Price Waterhouse Limited - Eron Mortgage Corporation

Eron Mortgage Corporation - Supplementary Distribution Report (REVISED) - May 20, 1999

INTRODUCTION

The Honourable Mr. Justice Tysoe issued his Reasons for Judgment ("Reasons") on February 17, 1999. The Reasons dealt with 6 of the 40 issues set out in the Judicial Trustee's Distribution Issues Report dated December 1998. Following the issuance of the Reasons, the Judicial Trustee sought instructions from the Court with respect to answering the remaining questions. The Judicial Trustee suggested to the Court that it be allowed to recommend answers for the remaining questions. This was agreed to by the Court.

Below, the Judicial Trustee has summarized the questions set out in its Report dated December 1998 and has provided its recommendation below. The recommendations have been made based on the Judicial Trustee's background with the Eron Mortgage Corporation ("EMC") file, Mr. Justice Tysoe's Reasons and his recommendation for Eron Investment Corporation ("EIC") dated July 13, 1998.

SUMMARY

The Judicial Trustee has summarized below its recommendations for each of the questions raised in its December 1998 Report. The majority of the recommendations are based on a common set of criteria. For simplicity, the Judicial Trustee has summarized under this heading its recommendation of the global criteria to be applied to determine whether a Lender has a beneficial interest in a specific project:

These criteria are as follows:

1. The Lender has advanced funds to either EMC, a Trustee or another related Company.

2. Independent evidence (preferably documentary or electronic) exists that supports or confirms which project the Lender intended to invest into. This evidence could be, but is not limited to, a term sheet or a listing of beneficiaries attached to a Declaration of Trust (a "Declaration").

3. A Declaration must exist for the specific project in order for a Lender to claim a specific beneficial interest in that project. If no Declaration exists then the Lender would not have a claim for a specific beneficial interest and would be treated as a pooled investor to EMC.

4. The listing of beneficiaries attached to the Declaration does not need to be complete or accurate. The fact that EMC did not complete its administrative task in updating or revising the listing of beneficiaries should not affect a Lender's claim to a beneficial interest in a specific project provided that sufficient documentary evidence is available to support the conclusion that the Lender's name should be added to the Declaration.

5. Funds advanced by EIC, EFS or EMC to a project are considered the same as an advance by a normal lender to a project.

Therefore in summary, if a specific project has a Declaration, the Lender has advanced funds to EMC (or a related company) and independent evidence exists supporting the lenders intention to invest in a specific project, the Judicial Trustee recommends that the Lender would have a claim for a beneficial interest in the project.

It should be noted that the definition of a Lender in the above discussion includes all individuals or groups who have advanced funds to EMC, a Trustee or a related company. Therefore EMC related projects that have advanced funds to another project also would be defined as a Lender.

Lenders who advanced funds to EMC (or a related company) and no beneficial interest can be established in a specific project would form part of general pool. This general pool would recover funds from all projects where no beneficial interest has been established by specific lenders.

The Judicial Trustee's recommended answers to the detailed questions have been provided below:

DISTRIBUTION QUESTIONS

1. Were the criteria used for interpreting and reconstructing the term sheet information reasonable? If not, what criteria should be used?

* The Judicial Trustee recommends that its interpretation of the term sheet information is reasonable as set out on page 6 of the December 1998 Report. Specifically:

* Where the principal amount on the term sheet differed from actual cash invested by the Lender, the Lender advance should be recorded as having a beneficial interest equal to the cash amount; not the amount recorded on the term sheet;

* When Lenders earned different levels of Lender fees within the same project, the amount listed on each of the individual Lenders' term sheet should be used. No adjustment should be made to give all Lenders within the same mortgage equal lender fees. The Lender fee (as set out on the term sheet) should be added to the cash value invested in the mortgage to arrive at the total beneficial interest of the particular Lender.

* For the Judicial Trustee's recommendation with respect to interest received, see question 18.

* To determine if a Lender has a beneficial interest in a specific project, the Judicial Trustee should:

* Ensure that adequate consideration has been advanced by the Lender to either EMC or a related company's bank account;

* Ensure that the specific project that the Lender intended to invest has a Declaration of Trust (an accurate listing of beneficiaries is not necessary);

* Use other independent evidence and documentation to determine which project that the Lender intended to advance his or her funds to (i.e. term sheet, listing of beneficiaries or other documentation available).

2. How should any discrepancies between the project stated by an unsigned term sheet and a Lender's opinion of which investment they believe to be in be resolved?

* The Judicial Trustee should review other documentation available, such as the listing of beneficiaries attached to a Declaration to determine which investment the Lender intended to invest.

* If it still cannot be readily determined to which project a Lender's beneficial interest resides, the Trustee recommends that the Lender's beneficial interest should reside in the project described on the unsigned term sheet (assuming no other independent evidence is available that confirms a Lender's intention).

3. Should the Declarations of Trust be used to determine a Lender's beneficial interest in a specific project? Should Lenders who participated in the original funding (who were noted correctly on the Declaration of Trust) rank in priority to other Lenders? How should a Lender rank that has an accurate Term Sheet, but is not accurately listed on the Declaration of Trust?

* The Declaration, more specifically the listing of beneficiaries attached thereto, should be used by the Judicial Trustee to aid in the determination to which project the Lender intended to invest. However it should not exclusively be relied upon to determine a Lender's entitlement to a beneficial interest in a specific project.

* For a Lender to receive a beneficial interest in a project, evidence that funds have been advanced to EMC or a specific Trustee's bank account is required. In addition, documentation indicating the project to which the Lender intended to invest is required.

* The Judicial Trustee recommends that Lenders should not rank in priority to other Lenders (within the same project) because they are accurately listed on the listing of beneficiaries attached to the Declaration while others are not. A Lender should not receive a priority just because EMC happened to include one lender and not the other on the list of beneficiaries attached to the Declaration so long as it can be established on balance, that it was simply an administrative failure which kept the other Lenders off the Declaration.

* A Lender who has an accurate term sheet but is not listed on the Declaration (or listed inaccurately) should rank the same as a Lender who has a term sheet and is listed accurately on the listing of beneficiaries, assuming both Lenders advanced the required funds and the project has a Declaration.

* In summary, the Judicial Trustee suggests that if a Lender's funds were advanced to EMC or a related Company and the evidence discloses that the lender chose that specific project and was lead to believe that his or her money was to be invested in that project (evidenced by a term sheet, declaration of trust or other evidence), that lender should have a beneficial interest in that specific project and rank equally to other lenders of that project regardless whether or not the project is overfunded.

Questions 4 through 9 have been answered by Judge Tysoe's Reasons dated February 17, 1998.

10. How are Lenders to EIC, EFS or CPI to be considered if their initial deposit was to the 290 Account and not to the specific account of the Companies?

* The fact that the funds were first advanced into the 290 Account does not affect a Lender's entitlement to rank as an investor in either EIC, EFS or CPI.

* Therefore, if a Lender received a term sheet indicating that they intended to lend funds to either EIC, EFS or CPI and the funds were advanced to the 290 Account (or to any EMC related company or bank account in a manner which establishes a funding of their investment) then the lender should be recorded as a lender to EIC, EFS or CPI.

11. Are Lenders to CPI-specific mortgages entitled to (or limited to) the return on the specific project?

* Lenders who advanced funds firstly to CPI, which were originally earmarked for a specific project identified on the term sheet, should rank equally to all other lenders of the specific project. These Lenders should be recorded as having a beneficial interest in the specific project (not in the CPI pool).

* For such a Lender to receive a beneficial interest in the specific project, the following criteria must be met:

* The project must have a Declaration;

* The term sheet or listing of beneficiaries must indicate that the Lender's funds were intended for the specific project; and

* The required funds advanced by the Lender to EMC or a related company's bank account.

* If the term sheet does not specify a specific project or sufficient evidence does not exist to allow the Judicial Trustee to determine the Lender's intended investment; rather the term sheet indicates that the Lender funds were intended to be advanced to the CPI pool, that Lender would be accounted for as a lender to CPI and would realize in the CPI pool (i.e. The Lender would not have a beneficial interest in any specific project).

12. Are Lenders to the CPI pool to receive a return based on the return on the pool?

* Funds realized by CPI on funds it advanced to various projects will be shared prorata by all lenders to CPI (pooled investment).

* CPI pooled investors are defined as Lenders who advanced funds to CPI and intended only to receive an interest in the CPI pool. The term sheet (or other documentation) does not indicate that the funds were earmarked for any specific project.

13. Does the fact that advances from the 290 Account do not necessarily balance with advances to the 290 Account defeat any claim a Lender could make to an interest in a specific project, or does it merely determine the amount and proportion of the interests in that project?

* The Judicial Trustee recommends that the Lender's beneficial interest be recorded at the amount of funds advanced to the 290 Account. The fact that EMC did not advance the same amount to a borrower (or advanced the funds to another project) should not affect the Lender's claim to its beneficial interest so long as that claim can be established on the basis of the criteria set out herein.

14. Does the fact that funds flowed through Mr. Jackie's account deprive or enhance a Lender from a claim to a beneficial interest in a specific project?

* See question 22 for the Judicial Trustee's recommendation.

15. Does the flow of funds through the 290 Account to the Trustee's account and then to the project deprive a Lender from a claim to an interest in a specific project?

* The Judicial Trustee recommends that this should not affect a Lender's claim to a beneficial interest in any project so long as there is a Declaration in existence for the particular project and there is sufficient evidence to satisfy the Court or Judicial Trustee of the Lender's intended investment.

16. Does the fact that Lenders were repaid their initial capital investment directly from a replacement lender or advanced from another project deprive the replacement lender or project of a beneficial claim in the project? Note that such payments were made directly from one lender to another and did not flow through the EMC or Trustee's bank account.

* The Judicial Trustee suggests that the replacement Lender or other project that advanced the funds should receive the same beneficial interest (what ever it may be) as the lender they replaced.

* The Replacement Lender should be in no better or worse position than the Lender that they replaced.

17. Does the fact that Lenders were paid interest without reference to the ability of a project to fund the interest deprive a Lender from a claim to an interest in a specific project, or was this payment conduct an accounting issue affecting the size of the specific pool for a specific project?

* See answer to question 18 for the Judicial Trustee's recommendation.

18. Does the payment of interest by a Trustee to a Lender represent a return of a Lender's initial capital if the specific borrower was not making any interest payments to the Trustee or where there was no interest reserve?

* The Judicial Trustee recommends that where interest was paid by the Trustee to the Lenders in excess of the interest received from the borrower (whether by interest payments received from the borrower or from an interest reserve), the difference between interest paid and interest received should be treated as a return of original investment for the Lenders.

* Accordingly, if a Lender to a specific project received interest in an amount greater to the amount the trustee received in interest from the borrower, the difference should be treated as a return of capital.

* The return of capital would reduce each Lender's beneficial interest accordingly.

* Attached, as Exhibit "A" to this report is a sample of calculations for the return of capital, which aids in explaining the Judicial Trustee's recommendation of how the return of capital should be calculated.

19. Should there be any case to allow the Judicial Trustee to set-off amounts owed to EMC from one project against amounts owed by EMC on other projects?

* The Judicial Trustee recommends that amounts owed to EMC on one project not be set-off against amount owed by EMC to other projects.

20. Does the fact that advances were made from the 290 Account relating to specific projects that were not authorized by the borrower affect a Lender's claim to a beneficial interest in a specific project? Examples of such advances would be payments made by the Trustee for broker or lender fees in excess of amounts that the borrower has agreed or expenses unrelated to the project.

* The Judicial Trustee suggests that this should not affect a Lender's claim to a beneficial interest in a specific project. Such occurrences would only affect the Judicial Trustee's ability to collect on amounts advanced under the mortgage.

21. Does the fact that advances were made from the 290 Account that cannot be attributable to any specific project affect a Lender's claim to a beneficial interest in a specific project?

* The Judicial Trustee suggests that this should not affect a Lender's claim to a beneficial interest in a specific project where the other criteria set out herein are met.

22. Do Lenders, whose funds flowed through Mr. Jackie, have a different beneficial interest in a project than Lenders whose funds did not flow through Mr. Jackie's account?

* An example of such a transaction would be a RRSP Lender who would have advanced his cheque directly to Mr. Jackie.

* The Judicial Trustee suggests that Lenders whose funds flowed through Mr. Jackie should not have any different beneficial interest in a project than Lenders whose funds did not flow through Mr. Jackie's account.

23. Should transfers or advances from one project to another be treated as 'normal' Lender advances and rank equally with other Lenders? Should such inter-mortgage advances receive accrued interest and a Lender fee?

* The Judicial Trustee suggests that funds advanced from a Trustee of one mortgage to another should be treated the same as a 'normal' lender's advance. Therefore the trust for the mortgage that advanced the funds should receive a beneficial interest in the mortgage it invested in (equal to the funds advanced).

* The Judicial Trustee suggests that where no term sheet was issued indicating any lender fee or interest rate, no such fees or interest should be accrued on these inter-mortgage transfers.

* As with a 'normal' lender, a trust for one mortgage can only claim a beneficial interest in other mortgage if funds were actually advanced, appropriate evidence exists supporting the intention of the advance and that the mortgage receiving the advance has a Declaration.

24. Do advances from EIC, CPI or EFS to specific projects rank equally to those of 'normal' Lenders and should outstanding interest and Lender fees on the advances be accrued? Should the answer be the same regardless of whether the Companies had valid term sheets and Declaration?

* The Judicial Trustee suggests that such advances be treated in the same manner as answered in 23.

25. Should advances from EIC, CPI or EFS rank equally to those of a 'normal' Lender if the funds were advanced directly to the borrower and not through an Eron related account?

* The Judicial Trustee suggests that funds advanced by EIC, CPI or EFS should rank equally to a 'normal' lender even if the funds were advanced directly to a borrower and not through an EMC related account.

* This type of transaction is the same as a Lender who advanced their funds directly to the borrower and not through an EMC related account. Such a lender would be recorded as having a beneficial interest in the particular project, therefore so should EIC, CPI or EFS.

26. Should advances from EIC, CPI or EFS rank equally to those of a 'normal' Lender if the funds were used to fund broker or lender fees paid to EMC? Does the answer to this question change if fees were paid in excess of the amount the borrower agreed upon?

* EIC, CPI or EFS advances should rank equally to a 'normal' Lender regardless of whether the funds were advanced to a Trustee to fund broker or lender fees (or any other type of payment). EIC, CPI and EFS should obtain a beneficial interest in the project equal to the cash that was advanced to the relevant Trustee.

* The fact that the Trustee used the funds to pay broker fees should not affect the beneficial interest of EIC, CPI or EFS.

27. Should EIC, CPI or EFS step into the shoes of a Lender if the funds were paid directly to the Lender (the payment was not made through a Trustee)?

* The Judicial Trustee recommends that the Companies should take the same position as the Lender that they have paid out directly.

28. Should EIC, EFS or EIC rank equal to 'normal' Lenders if the funds advanced were used to make interest payments to the current project's Lenders?

* The Judicial Trustee recommends that if funds were advanced by EIC, CPI or EFS to a Trustee (or through a series of interest payment cheques directly to the Lenders) to allow for the payment of monthly interest payments, then ECI, CPI or EFS should be entitled to a beneficial interest in the particular mortgage for the amount of the funds advanced.

* This treatment is consistent to the situation where a Lender advanced funds to a Trustee and these funds were immediately used to pay interest to other Lenders. This Lender would receive a beneficial interest in the mortgage equal to the advance regardless of the fact that his or her funds were used to fund interest payments.

29. Does the underlying type of advance and whether the advance was authorized or agreed by the borrower and/or Trustee affect the position of EIC, CPI or EFS?

* The Judicial Trustee recommends that the underlying type of advance or whether the advance was authorized should not affect its entitlement of a beneficial interest.

* If EIC, EFS or CPI advanced funds to a specific project then the Companies should receive a beneficial interest in the specific project equal to the funds advanced, regardless of how this advance was used so long as the borrower wasn't a knowing participant in a breach of trust.

30. Are non-cash transfers valid or should the Lender be reverted to the original project that received his initial advance?

* An example of such a transaction is where a Lender advances funds to project A and is listed as a beneficiary to that project (assuming that the criteria discussed above has been met and therefore the Lender has a valid claim in project A). When the Lender's investment matures, the Lender requests a transfer of his investment to project B. All documentation is done to complete the transaction, however EMC does not transfer the funds from project A to project B in support of the transfer.

* The Judicial Trustee recommends that if a Lender requested a move from one project to another and received sufficient supporting documentation for such a transfer (term sheet, listing of beneficiaries) to lead the investor to believe that the transfer had occurred, the fact that EMC did not transfer the required funds should not affect a Lender's entitlement to a beneficial interest. This assumes that project B has a Declaration. Therefore in this example, the Lender would have a claim for a beneficial interest in project B.

* In the example above project B will have a claim against project A for the amount equal to the Lender's investment that was transferred (as no cash was transferred from project A to project B in settlement of the Lender transfer). Therefore project B would be recorded as having a beneficial interest in project A.

* The Judicial Trustee notes that these non-cash transfers have affected the majority of projects.

31. Should cases (transfers between projects within the 290 Account) be considered as valid cash transfers?

* The Judicial Trustee recommends that transfers within the 290 Account be recognized as valid cash transfers between investments assuming such transfers were initiated by the Lender and not unilaterally by EMC.

32. Is a Lender bound by a move made unilaterally without the Lender's consent, or does he or she have a claim to the original mortgage?

* The Judicial Trustee recommends that this type of move is of no effect on the specific Lender, as he or she has not authorized the transaction. The Lender would be entitled to a beneficial interest in the project to which they advanced their funds.

* If a Trustee transfers funds to another project or mortgage, it would be a creditor to the project to which the funds were advanced. However, a Trustee cannot unilaterally decide to move any Lender's beneficial interest as settlement for the transaction.

33. Should a Replacement Lender be reverted to the EIC pool or remain in the mortgage that they intended to participate in?

* The Judicial Trustee recommends that replacement Lenders should receive a beneficial interest in the mortgage in which they were intending to invest. If sufficient evidence exists that suggest that the Replacement Lender intended to invest in the specific mortgage and was lead to believe he or she was investing in that mortgage, then the Lender should have received a beneficial interest in the mortgage.

* This recommendation is based on the fact that the Lender intended to advance funds to a specific project and receive a beneficial interest in the project. In addition, funds were advanced supporting this intention. The fact that the Trustee used these funds to pay out a Lender that would have been reverted to the EIC pool should not affect the Replacement Lender's beneficial interest.

* The Judicial Trustee notes that a significant number of Lenders who were allocated to projects from EIC (as part of the May 1997 allocation process) were subsequently paid out from funds received from Replacement Lenders. Over $6.0 million of the EIC allocated Lenders were paid out from May 1997 to October 3, 1997.

34. Is the priority of a Lender's claim impacted when the investment was made after a mortgage was fully funded or where the funds were used for purposes such as to fund interest payments to existing lenders?

* The Judicial Trustee recommends that Lenders should rank equally regardless of the fact that they may have participated in an over-funded mortgage. Assuming the Lender advanced funds with appropriate documentation and was led to believe that a portion of the project was held in trust, the timing of the advance should not defeat the claim to the investment in the project.

35. There are many instances where Lenders have been paid interest after being paid out of mortgages or been overpaid fees. In isolated cases, Lenders have, been paid out twice for one investment, or have been paid out or preferred as a result of inside knowledge. In these cases can the overpayment be set off against other investments in other mortgages (even with different Trustees)?

* The Judicial Trustee suggests that such situations are brought to the Court's attention and further directions obtained as specific situations are identified. However, the Judicial Trustee seeks authorization in appropriate circumstances to withhold a payment if it appears that there may be such indebtedness.

36. If EMC/CPI received broker fees in excess of the agreed upon amount noted in the borrower term sheet, can this overpayment be set off against amounts which EMC/CPI may have advanced to the specific mortgage where the overpayment occurred?

* The Judicial Trustee recommends that such set-offs can be made if the advances where made to the specific mortgage where the overpayment occurred.

37. There are many instances where Lenders were advised that they were going to fund a second mortgage and given term sheets indicating this, when in fact their funds were used to fund subsequent mortgages on the same property. In these cases, does the flow of funds or the term sheet determine in which mortgage the Lender will participate?

* The above question is based on a situation where Lenders were advised that they were receiving a 2nd mortgage when in fact EMC had a 5th mortgage registered. EMC had no other mortgages on title for this particular project.

* In this situation the Lenders would receive a pro-rata return on the recovery from the 5th mortgage.

38. On several projects where more than one mortgage was sourced by EMC, it is impossible to determine to which mortgage (second, third, forth etc) a certain Lender's funds were advanced. In these cases we are virtually certain that there will not be a full recovery to all mortgages. Is it appropriate to make distributions to the Lenders in the mortgage group on a pooled basis or to prioritize the Lenders by the time of their investments?

* The Judicial Trustee recommends that if it cannot be determined to which mortgage the Lenders belong, it is appropriate to make distribution to the Lenders in the mortgage group on a pooled basis. Prioritizing lenders by the timing of their investment is likely not possible.

* The projects where the Judicial Trustee is aware of this situation is with the Emerald mortgages and the PG Specialty Woods mortgage. There does not appear to be any other mortgages affected by this situation.

39. If funds remain in the Trustee's account, do these Lenders have a beneficial interest in the mortgage or a trust claim on their advance of funds?

* The Judicial Trustee notes that there are only a few instances where this has occurred. These situations occurred near the shutdown of EMC. Some Lenders advanced funds to a Trustee's account with the intention of investing in the particular project. The Lender's funds were to be used by the Trustee to payout other Lenders who had invested earlier in the project. The Trustee received the funds and issued the cheques to payout the Lenders, however the cheques did not clear the bank account prior to it being frozen. The funds remain in the Trustee's account and the mortgage is over-funded.

* The Judicial Trustee recommends that in instances where funds were advanced by Lenders to a Trustee's account, and these funds were never advanced to the mortgagor, these funds, less appropriate costs, should be returned to the Lender who advanced the funds.

* This recommendation is contingent on the following set of criteria:

* The funds were advanced to a specific bank account and can be traced directly into the account;

* The funds were not commingled with other funds within the bank account (ie. Are specifically identifiable);

* The funds remain in the account (ie. Where not advanced under the mortgage or transferred to any other account);

* It is clearly evident who the lender was that advanced the funds.

40. If the uncleared cheques relate to monthly interest payments, how do the uncleared cheques rank relative to other claims?

* The Judicial Trustee suggests that Lenders receive a distribution based on their beneficial interest in a particular mortgage. This beneficial interest would be equal to the initial advance of principal, accrued lender fees and accrued interest on these balances up to October 3, 1997. Therefore if a Lender was unable to cash his or her interest cheque prior to the accounts being frozen on or about October 3, 1997, then they would have a larger amount of accrued interest included in their claim than a Lender who was able to cash his or her last interest cheque.

41. The Judicial Trustee is aware of one project where sufficient evidence exists to establish the intention of the Lenders to invest in the project, however no Declaration exists. Should such Lenders be pooled or should they receive a beneficial interest in the project (assuming the other criteria discussed herein has been met)?

* This question refers to the Seasons Memorial Project, which involves shares rather than a mortgage. From the Judicial Trustee's review of the books and records, no mortgage or declaration ever existed for this project. A mortgage could not be registered on this property as it is prohibited by the Cemetery and Funeral Services Act.

* Other evidence exists which clearly satisfies the Judicial Trustee of the amounts advanced and the lenders who intended to invest in this project. However if it is an absolute requirement that a declaration exists then lenders to this project would be pooled.

42. Where a project is owed money by EIC will the project participate in the EIC pool of assets to the same extent as if an individual lender had advanced to EIC?

* The project would participate in the EIC pool of assets to the same extent as an individual lender.

43. Where a payment is made by a project to EIC investors for interest and the EIC investor had not advanced funds to EIC in respect of that project, will this result in an increase in the amount which EIC will owe the projects involved?

* If a specific project paid interest to Lenders who did not advance any funds to that specific project, then the project should receive a beneficial interest in the EIC pool of assets equal to the amount of interest paid.

OTHER ISSUES

Once the above distribution issues are settled, the Judicial Trustee will be in a position to distribute funds on several mortgages that it has realized on. The CIBC has a charge on all funds and must be repaid prior to payment out of all funds. In addition, a holdback will need to be made to cover the indirect fees. Several issues are present with respect to the calculation of the holdback, specifically:

* How should the holdback for indirect costs be calculated given that all mortgages have not been realized upon and therefore indirect charges are continuing to be accrued?

* How should indirect charges be applied to projects that have been realized upon? For example, should indirect charges be applied as at the date of realization or do they continue to accrue up to the date of distribution.

* The Judicial Trustee paid out several projects almost immediately after our appointment (Wang Building and ABC Boat Charters). Should these projects attract any allocation of indirect charges and if so at what percentage?

* Two projects (Gateway and 570 Dunsmuir) had significant expenditures for fees, consulting costs and borrowings relating to the completion of the project. Should these costs, relating to the completion of the project, attract a proportionate share of indirect costs? It is the Judicial Trusted opinions that in calculating the amount of the indirect costs for which these projects should be liable, the completion costs as above noted should be disregarded.

With respect to these specific questions, the Judicial Trustee recommends that they be dealt with after receiving direction from this Honourable Court regarding the above questions.

Dated this 23rd day of June, 1999.

All of which is respectfully submitted,

PricewaterhouseCoopers Inc.
Judicial Trustee
Per:

Craig G. Bushell

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