Shop Your Own Mortgage: twenty-eight clawback disputes reach the court

One of the twenty-eight notices of application puts its applicant's whole loss on My Mortgage Auction Corp. at $2.07: $50,000 paid in, $49,997.93 paid back. The applicant, a company, asks the Supreme Court of British Columbia to declare that it owes the estate nothing. The trustee has acknowledged that it is a net-loss investor, the notice says, and has taken the position that repayment is required anyway, because $24,900 of the money returned arrived on March 21, 2023 — eleven weeks before the bankruptcy, inside the window in which a payment to a creditor is void as a preference, per the Notice of Application, Parts 1–2.

Getting that question in front of a judge is the investor's own job, and that is by design. Paragraph 9 of the clawback order of June 6, 2025 gives a recipient who has filed a notice of dispute sixty days to settle; where there is "no settlement or resolution on terms acceptable to the Trustee and Recipient," the recipient "must apply to this Court for direction and determination as to the judgment amount, if any," by filing a notice of application and supporting affidavit evidence within fifteen days of that period expiring. Paragraph 11 disposes of the recipient who disputes and then does not file: the trustee "shall be granted judgment against that Recipient in the amount of the Clawback Calculation and be immediately entitled to enforce such judgment without further order of this Court," per the Order Made After Application (Clawback Order), June 6, 2025, paras. 5, 9–11.

Sixty-five documents are what that clock produced — twenty-eight notices of application and thirty-seven affidavits, numbered 79 through 143 on the record, which reached the public record together. They were not drafted together: on the nineteen notices of application read for this piece, the Vancouver Registry stamps run from December 2025 to February 2026, and the last of them was prepared after September 2, 2026. All are returnable before the same judge, who has supervised both the receivership and the bankruptcies since May 2023, and counsel for one group of applicants records that the applications have been "set for hearing for five days, commencing on November 30, 2026," per the Notice of Application, Part 2, para. 8.

What the June order decided, and what it left

The reasons behind the clawback order were released on August 6, 2025, two months after the order itself. In them, Fitzpatrick J. found as a fact that the scheme run by Gregory Martel through MMAC was a Ponzi scheme, and recorded the trustee's arithmetic: investors contributed $301 million and $210 million came back to them; no money ever funded the bridge loans the investment documents described; of about 1,700 investors identified, 480 net winners received some $68.2 million above their principal and 1,229 net losers lost about $149 million. Eighty-one further investors received payments totalling over $3.1 million in the three months to June 6, 2023. Recovery has been minimal, and the receiver and trustee have financed the administration by deferring their own fees, then estimated at $4 million with $3.1 million unpaid, per the Reasons for Judgment, Aug. 6, 2025, paras. 2–3, 37, 42–47, 50. MMAC's statement of affairs, sworn by Mr. Martel on June 5, 2023, records total liabilities of $227,187,257.81 against total assets of $292,586.00, a deficiency of $226,894,671.81, per the Statement of Affairs (Form 78), June 5, 2023, p. 1.

The judge was careful about what that made the recipients. "There is no allegation that any of the MMAC investors were participants in the Scheme or even had knowledge that Mr. Martel was perpetrating this fraud. No investor here is a 'winner' in the true sense – each is a victim," per the Reasons for Judgment, Aug. 6, 2025, para. 9. What the trustee sought was not the return of anyone's principal but of the false profits paid on top of it, and, separately, of the payments made in the last three months. On the insolvency finding that underpins both: "The Recipients did not receive the Preference Payments and/or Excess Funds as a return for their investment; there was no investment," per the Reasons for Judgment, Aug. 6, 2025, paras. 153, 170.

Phase I settled liability, and quantum went to Phase II, which is the process the twenty-eight applications are now inside. The reasons anticipated much of what has come back. Investors had told the court their transactions were missed or wrongly valued, and the judge wrote that the trustee "is well-aware of the limitations of its analysis" and that "no doubt some changes are in order." A recipient who establishes it is a net loser rather than a net winner "will not be liable for any amount." The consolidation point — that a winner's gains should be set against the losses of the spouse, child or company they brought in — was acknowledged and deferred to Phase II as well, per the Reasons for Judgment, Aug. 6, 2025, paras. 102–106.

Families, and the accounts they were held in

The largest group of applications is about whose account a dollar sat in. One couple's revised statements show one spouse individually at a $110,000 loss and the two of them jointly at a $930,403.92 gain; they agree the quantum but not its allocation, and ask the court to net the two to $820,403.92, per the Notice of Application, Part 2, paras. 14–17. Another couple, who say every dollar they invested was drawn on a joint line of credit and every dollar returned was deposited to a joint account, are each named in Schedule "C" to the clawback order: the statements put one at $0 paid in and $173,594.28 received, the other at $200,000 in and $83,301.47 out, and the applicants say the first figure is principal first invested in the second spouse's name and later rolled over by MMAC, per the Notice of Application, Part 2, paras. 7–14.

The corporate variants follow the same line. One applicant company's excess-funds figure of $356,761.19 would fall to $256,761.19 if the $100,000 loss of its sole director and shareholder were set against it, per the Notice of Application, Part 1; Part 2, paras. 1–4. A married couple and the company one of them owns set out a table of three accounts — $720,321.75 received against $700,000 invested — and ask to discharge the whole obligation with a combined payment of $20,321.75, relying on the clawback order's own dispute form, which lists as a ground that "the investor... asserts that transactions concerning Related Accounts should be considered together," per the Notice of Application, Part 2, paras. 3–10; Part 3, paras. 1–7. A parent and two children who were university students when the parent invested on their behalf ask for the same treatment, which would put the parent's figure at $190,989.15, per the Notice of Application, Part 1, para. 1.

Some of the disputes are about the allocation itself rather than about relatedness. One couple's notice records that a clawback demand of $325,077 issued on July 4, 2025 was reduced to $46,357 on November 27, 2025 after the trustee corrected the allocation of deposits, but that the redemptions stayed where MMAC's own processing had put them; on the applicants' figures the couple is at a joint net loss of $105,824, and they say the trustee's method "measures administrative contract allocation rather than actual economic benefit," per the Notice of Application, Part 2, paras. 5–13. Two related investor groups record larger revisions — one member's figure fell from $1,948,464.98 to $369,640.58 — and ask the court to approve the settlement offers they made on January 15 and 16, 2026, of $380,000 and $700,000, which the trustee rejected on January 20 and 26; in the alternative, they seek unredacted inspector meeting minutes, per the Notice of Application, Part 1, paras. 1–4; Part 2, paras. 13–26.

The T5 slips, and a demand for the file

The second recurring claim is fiscal. MMAC filed T5 returns with the Canada Revenue Agency for each investor for the five years ending December 31, 2022, per the Reasons for Judgment, Aug. 6, 2025, para. 41 — reporting investment income on money the court has since found was never invested, and on which investors paid tax. Several applicants ask the court to direct the trustee to reissue those slips to zero; one household's notice puts the tax it paid to the CRA between 2017 and 2022 at $1,030,487.72, and asks that entry of any judgment be postponed until the agency has refunded on the basis of reissued slips, per the Notice of Application, Part 1, para. 1; Part 2, paras. 26–27. The same relief is sought by a family and a family trust, per the Notice of Application, Part 1, para. 1, and by a couple and the company they own, per the Notice of Application, Part 1, para. 1.

The trustee's position on that is public and predates the applications. Its guidelines of October 1, 2025, developed with the CRA, treat cash received by an investor as income first and return of capital second, fix 2023 as the year of the fraud, and accept that investors' losses are business investment losses, half of which may be claimed as an allowable business investment loss. On repayments, the guidelines say the trustee "will amend T5 slips previously issued by MMAC to reflect the repayment of Excess Funds and Preference Payments," once an agreement is reached, with repayments "applied to reduce investment income reported until the full repayment is accounted for or all T5s are amended to nil," per the Guidelines re Tax Treatment applicable to Investors of MMAC, Oct. 1, 2025, pp. 2–4. On August 9, 2026 the trustee circulated supplementary guidance for corporate and trust investors, reporting the CRA's advice that they will be statute-barred from adjusting their T2 or T3 returns on receiving an amended T5, and may instead deduct the repayment under section 9 of the Income Tax Act in the year the obligation becomes unconditional. The trustee "takes no position with respect to the information that has been provided by the CRA," per the Supplementary guidance re Tax Treatment of Corporate Investors & Trusts, Aug. 9, 2026, p. 1.

The last of the twenty-eight is a production application arising from that history. It asks for the trustee's correspondence with the CRA and the Department of Justice since May 4, 2023, MMAC's amended financial statements and T2 returns, and the internal memoranda, working papers and meeting records behind the tax treatment of investors. The applicants say they demanded the material on August 21, 2026, received nine categories of documents on August 28 including the trustee's December 18, 2024 submission to the CRA and its later addendum, and were told on September 2 that the rest would not be produced. Their stated purpose is to test whether the trustee put to the CRA the case that the "interest" was fictitious; they point to Easy Loan Corporation v Base Mortgage and Investments Ltd, 2020 ABQB 110, in which the court accepted a receiver's opinion that the interest earned or paid on investments in a Ponzi scheme should be considered a repayment of principal, per the Notice of Application, Part 1, para. 1; Part 2, paras. 26–30; Part 3, paras. 19–24.

The eighty-one

The third group is the preference recipients who are also net losers, and their notices are the shortest in the wave. One applicant invested $705,000 and received $368,306.50, a net loss of $336,693.50, of which $86,709.00 came on April 14, 2023; another invested $420,000 and received $212,679.18, with $36,060.00 arriving on April 4; another invested $50,000 and received $15,931.25, with $9,396.25 arriving on March 6, the first day of the preference window. Each asks for a declaration of net-loss status and a determination under paragraphs 9 to 11 that no judgment amount is owing, and each frames the question as one of interpretation: whether any judgment may properly be imposed on an acknowledged net loser, per the Notice of Application, Parts 1–3, the Notice of Application, Parts 1–3 and the Notice of Application, Parts 1–3.

Two of the notices go at the preference test itself. One applicant, who invested $120,000 and received $108,717.86, seeks to have the trustee's demand for $24,078.03 withdrawn and says the payment was contractually owed and long overdue, per the Notice of Application, Parts 1–2. Another, who invested $210,000 in late 2022 and puts the overall loss at $177,665, says the $14,525 received was a partial return of principal and that the payment fell two days after the preference period opened, per the Notice of Application, Part 1, p. 1.

The trustee's answer to the consolidation point is recorded in its own inspector minutes. Clawback amounts are determined by each legal individual or entity that contracted with MMAC, because "contracts serve as the most independent and objective source for allocating winnings and losses to an investor"; after net positions are established, a related group's ability to pay is reviewed case by case, and where a husband and wife each invested individually and also jointly, the joint contract is split evenly between them. Investors chose their structures for commercial or tax reasons, the minutes record, and the trustee's view is that the structure should be followed for repayment. Those minutes also note that an investor group had submitted a ten-point complaint to the Office of the Superintendent of Bankruptcy in late January 2026, on related party offsets, preference payments from net losers and T5 amendments, and that Fitzpatrick J. had indicated she would schedule a hearing to address all related applications at once, per the Thirty-fourth Inspector Meeting Minutes, Feb. 12, 2026, pp. 2–4.

By the following meeting the trustee reported that it was "fully engaged in settlement discussions with a number of investors" and was waiting for every filing deadline to expire so that one hearing could cover all outstanding matters. The target of collecting all monies by December 2026 was abandoned and moved to June 2027. About 600 of roughly 1,300 net-loss statements had been reviewed, and total net losses across that group were put at between $120 million and $130 million. About 98 per cent of the estate's creditors are net-loss investors, and the trustee intends to ask the court to approve a streamlined distribution using those figures rather than the proofs of claim filed in 2023, per the Thirty-fifth Inspector Meeting Minutes, Apr. 23, 2026, pp. 1–2.