A court in Quebec has denied a brokerage firm’s bid to stay a lawsuit over investors’ alleged losses on funds in failed alternative fund manager, Bridging Finance Inc. (BFI), until regulatory and receivership proceedings are wrapped up — concluding that it will likely take years for those efforts to come to end, and that investors deserve their day in court sooner rather than later.
The Superior Court of Quebec in Montreal dismissed a motion from Raymond James Ltd., seeking a stay of a lawsuit from a handful of investors who have seen their investments in Bridging funds written down in the wake of the alternative fund manager being placed into receivership back in 2021. That was done at the behest of the Ontario Securities Commission (OSC) amid suspected misconduct at the firm.
At this point, retail investors in the Bridging funds still haven’t seen any of their money back.
In court filings, the firm’s court-appointed receiver, PricewaterhouseCoopers Inc. (PwC), has estimated that the investors will ultimately recover between 34% and 42% of their money — between $701 million and $880 million of the $2.1 billion that was supposed to be in the funds when they were put into receivership.
The next hearing in the receivership case is scheduled for Feb. 3.
In the meantime, the plaintiffs in the Quebec case sued their brokerage firm seeking $1.15 million in damages, including $300,000 in “moral damages” in addition to the $850,000 for their lost investments.
None of the allegations have been proven in court.
According to the court’s decision, the brokerage firm argued that the case should be stayed until the receivership, and the regulatory proceedings brought by the OSC against a handful of Bridging executives, are completed.
“Defendants submit that the interests of justice, proportionality, and their right to a full defence command that the proceedings before the Superior Court of Québec be stayed until the proceedings instituted by the OSC and the receiver in Ontario (Ontario proceedings) come to an end,” it noted.
Yet, both those proceedings remain in progress, with no clear end in sight.
In next month’s hearing in the receivership, the court will be asked to approve an initial $473 million distribution to investors, but efforts to return money to investors have been mired in complex litigation. And, it’s expected that further distributions to investors will be made later, when all the receiver’s efforts to recover assets are complete, and various legal tussles over those assets are wrapped up — meaning the receivership is likely far from over.
Alongside the ongoing receivership proceeding, the OSC’s enforcement case remains a work in progress too.
In October last year, Ontario’s Capital Markets Tribunal ruled that several top executives at Bridging engaged in fraud through Bridging and its funds, but the tribunal has yet to order sanctions in that case.
A hearing on sanctions is scheduled for later this year. And, lawyers for one of Bridging’s founders, David Sharpe, have previously said that they intend to appeal the tribunal’s findings to the courts, based on an alleged “abuse of process and violation of his Charter rights.”
When the brokerage firm sought to stay the investor lawsuit until the proceedings in Ontario are complete, the court rejected its motion, concluding that, while there is a relationship between the investor lawsuit and the proceedings in Ontario, “… the ultimate outcome of the [investors’ lawsuit] does not depend to any significant extent on the outcome of the Ontario proceedings.”
Among other things, it noted that the receivership is unlikely to result in the plaintiffs fully recovering their alleged damages; and, that investors’ claims include allegations of wrongdoing by the brokerage firm too.
While the firm argued that it should be able to rely on the findings of the Ontario proceedings to make its defence by pointing to misconduct by third parties, the court found that it wasn’t able to provide specific support for this contention.
“Such broad and vague submissions are insufficient to convince the court that a stay is warranted,” it said — adding, that it, “fails to see any practical and concrete advantages to staying the current proceedings until the Ontario proceedings come to an end.”
The court also said that, “a stay would be contrary to the requirements of accessibility and promptness of civil justice, particularly in the present case, where plaintiffs Schwartz and Glasberg/Miller are respectively 79 and 65 years old and allege that the investment lost in Bridging was part of their personal retirement portfolios.”
Ultimately, the court said that, “it will likely take many years” before the receivership and the OSC proceedings are completed, and possible appeals are exhausted.
“Staying the current proceedings until then is likely to deny plaintiffs’ right to their ‘day in court,'” it concluded.