San Industries: the Vernon Bay logs and the order for HTS's records

On October 5, 2026, Justice Stephens of the Supreme Court of British Columbia made three orders in the San Group's CCAA, and two of them are addressed to parties that are not petitioners. Probyn Log Ltd., a log marketing and financing company, is authorized and directed to pay Deloitte Restructuring Inc., the monitor, "an amount not less than $153,278" within seven days of receiving a copy of the order, and on paying is released from claims of the petitioners or the monitor "arising solely from" the payment, per the Payment Order, Oct. 5, 2026, paras. 1–2. HTS Forest Products Ltd. and Ravjit Sanghera have 14 days from receiving a copy to give the monitor HTS's account statements, cheque images, transfer records, signing authorities and books of account for November 1, 2024 to October 5, 2026, and Toronto-Dominion Bank 14 days to produce its records of HTS's accounts for the same period, per the Disclosure Order, Oct. 5, 2026, paras. 1–4. The third order extends the stay to June 30, 2027, per the Stay Extension Order, Oct. 5, 2026, para. 2.

The first two rest on the monitor's Twelfth Report, dated September 28, and on a logging project at Vernon Bay, on Vancouver Island. Investigating transfers the petitioners made before and immediately after the initial order of November 29, 2024, Deloitte identified payments to Probyn totalling $2,467,500, made between November 21, 2024 and January 28, 2025 in connection with the project, per the Twelfth Report, Sept. 28, 2026, paras. 12, 27. The group's asset sales, the $21.7 million paid to RBC and BDC and the August bankruptcies of two of its companies were reported here on September 3.

How the booms were released

Probyn's part began with a Log Marketing and Financing Agreement dated March 15, 2024 among Probyn, the holder of certain timber salvage licences, and 1004744 B.C. Ltd., a company that, like its two directors, is not a petitioner. Probyn was the exclusive marketing and sales agent for the project's logs and financed the harvesting by advancing funds to or on behalf of 1004744, recovering its advances, interest, insurance costs and marketing fees from log sales ahead of any distribution to 1004744, whose entitlement was the residual, "if any," per the Twelfth Report, Sept. 28, 2026, paras. 28–29.

Probyn has told the monitor how that worked. It would not authorize the release of a boom of logs for towing to the Coulson Mill, for dewatering, sorting and scaling, until it had been paid on account of its advances: 1004744 would remit the money, Probyn would release the logs, and Probyn would then invoice HTS for the volume delivered. The monitor reports four invoices to HTS, for about 3,654 m³ of logs, totalling $1,786,943.88 including taxes, which, Probyn told it, were not separately collected from HTS but applied against funds already received from 1004744, per the Twelfth Report, Sept. 28, 2026, paras. 31–33.

The mill belonged to Coulson Manufacturing 2017 Ltd., a petitioner, and processed the logs under an agreement of November 18, 2024 with Da-Le Falling Ltd., under which Da-Le was said to own them and Coulson was entitled only to a processing fee of $9 per m³ for dryland sorting and $3,500 per hour of mill time. The monitor concluded in its Sixth Report that the logs were bought with San Group funds and not by Da-Le, and it now understands that HTS, rather than Da-Le, sold the finished lumber, a number of the buyers being existing customers of San Industries, per the Twelfth Report, Sept. 28, 2026, para. 34. Da-Le, which asked in early 2025 for the remaining logs and processed inventory to be released to it, has not answered the monitor's letter of March 24, 2025, per the Sixth Report, Apr. 30, 2025, paras. 54–55 and the Twelfth Report, Sept. 28, 2026, para. 46.

In the monitor's summary, which opens "Taken together, and subject to the matters the Monitor has not yet been able to verify," the petitioners' funds were used to pay for logs, a petitioner's mill processed them "in return for a processing fee only," Probyn invoiced them to HTS, "HTS paid nothing for them," and HTS sold the lumber, "in a number of cases to parties the Monitor understands to be customers of San Industries, with HTS collecting the proceeds," per the Twelfth Report, Sept. 28, 2026, para. 35.

Where the money came from

On the petitioners' banking records and a screenshot of a 1004744 bank statement, the monitor says, the payments to Probyn other than the last, $2,067,500 in all, were funded this way: Mountainside Logging Ltd., a petitioner, sent $1,100,000 to 1004744 on November 18, 2024, and 1004744 paid Probyn $1,100,000 on November 21; 1290712 B.C. Ltd. sent 1004744 $350,000 on December 10, and 1004744 paid Probyn $350,000 on December 11; 1290712 sent a further $60,719 on December 11 and $423,833 on December 19, and 1004744 paid Probyn $467,500 on December 20; and on January 27, 2025, HTS deposited $150,000 directly with Probyn on account of 1004744's obligations. "On the records available to the Monitor, none of the funds transferred by 1004744 to Probyn appear to have originated with 1004744," per the Twelfth Report, Sept. 28, 2026, paras. 36–37.

1290712 is not a petitioner either. Its sole director, the monitor reports, is the San Group's former corporate operating officer, and in the weeks immediately before the initial order it received about $1,106,802 from or through petitioners, about $749,802 of it on November 28 and 29, 2024, the day before the order and the day it was granted, per the Twelfth Report, Sept. 28, 2026, para. 38.

After the monitor's counsel wrote in August asking for the commercial basis on which 1004744 received the money, one of its directors telephoned on September 8 to say that the two of them had no issue cooperating, and on September 28 they gave the monitor an irrevocable direction to have Probyn pay it the balance. Neither the company nor its directors has claimed that balance; the monitor reports that no explanation has been given of the commercial basis on which 1004744 received the funds, or of any consideration it gave, per the Twelfth Report, Sept. 28, 2026, paras. 41–43.

What Probyn held

Asked by the monitor on July 30 to hold whatever it had on account of 1004744, Probyn agreed on August 21 and sent a reconciliation: about $265,309 held on account of 1004744, against about $112,031 of unpaid invoices from subcontractors and service providers on the project and of its own anticipated costs, about $20,000 of that figure being its own costs, legal costs among them. It had received $2,467,500 in all, $400,000 more than it first identified; on September 16 its counsel said the extra $400,000 had come from 1004744 by wire on January 28, 2025, and had been applied to ongoing project costs and outstanding advances rather than in connection with any particular log delivery, per the Twelfth Report, Sept. 28, 2026, paras. 39–40.

Probyn, its counsel said, would not act on a direction from 1004744 alone. The monitor supported a court order but not a release of Probyn "in respect of the Vernon Bay Project given the limited information available to the Monitor," and framed the order it sought accordingly. On the information available to it, the monitor says, the balance "represents the unexpended portion" of the money that appears to have originated with Mountainside and 1290712, per the Twelfth Report, Sept. 28, 2026, paras. 44–45, 66. It does not admit that Probyn's own costs are properly deductible, but is prepared to accept their deduction on a without-prejudice basis, given the amount and Probyn's cooperation, and said the subcontractors, "who are not connected to the San Group," should not bear the cost of the dispute. The relief, it told the court, determines no claim the petitioners may have against 1004744 and one of its directors, 1290712 and its director, HTS, Da-Le or any other party, and it understands RBC and BDC, the senior lenders, to support it, per the Twelfth Report, Sept. 28, 2026, paras. 66–67.