the property with the municipal address of 33 Theodore Place, Vaughan, Ontario (“33 Theodore“) to the Receiver;
  2. an order granting leave to issue a write of possession of 33 Theodore in favour of the Receiver;
  3. costs of this motion on a partial indemnity basis; and
  4. such further and other relief as this Honourable Court may deem just.

A copy of the motion record and responding motion record can be found below.

On December 7, 2021, the receiver filed its Sixteenth Report along with a motion returnable on February 17, 2022 to address the Andriot Mortgage motion. The Receiver does not take a position on the Androit Mortgage motion and seeks no orders in connection with this report.

The motion record and the Sixteenth Report of the Receiver can be found below.

On December 16, 2021, the Court issued an Order ordering:

  1. that the Receiver shall be granted exclusive possession of 33 Theodore effective March 1, 2022;
  2. that leave is granted to issue a write of possession in relation to the Property effective March 1, 2022.

A copy of the Order and Endorsement of Justice Gilmore can be found below. The Receiver took possession and control of the property at 33 Theodore on March 7, 2022.

On February 1, 2022, the Court issued an order declaring that the Trusts are invalid and that the interests of Tanya Hutchens, Sandy Hutchens and any related interests in the Trust Properties are assets of the receivership estate and subject to realization for the benefit of creditors.

A copy of the order can be found below.

On March 9, 2022, the Court provided the reasons for decision for the Adriot Mortgage motion. The Court’s order directs that any distribution should be made without regard to the Adroit mortgage. Some of the key findings made by Justice Gilmore are:

  • The $2,000,000.00 mortgage was given for inadequate consideration because Adroit’s invoiced fees only amounted to $180,000.00 USD at the time of the mortgage (paras. 60-61);
  • The mortgage was not registered in good faith because Adroit obtained the mortgage with an intent to get ahead of creditors, knowing that the Hutchens had no assets to pay the pending judgment, and knowing that the properties were obtained with proceeds of fraud (paras. 45, 62, 65).

A copy of the reasons for decision of Justice Gilmore can be found below.

Specifically, the Court Order dated March 9, 2022, in respect of the Adroit Mortgage matter ordered, among other things:

  1. that the Applicants have standing to bring this Motion;
  2. that the Mortgages are void ab initio;
  3. that the Land Registrar discharges the Mortgages;
  4. that the proceeds of sale held by the Receiver shall be distributed without regard for the Mortgages;
  5. that Adroit Advocates shall pay costs to the Applicants forthwith, in the agreed amount of $23,000, all inclusive.

A copy of the order can be found below.

On May 30, 2022, the Receiver filed its Seventeenth Report to update the Court on its activities and to support its request for orders for the following relief:

  1. approving the sale of 33 Theodore and vesting in the purchaser thereunder the right, title and interest of the subject property and authorizing the Receiver to take all steps required to complete the 33 Theodore Transaction;
  2. declaring the net sale proceeds of 33 Theodore Transaction shall be subject to a priority claim in favour of the segregated accounts maintained by the Receiver for the 1479 Maple and 1573 Houston properties, which shall have the same priority as the Meridian Mortgage;
  3. sealing confidential Appendices “A”, “B”, and “C” to the Seventeenth Report, pending the filing of a Receiver’s certificate confirming the closing of the 33 Theodore Transaction; and
  4. approving the Seventeenth Report and the activities and conduct of the Receiver.

A copy of the Seventeenth Report of the Receiver and the Factum dated June 2, 2022 can be found below.

On May 30, 2022, Adroit Advocacy LLC (the “Appellant” or “Adroit“) perfected its appeal of Justice Gilmore’s decision, dated March 9, 2022, invalidating their mortgage claims against the properties.

On August 18, 2022, the Receiver made a motion to the Honourable Justice Gilmore to be heard on August 30, 2022.

The motion is for an order substantially in the form included in the Motion Record of the Receiver:

  1. if necessary, abridging the time for service and filing of this notice of motion and the motion record or, in the alternative, dispensing with same;
  2. approving the fees and disbursements of the Receiver and its counsel as set out in the Eighteenth Report of the Receiver dated August 15, 2022 (the Eighteenth Report);
  3. approving the Eighteenth Report and the activities of the Receiver as described in the Eighteenth Report;
  4. approving the settlement agreement between the Receiver, Dina Brik and Semion Brik (the Settlement Agreement) as outlined and described in the Eighteenth Report; and
  5. directing that the Receiver shall make distributions of funds in the receivership proceeding without regard to any mortgages registered in favour of Dina Brik or Semion Brik.

Relevant documents can be found below.

On August 30, 2022, the Court issued an Order approving, among other things, the Eighteenth Report, the fees of the Receiver, the Settlement Agreement and distribution of funds.

A copy of the Order can be found below.

Creditor or Tenant Inquiries

For creditor or tenant inquiries, please contact:

Angela Liu
T: 437.317.6056
E: aliu@farbergroup.com

Paul Denton
T: 416.496.3773
E: pdenton@farbergroup.com

The case updates and court filed documents on this website are for information purposes only and you should consult your financial or legal adviser if you have any questions or concerns about your rights or obligations. Additional updates on the status of these proceedings may become available in the future.

Documents

Court Reports

Motion Materials

Application Materials

Court Orders & Endorsements

Service List