The decision to deny a company’s $213-million claim against the Bridging Income Fund (BIF) — the flagship fund of failed fund manager, Bridging Finance Inc. — is facing an appeal, which delays the prospect of further recovery for retail investors that lost money in the collapse of Bridging.
Earlier this month, a court-appointed adjudicator ruled against Cerieco Canada Corp., which claimed that it was owed $213 million (plus interest and costs) by the investment fund. The claim was based on a “secret” loan guarantee that the company said Bridging co-founder Natasha Sharpe provided on behalf of the fund, in connection with a real estate development project that ultimately failed.
That ruling opened the door to Bridging investors potentially recovering more money from the firm’s ongoing receivership process. Last year, retail investors received an interim distribution of $321 million from the receivership — an amount that was reduced from an initially planned distribution of $491 million, pending the resolution of Cerieco’s large outstanding claim against the BIF.
The company’s claim was first denied by Bridging’s receiver, PricewaterhouseCoopers Inc. (PwC), in late 2023. That decision that was appealed to a claims officer, Douglas Cunningham, who was appointed by the Ontario Superior Court of Justice to adjudicate disputed investor claims.
In his decision on Jan. 7, Cunningham ruled that the purported loan guarantee was invalid because, among other things, he found that Sharpe didn’t have the authority to commit the fund to backing the loan; that the guarantee was never ratified by the fund’s limited partners; and it wasn’t disclosed in the fund’s financials.
Now, Cerieco has filed a motion in the Ontario Superior Court of Justice seeking to overturn Cunningham’s ruling, alleging that he made various errors in that decision.
Among other things, it argues that he ignored evidence that Sharpe did have the authority to make the loan guarantee, and was wrong in concluding that the company should have suspected that she didn’t have the necessary authority.
In its latest filings, the company said that there was no way for it to know that the fund’s internal investment policy and concentration restrictions would have limited Sharpe’s authority to provide such a guarantee — and, it said that the adjudicator erred in finding that it was up to Cerieco to determine that she was prevented from providing the guarantee.
“This is a commercially absurd result,” it said in its filing — adding that there was also no way for the company to know that the guarantee would have had to be ratified by the fund’s limited partners at the time.
As a result, it argued that the claims officer erred in his application of the law to the facts, misunderstood the evidence, and made findings that aren’t available, based on the evidence.
The motion asks the court to set a date to hear its appeal — which pushes back the prospect of further recovery for retail investors that lost money in the Bridging collapse.