Nygard companies fighting for ownership of Winnipeg property

Nine Nygard companies in receivership since March are fighting to take back control of their assets, even though only part of their debt has been repaid.

In November, Manitoba Court of Queen's Bench Justice James Edmond approved a motion by receiver Richter Advisory Group Inc. to maintain control of the Nygard Group of companies, and finalize the sale of a property on Inkster Boulevard in Winnipeg. Proceeds from that sale would be put toward unsecured creditors.

"A receiver is not entitled to maintain possession and control of private property, after the applicant lender has been repaid in full, simply because the court does not prefer the alternative," said lawyers for the Nygard group in a Nov. 27 notice of appeal. 

The Nygard Group of companies were nearly $50 million in debt to approximately 350 creditors around the world when the only secured creditor — American lender White Oak Commercial Finance, LLC — took them to court in March.

Court filings in the case say White Oak has since been repaid. 

Last month, the Nygard companies unsuccessfully argued that Richter's job as receiver was therefore complete, and the court should discharge the receivership and prevent the sale of the Inkster property. They lost and are now appealing that decision to the Manitoba Court of Appeal.

"The debt which formed the basis of the appointment order had been completely satisfied and with it, the Receiver's mandate and powers over the appellants' property," said the notice of appeal. 

In court filings, the companies say it is unlawful to allow the receiver to sell the Inkster property — which is owned by Nygard Properties Limited — in order to pay back unsecured creditors of a different company, Nygard International Partnership.

"[The court] failed to appreciate that it did not have the jurisdiction to approve the sale in the circumstances, it failed to give sufficient weight to the interests of [Nygard Properties Limited] (which opposed having its real property sold, its ownership in that property destroyed, and the proceeds of that sale reduced to a fund)," said the appeal.

The Nygard Group said Nygard Properties Limited owned four properties, two of which were sold by the receiver to fund $19.6 million in repayments to White Oak. Since the debt to White Oak has been paid in full, Richter should not be allowed to sell the Inkster property, the Nygard Group says.

The companies said the court's actions raise issues of fundamental importance to bankruptcy and insolvency proceedings and to "the administration of justice."

"Does the court have the jurisdiction to extinguish an ownership right in a property in a vesting order, when the owner of the property is not indebted to the applicant creditor and objects to the sale?" the Nygard companies said in the appeal.

The Nygard companies are also asking the Court of Appeal to lift a stay of proceedings so that they can file a notice of intention to file a proposal under the Canadian Bankruptcy and Insolvency Act.

That means they want to submit a proposal to their creditors saying they intend to bring in a proposal trustee to help them restructure their companies finances instead of filing for bankruptcy.

A date has not been set to hear the appeal.

Peter Nygard, who in court filings says he is a consultant for the Nygard Group and owns one of the nine companies under receivership, is under investigation in Canada, the U.S. and the Bahamas for allegations of sex crimes. In February, the FBI raided Nygard's New York headquarters and two grand jury subpoenas have been issued for Nygard company records.

No charges have been laid in any of the investigations and it's not known if any of them are complete. Nygard has consistently denied he has sexually abused anyone, and maintains the allegations are fabrications as part of a conspiracy to malign his reputation.

Last February, 10 women filed a class-action lawsuit in a Southern District of New York court, claiming the fashion designer raped them at his properties in the U.S. and the Bahamas. That lawsuit now includes a total of 57 women.

In August, a judge put the civil case on hold, after the U.S. government was granted leave to intervene.