Boughner v. Greyhawk Equity Partners Limited Partnership (Millenium), 2013 ONSC 163

COURT FILE NO.: CV-11-9089-00CL

DATE: 20130116

SUPERIOR COURT OF JUSTICE – ONTARIO

(COMMERCIAL LIST)

RE: JAMES BOUGHNER, RICHARD GIBSON and JACK WALDOCK, Plaintiffs/Moving Parties

AND:

GREYHAWK EQUITY PARTNERS LIMITED PARTNERSHIP (MILLENIUM), GREYHAWK EQUITY PARTNERS LTD., GREYHAWK EQUITY PARTNERS LIMITED PARTNERSHIP BEDFORD AND ASSOCIATES RESEARCH GROUP INC., TERRENCE M. BEDFORD and JOANNE HARRIS-BEDFORD, Defendants/Responding Parties

BEFORE: MORAWETZ J.

COUNSEL: Derek J. Bell, for the Plaintiffs

Daniel Naymark, for A. Farber & Partners Inc., Receiver

Terry Bedford, Self-Represented

HEARD: DECEMBER 13, 2012

ENDORSEMENT

[1] On the return of this summary judgment motion, the plaintiffs also brought a motion to amend the Amended Notice of Action and Statement of Claim to add additional plaintiffs who are family members of the plaintiffs that were the actual beneficial owners of some of the securities of the Greyhawk defendants. This unopposed motion was granted on December 13, 2012.

[2] The plaintiffs’ motion for summary judgment was brought against the defendants, Greyhawk Equity Partners Limited Partnership (Millenium) (“Greyhawk LP”), Greyhawk Equity Partners Ltd. (“Greyhawk GP”, and together with Greyhawk LP “Greyhawk”), Greyhawk Equity Partners Limited Partnership, Bedford and Associates Research Group Inc. (“BARG”), and Mr. Terrence M. Bedford (“Bedford”) (collectively, the “Selected Defendants”).

[3] The plaintiffs did not bring this motion as against Ms. Joanne Harris-Bedford and counsel to the plaintiffs advised that nothing in this motion would affect any proceedings against Ms. Harris-Bedford.

[4] Mr. Bedford was self-represented. He confirmed at the opening that he was not going to retain counsel.

FACTS

[5] The plaintiffs are victims of a fraudulent investment scheme involving Greyhawk. The uncontested evidence, largely confirmed by admissions from Mr. Bedford throughout these proceedings, established the facts underlying all of the allegations in this proceeding, including multiple acts of fraud.

[6] The plaintiffs seek judgment against the Selected Defendants, on a joint and several basis, for fraud, breach of trust, breach of fiduciary duty, unjust enrichment and breach of contract.

[7] From 2000 to 2011, Mr. Bedford represented himself as the fund manager of Greyhawk and accepted funds from the plaintiffs for investment. For more than a decade, Mr. Bedford, through his control of the related Greyhawk entities, did not invest the funds in the manner that was promised and disclosed to the investors, and proceeded to deceive investors by forwarding to them false statements, including forged audited financial statements purportedly authored by PricewaterhouseCoopers but actually authored by Mr. Bedford. This scheme spanned a lengthy period of time, all the while Mr. Bedford and related entities accepted management fees ultimately paid by the plaintiffs.

[8] The plaintiffs seek damages in an amount representing the value of the investments that should have been invested (and which the defendants said they were investing in), plus pre-judgment and post-judgment interest.

[9] Mr. Bedford did not contest the facts as alleged by the plaintiffs. These facts were summarized in the factum filed by counsel to the plaintiffs. The relevant portions of the factum, without citations, are attached as Schedule “A”.

[10] I find all of the facts to have been proven.

ISSUES AND DISCUSSION

[11] Counsel to the plaintiffs submits that there are only two issues in this motion:

(i) Are the Selected Defendants liable for fraud, breach of trust, breach of fiduciary duty, knowing assistance, and/or breach of contract, or is there a genuine issue for trial in that respect?

(ii) What is the appropriate quantum of damages to be awarded?

[12] Summary judgment is available to plaintiffs under Rule 20.04 where there is no genuine issue requiring a trial with respect to a claim or defence.

[13] In Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, the Court of Appeal identified three types of cases amenable to summary judgment:

(a) Cases where the parties agree that it is appropriate to determine an action by way of a motion for summary judgment;

(b) Cases where the claims or defences can be shown to be without merit in the sense that they have no chance of success; and

(c) Cases where the trial process is not required in the “interests of justice” to perform a final adjudication on the merits.

[14] In this case, Mr. Bedford has not entered a defence, although he has participated and attended personally on several motions and attended on court-ordered examinations. Mr. Bedford has given no indication of any intent to mount a defence, let alone prepare a statement of defence.

[15] Mr. Bedford made oral submissions.

[16] He referenced paragraph 64 of the plaintiffs’ factum and took the position that the admission referenced in that paragraph did not extend to dealings with the Offering Memorandum.

[17] With respect to paragraph 71 of the plaintiffs’ factum, Mr. Bedford indicated that the fees had been taken monthly. At paragraph 88, Mr. Bedford questioned whether damages should be the stated return of the Greyhawk Fund. The same submission was also made with respect to paragraph 89.

[18] Mr. Bedford made reference to paragraph 94 but this appears to have been a misunderstanding and Mr. Bedford accepted clarification provided by Mr. Bell.

[19] Mr. Bedford also challenged the claim for management fees.

[20] Mr. Bedford also questioned some of the statements made at paragraph 105 of the factum which relate to his own conduct.

[21] Finally, Mr. Bedford indicated that he had cooperated with the Receiver.

[22] With the exception of an adjustment to the claim for the management fees (discussed below), I decline to give effect to any submissions made by Mr. Bedford. While I recognize that Mr. Bedford has cooperated with the Receiver, the only statement that can be made in his favour is that he did not try to make matters worse after his fraud was discovered. His after the fact cooperation does not, in my view, in any way lessen the impact of his fraudulent conduct over a lengthy period of time.

[23] The plaintiffs brought this motion without requiring a statement of defence. To the extent that an order is required under Rule 2.01 to allow the motion to proceed in the absence of a statement of defence, I am in agreement with the plaintiffs’ submission that such relief is appropriate and is granted.

[24] In determining whether there is a genuine issue requiring a trial, the court is required to inquire if the “full appreciation” of the evidence and issues necessary to make dispositive findings can be achieved by way of summary judgment, or whether the “full appreciation” can only be achieved by way of trial.

[25] I am in agreement with the submission of the plaintiffs that a “full appreciation” of the evidence and issues may be achieved to arrive at dispositive findings of liability and damages against the Selected Defendants for fraud and deceit, breach of fiduciary duty (and knowing assistance), breach of trust (and knowing assistance), unjust enrichment and breach of contract.

[26] The basis for liability is set out at paragraphs 51 – 73 of the factum.

[27] I accept the submissions of counsel and conclude that the plaintiffs have established that there is no genuine issue requiring a trial and that the Selected Defendants are liable for the tort of fraud.

[28] I am also satisfied that the plaintiffs have established that there has been breach of fiduciary duty (Greyhawk GP) and knowing assistance of breach of fiduciary duty (remainder of Selected Defendants).

[29] Further, the plaintiffs have also established that there has been breach of trust (Greyhawk GP) and knowing assistance of breach of trust (remainder of Selected Defendants).

[30] I am also satisfied that the plaintiffs have established the basis for breach of contract (Greyhawk GP).

[31] Finally, I accept the submission of the plaintiffs that the evidence shows that the Selected Defendants, through the vehicle of the limited partnership, collectively participated in a “joint enterprise” that inflicted serious harm upon the plaintiffs and, in these circumstances, it is appropriate to find the Selected Defendants liable on a joint and several basis.

DAMAGES

[32] Turning now to the proper approach for damages, counsel’s submissions are at paragraphs 84 – 99 of the factum.

[33] Counsel to the plaintiffs relies on Hodgkinson v. Simms, [1994] 3 S.C.R. 377; Carson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 at para. 18 and Osborne v. Harper, [2005] B.C.J. No. 2625 as the basis for the argument that damages should be the stated return of the Greyhawk Fund. However, in my view, to award damages based on the stated return of the Greyhawk Fund requires one to speculate as to a possible course of action arising out of fictional events. In this respect, this case is very different than the cases referenced. I have not been persuaded that this is the proper methodology to be used to award damages. A methodology that is fact based as opposed to speculation is required.

[34] As an alternative, the Receiver, in its Seventh Report, at the request of counsel to the plaintiffs and Mr. Bedford, calculated what the value of the respective amounts invested in Greyhawk would have been had those investments earned a return equal to the performance of the Standard and Poor’s 500 Index (the “SPX”), based on the dates of each investor’s investments and ending on January 31, 2011 (just prior to a number of investor redemptions on February 1, 2011). The Seventh Report of the Receiver is reproduced at Schedule “B”.

[35] Counsel to the plaintiffs referenced a further alternative approach based on principal plus pre-judgment interest, on a compounded basis, as the proper way to calculate damages in this case. This approach is referenced in the factum commencing at paragraph 95.

[36] I accept that the “plaintiffs are entitled to be put in the same position they would have been in if the representation had not been made, but not to be in the position they would have been if the representation had been true”. (See Fiorillo et al v. Krispy Kreme Doughnuts (2009), 98 O.R. (3d) 103 at para. 100).

[37] This method of calculation avoids speculation as to what steps the plaintiffs would have taken if the breach had not occurred. It also avoids speculation as to whether the plaintiffs would have accepted a return based on the SPX 500. Compound interest is available as a discretionary remedy in equity, particularly where the breaches require “moral sanction”, or where compound interest is consistent with expectation damages or is necessary as a component of restitutionery damages. (See Bank of America Canada v. Mutual Trust Co. 2002 SCC 43, [2002] 2 S.C.R. 601 at paras. 41 – 59.)

[38] In my view, the actions of Mr. Bedford require a “moral sanction” and the expectation of the investors, as reflected in their accepted risk portfolio with Greyhawk, is such that compound interest is, in my view, a component of restitutionery damages. Simply put, the plaintiffs did not invest with Greyhawk in the expectation of earning a rate of return consistent with a low-risk investment. Rather, they accepted a higher risk profile in the hopes of a higher return.

[39] The plaintiffs also seek judgment on the management fees taken by Mr. Bedford and BARG. The Second Report of the Receiver detailed the management fees obtained by Mr. Bedford and BARG at $1.304 million. However, it seems to me that, if judgment were granted for this amount, it would in essence provide for a double recovery. In my view, in awarding damages based on net principal invested, together with compound interest, the claim for management fees has already been recognized.

[40] Finally, the plaintiffs seek punitive damages. In order to establish punitive damages, the plaintiffs must establish an independently actionable wrong and that the defendant’s conduct was sufficiently malicious, oppressive and high-handed such that it offends the court’s sense of decency. See Whiten v. Pilot Insurance Co. (2002) 2002 SCC 18, 1 S.C.R. 595 at paras. 36 and 78.

[41] In this case, the Selected Defendants committed outright fraud for the better part of a decade. The victims ranged from the octogenarian grandparents to their infant grandchildren. The conduct of Mr. Bedford and the Selected Defendants was reprehensible and a marked departure from the standards of common decency. Further, the defendants took advantage of the vulnerability of their clients. This is conduct that should be deterred.

[42] In Elekta Limited v. Rodkin, 2012 ONSC 2062, the rogue had defrauded his employer of more than $12 million and punitive damages were assessed at $200,000. It seems to me that the conduct of the Selected Defendants in this matter is at least on a par with that in Elekta.

[43] Accordingly, I award the plaintiffs punitive damages in the amount of $200,000.

[44] General damages are also awarded in the amount of $356,646.33 for damages arising out of the detection, investigation and quantification of the losses suffered by the plaintiffs. These damages are detailed in the Second Report of the Receiver.

DISPOSITION

[45] In the result, summary judgment is granted as follows:

(a) a declaration that the defendants, individually and collectively, committed fraud, breached their fiduciary duties and/or knowingly assisted such breach, breach of trust and/or knowingly assisted such breach of trust and breach of contract;

(b) general damages in the amount of $10,246.139 representing unpaid redemptions of principal amounts invested by the plaintiffs pursuant to the LP Agreement, plus pre-judgment interest on a compound basis;

(c) general damages in the amount of $356,646.33 for damages arising out of a detection, investigation and quantification of the losses suffered by the plaintiffs;

(d) punitive damages in the amount of $200,000;

(e) post-judgment interest in accordance with the CJA.

[46] The plaintiffs are also entitled to their costs of this proceeding.

MORAWETZ J.

Date: January 16, 2013

SCHEDULE “A”

SELECTED EXCERPTS FROM

FACTUM OF THE MOVING PARTIES

(without citations)

I: OVERVIEW

1. The victims of a fraudulent investment scheme involving Greyhawk Equity Partners Limited Partnership and related entities ("Greyhawk", defined more particularly below) ask that summary judgment be issued against the architect of the scheme, Terrence M. Bedford ("Bedford"), and the related corporate entities through which the scheme was operated. The direct and uncontested evidence, largely confirmed by admissions from Bedford throughout these proceedings, establishes the facts underlying all of the allegations in this proceeding, including multiple acts of fraud, such that there is no genuine issue requiring a trial. The plaintiffs seek judgment against the selected defendants, on a joint and several basis, for fraud, breach of trust, breach of fiduciary duty, unjust enrichment and breach of contract.

2. From 2000 to 2011, Bedford represented himself as the fund manager of Greyhawk and accepted funds from the plaintiffs for investment. For more than a decade, Bedford, through his control of the related Greyhawk entities, did not invest the funds in the manner that was promised and disclosed to the investors and proceeded to deceive investors by forwarding false statements, including forged audited financial statements purportedly authored by PricewaterhouseCoopers but actually authored by Bedford. This scheme spanned a lengthy period of time, all the while Bedford and various related entities accepted management fees ultimately paid by the plaintiffs.

3. The plaintiffs seek damages in an amount representing the value of the investments that should have been invested (and which the defendants said they were investing in), plus prejudgment and postjudgment interest. Other quantums are sought in the alternative. The quantum ordered should represent the amount necessary to place the plaintiffs in the position they would have been in but for the wrongful acts of Bedford and the related entities.

II: FACTS

A. An Overarching Caveat on the Evidence and Admissions

5. Throughout these proceedings, Bedford has made a number of admissions under oath and to this Honourable Court during hearings. Bedford has consented to relief in the past and may consent to some or all of the relief in this motion. Notwithstanding that Bedford has admitted virtually all of the allegations against him, the plaintiffs have attempted to adduce sufficient evidence on this motion such that there is direct evidence supporting each of the material allegations of fact independent from any admissions. The citations in this factum seek to clearly differentiate between the direct evidence and the admissions.

6. The defendant, Bedford, is an individual residing in Hamilton, Ontario. Bedford formerly acted as the "fund manager" of Greyhawk and was the directing mind of all of the corporate entities related to Greyhawk as described below.

7. Greyhawk Equity Partners Limited Partnership ("Greyhawk LP") is a limited partnership incorporated under the laws of Ontario.

8. Greyhawk Equity Partners Ltd. ("Greyhawk GP") (together with Greyhawk LP"Greyhawk") is a company incorporated under the laws of Canada and the general partner of Greyhawk LP. Bedford is the founder and managing partner of Greyhawk GP.

9. The Defendant, Bedford and Associates Research Group Inc. ("BARG"), is a company incorporated under the laws of Ontario and the parent company of Greyhawk GP. Bedford is the president and owner of BARG.

10. Bedford operated BARG as the de facto general partner of Greyhawk. Through his control of BARG and Greyhawk GP, Bedford maintained full and effective control of the general partner of Greyhawk from the inception of the Fund.

11. At this time, the plaintiffs are seeking summary judgment only against Bedford, Greyhawk LP, Greyhawk GP, and BARG (collectively, the "Selected Defendants"). Judgment is not being sought at this time against the defendant, Joanne Harris-Bedford.

C. The Greyhawk Fraudulent Investment Scheme

14. The facts underlying the Greyhawk fraudulent investment scheme are not in dispute. The plaintiffs were duped into believing that Greyhawk was a large and highly profitable investment vehicle. Investors were provided with fictitious account statements, financial reports and audit reports and were allocated units on the basis of their investments. The investors received monthly reports which indicated that the value of their units was increasing; however, such unit values were fabricated.

15. Greyhawk was marketed to investors as a hedge fund designed for sophisticated and institutional investors. The investment was described as providing "significant additional diversification for equity portfolios and the potential for premium returns while reducing portfolio exposure to general market volatility".

16. In the Offering Memorandum, the investing objectives of Greyhawk were described as achieving "capital appreciation primarily through the purchase and short sale of equity and equity derivative securities." The Offering Memorandum represented that the partnership would make long and short investments in securities under the direction of the general partner and engage in certain other risk arbitrage opportunities.

17. The affairs of Greyhawk were governed by the terms of a limited partnership agreement dated June 30, 2000 (the "LP Agreement"). The LP Agreement sets out the relationship between the general partner (stated to be Greyhawk GP), the initial limited partner (stated to be BARG), and the subsequent limited partners who would purchase units of the Fund.

18. Section 6.03 of the LP Agreement provided that the general partner had the following duties:

Duties of General Partner: The General Partner shall exercise the powers and discharge the duties of its office hereunder honestly, in good faith, and with a view to the best interests of the Partnership and in connection therewith shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The General Partner shall be entitled to retain advisors, experts or consultants to assist in the exercise of its powers and the performance of its duties hereunder.

19. Sections 6.04 and 6.07 of the LP Agreement vested the general partner with a power of attorney and certain other powers that permitted the general partner to act on behalf of the limited partners.

20. The LP Agreement also required Greyhawk GP to retain an auditor in good standing with the Canadian Institute of Chartered Accountants to review and report on the annual financial statements of the partnership. Those audited financial statements were required to be provided to investors.

21. At the time of its collapse in 2011, Bedford represented that Greyhawk controlled almost $260 million in total assets. Bedford represented the net asset value per unit of Greyhawk as being worth $73,180.71. As this Honourable Court commented in the distribution motion, the reported unit values had no relationship to the actual value of each investor's investment in Greyhawk.

D. Greyhawk Collapsed Upon Discovery of the Fraud

22. In or about August of 2010, Gibson's son, Glen Gibson, requested a copy of Greyhawk's 2009 annual financial statements as purportedly authored by PwC (the "PwC Statements"). Those statements were provided in early September 2010.

23. On or about January 3, 2011, Glen Gibson reviewed the PwC Statements and noticed several errors that caused him to doubt the authenticity of those statements. He subsequently telephoned PwC and asked to speak to the person responsible for the preparation of the PwC Statements. PwC advised that it had not conducted an audit of Greyhawk and that the statements reviewed by Glen Gibson were not the work of PwC.

24. After learning that the PwC Statements were not genuine, Glen Gibson advised his father, the plaintiff Gibson, and the two of them immediately took steps to redeem their investments in Greyhawk. Bedford confirmed that he would "immediately" process the redemptions.

25. As word spread about the apparent fraud, other investors made redemption requests and were advised by Bedford that all redemption requests would be paid on February 1, 2011.

26. While Bedford did fulfill some of the redemption requests, the majority were not fulfilled. As the due date for redemptions came and went, Bedford communicated with some of the investors and advised that he would be abandoning control of Greyhawk.

E. Bedford Abandoned Control of Greyhawk

27. On February 4, 2011, Bedford wrote the daughter of the plaintiff, Waldock, Rebecca Waldock and advised that he was effectively abandoning Greyhawk.

28. On February 7, 2011, Bedford confessed to Gibson that Greyhawk did not control assets in excess of $200 million. Bedford further advised that he would be relinquishing control of Greyhawk to a court-appointed Receiver and that he would take steps to spare the investors all time and expense in resolving claims and disputes related to Greyhawk.

F. Appointment of a Receiver

29. On February 8, 2011, the plaintiffs moved for an order to preserve the assets of Greyhawk through the appointment of A. Farber & Partners Inc. as Receiver (the "Receiver").

30. Bedford attended at that motion and consented to the Order appointing the Receiver. Bedford further consented to an Order prohibiting him and his wife, Joanne Harris-Bedford, from having any further dealings with any of the Greyhawk assets or entities.

31. Since its appointment on February 8, 2011, the Receiver has continued to maintain control over the Greyhawk assets and the related entities.

32. The total cost of the detection, investigation and quantification of losses, both by the Receiver and counsel for the plaintiffs and the Receiver, is $356,646.33.

G. Bedford has admitted to Substantially All of the Allegations

33. During the hearing on the motion to appoint the Receiver, counsel for the plaintiffs read out a detailed description of the allegations in this proceeding and described the evidence supporting those allegations. At that appearance, Bedford was asked by Justice Morawetz whether Bedfprd disagreed or had any further comment on the allegations as they had been read out. Bedford advised that, subject to two small clarifications, the allegations as read out were true and that he had no further comments.

34. Pursuant to the Order appointing the Receiver, Bedford was also required to submit to a sworn examination by counsel to the plaintiffs. In that examination, Bedford confirmed that he had the opportunity to seek legal advice, but elected not to do so.

35. In that sworn examination, Bedford made the following admissions which support the evidence submitted on this motion:

(a) In the year 2000, Bedford created an investment fund structured as a limited partnership known as Greyhawk.

(b) Bedford maintained complete control of Greyhawk until 2011.

(c) Bedford provided fictitious investor statements and forged annual audited financial statements to Greyhawk investors to secure their continued confidence and investment.

(d) Bedford provided fictitious monthly audited statements to Jack Waldock.

(e) Bedford received management fees from Greyhawk through BARG, a related entity which they controlled.

(f) In early 2011, investors sought to redeem their investments in Greyhawk but Bedford failed to pay the majority of those redemptions.

(g) In February of 2011, Bedford confessed to individual investors and abandoned control of Greyhawk.

(h) The plaintiffs are entitled to judgment.

H. The Receiver Conducted an Investigation and Identified Investor Losses

37. Following its appointment, the Receiver conducted an investigation, reviewed documents obtained from Bedford, and compiled a detailed spreadsheet listing each individual investor and the amount of their respective investments and redemptions:

Investor

Principal

Redemptions

Net Principal

James Boughner

$6,024,392

$2,650,050

$3,374,342

Richard Gibson

$2,200,000

$1,360,000

$840,000

John H. Waldock

$4,214,015

$1,000,000

$3,214,015

John H. Waldock Jr.

$100,000

$100,000

Rebecca Waldock

$300,000

$300,000

Andrew Waldock

$100,000

$100,000

Laura Hardy

$100,000

$100,000

Margot Liebethal

$100,000

$100,000

Elizabeth R. Houck

$100,000

$100,000

Glen Gibson

$639,907

$639,907

Elaine Gibson

$302,970

$302,970

Arlene Mayes

$707,000

$328,000

$379,000

Herbert R. Gibson

$300,000

$300,000

Camille Gibson

$424,999

$424,999

Rachel Nicole Gibson Irrevocable Family Trust

$249,953

$100,000

$149,953

Laura Elizabeth Gibson Irrevocable Family Trust

$249,953

$100,000

$149,953

Rachel Nicole Gibson Irrevocable Trust Number 2

$781,000

$310,000

$471,000

TOTAL:

$16,894,189

$6,648,050

$10,246,139

38. Additional documents uncovered by the Receiver confirm that Greyhawk units had been assigned a net value of $73,180.71 as at December 31, 2010.

39. The following chart summarizes the unit holdings of each investor and the net asset value of their individual investments as recorded in the documents uncovered by the Receiver:

Investor

Units

Unit Value

Total Value

James Boughner

161.0437

$73,180.71

$11,785,292.31

Richard Gibson

29.6532

$73,180.71

$2,170,042.23

John H. Waldock

198.5546

$73,180.71

$14,530,366.60

John H. Waldock Jr.

1.6463

$73,180.71

$120,477.40

Rebecca Waldock

2.9015

$73,180.71

$212,333.83

Andrew Waldock

1.6463

$73,180.71

$120,477.40

Laura Hardy

1.6463

$73,180.71

$120,477.40

Margot Liebethal

1.6463

$73,180.71

$120,477.40

Elizabeth R. Houck

1.6463

$73,180.71

$120,477.40

Glen Gibson

10.5981

$73,180.71

$775,576.48

Elaine Gibson

5.2756

$73,180.71

$386,072.15

Arlene Mayes

7.4997

$73,180.71

$548,833.37

Herbert R. Gibson

6.2300

$73,180.71

$455,915.82

Camille Gibson

6.9945

$73,180.71

$511,862.48

Rachel Nicole Gibson Irrevocable Family Trust

9.6096

$73,180.71

$703,237.35

Laura Elizabeth Gibson Irrevocable Family Trust

4.0113

$73,180.71

$293,549.78

Rachel Nicole Gibson Irrevocable Trust Number 2

4.0113

$73,180.71

$293,549.78

TOTALS:

454.6146

$33,269,019.18

40. According to the final individual investor statements, the total value of the units owned by the named plaintiffs and Proposed Plaintiffs, $33,269,019.18, net of redemptions received $6,648,050, is $26,620,969.18.

I. Greyhawk Would Have Succeeded if Bedford Did What He Said He Was Doing

41. Perhaps the most unusual aspect of this case is that Bedford's investing strategy was sound. If Greyhawk had invested in the manner that was being disclosed to the plaintiffs, it would have actually succeeded. This is not just hindsight: Bedford was actively telling the plaintiffs what he would be investing in, and had he done so, those investments would have succeeded. The clients themselves verified the performance of the investments. The problem was that Bedford was not doing what he said he was doing.

42. The problem Bedford faced was that he had inadequate capital to execute the option strategies attendant to some of the transactions. The plaintiffs would review his strategies, verify for themselves that they were working, but in reality, Bedford was not executing.

III: ISSUES

45. The plaintiffs submit there are only two issues in this motion:

46. Are the Selected Defendants liable for fraud, breach of trust, breach of fiduciary duty, knowing assistance, and/or breach of contract, or is there a genuine issue for trial in that respect?

47. What is the appropriate quantum of damages to be awarded?

IV: LAW AND ARGUMENT

A. LIABILITY

1. Fraud and Deceit

2. Fraud is often a component of other causes of action: fraudulent misrepresentation, fraudulent conveyance, fraudulent preference, fraudulent concealment, etc. However, fraud is also a standalone tort that has specific treatment in statutes.

3. The elements of fraud as set out by this Honourable Court demonstrate it is a close cousin to the torts of deceit and fraudulent misrepresentation. The classic definition is from the 1899 House of Lords decision in Derry v. Peek, which has been adopted in Ontario including in recent decisions:

In an action of deceit the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false.

53. And the Ontario Court of Appeal has set out the following requisite elements for the tort of fraud or deceit:

It consists in recklessly or willfully causing another person to believe and act on a falsehood. If a representation be made by a person which he does not in fact honestly believe to be true, it becomes a fraudulent misrepresentation. To create a right of action, the following conditions must concur: (a) that a statement made by the defendant was untrue in fact; (b) that he either knew it to be untrue or was recklessly and consciously ignorant whether it was true or not [...]; (c) that the defendant intended the plaintiff to act upon it; (d) that the plaintiff acted thereon in the manner contemplated or manifestly probable; (e) that the plaintiff suffered damages as a result thereof.

54. The evidence described above, corroborated by the admissions made by Bedford, demonstrates that the tort of fraud has been made out:

(a) Untrue Statements Made by the Defendants: Bedford made numerous false statements to the plaintiffs, including: the initial value of the fund, false monthly investor statements, the fabricated PwC Statements, and weekly investor updates concerning his proposed investment strategy that were also false.

(b) Knowledge of the Falsity: There is no possible argument that the Selected Defendants did not know that the statements made to the plaintiffs were false. The PricewaterhouseCoopers logo was physically cut out and pasted onto financial statements generated by the Selected Defendants. The statements described holdings of securities that did not exist. Bedford acknowledged that the PwC Statements and other communications were deliberately provided to investors to "prolong" the life of Greyhawk as long as possible and to foster "some sort of confidence in the fund".

(c) Intention for Plaintiffs to Rely on the Statements: As indicated above, Bedford explained that the purpose of the misrepresentations was to foster confidence in the funds. After the initial investments by Waldock, the performance reports of the fund were provided to the subsequent investors for the self-evident purpose of encouraging them to invest in Greyhawk. There has been no suggestion by Bedford that he gave these false statements to the plaintiffs for any other reason.

(d) Plaintiffs Acted on the Statements: The statements concerning Greyhawk's performance and financial health were material to the investors and the plaintiffs acted upon them in the manner contemplated. In his affidavit sworn in February of 2011, Waldock testifies he stayed in almost "daily contact" with Bedford and that he requested and was provided monthly assurance letters from Bedford that were purportedly authored by PwC. The evidence of Glen Gibson is that that he reviewed the financial statements of Greyhawk prior to making the decision to invest. The plaintiffs would never have kept money in Greyhawk had they known of the fraudulent statements, as is plainly apparent by the reactions of each of the plaintiffs after the fraud was discovered: anyone who learned of the fraud tried to extract their investment as quickly as possible.

(e) The plaintiffs have clearly suffered damages as a result of the fraud. Even if the plaintiffs were limited to recovering their principal amounts invested, that money has ceased to exist. Approximately $9 million of net investments should be in Greyhawk's accounts, yet the Receiver has only located approximately $4 million. Particulars of the damages are described below.

55. As a result, the plaintiffs submit that there is no genuine issue requiring a trial that the Selected Defendants are liable for the tort of fraud.

56. Breach of Fiduciary Duty (Greyhawk GP) and Knowing Assistance of Breach of Fiduciary Duty (Remainder of Selected Defendants)

57. The tort of knowing assistance in breach of fiduciary duty requires the plaintiffs to establish the following: (1) there must be a fiduciary duty; (2) the fiduciary must have breached that duty fraudulently and dishonestly; (3) the stranger to the fiduciary relationship must have had actual knowledge of both the fiduciary relationship and the fiduciary's fraudulent and dishonest conduct; and (4) the stranger must have participated in or assisted the fiduciary's fraudulent and dishonest conduct.

58. Canadian law distinguishes between per se and ad hoc fiduciary relationships. Per se fiduciary relationships include those between director/corporation, trustee/beneficiary, solicitor/client, partners, and principal/agent. Ad hoc fiduciary obligations may arise as a matter of fact out of the specific circumstances of a particular relationship.

59. The Supreme Court of Canada revisited the requirements to establish an ad hoc fiduciary relationship in last year's decision in Alberta v. Elder Advocates of Alberta Society. In order to establish whether an ad hoc fiduciary relationship is present, plaintiffs must show:

(a) the alleged fiduciary gave an undertaking of responsibility to act in the best interests of a beneficiary;

(b) the duty must be owed to a defined person or class of persons who must be vulnerable to the fiduciary in the sense that the fiduciary has a discretionary power over them; and,

(c) the alleged fiduciary's power may affect the legal or substantial practical interests of the beneficiary.

59. Courts have found an ad hoc fiduciary relationship to exist in circumstances where an investment advisor failed to meet the professional standards in making investment decisions. While the relationship between broker and client is not a per se fiduciary relationship, the relationship may be found where the elements of trust, confidence, reliance on skill and knowledge and advise are present.

60. The plaintiffs submit that an ad hoc fiduciary relationship was present as between Greyhawk GP and the plaintiffs as limited partners. While the circumstances of this case strongly suggest that Bedford as "fund manager" may have acted as a fiduciary directly vis-à-vis the unitholders of Greyhawk, the plaintiffs rely on the express undertaking assumed by Greyhawk GP to act in the best interests of the partnership as expressed in section 6.03 of the LP Agreement.

61. Pursuant to section 6.03 of the LP Agreement, Greyhawk GP was obligated to "exercise the powers and discharge the duties of its office hereunder honestly, in good faith, and with a view to the best interests of the Partnership" and to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise.

62. This obligation was further described in the Offering Memorandum provided to investors and identified, in bold text, as the "Fiduciary Responsibility of the General Partner."

63. In this circumstance, the plaintiffs were plainly vulnerable as limited partners to the powers and discretion vested in the general partner. Sections 6.04 and 6.07 of the LP Agreement expressly provide Greyhawk GP with powers to deal with investor funds and the power to take investment risks affecting the legal and practical interests of the plaintiffs.

64. The plaintiffs submit that the fiduciary obligations described above were breached when Greyhawk GP failed to invest the funds in the manner it was obligated to under the Offering Memorandum and the LP Agreement. In his sworn examination, Bedford admitted that the funds received from investors were not invested in the manner described. Indeed, Bedford expressed frustration that he did not have enough capital to execute his investment strategy as early as 2003.

65. Bedford and the other Selected Defendants possessed actual knowledge of the fraudulent and dishonest conduct of Greyhawk GP. Indeed, both as the "fund manager" and as the directing mind of BARG and Greyhawk GP, Bedford not only "knowingly assisted", but actively designed and executed the acts breaching the fiduciary obligations through his control of Greyhawk GP.

66. Breach of Trust (Greyhawk GP) and Knowing Assistance of Breach of Trust (Remainder of Selected Defendants)

67. A trust, express or implied, has three characteristics: (1) certainty of the intention to create the trust; (2) certainty of the subject matter or trust property; and (3) certainty of the objects of the trust.

68. In the absence of formal trust documentation, the court considers the circumstances and evidence as to what the parties intended, what was actually agreed to and how the parties conducted themselves to determine if the requisite clear intention to create a trust is present.

69. Factors to consider include the content of any agreements between the parties, whether the alleged trust property is held in a separate account, whether the alleged trustee is permitted to commingle the alleged trust funds with his or her own funds or use the funds for his or her own general business purposes and, past events and conduct that may suggest that the parties treated the funds as trust funds.

70. In circumstances where a trust is determined to be present, the tort of knowing assistance in breach of trust requires the following: (1) the plaintiff must prove the defendant had actual knowledge of the underlying breach; and (2) the plaintiff must prove the underlying breach was part of a trustee's fraudulent and dishonest design.

71. Applied to the facts of this case, the parties intended that Greyhawk GP would hold investor funds in trust for the benefit of the limited partners. Under the terms of the LP Agreement, the general partner was obliged to establish a separate "Capital Account" for each limited partner and to maintain a Register identifying the names of the individual limited partners and the number of units held by each limited partner. Further, the general partner was required to maintain the trust property in a separate account and expressly prohibited from commingling the funds and assets of Greyhawk with those of any other person, including the general partner.

72. Another indicator of the trust relationship is that, in some respects, Bedford himself treated the funds provided to Greyhawk as though they were trust property. In his sworn examination, Bedford testified at length about the process of determining management fees owing to BARG under the LP Agreement. The process described by Bedford demonstrates that the funds invested were not used for the general business purposes of Greyhawk GP or BARG. To the contrary, Bedford testified that he employed an elaborate formula to arrive at an appropriate management fee based on the weekly "performance" of the Fund, derived from the trading positions he purported to be taking, and that this amount was deducted from the Greyhawk accounts. Absent the fraudulent steps taken to maintain control of the trust property, Bedford's conduct in calculating measured "management fees" and not commingling the funds is consistent with the characterization of the investment funds as trust property.

73. The plaintiffs submit that there was a clear intention to impress the funds invested in Greyhawk with a trust. Further, the Offering Memorandum and the LP Agreement sufficiently state the objects of the trust as an investment vehicle and that the trust property is sufficiently defined.

74. As with the breaches of fiduciary duty, the plaintiffs submit that Greyhawk GP breached its obligations as trustee when it failed to invest the funds in the manner it was obligated under the Offering Memorandum and LP Agreement.

75. Bedford possessed actual knowledge of the fraudulent and dishonest design on the part of Greyhawk GP, as set out above. Indeed, both as the "fund manager" and as the directing mind of BARG and Greyhawk GP, Bedford not only "knowingly assisted", but actually executed the acts by which Greyhawk breached its obligations as trustee in possession of trust property.

76. Breach of Contract (Greyhawk GP)

77. Under sections 5.01 and 5.02 of the LP Agreement, the plaintiffs were entitled to receive distributions upon the redemption of their investments in Greyhawk.

78. Section 5.02 provides that on the redemption of units, the general partner shall distribute "the aggregate amount in the Capital Account of such Limited Partner on the Redemption Date" as multiplied by a formula to determine the value of the units held by the redeeming investor.

79. The evidence in the record is that the plaintiffs and Proposed Plaintiffs attempted to redeem their investments in Greyhawk. As set out in the table contained at paragraph 0, all of the investors identified in that table, but four, had a portion of their principal investments returned. However, none of the investors received distributions in an amount corresponding to what they were owed under section 5.02 of the LP Agreement - that being the net asset value of their limited partnership units.

80. In his sworn examination, Bedford stated that the Fund did not have enough assets to pay the redemptions and that he took steps to redeem some but not all of the investors. Bedford admitted he fulfilled such requests on a "last-in-first-out" basis and only to the extent of their principal investments.

81. The full amounts owing to the plaintiffs and Proposed Plaintiffs pursuant to the LP Agreement are based on the unit value identified on the individual investor statements as at December 31, 2010. These amounts are set out in the right column of the table contained at paragraph 0. The plaintiffs submit that Greyhawk GP has breached the LP Agreement by failing to fulfill the redemption requests and that they are contractually entitled to receive the full amounts owing under the LP Agreement, net of any partial redemptions already received.

82. Joint and Several Liability

83. The evidence shows the Selected Defendants, through the vehicle of the limited partnership, collectively participated in a "joint enterprise" that inflicted serious harm upon the plaintiffs. Given that each of the corporate vehicles were controlled by Bedford, and to the knowledge of the plaintiffs, with the possible exception of Harris-Bedford, there were no other individuals involved in Greyhawk. In such circumstances, the plaintiffs submit it is appropriate to find the Selected Defendants liable on a joint and several basis.

C. DAMAGES

1. The Proper Approach to Damages

2. The plaintiffs say that the various causes of action in equity and common law, tort and contract, described above, have been established. In general, these different causes of action should not result in different quantums of damages, based on how the cause of action is pleaded.

3. However, cases involving fraud and breaches of fiduciary duty are often treated differently from other common law torts because, in circumstances where there is criminal conduct and/or vulnerability, courts will permit the plaintiffs to rely on equitable principles to allow for remedies that appropriately restore and provide restitution to the plaintiff.

4. Most particularly, where fraud is shown, courts will not require exacting proof of the precise loss where the plaintiff makes reasonable efforts to establish quantum. Rather, the onus is placed on the defendant who has been found to have acted fraudulently to disprove the claimed loss. The approach to be taken by courts in this type of cases was stated by the British Columbia Court of Appeal in Huff v. Price:

Not only are damages for fraud and breach of fiduciary duty the same for the purposes of calculation, they are also the same for the purposes of the treatment they should receive in relation to the issues of causation and remoteness and they are the same with respect to the discharge of the burden of proof. Once the fraud or breach of fiduciary duty is shown, then the court assessing damages will not be exacting in requiring proof of the precise loss in circumstances where all reasonable efforts have been made by the plaintiff to establish the amount of the loss and the cause of the loss. The burden of leading the evidence to disprove the amount of the loss and the cause of the loss will then fall on the defendant who has been found to have been fraudulent or in breach of fiduciary duty.

87. Here, the fraud or breach of fiduciary duty has been shown. All reasonable efforts have been made to establish the amount of the loss and the cause of the loss. The burden of disproving the amount of the loss falls on the Selected Defendants.

88. Damages Should be the Stated Return of the Greyhawk Fund

89. The plaintiffs state that they are entitled to full restitution for their investments in Greyhawk up to and including the face value of their investments as stated by Bedford. This amount reflects the expectations of the plaintiffs, holds the Selected Defendants to their word, and is consistent with restitutionary principles applicable to breaches of trust and fiduciary duty.

90. Victims of breaches of fiduciary duty are entitled to be put in as good a position as they would have been in had the breach not occurred. As stated in the quote above, a less "exacting" approach is used for breaches of fiduciary duty: in order to support such an award, there must only be a causal link between the breach and the loss.

91. Similar to the principles underlying remedies for a breach of fiduciary duty, a remedy for breach of trust is an order requiring the defaulting trustee to effect restitution to the estate.

92. There is always a degree of speculation in determining the "what if" scenario of what would have happened had the breach not occurred. Sometimes experts are called and evidence is led on the issue. This is particularly the case in stockbroker cases where the stockbroker invested funds in a risky manner, contrary to the low-risk profile of the client. This was the case in Osborne v. Harper, where the Court arrived at the following conclusion:

I find that the plaintiff is entitled to damages of the equivalent of what a portfolio consisting of the principal amounts of the three investments would have been worth shortly after the conclusion of the fiduciary relationship. The fiduciary relationship with Mr. Harper ended in May 1993. I find that assessing damages on the basis of what her portfolio would have been as of June 30, had it been invested in accordance with her accepted risk, is that proper measure of her loss. I think that would put her in the same position that she would have been but for the breach of fiduciary duty.

92. But whereas in Osborne v. Harper, where the Court needed expert evidence to determine what the portfolio "would have been … had it been invested in accordance with her accepted risk", here those facts are known. Had the plaintiffs' funds been invested in accordance with their accepted risk, and invested in the manner that they expected, they would have received the returns they were told they were receiving.

93. In light of: (a) the less than exacting approach demanded in calculating damages for breach of fiduciary duty and trust; (b) the fact that the defendant has not discharged the onus to disprove the loss claimed; (c) the logical causal link between the breach of fiduciary duty and trust, and the loss that has been claimed, it is respectfully submitted that the appropriate quantum of damages in the present case is the amount that was stated to be the value of the plaintiffs' investment. This is approximately $26 million.

94. This method of calculating damages also ensures that the damage award is consistent among the various defendants. The plaintiffs state that they had a contractual right to have the units in the Greyhawk fund redeemed at the price stated by Greyhawk. They have sought specific performance, which in the circumstances, is the same thing as a payment of damages in the stated amount of the Greyhawk fund. Given the common enterprise nature of the Greyhawk scheme, it is appropriate that the damages payable by one of the entities is the same payable by all of them.

95. Alternative Damages: Principal plus Prejudgment Interest, Compounded

96. The plaintiffs acknowledge that not all cases lead to the result described above. There are cases that stand for the proposition that in an action for deceit"plaintiffs are entitled to be put in the same position they would have been in if the representations had not been made, but not to be put in the position they would have been if the representations had been true."

97. This approach to damages makes sense in many scenarios: if the defendant falsely says that there is gold in the mine worth billions, and someone pays a small amount of money to acquire those rights, it makes sense that the plaintiff should recover only the out of pocket money lost, plus the opportunity cost occasioned by the loss of those funds. It would not make sense for the defendant to be liable for the billions of dollars. The Court is not in the business of ensuring that parties make good on their fraudulent misrepresentations; it is about remedying the harm occasioned by the misrepresentation.

98. The difference here is that the breach of fiduciary duty and trust was in failing to execute the trades the defendants said they were making. The "misrepresentation" was not the value of the fund, had it been properly invested. The misrepresentation was that the defendants were not investing in the manner disclosed.

99. In these circumstances, the approach set out in the prior section, and in particular, in the Osborne v Harper case, is far more appropriate. If the court asks the question"What would this fund have been worth had it been invested according to the plaintiffs risk profile", the answer is the amount that the defendants said the Greyhawk fund was worth.

100. However, in the event that the Court elects to award damages in the amount of the principal invested plus prejudgment interest, it should be noted that the lost opportunity in respect of these funds, at least for some of the plaintiffs, spanned a decade. These were investments in a hedge fund with a heightened expectation of returns (and admittedly, risk) than a money market fund might yield. If only the principal invested (net of redemptions) is to be awarded, plus prejudgment interest, it is respectfully submitted that prejudgment interest should be compounded. Compound interest is available as a discretionary remedy in equity, particularly where the breaches require "moral sanction", or where compound interest is consistent with expectation damages or are necessary as a component of restitutionary damages. All of those circumstances apply here.

101. Punitive Damages

102. Finally, the plaintiffs seek punitive damages. In order to establish punitive damages, the plaintiffs must establish an independently actionable wrong and that the defendant's conduct was sufficiently malicious, oppressive and high-handed that it offends the court's sense of decency.

103. Courts have frequently awarded punitive damages in circumstances involving fraud where employees had defrauded their employers and been subject to punitive damages. In the Elekta decision, the rogue had defrauded his employer of funds totaling more than $12 million and Justice Brown assessed punitive damages at $200,000.

104. In the present case, the Selected Defendants committed abject and outright fraud for the better part of a decade. The victims ranged from the octogenarian grandparents to their infant grandchildren. The conduct was clearly reprehensible and a marked departure from standards of common decency. The defendants took advantage of the vulnerability of their clients. This is clearly conduct that should be deterred. Punitive damages should be awarded in the amount of $400,000, which is twice the amount awarded in Elekta, supra, reflecting that the damages in this case are double those in Elekta.

SCHEDULE “B”

SEVENTH REPORT OF THE RECEIVER

PURPOSE OF SEVENTH REPORT

1. This seventh report of A. Farber & Partners Inc., as receiver (the “Receiver”), without security, of all the assets, undertakings and properties of Greyhawk Equity Partners Limited Partnership (Millenium) (“Greyhawk LP”), Greyhawk Equity Partners Limited Partnership (“Greyhawk LP 2”), Greyhawk Equity Partners Ltd. (“Greyhawk GP”, and together with Greyhawk LP and Greyhawk LP 2, “Greyhawk”), and Bedford & Associates Research Group Inc. (“BARG”) is filed with respect to the Plaintiffs’ motion for summary judgment against Greyhawk, BARG and Terrence M. Bedford (“Bedford”) and other relief, currently scheduled to be heard December 3, 2012.

2. On December 10 and 11, 2012, counsel for the Plaintiffs and Bedford requested that the Receiver calculate what the value of the respective amounts invested in Greyhawk by the Plaintiffs and other Greyhawk investors would have been had those investments earned a return equal to the performance of the Standard and Poor’s 500 index (the “SPX”), based on the dates of each investor’s investments and ending on January 31, 2011 (just prior to a number of investor redemptions on February 1, 2011).

BENCHMARKED RETURNS

3. The following chart sets out, for each Greyhawk investor:

• The total amount of funds invested in Greyhawk (column A)

• What the value of the amounts invested would have been on January 31, 2011, had they earned a return benchmarked to the SPX (column B)

• The total amount of redemptions paid by Greyhawk to the investor up to and including January 31, 2011 (column C)

• The net market value (= B - C) (column D)

• The net capital investment (= A - C) (column E)

Investor

A

Gross Capital Investment

B

Gross Market Value

C

Redemptions

D

Net Market Value

E

Net Capital Investment

Jim Boughner

$ 5,464,392

$ 6,061,768

$ 515,243

$ 5,546,525

$ 4,949,150

Boughner Foundation

$ 560,000

$ 570,382

$ 813,304

John H. Waldock

$ 4,214,015

$ 4,144,261

$ 1,000,000

$ 3,144,261

$ 3,214,015

Richard Gibson

$ 2,200,000

$ 2,664,008

$ 660,000

$ 2,004,008

$ 1,540,000

Glen Allen Gibson

$ 639,908

$ 858,796

$ 858,796

$ 639,908

Rachel Gibson Trust No. 2

$ 781,000

$ 968,663

$ 310,000

$ 658,663

$ 471,000

Camille Gibson

$ 424,999

$ 524,250

$ 524,250

$ 424,999

Arleen Michelle Mayes

$ 707,000

$ 1,006,695

$ 328,000

$ 678,695

$ 379,000

Elaine Gibson

$ 302,970

$ 423,880

$ 423,880

$ 302,970

H.R. Gibson Jr

$ 300,000

$ 275,940

$ 275,940

$ 300,000

Rachel N. Gibson Trust

$ 249,954

$ 105,312

$ 105,312

$ 249,954

Laura E. Gibson Trust

$ 249,954

$ 105,312

$ 105,312

$ 249,954

Coy Jones

$ 200,000

$ 230,692

$ 230,692

$ 200,000

Jimmy E. Dunn

$ 150,000

$ 181,894

$ 181,894

$ 150,000

Rebecca Waldock

$ 300,000

$ 334,440

$ 334,440

$ 300,000

Margot Liebenthal

$ 100,000

$ 115,986

$ 115,986

$ 100,000

Laura Hardy

$ 100,000

$ 115,986

$ 115,986

$ 100,000

Elizabeth Houck

$ 100,000

$ 115,986

$ 115,986

$ 100,000

John Waldock Jr.

$ 100,000

$ 115,986

$ 115,986

$ 100,000

Andrew Waldock

$ 100,000

$ 115,986

$ 115,986

$ 100,000

Walter Johnson

$ 300,000

$ 321,972

$ 300,000

$ 21,972

Mark Farber

$ 50,000

$ 27,997

$ 62,455

Charles Floyd Daniel

$ 295,000

$ 355,645

$ 355,645

$ 295,000

Louraine Wilborn Trust

$ 600,000

$ 680,288

$ 841,981

Michael McMurrich

$ 676,133

$ 672,845

$ 1,534,967

Total

$ 19,165,324

$ 21,094,968

$ 6,365,950

$ 16,030,214

$ 12,799,374

ASSUMPTIONS AND LIMITATIONS

4. The calculations in the chart above are subject to the following assumptions and limitations:

(a) The Receiver takes no position with respect to the appropriate benchmark for use on this motion, or with respect to the use of index benchmarking as a mechanism for calculating damages.

(b) The Receiver used a final valuation date of January 31, 2011, which is the date just prior to the final redemptions of the Greyhawk investment funds on February 1, 2011. The calculations therefore do not include any redemptions paid February 1, 2011. The Receiver intends to commence an application shortly for the repayment of those redemptions. The Receiver was appointed by order dated February 8, 2011.

(c) In calculating net market value, the absolute amount of redemptions is subtracted from the market value based on the gross capital investment as of January 31, 2011. As a result of time constraints, the Receiver has not taken into account the market value of investments on the date of redemptions, which could be done by calculating the market value of a redeeming investor’s investment according to the value of the SPX on the redemption date, deducting the amount of the redemption from that value, and continuing to track the benchmarked return of the remainder of the investment to January 31, 2011. The impact of such a ‘reset’ of market value can be illustrated by the following numerical example:

• Suppose an investor invested $1,000,000 on Date A when the value of the SPX was 10,000, redeemed $500,000 on Date B when the value of the SPX was 6000, and did not make any further redemptions until January 31, 2011 when the value of the SPX was 7500.

• Without taking into account the value of the SPX on the date of redemption, the net market value of the investor’s investment as at January 31, 2011 would be $250,000 ($1,000,000 x (7500/10,000) - $500,000).

• If the value of the investment were reset on the redemption date, the net market value of the investment immediately following the redemption would be $100,000 ($1,000,000 x (6000/10,000) - $500,000), resulting in a net market value as at January 31, 2011 of $125,000 ($100,000 x (7500/6000)).

All of which is respectfully submitted this 12th day of December 2012.

A. FARBER & PARTNERS INC.

IN ITS CAPACITY AS RECEIVER OF

GREYHAWK EQUITY PARTNERS LIMITED PARTNERSHIP (MILLENIUM),

GREYHAWK EQUITY PARTNERS LIMITED PARTNERSHIP, GREYHAWK EQUITY PARTNERS LTD., and BEDFORD & ASSOCIATES RESEARCH GROUP INC.

and with no personal or corporate liability.