COURT FILE NO.: 13-57904

DATE: 2013/07/03

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

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: Kane J.

COUNSEL:
Justin R. Fogarty, counsel for the Applicants

Jason Dutrizac, counsel for the Interim Receiver

HEARD at Ottawa: July 2, 2013

ENDORSEMENT

[1] The applicants presented on July 2, 2013, an ex parte motion to make certain amendments to the order of this court dated June 19, 2013 and to expand the powers of the Interim Receiver. Counsel for the applicants and counsel for the Interim Receiver were present on the return of this ex parte motion.

[2] Several of the applicants herein and other individuals commenced an application in February of 2013 (action #13-56663) for the appointment of an Inspector of the respondent corporations herein as well against Thomas G. Assaly (“Inspector Proceedings”).

[3] This court on February 6, 2013 appointed an Inspector to examine the respondent corporations and report upon how the investment monies paid by the applicants had been used on three development projects as marketed and administered by Thomas G. Assaly in the Province of Ontario.

[4] The Inspector over several reports advised the court that none of the three Ontario development projects for which monies had been raised and received from the applicants was proceeding. In its reports, the Inspector presented evidence which suggested that portions of the monies invested by the applicants to fund the three Ontario development projects appeared to have been diverted and used in the renovation of a Florida property (“Canada House”) known municipally as 2611 S. Indian River Drive, Ft. Pierce, Florida, USA.

[5] Thomas G. Assaly, his wife Karen Assaly and their children currently reside at Canada House. The evidence presented indicates that they resided in the Province of Ontario at the time that Mr. Assaly through offering memorandums on behalf of corporations which he controlled raised money from the applicants in order to develop the three Ontario projects.

[6] The evidence presented to this court indicates that Millennium Educational & Research Charitable Foundation (the “Foundation”) in 2010 undertook renovations to Canada House at a cost of some $713,000. As stated, it appears from the Inspector’s Report that some of those renovation costs were paid for by diverting some of the money invested by the applicants to develop the three Ontario projects.

[7] In order to raise capital to carry out the renovations of Canada House, Thomas G. Assaly in the name of the Foundation also established a charitable donation strategy involving Canada House. A number of individuals donated to the Foundation for which each of them received a life interest in Canada House, including access to and use thereof for two weeks per year. Those donors include Patrick Caicco and others.

[8] The evidence indicates that the Foundation, incorporated in Canada under the Canada Not-for-profit Corporations Act, S.C. 2009, c. 23 has established several wholly owned subsidiary corporations in Florida, including Canada HSE LLC.

[9] This court was concerned at the time of the appointment of the Inspector on February 6, 2013, that Thomas G. Assaly appeared to have internally intermingled monies owned by and between the respondent corporations.

[10] On April 18, 2013, this court determined that the Foundation was affiliated to and controlled Millennium Springs Development & Construction Corp. (“MSDC”) and Assaly Investment Program Corporation. This court further found that there had been default in payment and development obligations by several of the respondent corporations to a number of the investor applicants in relation to the three Ontario developments. The court further dismissed the Foundation’s motion to be removed from the appointment and powers of the Inspector in the Inspection Proceedings.

[11] This court on May 22, 2013, ordered that the following matters were to proceed to argument on June 19, 2013, namely:

(a) A motion by the applicants herein to freeze the assets of and to appoint a Receiver of the Foundation.

(b) Whether the respondents including the Foundation and Thomas G. Assaly had breached any of the prior orders in the Inspection Proceedings.

(c) Whether Mr. Assaly or the Foundation should be required to pay the liability determined owing under the Administrative Charge in the Inspection Proceedings.

[12] The evidence presented in the Inspection Proceedings on June 19, 2013, included the following:

(a) Written confirmation dated February 8, 2013, from the vice-president and investment advisor of TD-Waterhouse Private Investment Advice confirming his receipt of instructions from Thomas G. Assaly regarding the investment accounts of the Foundation located in Canada with the specific instructions that TD-Waterhouse was to “sell all, pay out margins and the net proceeds” of all of Foundation investment accounts to transfer the proceeds to Mr. Assaly in Florida.

(b) A letter of authorization signed by Thomas G. Assaly dated February 11, 2013 directing the transfer of $367,000 US from one of the Foundation’s bank accounts in Lake Mary, Florida to the bank account of Canada HSE LLC in Ft. Pierce, Florida.

(c) A letter of authorization signed by Thomas G. Assaly on February 11, 2013, directing that $50,000 in US monies be transferred from the Foundation’s bank account in Lake Mary, Florida to the bank account of Canada HSE LLC in Ft. Pierce, Florida.

[13] This court in this receivership proceeding on June 19, 2013, pursuant to s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 as amended, rule 40.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and s. 46 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, granted an Interim Interlocutory Injunction and interim appointment of a Receiver for a limited purpose to protect assets against dissipation pending the return of proceedings in this Receiver Action and the first attendance upon bankruptcy proceedings brought by one or more of the applicants against the Foundation. The return of the bankruptcy proceeding was scheduled for June 24, 2013.

[14] The evidence presented to this Court on July 2, 2013, includes the following:

(a) The Foundation transferred its full ownership interest of Canada House on May 24, 2013, to Thomas G. Assaly and Karen Assaly without prior notice to or consent of the holders of a life interest therein, including Caicco and others.

(b) Despite the Foundation’s registration in Canada as a charitable corporation, such corporation has not made any charitable donations for the last 18 months.

(c) Three of the previous five directors of the Foundation have resigned. Thomas G. Assaly and Karen Assaly are the only remaining directors of the Foundation.

(d) Thomas G. Assaly and James Meuse, of the City of Ottawa, caused to be incorporated Assaly Meuse LLC. Mr. Meuse and his wife own 50% of the shares in that corporation. The other 50% of the shares in Assaly Muse LLC are owned by the Foundation.

(e) James Meuse by affidavit alleges having personal knowledge that Thomas G. Assaly used money belonging to the Foundation for his own personal use.

(f) Assaly Meuse LLC owns at least four residential properties in Port St. Lucie, Florida, purchased in the years 2011 and 2012, most of which are currently rented.

(g) Rental income payable to Assaly Meuse LLC for the month of May, 2013, was directed by Thomas G. Assaly to be deposited into a separate HCB account which he controls.

(h) Frank H. Fee is an attorney in Ft. Pierce, Florida. Mr. Fee’s office received and deposited into his firm’s trust account money directed by Thomas G. Assaly from accounts in the name of Thomas G. Assaly and/or corporations which he controls, including the Foundation. Such monies may include the proceeds of sale of Canada House.

(i) The Foundation had one or more HCB bank accounts in which there was a credit balance as of March, 2013 of in excess of $400,000 US which is now understood to be in Mr. Fee’s trust account.

[15] Relying upon the jurisdiction under s. 101 of the Courts of Justice Act, s. 248 (3) (b) of the Ontario Business Corporations Act, s. 241 (3) (b) of the Canada Business Corporations Act, s. 253 (3) (b) of the Canada Not-For-Profit Corporations Act, and ss. 46 (1), 95 and 96 of the Bankruptcy and Insolvency Act, this court on an interim basis: (a) amends the pleadings in the Receivership Action to add Thomas G. Assaly and Karen Assaly, as respondents and to a limited extent, Frank H. Fee; and (b) expands the limited powers of the Interim Receiver appointed in the Receivership Action and mirrors that appointment within the bankruptcy action.

[16] These motions are returnable on July 9, 2013, at 10 a.m.

[17] This endorsement, the order resulting therefrom and the motion, affidavits and factum are to be served electronically by July 4, 2013, on Mr. Smith, Mr. Eisen, counsel for Thomas G. Assaly and his wife, the Foundation and all parties affected by July 4 or as soon as possible thereafter.

Kane J.

Released: July 3, 2013

ONTARIO
SUPERIOR COURT OF JUSTICE

RE: Ronald Ayoub, et al

Applicants

AND

Millennium Educational & Research Charitable Foundation et al

Defendants

BEFORE: Kane J.

COUNSEL:
Justin R. Fogarty, counsel for the Applicants

Jason Dutrizac, counsel for the Respondents

ENDORSEMENT

Kane J.

Released: July 3, 2013