TD faces $5M negligence claim on behalf of Assaly creditors
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The Toronto Dominion Bank, its investment arm, and one of its Ottawa executives are facing a claim for $5 million in damages filed on behalf of a group of Ottawa investors who lost millions of dollars in two stillborn real estate projects promoted by Thomas G. Assaly.
In a statement of claim filed with Ontario Superior Court, receiver and bankruptcy trustee Doyle Salewski Inc. seeks the damages for alleged negligence and breach of fiduciary duty by the bank, TD Waterhouse Canada Inc. and David Thomson, a vice-president and investment adviser with TD Waterhouse in Ottawa.
The statement of claim was filed with the court in March but has not yet been served, largely because many of the investors hope to take over the lawsuit from Doyle Salewski and act directly as plaintiffs.
“There’s a whole bunch of the investors who would like to step in and take over the claim,” said Jason Dutrizac, one of the lawyers acting for the investors. He expects a motion substituting the investors as plaintiffs to be heard before the end of the summer.
TD issued a statement saying it hasn’t yet had a forum to “refute” the allegations in the statement of claim.
“We strongly disagree with the characterizations made against TD and our employee,” the bank said. Once the claim has been served, it said, “TD and Mr. Thomson will vigorously defend these allegations.”
Asked for his response, Thomson said he’d “love to comment, but I can’t. I’ll leave that to TD to do that for me.”
The lawsuit against TD offers the investors their best hope of recovering the $3.37 million they put into the Assaly real estate projects in North Grenville and Smiths Falls, neither of which proceeded.
“The $5 million (being claimed in the lawsuit) would pay out the creditors in full,” said Doyle Salewski president Brian Doyle.
According to reports filed with the court in 2013, Assaly — the eldest son of the late Ottawa developer Thomas C. Assaly — shifted investor funds from four now-bankrupt companies into a charitable foundation he then controlled and used the money for personal purposes.
The statement of claim alleges that more than $750,000 of investors’ funds were funnelled to U.S. accounts to pay to renovate Canada House, a Florida mansion where Assaly and his family then lived. Some of that money “flowed from TD Bank accounts overseen by Thomson,” the statement alleges.
Thomson was one of seven people who participated in a complex “tax-driven transaction” with Assaly involving Canada House in 2009, the statement of claim states. The plan was to renovate the mansion using promissory notes characterized as charitable donations and generate income by renting it to third parties.
“At all material times, Thomson was in a conflict of interest while acting in his capacity as banker and investment adviser to Assaly, (his companies) and the foundation,” the statement of claim alleges.
He made decisions that, “on their face, appear to have been motivated by a personal interest in Canada House,” the statement alleges.
“Thomson oversaw the movement of investor funds by Assaly and allowed substantial investor and charitable funds and assets in the province of Ontario to be stripped from the foundation and (the Assaly companies) and redirected or funnelled out of the jurisdiction to, among other places, Canada House,” it further alleges.
By virtue of its control over Thomson, TD Bank had “actual and/or constructive knowledge of what appeared to be a fraud carried out by one of its customers through its banking facilities,” the statement alleges. It was therefore negligent or in breach of its fiduciary duty, it alleges.
Aside from the lawsuit, Canada House is the only substantial asset that could bring a return for the long-suffering investors, who put sums ranging from $14,000 to $316,000 into the Assaly projects.
It’s now controlled by Doyle Salewski, which has been trying unsuccessfully to sell it for more than a year. The trustee has twice reduced the original $1.39-million asking price, cutting it to $995,000 on July 1.
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