Court File Numbers and Parties

Court File No.: CV-16-558165-00CP
Date: 2025-06-06
Superior Court of Justice - Ontario

RE: Arlene McDowell and Saverio Aversa, Plaintiffs
AND: Fortress Real Capital Inc., Fortress Real Developments Inc., Centro Mortgage Inc., Ildina Galati, FFM Capital Inc., Rosalia Spadafora, Saul Perlov, Derek Sorrenti, Sorrenti Law Professional Corporation and Olympia Trust Company, Defendants

AND RE: Court File No.: CV-16-560268-00CP
Arlene McDowell, Plaintiff
AND: Fortress Real Capital Inc., Fortress Real Developments Inc., Empire Pace (1088 Progress) Ltd., Building & Development Mortgages Canada Inc., Estate of Ildina Galati by its Trustee in Bankruptcy Crowe Soberman Inc., Derek Sorrenti, Sorrenti Law Professional Corporation and Michael Cane, Defendants

AND RE: Court File No.: CV-16-561293-00CP
Sandra Medland, Plaintiff
AND: Fortress Real Capital Inc., Fortress Real Developments Inc., ADI Developments (Link) Inc., ADI Development Group Inc., Building & Development Mortgages Canada Inc., Ildina Galati, FFM Capital Inc., Rosalia Spadafora, Saul Perlov, Derek Sorrenti and Sorrenti Law Professional Corporation, Defendants

AND RE: Court File No.: CV-16-565287-00CP
The Estate of Bryan Madryga, by his Estate Administrator Rebecca Shaw, Plaintiff
AND: Fortress Real Capital Inc., Fortress Real Developments Inc., Fortress Kempenfelt Bay Developments Inc., Harmony Village-Lake Simcoe Inc., City Core Developments Inc., Building & Development Mortgages Canada Inc., Estate of Ildina Galati by its Trustee in Bankruptcy Crowe Soberman Inc., Derek Sorrenti, Sorrenti Law Professional Corporation, Grant Edwardh Appraisers and Consultants Ltd. and Ian G. McLean, Defendants

AND RE: Court File No.: CV-17-570361-00CP
Arlene McDowell and the Estate of Bryan Madryga, by his Litigation Administrator Rebecca Shaw, Plaintiffs
AND: Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, Vincenzo Petrozza, Lamb Calgary Inc., Orchard Calgary Inc., Building & Development Mortgages Canada Inc., Ildina Galati, FFM Capital Inc., Rosalia Spadafora, FMP Mortgage Investments Inc., Michael Daramola, Tonino Amendola, Graham McWaters, Derek Sorrenti, Grant Morgan and Sorrenti Law Professional Corporation, Defendants

Before: Edward M. Morgan

Counsel:
Mitchell Wine and Karine Bédard, for the Plaintiffs
Charles Sinclair and Jody Brown, for the Defendants, Derek Sorrenti and Sorrenti Law Professional Corporation

Heard: 2025-06-02

Motion for Settlement and Fee Approval

[1] The Plaintiffs represent a class of investors in syndicated mortgage loans in respect of a number of different projects. They seek an order, for settlement purposes, certifying these proceedings as class action under ss. 2 and 5 of the Class Proceedings Act, 1992, SO 1992, c. 6 (“CPA”), as against Derek Sorrenti and Sorrenti Law (together, the “Sorrenti Defendants”). They also seek a further order approving the settlement with the Sorrenti Defendants, as well as an order approving class counsel fees.

[2] The actions were commenced in 2016-2017. The syndicated mortgage loan to which they relate was promoted by the Defendants, Fortress Real Developments Inc. and Fortress Real Capital Inc. (together, “Fortress”), and was registered as against a number of real estate development projects. The Sorrenti Defendants were solicitors with respect to the syndicated mortgage. The claims disclose causes of action against the Sorrenti Defendants in breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, and breach of trust.

[3] The Plaintiffs allege that the class members were misled about the value of the properties on which the mortgage would be registered, the risks involved in participating in the investment, how the mortgage proceeds would be used by the developers and the mortgage administrators, and that their interest in the mortgage would qualify to be held in registered accounts (which it did not). The Plaintiffs claim that had they been properly advised by the Sorrenti Defendants they would not have invested their funds in the first place.

[4] When the mortgage went into default, the class members lost most of their investments. The Plaintiffs have brought this claim on the investors’ behalf seeking to recover those losses.

Class Definitions

[5] The proposed representative plaintiffs seek to represent classes comprised of the individuals who invested in the referenced syndicated mortgages in respect of each of the following developments:

• (a) In Action CV-16-558165-00CP (Collier Centre), Arlene McDowell and Saverio Aversa seek to represent: All persons in Canada who invested prior to January 30, 2015 in a syndicated mortgage in respect of the Collier Centre Project No. 1, registered against title to lands located at 90 Collier Street and 55 Mulcaster Street, Barrie, Ontario, as Instrument SC1005953;
• (b) In Action CV-16-550268-00CP (Progress), Arlene McDowell seeks to represent: All persons in Canada who invested in a syndicated mortgage in respect of the Progress/Ten88 Project, registered against title to lands located at 1088 Progress Avenue in Toronto, Ontario as Instrument AT3101004 or AT3127137;
• (c) In Action CV-16-561293-00CP (Sutton/The Link), Sandra Medland seeks to represent: All persons in Canada who invested in either of the syndicated mortgages in respect of the Sutton/The Link Project, registered against title to lands located at 5210, 5218, 5226, 5236 Dundas Street and 2500 Burloak Drive in Burlington, Ontario as Instrument HR1062915, HR1163239, or Instrument No. HR1174204.
• (d) In Action CV-16-565287-00CP (Harmony Simcoe), the Estate of Bryan Madryga by his Estate Administrator Rebecca Shaw seeks to represent: All persons in Canada who invested in a syndicated mortgage in respect of the Harmony Village Simcoe Project/The Kemp, registered against title to lands located at 51, 53, 55 and 75 Bradford Street, Barrie, Ontario as Instrument SC983678; and
• (e) In Action CV-17-570361-00CP (Orchard), Arlene McDowell and the Estate of Bryan Madryga by his Estate Administrator Rebecca Shaw seek to represent: All persons in Canada who invested in a syndicated mortgage in respect of the Orchard Project, registered against title to lands located at 602, 606, 610, 620, 624, 626 and 628 12th Avenue S.E., in Calgary, Alberta as Registration Number 141 112 373.

Administration and Investor Numbers

[6] FAAN Mortgage Administrators (“FAAN”) is the Trustee of the mortgage administration businesses of the Defendant, Business Building & Developments Mortgages Canada Inc., and the Sorrenti Defendants relating to the syndicated mortgages. It has access to the available books and records of these businesses, which contain the last known contact details of the investors and the amount of each investor’s investment in the mortgages.

[7] FAAN’s information is that the total number of Investors who participated in the syndicated mortgage is:

• a) 361 investors who participated in the first syndicated mortgage with respect to the Collier Centre Project No. 1;
• b) 364 investors who participated in the syndicated mortgage with respect to the Progress Project;
• c) 456 investors who participated in the two syndicated mortgages with respect to the Sutton/The Link Project;
• d) 360 investors who participated in the syndicated mortgage with respect to the Harmony Simcoe/The Kemp Project; and
• e) 342 investors who participated in the original syndicated mortgage with respect to the Orchard Project.

Settlement Agreement

[8] The Plaintiffs entered into a Settlement Agreement with the Sorrenti Defendants on April 7, 2025. The Settlement Agreement settles all claims as between the class and the Sorrenti Defendants. It provides for the Sorrenti Defendants’ consent to certification to put the settlement into effect on a class-wide basis.

[9] Under the terms of the Settlement Agreement, the Sorrenti Defendants will pay to the class members in these five related actions the total sum of $1,648,725 inclusive of legal fees, disbursements, HST, interest, and notice, administrative, and all other expenses, as approved by the Court. This will settle with finality all five actions as against the Sorrenti Defendants.

[10] The amount of the settlement funds represents roughly 82% of the insurance originally available under the Sorrenti Defendants’ insurance policy, which is an eroding professional liability policy. The Plaintiffs and experienced class counsel have concluded that the Settlement Agreement is at the upper end of what the class could hope to recover, and as such is fair and reasonable and in the best interest of the class. The settlement calls for the Sorrenti Defendants to pay substantially all of the remaining available insurance to settle this claim; beyond that, there is little possibility of meaningful recovery directly from the Sorrenti Defendants.

Certification and Class Proceedings

[11] Certification of a national class is preferable to all other litigation options under the circumstances. It will provide access to justice and promote judicial economy, both of which are in the best interest of the class.

[12] The class is objectively defined, readily ascertainable, and not unnecessarily broad. Further, there is a rational relationship between the class and the common issues.

[13] It is also evident that the claims alleged in the pleadings raise common issues of liability, the determination of which will move the litigation substantially forward. In light of the access to justice concerns with respect to a class composed of many relatively small investors, and keeping in mind the goal of achieving judicial economy, a class proceeding is both the preferable procedure for resolving this claim and, realistically, the only way that the claim can proceed. It is certainly the most efficient and fair way to manage the adjudication of the common issues.

[14] The record gives me no reason to doubt that the proposed representative Plaintiffs can fairly and adequately represent the interests of the class. They do not have any discernable conflict of interest with the class in respect of the common issues or otherwise.

[15] Moreover, the plan presented by class counsel for disseminating the notice of certification and settlement approval will be effective. It is designed to be proportionate, taking into account the size of the settlement. It is bound to be effective, as it will involve direct notice to all or virtually all class members.

[16] The Plaintiffs and the Sorrenti Defendants consent to the requested order.

[17] The certification criteria under the CPA are all satisfied.

Approval of Settlement and Fees

[18] The Settlement Agreement was negotiated by experienced counsel on both sides dealing at arm’s length. In my view, it is fair and reasonable and in the best interests of the class.

[19] In addition to certification and approval of the settlement, class counsel request an order:

• (a) Approving class counsel’s fee request in the total amount of $412,181.25, plus HST in the amount of $54,233.56 (total: $471,414.81);
• (b) Approving payment to class counsel for their incurred disbursements in the amount of $12,641.48 inclusive of HST plus the disbursements to be incurred in completing the settlement in the estimated amount of $1,000 plus HST (total: $1,130), to be paid from the Settlement Funds;
• (c) That Class Counsel shall transfer the net balance of the Settlement Funds to FAAN as Claims Administrator for distribution to the Class Members in accordance with the Distribution Plan as approved by the court; and
• (d) That FAAN shall be paid for their costs of disseminating the notices and distributing the net Settlement Fund to the Class from the Settlement Funds without the need for a further order from this court.

[20] The Plaintiffs’ contingency fee retainer agreement made effective as of April 8, 2021, has already been approved by a prior court order, dated January 19, 2023: McDowell v. Fortress Real Capital Inc., 2025 ONSC 635. The counsel fee is well under the 33% typically approved as reasonable in class action cases, and reflects a reasonable fee given the time and effort invested by class counsel. Furthermore, the disbursements are relatively modest for this type of action.

[21] Certification is granted for all five actions and the Settlement Agreement is approved.

[22] Class counsel shall have orders respecting fees, disbursements, and administrative costs as requested.

Edward M. Morgan
Date: 2025-06-06