Court File and Parties

COURT FILE NO.: 13-56663

DATE: 2013/10/23

SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN: (Inspection Proceeding)

COLLEEN MOORE, BARRY DOUCETTE, RONALD X. AYOUB, KIM KRUK, DALE HEIN, PAMELA STONE, CAROLINE LEWANDOWSKY, ANNE LEFIER, GARRY McGINN, DAVID HAMILTON, JAMES MILLER, HELENE LAMADELEINE, MARY LOU FISHER, ALLAN BRETT, DONALD HUTCHINSON, GLORIA HUTCHINSON, RICHARD MELCER, STEPHEN CALDWELL, MICHELLE VEZEAU, DAVID KORNELSEN, KEVIN HARSH, COLLEEN MALTAIS, LUC MALTAIS, BOB MECH, A.A.N.T. SOFTWARE CORPORATION, TERRENCE FINNIGAN and JAMES JOSS

Applicants

AND

THOMAS G. ASSALY, ASSALY INVESTMENT PROGRAM CORPORATION, ASSALY FINANCIAL CORPORATION, ACT 1 CORP., ASSALY CREDIT & TRADE CORP., ASSALY ASSET MANAGEMENT CORPORATION, MILLENNIUM SPRINGS DEVELOPMENT & CONSTRUCTION CORP. (aka MILLENNIUM SPRINGS PROPERTIES LTD.) and MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C. ASSALY CHARITABLE FOUNDATION)

Respondents

AND BETWEEN: (Receivership Proceeding)

COURT FILE NO.: 13-57904

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 BETWEEN: (Bankruptcy Proceeding)

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:
J. Fogarty and P. Masic, counsel for the Applicants

J. E. Smith, counsel for the Respondent, Thomas G. Assaly

C. Morris, counsel for Doyle Salewski Inc., Inspector

J. Dutrizac, counsel for Doyle Salewski Inc., Interim Receiver

S. Eisen, counsel for Millennium Educational & Research Charitable Foundation (“the Foundation”)

J. O’Sullivan, counsel for S. Eisen

A. Matheson, counsel for TD Bank and TD Waterhouse

C. L. Merovitz, counsel for Your Credit Union

HEARD: October 11, 2013

CASE CONFERENCE ENDORSEMENT

Inspection Proceeding

[1] Counsel for Your Credit Union advised it wished to proceed with a motion to establish priorities as between registered encumbrances and the Administrative Charge.

[2] The priority motions of Your Credit Union and TD Bank and TD Waterhouse shall proceed on Thursday, November 14, 2013.

[3] Your Credit Union and the TD are to serve and file a report as to their realization and results of any sale or disposition of assets owned by the respondents by Thursday, October 31, 2013.

Receivership Proceeding

[4] The scheduled dates for the hearing of the Receiver’s motion for contempt and the motion by the Foundation regarding Clark/O’Connor are cancelled with new dates to be set through the office of the Trial Coordinator.

[5] The parties advised that the Receiver has served a motion seeking an order of contempt against Mr. Assaly, Mrs. Floyd-Assaly and Mr. Eisen.

[6] Counsel for Mr. Eisen as a result of the Receiver’s contempt motion against Mr. Eisen, seeks suspension of these three proceedings until such contempt motion against Mr. Eisen has either been finally determined or withdrawn, with prejudice.

[7] The Receiver and the Inspector oppose any suspension of these proceedings and advised that it would amend its notice of motion for contempt to remove the remedy sought against Mr. Eisen, without prejudice to its right to bring such motion in the future.

[8] Counsel for Mr. Eisen advised that amending the motion in that way with the right to bring such a motion in the future was unacceptable. Counsel advises that Mr. Eisen and the Foundation under those circumstances would each be in position of conflict. It was submitted that the present motion for contempt against Mr. Eisen creates an appearance that the lawyer has a personal interest that could affect his judgment or loyalty to his client, question his safeguarding of the client’s interest and expose counsel to a potential claim of malpractice.

[9] Counsel for Mr. Eisen further submitted that a lawyer with such a conflict is in breach of the rules of professional Conduct, Rule 2.04, and that the simple withdrawal of the motion would not cure the conflict. Therefore it is submitted that the motion against Mr. Eisen must either be dismissed or withdrawn with prejudice.

[10] The Foundation has had multiple counsel in these proceedings. J. Smith originally represented Mr. Assaly and the Foundation in the Inspection Proceeding. Due to a potential conflict, Mr. Smith ceased acting for the Foundation which is now represented by Mr. Eisen, but continued as counsel to Mr. Assaly.

[11] The Foundation in this Bankruptcy Proceeding is represented by Kenneth Page as counsel and by other counsel in the United States bankruptcy action.

[12] Neither Mr. Assaly nor the Foundation has disputed in the Inspection Proceeding or the Receivership Proceeding, the allegation that Mr. Assaly was the directing mind of the respondent corporations, including the Foundation. Mr. Assaly only recently resigned as one of the two remaining directors of the Foundation thereby leaving his wife as the sole remaining director thereof.

[13] Mr. Assaly accordingly was or is instructing at least three different law firms acting for the Foundation and is separately represented by Mr. Smith.

[14] The inspection above was terminated on May 7, 2013 subject to the remaining issues as to the cost of those proceedings and the above mentioned priority motions now scheduled for Thursday, November 14, 2013. That proceeding essentially therefore is completed.

[15] The trial in the Bankruptcy Proceeding to determine whether the Foundation be declared bankrupt has been adjourned pending determination of the Receiver’s motion to remove and replace Mr. and Mrs. Assaly as the only directors of the Foundation. The outcome of that motion may impact Mr. Eisen’s representation of the Foundation in any of these actions.

[16] Doyle Salewski Inc. was appointed as interim receiver of several of the respondent corporations on July 2, 2013. That interim appointment was made final against those corporations on August 6, 2013. With the consent of the Foundation, the interim Receivership Order was expanded on August 6, 2013 to include the Foundation.

[17] There have been multiple delays in these three proceedings. Some of those delays have been caused by the change in counsel to the Foundation. There have been additional delays caused by the unavailability of Mr. Assaly for examination in Canada as to the alleged transfer of assets between respondent corporations and by the Foundation. There are numerous allegations of Mr. Assaly transferring assets of several of the respondent corporations to the Foundation and out of Canada.

[18] The amendment of the Receiver’s motion removing the requested relief of contempt against Mr. Eisen results in there being no motion for contempt against him.

[19] Given that result and the above facts, this court is not prepared to sanction any further delays because of the possibility that such a contempt motion may be made in the future.

[20] These proceedings are not to be suspended because of potential future events.

[21] The requested suspension is accordingly dismissed.

Kane J.

Released: October 23, 2013

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: Moore et al

AND

Assaly et al

BEFORE: Kane J.

COUNSEL:
J. Fogarty and P. Masic, counsel for the Applicants

J. E. Smith, counsel for the Respondent, Thomas G. Assaly

C. Morris, counsel for Doyle Salewski Inc., Inspector

J. Dutrizac, counsel for Doyle Salewski Inc., Interim Receiver

S. Eisen, counsel for Millennium Educational & Research Charitable Foundation (“the Foundation”)

T. O’Sullivan, counsel for S. Eisen

A. Matheson, counsel for TD Bank and TD Waterhouse

C. L. Merovitz, counsel for Your Credit Union

CASE CONFERENCE ENDORSEMENT

Kane J.

Released: October 23, 2013