Court File and Parties

Court File No.: CV-19-00628258-00CL
Date: 2025-01-14
Court: Superior Court of Justice – Ontario – Commercial List

Application under section 49.47 of the Law Society Act, R.S.O. 1990, c. L.8 and section 101 of the Courts of Justice Act, R.S.O. 1990 c. C.43

Applicant: The Law Society of Ontario
Respondents: Derek Sorrenti and Sorrenti Law Professional Corporation

Before: Peter J. Osborne

Counsel

• Michael De Lellis, Jeremy Dacks, and Blair McRadu, lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee of Building & Development Mortgages Canada Inc.
• George Benchetrit, Court-appointed Representative Counsel for Investors
• Naveed Manzoor and Lana Bezner, Trustee

Hearing Date

Heard: January 14, 2025

Endorsement

[1] This is a motion by FAAN Mortgage Administrators Inc. in its capacity as Court-appointed Trustee of the assets of Derek Sorrenti and Sorrenti Law Professional Corporation relating to their trusteeship and administration of syndicated mortgage loans and projects affiliated with Fortress Real Developments Inc. (FRDI), for an order:

a. approving the Settlement and Mutual Release Agreement entered into among the Trustee, Olympia Trust Company, BJL Properties Inc. and Soba Ottawa Inc. as of December 16, 2024 and authorizing the Trustee to enter intothe Settlement Agreement;

b. directing BJL and/or Soba, as the case may be, to pay the Settlement Payment, and if applicable, the Late Payment Fee, to the Trustee in accordance with the Settlement Agreement;

c. providing that all funds received by the Trustee in respect of the Settlement Payment are and shall be Realized Property as defined in the Soba Realized Property Order of this Court dated September 30, 2019; and

d. authorizing the Trustee to make a distribution to the Soba Investors in an amount equal to 65% of the Soba Realized Property, pro rata to the Soba Investors entitled to such funds, in accordance with the First Omnibus Order, as amended by the Third Omnibus Order.

[2] The Trustee relies primarily on its 7th Report dated December 18, 2024. Defined terms in this Endorsement have the meaning given to them in the motion materials unless otherwise stated.

[3] The Service List has been served with the motion materials. The relief sought today is unopposed.

[4] This matter was previously case managed by Justice Hainey and thereafter by Justice McEwen, who directed upon his retirement that I assume that role.

[5] For the reasons set out in the seventh Report, I am satisfied that the Settlement Agreement should be approved, and the Trustee authorized to enter into and perform it. The Settlement Payment results in a nominal return of approximately 11.3% of the outstanding principal when Previously Paid Interest is included.

[6] The Trustee is of the view, in consultation with Representative Counsel, that there are no alternatives to the Settlement Agreement that could have resulted in a more favourable outcome for the Soba Investors.

[7] As submitted by the Trustee, the only alternative to the Settlement Agreement would have been to continue to discharge the Soba Mortgage as required by the Soba Loan as the Remaining Units were sold, and that is expected to have resulted in no proceeds being repaid to the Soba Investors.

[8] The Settlement Agreement was determined by the Trustee to be appropriate since it provides certainty regarding the amount and timeframe for the payment in respect of the Soba Loan; as noted above, there are no favourable alternatives; and the Soba Settlement Agreement provides the Soba Investors with closure and at least a nominal payment. The Soba Investors have already endured a significant delay in realizing any recovery as against their loans over the period of six years that has passed since the maturity of the Soba Loan.

[9] Accordingly, and while the Settlement Agreement provides a recovery that is far from full, I am satisfied that it does offer the greatest opportunity for at least some recovery and crystallizes the outcome of the Soba Loan at this time.

[10] I also observe that contemporaneous with the service of the Seventh Report, the Trustee sent a notice to the 188 Soba Investors on December 18, 2024, disclosing the financial and other details of the Settlement Agreement and to provide notice of this hearing. As noted above, there is no opposition today.

[11] For all of these reasons, I am satisfied that the requested relief is appropriate. The order I have signed today has immediate effect without the necessity of issuing and entering.

Peter J. Osborne