CITATION: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 4791

COURT FILE NO.: CV-16-558165CP

COURT FILE NO.: CV-16-560268CP

COURT FILE NO.:CV-16-561293CP

COURT FILE NO.:CV-16-565287CP

DATE: 20170810

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ARLENE McDOWELL and SAVERIO AVERSA

Plaintiffs

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, CENTRO MORTGAGE INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and FINANCIAL SERVICES COMMISSION OF ONTARIO

Defendants

Mitchell Wine for the Plaintiffs

Ryan Morris and Daniel Styler for the Defendant Olympia Trust Company

Jeremy Devereux and Jennifer Teskey, and Lynne O’Brien for the Defendants, Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, and Vincenzo Petrozza

Mikel Pearce for the Defendants Centro Mortgage Inc. and Ildina Galati

Elizabeth K. Ackman for the Defendants Rosalia Spadafora, Krish Kochhar, Tony Mazzoli, and Saul Perlov

Proceeding under the Class Proceedings Act, 1992

AND BETWEEN:

ARLENE McDOWELL

Plaintiff

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, EMPIRE PACE (1088 PROGRESS) LTD., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI,

DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION,

OLYMPIA TRUST COMPANY and MICHAEL CANE

Defendants

Mitchell Wine for the Plaintiff

Martin Sclisizzi and Ziad Yehia for the Defendant Empire Pace (1088 Progress) Ltd.

Jeremy Devereux and Jennifer Teskey, for the Defendants, Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, and Vincenzo Petrozza

Ryan Morris and Daniel Styler for the Defendant Olympia Trust Company

Mario Delgado for the Defendants Building & Development Mortgages Canada Inc. and Ildina Galati

Proceeding under the Class Proceedings Act, 1992,

AND BETWEEN:

DAVID MARTINO

Plaintiff

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, ADI DEVELOPMENTS (LINK) INC., ADI DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO

Defendants

Mitchell Wine for the Plaintiff

Lisa Parliament and Lauren Ray for the Defendants Adi Developments (Link) Inc. and Adi Development Group Inc.

Jeremy Devereux and Jennifer Teskey for the Defendants, Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, and Vincenzo Petrozza

Ryan A. Morris and Daniel Styler for the Defendant Olympia Trust Company

Mario Delgado for the Defendants Ildina Galati and Building & Development Mortgages Canada Inc.

Elizabeth K. Ackman for the Defendants FFM Capital Inc, Rosalia Spadafora, Krish Kochhar, Tony Mazzoli, and Saul Perlov

Proceeding under the Class Proceedings Act, 1992

AND BETWEEN:

BRYAN MADRYGA and EILEEN WALLACE

Plaintiffs

• and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., FORTRESS KEMPENFELT BAY DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, HARMONY VILLAGE-LAKE SIMCOE INC., CITY CORE DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FMP MORTGAGE INVESTMENTS INC., MICHAEL DARAMOLA, TONINO AMENDOLA, GRAHAM MCWATERS, FDS BROKER SERVICES INC., GLENN MAY-ANDERSON, ZAFAR IQBAL KHAWAJA, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY, GRANT EDWARDH APPRAISERS AND CONSULTANTS LTD. and IAN G. MCLEAN

Mitchell Wine for the Plaintiff

Jeremy Devereux, Jennifer Teskey, and Lynne O’Brien for the Defendants, Fortress Real Capital Inc., Fortress Real Developments Inc., Fortress Kempenfelt Bay Developments Inc., Jawad Rathore and Vincenzo Petrozza

Ryan A. Morris and Daniel Styler for the Defendant Olympia Trust Company

Mario Delgado for the Defendants Ildina Galati and Building & Development Mortgages Canada Inc.

Proceeding under the Class Proceedings Act, 1992

HEARD: July 25 and 26, 2017

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] Before the court are four proposed class actions that concern investments in four land development projects. The camaraderie of the class actions is that they involve the same proposed Class Counsel, one overlapping plaintiff in two actions, some overlapping defendants, similar theories of the case, and a new genre of class action; i.e., a mass rescission of investments in a syndicated mortgage, combined with a mass mortgage enforcement action, combined with tort, contract, and breach of fiduciary duty claims.

[2] The proposed Representative Plaintiffs are: (1) Arlene McDowell for the Ten88 Project in Toronto, Ontario; (2) Arlene McDowell and Saverio Aversa for the Collier Centre Project in Brampton, Ontario; (3) David Martino for the Sutton Project in Burlington, Ontario; and (4) Bryan Madryga and Eileen Wallace for the Harmony Simcoe Project in Barrie, Ontario.

[3] The proposed Class Members, who are the investors in the syndicated mortgages for each of the four class actions, are to be represented by the same proposed Class Counsel, Levine Sherkin Boussidan PC.

[4] In the Ten88 Project Action, Empire Pace (1088 Progress) Ltd. brings a pleadings motion to strike various claims or paragraphs from the Statement of Claim and to have the action dismissed against it.

[5] In the Sutton Project Action, Adi Developments (Link) Inc. and Adi Development Group Inc. bring a pleadings motion to strike various claims or paragraphs from the Statement of Claim and to have the action dismissed against them. (Adi Development Group Inc. was misnamed as Adi Developments Inc., and, in Martino v. Fortress Real Capital Inc., 2017 ONSC 4790, on consent, I ordered that the Statement of Claim be amended to correct the misnomer.)

[6] In all four actions, the Fortress Defendants; namely Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, and Vincenzo Petrozza bring a pleadings motion to strike various claims or paragraphs from the various Statements of Claim. Messrs. Rathore and Petrozza also seek to have the action dismissed as against them.

[7] In all four actions, Olympia Trust Company brings a pleadings motion to strike various claims or paragraphs from the various Statements of Claim.

[8] In the various actions, there were other pleadings motions, but these motions have been settled; that is, the motions have been withdrawn but with agreements about amending the pleadings. In response to the now withdrawn motions and in response to the motions now before the court, the Plaintiffs made concessions and withdrew certain claims, and they agreed to discontinue claims against several Defendants.

[9] These Reasons for Decision respond to Olympia Trust’s motions.

[10] The Reasons for Decision in the other motions are being simultaneously released. See: McDowell v. Fortress Real Capital Inc., 2017 ONSC 4789; Martino v. Fortress Developments Inc., 2017 ONSC 4790; and Madryga v. Fortress Real Capital Inc., 2017 ONSC 4792.

[11] Taken together, the outcome of the various motions is as follows: (a) the claims against Messrs. Rathore and Petrozza are struck out without leave to amend; (b) the claims against Empire Pace are struck out without leave to amend; (c) the claims against the Adi Development Defendants are struck out without leave to amend; (d) the claims against Kochhar, Mazzoli, Amendola, McWaters, Khawaja, May-Anderson, FDS Broker Services, Financial Services Commission of Ontario, and Her Majesty the Queen in Right of Ontario are discontinued; and (e) the Plaintiffs’ Statements of Claim in all the actions are struck out in their entirety against all remaining Defendants with leave to deliver Fresh as Amended Statements of Claim.

[12] A Fresh as Amended Statement of Claim means a pleading with an amended style of cause and without the amendments being underlined and without strikeouts and without the joinder of the Defendants against whom the Plaintiffs have delivered discontinuances or against whom the claims have been struck. The Plaintiffs shall have 40 days to deliver their Fresh as Amended Statements of Claim, failing which the actions shall be dismissed. The delivery of the Fresh as Amended Statements of Claim is without prejudice to the Defendants’ rights to challenge the pleadings as not disclosing a reasonable cause of action or as non-compliant with the Rules of Civil Procedure.

B. Factual Background

[13] Olympia Trust’s motions attacking the pleadings are brought in all four of the proposed class actions. For the purposes of Olympia Trust’s motions, I shall, however, primarily use the facts as set out in the proposed and not officially delivered Amended Amended Statement of Claim in Ms. McDowell’s and Mr. Aversa’s proposed class action for the Collier Centre Project along with the facts associated with the documents referred to in that pleading.

[14] In 2011, Mady-Collier Centre Ltd. was incorporated to develop a mixed-use development in Brampton, Ontario comprised of an 82-unit residential condominium building and an eight-storey commercial office tower with retail space.

[15] In 2012, Mady-Collier purchased the lands for the development for $4 million. The transfer was registered on title on July 3, 2012. The Fortress Defendants obtained an opinion of value that stated the land had an “as is” value of $21,840,090.

[16] By agreement dated July 17, 2012, Mady-Collier agreed to borrow up to $16,923,077 from Fortress Real Developments by way of the security of a third mortgage. Fortress Real Developments assigned its interest in the secured portion of the loan to Olympia Trust and a co-trustee, Mr. Sorrenti.

[17] On July 26, 2012, Mady-Collier entered into an agreement with Olympia Trust and Mr. Sorrenti pursuant to which a syndicated third mortgage was registered against the Collier Centre as security for the loan.

[18] The Defendant Fortress Real Developments, which orchestrated the lending but which is not the lender, is an Ontario corporation with an office in Richmond Hill and is in the business of real estate development. The nature of Fortress Real Developments’ business; i.e., whether it was a land developer, a promoter, a lender, a broker, a fiduciary, or something else, will be a contentious issue in all four proposed class actions, but for the purposes of Olympia Trust’s motions, nothing turns on how to categorize the business of Fortress Real Developments.

[19] The Defendant Fortress Real Capital, which is a Canadian corporation, is related to Fortress Real Developments. The nature of Fortress Real Capital’s business will be another contentious issue, but for present purposes, it is sufficient to say that it was involved with its sister company to syndicate mortgages to lend money to land developers like Mady-Collier.

[20] The principals of the Fortress corporations are the Defendants Jawad Rathore of Markham, Ontario and Vincenzo Petrozza of Richmond Hill, Ontario.

[21] The Defendant Mr. Sorrenti is a lawyer who practices in Vaughan, Ontario. In addition to being a lender, Mr. Sorrenti played several roles with respect to the Collier Centre Project. Among other things, he and his firm, the Defendant Sorrenti Law Professional Corporation, provided legal advice to the investors in the syndicated mortgages.

[22] Olympia Trust is a trust company incorporated under the laws of the province of Alberta with its office in Calgary. It was a lender and a trustee with respect to the syndicated mortgages.

[23] During the summer and autumn of 2012, Ms. McDowell, who works in the IT sector, and Mr. Aversa, who is an employee of a construction contractor, and others, agreed to participate in the syndicated mortgage.

[24] In August 2012, Ms. McDowell received promotional material about the Collier Centre Project from Marcel Greaux of the mortgage brokerage firm Mortgage Alliance of Canada.

[25] After receiving information and promotional material, Ms. McDowell decided to invest $80,000 in the syndicated mortgage.

[26] In the autumn of 2012, Mr. Aversa, who had been introduced to the Collier Centre Project by an employee of the Defendant FFM Capital Inc. and who attended several Fortress seminars and who had received information and promotional material, decided to invest $15,000 from his TFSA account. His wife, Adriana, decided to invest $15,000.

[27] On October 5, 2012, Ms. McDowell met with Mr. Greaux and a notary to close her investment transaction. During the meeting, Ms. McDowell had a phone conversation with Mr. Sorrenti. Ms. McDowell alleges that she was not properly advised by Mr. Sorrenti and that he did not provide her with genuine independent legal advice with respect to her investment in the Collier Centre Project.

[28] At the meeting Ms. McDowell received, and in some instances completed or signed, the following documents: (1) a letter from Fortress Real Capital and Centro Mortgage Inc. (Building & Development Mortgages Canada Inc.); (2) Investor/Lender Disclosure Statement for Brokered Transactions; (3) Attestation; (4) Investment Authority – Form 9D; (5) Mortgage Commitment; (6) Loan Agreement; (7) Memorandum of Understanding; (8) Lender Acknowledgement and Consent Agreement; (9) Mortgage Investment Direction and Indemnity Agreement; (10) Solicitor’s Certificate of Disclosure & Undertaking Regarding Arms-Length Mortgages; (11) Client Suitability Form; (12) Declaration of Bare Trust with Mr. Sorrenti; (13) Confirmation of Lender’s Interest with Empire Pace; and (14) an opinion of land value.

[29] In November 2012, the FFM agent and a notary visited the Aversas at their home to close the investment transaction. The Aversas received a similar set of material to the material received by Ms. McDowell.

[30] Amongst the material received by Ms. McDowell and Mr. Aversa was the Mortgage Investment Direction and Indemnity Agreement that provided, among other things: (a) [the investor] should seek independent legal, tax, or other professional advice before deciding to invest funds held in the syndicated mortgage and before signing the Indemnity Agreement; (b) it is [the investor’s] sole and entire responsibility to verify that the syndicated mortgage is a qualified investment and is not a prohibited investment as defined in the Income Tax Act (Canada); (c) [the investor] should not rely upon any representation made by Olympia Trust in deciding to participate in the syndicated mortgage; (d) [the investor] shall be solely and entirely responsible for the collection of all arrears of payments on the syndicated mortgage; (e) [the investor] is solely and entirely responsible for instituting and pursuing any necessary legal proceeding in the event of a default by the borrower, including all fees, costs, expenses and charges of Olympia Trust if any; and (f) [the investor] is asked to represent that he or she have sought and obtained independent financial, investment, tax, and legal advice and carried out such due diligence and made other such enquiries to determine the suitability of the investment in light of their personal circumstances.

[31] Amongst the material received by Ms. McDowell and Mr. Aversa was the Lender Acknowledgement and Consent Agreement that disclosed, among other things that: (a) other mortgages may be registered in priority to the syndicated mortgage; (b) additional priority financing may be required and may be registered in priority to the syndicated mortgage to a maximum of $72,923,077; and (c) [the investor] is being asked to represent that he or she has obtained independent legal advice and if necessary independent tax advice with regard to the relevant agreements; and the Lender Acknowledgement is subject to the laws of the Province of Alberta.

[32] By agreement dated December 13, 2012, Mady-Collier entered into a construction financing loan agreement with Laurentian Bank of Canada. The amount of the facility was $52 million.

[33] Between August 2012 and May 2013, $16,921,500 was advanced pursuant to the syndicated mortgage. Because of the payments, prepayments, and holdbacks, Mady-Collier did not itself receive all these funds.

[34] In December 2014, construction of the Collier Centre stopped, and in January 2015, Mady-Collier filed for protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36.

[35] In 2015, the Fortress Defendants incorporated Fortress Collier Centre Ltd., and on November 2015, this affiliated company [which, having regard to the claims of relief, should be added as a defendant, for which I grant leave] purchased the assets of the Collier Centre. The transaction was finalized by an order of the Ontario Superior Court of Justice. The order extinguished the rights of investors in the syndicated mortgage.

[36] However, the investors were not left without recourse. Following its acquisition of the Collier Centre assets, Fortress Collier Centre agreed that “all available cash flow after repayment of all construction and other financing required for acquisition, construction, development, leasing and sale of the [Collier Centre]...and after payment of all other costs to complete the [Collier Centre] not otherwise financed and appropriate reserves for future expenses and warranty claims, will be made available for repayment” to investors in the syndicated mortgage.

[37] On August 8, 2016, Ms. McDowell and Mr. Aversa commenced a proposed class action. The Statement of Claim was amended on October 11, 2016.

[38] Ms. McDowell’s and Mr. Aversa’s Statement of Claim asserts claims based on breach of contract, misrepresentation, negligence, breach of fiduciary duty, breach of statute, conspiracy, and oppression pursuant to the provisions of the Alberta Business Corporations Act, R.S.A. 2000, c. B-9. The Plaintiffs subsequently withdrew their claims of breach of statute, conspiracy, and oppression.

[39] Ms. McDowell’s and Mr. Aversa’s allegations as against Olympia Trust are set out in paragraphs 198 - 201 of the Amended Amended Statement of Claim as follows:

Olympia

198. Olympia owed a contractual duty of care to McDowell and Aversa as well as a duty of care in tort generally to them. As a trustee, Olympia also owed the Plaintiffs a fiduciary duty.

199. Olympia’s actions amounted to a breach of contract, a misrepresentation (by its statements made orally or in writing or its failure to disclose material information orally or in writing), negligence and a breach of fiduciary duty, all contrary to the provisions of the Act and contrary to common law. These actions have caused the Plaintiffs damage.

199a. The Plaintiffs plead it was an implicit contractual term in all agreements signed with Olympia that Olympia was licensed to carry on business in Ontario. Olympia is, in fact, not licensed to carry on business in Ontario and is prohibited from operating as a trust company in Ontario. This breach has caused the Plaintiffs damages in that they would not have invested in the Syndicated Mortgage had they been aware that a trust company that was not licensed to carry on business in Ontario was to hold their investment.

199b. Particulars of the misrepresentation, negligence and breach of fiduciary duty claims are as follows:

(a) By acting as a trustee with respect to the Syndicated Mortgage when it knew or ought to have known that:

(i) Fortress was lending money to Mady-Collier on the security of real estate without being licensed under the provisions of the Act;

(ii) Fortress was acting as a mortgage broker and selling investments in the Syndicated Mortgage to investors without being licensed contrary to the provisions of the Act;

(iii) Fortress failed to ensure investments in the Syndicated Mortgage were sold by licensed mortgage brokers who would ensure investors received appropriate advice with respect to their investments;

(iv) Fortress marketed the Syndicated Mortgages as safe and secure investments when they knew or ought to have known they were risky investments not suitable for investors with a lower to moderate risk profile;

(v) Fortress failed to ensure the investments in the Syndicated Mortgage were appropriate investments for each investor;

(vi) Fortress misrepresented to investors that the Syndicated Mortgages would be registered in their own name against the secured property thus conveying a sense of security that did not, in fact, exist.

(vii) Fortress misrepresented that being in second position as a mortgagee behind a construction lender (or even in a lesser position in certain circumstances) on a project under development was a secure position when, in fact, it is a risky position for investors;

(viii) Fortress represented the Syndicated Mortgage would remain a second (or in some cases, third) highly-secure mortgage without disclosing investors were contractually agreeing to subordinate their interest to subsequent financing for the Collier Centre up to $72.9 million in prior encumbrances, an amount in excess of even the illusory value set for the entire Collier Centre of $72 million in the Opinion;

(ix) Fortress failed to disclose that Fortress might and did receive advance payments of anticipated profits from funds invested in the Syndicated Mortgage thus depriving Mady-Collier from the use of those funds in the construction of the Collier Centre;

(x) Fortress misrepresented that the use of the funds was for “soft costs and pre-construction financing” of the Collier Centre without disclosing substantial portions of the funds would be retained as advances to Fortress against anticipated profits;

(xi) Fortress failed to disclose that interest payments to investors would be made from the capital provided by investors (leading investors who held their interest in the Syndicated Mortgage outside their RRSP and TFSA to pay tax on repayments of their own capital thinking the payments were interest);

(xii) Fortress failed to disclose that commissions amounting to 15% of the funds raised would be paid to various brokers, agents and referring parties, substantially higher than the normal 2% to 4% commissions paid for investments of this kind;

(xiii) Fortress failed to disclose the Opinion was not an appraisal provided by an Accredited Appraiser of the Canadian Institute (AACI) and by misrepresenting that the Opinion was, in fact, an appraisal;

(xiv) Fortress substantially overstated the value of the Collier Centre to be $21,840,090 when its true current or “as is” value was significantly lower. This resulted in a significant misrepresentation of the loan to value ratio of the Collier Centre;

(xv) Fortress failed to disclose that Fortress and Centro and Fortress and Olympia were related entities and, as such, there might be a conflict of interest with respect to the Plaintiffs’ investment;

(xvi) Fortress failed to ensure the Plaintiffs obtained genuine independent legal advice and arranged for legal advice that was not truly independent as it was paid for by Fortress and Mady-Collier;

(xvii) Fortress represented the investments in the Syndicated Mortgage were RRSP and TFSA-eligible when it knew or ought to have known this was not true because the actual value of the Collier Centre might be less than the value of outstanding encumbrances thus making the investments unsuitable for retirement investing;

(xviii) Fortress utilized and promoted the services of Olympia as a trustee for the Sorrenti/Olympia Loan Agreement when it knew or ought to have known Olympia was prohibited from operating as a trust company in Ontario under the provisions of the Loan and Trust Corporations Act, R.S.O. 1990, c. L-25 sections 31 and 213; and

(xix) Fortress failed to disclose to investors the Undisclosed Risks and all material risks generally of investments in the Syndicated Mortgage.

(b) By failing to ensure the Plaintiffs obtained genuine independent legal advice;

(c) By failing to advise investors as the trustee that pursuant to the investment documents investors (not Fortress, Mady-Collier, Sorrenti or Olympia) were responsible for ensuring the investments were RRSP and TFSA-eligible and investors contractually indemnified Olympia with respect to same;

(d) By failing to advise investors as the trustee that the Syndicated Mortgage might be subordinated to subsequent financing for the Collier Centre up to $72.9 million of prior encumbrances;

(e) By failing to advise investors as the trustee that in the event of default under the Syndicated Mortgage, investors (not Olympia or Sorrenti) were the ones contractually obligated to collect all mortgage arrears and to institute legal actions with respect to same;

(f) By failing to advise investors as the trustee that notwithstanding that investors might have the contractual obligation to collect mortgage arrears and institute legal proceedings in the event of default, as minority investors in the Syndicated Mortgage, they might not be legally able to take steps with respect to the Syndicated Mortgage to protect their legal rights;

(g) By failing to advise investors as the trustee that the investments in the Syndicated Mortgage might not be RRSP and TFSA-eligible;

(h) By providing additional advances to Mady-Collier as trustee after the Plaintiffs purchased their investment without obtaining an updated valuation of the Collier Centre;

(i) By improperly operating as a trust company in Ontario contrary to the provisions of the Loan and Trust Corporations Act, R.S.O. 1990, c. L-25, sections 31 and 213; and

(j) By failing to properly represent the interests of the Plaintiffs and other investors in the CCAA proceedings.

200. [Deleted by Plaintiffs]

201. The Plaintiffs plead they are entitled to damages from Olympia as a result of its actions. As Olympia was a fiduciary, the Plaintiffs plead all profits earned by it should be disgorged and paid to the Plaintiffs.

C. Discussion and Analysis

1. Olympia Trust’s Argument

[40] Olympia Trust submits that the Statements of Claim are so poorly pleaded that it is impossible to ascertain the case against Olympia Trust and all the indiscernible claims should therefore be struck out. Further, Olympia Trust submits that it is plain and obvious that the Plaintiffs do not have a reasonable cause of action for: (a) breach of contract; (b) misrepresentation; (c) negligence; and (d) breach of fiduciary duty.

[41] Olympia Trust submits that the pleadings do not disclose any losses or damages as a result of Olympia Trust’s alleged conduct, and, therefore, the pleaded causes of action cannot survive and the claims should be struck out.

[42] With respect to the misrepresentation claim, Olympia Trust submits that: (a) to the extent that the Plaintiffs rely on the Mortgage Brokerages, Lenders and Administrators Act and the Loan and Trust Corporations Act, the Statement of Claim does not identify what sections of the legislation have been breached; (b) there are no material facts in support that Olympia Trust improperly operated as a trust company; (c) there is no pleading of reliance on Olympia Trust’s compliance with any identified statute; and (d) the Lender Acknowledgement is clear that it is subject to Alberta law and that Olympia Trust is an Alberta trust corporation and there was no misrepresentation.

[43] Furthers still, Olympia Trust submits that to the extent that there are allegations that it failed to disclose information to investors to warn them about the suitability of the syndicated mortgage for RRSPs and TFSAs and failed to ensure that the investors obtained genuine independent legal advice, these allegations are belied by the documents incorporated by reference into the pleadings.

[44] With respect to the breach of fiduciary duty claim, Olympia Trust submits that the claim is indiscernible but appears to be an allegation that Olympia Trust had a duty not to act as a trustee.

2. Procedural Background

[45] The rules that are engaged on the various motions before the court are rules 21.01(1)(a), 21.01(1)(b), 21.01(3)(a), 25.06(1), 25.06(2), 25.06(7), 25.06(8) and 25.11, which state:

WHERE AVAILABLE

To any Party on Question of Law

21.01(1) A party may move before a judge,

(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs;

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence, and the judge may make an order or grant judgment accordingly.

(2) No evidence is admissible on a motion,

(a) under clause (1)(a), except with leave of a judge or on consent of the parties;

(b) under clause (1)(b).

To Defendant

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

Jurisdiction

(a) the court has no jurisdiction over the subject matter of the action;

Capacity

(b) the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued;

Another Proceeding Pending

(c) another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter; or

Action Frivolous, Vexatious or Abuse of Process

(d) the action is frivolous or vexatious or is otherwise an abuse of the process of the court,

and the judge may make an order or grant judgment accordingly.

RULES OF PLEADING — APPLICABLE TO ALL PLEADINGS

Material Facts

25.06 (1) Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved.

Pleading Law

(2) A party may raise any point of law in a pleading, but conclusions of law may be pleaded only if the material facts supporting them are pleaded.

Documents or Conversations

(7) The effect of a document or the purport of a conversation, if material, shall be pleaded as briefly as possible, but the precise words of the document or conversation need not be pleaded unless those words are themselves material.

Nature of Act or Condition of Mind

(8) Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.

STRIKING OUT A PLEADING OR OTHER DOCUMENT

25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[46] On a Rule 21 motion, the court is entitled to consider any documents specifically referred to and relied on in a pleading: Martin v. Astrazeneca Pharmaceuticals PLC, 2012 ONSC 2744 at paras. 160-162, aff’d 2013 ONSC 1169 (Div. Ct.); Re*Collections Inc. v. Toronto-Dominion Bank, 2010 ONSC 6560; Web Offset Publications Ltd. v. Vickery (1999), 1999 4462 (ON CA), 43 O.R. (3d) 802 (C.A.), leave to appeal dismissed, [1999] SCCA No. 460; Corktown Films Inc. v. Ontario, [1996] O.J. No. 3886 (Gen. Div.).

[47] A statement of claim is deemed to include any statement or documents incorporated in it by reference and which form an integral part of a plaintiff's claim: Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274 (Gen. Div.); Weninger Farms Ltd. v. Canada (Minister of National Revenue), 2012 ONSC 4544 at paras. 11-12; McCreight v. Canada (Attorney General), 2013 ONCA 483 at para. 32.

[48] With respect to the statement of claim, under rule 21.01(1), the court accepts the pleaded allegations of fact as proven, unless they are patently ridiculous or incapable of proof: A-G. Canada v. Inuit Tapirisat of Canada, 1980 21 (SCC), [1980] 2 S.C.R. 735; Canada v. Operation Dismantle Inc., 1985 74 (SCC), [1985] 1 S.C.R. 441; Nash v. Ontario (1995), 1995 2934 (ON CA), 27 O.R. (3d) 1 (C.A.); Folland v. Ontario (2003), 2003 52139 (ON CA), 64 O.R. (3d) 89 (C.A.); Canadian Pacific International Freight Services Ltd. v. Starber International Inc. (1992), 1992 15412 (ON SC), 44 C.P.R. (3d) 17 (Ont. Gen. Div.) at para. 9.

[49] Bare allegations and conclusory legal statements based on assumption or speculation are not material facts; they are incapable of proof and, therefore, they are not assumed to be true for the purposes of a motion under Rule 21: Losier v. Mackay, Mackay & Peters Ltd., 2009 43651 (ON SC), [2009] O.J. No. 3463 (S.C.J.) at paras. 39-40, aff’d 2010 ONCA 613, leave to appeal ref’d [2010] SCCA 438; Deluca v. Canada (AG), 2016 ONSC 3865; Merchant Law Group v. Canada Revenue Agency, 2010 FCA 184 at para. 34; Grenon v. Canada Revenue Agency, 2016 ABQB 260 at para. 32.

[50] Where a defendant submits that the plaintiff’s pleading does not disclose a reasonable cause of action, to succeed in having the action dismissed, the defendant must show that it is plain, obvious, and beyond doubt that the plaintiff cannot succeed in the claim: Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 1998 4831 (ON CA), 164 D.L.R. (4th) 257 (Ont. C.A.); Hunt v. Carey Canada Inc. (1990), 1990 90 (SCC), 74 D.L.R. (4th) 321 (S.C.C.).

[51] Matters of law that are not fully settled should not be disposed of on a motion to strike: Dawson v. Rexcraft Storage & Warehouse Inc., supra, and the court's power to strike a claim is exercised only in the clearest cases: Temelini v. Ontario Provincial Police (Commissioner) (1990), 1990 7000 (ON CA), 73 O.R. (2d) 664 (C.A.).

[52] In R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at paras. 17-25, the Supreme Court of Canada noted that although the tool of a motion to strike for failure to disclose a reasonable cause of action must be used with considerable care, it is a valuable tool because it promotes judicial efficiency by removing claims that have no reasonable prospect of success and it promotes correct results by allowing judges to focus their attention on claims with a reasonable chance of success.

[53] If a statement of claim fails to plead a material fact necessary for a cause of action, the statement of claim is defective and the remedy is a motion to strike the pleading: Copland v. Commodore Business Machines Ltd. (1985), 1985 2190 (ON SC), 52 O.R. (2d) 586 (Master) at pp. 588-589; Kang v. Sun Life Assurance Co. of Canada, 2011 ONSC 6335 at para. 71.

[54] A pleading shall contain material facts but it should not contain the evidence by which those facts are to be proved: rule 21.06; Mudrick v. Mississauga Oakville Veterinary Emergency Professional Corp., [2008] O.J. No. 4512; Murray v. Star, 2015 ONSC 4464.

[55] Pleadings that are irrelevant, argumentative, inflammatory, inserted only for colour, inserted only to disconcert or humiliate, or that constitute bare unfounded allegations should be struck out as scandalous: Sequin v. Van Dyke, 2011 ONSC 2566 (Master); Dugal v. Manulife Financial Corp., 2011 ONSC 387; Gardner v. Toronto Police Services Board, 2007 ONCA 489; Williams v. Wai-Ping, [2005] O.J. No. 1940 (S.C.J.), aff’d, [2005] O.J. No. 6186 (Div. Ct.); Hodson v. Canadian Imperial Bank of Commerce, [2001] O.J. No. 4378 (Div. Ct.).

[56] The court may strike a pleading even where it was relevant, if its marginal probative value is outweighed by its prejudicial effect: Quizno’s Canada Restaurant Corp. v. Kileel Developments Ltd. (2008), 2008 ONCA 644, 92 O.R. (3d) 347 (C.A.); Asper v. Lantos (2000), 2000 29038 (ON SCDC), 51 O.R. (3d) 215 (Div. Ct.).

[57] Where a breach of statute is pleaded, the particular sections relied on must be identified: Mirshahi v. Suleman, 2008 64006 (ON SC), [2008] O.J. No. 4954 (S.C.J.) at para. 48.

[58] A claim for breach of contract must contain: (a) sufficient particulars to identify the nature of the contract, the parties to the contract and the facts supporting privity of contract between the plaintiff and defendant; (b) the relevant terms of the contract; (c) the term or terms that were breached, and (d) the damages that flow from the breach or breaches: McCarthy Corp. PLC v. KPMG LLP, [2007] O.J. No. 32 (S.C.J.).

[59] When misrepresentation is pleaded, full particulars include: (a) the misstatement; (b) when, where, how, by whom the misstatement was made; (c) the nature of the falsity; (d) the inducement; (e) the intention that the plaintiff should rely on the misstatement; (f) reliance; (g) resulting loss or damage and (h) if deceit is alleged, an allegation that the defendant knew of the falsity of his statement: Hamilton v. 1214125 Ontario Ltd., 2009 ONCA 684 at para. 35; Balanyk v. University of Toronto, 1999 14918 (ON SC), [1999] O.J. No. 2162 (S.C.J.) at paras. 28, 65; Lana International Ltd. v. Menasco Aerospace Ltd. (1996), 1996 7974 (ON SC), 28 O.R. (3d) 343 (Gen. Div.) at para. 21.

[60] A pleading of breach of fiduciary duty should set out the material facts to sufficiently identify: (a) the nature of the fiduciary relationship; (b) the nature of the duty owed by the fiduciary; (c) how the duty was breached; (d) how the defendant put its own interests ahead of the plaintiff’s interests, and (e) the appropriate remedy for the breach: Cooper v. Atlantic Provinces Special Education Authority, 2008 NSCA 94 at para. 14.

[61] In Cerqueira v. Ontario, 2010 ONSC 3954 at para. 11, Justice Strathy, as he then was, summarized the major principles about what counts or does not count for a proper pleading, as follows:

11. It may be of assistance to the parties, and particularly to Ms. Cerqueira who is not a lawyer, to state some general principles governing pleadings. I set out some of these principles in Cavarra v. Sterling Studio Lofts Inc., 2010 ONSC 3092, [2010] O.J. No. 2211, and I have added some additional principles:

(a) the purpose of pleadings is to give notice of the case to be met, to define the matters in issue for the parties and for the court, and to provide a permanent record of the issues raised: 1597203 Ontario Limited v. Ontario, 2007 21966 (ON SC), [2007] O.J. No. 2349; Aristocrat Restaurants v. Ontario, [2003] O.J. No. 5331 (S.C.J.) at para. 15; Somerleigh v. Lakehead Region Conservation Authority, [2005] O.J. No. 3401, 2005 CarswellOnt 3546 (S.C.J.) at para. 5;

(b) the causes of action must be clearly identifiable from the facts pleaded and must be supported by facts that are material: CIT Financial Ltd. v. Sharpless, [2006] O.J. No. 2170, 2006 CarswellOnt 3325;

(c) every pleading must contain a concise statement of the material facts on which the party relies but not the evidence by which those facts are to be proved: rule 25.06; this includes pleading the material facts necessary to support the causes of action alleged;

(d) a party is entitled to plead any fact that is relevant to the issues or that can reasonably affect the determination of the issues, but it may not plead irrelevant, immaterial or argumentative facts or facts that are inserted only for colour: Williams v. Wai Ping, [2005] O.J. No. 1940 (S.C.J.), aff'd [2005] O.J. No. 6186 (Div. Court); George v. Harris, [2000] O.J. No. 1762 (S.C.J.);

(e) allegations that are made only for the purpose of colour or to cast a party in a bad light, or that are bare allegations, are scandalous and will be struck under rule 25.11(b): Senechal v. Muskoka (District Municipality), [2003] O.J. No. 885 (S.C.J.);

(f) the court may strike part of a pleading, with or without leave to amend, on the grounds that (a) it may prejudice or delay the trial of an action, (b) it is scandalous, frivolous or vexatious, or (c) it is an abuse of the process of the court: rule 25.11;

(g) on a motion to strike a pleading under rule 21.01(1) on the ground that it discloses no cause of action, it must be shown that it is plain, obvious and beyond doubt that the claim cannot succeed and the pleading must be read generously; allegations of fact, unless plainly ridiculous or incapable of proof must be accepted as proven: Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, 1990 CarswellBC 216 (S.C.C.);

(h) any fact that can affect the determination of rights between the parties can be pleaded, but the court will not permit facts to be alleged that are immaterial or irrelevant to the issues in the action: Toronto (City) v. MFP Financial Services Ltd., [2005] O.J. No. 3214 (S.C.J.);

(i) allegations of fraud, misrepresentation, negligence and conspiracy must be pleaded with particularity: Lana International Ltd. v. Menasco Aerospace Ltd., 1996 7974 (ON SC), [1996] O.J. No. 1448.

[62] On motions brought under the procedure to strike a claim or defence as untenable in law, leave to amend the pleading may and usually will be given, and leave to amend will only be denied in the clearest cases when it is plain and obvious that no tenable cause of action is possible on the facts as alleged and there is no reason to suppose that the party could improve his or her case by any amendment: Mitchell v. Lewis, 2016 ONCA 903 at para. 21; Conway v. Law Society of Upper Canada, 2016 ONCA 72 at para. 16; Fournier Leasing Co. v. Mercedes-Benz Canada Inc., 2012 ONSC 2752 at para. 46; Hostmann-Steinberg Ltd. v. 2049669 Ontario Inc., 2010 ONSC 2441 at paras. 21-22; Holdings Ltd. v. Toronto-Dominion Bank (c.o.b. TD Canada Trust)), 2007 ONCA 456, [2007] O.J. No. 2445 (C.A.) at para. 6; Miguna v. Ontario (Attorney General), 2005 46385 (ON CA), [2005] O.J. No. 5346 (C.A.); AGF Canadian Equity Fund v. Transamerica Commercial Finance Corp. Canada (1993), 1993 8682 (ON SC), 14 O.R. (3d) 161 (Gen. Div.) at p. 173.

3. The Contraventions of the Rules of Pleading

[63] Ms. McDowell’s and Mr. Aversa’s Amended Amended Statement of Claim is 90 pages in length. Its word count is 21,575 words. The pleading contains 214 main paragraphs and a total of 781 paragraphs and sub-paragraphs.

[64] The allegations in the 781 main and sub-paragraphs, however, are sometimes inconsistent one with another. Many of the allegations are unclear. Many of the allegations, be they clear or unclear, are unnecessarily repeated. Some of the allegations properly group the Defendants, but, in other instances, the case against a particular Defendant should be differentiated and not lumped together and the collective allegation is confusing and unclear.

[65] While some of the 781 paragraphs contain properly pleaded allegations, many of the paragraphs combine properly pleaded allegations with improperly pleaded allegations. Others of the 781 paragraphs contain no properly pleaded allegations of material fact. The pleading shows little concern for the reader and the Statement of Claim overall is ill-organized, prolix, and unclear.

[66] In the Collier Centre Project Action, of the 214 main paragraphs, the following 138 main paragraphs, which include hundreds of subparagraphs, of the proposed Amended Amended Statement of Claim have either been withdrawn or discontinued or the paragraphs contravene in whole or in part the rules of pleading: paragraphs 8, 9, 13, 14, 15, 20, 21, 22, 23, 24, 24a, 28, 29, 30, 31, 32, 33, 35, 36, 38, 44, 45, 47, 48, 52, 53, 54, 56, 58, 60(i), 60(j), 62, 68, 71, 72, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 88, 89, 90, 91, 92, 93, 94, 95, 96, 98, 99, 100, 102, 103, 104, 105, 106, 107, 108, 109, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 135, 136, 137, 138, 139, 140, 141, 142, 143, 145, 146, 147, 148, 150, 151, 152, 153, 156, 158, 159, 162, 163, 166b, 167, 169, 173, 174, 178, 179, 180, 181, 182, 185, 186, 190, 191, 192, 193, 194, 196, 199a, 199b, 200, 202, 203, 204, 205, 206, 207, and 209.

[67] From minor to major contraventions, these paragraphs and others offend the Rules of Civil Procedure, among other things, by: (a) not being a concise statement of the material facts; (b) pleading evidence; (c) pleading allegations that in whole or in part are immaterial or irrelevant; (d) pleading allegations that are confusing, inconsistent, or repetitively-imprecise; (e) pleading allegations that are argumentative or polemical; and, or (f) pleading allegations that are inflammatory, inserted only for colour, or inserted only to disconcert or humiliate.

[68] By way of illustrations of non-compliance:

• Paragraphs 21 to 24a (over 3 pages), under the misleading and inaccurate title “Mortgage Law in Ontario” are combination of a lecture and an argument not about mortgage law in Ontario but rather about: (a) applying the Mortgage Brokerages, Lenders and Administrators Act; (b) the duties of mortgage brokerages, principal brokers, brokers, agents, mortgage administrators and brokerage officers under that Act; and (c) the dangers of syndicated mortgages as taken from warnings provided by the Ontario Ministry of Finance and by the Financial Services Commission of Ontario. Paragraphs 21 to 24a do not contain material facts; they plead evidence; they are not concise; they are not necessary, and they are argumentative.

• Paragraph 21 (excerpts from Ontario Ministry of Finance publications), paragraph 22 (excerpts from Financial Services Commission of Ontario documents); paragraphs 23 and 24 (summary of the Mortgage Brokerages, Lenders and Administrators Act and its regulations), paragraph 47 (excerpts from the Fortress website), paragraphs 60-62 and 156-157 (excerpts from agreements unconnected to specific claims), and paragraph 68 (description of opinions of value or appraisals), are pleadings of evidence or argument.

• Paragraph 47 is an example of a pleading of evidence that is not a concise material fact. Much of the information it contains is extraneous to the circumstances of the immediate case. It is also a pleading that is argumentative and vexatious and would broaden the action before the court to a commission of inquiry and not an adjudication of the Plaintiffs’ or the Class Members’ claims. Paragraph 47 states:

47. Fortress’ marketing of its syndicated mortgages misleads investors with respect to the security of their investment. An example is a Fortress document with the heading Fortress Real Capital Risk Profile (the “Profile”) dated July 27, 2011. The Profile refers to information available on the Fortress website as Frequently Asked Questions as including the following:

(a) A syndicated mortgage allows for each investor to be “individually registered and secured proportionately” against the subject property;

(b) Fortress works with developers who are “carefully screened” and “contribute their own equity and cash at prescribed intervals”;

(c) “WHAT IS AN APPRAISAL? Appraisals are provided by A.A.C.I. designated members. These professionals are tasked with providing hard and reliable valuations of land to banks, especially when land is being purchased. This baseline for value provides a key element of assessing the current value of a project.”;

(d) “WHY ARE APPRAISALS AND VALUATIONS SO IMPORTANT? Appraisals are critical as they help assess the ‘loan to value’ ratio of a deal. This is one of the formulas that illustrate the degree of risk associated with your investment. Since you are secured against the land/property, the value of that asset is key in the event of any problem with the project. The asset can be sold to help recover your principal investment. When appraisal is not available, (e.g. lack of direct comparables), Fortress engages third party research companies to provide detailed analytics to assess the value of a property or parcel.”; and

(e) In the event of developer default, Fortress works to find a solution that might include a payment to investors for a loan extension, an institutional refinance to buy out the investors or selling the property to recover investor money. “This is a significant advantage to being secured with a syndicated mortgage. Recovery of your investment will take priority over all unsecured debts, monies owed by the corporation and even construction liens.”

[Emphasis in original.]

• Paragraph 62 is not a material fact. It is argument about the borrower, Mady-Collier, and insofar as its parenthetical reference to the Fortress Defendants is concerned, that allegation is both confusing and irrelevant. Paragraph 62 states:

62. A review of both agreements leads to two conclusions. First, Mady-Collier (and Fortress) invested little or no equity in the Collier Centre. The capital was provided by the investors in the Syndicated Mortgage. Second, less than 50% of the capital raised ever reached Mady-Collier for use in building the development. Neither fact was disclosed to investors.

• Paragraph 104 is not a pleading of a material fact relevant to Ms. McDowell’s claim. It is a redundant argument in anticipation of a defence that may or may not be raised by one or more Defendants to her claim, and as an argument, paragraph 104 confusingly conflates independent legal advice with negligent legal advice.

104. In the [Mortgage Investment Direction and Indemnity Agreement] McDowell acknowledges she obtained independent legal advice with respect to her investment. In fact, McDowell’s legal advice was not independent as it was paid for by Fortress and Mady-Collier and Sorrenti was in a conflict of interest as both a trustee for the Development Loan and a lawyer providing advice. As well, the “advice” did not advise her with respect to the substantial risks associated with her investment, particularly the Undisclosed Risks.

• Paragraph 109, which is an allegation that it is unclear whether Mr. Sorrenti signed the Solicitor’s Certificate of Disclosure & Undertaking Regarding Arms-Length Mortgages before or after he had his telephone conversation with Ms. McDowell, is an example of a pleading of evidence that is not a material fact and that is immaterial or irrelevant because given that it is alleged that Mr. Sorrenti did speak to Ms. McDowell when he signed the certificate confirming what he did seems irrelevant.

• Paragraph 151 is a pleading of what Grant Thornton Limited (“GTL”), the monitor in Mady-Collier’s CCAA proceedings, reported to the court about how Mady-Collier used the funds advanced from the syndicated mortgage and about the extent to which GTL could trace the funds. At best, paragraph 151 is a pleading of evidence and not material facts relevant to the various pleaded claims against the various Defendants. There is no allegation that Mady-Collier misappropriated the syndicated mortgage funds and the extent to which GTL could trace the use of the funds is not a material fact. Paragraph 151 states:

151. GTL provided several reports to the Court over the course of its time as Monitor. A summary of its findings with respect to the Development Loan is as follows:

(a) 13 advances were made to Mady-Collier between August 24, 2012 and May 22, 2013 totaling $16,897,682.55;

(b) GTL could only trace $10,656,000 of this amount. Approximately $6,242,000 could not be traced; and

(c) From documentation provided by Mady-Collier, GTL “understood” that the missing funds were made up of approximately $1,692,308 for “sales and referral bonuses”, $1,438,461 for “marketing and promotional fees”, $507,692 for mortgage brokerage fees and $2,284,616 for “co-development/priority returns” i.e. Fortress’ advance payments on anticipated profits.

• Paragraphs 152 and 153 are not a pleading of material facts and rather are an example of a “sleight of hand” argument inserted for colour. The argument is disingenuous because paragraph 152 refers to “advance on profit sharing” while paragraph 153 refers just to “profit sharing.” The sleight of hand is that Mady-Collier never earning a profit does not make inaccurate that it showed “an advance on profit sharing” in its balance sheet. The paragraphs state:

152. The balance sheet prepared for Mady-Collier as of November 30, 2014 showed $6,021,950 as an “advance on profit sharing”.

153. No profit was ever earned by Mady-Collier on the Collier Centre so it was inaccurate to refer to the amounts retained by Fortress as “profit-sharing”.

• Paragraph 156 is not a material fact and is another example of argument in anticipation of a defence and it is also an example of an unnecessary immaterial argumentative allegation inserted for colour. The paragraph states:

156. McDowell and Aversa plead the [Fortress Collier Centre] commitment is an empty one crafted solely for public relations purposes. The obligation is worded in such a manner that it is highly unlikely there will ever be any “available cash flow” once the Collier Centre is completed.

• Paragraph 199b(b) is a pleading of a particular of a misrepresentation, negligence and breach of fiduciary duty. The particular is that Olympia Trust as the trustee allegedly failed to advise investors that the syndicated mortgage might be subordinated to subsequent financing for the Collier Centre up to $72.9 million of prior encumbrances. If this is a pleading of misrepresentation or negligence or fiduciary duty, then it is belied by the pleaded documents, which are incorporated by reference, which documents disclose that the subordination of the mortgage was disclosed several times. If this paragraph is a pleading of breach of fiduciary duty, what makes it a breach of fiduciary duty is unclear because it is not a breach of fiduciary duty to be negligent and if this is a pleading of negligence or misrepresentation, how the failure to disclose something that has been disclosed counts for negligence is a non-sequitur. Paragraph 199b(b) is not a pleading in the alternative; it is a pleading of inconsistent facts.

• Paragraphs 199b(c),(d),(e), and (g) have similar problems to those of paragraph 199b(b).

• Paragraph 199b(i) is a pleading of a particular of a misrepresentation, negligence and breach of fiduciary duty. The particular is that Olympia Trust improperly operated as a trust company in Ontario contrary to sections 31 and 213 of the Loan and Trust Corporations Act, R.S.O. 1990, c. L-25. The problem with this allegation is that the material facts that would provide a foundation for it as a particular of misrepresentation, negligence, and breach of fiduciary duty indicate that the precise contravention of sections 31 and 213 was operating as a trust company in Ontario regardless of whether the operation as such was proper or improper. The result is that the pleaded particular is a non sequitur and does not reveal the case that Olympia Trust is asked to meet.

[69] While in individual instances the contraventions, standing alone, are not serious, taken together even the modest contraventions make for an unacceptable pleading. Combined with the many major contraventions, the whole pleading should be struck out. I, however, grant the Plaintiffs leave to amend and deliver a Fresh as Amended Statement of Claim.

[70] The pleadings in all four actions are based on the same model, and my findings with respect to the pleading in Ms. McDowell’s and Mr. Aversa’s proposed class action apply mutatis mutandis to the pleadings in the other actions. In some instances, the pleadings in the other actions are worse than the pleadings in Ms. McDowell’s and Mr. Aversa’s proposed class action because mistakes have been made in copying the pleadings from the model to another case by not adjusting the pronouns and by including allegations that have no relevance to the particular case.

[71] Based on the current state of the pleadings, I am unable to determine the merits of Olympia Trust’s substantive attacks on the Plaintiffs’ claims against them. It remains to be determined whether Fresh as Amended Statements of Claim will survive both technical and substantive attacks. It is for this reason that in granting leave to amend, I do so without prejudice to Olympia Trust’s arguments that the revised pleading also does not pass muster in showing a reasonable cause of action or in pleading the constituent elements of a cause of action.

[72] In other words, it is a puerile exercise to analyze the substantive merits of whether or not the Plaintiffs have properly pleaded and shown a reasonable cause of action in negligence, misrepresentation, or breach of fiduciary duty, and I decline to do so.

[73] Thus, taken together, the outcome of the various motions is as follows: (a) the claims against Messrs. Rathore and Petrozza are struck out without leave to amend; (b) the claims against Empire Pace are struck out without leave to amend; (c) the claims against the Adi Development Defendants are struck out without leave to amend; (d) the claims against Kochhar, Mazzoli, Amendola, McWaters, Khawaja, May-Anderson, FDS Broker Services, Financial Services Commission of Ontario, and Her Majesty the Queen in Right of Ontario are discontinued; and (e) the Plaintiffs’ Statements of Claim in all the actions are struck out in their entirety against all Defendants with leave to deliver Fresh as Amended Statements of Claim.

D. Conclusion

[74] If the Plaintiffs and Olympia Trust cannot agree about the matter of costs, they may make submissions in writing beginning with Olympia Trust’s submissions within 20 days of the release of these Reasons for Decision followed by the Plaintiffs’ submissions within a further 20 days.

Perell, J.

Released: August 10, 2017

CITATION: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 4791

COURT FILE NO.: CV-16-558165CP

COURT FILE NO.: CV-16-560268CP

COURT FILE NO.:CV-16-561293CP

COURT FILE NO.: CV-16-565287CP

DATE: 20170810

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ARLENE McDOWELL and SAVERIO AVERSA

Plaintiffs

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, CENTRO MORTGAGE INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and FINANCIAL SERVICES COMMISSION OF ONTARIO

Defendants

AND BETWEEN:

ARLENE McDOWELL

Plaintiff

-and-

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, EMPIRE PACE (1088 PROGRESS) LTD., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and MICHAEL CANE

Defendants

AND BETWEEN:

DAVID MARTINO

Plaintiff

-and-

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, ADI DEVELOPMENTS (LINK) INC., ADI DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO

Defendants

AND BETWEEN:

BRYAN MADRYGA and EILEEN WALLACE

Plaintiffs

• and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., FORTRESS KEMPENFELT BAY DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, HARMONY VILLAGE-LAKE SIMCOE INC., CITY CORE DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FMP MORTGAGE INVESTMENTS INC., MICHAEL DARAMOLA, TONINO AMENDOLA, GRAHAM MCWATERS, FDS BROKER SERVICES INC., GLENN MAY-ANDERSON, ZAFAR IQBAL KHAWAJA, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY, GRANT EDWARDH APPRAISERS AND CONSULTANTS LTD. and IAN G. MCLEAN

Defendants

REASONS FOR DECISION

PERELL J.

Released: August 10, 2017