Judge rejects Nygard bid to use money from firms in receivership to pay criminal case lawyers

A Manitoba judge has rejected a request by disgraced fashion mogul Peter Nygard to use money from his companies currently in receivership to pay his criminal defence lawyers. 

Nygard is appealing the decision.

Nine Nygard companies have been under court-appointed receivership since March 18, 2020. 

Recent documents filed in the case show since that time the receiver, Richter Advisory Group Inc., took in more than $121 million and paid out more than $42 million to clear up company debts. 

The court records show as of May 2021, $12.8 million remains after the sale of company assets.

Court filings also indicate the Nygard companies owe $3 million to the Canada Revenue Agency, although the court has not yet authorized that payment

Court records filed between December 2021 and March 2022 show Nygard wants to use $1.15 million from the $10 million being held in trust by the receiver to pay for legal fees.

The $10 million includes the proceeds of Nygard's Falcon Lake Cottage, a property that was not part of the receivership.

Since the start of the receivership, Manitoba Court of Queen's Bench Justice James Edmond approved the sale of four properties owned by the Nygard companies on Broadway, Notre Dame Avenue and on Inkster Boulevard, as well as the company's Toronto headquarters.

He also approved the liquidation of fashion merchandise, furniture and fixings from Nygard retail stores.

Nygard, 81, is currently being held in a Toronto jail awaiting trial for sexual assault and forcible confinement on allegations dating back 40 years.

Last December, Nygard's lawyers filed a notice of motion in the receivership asking a judge to authorize the distribution of $1.15 million from the net receivership proceeds to Nygard Properties Ltd. (NPL) for "payment of certain legal fees incurred, or to be incurred, by Peter J. Nygard personally in connection with the defence of certain criminal charges laid" by the Toronto Police Service and the request for his extradition to the United States for various charges relating to sex trafficking.

The court filings break down how that money, totalling $500,000, would be spent:

• $350,000 to Toronto criminal defence lawyer Brian Greenspan.
• $50,000 to Jeff Hartman who specializes in prison law in Toronto.
• $50,000 to Winnipeg lawyer Richard Wolson.
• $50,000 to Nygard's longtime Winnipeg lawyer Jay Prober. 

The court records say the rest of the money would go to his insolvency lawyers:

• $250,000 to Fred Tayar and Associates.
• $350,000 to Levene Tadman.
• $50,000 to Albert Gelman Inc.

"It is the position of NPL that because Peter Nygard is the ultimate owner of NPL, it is in NPL's best interests that Peter Nygard be acquitted," Nygard lawyer Wayne Onchulenko wrote in a January motion brief.

"If Peter Nygard is convicted, NPL's assets would likely be used to pay a judgment obtained by anyone who is successful in the prosecution of a civil claim after a successful criminal prosecution against Peter Nygard," Onchulenko wrote.

The court filings say the Toronto allegations are said to have taken place at Nygard's Toronto headquarters.

Nygard's lawyers argued that under The Corporations Act, there are sections that describe instances when a company can pay the legal costs of an officer, director or employee.

The judge denied their request.

"I fail to see how it is possibly in the best interests of NPL to successfully defend criminal charges of sexual assault and other related offences against a former officer or director or personal controlling or directing the corporation," Edmond wrote in a March decision.

He went on to say the lawyers have not established that the criminal charges have anything to do with Nygard acting as an officer or director of the companies.

Edmond granted Nygard's request to pay "reasonable legal fees and professional costs" in the receivership or bankruptcy proceedings, but not to defend the criminal charges against Nygard.

Nygard was arrested in Winnipeg in December 2020 on a nine-count indictment in the United States on charges of racketeering, sex trafficking and related crimes.

Nygard was held at Headingley Correctional Centre until October 2021, when he was transferred to a Toronto jail. He is charged with 11 counts of sexual assault and three counts of forcible confinement in Toronto, related to allegations from the late 1980s and mid-2000s. 

In May of this year, Montreal police also charged Nygard with one count of sexual assault and one count of forcible confinement in Quebec. The alleged crimes, which involve the same person, took place between Nov. 1, 1997, and Nov. 15, 1998.

Nygard is not facing charges in Winnipeg, despite numerous women reporting to police that he raped them.

The receiver also asked the court to consolidate the nine Nygard companies' assets for creditor purposes, meaning they would be allowed to use the assets from any of the companies to pay off the debts of the others.

The two companies owned by Nygard — Nygard Properties Ltd. and its parent company, Nygard Enterprises Ltd. — objected, saying they have assets and revenues that the other companies should not be entitled to.

NPL was a real estate holding company, and its assets were sold off during the course of the receivership. 

In court filings NPL said it's solvent, asset-rich and is a secured creditor for the other companies.

Justice Edmond found that Peter Nygard controlled all the companies, whether directly or indirectly, and that their finances were intermingled. 

The judge also found in excess of $87-million in inter-company loans among them, and that Nygard International Partnership, for example, paid millions to maintain Nygard's Falcon Lake cottage.

In the end, he granted the receiver's request to consolidate the companies' assets.

"The prejudice that may be suffered by NPL, and its parent corporation NEL, must be weighed against the claims of the employees, landlords, suppliers and other vendors, gift card purchasers and taxing authorities who are owed debts by NIP [Nygard International Partnership], NI [Nygard International] and other debtors who are economically advantaged by substantive consolidation of the debtors for creditor purposes," Edmonds wrote in March.

The judge also approved the receiver's request to file bankruptcy proceedings for all nine Nygard companies.

In March, Nygard filed an appeal of the judge's decision to dismiss the request to pay for criminal lawyers, and to consolidate NPL's and NEL's assets with the other companies.

The appeal is scheduled to be heard in court on Wednesday.