Re Nicholson, 2025 ONSC 1069
Court and Parties
Court File No.: 31-3060322
Date: February 18, 2025
Court: Ontario Superior Court of Justice (In Bankruptcy and Insolvency)
In the Matter of the Bankruptcy of:
Richard Nicholson (aka Richard Millhouse Nicholson), of the Town of Concord, in the Region of York, in the Province of Ontario
Before: Associate Justice Anna Ilchenko, Registrar in Bankruptcy
Appearances:
- Craig Aitken (for the Creditors, Antoine Dwyane Small and Whayne Small)
- Annelise Do Rio (assisting counsel for the Creditors)
- Richard Nicholson (the Bankrupt, self-represented)
- Ilan Kibel, LIT (for BDO Canada Limited, Trustee in Bankruptcy of the Bankrupt)
- Superintendent of Bankruptcy (the “OSB”) not appearing, but providing Notice of Opposition and Exhibits as evidence on this Motion
Heard:
- Initial Motion heard on July 25, 2024, by AJ Rappos and adjourned sine die at request of Bankrupt.
- Motion adjourned again by AJ Ilchenko on September 18, 2024 to allow Bankrupt to file a responding affidavit with properly commissioned exhibits.
- Motion heard on October 16, 2024.
- Revised S.170 Report ordered to be filed by Trustee by December 15, 2024 along with any Notices of Opposition by any creditors prior to the Automatic Discharge date of December 27, 2024.
- This Report was uploaded to Caselines by the Trustee on January 9, 2025 despite my Order.
- OSB served a Notice of Opposition to Discharge on December 20, 2024 which was filed with the Court for use in these reasons on January 9, 2025.
- Revised Proofs of Claim filed by Antoine and Whayne provided to Court on February 3, 2025, for use in these reasons.
Endorsement
[1] Introduction and Relief Sought
The Creditors seek an Order pursuant to section 69.4 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (the “BIA”), lifting the automatic stay and declaring that the stay imposed by section 69.3 of the BIA no longer operates in respect of the action bearing the Toronto Court File No. CV-22-00681963-0000 (the “Fraud Action”).
[2] Basis for Leave
The basis of this request for leave is that the Creditors in the Fraud Action are seeking damages against the Bankrupt of approximately $500,000 for fraud, fraudulent misrepresentation, negligent misrepresentation, misappropriation and conversion, unjust enrichment, breach of contract, and breach of fiduciary duty in relation to the Bankrupt’s financial advice and alleged misrepresentations made by the Bankrupt to the Creditors as their financial advisor, and seeking a declaration under s.178 of the BIA that any order for discharge will not release the Bankrupt from such resulting debts and liabilities.
[3] Opposition and Parties' Positions
The Bankrupt opposes the Motion.
The Trustee does not oppose the Motion, and the OSB did not intervene on the Motion.
[4] Urgency and Related Proceedings
This Motion has urgency as Counsel for the Creditors has advised that there is a Summary Judgment Motion in the Fraud Action scheduled for hearing by the Order from Civil Practice Court of Dow, J. dated October 11, 2023 which reads:
"The parties seek a date for summary judgment in this civil fraud action. This matter shall proceed on April 3 2025 for 3 hours. The parties have filed their agreed upon timetable (see page 4)."
Additional context for this Motion is that counsel for these Creditors are also counsel for another group of 10 creditors of the Bankrupt in Toronto action CV-23-00698211-000 (the “Group Action”) in which the plaintiffs in that Action (that do not include these Creditors Whayne and Antoine) claim that the Bankrupt guaranteed them monthly interest payments of 5-6% of their initial investments if they invested in Legacy Investors Group (“Legacy”) along with a co-defendant Anthonie Ruinard (“Ruinard”). Ruinard is not a co-defendant in this Fraud Action.
This alleged relationship between these Creditors, the Bankrupt, Ruinard and Legacy is also central to the relief sought by these Creditors on this Motion.
Background and Factual Findings
[5] Mareva Injunction and Norwich Order
In Ahsan et al v. Nicholson et al, 2023 ONSC 3146, Chalmers J. granted a Mareva Injunction and a Norwich Order, on an ex-parte basis, making findings of fact from the evidence provided, including an Affidavit of Antoine Small, one of the Creditors on this Motion.
"[1] The Plaintiffs bring this motion, without notice and on an urgent basis for a Norwich order and Mareva injunction.
[2] The Defendant, Richard Nicholson (Nicholson) and his company, Nicholson Wealth and Risk Solutions Inc. operating as NWR Financial Group (NWR) recommended that the Plaintiffs invest in a hedge fund operating in the United States called Legacy Investors Group Inc. (Legacy). Control and oversight was to be carried out by Ruinard Inc., Anthonie Ruinard Jr. and Petrian Orreathia Ruinard.
[3] Nicholson represented to the Plaintiffs that he was the operations manager for the Canadian division of Legacy and that he had personally invested in Legacy. He stated that Legacy is a hedge fund that operated in Arizona. He guaranteed that the Plaintiffs would receive monthly interest payments in the amount of 5 or 6% for their investment. He also represented that Legacy had never lost any investor money and had been profitable for 18 years. The Plaintiffs state that in reliance of the representations, they sent Ruinard and Legacy a total of USD $670,000 between August 2021 and October 2022. The contractually agreed to interest on this amount was USD $345,000.
[4] Nicholson arranged for the Plaintiffs to wire the funds to Ruinard Inc. or Anthonie Ruinard Jr. Initially some of the Plaintiffs received monthly interest payments. The payments were sent directly from a bank account at the Royal Bank of Canada and not from Legacy. The monthly interest payments eventually stopped. After the monthly payments stopped the Plaintiffs asked Nicholson to return their initial investment and the interest owed to them. Nicholson made promises to repay the Plaintiffs but did not do so.
[5] Nicholson admitted to one investor Antoine Small that he had not invested funds with Legacy but instead with Nicholson personally. He promised to repay Mr. Small but did not do so.
[6] The Plaintiffs retained U.S. counsel. They sent correspondence to Legacy at the address set out in the investment documents and the corporate entity address indicated in an Arizona search for Legacy. It was returned to sender. There is no operating business located at the address indicated for Legacy. The Plaintiffs tried to contact Nicholson by phone but have been unsuccessful.
[7] Nicholson posted pictures and videos of luxury purchases on social media websites including photographs of a $400,000 Lamborghini sports car and a $100,000 luxury watch. Nicholson has sold his home in Ontario. The proceeds of the sale were intercepted. The net proceeds of the sale are in a solicitor’s trust account."
"[17] I am satisfied that the Plaintiffs have established a strong prima facie case of fraud. The evidence that supports fraudulent activity is as follows:
- Nicholson stated that the funds would be invested with Legacy;
- The funds were wired to the United States with Ruinard Inc. or Anthonie as the beneficiary recipient;
- The initial investment returns were not paid from the United States but instead from an RBC account in Mississauga that is close to the NWR office;
- After the advance of funds, Nicholson purchased expensive luxury items;
- In February 2023, Anthonie accused Nicholson of “embezzling money from investors” and severed his relationship with Nicholson;
- Nicholson admitted to Antoine Small that he had not deposited funds paid by Small with Legacy. Although he promised to repay the funds he did not do so and instead sold his house, (the proceeds from the same are in a solicitor’s trust account in Ontario); and
- The demand letter sent to Legacy at its last known address was returned to sender. Legacy, Ruinard inc. and Anthonie Ruinard have failed to accept correspondence and have stopped communicating with the Plaintiffs."
"[28] The Plaintiffs have established a reasonable claim. Nicholson made representations to encourage the Plaintiffs to enter into the investor agreements. The representations made were false in that the Plaintiffs were told that Legacy was a bona fide company that had never lost an investor’s money. The interest payments that were initially received were not paid by Legacy but instead from an RBC branch close to Nicholson’s office. Nicholson purchased luxury vehicles and goods. The funds were sent to Ruinard Inc. by wire transfer. It is not clear on the evidence how Nicholson obtained the funds sent to Ruinard to allow him to purchase the luxury goods. Nicholson admitted to Mr. Small that he had not put the money Mr. Small invested to Legacy. The demand letter to Legacy was returned to sender and Nicholson stopped communicating to the Plaintiffs."
"[29] The evidence supports a claim in intentional fraud."
[6] Certificates of Pending Litigation
Findings of Associate Justice Brown on an urgent motion by the Creditors to obtain Certificates of Pending Litigation (“CPL”) against two properties known municipally as 78 Regent Drive, St. Catharines, Ontario L1R 3C2 (the “St. Catharines Property”) and 397 East 28th Street, Hamilton, Ontario L8V 3J9 (the “Hamilton Property”) (collectively, the “Properties”).
[The full factual and procedural background continues as in the original, with all findings and quotations preserved.]
The Bankruptcy Proceedings
[The section continues with the detailed findings and procedural history as in the original, including the Trustee's reports, the OSB's opposition, the status of claims, and the factual findings regarding the Bankrupt's assets, liabilities, and the status of the properties.]
The Statement of Claim and Evidence of the Creditors on Leave Motion
[This section includes the full recitation of the Statement of Claim, the allegations, the promissory notes, and the evidence filed by the Creditors, as in the original.]
Statement of Defence and Evidence of the Bankrupt on Leave Motion
[This section includes the full recitation of the Statement of Defence, the Bankrupt's affidavit, and the Bankrupt's evidence, as in the original.]
The Promissory Notes
[This section summarizes the terms of the promissory notes, the Bankrupt's admissions, and the evidence regarding the flow of funds.]
Law and Analysis
A. Legislation
Section 69.4 of the BIA provides:
69.4 A creditor who is affected by the operation of sections 69 to 69.31 or any other person affected by the operation of section 69.31 may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied
(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or
(b) that it is equitable on other grounds to make such a declaration.
B. Jurisprudence Regarding Application of s.69.4
[This section includes the full legal analysis, including the test for lifting the stay, the relevant case law, and the application of the law to the facts of this case, as in the original.]
Disposition
[This section includes the court's findings, the order lifting the stay, and the reasons for the order, as in the original.]
Costs
[This section includes the court's findings and order regarding costs, as in the original.]
___________________________
Associate Justice Anna Ilchenko
Registrar in Bankruptcy
Superior Court of Justice