A $213-million dispute over assets caught up in the failure of alternative fund manager Bridging Finance Inc. will be heard in the late spring — with the outcome impacting how much investors ultimately recover from the firm and its funds.
Following a case conference, the Ontario Superior Court of Justice has scheduled a hearing for June 18 and 19 to hear an appeal from Cerieco Canada Corp., which has claimed that it’s owed $213 million from Bridging’s flagship fund, the Bridging Income Fund.
In court filings, Cerieco has argued that the fund owes the money based on a loan guarantee allegedly provided by Bridging co-founder, Natasha Sharpe, in connection with a large real estate project (The One project in midtown Toronto) that ultimately failed and was put into receivership in 2023.
The firm has argued that Sharpe provided it with a guarantee on behalf of the fund, in order to secure a loan that Cerieco furnished to the project in 2017 to finance the initial stage of construction.
The company’s initial claim was denied by Bridging’s court-appointed receiver, PricewaterhouseCoopers Inc. (PwC). It then appealed that decision to a court-appointed adjudicator, Douglas Cunningham, who also rejected the claim, ruling that the purported loan guarantee was invalid.
Among other things, the adjudicator found that Sharpe didn’t have the authority to provide a loan guarantee on behalf of the fund, that the guarantee was never ratified by the fund’s limited partners, and that Cerieco should have known that she didn’t have the authority to provide the guarantee.
In late January, the company indicated that it intended to appeal Cunningham’s ruling — arguing that he ignored evidence that Sharpe did have the authority to provide the guarantee, and that he was wrong in concluding that it was up to the company to verify whether she had the requisite authority.
With the appeal now scheduled for mid-June, the outcome of the dispute will impact retail investors’ ultimate recovery from the failure of Bridging, whose losses are expected to exceed $1 billion. So far, investors have received an interim distribution of $321 million from the receivership.
Along with Cerieco’s appeal, the court will also hear a motion from law firm, Dentons Canada LLP, seeking intervener status in the case. In previous filings, Cerieco has cited a legal opinion from Dentons as evidence supporting its claim.