Court File and Parties

Court File No.: CV-17-2649 Date: 2025-11-05 Ontario Superior Court of Justice

Between:

1305268 Ontario Inc. (Plaintiff)

– and –

823042 Ontario Inc. and The Canada Trust Company (Defendants)

Counsel:

• Adam Wainstock and Tushar Sabharwal, for the Plaintiff
• Tyler McLean, for the Defendant 823042 Ontario Inc.

Heard: May 30, 2025, to June 5, 2025, and June 9, 2025

Reasons for Judgment

The Honourable Justice Ranjan K. Agarwal

I. INTRODUCTION

[1] This action is for foreclosure under a mortgage. In 1993, 830990 Ontario Ltd. (830) gave a $100,000 mortgage to the defendant 823042 Ontario Inc. (823), which was secured by a charge on 823's office property in Brampton (the Mortgage). In 2006, the plaintiff 1305268 Ontario Inc. (1305) allegedly assumed the Mortgage from 830.

[2] 1305 claims that the Mortgage went into default in 2011, when 823 failed to renew it or pay it off. It now claims that it's owed over $2.5 million in unpaid interest, and seeks a foreclosure order. 823's main defence is that 1305's claim is a fraud orchestrated by Kenneth James, a disgruntled shareholder and the party originally responsible for payment of the Mortgage.

[3] James and 1305's principal, Marco Lorenti, aren't credible witnesses. I don't believe their evidence. As a result, I find that the Mortgage was never renewed, and 1305 isn't the valid holder of the Mortgage. Thus, 1305's claim is dismissed.

II. BACKGROUND

A. Cast of Characters

[4] At the outset, it's useful to identify the various companies and individuals involved in this case:

Name	Role
1305	Plaintiff alleged mortgagee
Lorenti	Sole officer and director of 1305
823	Defendant mortgagor
Kenneth Robinson (Ken R)	Principal of 823 and K.C.R. Investments Ltd., a mortgage brokerage business (now deceased)
Stephen Robinson (Stephen)	Ken R's son, and officer and director of 823
Donald Stoddart	Officer and director of 823
Margaret Wallis-Duffy	Director of 823
Maureen Asquith	Principal of Sullivan Realty Limited and former officer and director of 823 (now deceased)
830	Original mortgagee
1303678 Ontario Inc. (1303)	Amalgo from 830 and Gasbar Construction Limited
Kenneth McClenaghan (McClenaghan)	Sole officer and director of 830 and the principal of 1303; RE/MAX real estate broker (now deceased)
Dorothy Short	McClenaghan's bookkeeper and a director of 1303; McClenaghan's estate trustee
Mike Zuccato	McClenaghan's nephew; successor-in-business of McClenaghan's RE/MAX brokerage
Laura McClenaghan (Laura)	McClenaghan's wife and estate trustee (now deceased)
James	Former principal of Pedigree Holdings Inc. and James & Associate law firm; director of 1303; former lawyer for 1305, Lorenti, McClenaghan, 823, 830, 1303, Ken R, Stephen, Zuccato, Lorenti's mother, and Rosemary Cremer; McClenaghan's estate trustee
Eveline Holdings Inc.	A company controlled by James
Sterling Capital Inc.	A company controlled by James
Rosemary Cremer	James's bookkeeper and officer manager; Short's assistant in the mid-1980s

B. Facts

1. The Conestoga Drive Property

[5] In 1989, Ken R incorporated 823 to buy a three-storey commercial condo on Conestoga Drive, Brampton, for KCR. 823 paid $795,000 for the building.

[6] 823's shareholders were originally Ken R, Stephen, several KCR employees, Stoddart (a family friend of the Robinsons and also a KCR employee), and James (who leased space in the building for his law firm). James practiced corporate and commercial law, and he's "well-versed" in mortgage transactions. Ken R and James were friends and business partners, and in a lawyer-client relationship.

[7] 823 had a mortgage from NN Financial. By 1993, the mortgage was underwater. Among the KCR shareholders, Ken R was the only solvent guarantor. James never gave a guarantee. To resolve the matter, the other shareholders (except Stephen and James) surrendered their shares to Ken R, and he settled NN's debt for $495,000.

[8] Ken R raised the settlement funds from the building's current and future tenants, who each received two shares in 823:

• $150,000 from Asquith and her brother Thomas Sullivan, who operated Sullivan Realty from the 3rd floor
• $150,000 from James, who operated his law firm from the 2nd floor (he subleased part of the floor to G.W. Martin Appraisal Ltd.)
• $195,000 from Ken R (which included a $5000 contribution from one of the original shareholders), who operated KCR from the 1st floor with Stephen

[9] James then sold one of his two shares to Stoddart for $25,000 "with an undertaking from Stoddart to assume 50% of [James's] financial obligations…."

[10] The shareholders memorialized their agreement in a Shareholders Agreement, dated August 31, 1993. Under the agreement, Ken R, Stephen, and Stoddart each had one share in 823. Asquith and Sullivan held two shares between them. The last share was held by "Kenneth James, in trust". The other parties to the Shareholders Agreement were KCR, Sullivan Realty, and Pedigree Holdings.

[11] In January 2003, Wallis-Duffy acquired the shares held by Asquith and Sullivan, and began operating her business, Wallis for Wellness, from the building.

2. The Mortgage

[12] The shareholders raised funds to buy the shares through mortgages on the building. They agreed that although 823 was the mortgagor, they would each be liable for their respective debt:

The parties agree that, although the Corporation is the mortgagor of the mortgages to be registered on title to the Property, as amongst the parties, the following Occupants are primarily responsible for payment of the following mortgages, and for so long as any debt is owed by the Corporation as secured by such mortgages, such debt shall be a first charge in favour of the Corporation against the shares owned by the corresponding Shareholders…. (paragraph II(1))

[13] James obtained his mortgage from McClenaghan. McClenaghan was a RE/MAX franchisee and real estate broker. He and James were friends, and in a lawyer-client relationship. McClenaghan and James were also in the private loan business together. McClenaghan was 830's sole officer and director.

[14] The mortgages, in order of priority, were described as follows:

Occupant	Mortgagee	Shares Charged
Pedigree	McClenaghan, through 830	James and Stoddart
KCR	Ken R (later transferred to The Canada Trust Company)	Ken R and Stephen
Sullivan	Ken R, through his SDRSP	Asquith and Sullivan

[15] If an "Occupant" defaulted on payment of their mortgage, their corresponding shares would be "forfeit[ed] to the Corporation" (paragraph II(2)). The shareholders also agreed to split the property's operating expenses on a per floor basis (paragraph III(7)).

[16] The terms of the Mortgage are stated in the Charge/Mortgage of Land document:

• Term: 3 years, starting August 31, 1993
• Interest rate: 12 percent per year
• Principal: $100,000
• Payment schedule: $1000 per month (i.e., interest only)
• Prepayment: 823 shall pay $10,000 on the anniversary date to be applied to the principal.

[17] To put all this plainly:

• James borrowed $100,000 from McClenaghan, through 830
• 823 was the mortgagor and the Mortgage was secured by a charge on the building
• Under the Shareholders Agreement, Pedigree agreed to repay the Mortgage—$1000 interest per month, and $10,000 on the anniversary date meaning it would be paid off and discharged by 2003
• 823 had a first charge against James's and Stoddart's shares in 823
• If Pedigree defaulted on the Mortgage, James's and Stoddart's shares forfeited to 823

[18] McClenaghan signed the Charge for the mortgagee. Stephen signed for the mortgagor. James acted for both parties.

[19] 830 was amalgamated into 1303, another company owned and operated by McClenaghan, in 1998. But the Application to Change Name for the Mortgage was only registered in May 2017. By that time, McClenaghan was dead, and James was a director of 830—he authorized the Application.

[20] Years later, the KCR and Sullivan mortgages were discharged.

3. The Alleged Renewals

[21] 1305 relies on several letters and documents that it says show the mortgage was successively renewed in 1996, 2001, and 2011. 823 responds that these letters are forgeries.

[22] On August 29, 1996, McClenaghan allegedly sent a letter to Ken R, copied to James. The letter offered to renew the mortgage:

• 830 hadn't received any payments since March or April 1994 (again, the monthly interest-only payment was $1000, and the annual prepayment was $10,000)
• At that time, McClenaghan had agreed with James to forgo payments and accumulate interest to maturity (i.e., a balloon mortgage)
• The current balance was $130,784 ($100,000 principal plus $30,784 in capitalized interest)
• McClenaghan was prepared to extend the mortgage on the same terms for another five years (i.e., open, balloon mortgage at 12 percent interest to August 31, 2001)

[23] On August 31, 2001, McClenaghan allegedly sent another letter to 823 and Ken R, again copied to James:

• The current balance was now $233,250.19 (i.e., $100,000 principal plus $133,250.19 in capitalized interest)
• He had renewed the mortgage for a ten-year term with two added conditions
  • First, a pre-payment of principal of $50,000, which reduced the loan to $183,250.19
  • Second, the balance of the "original principal" (i.e., $50,000) to be repaid by August 31, 2006

[24] James said he made the first $50,000 payment but there's no documentary evidence. As to the second payment, the letter states: "I will expect you and Ken James to negotiate and arrange to have it paid to me on, or before, that date." James or Pedigree were always liable for this debt. It's unclear why, if this letter is authentic, McClenaghan was expecting Ken R to "negotiate" with James.

[25] Stephen says he never received these letters, either indirectly from Ken R, or directly.

4. James's Legal Troubles

[26] In 2006, James made a consumer proposal under the Bankruptcy and Insolvency Act, RSC 1985, c B-3.

[27] In 2010, the Law Society of Ontario alleged that James had engaged in mortgage fraud. It suspended his license on an interim basis. In 2011 and 2012, the RCMP froze James's bank accounts. They then charged him with possession of the proceeds of crime, laundering the proceeds of crime, fraud, exporting drugs, and conspiracy.

[28] James was released on bail. Zuccato was James's surety. James lived with Zuccato for three years while under house arrest. At the time, James and Zuccato weren't friends. They had lunch from time to time but didn't socialize otherwise. Zuccato had bought McClenaghan's real estate business in July 2007 after McClenaghan died. James assisted with the "implementation" of the purchase.

[29] James was acquitted of the criminal charges in January 2016. See R v James, 2016 ONCJ 10.

[30] During this time, James's accounts remained frozen. Zuccato dealt with James's business affairs on James's behalf. He effectively acted as James's bank: Zuccato received monies owed to James into his holding company's account, and paid James's debts from that same account. Zuccato also lent considerable money to James (including James's share of 823's operating expenses). As of June 2016, James owed Zuccato over $1 million. Zuccato ostensibly did all this for James because James was McClenaghan's best friend. Zuccato also acted as James's real estate agent during negotiations with Wallis-Duffy to sell her his interest in the building.

[31] In 2017, James was disbarred. See Law Society of Upper Canada v James, 2016 ONLSTH 176, 2017 ONLSTH 130. The revocation of his license was upheld by the Appeal Division, and by the Divisional Court. See Law Society of Ontario v James, 2018 ONLSTA 9, 2018 ONLSTA 15, aff'd 2021 ONSC 1935 (Div Ct).

5. Lorenti Allegedly Assumed the Mortgage

[32] Lorenti, through 1305, allegedly assumed the Mortgage from 1303 for $150,000 in August 2006. 1305 is Lorenti's "shell company". He used it for "various things" in his business—he "put out offers under it but would close in a different numbered company", "ran" his expenses through it, and "owned other assets from time to time through it." As discussed below, Lorenti also used 1305 to sell building materials to a Spanish company.

[33] On that same day as the assumption, 1303 allegedly transferred the charge to 1305. McClenaghan and Lorenti allegedly signed the Transfer of Charge. But this document wasn't registered on title until 2017. 823 submits that the Transfer of Charge is also a forgery. James says he saw McClenaghan sign the Transfer of Charge.

[34] On August 31, 2006, McClenaghan, now on behalf of 1303, allegedly sent a letter to 823 and Ken R, again copying James:

• The full amount of the principal had been repaid, leaving a balance of $276,808.24
• He had assigned the remaining balance secured by the charge to 1305

[35] Stephen says he never received this letter either. There's no documentary evidence that James paid $50,000 to McClenaghan in 2006. McClenaghan passed away in July 2007. No one witnessed him signing the renewal letters.

[36] 1305 also relies on a letter dated July 31, 2011, which 823 says was contrived for this case. In that letter, Lorenti advised Ken R, Stephen, and 823 that 1305 would renew the Mortgage again:

• The mortgage loan term expired on August 31, 2011
• The balance outstanding was $493,659.63
• 1305 was prepared to renew the loan for another 10 years on the same terms (i.e., open, balloon mortgage at 12 percent interest)

[37] James was not copied on this letter. Stephen says he never received it. 823 never responded. Arguably, the Mortgage was in default as of September 1, 2011. Lorenti calculated that 1305 was owed $2,436,802.56 as of November 2024.

6. The Dispute Between James and 823

[38] In April 2015, Wallis-Duffy expanded her business, and leased James's part of the 2nd floor from him. In 2016, James agreed to sell his interest in 823 to her, but the deal never closed.

[39] In December 2016, Stephen, through 823's lawyer, asked James whom he holds the shares of 823 in trust for. James didn't respond. Stephen asserted that if James was holding a share of 823 in trust for another person, it would've been lost in James's bankruptcy proceedings in 2006. Later that month, Stephen, in an email to James, asserted that James was not a shareholder of 823. James never responded to this allegation. James believes that Stoddart was working with Wallis-Duffy and Stephen to claim part of the sale price. The deal with Wallis-Duffy never closed over this dispute.

[40] In April 2017, James stopped paying his share of 823's operating expenses. In response to Stephen's demand, James emailed: "I have surrendered possession of my 'unit' to the secured creditor to realize as it feels best." A notice posted in the building stated that 1305 had taken possession of the 2nd floor.

[41] In May 2017, five days after registering the Transfer of Charge on title, 1305 demanded full payment of the Mortgage (calculated then as $953,289.41). 1305 also advised 823 that its position was that it "does not hold any security over shares" and isn't a party to the Shareholders Agreement. 1305 sued in June 2017.

[42] In November 2017, 823 wrote to James, alleging that he had breached the Shareholders Agreement: (a) he hadn't paid his share of 823's operating expenses; and (b) he failed to discharge the Mortgage by August 2003. 823 demanded that James pay the unpaid operating expenses and discharge the Mortgage.

C. The Trial Evidence

[43] For trial, the parties adduced evidence by affidavit:

Witness	Affidavits
Lorenti	November 18, 2024; March 3, 2025; May 2, 2025
James	November 17, 2024; March 7, 2025; May 2, 2025
Zuccato	November 14, 2024; March 5, 2025; May 5, 2025
Short	November 27, 2024; March 11, 2025
Cremer	March 7, 2025
Stephen	December 18, 2024; March 27, 2025
Wallis-Duffy	December 18, 2024
Christine Brannan	June 12, 2024
Nathalie Bureau	December 13, 2024

[44] As I discuss below, the affidavits were replete with irrelevant evidence, much of which was initiated by James. 823 seems to have felt obligated to respond to all of James's evidence, no matter how tangential to the issues in dispute.

[45] The witnesses were cross-examined. Each party made written and oral arguments. The parties filed further written submissions on the admissibility of several documents.

III. ANALYSIS AND DISPOSITION

[46] To foreclose on the Mortgage, 1305 must prove that: (a) there was a valid mortgage; (b) 830, the original mortgagee, advanced the mortgage funds; (c) 1305 is the current holder; and (d) 823, the mortgagor, defaulted. See 1250294 Ontario Ltd. v 2141065 Ontario Inc., 2014 ONSC 2918, at para 67.

[47] There's no dispute that 830 and 823 entered into a mortgage in 1993 (i.e., there was a valid mortgage at that time). But the remaining issues are contested by 823. In addition, 823 raises several other defences to 1305's claim.

[48] At bottom, 823 doesn't plead that the Mortgage should be voided or rescinded because of 1305's alleged fraud. But its defence rests on a finding that James and Lorenti are engaged in a scheme to cheat 823. As previewed in the introduction, I don't find Lorenti or James to be credible. This transaction, as described by them, doesn't make common or commercial sense. As a result, I conclude that 1305 isn't the current holder of the Mortgage.

A. Issue #1: Did 830 Advance Funds to 823?

[49] 1305 submits that there's ample evidence that 830 advanced the funds under the Mortgage to 823. 823 responds that there's no evidence that the funds were actually advanced on behalf of 830, which means there's no debt owing. See Toronto-Dominion Bank v Block Brothers Contractors Ltd., at para 20.

[50] I find that 830 advanced the Mortgage funds to 823. First, the ledger for the purchase of 823's shares and the settlement of NN Financial's loan shows a deposit from RE/MAX of $100,000 on August 31, 1993. This and the other transactions add up to $495,000, which was then paid to NN Financial. McClenaghan operated a RE/MAX franchise. Short, his longtime bookkeeper, testified that McClenaghan "would take his profit from the one business and make investments." The reasonable inference is that McClenaghan advanced the Mortgage funds from his RE/MAX business on behalf of 830.

[51] Second, when he was examined for discovery on behalf of 823, Stephen admitted that the "funds were actually advanced."

B. Issue #2: Is 1305 the Current Holder of the Mortgage?

[52] 823 alleges that 1305's entire claim is based on a fraud, and the Mortgage was never renewed or assigned to Lorenti. It's theory of the case is as follows:

• James held his share in 823 in trust for an unnamed party
• Stoddart wasn't contributing to 823's operating expenses, so James was responsible for all the 2nd floor's share
• After James's license was suspended in 2012, he had no need for the 2nd floor space, which he eventually leased to Wallis-Duffy
• He tried to sell it to her, but the deal collapsed when she asserted that James didn't have an interest in 823 (because Stoddart held one share, and James's share was held in trust for some unknown beneficiary)
• James discovered that he had "lost" his interest in 823 when he declared bankruptcy in 2006
• Zuccato, who was James's real estate agent, urged James to get "creative", which led James to assert, for the first time, that the Mortgage was valid and enforceable
• James and Lorenti then forged several renewal letters and the Transfer of Charge to support James's position
• Lorenti is James's strawman, and is being paid for pursuing this litigation on James's behalf

[53] 823's evidence is broadly divided into two categories: (a) circumstantial evidence that, taken together, it submits should lead to the inference that James and Lorenti are defrauding it and the court; and (b) direct evidence that documents have been forged.

[54] I largely agree with 823—it has proven that the Mortgage was never renewed by McClenaghan, and never assigned to Lorenti. That said, I don't agree with all its theory of the case.

[55] The reasonable inference that emerges from the evidence is that James concocted this narrative to erase the forfeiture of his shares. He defaulted on the Mortgage, either by failing to pay the monthly interest or paying it off by 2003. Thus, under the Shareholders Agreement, his shares were forfeited to 823. 823 had poor management practices and, as a result, either no one noticed, or they turned a blind eye:

• James was still operating his law office from the 2nd floor until 2012 and paying his share of the expenses until 2016
• James's delay in discharging the Mortgage wasn't prejudicing Ken R and, moreover, they were friends and business partners
• McClenaghan, because of his and James's friendship and ongoing business relationship, didn't enforce the Mortgage

[56] When McClenaghan died in 2007, James became his Estate Trustee and a director of 1303. At this point, he was de facto the mortgagor and the mortgagee—he had no reason to enforce the Mortgage for 1303's benefit against himself.

[57] Then, in 2016, James saw an opportunity to extricate himself from this lingering issue—he could sell his interest to Wallis-Duffy, and use the funds to discharge the Mortgage. But when 823 began questioning his bona fides and the sale fell through, James came up with a fraudulent plan to retcon the history of the Mortgage to hide his tracks, and undo the forfeiture. He engaged Lorenti to help him with the scheme—if they were successful, Lorenti would receive many multiples of his investment in legal fees and time, and James would get something for his shares.

1. Overview: Lorenti and James Aren't Credible

[58] Credibility and reliability are different. Credibility has to do with a witness's veracity; reliability with the accuracy of the witness's testimony. Reliability engages consideration of the witness's ability to accurately observe, recall, and recount events in issue. Any witness whose evidence on an issue isn't credible can't give reliable evidence on the same point. Credibility, on the other hand, isn't a proxy for reliability: a credible witness may give unreliable evidence. See R v GF, 2021 SCC 20, at para 82; R v HC, 2009 ONCA 56, at para 41.

[59] The factors relevant to assessing credibility include: (a) honesty; (b) an interest in the outcome of the proceedings; (c) accuracy and completeness of observations; (d) circumstances of the observations; (e) memory; (f) availability of other sources of information; (g) inherent reasonableness of the testimony; (h) internal consistency, and consistency with other evidence; and (i) demeanour. See D Watt & J Makepeace, Watt's Manual of Criminal Jury Instructions 2024 (Toronto: Thomson Reuters, 2024) at Final 14; R v King, 2025 ONSC 2448, at para 15.

[60] Lorenti and James aren't credible witnesses. I discuss several specific instances where their narrative isn't believable. But taking all the evidence together, they don't seem honest. They had good memories of facts that were favourable to them, but couldn't recall facts that were unfavourable to them. Their inability to remember unfavourable facts didn't seem genuine. Their evidence was often unreasonable, especially for two sophisticated businesspersons and, in James's case, a former lawyer. Their narrative sounds like it was made up to align with the documentary evidence. Their evidence was inconsistent, largely because they failed to mention other facts and rarely explained their omissions. They were argumentative in cross-examination. They repeatedly attacked the premise of 823's lawyer's questions. James, who isn't a party to this case and was, at some point, 823's lawyer, only gave evidence favourable to 1305. He was verbose and went off on tangents, which obscured the truth of this matter.

[61] At bottom, I don't believe their story that McClenaghan repeatedly renewed the Mortgage, and then sold it to 1305.

2. Credibility Findings from James's Other Cases Aren't Admissible

[62] 823 relies on decisions from several other proceedings involving James to argue that James isn't credible.

[63] Character evidence, good or bad, is generally inadmissible in a civil trial. See Jarvis v Oliveira, 2024 ONCA 200, at para 55. That said, 823, to diminish James's credibility, was entitled to cross-examine James on his "general reputation for untruthfulness or to prior criminal convictions or to findings of professional misconduct involving dishonesty". See Jarvis, at para 56.

[64] In 2016, the Law Society Tribunal found that James engaged in professional misconduct by knowingly assisting fraud or dishonesty. The Tribunal repeatedly found that his evidence wasn't credible. See Law Society of Upper Canada v James, 2016 ONLSTH 176, at paras 38, 79, 89, 153-4, 236, 296, and 334-5.

[65] 823 didn't seek to cross-examine James on these findings. It still asks me to rely on the tribunal's decision in assessing James's credibility. 823 misunderstands how other judicial decisions involving dishonesty can be used. The decision itself isn't at issue. It's the relevance of questions about the decisions, and the admissibility of the witness's answers. Here, 823 didn't cross-examine James about these other findings.

[66] 823 responds that it's not required to cross-examine James on everything in its affidavits in a summary trial. In McFlow Capital Corp. v James, 2020 ONSC 374, Nishikawa J, discussing James's evidence in that case, held that the plaintiff there wasn't obligated to cross-examine James on every statement in its affidavit, in part because James was "provided with ample opportunity to address contradictory evidence…." See McFlow, at para 127. I agree with Nishikawa J on the law, but the issue here is different.

[67] The failure to cross-examine James on the tribunal's decision isn't about trial fairness—it's about the admissibility of the evidence. The evidence isn't admissible just because Stephen attached it to his affidavit. It's admissible when 823 cross-examines James on the findings, which it didn't do. 823's argument is that James had the onus of explaining himself once Stephen adduced the tribunal decision. I don't agree—1305 wasn't obligated to respond to every allegation and document in 823's affidavits. And I can't make a credibility finding unless James has had a chance to explain himself. As a result, the evidence is inadmissible. See Jarvis, at para 57.

[68] At trial, 823 did seek to cross-examine James on Nishikawa J's credibility findings in McFlow. I held that the questions were improper. In R v Ghorvei, the Court of Appeal held that a credibility finding in an earlier case isn't probative of whether the witness is credible in the instant case. The exceptions are where the parties and the issues in both cases are the same or related, and where the other proceeding is a criminal or professional misconduct case. See British Columbia (AG) v Malik, 2011 SCC 18. The McFlow case and this case have different parties and issues, and that case is for civil liability.

[69] As a result, these other decisions play no role in my assessment of James's credibility.

[70] That said, James was highly argumentative about Eveline Holdings. He refused to accept the finding in McFlow that Eveline is his alter ego (at para 199), arguing that the court was misled. His failure to admit this fact undermines his credibility.

3. Stoddart's Share Reverted to James

[71] 823's theory is that James had one share in 823, which he "lost" when he was petitioned into bankruptcy in 2006. As highlighted above, I don't agree with this part of 823's theory of the case.

[72] First, James wouldn't have to surrender shares automatically in a consumer proposal. Second, property held in trust is exempt. See BIA, s 67(1)(a). Third, in any event, James's consumer proposal didn't list his interest in 823. So the share couldn't have been "lost" because it wasn't disclosed to the trustee or James's creditors. [2]

[73] That said, James's failure and refusal to be candid and transparent about the ownership of his shares undermines his credibility. The Shareholders Agreement always describes James as "KENNETH JAMES, in trust": (a) on the title page, when describing the parties to the agreement; (b) in the notice section; and (c) on the signature page. For years, James refused to disclose why the Shareholders Agreement states that he's a trustee. In 2016, 823 repeatedly asked James to identify the beneficial owner. James didn't respond directly, leaving Stephen and Wallis-Duffy to suppose that James somehow lost his share.

[74] James now tries to explain this away, but his evidence was inconsistent. In his first affidavit, he said he took the new share of 823 "in trust" for Stoddart, and would transfer it to Stoddart once Stoddart paid him under their agreement. Then, in James's reply affidavit, he said the Shareholders Agreement contained a "mis-description": if he had drafted the agreement, he would've made clear that he held one share for himself and one share in trust for Stoddart.

[75] Though this evidence goes some way towards explaining the issue, it's still inconsistent.

[76] First, if the "new" share was for Stoddart's benefit, why was Stoddart also holding the "old" share under the agreement? And if that was merely a drafting mistake, why not say so either in response to Stephen's emails or in his first affidavit?

[77] Second, why didn't James correct the mistake when he signed the agreement? James was an experienced lawyer and had numerous other business dealings. The mistake is repeated multiple times, including on the cover page and below his signature. The reasonable person, never mind an experienced lawyer and businessperson, would pause when seeing that they were signing in trust alongside the beneficial owner of the share.

[78] Third, after Stoddart reneged on their deal, why didn't James seek to amend the Shareholders Agreement?

[79] Fourth, why did James operate, for almost 20 years, as if he had limited rights under the Shareholders Agreement? Each group of shareholders nominated someone to 823's board. James says he nominated Stoddart. But then Stoddart was fired from KCR shortly after 823 was reorganized, which is what apparently led to Stoddart reneging on his deal with James. James understood that Ken R, Asquith, and Sullivan replaced Stoddart with Stephen on the board, and Stephen and Asquith were now running 823. James also deposes that he had "no communication" with Stephen between 1993 and 2012 about 823's operations.

[80] This evidence isn't believable. Stoddart was James's nominee on the board under section I(1) of the Shareholders Agreement. If Stoddart was being replaced on the board, the other shareholders didn't have the unilateral right to appoint Stephen as a director. Given the lawyerly way in which James protected his interests (for example, by refusing to guarantee 823's first mortgage with NN Financial), it's not credible that he simply acquiesced to the Robinsons controlling 2/3 of the board and then turned a blind eye to 823's operations for two decades.

[81] Fourth, at points, James disavowed any knowledge of the Shareholders Agreement. In September 2012, James emailed Stephen: "I have never seen any shareholders agreement and I certainly do not have one." And in his reply affidavit, he states that the lawyer that prepared the agreement did so "without the enquiry of, input from or consent of the other officers, directors or shareholders of 823." These statements are inconsistent with the fact that James signed the Shareholders Agreement.

[82] At bottom, I find that James held two shares in 823. Though one of the shares was being held in trust for Stoddart, it reverted to James once Stoddart failed to pay for the share as he and James had agreed. The references in the Shareholders Agreement were in anticipation of Stoddart paying James. This finding is bolstered by several emails from the aborted sale to Wallis-Duffy, where James repeatedly talks about his "shares" (plural) and his 1/3 interest in 823.

[83] But James's failure, in response to 823's letters and then in this litigation, to provide a logical, cogent, and clear explanation for why he's described as an "in trust" shareholder undermines his credibility. His evidence isn't inherently reasonable.

4. James's Communications to Wallis-Duffy Undermine 1305's Claim

[84] During James's negotiations with Wallis-Duffy to sell his shares in 823, he made several statements that are inconsistent with his evidence about the Mortgage and 1305's claim more generally. This evidence undermines his and Lorenti's credibility.

[85] As discussed above, on May 9, 2016, James, through Zuccato, agreed to sell his shares in 823 to Wallis-Duffy for $384,000. At that time, the alleged Mortgage debt was over $865,000.

[86] James then followed up with Zuccato and Wallis-Duffy the next day: "I have a discharge of the mcClenaghan [sic] mortgage which I believe is numerically first in priority. You are entitled to have me assign it to you as part of the agreement to sell if you prefer that having it discharged. You should speak to you a lawyer about this decision." In cross-examination, James said that he had the "availability of the discharge" for the Mortgage. In his reply affidavit, James said that he had "already made an arrangement with [Lorenti] to allow this to happen…."

[87] On June 1, 2016, in response to Wallis-Duffy's request that James produce a release from Stoddart, he indirectly refused to do so: "If you form the impression that I am somewhat irritated by your email then I confirm your perception, and it flows more from the 'bullet-ting' of the requirement that Don Stoddart's consent is somehow necessary to my sale of shares to you."

[88] James then made a counterproposal: "Rather than discharging the first mortgage held by 830990 Ontario Ltd. I can arrange for that corporation, whose mortgage has long been in default, to transfer my share interest (and any interest which Don Stoddart may assert after nearly a quarter century) to you directly."

[89] 823 argues that these communications undermine James's credibility, and 1305's case more generally:

• James states that he has a discharge of the Mortgage, implying that the Mortgage had been paid off
• Even though James facilitated the alleged assumption of the Mortgage by 1305 in 2006, he described it as the "McClenaghan mortgage" not 1305's or Lorenti's mortgage
• He then says that Wallis-Duffy was "entitled to have [James] assign it to [her]"—that makes sense where 1303, which James controlled after McClenaghan's death, was still the mortgagee but not so much if Lorenti was now the mortgagee
• James told Wallis-Duffy that he could arrange for 830 to "transfer my share interest" to her—this statement makes no sense because 830 didn't hold any "share interest" in 823 and, by the time of this email, the Mortgage had been transferred to 1303 (which James facilitated) or assumed by 1303 (which, again, James allegedly facilitated)

[90] I agree with 823. First, these communications strongly suggest that, as of May 2016, James believed that the mortgagee was still 830 or 1303, not Lorenti or 1305. It doesn't make sense that James, again an experienced lawyer and businessman, who facilitated the alleged sale of the Mortgage to 1305, would make these simple mistakes in his discussions with Wallis-Duffy. Indeed, according to James and Lorenti, it wasn't a secret that 1305 had assumed the Mortgage—McClenaghan allegedly told 823 and Ken R that in 2006, and Lorenti himself allegedly wrote to 823 and Ken R in 2011. James never explained this omission in his evidence.

[91] Second, James's proposal doesn't make sense. At first, he testified that he intended to pay Lorenti the sale proceeds he received from Wallis-Duffy (around $385,000), and he would have "made up the difference", which was over $500,000. When he was pressed on the unreasonableness this proposal, James said, for the first time in this proceeding, that Lorenti had agreed to settle: "I wouldn't have paid him the difference between the $400,000.00 that I was getting and…this amount, $850,000.00. I would have settled for, and I might have paid him $200,000.00."

[92] This evidence raises more questions than answers. Why would James be offering to settle with Lorenti at all? James's position is that he simply brokered the deal between McClenaghan and Lorenti, and 823 was liable for the debt. And why was Lorenti prepared to accept a sizeable discount? According to Lorenti, he offered to renew the Mortgage in 2011, but 823 never accepted. If, five years later, Lorenti deemed 823 to be in default, why didn't he demand payment from 823, and try to settle directly? Finally, why didn't Lorenti ever mention this settlement?

[93] In capsule form, James's conduct in 2016, combined with his and Lorenti's inconsistencies and lack of credible evidence, leads me to conclude that the Mortgage was never transferred to 1305. James's many statements lead to the conclusion that 1303 was the mortgagee, and he viewed himself as liable for the debt.

5. James's Threat to Windup 823 Undermines His Credibility

[94] After James's proposal to sell his shares to Wallis-Duffy was aborted, James sent several emails that undermine his credibility.

[95] Wallis-Duffy offered to buy James's 1/3 interest for $384,000. That means that 823 was worth, at that time, around $1.15 million. The Mortgage debt was allegedly $930,000 at that time. So the gross proceeds would have been around $220,000.

[96] In October 2016, after negotiations between Wallis-Duffy and James ended, James sent Wallis-Duffy and Stephen several emails threatening to dissolve 823. In none of these emails does James mention the Mortgage, even though this debt would have a significant impact on any post-dissolution distribution.

[97] To be fair, James does refer to "net equity" in one of the emails, which suggests that he always contemplated that the shareholders' equity would be less payout of the Mortgage:

To wind up the company will not guarantee either of us our price, it will simply guarantee that we each get one third of the net equity on dissolution. If the property sells for enough we could make out like bandits and get more than we were prepared to take from Margaret, if it does not then we will get less. The cost of winding up will seriously impact the net recovery which is why it is really the nuclear option, not to mention the claims of each of us for legal costs against the others based on our differing allegations as to who is at fault.

[98] But given the Mortgage debt, which James would've been aware of, it wasn't reasonable for him to assert that he and Stephen would "get more than [they] were prepared to take from" Wallis-Duffy. She offered him $384,000—he would only get around $75,000 on dissolution if the Mortgage had to be paid off.

[99] Again, James's own words at the time of the transaction, and before 1305 asserted that 823 had defaulted on the Mortgage, undermine his credibility and the credibility of 1305's claim.

6. Zuccato's Encouragement to Get "Creative" Isn't Probative

[100] In May 2017, James advised Stephen and Wallis-Duffy that he was surrendering possession of his "unit" to "the secured creditor". I infer that the "secured creditor" referred to in James's email is 1305.

[101] Stephen responded with optimism that the dispute would be resolved. Zuccato, who was copied on the email chain, replied to James: "I will leave it to your creativeness to respond accordingly, and look forward to your witty answer !" 823 argues that this email is the seed of James's plan to defraud 823. In other words, Zuccato encouraged James to get "creative" in his overall response to the impasse, which included forging documents. On May 23, 2017, 1305 sent its demand letter to 823. Zuccato's email was in response to James's reference to "the secured creditor".

[102] 823 also points to emails from James in June 2017. In particular, 823 argues that James was hinting at an extra-legal plan:

The events of the last year involving my communication with yourself, Margaret and her lawyers, (who appear to me as more versed in Stoddart's interests that those of her and the company] have caused me to totally re-assess and re- evaluate my position regarding 8230423 Ontario inc. as well as my rights and obligations to the property which it owns. time at which a non-litigious resolution was possible is long passed.

My recent decisions and the actions taken as a result flow directly from my experience with you, Margaret Wallis-Duffy, and, (as now appears obvious from the content and concerns of your recent emails), the interaction you have both clearly had with Don Stoddart since Margaret first approached me to buy my shares in 823042 Ontario Inc.

[103] I don't read these emails the same way as 823. Lawyers and businesspeople are often creative and innovative in how they manage their affairs and respond to disputes. Though James's humour is lost on me, I can see how Zuccato might have thought that James's verbose and rambling emails were "witty". And James's reference to "re-assessment" in the latter email could mean many things, including his intention to stop paying operating costs.

7. Lorenti is a Strawman for James

[104] 823 argues that Lorenti is a strawman for James. James responds that he has no interest in the claim—he's helping Lorenti only because he "got him into the mess". But he also said that if Lorenti was successful, James would "suggest" that he "lost $384,000 in this". For his part, Lorenti said he and James are friends and James "did the right thing", but left open the possibility that he may still sue James. I don't believe either of them.

[105] 823's argument requires some context, starting with a different lawsuit started by 1305 and involving James and Eveline:

2002-2003

• 1305 sold building materials to a Spanish company
• 1305 sold its invoice to Eveline to prepay for the building materials, and Lorenti guaranteed the loan
• The purchaser didn't pay for the materials
• As a result, 1305 and Lorenti were liable to Eveline under the factoring loan
• 1305 and Lorenti sued Export Development Canada, which had insured the sale—Eveline was holding "action on the factoring note in abeyance"
• Eveline agreed to pay $180,000 to Lorenti and reimburse his legal fees to "stickhandle" the litigation

August 2006

• Lorenti was preparing to close on a pre-sale investment property at 34 Autumn Ridge Court, Vaughan, through a numbered company
• Lorenti's mother, who was represented by James, offered to provide him a $410,000 mortgage
• At the same time, James proposed that Lorenti buy the Mortgage from McClenaghan
• James says that McClenaghan was fatally ill and wanted to resolve his financial issues, and James was too sick to buy the Mortgage himself
• Lorenti and McClenaghan negotiated a discounted transfer price of $150,000 (the capitalized interest on the Mortgage was allegedly worth over $275,000)
• Lorenti and McClenaghan memorialized their agreement but the document was lost
• Lorenti then obtained a $150,000 mortgage from R.A. & J. Family Investment Corporation for the Autumn Ridge investment property meaning he only needed $260,000 from his mother
• Lorenti intended to use the balance of his mother's loan ($150,000) to pay McClenaghan for the assignment of the Mortgage
• The $260,000 that Lorenti borrowed from his mother was registered as a second mortgage on the Vaughan property
• Lorenti allegedly signed the Transfer, and left it to James to register it

September 2006

• Lorenti was petitioned into bankruptcy by Speigel Nichols Fox LLP, which had purchased Lorenti's debt from TD Canada Trust
• James feared that 1305's lawsuit against EDC would "fall into" the trustee's hands
• SNF refused Lorenti's offer to settle their claim for $25,000
• Lorenti's mother hadn't given him the $150,000 loan proceeds and James hadn't registered the Transfer yet
• James paid $150,000 to McClenaghan on Lorenti's behalf, and Lorenti agreed that James could hold the Transfer as a pledge for 1305's debt to Eveline
• McClenaghan took the $150,000 from funds that he was holding for James through their joint investments that McClenaghan managed

2008

• Lorenti filed a consumer proposal, which his creditors approved
• James bought out RA&J's mortgage through Sterling
• Lorenti continued the lawsuit against EDC

2014

• EDC settled Lorenti and 1305's lawsuit for $792,068.25
• The funds were paid to Zuccato, who was handling James's money while James's bank accounts were frozen
• Zuccato, on behalf of James, paid $80,000 to Lorenti: the $180,000 "stickhandling" fee plus $50,000 for legal fees, less $150,000 that Lorenti allegedly owed James for the Mortgage
• Lorenti allegedly got the Transfer document, though he didn't register it on title until 2017

2017

• 1305's law firm, Burstein & Greenglass LLP, registered the Transfer

[106] To begin, Lorenti and James were not transparent about these transactions. Their affidavits were lengthy and convoluted. They both veered off into irrelevant evidence. They provided an unnecessary amount of detail, much of which was unsubstantiated by any documentary evidence. In doing so, Lorenti and James obscured facts that are important to understanding the narrative. Though James's and Lorenti's evidence was introduced by affidavit, they were still evasive, in that they both avoided direct answers, even in writing.

[107] For example, James, in his first affidavit, deposes: "I arranged for a private lender client to pay the debt owed to RA&J and secured the loan by taking an assignment of the first mortgage." That private lender was Sterling. This court has found that Sterling was James's "alter ego". See McFlow, at para 199. Even if James disagreed with those findings, he could've identified the private lender as Sterling, or tried to explain away the findings in McFlow. Instead, his affidavit hid the facts.

[108] James's credibility was also undermined by his refusal to admit facts that were established by other witnesses and the documentary evidence. For example, he refused to admit that he or Eveline lost $2.8 million because of Lorenti's consumer proposal. Though James tried to rely on the fact that the debt arose from a factoring invoice, his evidence is inconsistent with Lorenti's oral evidence. Similarly, James refused to admit that Zuccato lent him a million dollars, which is inconsistent with Zuccato's oral evidence and Zuccato's records.

[109] Lorenti's affidavit is similarly problematic. For example, he never directly explains why he didn't pay McClenaghan for the alleged transfer in 2011. I'm left to piece together the facts (i.e., his mother didn't give him the loan proceeds because he was, presumably, concerned that they would be seized in the bankruptcy, so James paid McClenaghan through a complicated set-off in their own business dealings). But if there's nothing untoward or unusual about this transaction, why not just say that? Another example: in Lorenti's affidavit, he said that James "controlled" Eveline but, in cross-examination, he said he didn't know if James owned Eveline.

[110] Their evidence leaves me with several questions that support 823's thesis that James is driving this litigation:

• What's 1305's business? Lorenti could only remember two transactions, both of which have led to litigation supported by James
• What's the nature of the relationship between Lorenti and James? James loaned Lorenti over $2.8 million through Eveline and $150,000 to buy the Mortgage
• Why did James lend any money to Lorenti after James lost over $2.8 million in Lorenti's consumer proposal?
• Why did James pay $180,000 as a "stickhandling fee" to Lorenti to pursue the EDC litigation? Why didn't Eveline sue 1305? Presumably 1305 would've added EDC as a third party, and there was no need to pay Lorenti to run the case
• What role did James play in the EDC litigation? Given that Eveline had the most at stake, what direction did he provide Lorenti and its lawyers?

[111] The evidence also discloses that James and Lorenti traded mortgages. James gave Lorenti a mortgage for $150,000. Lorenti gave James two mortgages for $350,000. There's no record of any mortgage agreements or payments schedules. 823 suggests that these are "phantom mortgages" intended to credit-proof both men. James appears to have done the same thing with McClenaghan. In James's November 2006 consumer proposal filing, he disclosed that he had two properties, each of which was fully encumbered to McClenaghan for $1.4 million. James deposed that he and McClenaghan "settled" their affairs in 2007, including paying off these mortgages. But there's no evidence that James did, in fact, payout these mortgages or even that he had $1.4 million to do so.

[112] James has also never sufficiently explained his role in this case:

• In Fall 2017, Greenglass emailed a draft demand letter to Lorenti and copied James—it's unclear why he did that if 1305 (not James) had retained Greenglass to demand payment on the Mortgage and, if necessary, sue 823
• James then responded with two long written communications, explaining the facts—this communication isn't in and of itself unusual, since James had more knowledge of the history of the matter, but in context it reads as if he's a co-party to the case
• In Fall 2024, James and Cremer asked Short to search McClenaghan's records for documents—if James is merely a witness to this case, it's unusual that he would be marshalling evidence from other witnesses and risking a waiver of privilege
• In July 2024, James asked Cremer to review 823's expert's report and identify any signatures that she made on McClenaghan's behalf—1305 was sharing trial evidence with James, and he was helping develop a rebuttal, again even though he was a mere witness
• He also sought information from Zuccato for Lorenti and Lorenti's lawyer, even though Lorenti and Zuccato know each other so Lorenti could've asked Zuccato directly
• After the summary judgment motion, Lorenti gave James the cross-examination transcripts because Lorenti was "upset"—again, there's nothing suspicious about James reading these given they were filed in court but, in context, I infer that he read them because he has a financial interest in this case

[113] I add here that, much to my surprise, Lorenti said he didn't know Short—he didn't know what role she played in this case, and he had no contact with her. I find it incredible that 1305's lawyers obtained an affidavit from Short, prepared her for trial, and called her as a witness, and their instructing client had no idea who she is. The only reasonable inference is that James, who marshalled Short's evidence, is directing this litigation.

[114] Lorenti was also evasive about the nature of his relationship with James. At trial, he first said that he reported James to the Law Society of Ontario. Then, he said that James self-reported to the Law Society, which doesn't make sense given that James is disbarred. Then, Lorenti corrected his evidence to say that he told James to self-report this matter to "his insurer". Lorenti also said that he hadn't sued James "yet". I don't believe Lorenti's evidence. Lorenti spun this narrative at trial to suggest that he and James were not working together but, mid-evidence, realized that his lie about reporting James didn't make sense, and changed his evidence.

[115] The inescapable conclusion from all this evidence is that James is directing this case for personal gain.

8. This Transaction Isn't Commercially Reasonable

[116] This transaction doesn't make sense. Lorenti's conduct and the alleged conduct of McClenaghan isn't reasonable for sophisticated businesspeople with significant experience in private mortgages.

[117] First, Lorenti didn't do any due diligence before buying the Mortgage. He's an experienced land developer and businessperson. He's been involved in other mortgage transactions, both as the mortgagee and the mortgagor. He's acquired several properties, all of which had mortgage financing, and acted as a private lender several times.

[118] But, here, he just trusted James's representations and his own "self-assessment" of the building. He didn't get copies of any of the Mortgage documents. He didn't ask for a copy of the charge or the renewal agreements. The only document he got stating the value of the Mortgage was the August 2006 letter, which was allegedly sent after the deal closed. He didn't do anything to satisfy himself that 823 could service this debt. He didn't get an appraisal of the building or request business financials, such as financial statements, ledgers, or payment history. He didn't seek to speak to 823's shareholders. The first time he contacted Stephen or Wallis-Duffy was in 2017, even though he was often "in and out" of that building meeting James and 823 hadn't responded to his renewal offer in 2011. There's no evidence that he did a title search. He relied on James's advice and representation that James "owned" the 2nd floor, even though a corporate search would've disclosed that Stoddart was on the board. That's not reasonable for a sophisticated businessperson making a significant investment, especially where he had to borrow the funds to make the purchase.

[119] Second, it doesn't make sense that McClenaghan sold the Mortgage at such a deep discount. Even if McClenaghan was fatally ill, there's no evidence that he was desperate for cash. James says that McClenaghan didn't want the Mortgage to "fall" into his estate because Laura wasn't a sophisticated businessperson. But, even then, the Mortgage wasn't a complicated financial instrument. It allegedly matured in 2011—the parties either would've agreed to renew it or Laura could've demanded that it be repaid in full, all with James's assistance.

[120] Alternatively, if McClenaghan needed cash in 2006, there's no evidence that he sought out any other buyers beside James and Lorenti. For example, he could've renegotiated with 823. If 823 did indeed owe over $275,000 in interest at that time and given Ken R's concern about the Mortgage depleting the building's equity, it would've been reasonable for McClenaghan to first negotiate with him. Even at $150,000, 823 would've reduced its liability by almost half.

[121] I also find James's role in this negotiation conflicted with his alleged loyalty to, and friendship with, McClenaghan. James and McClenaghan were such good friends that Zuccato, who had only met James a few times previously, was willing to be James's surety and live with him during James's house arrest. It's hard to believe that James, being McClenaghan's "best friend", business-partner, and lawyer, would facilitate such a one-sided transaction between McClenaghan and Lorenti. At the very least, I would've expected James to marshal some evidence that he sought out other buyers so McClenaghan could maximize his return.

[122] Third, Lorenti's evidence about the interaction between the sale of the Mortgage to 1305 and his consumer proposal is also unreasonable. He deposed that even though he assumed the Mortgage from McClenaghan in 2006 and both he and McClenaghan signed the Transfer document, he didn't "close" on the sale because he didn't advance the funds. James allegedly convinced him to pledge the Mortgage so, presumably, Lorenti didn't have to declare the Mortgage as an asset in any bankruptcy proceedings.

[123] But neither Lorenti nor James explains who owned the Mortgage during this period. McClenaghan allegedly wrote to 823 to advise it that 1305 was the mortgagee. James was copied. Even if the letter was sent before James and Lorenti agreed to the pledge, James, who was acting for almost everybody in this affair, had some obligation to correct the record. The reasonable person in James's position would've notified 823 that, in fact, it should contact him instead of Lorenti.

[124] Lorenti and James also didn't explain what would happen if, under their theory of the case, 823 repaid the Mortgage when it matured in 2011. Who would get the funds? Lorenti says 1305 didn't own the Mortgage ("He never gave me the asset"). And why did Lorenti write the alleged renewal letter in 2011, and send it on 1305's letterhead, if 1305 wasn't the mortgagee?

[125] Finally, Lorenti's conduct after he allegedly bought the Mortgage doesn't make sense. Between 2006 and 2011, he never once contacted 823 or its shareholders, even though they were in a significant business relationship together. Then, in 2011, he offered to renew the Mortgage. But he never received a response. If 1305's narrative was true, the reasonable person would have either followed up with 823 about a renewal or demanded repayment. Instead, Lorenti did nothing for six years. The Mortgage was allegedly in default, but he never once contacted Stephen or Wallis-Duffy, who shared a building with his lawyer, never mind sent a demand letter. For their part, Stephen and Wallis-Duffy say they had never heard of Lorenti or 1305 until his demand letter. Lorenti's first move to enforce the Mortgage, after it was in default for six years, came only after James's attempts to sell his shares to Wallis-Duffy failed. Lorenti never explained his actions.

[126] None of this makes any sense. This transaction isn't credible.

9. The Alleged Renewals Aren't Legally Valid

[127] Like James and Lorenti, McClenaghan was a sophisticated and experienced businessperson. He was a long-time real estate agent, and had a side hustle in private mortgages. It makes no sense that he would purport to renew the Mortgage by unilateral letter rather than a written agreement.

[128] Under the Standard Charge Terms, the "Charge may be renewed by an agreement in writing at maturity…." The Statute of Frauds, RSO 1990, c S.19, s 4, requires that an agreement to "to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them" must be in writing and signed by the "party to be charged". In Albrecht v 1300880 Ontario Inc., 2024 ONSC 3328, the court held that an agreement to "vary a mortgage" must be in writing to be enforceable (at para 24). It's arguable that a renewal of a charge must also be in writing.

[129] McClenaghan, given his line of business and experience, would've understood the risks of ignoring the Standard Charge Terms. Given that James, a lawyer, was a party to the Mortgage, it would have cost next to nothing in time, money, or resources to paper the renewal.

[130] Moreover, the 1996 letter reads like an offer not the memorialization of an agreement:

I am prepared to extend this mortgage to 823042 Ontario Inc. at the same rate of interest, continue with the ballooning of interest payments and the compounding of interest on them to maturity, for an to expire on August 31, 2001.

[131] There's no evidence that Ken R agreed to these terms, or that McClenaghan's letter followed an oral agreement.

9. The Letters and Transfer Are Fake

[132] 823 argues that the three renewal letters from 1996, 2001 and 2006, and the Transfer were forged by James or Lorenti to further their scheme. In support of this claim, it relies on: (a) opinion evidence from Ms. Bureau; (b) Short's evidence; and (c) my comparison of the handwriting.

[133] At bottom, I don't know what documents McClenaghan signed or authorized others to sign. He was lackadaisical with his signature, and his illness may have changed his handwriting. But the only reasonable inference is that the letters and Transfer are fake.

i. The Documents Are Prima Facie Authentic

[134] When a document is produced at trial, it's admitted if it's authentic. The trial judge must be satisfied that the document is what it purports to be. See S Lederman, M Fuerst & H Stewart, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 6th ed (LexisNexisCanada, 2022), at §18.02.

[135] The party seeking to rely on a document has the burden of establishing the "prima facie authenticity of the document". If the court is satisfied that the proponent of the document has discharged its onus, the burden shifts to the other party to prove forgery on a balance of probabilities. See 2089322 Ontario Corporation v DesRoches, 2023 ONSC 1681 at paras 37-38, aff'd 2025 ONCA 17, at para 37; Christina Georgiou Psoma (Estate), 2025 ONSC 1476, at para 25 (f)(iii).

[136] James deposes that he received the 1996, 2001 and 2006 letters from McClenaghan. He says he saw McClenaghan sign the Transfer.

[137] This evidence satisfies the low bar for proving that these documents are prima facie authentic. The documents appear to be letters and a form signed by McClenaghan. Even discounting James's evidence because of his lack of credibility, the handwriting looks like McClenaghan's signature. That is enough to be make the documents prima facie admissible.

ii. Ms. Bureau's Evidence Is Unreliable

[138] A lay witness or an expert witness can provide an opinion on the genuineness of the disputed handwriting by comparing it to a known sample of the person's handwriting. See Evidence Act, RSO 1990, c E.23, s 57; Canada Evidence Act, RSC 1985, c C-5, s 8. A court may draw a negative inference when a party has failed to call expert evidence to prove or rebut forgery. See 2089322 (Sup Ct), at para 35.

[139] Ms. Bureau is the principal of Bureau Forensic Document Examination. 823 tendered her as a handwriting expert. 1305 didn't challenge the admissibility of her evidence generally or her qualifications specifically. Ms. Bureau has worked as a handwriting expert since 2012. She's certified by the International Association of Document Examiners (IADE) and International Graphoanalysis Society (IGAS). She's taken courses offered by other document examiners, and regularly attends seminars organized by IADE and IGAS. She has published in the IADE's journal. Ms. Bureau's opinion evidence has been admitted in several other proceedings. See Laur v Ball (Estate), 2025 ONSC 1366; 6978991 Canada Inc. (Niva Services) v Karasevych, 5 February 2024 Toronto (Ont Sup Ct); and Web Objective Inc. v Stramacchia, 2022 ONSC 727.

[140] 823 provided Ms. Bureau with 25 "known samples" of McClenaghan's signature. She compared these signatures to the three renewal letters and the Transfer. Ms. Bureau opined that none of the alleged forgeries "were written by the same person who wrote the known signatures" of McClenaghan. Ms. Bureau also commented on how age or illness may affect handwriting: "Tremor is often seen in elderly or ill people who suffer from physical weakness. Despite the presence of tremor in writing, characteristics of authenticity are usually still present and identifiable." (emphasis in original)

[141] 1305 challenges Ms. Bureau's evidence on two grounds. First, it argues that her evidence should be given less weight because of deficiencies in her qualifications:

• She doesn't have any university or college-level training in forensic sciences
• Her education in this field was done through an apprenticeship and online courses
• Her certification is from a private, unregulated body

[142] I don't find this argument persuasive. There's no evidence that Ms. Bureau's education was subpar. There's also no evidence about the certifications provided by IADE or IGAS. The expert must possess special knowledge and experience going beyond that of the trier of fact. The admissibility of such evidence doesn't depend on how the expert's special knowledge and experience was acquired so long as the witness is sufficiently experienced in the subject matter in issue. See Wei v Ontario, 2025 ONSC 3580, at para 35. Ms. Bureau has been doing handwriting analysis for over 10 years, and has been repeatedly qualified by this court as an expert witness.

[143] Second, 1305 argues that not all the known samples were signed by McClenaghan, making Ms. Bureau's evidence unreliable. Cremer worked for McClenaghan's real estate firm until 1988, when she joined James's law firm as a bookkeeper and, later, office manager. She deposed that McClenaghan authorized her to sign his name to his companies' annual filings. She testified that she signed forms dated July 26, 1993, and June 23, 1994. Cremer's evidence is consistent with other witness's evidence about McClenaghan's practices. He was lackadaisical about his signature. He did sign documents himself. But he also gave his staff blank letterhead with his signature pre-signed. And he authorized Short to sign, or affix his digital signature to, documents.

[144] Ms. Bureau opined that the 1994 signature didn't "adhere to the natural writing patterns of other known signatures". But Ms. Bureau didn't say the same thing about the 1993 signature: "it didn't stand out in my internal consistency test so, it adheres to other characteristics of his known signatures. So, she could be mistaken, I don't know."

[145] As a result, I conclude that Ms. Bureau's opinion is unreliable. I must be satisfied that Ms. Bureau compared the disputed handwriting from McClenaghan with known signatures. But at least two documents weren't signed by McClenaghan. And one of those documents resembled his other "known" signatures, casting doubt on whether the known signatures are his handwriting.

[146] Separately, 1305 also argues that 823 hasn't proven that McClenaghan signed 18 of the other 25 specimen signatures. For many of the documents, no one witnessed McClenaghan sign the document or the handwriting wasn't legible. I don't find this argument persuasive. Christine Brannan worked with McClenaghan as a real estate agent for many years. Her evidence, which I accept, is that she believed that McClenaghan signed many of the documents provided to Ms. Bureau. The basis for her belief is that she saw him sign the documents or the documents were serious enough that he wouldn't have delegated the task. This latter evidence is consistent with Cremer's evidence that McClenaghan allowed her and Short to sign "less formal and impersonal documents".

iii. Short's Evidence Is Unreliable

[147] A lay witness may identify a person's handwriting if they've acquired sufficient familiarity with it, such as through a consistent exchange of correspondence or by observing numerous examples. This foundational knowledge is a prerequisite for offering an opinion on authorship. The frequency and number of these observations will determine the weight of their testimony, rather than its admissibility. See Sopinka on Evidence, at ¶12.32

[148] Short was McClenaghan's personal and business bookkeeper for almost 30 years. She often saw his signature and, again, signed documents on his behalf. She's in as good a position as anybody to testify about McClenaghan's signature. But her evidence was also unreliable.

[149] She produced a specimen of McClenaghan's signature from pre-signed letterhead. There's no dispute that this signature is in McClenaghan's handwriting:

[150] She testified that the signature on the August 2006 letter (top) didn't seem "odd" to her but the signature on the Transfer of Charge (bottom) "doesn't look like" McClenaghan's signature:

[151] Short's evidence is unreliable for three reasons. First, Short was equivocal about the signature on the Transfer of Charge because McClenaghan had recently been diagnosed with lung disease and was getting "progressively worse". Second, she testified that McClenaghan wrote his signature in "one fluid stroke". But the signatures on the pre-printed letterhead and the August 2006 letter aren't in a single stroke. Finally, the signatures on the Transfer of Charge and the August 2006 letter are more like each other than to the known signature.

iv. The Signatures Are Forged

[152] The trial judge can also compare disputed handwriting with admitted or proved handwriting in documents that are properly in evidence, and draw inferences about the evidence. See R v Megill, 2021 ONCA 253, at para 87; R v Abdi (1997), 34 OR (3d) 499, at paras 22, 23, and 25 (CA).

[153] Given that at least three people were signing McClenaghan's name for him and there's a dispute about at least one of his admitted handwritings, I can't conclude that the signatures on the renewal letters or the Transfer are fake only by looking at them.

[154] That said, the totality of the circumstantial evidence leaves me persuaded that the letters and the Transfer are fake. James or Lorenti drafted them to further this scheme. Someone placed McClenaghan's signature at the bottoms. It could be that they used pre-printed letterhead that McClenaghan signed. In that case, the signatures weren't forged, though the documents are still fake. Or, more likely, someone signed McClenaghan's name in their handwriting. That person could be one of the many people authorized to sign on his behalf, meaning that the handwriting is the same as other documents signed by third parties. Or it could be someone trying to approximate McClenaghan's signature. I can't say for sure given that McClenaghan had loose controls over his signature.

[155] But 823 has proven, on a balance of probabilities, that these documents aren't real. The 2011 letter is real, in that Lorenti signed it. But it's fake in that it was prepared to further Lorenti and James's fraud.

10. Conclusion

[156] Lorenti and James weren't honest with this court. Their evidence makes no sense. The transaction they describe is commercially unreasonable. There's little or no documentary evidence to support their claims. As a result, I find that 1305 isn't the valid holder of the Mortgage. The Transfer was a forgery.

[157] As McClenaghan and Ken R have passed away and James isn't a credible witness, I can't be sure what precisely happened between 1993 and 2003, when the Mortgage matured. But absent any evidence that James paid off the loan as he had to do under the Shareholders Agreement, the only reasonable inference is that he failed to do so, and he forfeited his shares in 823. The forfeiture of the shares doesn't invalidate the Mortgage. But 830 and 1303 have never sought to enforce the Mortgage.

C. Issue #3: Is 1305's Claim Statute-Barred Under the RPLA?

[158] No action to enforce a mortgage may be brought more than 10 years after the mortgage went into default unless, in the meantime, there has been a payment made or a written acknowledgment of the indebtedness. In that case, the limitation period is 10 years from the payment or acknowledgment. See RPLA, s 23(1); Maxwell v Altberg, 2023 ONCA 305, at para 3.

[159] 823 argues that 1305's claim is statute-barred because the Mortgage came due in August 1996, which was plainly more than 10 years before this claim was started. Given my finding that the renewal letters are forgeries, there's no evidence that the Mortgage was renewed after 1996. As a result, any action to enforce the Mortgage had to be started by August 2006. Even if James paid the principal by 2006, any action to enforce payment of the interest had to be started by 2016. In either case, the action is statute-barred.

IV. CONCLUSION

[160] To quote James, "oh these crooked webs we weave, when it is our intent to deceive!!" He should know—this whole claim is a fiction orchestrated by James and carried out by Lorenti. The foundation for their fraud is the forged letters and Transfer. Rather than accept that his failure to discharge the Mortgage meant that he was no longer a shareholder, James leveraged his long relationship with McClenaghan and Ken R to try to trick 823. If he and Lorenti were successful, they would, again in James's words, "make out like bandits": 1305 would get possession of the building for only investing time and legal fees in this lawsuit, and James would, as he suggested, get paid for his forfeited equity in the building.

[161] But this claim was ill-conceived: nothing about it makes any sense, and James's and Lorenti's own words and conduct disclose the truth.

[162] This action is dismissed. The parties will engage in meaningful discussions and negotiations respecting the costs of this trial. If they can't resolve costs, any party seeking costs will serve, file, and upload to Case Center costs submissions (1500 words), any relevant offers to settle, and their bill of costs by November 21, 2025, 4pm. The other party's responding submissions (1500 words) will be served, filed, and uploaded to Case Center by December 5, 2025, 4pm.

Agarwal J

Released: November 5, 2025

[1] The action was discontinued against The Canada Trust Company in August 2022.

[2] As an aside, it doesn't list any of his corporate assets and James stated that he hadn't operated a business in the last five years, which is plainly a lie.