Raponi v. Olympia Trust Company

CITATION: Raponi v. Olympia Trust Company, 2022 ONSC 4481

COURT FILE NO.: CV-20-00643593-00CP

DATE: 20220802

ONTARIO

SUPERIOR COURT OF JUSTICE

)

BETWEEN:

DANIELE RAPONI

)

Plaintiff

Garth Myers, Paul Bates, Serge Kalloghlian,

and David Milosevic for the Plaintiff

- and –

OLYMPIA TRUST COMPANY

Defendant

Ryan Morris and Daniel Szirmak for the

Defendant

Proceeding under the Class Proceedings

) HEARD: May 30, 31, and June 1, 2, 2022

Act, 1992

PERELL, J.

REASONS FOR DECISION

Contents

A.

B.

C.

D.

Introduction.......................................................................................................................... 2

Dramatis Personae .............................................................................................................. 4

Summary of the Parties’ Case Theories and Substantive Arguments.................................. 6

Procedural and Evidentiary Background ........................................................................... 10

E. Related Class Actions............................................................................................................ 14

F. Preliminary Evidentiary Rulings ........................................................................................... 15

The Missing Evidence........................................................................................................ 15

The Disqualification of Mr. Wells as an Expert Witness .................................................. 16

Should the Court Draw Adverse Inferences from the Testimony of Ms. Revol?.............. 17

G.

H.

Registered Savings Accounts under the Income Tax Act................................................... 19

Fortress Developments: The Fall of the Pied Piper of Syndicated Mortgages.................. 22

I. Summary of Syndicated Mortgage Estimated Loan Losses.................................................. 27

2

J. Olympia Trust’s Role in the Syndicate Mortgages ............................................................... 28

K.

Mr. Raponi’s Investment in the Collier Centre Project ..................................................... 37

L. Class Size............................................................................................................................... 37

M.

N.

Certification: General Principles........................................................................................ 38

The Cause of Action Criterion (s. 5 (1)(a))........................................................................ 39

Pleadings Sufficiency and the Plain and Obvious Test ..................................................... 39

Breach of Fiduciary Duty and of Trust (Statement of Claim, paras.79-92) ...................... 41

Breach of Contract (Statement of Claim, paras. 93-97)..................................................... 47

Negligence (Statement of Claim, paras. 98.-103).............................................................. 48

Summary Cause of Action Criterion.................................................................................. 52

Identifiable Class Criterion (s. 5 (1)(b)) ............................................................................ 54

General Principles: Identifiable Class Criterion ................................................................ 54

Analysis: Identifiable Class Criterion................................................................................ 54

O.

P. Common Issues Criterion (s. 5 (1)(c))................................................................................... 55

General Principles: Common Issues Criterion................................................................... 55

Analysis: Common Issues.................................................................................................. 57

Q.

Preferable Procedure Criterion (s. 5 (1)(d))....................................................................... 59

General Principles: Preferable Procedure Criterion........................................................... 59

Analysis: Preferable Procedure Criterion .......................................................................... 59

Representative Plaintiff Criterion (s. 5 (1)(e))................................................................... 60

General Principles: Representative Plaintiff Criterion ...................................................... 60

Analysis: Representative Plaintiff Criterion...................................................................... 60

R.

S. Conclusion............................................................................................................................. 61

Schedule “A” – Excerpts Income Tax Act and Income Tax Regulations...................................... 62

Schedule “B” – Excerpts Bulletin IT-320R3 and Income Tax Folio S3-F10-C1.......................... 65

A. Introduction

[1]

motion to certify his action against the Defendant Olympia Trust Company as a class proceeding.

Pursuant to the Class Proceedings Act, 1992,¹the Plaintiff, Daniele Raponi, brings a

[2] Between 2008 and 2017, Fortress Real Capital Inc. and Fortress Real Developments Inc.

¹S.O. 1992, c. 6.

3

(“Fortress Developments”) designed, promoted, and marketed syndicated mortgages for real estate

projects across Canada. A syndicated mortgage is a loan where multiple Lenders fund a loan that

is secured by a mortgage against the title of the land underlying the mortgage. The mortgage is

held by a trustee/mortgagee for the Lenders. Each Lender obtains a security interest proportional

to his or her contribution to the loan.

[3]

The immediate proposed class action concerns 54 land development projects and 69

syndicated mortgage loans marketed by Fortress Developments in the period between 2011 and

2017. Mr. Raponi was a “Lender” for the Collier Centre, one of the 54 projects. He funded a

portion of the loan from his self-directed registered savings account that he had arranged with the

Defendant Olympia Trust.

[4]

Fortress Developments was a Pied Piper, and it allegedly lured around 13,000 Lenders into

funding the syndicated mortgages by false representations. The design of the syndicated mortgages

was allegedly a sham to line the pockets of Fortress Developments and some of the “Borrowers”

by deceiving the Lenders. Some of the Borrowers were avatars of Fortress Developments and

participants in the alleged fraud.

[5]

The Lenders were provided with promotional material and copious legal documentation.

The Lenders like Mr. Raponi were unaware that the mortgage brokers and Fortress Developments

were receiving approximately 35% of the money up front and that much of the mortgage money

was not being used to build out the projects. The Lenders were unaware that the loan agreements

had “waterfall” provisions that permitted Borrowers and the owners of the Borrowers to receive a

return on their investment in the project before the Lenders were repaid and the project built. The

Lenders were allegedly given false “as is” appraisals or opinions of value for the land that was

being developed and mortgaged. After the Borrowers defaulted on the loans, the security of the

syndicated mortgage proved improvident. The Lenders were deceived and suffered losses.

[6]

While Fortress Developments is the alleged fraudster in this proposed class action, it is not

a defendant. Rather, Mr. Raponi, sues Olympia Trust with respect to the Class Members’

investment in the 69 syndicated mortgage loans. The Class Members are a subset of the larger set

of Lenders. The larger set of Lenders is comprised of: (a) Lenders who made their investments

with funds advanced from unregistered accounts, and (b) Lenders who made their investments in

the 69 syndicated mortgages from funds in savings accounts registered under the Income Tax Act.²

The trustee/mortgagee/administrator for the Lenders who advanced funds from unregistered

accounts were mortgage brokers or law firms. The trustee/mortgagee/administrator for the Lenders

who advanced funds from registered savings accounts was Olympia Trust.

[7]

Why is Olympia Trust being sued? The Borrowers, some of whom were avatars of Fortress

Developments, defaulted on the syndicated mortgages, and Mr. Raponi alleges that Olympia Trust

breached trust, fiduciary, contractual, and common law duties and is the cause of the putative Class

Members’ losses because, to quote Mr. Raponi’s factum: “Olympia Trust was a critical gatekeeper

without which [the Borrower] could not have accessed the capital it needed to finance its failed

development.”

[8]

Mr. Raponi’s principal allegation against Olympia Trust is that it failed to satisfy itself,

before, at the outset, and throughout the approximately 200 advances of the 69 syndicated

mortgages for the 54 projects that the syndicated mortgages were “fully secured” and “qualified

²R.S.C. 1985, c. 1 (5th Supp.).

4

investments” under the Income Tax Act and its regulations (Income Tax Regulations).³More

precisely, Mr. Raponi submits that before, at the outset, and throughout the approximately 200

advances made on the 69 syndicated mortgages that Olympia Trust failed to ensure that the amount

of loan did not exceed the fair market value of the Borrower’s property at the time of the advance.

[9]

For the reasons that follow, Mr. Raponi’s motion is dismissed. It is plain and obvious that

Mr. Raponi has no cause of action against Olympia Trust, which acted in accord with its trust,

fiduciary, contractual, and common law responsibilities. Olympia Trust was not a gatekeeper. It

was not a guardian angel. It ought not be made a scapegoat.⁴Mr. Raponi’s proposed class action

fails all of the certification criteria. His action should be dismissed even as an individual action.

B. Dramatis Personae

[10] The principal actors in this proposed class action are the following:

 Bates Barristers is Mr. Raponi’s co-lawyer of record and proposed co-Class Counsel.

 Blake, Cassels & Graydon LLP is Counsel for to Olympia Trust Company.

 Building and Development Mortgage Canada Inc. (“BDMC”) (formerly Centro

Mortgage Inc.) is a mortgage broker that promoted and marketed Fortress Developments’

syndicated mortgages. BDMC shared premises with Fortress Developments. BDMC was

the trustee/mortgagee/administrator in 44 of the 69 syndicated mortgages for the 54 land

development projects for Lenders who did not make their investments with funds from

registered savings accounts.

 Computershare Trust Company of Canada, (“Computershare”), a trust company that

acted as the trustee/mortgagee/administrator for some of the estimated 2,750 - 3250

syndicated mortgage Lenders who lent money to 54 Borrowers in the 69 syndicated

mortgages that are the subject of this proposed class action. Pursuant to the Income Tax

Act, the mortgage funds were advanced from savings accounts registered by

Computershare. (Computershare is not a party to this proposed class action.)

 FAAN Mortgages Administrators Inc. (“FAAN”). After some of the 69 syndicated

mortgages went into default, upon the applications of FSCO and of the Law Society of

Ontario, FAAN was appointed as trustee and administrator of the 69 syndicated mortgages

for the 54 development projects.

 FDS Broker Services Inc. (“FDS”) is a mortgage broker that promoted and marketed

Fortress Developments’ syndicated mortgages. FDS’s principals had formerly been

associated with BDMC, which promoted and marketed Fortress Developments’ syndicated

mortgages.

 FFM Capital Inc. (“FFM”), formerly Fortress Financial Management Inc., is a mortgage

broker that promoted and marketed Fortress Developments’ syndicated mortgages. FFM’s

principals had formerly been associated with BDMC, which promoted and marketed

³C.R.C., c. 945.

⁴Leviticus 16:10: “[T]he goat, on which the lot fell to be the scapegoat, shall be presented alive before the LORD, to

make an atonement with him, and to let him go for a scapegoat into the wilderness. [The Bible - King James

Version].

5

Fortress Developments’ syndicated mortgages.

 Pursuant to the Financial Services Commission of Ontario Act, 1997,⁵and the Mortgage

Brokerages, Lenders and Administrators Act, 2006,⁶the Financial Services Commission

of Ontario (“FSCO”) is the regulator of syndicated mortgages.

 FMP Mortgages Investment Inc. (“FMP”) is a mortgage broker that promoted and

marketed Fortress Developments’ syndicated mortgages. FMP’s principals had formerly

been associated with BDMC, which promoted and marketed Fortress Developments’

syndicated mortgages.

 Fortress Real Capital Inc. and Fortress Real Developments Inc., along with their

associated corporations (collectively “Fortress Developments”) developed, promoted,

and marketed 69 syndicated mortgages for the 54 land development projects that are the

subject of this proposed class action. In some instances, Fortress Developments or a

company owned by Fortress Developments was a Borrower whose project was being

financed by the syndicated mortgage. The principals of Fortress Developments are

Vincenzo Petrozza and Jawad Rathore.

 Kalloghlian Myers LLP is Mr. Raponi’s co-lawyer of record and proposed co-Class

Counsel.

 Milosevic Fiske LLP is Mr. Raponi’s co-lawyer of record and proposed co-Class Counsel.

 Olympia Trust Company is a non-deposit taking trust corporation formed under the

Alberta Loan and Trust Corporations Act,⁷with its head office located in Calgary, Alberta.

Olympia Trust is a wholly owned subsidiary of Olympia Financial Group Inc., an Alberta

corporation that is also headquartered in Calgary. Olympia Financial Group Inc. is a

reporting issuer in British Columbia, Alberta, and Ontario and its common shares are listed

for trading on the Toronto Stock Exchange. Olympia Trust was a

trustee/mortgagee/administrator for some of the estimated 2,750 - 3250 syndicated

mortgage Lenders who lent money to 54 Borrowers in the 69 syndicated mortgages that

are the subject of this proposed class action. Pursuant to the Income Tax Act, the mortgage

funds were advanced from registered savings accounts administered by Olympia Trust.

 Raponi, Daniele resides in the Township of King, Ontario. Mr. Raponi invested $95,000

in a Fortress Developments’ syndicated mortgage for the Collier Centre project, one of the

54 land development projects.

 Sorrenti, Derek and Sorrenti Law Professional Corporation are a lawyer and his law

firm. Mr. Sorrenti was the trustee/mortgagee/administrator in 10 of the 69 syndicated

mortgages for the 54 land development projects for Lenders who did not make their

investments with funds from registered savings accounts. As Mr. Sorrenti is a lawyer, he

was qualified to administer mortgages under the exemption in the Mortgage Brokerages,

Lenders and Administrators Act, 2006. In addition to being a lender and trustee, among

other things, Mr. Sorrenti and his firm provided legal advice to Lenders of the syndicated

mortgages.

⁵S.O. 1997, c. 28.

⁶S.O. 2006, c. 29.

⁷R.S.A. 2000, c. L-20, as amended.

6

C. Summary of the Parties’ Case Theories and Substantive Arguments

[11] A summary of the parties’ case theories and their substantive arguments follows.

[12] The background to Mr. Raponi’s case is that Fortress Developments and companies

associated with Fortress Developments designed, promoted, and marketed syndicated mortgages

for 54 land development projects across Canada. One of the land development projects was in

British Columbia, one was in Saskatchewan, one was in Manitoba, seven were in Alberta, and 44

were located in Ontario. The funds for the syndicated mortgages were advanced in tranches for

each of 69 syndicated mortgages. It is estimated that there were approximately 200 tranches for

the 54 projects and that approximately $600 million was raised by Fortress Developments to

finance the 54 land development projects across the country and across Ontario.

[13] Fortress Developments represented to Lenders that the 69 syndicated mortgages qualified

for registered savings accounts (Registered Retirement Savings Plans (“RRSPs”), Registered

Retirement Income Funds (“RRIFs”), Tax-Free Savings Accounts (“TFSAs”) and Registered

Education Savings Plans (“RESPs”)) under the Income Tax Act and its regulations.

[14] Thus, a non-corporate Lender had the choice of making his or her loan in the syndicated

mortgage using funds from an unregistered account or from a registered savings account. It is

estimated that there were around 13,000 Lenders. Of these, it is estimated that 2,750 – 3,250 of the

Lenders made their loans from funds in a registered savings account.

[15] Some, but not all, of the Borrowers were land development companies with reputable

records of successful land development projects; however, some of the Borrowers were

incarnations of Fortress Developments. In his affidavit for a search warrant, RCMP investigator,

Constable Williamson noted that Fortress Developments had represented that it had partnered with

over 25 builders and developers in British Columbia, Alberta, Saskatchewan, Manitoba, and

Ontario.⁸FAAN in its trustee’s report noted that many of the Borrowers were Fortress

Development entities or otherwise related to Fortress Developments.

[16] After the 69 syndicated mortgages were placed for the 54 projects, the Borrowers defaulted

on the primary, secondary, and tertiary mortgages, and they failed to complete the projects. After

mortgage enforcement proceedings, the Lenders in the syndicated mortgages lost all or

substantially all of their investment.

[17] Mr. Raponi’s theory of the case is that Olympia Trust is liable because it failed to satisfy

itself, before, at the outset, and throughout the approximately 200 advances of the 69 syndicated

mortgages for the 54 development projects that the syndicated mortgages were “fully secured” and

“qualified investments” under the Income Tax Act and its regulations (Income Tax Regulations),

which is to say that it is Mr. Raponi’s theory that Olympia Trust is liable because before and during

the life of the syndicated mortgage, before advancing funds, it failed to satisfy itself that the value

of the syndicated mortgage loan plus prior encumbrances did not exceed the fair market value of

the property at the time of the advance under the syndicated mortgage.

⁸For examples: (a) Fortress Real Developments Inc. was the developer of Capital Pointe and the guarantor of the

mortgage. (b) Fortress Real Developments Inc. was the developer of the Collier project. (b) Charlotte Adelaide

Tower was a project by Cityzen Development Group & Fortress Real Developments Inc. operating under the

corporate entity, Fortress Charlotte 2014 Inc. (c) The developers for Humberstone included Worthington Homes &

Fortress Real Developments Inc.

7

[18] Mr. Raponi’s submits that Olympia Trust is liable because it has trust, fiduciary,

contractual, and common law duties owed to the Class Members. The alleged duties are: (a) to

ensure that the 69 syndicated mortgage loans were fully secured; and (b) to warn the Class

Members that some or all of the syndicated mortgage loans appeared to be or would likely become

non-qualified investments under the Income Tax Act. Further, Mr. Raponi submits that Olympia

Trust’s breach of trust, fiduciary, contractual, and common law duties is the cause of the Class

Members’ losses because to quote Mr. Raponi’s factum: “Olympia Trust was a critical gatekeeper

without which [the borrower] could not have accessed the capital it needed to finance its failed

developments.”

[19] Mr. Raponi argues that the standard of care of a reasonable trustee/mortgage of a

syndicated mortgage charged with ensuring that the mortgage is compliant for a registered savings

account, entails the following eleven duties, promises, and obligations that:

(1) Before agreeing to act, Olympia Trust must review the syndicator’s marketing material

to make sure the promotional material is not misleading, and Olympia Trust must refuse to

act as trustee if the syndicator’s marketing materials contains misrepresentations.

(2) Before agreeing to act, Olympia Trust must identify risks to Lenders including the risk

that the syndicated mortgage can be subordinated after its execution, and Olympia Trust

must refuse to act as trustee in those circumstances.

(3) Olympia Trust must review the use to be made of the funds to be advanced to ensure that

the use of the funds is exclusively to develop the property and not for other purposes such

as consulting fees, marketing costs expenses, and sales commission, and Olympia Trust must

refuse to act as trustee if the use of the mortgage’s funds is for such purposes.

(4) Olympia Trust must review the loan agreement to ensure that it was permitted to fulfill

its obligation to communicate with and report to the Class Members.

(5) Olympia Trust must obtain appraisals and not use opinions of value to determine the fair

market value of the mortgaged lands.

(6) Olympia Trust must determine if a proper appraisal of the mortgaged property uses an

appropriate valuation method and must not advance funds for the mortgage relying on an

appraisal based on the “residual method of valuation” or an appraisal based on future

hypothetical assumptions.

(7) Olympia Trust must refuse to act as trustee if the value of the syndicated mortgage plus

prior encumbrances exceeds the appraised fair market value of the mortgaged land.

(8) Olympia Trust must refuse to act as trustee for any of the 69 syndicated mortgages if it

knows or ought to know that the value of the syndicated mortgage plus prior encumbrances

on any one of the syndicated mortgages plus prior encumbrances exceeds the appraised fair

market value of the land mortgaged in that syndicated mortgage. This duty is an aspect of

Mr. Raponi’s proposition that since Fortress Developments has been involved in prior

syndicated mortgage loans, then a prudent trustee should review the history of each prior

8

syndicated mortgage loan to determine whether the loan remained a qualified investment

throughout its term.

(9) Olympia Trust must determine whether Fortress Developments was ever involved in

syndicated mortgages where during the life of the loan, the amount of the loan plus the prior

encumbrances exceeded the fair market value of the mortgaged lands and, if so, Olympia

Trust should refuse to be trustee. This duty is an aspect of Mr. Raponi’s proposition that

since Fortress Developments has been involved in prior syndicated mortgage loans, then a

prudent trustee should review the history of each prior syndicated mortgage loan to

determine whether the loan remained a qualified investment throughout its term.

(10) During the life of the syndicated loan, Olympia Trust must conduct an annual review of

each and every syndicated mortgage loan, to determine whether the fair market value of the

land exceeds the value of the loan plus prior encumbrances and whether the borrower is in

good standing in making its mortgage payments, and if the syndicated mortgage is non-

compliant, Olympia Trust must inform the Canada Revenue Agency (“CRA”) of the non-

compliance. This duty is an aspect of Mr. Raponi’s proposition that since Fortress

Developments has been involved in prior syndicated mortgage loans, then a prudent trustee

should review the history of each prior syndicated mortgage loan to determine whether the

loan remained a qualified investment throughout its term.

(11) Before and during the life of the syndicated mortgage, Olympia Trust must advise Class

Members if the syndicated mortgage was at risk of being or of having become one in which

the value of the syndicated mortgage and prior encumbrances exceeded the fair market value

of the mortgaged land.

[20] It is a critical component of Mr. Raponi’s proposed class action that the providence of all

69 syndicated mortgages be adjudicated in one class action. Mr. Raponi advances what I shall label

the “Omnibus Class Action Argument.” The argument is that Olympia Trust’s duties must be

adjudicated “as a whole … because the status of prior Fortress Development Properties ought to

have impacted its responsibility and decision making for funding later Development Properties.”

[21] At the heart of Mr. Raponi’s case is the proposition that since Fortress Developments

Fortress) has been involved in prior syndicated mortgage loans, then a prudent trustee should

review the history of each prior syndicated mortgage loan to determine whether the loan remained

a qualified investment throughout its term. Mr. Raponi says that it is an absolute necessity to have

an Omnibus Class Action. Because of the professed critical importance and necessity of having an

Omnibus Class Action, I set out his argument as it is found in paragraphs 33-36 of Mr. Raponi’s

certification factum (The argument is repeated numerous times in the factum):

33. Olympia Trust’s duties and obligations applied for each Fortress Development Property.

34. At the same time, Olympia Trust’s duties and obligations also applied across the Fortress

Development Properties as a whole. A reasonably prudent Registered Plan trustee in the position of

Olympia Trust ought to have relied on information about existing Fortress Development Properties

(including whether each existing Fortress Development Properties was a qualified investment) in

determining whether it should act as trustee and make advances for each subsequent Fortress

Development Property syndicated mortgage loans.

9

35. Put another way, a reasonably prudent Registered Plan trustee should not consider each project

in isolation, because the status of prior Fortress Development Properties ought to have impacted its

responsibility and decision making for funding later Development Properties.

36. The significance of this interrelationship between the Fortress Development Properties is that a

class action and common issues trial determining Olympia Trust’s liability individually for each

Fortress Development Property (i.e., 54 separate class actions and 54 separate common issues trials)

is inappropriate. Instead, one common issues trial considering all the Fortress Development

Properties is necessary to adjudicate Olympia Trust’s liability.

[22] In its defence, Olympia Trust’s case theory and counterargument is that while it had duties:

(a) it owed no duties to ensure that the 69 syndicated mortgage loans were fully secured; (b) it

owed no duties to warn the Class Members that some or all of the syndicated mortgage loans

appeared to be or would likely become non-qualified investments; and (c) it owed no duties to

satisfy the enumerated duties and standard of care alleged by Mr. Raponi. Olympia Trust submits

that it is not the gatekeeper or guardian angel of the Class Members and ought not to be made the

scapegoat because the alleged duties do not exist in the circumstances of the 69 syndicated

mortgage loans.

[23] As the factual underpinning for its defence, Olympia Trust says that it did not design,

promote, or market the syndicated mortgages. Rather, after a Lender (a putative Class Member)

had received promotional and appraisal information about the project and about the syndicated

mortgage, and after he or she had received warnings about the risk of the investment and

recommendations to obtain investment, and after he or she received legal and business advice from

the mortgage broker and others, and after the Lender had received copious amounts of contractual

documents from and with the syndicator, broker, and Borrower, and after the Lender

acknowledged receiving advice and after he or she had already decided to participate in the

syndicated

mortgage,

Olympia

Trust

made

itself

available

to

be

the

trustee/mortgagee/administrator of a registered savings account for the syndicated mortgage loan.

[24] Olympia Trust says that after the putative Class Member applied to Olympia Trust,

Olympia Trust applied to the Canada Revenue Agency (“CRA”) for registration of the registered

savings account for the Class Member and the Class Member signed (a) an “Account Application”,

(b) a “Self-Directed Savings Plan Declaration of Trust”, (c) a “Lender Acknowledgment and

Consent Agreement” and (d) a “Mortgage Investment Direction and Indemnity Agreement”.

Olympia Trust submits that the terms of its agreements with the Class Members define and

preclude Olympia Trust having the alleged fiduciary, contractual, and common law duties with

their attendant standards of care.

[25] In its defence, Olympia Trust submits that the alleged duties and the alleged standards of

care do not exist and are a fabrication of Mr. Raponi looking for someone to atone for the deceits

of Fortress Developments.

[26] Further still, Olympia Trust submits that it is not the cause of the Class Members’ losses;

rather the syndicators, the mortgage brokers, the appraisers, and the 54 defaulting Borrowers are

the cause of the Class Members’ losses along with the attendant risks of development projects and

the economy. Olympia Trust submits that the die was cast before Olympia Trust became involved

and before each and every of the 200 advances of mortgage funds for the 69 syndicated mortgages.

In short, Olympia Trust submits that the Class Members may have claims against others, but they

do not have sustainable claims against Olympia Trust.

10

[27] Olympia Trust’s denial of responsibility is disputed by Mr. Raponi who, amongst other

things, submits that both as a matter of interpreting and applying the direct agreements between

the Class Members and Olympia Trust and also as a matter of overarching fiduciary, contractual,

and common law principles, the alleged duties exist and that Olympia Trust is the cause of the

Class Members’ losses because Olympia Trust could have and should have stopped the Class

Members’ losses from happening by not accepting the retainer as trustee/mortgage and by refusing

to advance mortgage funds to the Borrowers who ultimately defaulted and whose development

projects were not completed. Mr. Raponi submits that situated as it was, Olympia Trust ought not

to have agreed to act as the trustee for the registered savings accounts and having wrongfully taken

on that position it had a duty to warn, which it breached, before making any advances from the

registered savings accounts.

D. Procedural and Evidentiary Background

[28] On July 8, 2020, Mr. Raponi commences his proposed class action by Notice of Action.

[29] On August 7, 2020, Mr. Raponi files the Statement of Claim.

[30] On April 30, 2021, Mr. Raponi files a Fresh as Amended Statement of Claim.

[31] On April 30, 2021, Mr. Raponi brings a motion for certification of his action.

[32] On September 29, 2021, Olympia Trust delivers its Statement of Defence.

[33] In 2020-21, Olympia Trust delivers 143 Third Party Claims against Fortress Developments

as well as against the mortgage brokers, mortgage administrators, project developers, Borrowers,

valuators, lawyers, law firms, and investment advisors associated with the 69 syndicated

mortgages.

[34] On December 24, 2021, Mr. Raponi delivers an amended Notice of Motion for

Certification.

[35] Mr. Raponi proposes the following class definition:

All persons wherever they may reside or be domiciled, who invested in a syndicated mortgage loan

investment through a registered retirement savings plan, registered retirement income fund, tax-free

savings accounts, registered education savings plan and/or other registered plan accounts under

Division G of the Income Tax Act, R.S.C. 1985, c 1 (5th Supp) held in trust by Olympia Trust

Company that was secured by the land of any of the Development Properties (as defined in the

Statement of Claim).

[36] Mr. Raponi proposes the following 34 common issues:⁹

Breach of Trust

1. Did Olympia Trust Company owe duties as a Registered Plan trustee to the Class Members to:

(a) exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility that the Class Members’ Registered Plans held non-qualified investments?

⁹These common issues were submitted on the third day of the certification motion. At my request, the original list

of sixteen questions was amended to particularize the allegations against Olympia Trust.

11

(b) exercise the care, diligence and skill of a reasonably prudent person to determine the

current fair market value of the security for the Fortress Development Property syndicated

mortgage loans?

(c) advance Registered Plan funds to Borrowers only after satisfying itself based on

appropriate care, diligence and skill that the debt obligation secured by the mortgage was

fully secured and a qualified investment?

(d) advise, warn or notify the Class Members that some or all of the Fortress Development

Property syndicated mortgage loans appeared to be or would likely become non-qualified

investments?

(e) report to the Class Members if their Registered Plans ceased to hold qualified

investments?

(f) decline to act as Registered Plan trustee for some or all the Fortress Development

Property Registered Plan syndicated mortgage loans?

2. If so, did Olympia Trust Company breach some or all these duties?

Breach of Fiduciary Duty

3. Did Olympia Trust Company owe fiduciary duties to the Class Members to:

(a) exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility that the Class Members’ Registered Plans held non-qualified investments?

(b) exercise the care, diligence and skill of a reasonably prudent person to determine the

current fair market value of the security for the Fortress Development Property syndicated

mortgage loans?

(c) advance Registered Plan funds to Borrowers only after satisfying itself based on

appropriate care, diligence and skill that the debt obligation secured by the mortgage was

fully secured and a qualified investment?

(d) advise, warn or notify the Class Members that some or all of the Fortress Development

Property syndicated mortgage loans appeared to be or would likely become non-qualified

investments?

(e) report to the Class Members if their Registered Plans ceased to hold qualified

investments?

(f) decline to act as Registered Plan trustee for some or all the Fortress Development

Property Registered Plan syndicated mortgage loans?

4. If so, did Olympia Trust Company breach some or all these duties?

Breach of Contract

5. Did Olympia Trust Company have contractual obligations to Class Members to:

(a) exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility that the Class Members’ Registered Plans held non-qualified investments?

(b) exercise the care, diligence and skill of a reasonably prudent person to determine the

current fair market value of the security for the Fortress Development Property syndicated

mortgage loans?

12

(c) advance Registered Plan funds to Borrowers only after satisfying itself based on

appropriate care, diligence and skill that the debt obligation secured by the mortgage was

fully secured and a qualified investment?

(d) advise, warn or notify the Class Members that some or all of the Fortress Development

Property syndicated mortgage loans appeared to be or would likely become non-qualified

investments?

(e) report to the Class Members if their Registered Plans ceased to hold qualified

investments?

(f) decline to act as Registered Plan trustee for some or all the Fortress Development

Property Registered Plan syndicated mortgage loans?

6. If so, did Olympia Trust Company breach some or all these contractual obligations?

Negligence

7. Did Olympia Trust Company owe the Class Members a duty of care to:

(a) exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility that the Class Members’ Registered Plans held non-qualified investments?

(b) exercise the care, diligence and skill of a reasonably prudent person to determine the

current fair market value of the security for the Fortress Development Property syndicated

mortgage loans?

(c) advance Registered Plan funds to Borrowers only after satisfying itself based on

appropriate care, diligence and skill that the debt obligation secured by the mortgage was

fully secured and a qualified investment?

(d) advise, warn or notify the Class Members that some or all of the Fortress Development

Property syndicated mortgage loans appeared to be or would likely become non-qualified

investments?

(e) report to the Class Members if their Registered Plans ceased to hold qualified

investments?

(f) decline to act as Registered Plan trustee for some or all the Fortress Development

Property Registered Plan syndicated mortgage loans?

8. If so, what was the standard of care applicable to Olympia Trust Company?

9. Did Olympia Trust Company breach the standard of care?

Causation

10. Did Olympia Trust Company's breach of breach of trust, breach of fiduciary duty, breach of

contract and/or the standard of care cause damages to the Class Members?

Remedies

11. What remedies are available to the Class Members?

12. If damages, equitable compensation and/or disgorgement are available to the Class Members,

how should they be calculated?

13. If an accounting is available to the Class Members, what is the amount of funds that the trustee

must return to each trust?

13

14. Does Olympia Trust Company’s conduct justify an award for punitive damages? If so, in what

amount?

[37] Mr. Raponi’s Litigation Plan does not envision individual issues trials. The plan is

structured on the resolution of the common issues followed by an individual claims process based

on documents filed by each Class Member. The Litigation Plan’s details for the resolution of the

common issues are as follows:

TRIAL OR SUMMARY JUDGMENT ON THE COMMON ISSUES

If appropriate, the Plaintiff may seek summary judgment on one or more of the common issues. If

the Plaintiff does not seek summary judgment on common issues, or if any common issues remain

following a motion for summary judgment, the Plaintiff will seek the early appointment of the

common issues trial judge. The Plaintiff will address issues of trial management in advance of the

trial to ensure the orderly and efficient determination of any remaining common issues. The Plaintiff

will ask the Court to hold the hearing on the merits (whether a motion for summary judgment or

common issues trial) no later than one (1) year after the completion of the examinations for

discovery and the production of information required by the undertaking and any motions.

[38] Mr. Raponi supports his motion for certification with the following evidence:

a.

Affidavits dated December 24, 2021 and February 3, 2022 of Serge Kalloghlian.

Mr. Kalloghlian is a partner of Kalloghlian Myers LLP, co-Class Counsel.

b. Affidavit dated April 28, 2021 of Daniele Raponi. Mr. Raponi is the Plaintiff and

the proposed Representative Plaintiff.

c. Affidavits dated April 29, 2021 and February 7, 2022 of Edward G. Wells. Mr.

Wells is a business consultant who formerly was a business development manager for

Community Trust Company, one the few trust companies that like Olympia Trust, offered

services as a trustee/mortgagee for registered savings account syndicated mortgages.

d.

Excerpts from a redacted affidavit, circa April 2018, of Constable Martin

Williamson for the RCMP Integrated Market Enforcement Team in support of a request

for search warrant in respect of the premises of Fortress Developments, BDMC, FDS,

FFM, and FMP.

e.

Affidavit dated April 19, 2018 of Brendan Forbes in support of an application by

FSCO for a court order seizing the assets of BDMC, the major broker used by Fortress

Developments to market its syndicated mortgages. Mr. Forbes is a legal counsel of the

Ministry of the Attorney General assigned to the FSCO Branch of the Civil Law Division

to, among other things, prosecute regulatory proceedings under the Financial Services

Commission of Ontario Act, 1997.

f.

Affidavit without exhibits dated September 30, 2019 of Nadia Musclow in support

of an application by the Law Society of Ontario for a court order to seize the ten

syndicated mortgages administered by Mr. Sorrenti and his law firm. Ms. Musclow is the

Manager, Trustee Services of the Law Society of Ontario.

[39] Olympia Trust resisted the certification motion with the affidavits dated January 7, 2021

and March 2, 2022 of Kelly Revol. Ms. Revol is the Executive Vice President, Investment Account

Services, of Olympia Trust. She began her career at Olympia Trust in 2002 and had a succession

of increasingly senior roles at Olympia Trust in mortgages, operations and client services relating

to registered savings accounts, including RRSPs, RRIFs, and TFSAs.

14

[40] On March 3, 2022, Mr. Kalloghlian is cross-examined. (608 questions, 168 pages)

[41] On March 4, 2022, Mr. Raponi is cross-examined. (213 questions, 54 pages)

[42] On March 8, 2022, Ms. Revol is cross-examined. (208 questions, 56 pages)

[43] On March 11, 2022, Mr. Wells is cross-examined. (874 questions, 215 pages)

[44] On March 30, 2022, Olympia Trust brings a motion to strike the evidence of Mr. Wells.

[45] In April 2022, Mr. Raponi delivers his Factum (121 pages).

[46] Mr. Raponi’s Motion Record is 8,409 pages and his Books of Authorities is 4,380 pages.

[47] On April 29, 2022, Olympia Trust delivers its Factum (83 pages). Olympia Trust’s Motion

Record is 6,439 pages and its Book of Authorities is 1,620 pages.

[48] In May 2022, Mr. Raponi delivers his Reply Factum (102 pages).

[49] On May 3, 2022, Olympia Trust delivers its Factum (38 pages) for a motion to strike the

evidence of Mr. Wells.

[50] In May 2022, Mr. Raponi delivers his Responding Factum to Olympia Trust’s motion to

strike the evidence of Mr. Wells. (40 pages)

[51] The motion materials comprised approximately 23,000 pages.¹⁰

E. Related Class Actions

[52] Before the commencement of this action, five proposed class proceedings were brought

against Fortress Developments, and the Borrowers, mortgage brokers, investment advisors,

appraisers, and lawyers in relation to the syndicated mortgages pertaining to projects known as:

(a) Collier Centre, (b) Progress, (c) Sutton, (d) Harmony-Village and (e) Orchard, an Alberta

property. At one time, Olympia Trust was a party defendant to those actions.

[53] In 2017, I struck out the pleadings in the Collier Centre, Progress, Sutton, and Harmony

Village actions against Olympia Trust, with leave to amend.¹¹No amendments were made, and

the actions as against Olympia Trust were subsequently discontinued in July 2021, after the

commencement of Mr. Raponi’s action. The action against Olympia Trust with respect to Orchard

was also discontinued.

[54] The class actions with respect to these four properties continue against the other

defendants, on behalf of all Lenders who invested in the syndicated mortgages.

¹⁰The motion materials were abysmally curated. For example, Justice Hainey made a 16-page Order appointing

FAAN trustee on April 20, 2018. Mr. Raponi’s motion record contains twenty-seven copies of Justice Hainey’s

Order.

¹¹Madryga v. Fortress Real Capital Inc., 2017 ONSC 4792; Martino v. Fortress Real Capital Inc., 2017 ONSC

4790; McDowell v. Fortress Real Capital Inc., 2017 ONSC 4789; McDowell and Aversa v. Fortress Real Capital

Inc., 2017 ONSC 4791.

15

F. Preliminary Evidentiary Rulings

The Missing Evidence

[55] Notwithstanding that there was a voluminous motion record and Class Counsel had two

years to prepare for the certification motion, there were many significant gaps in the evidentiary

record for this certification motion.

[56] A less than comprehensive evidentiary foundation for a certification motion is an expected

and acceptable phenomenon for a certification motion, which occurs before documentary

production and which is a procedural, non-merits motion, with a low evidentiary standard.

However, in the immediate case, there was evidence that was feasible to produce and whose

absence raised serious issues about the class definition, common issues, and preferable procedure

criteria.

[57] For example, neither party filed the syndicated mortgage documents for any of the 69

syndicated mortgages until, during the course of the hearing, I asked Olympia Trust to file a sample

of the registered mortgage documentation, and Olympia Trust provided a copy of the

charge/mortgage and a copy of the transfer of charge for five of the development projects. Mr.

Raponi did not object to the admission of the additional documentary material, which added 109

more documents and another 1,000 pages to the motion record. The admission of the actual

syndicated mortgage instruments disclosed problems of commonality and about the class

definition.

[58] As revealed below, there is quite a bit of evidence and analysis from Mr. Raponi about the

common bad outcome of the 54 development projects and the common bad prospects of recovery

for the Class Members who invested in the syndicated mortgages. However, my review of the

evidence and the additional evidence revealed that there were some major uncommonalities;

visualize: (a) some - and I do not know precisely how many - of the 54 Borrowers were

incarnations of Fortress Developments; and (b) some - and I do not know how many - of the 54

Borrowers may have been independent land developers and some of these – and I do not know

how many – may have had proven track records as successful land developers. Further, I do not

know how many of the 69 syndicated mortgages involved Olympia Trust as opposed to

Computershare.

[59] In this last regard, Mr. Raponi’s motion record noted that he only had copies of 41 loan

agreements up to September 2016; he did not have copies of the remaining 28 loan agreements.

The parties seem to have argued the certification motion on the basis that Olympia Trust was

involved in all 69 syndicated mortgages. However, Mr. Raponi proffered the affidavit of Brendan

Forbes, whose affidavit was filed in support of the appointment of FAAN to administer the

liquidation of the syndicated mortgages. In his affidavit, Mr. Forbes notes that as of August 2017,

Olympia Trust announced that it would no longer accept new business from Ontario Lenders and

that after that date, Computershare Trust Company of Canada facilitated the investments in the

syndicated mortgages for Lenders who wished to invest funds held in registered savings accounts.

[60] Mr. Forbes’ evidence casts some doubt on whether Olympia Trust was the

trustee/mortgagee/administrator for all 69 of the syndicated mortgages as is alleged, and most

emphatically alleged in support of Mr. Raponi’s assertion that there must be an Omnibus Class

Action.

16

[61] For another example of evidence that could have feasibly been forthcoming for the

certification motion, is the appraisal evidence. The appraisals are the focus of the allegation that

Olympia Trust breached its standard of care. What was required from Mr. Raponi, but was not

made available, was an expert appraiser qualified to say that there was some basis in fact that the

appraisals for a particular project or for some or for all of the projects was not an “as is” evaluation

of the security or was an improper “as is” appraisal – at the time that the syndicated mortgage’s

funds were advanced.

[62] Rather than proffering what would have been helpful evidence, the evidence from Mr.

Raponi about the appraisals used for the syndicated mortgages was very poor. The appraisal

evidence was largely of two types. The first type of appraisal evidence was double or triple or who

knows the degree of hearsay evidence from persons who are not qualified to give appraisal

evidence. Mr. Wells is an example of a person unqualified to give appraisal evidence and his

informants and the qualifications of them are unknown.

[63] Another example of this poor quality of evidence was RCMP Investigator Constable

Williamson whose search warrant affidavit stated that there were “as is” appraisals, but that they

were inflated “as is” appraisals. Constable Williamson, who is no appraiser, was relying on who-

knows-whom, who may have been relying on who-knows-whom for information about the

adequacy of the appraisals. Moreover, so far as it went, Constable Williamson’s evidence

somewhat contradicts Mr. Raponi’s position that the appraisals were not “as is” appraisals at all.

[64] The second type of poor appraisal evidence was some sort of res ipsa loquitur double or

triple or who knows the degree of circumstantial evidence that inferred from the deficient ultimate

recovery made in enforcement or settlement of the mortgage indebtedness, that the appraisals of

the syndicated mortgages were palpably and patently deficient from the outset. In Fontaine v.

British Columbia (Official Administrator),¹²the Supreme Court of Canada debunked the use of

res ipsa loquitur as a basis to infer negligence. In the immediate case, however, this circumstantial

evidence was very weak because there was no one with expertise and as Alexander Pope noted a

little learning is a dangerous thing.

[65] Nevertheless, despite these deficiencies, as discussed later, the appraisal evidence is

sufficient for Mr. Raponi to scale the knoll of the some-basis-in-fact evidentiary standard to prove

that a problem with the appraisals may exist.

The Disqualification of Mr. Wells as an Expert Witness

[66] As noted above, Olympia Trust brought a motion to strike the evidence of Mr. Wells.

[67] Mr. Wells is the former Business Development Manager of Community Trust one of four

financial institutions that offer services as a trustee/mortgagee for registered savings accounts with

syndicated mortgage investments. Mr. Wells was proffered by Mr. Raponi as an expert witness to

provide evidence on the duties and the standard of care of trustees of registered savings accounts

that invest in syndicated mortgages.

[68] As explained in separately released Reasons for Decision, I do not admit Mr. Wells’

evidence for this certification motion.¹³

¹²[1998] 1 S.C.R. 424.

¹³Raponi v. Olympia Trust Company 2022 ONSC 4480.

17

[69] However, as it happens, very little turns on the rejection of Mr. Wells’ evidence because

very much of it was legal opinion and argument or hearsay or hearsay upon hearsay about the

appraisal evidence for which Mr. Wells was just a mouthpiece for Class Counsel. At the hearing

of the certification motion, relying on the voluminous materials put on the record by both parties,

Class Counsel made the same arguments relying on the same documentation, statutory material,

and hearsay, as Mr. Wells did.

Should the Court Draw Adverse Inferences from the Testimony of Ms. Revol?

[70] Mr. Raponi submits that pursuant to rule 34.15 (1) of the Rules of Civil Procedure,¹⁴this

court should draw adverse inferences against Olympia Trust. The requested adverse inferences

come in three tranches of questions.

[71] For the first tranche of three adverse inferences, Mr. Raponi relies on Ms. Revol’s refusal

to answer the following six questions.

1. Does Olympia Trust have a procedures manual that describes what is to be done and not done by

mortgages services when deciding to advance funding under a syndicated mortgage loan?

2. What was Olympia Trust’s review officer supposed to determine from opinions of value?

3. To provide information about Fortress’s business acceptance practices.

4. Is there a record in Olympia’s possession of what it will accept as evidence of value?

5. To produce Olympia Trust’s record of syndicated mortgage acceptance criteria.

6. Did Olympia Trust treat the residual method of valuation as satisfactory for purposes of funding

a syndicated mortgage loan?

[72] From Ms. Revol’s refusal to answer these six questions, Mr. Raponi asks the court to draw

the following three adverse inferences:

1. Olympia Trust did not have adequate business acceptance practices to act as a Registered Plan

trustee or, if it did, it did not meet its business acceptance practices for the Registered Plan Fortress

Development Property syndicated mortgage loan investments.

2. Olympia Trust did not meet its internal funding requirements for the Registered Plan Fortress

Development Property syndicated mortgage loan investments.

3. Olympia Trust treated the “residual method” of property valuation as a sufficient basis to advance

Registered Plan funds for the Fortress Development Property syndicated mortgage loan investments.

[73] For the second tranche of two adverse inferences, Mr. Raponi relies on Ms. Revol’s refusal

to answer the following three questions.

1. Did Olympia Trust assess the Fortress business model in any way?

2. What was Olympia Trust’s understanding of the level of risk involved in the Fortress syndicated

mortgage loan investments?

3. Describe the risks in the Fortress syndicated mortgage loan investments.

[74] From Ms. Revol’s refusal to answer these three questions, Mr. Raponi asks the court to

¹⁴R.R.O. 1990, Reg. 194.

18

draw the following two adverse inferences:

1. Olympia Trust did not assess the Fortress Development Property business model in any way.

2. Olympia Trust had undisclosed knowledge of risks associated with the Fortress Development

Property syndicated mortgage loan investments.

[75] For the third tranche for one adverse inference, Mr. Raponi relies on Ms. Revol’s refusal

to answer the following question.

1. Did Olympia Trust have any dealings with FSCO in connection with their investigations into

Fortress?

[76] Olympia Trust refused to have Ms. Revol answer these three tranches of questions on the

grounds that the questions were not proper questions. More precisely, Olympia Trust’s position

was that the questions were merits questions not material and not relevant to the certification

motion criteria, which are procedural and not merits based measurements.

[77] Rule 34.15 (1) states:

Sanctions for Default or Misconduct by Person to be Examined

34.15 (1) Where a person fails to attend at the time and place fixed for an examination in the notice

of examination or summons to witness or at the time and place agreed on by the parties, or refuses

to take an oath or make an affirmation, to answer any proper question, to produce a document or

thing that he or she is required to produce or to comply with an order under rule 34.14, the court

may,

(a) where an objection to a question is held to be improper, order or permit the person being

examined to reattend at his or her own expense and answer the question, in which case the

person shall also answer any proper questions arising from the answer;

(b) where the person is a party or, on an examination for discovery, a person examined on

behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence;

(c) strike out all or part of the person’s evidence, including any affidavit made by the

person; and

(d) make such other order as is just.

[78] Relying on Snelgrove v. Steinberg,¹⁵and 236523 Ontario Inc. v. Nowack,¹⁶Mr. Raponi

submits that notwithstanding that a party has not brought a preliminary refusals motion, a court

may draw an adverse inference against the opposing party because of his or her refusal to answer

a proper question on his or her examination.

[79] I agree with Olympia Trust’s position that the questions Ms. Revol refused to answer were

not proper questions for this certification motion and, therefore, I shall not draw any adverse

inferences from Ms. Revol’s refusals.

[80] Moreover, some of the questions posed to Ms. Revol were justifiably refused on grounds

of proportionality or unanswerability (vague, unclear, inconsistent, unintelligible, redundant,

superfluous, repetitious, overreaching, fishing, beyond the scope of the examination, speculative,

¹⁵1995 1526 (ON CA).

¹⁶2013 ONSC 7479.

19

unfair, oppressive, or a matter of rhetoric or argument).¹⁷

[81] Further still, and more to the point, even if the questions were proper and Ms. Revol’s

refusals unjustified, the adverse inferences requested do not logically follow from the refusal and

are merits determinations that should be determined on a full evidentiary record and not on the

basis of the miniscule some-basis-in-fact standard used for a certification motion.

[82] In the discussion of the facts below, I may draw inferences, but those inferences will not

be based on Ms. Revol’s refusals to answer the three tranches of questions.

[83] Much like the situation with Mr. Raponi or Mr. Wells’ absent evidence, very little turns on

the absence of additional evidence from Ms. Revol in determining whether or not Mr. Raponi’s

case was certifiable.

G. Registered Savings Accounts under the Income Tax Act

[84] Fundamental background information for Mr. Raponi’s proposed class action, is the matter

of the regulation of registered savings accounts under the Income Tax Act and the Income Tax

Regulations. The relevant excerpts of the Income Tax Act and the Income Tax Regulations are set

out in Schedule “A” to these Reasons for Decision.

[85] The CRA provides guidance to trustees and administrators of registered savings accounts

through tax bulletins and tax folios. Pertinent to the immediate case are: (a) Bulletin IT-320R3 and

(b) Income Tax Folio S3-F10-C1, which updated and replaced the tax bulletin. The relevant

provisions of these guidelines are set out in Schedule “B” to these Reasons for Decision.

[86] Olympia Trust provides its clients with self-directed savings accounts, including RRSPs,

RRIFs, TFSAs, Locked-in Retirement Accounts (LIRAs) and Life Income Funds (LIFs). In the

immediate case, these accounts were made available for the Lenders in the Fortress Developments

syndicated mortgages. (It appears that Computershare also provided registered savings accounts

to some Lenders.) The nature and operation of these registered accounts is at the heart of all of Mr.

Raponi’s substantive arguments about his various causes of action against Olympia Trust.

[87] Part XI.01 of the Income Tax Act specifies the tax treatment of registered savings accounts.

Under the Income Tax Act, registered savings account plans permit investors to defer tax on

invested funds and/or gains on investments until funds are withdrawn from their registered savings

account. Investing through a registered savings account provides investors with tax advantages in

respect of the gains on their investments but exposes them to potential adverse tax consequences

if the investment does not meet the requirements of the Income Tax Act and its regulations.

[88] For a Lender to hold a syndicated mortgage investment in a registered savings account

under the Income Tax Act, he or she must open a registered account with a custodial trustee or an

approved financial institution. The trustee will register the investor’s account with the Canada

Revenue Agency (“CRA”).

[89] Olympia Trust was the custodial trustee for some of the 69 syndicated mortgages for the

54 development projects. The certification motion was argued on the basis that Olympia Trust was

the trustee/mortgagee/administrator for all of the syndicated mortgages for Lenders who advanced

funds from a registered savings account.

¹⁷Ontario v. Rothmans Inc., 2011 ONSC 2504 (S.C.J.), leave to appeal refused 2011 ONSC 3685 (Div. Ct.).

20

[90] Pursuant to sections 146(1), 146.1(1), 146.2(6), and 146.3(1) of the Income Tax Act,

investments that meet the definition of a “qualified investment” may be held in a registered savings

account. Sections 146(1) and 204 of the Income Tax Act provide the definition of a “qualified

investment” for a trust governed by an RRSP and similar definitions are provided for RRIFs,

TFSAs, and RESPs.

[91] Regulation 4000 (1)(j) of the Income Tax Regulations, set out in Schedule “A” to these

Reasons for Decision, prescribes that a debt obligation (such as a syndicated mortgage), is a

qualified investment for registered savings accounts if it is “fully secured by a mortgage … in

respect of real … property situated in Canada, or would be fully secured were it not for a decline

in the fair market value of the property after the debt obligation was issued …”

[92] The Income Tax Act and its regulations do not define “fully secured,” but s. 1.33 of the

Income Tax Folio S3-F10-C1 provides that:

In general, a debt obligation would be considered to be fully secured if the value of the real or

immovable property pledged by the borrower to the lender in the event of default is sufficient to

cover the full amount of the principal and interest outstanding on the loan. For this purpose, any

decline in the fair market value of the property after the debt obligation was issued can be ignored.

[93] The Income Tax Act and its regulations do not define “fair market value,” but s. 1.96 of the

Income Tax Folio S3-F10-C1 states:

[…] While the term fair market value is not defined in the Act, it generally is considered to mean

the highest price expressed in terms of money that can be obtained in an open and unrestricted

market between informed and prudent parties, who are dealing at arm's length and under no

compulsion to buy or sell. The determination of fair market value is a question of fact.

[94] Thus, to be eligible as an investment in a registered savings account, a syndicated mortgage

had to be a “qualified investment” under paragraph 4900(1)(j) of the Income Tax Regulations,

meaning that it had to be “fully secured” by a mortgage or would be fully secured were it not for

a decline in the fair market value of the property after the debt obligation was issued.

[95] Section 207.01 (5) of the Income Tax Act, set out in Schedule “A”, requires that the trustee

of a registered plan “shall exercise the care, diligence and skill of a reasonably prudent person to

minimize the possibility that a trust governed by the registered plan holds a non-qualified

investment.” Mr. Raponi says that s. 207.01(5) is critical to his case because it is “the foundation

of Olympia Trust’s duties and obligations to Class Members.”

[96] At the heart of s. 207.01(5) is the notion of minimizing the possibility of the secured savings

account holding a non-qualified investment. How the trustee is to minimize the possibility that the

registered savings accounts might hold a non-qualified investment is not spelled out in the Income

Tax Act or the Income Tax Regulations. However, sections 1.92-1.98 of Folio S3-F10-C1 provide

guidance with respect to the obligations of the registered savings accounts trustee as follows:

Obligations of registered plan trustees

1.92 Responsibility for compliance with the qualified investment rules generally lies with the trustee

of the registered plan. […] In some cases, the trustee may require the plan’s controlling individual

[in the immediate case the Class Member/Lender] to provide the trustee with evidence for the

purpose of determining qualified investment status. In these cases, the trustee must exercise due

diligence in satisfying itself that the documentation provided is sufficient. The CRA may ask the

trustee to demonstrate how it determined that a particular property was a qualified investment.

21

1.93 Subsection 207.01(5) requires the trustee of an RRSP, RRIF, RDSP, or TFSA, or the promoter

of an RESP, to exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility of the plan holding a non-qualified investment. If a trustee […] fails to comply with this

obligation, the trustee […] is liable to a penalty under subsection 162 (7).

[…]

1.95 The trustee of an RRSP, RRIF, RDSP, or TFSA, […], is also required to report information to

the CRA and the controlling individual of the plan [in the immediate case, the Class

Member/Lender] if the plan begins or ceases to hold a non-qualified investment in a year. For

information on these reporting obligations, refer to: […]

1.96 The Act requires that all contributions, acquisitions and dispositions of property, distributions,

and any other transactions involving a registered plan occur at fair market value. Otherwise, adverse

tax consequences will arise. While the term fair market value is not defined in the Act, it generally

is considered to mean the highest price expressed in terms of money that can be obtained in an open

and unrestricted market between informed and prudent parties, who are dealing at arm's length and

under no compulsion to buy or sell. The determination of fair market value is a question of fact.

1.97 It is the responsibility of the registered plan trustee to determine the fair market value of

property involved in a transaction. […] In some cases, the trustee may require the controlling

individual of the registered plan [in the immediate case, the Class Member/Lender] to provide

evidence to determine the property’s fair market value. In these cases, the trustee must exercise due

diligence in satisfying itself that the documentation provided is sufficient. The CRA may ask the

trustee to demonstrate how the fair market value of a particular property was determined.

1.98 Except for RESPs, it is common for registered plan trustees to have an agreement with an agent

or mandatary, such as an investment broker, that allows the agent or mandatary to provide the trustee

with certain administrative and investment functions. However, the ultimate responsibility for

ensuring that a registered plan complies with the qualified investment rules always remains with the

trustee.

[97] Pausing here - and this is crucial to Mr. Raponi’s theory of why Olympia Trust is liable for

the Class Members’ losses – Mr. Raponi submits that s. 207.01(5) of the Income Tax Act’s directive

that Olympia Trust be reasonably prudent to minimize the holding of a non-qualified investment

along with the guideline provisions of Income Tax Folio S3-F10-C1 are the source of and

establishes Olympia Trust’s trust, fiduciary, and contractual duties.

[98] In other words, it is Mr. Raponi’s argument that these provisions are in effect read into the

various agreements between the Lender and Olympia Trust with the result that Olympia Trust is

obliged to determine the current fair market value of the security for the syndicated mortgage and

to advance funds only if the syndicated mortgage is fully secured. Further, it is Mr. Raponi’s thesis

that Olympia Trust is obliged to warn the Class Members if some or all of the syndicated mortgage

loans appeared to be or would likely become not fully secured. Moreover, it is Mr. Raponi’s critical

submission that Olympia Trust has trust, fiduciary, and contractual duties to decline to act as

trustee if it ought to have determined that any of the syndicated mortgage loans were not fully

secured.

[99] I will discuss the merits of Mr. Raponi’s critical argument below, but I foreshadow to say

that I shall show that it is plain and obvious that Olympia Trust does not have the alleged trust,

fiduciary, and contractual duties based on s. 207.01(5) of the Income Tax Act.

[100] I shall end this discussion of the regulation of registered savings accounts under the Income

Tax Act and its regulations by what is entailed by the Income Tax Act if a trustee does not comply

22

with its obligations under s. 207.01(5) of the Act.

[101] If an investment in a registered savings account is not a qualified investment, then pursuant

to sections 162 (7) and 207 of the Income Tax Act, set out in Schedule “A”, there are penalties

imposed on the trustee. If an investment ceased to be “fully secured,” the custodial trustee must

report to the Canada Revenue Agency and the investment would become disqualified for

preferential tax treatment. If the custodial trustee failed to report, it could be subject to a penalty

“of the greater of $100 and the product obtained when $25 is multiplied by the number of days,

not exceeding 100, during which the failure continues;” i.e., the trustee would be subject to a

minimum penalty of $100 to a maximum penalty of $2,500.

H. Fortress Developments: The Fall of the Pied Piper of Syndicated Mortgages

[102] Between 2008 and 2017, Fortress Developments designed, promoted, advertised, and

marketed syndicated mortgages for residential and commercial real estate projects across Canada.

It was a Pied Piper of syndicated mortgages. The immediate case concerns 54 land development

projects and 69 syndicated mortgage loans (eight projects have more than one syndicated mortgage

loan). Fortress Developments raised over $600 million from these mortgages, and it allegedly lined

its own pockets. Fortress Developments lured approximately 13,000 Lenders into funding the

mortgages by false promises of the rewards of investing in what was essentially a scam.

[103] To be fair and to avoid confusion and because it is relevant to the analysis of commonality

of the facts discussed later in these Reasons, it should be noted that Fortress Developments was

involved in more than 54 land development projects across Canada. I cannot say precisely how

many, but some of projects and mortgages apparently were successful and the Lenders received

their anticipated returns.

[104] To finance the 54 land development projects, the Borrowers, many of whom were

emanations of Fortress Developments, arranged first mortgages from financial institutions, and

then they raised money through syndicated mortgage loans that were secondary or tertiary to the

prior encumbrances. The loan funds were typically to be advanced in tranches.

[105] Some of the Lenders in the Fortress Developments syndicated mortgages made their

investment through an investment account that was not registered under the Income Tax Act. In

contrast, the putative Class Members in the immediate case invested through registered savings

accounts under the Income Tax Act.

[106] Fortress Developments and the parties responsible for brokering and administering the

syndicated mortgages were required to be licensed under the Mortgage Brokerages, Lenders and

Administrators Act, 2006 and they were subject to regulatory oversight by FSCO. Among other

things, FSCO required the licensees to provide accurate representations and adequate disclosures

to Lenders regarding the projects and syndicated mortgages and to take reasonable steps to ensure

the suitability of these investments.

[107] Brokers of the Syndicated Mortgages were required to provide detailed disclosure

statements to Lenders in a form prescribed under the Mortgage Brokerages, Lenders and

Administrators Act, 2006 that detailed, among other things, the costs and terms of the syndicated

mortgages, the appraised value of the project’s land based on a valuation obtained by the broker,

and the amounts of any other mortgages registered on title to the property.

[108] FSCO required Fortress Developments to encourage Lenders to obtain independent legal

23

advice before deciding to invest in a syndicated mortgage.

[109] Lenders learned about Fortress Developments’ syndicated mortgages through promotional

materials prepared for Fortress Developments or through their own investment advisors or

mortgage brokers. Many of the eventual Lenders, like Mr. Raponi, attended promotional seminars.

While the nature and content of the promotional materials varied across projects, the marketing

material typically included: (a) a description of the project, (b) the total value and term of the loan,

(c) the purpose of the loan, (d) the status of the project, and (e) the eligibility of the syndicated

mortgage as a registered savings account under the Income Tax Act.

[110] The Lenders were given the materials prescribed by FSCO, and eventually the Lenders

signed numerous contracts with the participants in the syndicated mortgage.

[111] Olympia Trust is not a licensed mortgage administrator or broker under the Mortgage

Brokerages, Lenders and Administrators Act, 2006. Olympia Trust was not involved in the

structuring, operation, promotion, or sales of the syndicated mortgages. Olympia Trust typically

had no contact with Lenders before their decision to invest.

[112] To elucidate the run up to participating in a syndicated mortgage, before entering into a

syndicated mortgage loan investment, a Lender – including the Class Members – would receive

and they would sign a “Form 1 – Investor/Lender Disclosure Statement for Brokered

Transactions.” This is a form issued by FSCO pursuant to the Mortgage Brokerages, Lenders and

Administrators Act, 2006.

[113] For present purposes, the following provisions of Form 1 are pertinent to understanding

the respective obligations and duties of the Class Member and Olympia Trust.

FORM 1 – INVESTOR/LENDER DISCLOSURE STATEMENT FOR BROKERED

TRANSACTIONS

Important Disclosure Duties

In this Investor/Lender Disclosure Statement For Brokered Transactions (“Disclosure

Statement”), mortgage brokerages are required to provide you with the completed Disclosure

Statement that contains important information in connection with this transaction.

A brokerage must:

[…]

5. Disclose material risks about the transaction that you should consider.

[…]

7. Take reasonable steps to ensure that any mortgage investment the brokerage presents

to you is suitable having regard to your needs and circumstances.

[…]

You must receive these disclosures in writing and acknowledge receipt of them. You should

keep a copy for your records

Important: This form is required by law and will provide the prospective investor/lender with

important information to assist you in making a decision about whether to invest/lend.

24

[…]

Section 1 - Caution 1.

2. All mortgage investments carry a risk. There is a relationship between risk and return. In general,

the higher the rate of return, the higher the risk of the investment. You should very carefully assess

the risk of the mortgage transaction described in this Disclosure Statement, the Addendum (Form

1.2) if applicable and in the supporting documentation before making a commitment.

3. Syndicated mortgages (defined as more than one investor/lender) may carry additional risks

pertaining not only to the risk of default but also to the risks associated with participating in a

syndication and the financing of real estate transactions.

4. Inexperienced investors are not advised to enter into mortgage investments.

[…]

7. You are strongly advised to obtain independent legal advice before committing to invest.

8. This mortgage investment cannot be guaranteed by the mortgage brokerage. If you are not

prepared to risk a loss, you should not consider mortgage investments.

9. If this investment is for a mortgage to fund a development, construction or commercial project,

the repayment of this investment may depend on the successful completion of the project, and its

successful leasing or sale.

10. If you are one of several investors in a syndicated mortgage, you may not be able to enforce

repayment of your investment on your own if the borrower defaults.

11. You should ensure you have sufficient documentation to support the property valuation quoted

in this Disclosure Statement. The property value may decrease over time, including the period

between the date of the most recent appraisal and the date you complete the transaction. A decline

in property value may also affect the return and/or value on your investment in the event of a default

in payments under this mortgage.

12. You should satisfy yourself as to the borrower’s ability to meet the payments required under the

terms of this mortgage investment.

[…]

16. This Disclosure Statement, the Addendum (Form 1.2) if applicable and the attached documents

are not intended to provide a comprehensive list of factors to consider in making a decision

concerning this investment. By law, the mortgage brokerage must disclose in writing the material

risks of the mortgage investment. There may be additional risks to the investment. You should

satisfy yourself regarding all factors relevant to this investment before you commit to invest.

[…]

SECTION 3 – INFORMATION DISCLOSURE SUMMARY

Part A. Property/Security to be Mortgaged

[…]

3. Purchase Price:

(a) Purchase Prices of Property $XXX

(b) Date of Purchase

25

[…]

7. Appraisal

□ An appraisal has not been done on the property within the past 12 months OR

□ An appraisal has been done within the past 12 months. For all properties, appraised “as is” value

$XXX.

If the appraisal was addressed to someone other than the investor/lender or record, provide a

transmittal letter.

Date of appraisal:

Name and address of appraiser: {…}

[114] If a person decided to invest in a syndicated mortgage, he or she would enter into a loan

agreement with Fortress Developments and with the mortgage administrator. The loan agreements

would specify the principal amount of the loan, the interest rate, the term of the loan, the priority

of the security with respect to other financing. The loan agreements would specify the syndicated

mortgage as the security for the loan.

[115] The syndicated mortgage typically began as a second-ranking or third-ranking mortgage

registered behind other mortgages. The syndicated mortgage could be further subordinated as a

result of the postponement and subordination provisions contained in the loan agreement and

syndicated mortgage granted by the Borrower.

[116] Although it would not have been readily apparent, under the loan agreements, Fortress

Developments and or the mortgage brokers were receiving approximately 35% of the money up

front and much of the mortgage money was not being used to build out the projects. The Lenders

were also deceived because many of the loan agreements had “waterfall” provisions that permitted

Borrowers and owners of the Borrowers receiving some of their investment in the project before

the Lenders and before the project was completed.

[117] More precisely, to proceed with an investment in a syndicated Fortress Developments

mortgage, the Lender would receive some or all of and sign some of the following documents: (a)

a letter from Fortress Real Capital and Building & Development Mortgages Canada Inc.; (b)

Investor/Lender Disclosure Statement for Brokered Transactions; (c) Attestation; (d) Investment

Authority – Form 9D; (e) Mortgage Commitment; (f) the Loan Agreement; (g) Memorandum of

Understanding; (h) Lender Acknowledgement and Consent Agreement; (i) Mortgage Investment

Direction and Indemnity Agreement; (j) Solicitor’s Certificate of Disclosure & Undertaking

Regarding Arms-Length Mortgages; (k) Client Suitability Form; (l) Confirmation of Lender’s

Interest; and (m) an opinion of land value.

[118] Where the Lender was investing funds from his or her registered savings account made

available by Olympia Trust as discussed below, the Lender would sign: (a) an Account

Application, (b) a Self-Directed Savings Plan Declaration of Trust, (c) a Lender Acknowledgment

and Consent Agreement and (d) Mortgage Investment Direction and Indemnity Agreement. (These

documents are discussed later in these Reasons for Decision.)

[119] In 2014, some of Fortress Developments’ projects began to experience financial

difficulties. The Borrowers failed to make interest payments on some of its prior mortgages and

the syndicated mortgages began to fall into arrears.

26

[120] With the mortgage defaults, some of the projects were sold under power of sale and some

Fortress Developments entities sought protection under the Companies’ Creditors Arrangement

Act.¹⁸

[121] Many Lenders complained to FSCO about the syndicated mortgages, and in December

2015, FSCO began an investigation of Fortress Developments and of BDMC, the primary

mortgage broker of the syndicated mortgages, because of concerns about the syndicated

mortgages.

[122] In October 2016, the RCMP received a complaint about the Collier Centre syndicated

mortgages. The RCMP opened an investigation with respect to the alleged fraudulent activities of

Fortress Developments and BDMC.

[123] In February 2018, FSCO and BDMC entered into a settlement agreement pursuant to

which FAAN would assume the responsibility to administer 44 syndicated mortgages that had

been administered by BDMC. Under the settlement agreement, various mortgage brokers agreed

to be suspended.

[124] On April 13, 2018, the RCMP executed a search warrant on the offices of Fortress

Developments, BDMC, FFM, FDS, and FMP.

[125] In a short time after the execution of the search warrant, the agreement between FSCO and

BDMC was found to be dysfunctional and inadequate, and the Superintendent of Financial

Services made an application for a court order pursuant to s. 37 of the Mortgage Brokerages,

Lenders and Administrators Act, 2006, to have FAAN permanently appointed as trustee of the 44

syndicated mortgages that had been administered by BDMC.

[126] On April 20, 2018, the late Justice Hainey officially appointed FAAN to be trustee of the

44 syndicated mortgages that BDMC was administering for 11,000 Lenders, some of whom had

invested in registered savings accounts and some of whom had invested through non-registered

savings accounts.

[127] On June 26, 2018, Justice Hainey appointed Chaitons LLP as representative counsel for

the Lenders in the 44 syndicated mortgages that had previously been administered by BDMC.

[128] Meanwhile, the Law Society of Ontario had for some time been receiving complaints about

the Fortress Developments syndicated mortgages that were being administered by Mr. Sorrenti

and his law firm. Mr. Sorrenti was outside the regulation of FSCO, and he was not adequately

responding to FAAN’s inquiries.

[129] On September 30, 2019, pursuant to an application by the Law Society of Ontario, FAAN

was appointed trustee of the assets of Derek Sorrenti. These assets included ten Fortress

Developments syndicated mortgages that Sorrenti and his law firm were administering for 2,900

Lenders, some of whom had invested in registered savings accounts and some of whom had

invested through non-registered savings accounts. On September 30, 2019, Justice Hainey

appointed Chaitons as representative counsel for the syndicated mortgages that had been

administered by Mr. Sorrenti and his law firm.

[130] Under the Court Orders, FAAN was given broad authority to enforce the securities

associated with the syndicated mortgages and to prosecute proceedings with respect to the

¹⁸R.S.C. 1985, c. C-36, as amended.

27

development projects. To date, FAAN has recovered in excess of $175 million, but there will be

deficiencies in the recoveries for Lenders in the syndicated mortgages.

I. Summary of Syndicated Mortgage Estimated Loan Losses

[131] In the motion material for the certification motion, there are 28 reports to the court made

by FAAN. The following chart provided by Class Counsel sets out what Class Counsel submits

represent the Lenders’ losses on the 54 projects and 69 syndicated mortgages.

Development Project (69

mortgages)

No. of

Syndicated Mortgage Loan Losses

Lenders (Estimate Based on Trustee Reports)

1. Gotham, ON

2. Kingridge Square ON

3. Bauhaus ON

4. White Cedar Estates ON

5. The Wade (Victoria Medical) BC

(2 mtgs)

145

45

110

42

$0.2 million

$0.4 million

$0.7 million

$1.2 million

$1.3 million

118

6. Jasper House AB

163

504

130

162

139

94

53

82

166

$1.3 million

$1.9 million

$2.0 million

$2.2 - $3.0 million

$2.4 million

$3.6 million

$3.7 million

7.Residences of Bayview ON

8. The Woodsworth (The James) ON

9. The Greenwood ON

10. Wellington House ON

11. Humberstone ON

12. Prescott Homes AB

13. Mississauga Meadows 2 ON

14.Crestview (Manors of Mineola)

ON

15. Solterra ON

16. Port Place Condos Phase 2 ON

17. Bowmanville ON

18. Mississauga Meadows 1 ON

19. The Harlowe ON

20. Nobleton South ON

21. Treehouse ON

22. Eden ON

23. Braestone ON

24. Estates of Nobleton North ON

25.Wismer3-Mark Condos/Mount Joy

ON

362

67

$4.2 million

$4.4 million

$4.7 million

$5.2 million

$5.3 million

$5.4 million

$5.9 million

$6.0 million

$6.5 million

$6.6 million

103

130

303

137

115

129

250

353

108

26. North Condominiums AB

27.Mapleview (Julien Ct) ON

28. Harmony Village ON

29. Bradford Bond Head ON

30. Pivot AB

152

155

542

186

176

154

301

241

453

612

282

306

$6.8 million

$8.1 million

$8.2 million

$8.3 million

$8.6 million

$9.1 million

$10.5 million

$10.9 million

$11.4 million

$12.2 million

$12.3 million

$14.4 million

31. Lake & East ON

32. Charlotte Adelaide Tower ON

33. Old Market Lane ON (3 mtgs.)

34. Castlemore ON

35. Peter & Richmond ON

36. Victoria Park Place ON

37. Glens of Halton Hills ON

28

38. Whitby Commercial Park ON

39. Triple Creek AB

40. The Kemp (Harmony Village) ON

41. The Orchard AB (2 mortgages)

42.Union Waterfront (Port Place

Phase 1) ON

257

280

360

382

353

$15.1 million

$15.4 million

$15.8 million

$16.1 million

$16.8 million

43. The South Shore ON (3 mtgs.)

44. SkyCity Centre MB (5 mortgages)

45. Capital Pointe SK (3 mortgages)

46. Collier Center ON (3 mortgages)

47.The Sutton (Condos+Towns) ON

48. Highlands of York Region ON

49.Unionvillas ON

50. Soba ON (2 mortgages)

51. Progress Manor (Ten88) ON

52. 6th and Tenth Condo AB

53. Brookdale on Avenue Rd ON

54. King Square ON

639

649

728

949

456

59

145

188

364

207

491

176

14,253

$27.4 million

$32.3 million

$33.3 million

$52.9 million

[?]

$2.5 million

[?]

$8.8 million

[?]

Total

$442.2 + ? million

J. Olympia Trust’s Role in the Syndicate Mortgages

[132] As noted above, for a Lender to hold the Fortress Developments syndicated mortgage in a

registered savings account under the Income Tax Act, he or she needed to open a registered account

with a custodial trustee or another approved financial institution which would register the account

with the Canada Revenue Agency. It is alleged that Olympia Trust was the custodial trustee for

the syndicated mortgages for the 54 development projects. With respect to the Fortress

Developments’ syndicated loans, Olympia Trust’s role was to register the Lender’s self-directed

accounts with the Canada Revenue Agency and to execute the Lender’s instructions to receive

funds, hold funds, and advance funds from the self-directed accounts and to report to the Lender.

[133] Olympia Trust charged fees for its services to the Class Members, i.e., the holders of the

self-directed registered savings accounts during the relevant period. Olympia Trust charged a $100

purchase fee, plus monthly fees of $10 to $12 for most projects or an annual fee of $60 for certain

Fortress Development projects. For each syndicated mortgage, Olympia Trust received a one-time

set up fee of $1,000 from Fortress Developments. Olympia Trust did not charge any investment

management fee. It was not a participant in the investments or in the Fortress Development

projects.

[134] For a Class Member to obtain a registered savings account with Olympia Trust for the 69

syndicated mortgages that are the subject of this proposed class action:

a.

Before November 2013, the Class Member signed: (a) an Account Application, (b)

a Self-Directed Savings Plan Declaration of Trust, (c) a Lender Acknowledgment and

Consent Agreement and (d) Mortgage Investment Direction and Indemnity Agreement.

b.

After November 2013, the Class Member signed: (a) an Account Application, (b)

a Self-Directed Savings Plan Declaration of Trust, and (c) Mortgage Investment Direction

and Indemnity Agreement.

[135] As it appears, before November 2013, the Class Member signed four documents and after

November 2013, the Class Member signed three documents. Nothing turns on these circumstances

29

because substantively the three post-November 2013 documents have the same substantive content

as the four pre-November 2013 documents. For present purposes, I shall describe the pre-

November 2013 documents.

[136] For present purposes, the following provisions of the Account Application are pertinent:

ACCOUNT APPLICATION

1. Annuitant Information

[…]

7. Plan Holder Authorization and Acceptance

(i) I acknowledge that this is a request for Olympia Trust Company to apply for registration of the

Olympia Trust Company Self-Directed Retirement Savings Plan, or Olympia Trust Company Self-

Directed Retirement Income Fund, under the Income Tax Act (Canada) and if applicable, under the

Taxation Act (Quebec) as: (a) a Registered Retirement Savings Plan if I have selected RSP, Spousal

RSP, or locked-in RSP/LIRA, as my plan type; or (b) a Registered Retirement Income Fund if I

have selected RIF, Spousal RIF, Prescribed RIF, LRIF, RLSP, LIF/RLIF or New LIF as my plan

type. I certify that the information contained in this Plan Application is true and correct, and that I

have read and am bound by the attached Declaration of Trust that governs my Plan and any

applicable Locking-in Supplements. I understand that it is my responsibility to arrange for the

transfer of assets to my Plan from any predecessor retirement plan or other permitted source.

(ii) I acknowledge and agree that I am solely responsible for all investments in my Account and all

investment decisions relating thereto. Olympia is not in the business of providing investment advice

and does not provide direction or advice with respect to the purchase of any securities or other form

of investment. Olympia strongly recommends that you should: (i) conduct extensive due diligence

on any investment prior to purchasing and obtain extensive information on the investment, the risk

associated with the investment and the ability to recover your investment; (ii) review the investment

objectives of any investment you have chosen to ensure that it meets your financial needs; and (iii)

if you invest in exempt market securities and/or publicly traded shares or bonds, obtain a prospectus,

offering memorandum or other prescribed documentation describing the investment prior to or at

the time you make your investment. You understand that if you have any questions or doubts about

a particular investment, it is your sole responsibility to obtain independent advice from a qualified

professional. Olympia will execute any order it receives from you without making any inquiries in

connection with the suitability of the investment.

(iii) I understand that Olympia Trust Company has the right to reject an order if the proper

documentation is not in place or if the investment is not eligible.

[…]

(vi) I understand that it is my responsibility to notify Olympia Trust Company in writing of any

errors or omissions within the time limits specified on the statements or other notices.

(vii) I acknowledge that I will advise Olympia Trust Company of any changes to my account.

[…]

(ix) I understand that I may be liable for certain tax consequences arising in connection with a non-

compliant qualifying arrangement.

[…]

[137] For present purposes, the following provisions of the Declaration of Trust are pertinent:

30

OLYMPIA TRUST COMPANY SELF-DIRECTED RETIREMENT SAVINGS PLAN

DECLARATION OF TRUST

Olympia Trust Company ("the Trustee"), a trust company incorporated under the laws of Alberta,

hereby declares that it agrees to act as trustee under the Olympia Trust Company Self-Directed

Retirement Savings Plan ("your Plan") for you, the annuitant, as defined in the Income Tax Act,

named in the Self-Directed Application Form ("your Application") which accompanies this

declaration on the following terms and conditions:

1. Registration: The Trustee will apply for registration of your Plan under the Income Tax Act

(Canada) ("the Act"). If you live in Quebec as indicated by your address on your Application, the

Trustee will also apply for registration of your Plan under the Taxation Act (Quebec).

2. Compliance: It is intended that, at all times, your Plan will comply with all relevant provisions of

the Act and, if applicable, the Taxation Act (Quebec) with respect to a retirement savings plan

("RSP"). You will be bound by the terms and conditions imposed on your Plan by all applicable

legislation.

[…]

4. No Financial Advice: I acknowledge and agree that I am solely responsible for all investments in

my Account and all investment decisions relating thereto. Olympia is not in the business of

providing investment advice and does not provide direction or advice with respect to the purchase

of any securities or other form of investment. Olympia strongly recommends that you should: (i)

conduct extensive due diligence on any investment prior to purchasing and obtain extensive

information on the investment, the risks associated with the investment and the ability to recover

your investment; (ii) review the investment objectives of any investment you have chosen to ensure

that it meets your financial needs; and (iii) if you invest in exempt market securities and/or publicly

traded shares or bonds, obtain a prospectus, offering memorandum or other prescribed

documentation describing the investment prior to or at the time you make your investment. You

understand that if you have any questions or doubts about a particular investment, it is your sole

responsibility to obtain independent advice from a qualified professional. Olympia will execute any

order it receives form you without making any inquiries in connection with the suitability of the

investment.

[…]

6. Investments: Contributions and transfers to your Plan will be invested and reinvested from time

to time in accordance with investment instructions unless the proposed investment does not comply

with requirements imposed by the Trustee in its sole discretion. Before the Trustee will act on your

investment instructions, the instructions must be in a form acceptable to the Trustee and be

accompanied by related documentation as required by the Trustee in its sole discretion. The Trustee

may accept and act on any investment instructions which it believes in good faith to be given by

you. The Trustee will endeavor to execute any purchase or sale of an investment within 5 business

days after receipt of cash and your investment instructions at the market or sale price in effect on

the day the transaction is executed. Any loss or gain resulting from errors made by the Trustee, its

officers, employees or agents in the execution of investment instructions from your Plan will be for

the Trustee's account.

7. Annuitant's Responsibility: You are responsible for ensuring that: (i) contributions to your Plan

do not exceed the maximum limits permitted by the Act; (ii) the investments held in your Plan are

qualified investments for your Plan under the Act. You acknowledge and accept responsibility for

the above-mentioned matters.

8. Non-Qualified Investments: If your Plan becomes liable for tax, interest or penalties under the Act

or similar provincial legislation, the Trustee is authorized to realize sufficient investments of your

31

Plan (unless prohibited from the Act), selected in its sole discretion, to pay the liability and the

Trustee will not be liable for any resulting loss.

[…]

16. Accounting and Reporting: The Trustee will maintain an account in your name reflecting, with

appropriate dates: (i) contributions to your Plan; (ii) the name, number and cost of investments

purchased or sold by your Plan; (iii) dividends, interest and other distributions received by your

Plan; (iv) cash; (v) withdrawals, transfers and expenses paid from your Plan; and (vi) the balance of

your account. The Trustee will send you an annual statement of your account. Before April of each

year, the Trustee will provide any applicable tax reporting required to be refiled with your or your

spouse's personal income tax return relating to contributions to or withdrawals from your Plan in

respect of the previous year.

[…]

20. Delegation of Duties: Without detracting in any way from the responsibility of the Trustee, the

Trustee may appoint agents and may delegate to its agents the performance of clerical,

administrative and other duties under this declaration. The Trustee may employ or engage

accountants, brokers, lawyers or others and may rely on their advice and services. The Trustee will

not be liable for the acts or omissions of any of its advisors or agents. The Trustee may pay to any

advisor or agent all or part of the fees received by it under the provisions of this declaration.

Notwithstanding any other provision in this declaration, the Trustee acknowledges that it is

ultimately responsible for the administration of your Plan.

[…]

23. Fees and Expenses: The Trustee may charge you or your Plan fees for its services under this

declaration as set out from time to time in the Olympia Trust Company fee schedule. The Trustee

will give you at least 30 days' notice of any change in its fees. Unless prohibited from the Act, the

Trustee is entitled to reimbursement from your Plan for disbursements and expenses (including

taxes, interest and penalties) reasonably incurred by the Trustee in connection with your Plan. The

Trustee is entitled to deduct its unpaid fees, disbursements and expenses (unless prohibited by the

Act) from the assets of your Plan and for this purpose you authorize the Trustee to realize sufficient

assets of your Plan selected in its sole discretion. The Trustee will not be responsible for any

resulting loss. You agree to pay Olympia annual fees and transaction fees in exchange for providing

services in connection with your self-directed account. The annual fee is charged immediately upon

opening an account and is prorated to half price for accounts opened August 1st or later each year.

The full annual fee will then be charged on January 1st of each year thereafter. All other fees are

charged when the transaction is processed. Please review the Olympia Trust Company Fee Schedule

for a full list of fees that may apply to your account.

[…]

25. Liability of the Trustee: The Trustee and its officers, employees and agents are indemnified by

you and your Plan from and against all expenses, liabilities, claims and demands arising out of the

holding of the assets of your Plan; the dealing with the assets of your Plan in accordance with

investment instruction which the Trustee, its officers, employees or agents believe in good faith to

be given by you or your properly authorized agent; and the delivery of release of assets of your Plan

in accordance with this declaration, provided that: (i) the Trustee exercises the same degree of care

with the assets of your Plan as it would with its own assets to minimize the fact that the Plan hold

any non-qualified investments; and (ii) the Trustee complies with applicable laws, regulations and

orders now or later in force that purport to impose a duty on the holder of assets of your Plan to take

or refrain from taking any action in connection with any asset of your Plan. Notwithstanding any

other provision of this declaration, the Trustee will not be liable for any loss or penalty suffered as

a result of any act done by it in reasonable reliance of your authority or the authority of your properly

authorized agent or legal representatives.

32

[…]

29. Governing Laws: This declaration will be governed, construed and enforced in accordance with

the laws of Alberta and Canada except that the word "spouse" and “common law partner” as used

in this declaration will have the same meaning as for the purposes of the Act.

30. Arms’ Length Mortgages: I hereby acknowledge and agree that where arms’ length mortgages

are held under this plan, whether syndicated or otherwise, they must be registered in the name of

Olympia Trust Company, as Trustee. The ranking of said mortgages may be either first, second or

third.

[…]

[138] For present purposes, the following provisions of the Lender Acknowledgment and

Consent Agreement are pertinent:

LENDER ACKNOWLEDGEMENT AND CONSENT AGREEMENT

This Agreement made and effective as of the xxx.

BETWEEN:

FORTRESS REAL CAPITAL INC., a corporation incorporated under the laws of the Province of

Ontario (hereinafter called "Fortress")

- and –

CENTRO MORTGAGE INC., a corporation incorporated under the laws of the Province of Ontario

(hereinafter called "Centro")

- and –

OLYMPIA TRUST COMPANY, a corporation incorporated under the laws of the Province of

Alberta (hereinafter called "Olympia" or the Trustee")

- and -

DEREK SORRENTI, a Banister and Solicitor licensed to practice law in the Province of Ontario

(hereinafter called "Sorrenti")

- and -

The undersigned individual Lender that has advanced funds to the Borrower and has agreed to be a

party hereto (hereinafter called the "Lender")

WHEREAS XXX (the "Borrower") is borrowing up to XXX from the undersigned Lender pursuant

to certain loan agreements (collectively referred to herein as the “Loan Agreements");

AND WHEREAS the loan from the Lender to the Borrower ranks pari passu with other borrowings

by the Borrower pursuant to similar Loan Agreements with other individual Lenders (collectively

referred to herein with the Lender as the "Junior Secured Lenders ") and such loans are collectively

secured by a mortgage (the "Mortgage") on the Borrower's lands described as XXX (the "Lands");

AND WHEREAS the Lender and the Junior Secured Lenders have agreed to postpone their loans

to one or more construction loans obtained by the Borrower up to XXX (the "First Priority

33

Construction Loans"), whereby the collective indebtedness of the Junior Secured Lenders would

rank junior to the First Priority Construction Loans;

AND WHEREAS the Lender is lending the Borrower funds from his or her registered savings plan

accounts ("RRSP Account") and is holding the mortgage granted by the Borrower in such account

as security for payment;

AND WHEREAS the RRSP Account is administered by Olympia pursuant to a trust account

agreement with the Lenders;

AND WHEREAS the RRSP Account is subject to the requirements of the Income Tax Act (Canada)

and the regulations thereunder;

AND WHEREAS the Lender is a client of Fortress and/or Centro and has been introduced to the

Borrower by either Fortress or Centro;

AND WHEREAS the Borrower has delivered Olympia a legal opinion confirming that the Mortgage

granted by the Borrower to the Lender is eligible for investment by the RRSP Account provided the

amount of the First Priority Construction Loans and the Mortgage granted to all of the Junior

Secured Lenders do not exceed the fair market value of the Lands;

AND WHEREAS the above representations are being made by Fortress, Centro and the Lender and

not by Olympia or Sorrenti;

NOW THEREFORE, IN CONSIDERATION OF the premises and mutual covenants herein

contained, the sufficiency of which is hereby acknowledged and confirmed, do hereby covenant and

agree as follows:

1. The Lender acknowledges and confirms that he or she has leaned the Borrower XXX pursuant

to the Loan Agreement, whereby his or her participating share in the Mortgage as at the date

hereof is XXX (based on the aggregate loans made by the Junior Secured Lenders being XXX.

2. The Lender hereby acknowledges and confirms that prior to entering into the Loan

Agreement that he or she was aware that: (i) certain provisions in the Loan Agreement allow

for the postponement of the Mortgage in favour of additional construction and/or mezzanine or

related mortgage financing to a maximum of XXX (the "Maximum Priority Financing Amount"

or "MITA"); and (ii) the Lender is required to the postponement of his or her interest in the

Mortgage in favour of certain development agreements between the Borrower and certain

governmental authorities (including but not limited to: city site plan, development plans,

Planning Act requirements, mezzanine financing and/or insurance on deposits, and/or

Condominium Act registrations), as such requirements are more particularly described in the

Loan Agreement, in order to facilitate the development of the Lands.

3. The Lender confirms that he or she fully understands the effect of the terms of the Loan

Agreement and that the Lender hereby reconfirms his or her instructions to proceed with the loan

pursuant to the terms and conditions outlined in the Loan Agreement.

4. The Lender hereby agrees to postpone the Mortgage to an amount not to exceed the MPFA and/or

to any required development agreements between the Borrower and the applicable government

authority(ies) in order to facilitate the development of the Lands.

5. The Lender acknowledges that the MPFA may be advanced to the Borrower in multiple stages

based on the achievement of certain construction milestones and may be advanced by various parties

and/or secured via multiple registrations on the Lands.

6. The Lender hereby acknowledges that he or she was advised that the face value of the Mortgage

could be amended periodically during the term to increase the face value of the Mortgage to a

34

maximum of XXX. The Lender hereby confirms that he or she fully understands the effect of this

term of the Loan Agreement and that the Lender re-confirms his or her instructions to proceed with

the investment.

7. The Lender understands that, as at the date hereof, pursuant to the Loan Agreement, the Mortgage

securing the loan ranks subsequent to other registered mortgages against the Lands in the amount of

XXX Further, the Lender understands that prior to further advances under the Mortgage the

Borrower shall be required to provide an updated valuation of the Lands to Sorrenti for the purpose

of confirming that the combined value of all registered mortgage security on the Lands does not

exceed the most recent valuation of the Lands (which currently indicates an estimated value of XXX

for the Lands authored by XXX and is in accordance with the terms and provisions of the Loan

Agreement).

[…]

13. The Lender hereby indemnifies and saves harmless Sorrenti and Olympia and each of their

directors, officers, employees, shareholders and agents for, and hold. such persons harmless against,

any loss, liability, damage, judgment, fine, penalty, claim, demand, suit, settlement, cost or expense

(including, without limitation, the fees and expenses of legal counsel), incurred without gross

negligence, willful misconduct or fraud on the part of the indemnified person (each as determined

by a final, non-appealable judgment of a court of competent jurisdiction), for any action taken,

suffered or omitted to be taken by such indemnified person in connection with the exercise or

performance of its duties hereunder, including without limitation, the costs and expenses of

defending against any claim of liability hereunder, directly or indirectly. All indemnities, all

limitations of liability and all other provisions for the protection of Sorrenti and Olympia and the

other indemnified persons provided for in this Agreement shall survive the termination of this

Agreement.

14. All parties hereto (including the Lender) have obtained independent legal advice (and if

necessary independent tax advice) with regard to the Loan Agreement, the Mortgage and this

Agreement.

15. Fortress, Centro and the Lender each acknowledge and agree that Olympia may be required to

issue T4 slips to the Lender pursuant to the Income Tax Act (Canada) in the event that it is concluded

that the First Priority Construction Loans and the mortgage granted to all of the Junior Secured

Lenders exceeds the fair market value of the Lands. Further, the parties also acknowledge that

Olympia may be required to issue T4 slips to the Lender pursuant to the Income Tax Act (Canada)

in the event that the Borrower fails to provide Olympia with the requisite confirmation as to the

value of the Lands as set out above. Fortress, Centro and the Lender acknowledge and agree that the

Lender will suffer adverse tax consequences in the event that Olympia is required to issue them T4

tax slips in accordance with the Income Tax Act (Canada) and each of Fortress and Centro agrees

to use its commercially reasonable efforts to take such actions to avoid such result.

16. The parties hereto agree that this agreement shall be construed and enforced in accordance with

the laws of the Province of Alberta.

[139] For present purposes, the following provisions of the Mortgage Investment Direction and

Indemnity Agreement are pertinent:

MORTGAGE INVESTMENT DIRECTION AND INDEMNITY AGREEMENT

The undersigned and Olympia Trust Company (“Olympia”) are parties to a Declaration of Trust (the

“Trust Agreement”) which governs my Plan (as identified above). In consideration of Olympia

accepting the above mortgage (the “Mortgage”) as an asset of my Plan, I hereby agree to the

following terms and conditions and I acknowledge that this Agreement shall constitute an addendum

to the Trust Agreement as if the following terms and conditions were set out therein:

35

1. I hereby confirm that I am fully aware of the nature of the Mortgage and its terms and conditions.

2. I acknowledge that I have been advised to seek independent legal, tax, or other professional advice

before deciding to invest funds held in my Plan in the Mortgage and before signing this Agreement.

3. I hereby authorize and direct Olympia to invest funds held by my Plan in the Mortgage as

described above.

4. I understand and acknowledge that it is my sole and entire responsibility to verify that:

a. the Mortgage is an “Arms-Length” transaction as defined in the Income Tax Act

(Canada) (the “Tax Act”);

b. the Mortgage is a “qualified investment” and is not a “prohibited investment” (as such

terms are defined in the Tax Act);

c. the Mortgage is a proper charge against the Land (as specified in the Mortgage) and is

fully secured;

d. all payments due on the Mortgage are to be made on the dates specified in the Mortgage

and all Mortgage payments are to be paid directly to Olympia; and

e. there is adequate fire / property insurance in place for the Lands specified in the

Mortgage.

5. I acknowledge that I do not rely and have not relied upon any representation made by Olympia

in deciding to invest Plan funds in the Mortgage. Without limiting the generality of the foregoing,

I also specifically agree and represent to Olympia that I have not, cannot and will not look to

Olympia or any of its employees for advice as to:

a. whether an interest in the Mortgage constitutes a “qualified investment” for my Plan;

b. whether the Lands securing the Mortgage are adequate or will be adequate security; and

c. whether the interest in the Mortgage otherwise constitutes a suitable investment for my

Plan.

[…]

7. In addition to all indemnities and other provisions benefiting Olympia that I have agreed to in the

Trust Agreement, I agree to indemnify and save harmless Olympia and their respective officers,

directors, and employees from and against all claims, demands, actions, suits, or other proceedings

by whomsoever brought, and from all losses, costs, fines, levies, damages, expenses (including any

legal fees and disbursements on a solicitor and client basis and any costs incurred in connection with

the enforcement of this indemnity), taxes, penalties, and other liabilities whatsoever, directly or

indirectly arising from or in connection with: (i) Olympia acting in accordance with the instructions

set out herein; (ii) the investment of funds from my Plan in the Mortgage; or (iii) any breach of any

representation, warranty or covenant made by me in the Trust Agreement or this Agreement. This

indemnity shall survive the termination of or transfer out of my Plan; the termination of the

investment in the Mortgage; and the resignation or revocation of the trusteeship of my Plan by

Olympia.

8. Olympia’s obligation to me is limited to accounting to me from time to time for the actual amounts

received by Olympia in respect of the Mortgage. I agree that for each and every payment remitted

to Olympia by the mortgagor which is not honoured for any reason, a charge (in accordance with

the current fee schedule) shall be payable by me.

36

9. I have received a copy of Olympia’s current fee schedule and I acknowledge that the mortgage

fees charged by Olympia are not pro-rated and are not based on the amount of activity, value, quality

or standing of a mortgage.

10. I am NOT a non-resident of Canada for the purposes of the Tax Act or any treaty or convention

that Canada may have with another country. Further, I undertake to immediately advise Olympia if

my status as a Canadian taxpayer and resident changes.

11. I acknowledge that I have sought and obtained independent financial, investment, tax, and legal

advice and carried out such due diligence and made other such enquiries to the extent that I deem

necessary and appropriate in making this investment for my Plan to determine the suitability of the

investment in light of my personal circumstances.

12. I will provide at my expense, at any time as Olympia may require, such independent information

or opinions as deemed necessary by Olympia with respect to the continued status of the Mortgage

as a “qualified investment” and as not being a “prohibited investment” (as such terms are defined in

the Tax Act). In the event that I fail to satisfy any of the requirements set forth above, Olympia is

fully entitled to deem that the Mortgage is not a “qualified investment”, or is a “prohibited

investment”, and to effect whatever actions and reporting is, in Olympia’s opinion, required for the

purposes of the Tax Act. I understand and agree that in such event, adverse tax consequences may

be suffered and I confirm that I will assume full responsibility for such tax consequences.

In accordance with the above and the Trust Agreement, I hereby direct Olympia to advance $xxx to

the specified Lawyer in accordance with this Agreement in order to facilitate my investment in the

Mortgage.

[140] Also relevant to the relationship between the Class Members and Olympia Trust is the

application form that Olympia Trust submitted to the CRA. In the immediate case, Olympia Trust

applied for registration of the Fortress Developments’ syndicated mortgages for registered savings

accounts. It did so using form T550 E(16), a form authorized by the Minister of National Revenue.

Mr. Raponi relies on the form as an aspect of determining Olympia Trust’s duties to the Class

Members. For present purposes, the pertinent parts of the form are set out below:

APPLICATION FOR REGISTRATION OF:

• retirement savings plans (RSPs)

• education savings plans (ESPs)

• retirement income funds (RIFs)

• Use this form if you are an RSP issuer as described in subsection 146(1) of the Income

Tax Act (the Act), an ESP promoter as described in subsection 146.1(1) of the Act, or a RIF

carrier as described in subsection 146.3(1) of the Act.

[…]

I request that the contracts or arrangements on the attached paper list (ESPs only) or CD-ROM or

DVD-ROM be registered under the Income Tax Act.

Certification

I, [Print name of authorized official] of [Business address] certify that:

1. the owners of the contracts or arrangements identified on the CD-ROM, DVD-ROM, or paper list (ESPs

only) have requested that I apply to register their contracts or arrangements;

37

2. the contracts or arrangements on the CD-ROM, DVD-ROM, or paper list (ESPs only) comply with the

applicable sections of the Income Tax Act;

3. the contracts or arrangements and the application conform in all respects to the documents constituting the

specimen plan or fund identified above, as approved by the Minister of National Revenue; and

4. the information given in this application and in any document attached is, to the best of my knowledge,

correct and complete.

[141] When Olympia Trust’s accountholders first invested in a syndicated mortgage and as

subsequent advances were made under the syndicated mortgage, Olympia Trust received and relied

on appraisals or valuations for each syndicated mortgage. On cross-examination, Ms. Revol

confirmed that Olympia Trust employed a review officer to consider the propriety of the opinions

of value. The review officer’s job was to determine whether Olympia Trust should advance funds

from a registered savings account.

[142] The nature and content of these valuations varied across projects. Sometimes Olympia

Trust was provided with formal appraisals from appraisers accredited by the Appraisal Institute of

Canada. Other times, Olympia Trust was provided “opinions of value” from real estate valuators.

Depending on the circumstances of a given project, different approaches and methodologies were

used to assess the fair market value of the underlying property. The appraisals or valuations also

made varying assumptions about the existing and future use and characteristics of the property,

depending on the nature of the project, the stage of development, the financing and permitting that

was in place, and other factors.

K. Mr. Raponi’s Investment in the Collier Centre Project

[143] Daniele Raponi is 45 years old. He lives in King City, Ontario. He is employed as a radio

station mix show coordinator.

[144] Mr. Raponi retained Olympia Trust to be his registered savings account trustee for a

$95,000 investment in a $16.9 million syndicated mortgage loan for the Collier Centre project.

[145] The Collier Centre developers purchased the property for $4 million.

[146] After some development of the property, in 2018, the Collier Centre defaulted on its loans.

Following a sales process, the property was sold for $18.5 million.

[147] The Lenders in the Collier Centre syndicated mortgage loans, including Mr. Raponi,

suffered a complete loss of their investments.

L. Class Size

[148] Although s. 5 (3) of the Class Proceedings Act, 1992 directs that: “Each party to a motion

for certification shall, in an affidavit filed for use on the motion, provide the party’s best

information on the number of members in the class,” in the immediate case neither party filed an

affidavit as to class size.

[149] It might have been possible for either party to provide more precise information had they

thought to analyze the 69 syndicated mortgage documents that were registered against title, but

neither party thought to include the syndicated mortgages in the thousands of pages of documents.

At my request, during the course of the hearing, the samples of the syndicated mortgage loan

documentation for five projects were added to the documentary record for the certification motion;

38

namely: (a) the Residence of Bayview, (b) Capital Pointe, (c) Harmony Village, (d) Simcoe Kemp,

and (e) Soba.

[150] I used that evidence, the guesses of the parties in their factums and during argument, and

the massive amounts of other evidence to make a guestimate of class size.

[151] Assuming that some Lenders invested in more than one project, it seems that there were

between 11,000 to 13,000 Lenders in the syndicated mortgages. Some of these Lenders were

corporate investors, which do not save for retirement and are not eligible for registered savings

accounts.

[152] Based on what evidence might be gathered from the documented five projects of (a) the

Residence of Bayview, (b) Capital Pointe, (c) Harmony Village, (d) Simcoe Kemp, and (e) Soba,

it would appear that approximately 25% of the Lenders used registered savings accounts from

either Computershare Trust or Olympia Trust. If that is correct, then a guestimate of the class size

is between 2,750 to 3,250 Class Members had registered savings accounts with Olympia Trust or

Computershare.

[153] My guestimate from sampling some of the projects for which information was available is

that the average investment per Class Member was approximately $25,000.

M. Certification: General Principles

[154] The court has no discretion and is required to certify an action as a class proceeding when

the following five-part test in s. 5 of the Class Proceedings Act, 1992 is met: (1) the pleadings

disclose a cause of action; (2) there is an identifiable class of two or more persons that would

be represented by the representative plaintiff; (3) the claims of the class members raise

common issues; (4) a class proceeding would be the preferable procedure for the resolution of

the common issues; and (5) there is a representative plaintiff who: (a) would fairly and

adequately represent the interests of the class; (b) has produced a plan for the proceeding that

sets out a workable method of advancing the proceeding on behalf of the class and of notifying

class members of the proceeding, and (c) does not have, on the common issues for the class, an

interest in conflict with the interests of other class members.

[155] On a certification motion, the question is not whether the plaintiff’s claims are likely to

succeed on the merits, but whether the claims can appropriately be prosecuted as a class

proceeding.¹⁹The test for certification is to be applied in a purposive and generous manner, to give

effect to the goals of class actions; namely: (1) to provide access to justice for litigants; (2) to

encourage behaviour modification; and (3) to promote the efficient use of judicial resources.²⁰

[156] For certification, the plaintiff in a proposed class proceeding must show “some basis in

fact” for each of the certification requirements, other than the requirement that the pleading

discloses a cause of action.²¹The some-basis-in-fact standard sets a low evidentiary standard for

plaintiffs, and a court should not resolve conflicting facts and evidence at the certification stage or

¹⁹Hollick v. Toronto (City), 2001 SCC 68 at para. 16.

²⁰Hollick v. Toronto (City), 2001 SCC 68 at paras. 15 and 16; Western Canadian Shopping Centres Inc. v. Dutton,

2001 SCC 46 at paras. 26 to 29.

²¹Hollick v. Toronto (City), [2001] 3 S.C.R. 158 at para. 25; Pro-Sys Consultants Ltd. v. Microsoft Corporation,

2013 SCC 57 at paras. 99-105; Taub v. Manufacturers Life Insurance Co., (1998) 40 O.R. (3d) 379 (Gen. Div.),

aff’d (1999), 42 O.R. (3d) 576 (Div. Ct.).

39

opine on the strengths of the plaintiff’s case.²²In particular, there must be a basis in the evidence

to establish the existence of common issues.²³To establish commonality, evidence that the alleged

misconduct actually occurred is not required; rather, the necessary evidence goes only to

establishing whether the questions are common to all the class members.²⁴

[157] The some-basis-in-fact standard does not require evidence on a balance of probabilities and

does not require that the court resolve conflicting facts and evidence at the certification stage and

rather reflects the fact that at the certification stage the court is ill-equipped to resolve conflicts in

the evidence or to engage in the finely calibrated assessments of evidentiary weight and that the

certification stage does not involve an assessment of the merits of the claim and is not intended to

be a pronouncement on the viability or strength of the action.²⁵

N. The Cause of Action Criterion (s. 5 (1)(a))

Pleadings Sufficiency and the Plain and Obvious Test

[158] The first criterion for certification is that the plaintiff’s pleading discloses a cause of action.

The "plain and obvious" test from Rule 21 of the Rules of Civil Procedure for disclosing a cause

of action from Hunt v. Carey Canada,²⁶is used to determine whether a proposed class proceeding

discloses a cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act, 1992. To

satisfy the first criterion for certification, a claim will be satisfactory, unless it has a radical defect,

or it is plain and obvious that it could not succeed.²⁷

[159] The failure to establish a cause of action usually arises in one of two ways: (1) the

allegations in the statement of claim do not plead all the elements necessary for a recognized cause

of action; or (2) the allegations in the statement of claim do not come within a recognized cause

of action.²⁸

[160] Matters of law that are not fully settled should not be disposed of on a motion to strike an

action for not disclosing a reasonable cause of action,²⁹and the court’s power to strike a claim is

exercised only in the clearest cases.³⁰The case law establishes that issues that are novel, complex,

and important should normally be decided on a full factual record after trial.³¹However, novelty

by itself is not a reason to allow a cause of action to proceed to trial and a novel claim must also

²²Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57; McCracken v. CNR Co., 2012 ONCA 445.

²³Singer v. Schering-Plough Canada Inc., 2010 ONSC 42 at para. 140; Fresco v. Canadian Imperial Bank of

Commerce, [2009] O.J. No. 2531 at para. 21 (S.C.J.); Dumoulin v. Ontario, [2005] O.J. No. 3961 at para. 25

(S.C.J.).

²⁴Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 110.

²⁵Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 at para. 102.

²⁶[1990] 2 S.C.R. 959.

²⁷176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2002), 62 O.R. (3d) 535 at para. 19 (SCJ),

leave to appeal granted, 64 O.R. (3d) 42 (S.C.J.), aff'd (2004), 70 O.R. (3d) 182 (Div. Ct.); Anderson v. Wilson

(1999), 44 O.R. (3d) 673 at p. 679 (CA), leave to appeal to S.C.C. ref'd, [1999] S.C.C.A. No. 476.

²⁸2106701 Ontario Inc. (c.o.b. Novajet) v. 2288450 Ontario Ltd., 2016 ONSC 2673 at para. 42; Aristocrat

Restaurants Ltd. v. Ontario, [2004] O.J. No. 5164 (SCJ); Dawson v. Rexcraft Storage & Warehouse Inc., [1998]

O.J. No. 3240 at para. 10 (CA).

²⁹Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 164 D.L.R. (4^th) 257 (Ont. CA).

³⁰Temelini v. Ontario Provincial Police (Commissioner) (1990), 73 O.R. (2d) 664 (CA).

³¹Sells v. Manulife Securities Inc., 2014 ONSC 715; Leek v. Vaidyanathan, [2011] O.J. No. 200 at para. 3 (CA);

PDC 3 Limited Partnership v. Bregman + Hamann Architects, [2001] O.J. No. 422 paras. 7–12 (CA).

40

be arguable, have some elements of a cause of action recognized in law, be a reasonable and

arguable incremental extension of established law and have a reasonable prospect of success.³²In

Atlantic Lottery Corp. Inc. v. Babstock,³³the majority of the Supreme Court stated:

[A] claim will not survive an application to strike simply because it is novel. It is beneficial, and

indeed critical to the viability of civil justice and public access thereto that claims, including novel

claims, which are doomed to fail be disposed of at an early stage in the proceedings. This is because

such claims present “no legal justification for a protracted and expensive trial”. If a court would not

recognize a novel claim when the facts as pleaded are taken to be true, the claim is plainly doomed

to fail and should be struck. [citation omitted]

[161] In the Ontario Court of Appeal’s decision in Darmar Farms Inc. v. Syngenta Canada Inc.,³⁴

Justice Zarnett stated:

51. The fact that a claim is novel is not a sufficient reason to strike it. But the fact that a claim is

novel is also not a sufficient reason to allow it to proceed; a novel claim must also be arguable.

There must be a reasonable prospect that the claim will succeed.

[162] In R. v. Imperial Tobacco Canada Ltd.,³⁵the 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.

[163] On a pleadings motion, the court accepts the pleaded allegations of material fact as proven,

unless they are patently ridiculous or incapable of proof.³⁶Bare 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 pleadings motion.³⁷In making

findings of fact and in applying the law to those facts the court is not obliged to accept as

necessarily true allegations of fact that are rhetorical conclusions or that are inconsistent with the

documents incorporated by reference.³⁸Documents referred to in a pleading are incorporated by

reference into the pleading, and on a motion to determine whether the plaintiff has pleaded a legally

viable cause of action, the court is entitled to consider any documents specifically referred to and

relied on in a pleading.³⁹

³²Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19 at para. 19; Darmar Farms Inc. v. Syngenta Canada Inc.,

2019 ONCA 789 at para. 51; Das v. George Weston Ltd., 2017 ONSC 4129 aff’d 2018 ONCA 1053, leave to appeal

refused [2019] S.C.C.A. No. 69.

³³2020 SCC 19 at para. 19.

³⁴2019 ONCA 789 at para. 51.

³⁵2011 SCC 42 at paras. 17-25.

³⁶Arora v. Whirlpool Canada LP, 2012 ONSC 4642 at para 12, aff’d aff’d 2013 ONCA 657, leave to appeal ref’d

[2013] S.C.C.A. No. 498; R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 22; Folland v. Ontario (2003),

64 O.R. (3d) 89 (CA); Nash v. Ontario (1995), 27 O.R. (3d) 1 (CA); Canada v. Operation Dismantle Inc., [1985] 1

S.C.R. 441; A-G. Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735.

³⁷Price v. Smith & Wesson Corp., 2021 ONSC 1114 at para 51; Das v. George Weston Ltd., 2017 ONSC 4129 at

paras. 14–29, aff’d 2018 ONCA 1053, leave to appeal refused [2019] S.C.C.A. No. 69; Losier v. Mackay, Mackay &

Peters Ltd., [2009] O.J. No. 3463 at paras. 39–40 (SCJ), aff’d 2010 ONCA 613, leave to appeal refused [2010]

S.C.C.A. No. 438.

³⁸Das v. George Weston Limited, 2017 ONSC 4129 at paras. 27, 79-80, aff’d 2018 ONCA 1053.

³⁹Das v. George Weston Limited, 2018 ONCA 1053 at paras. 31, 71, 74 and 78; McCreight v. Canada (Attorney

General), 2013 ONCA 483 at para. 32; Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC

80 at para. 31, aff’d 2013 ONCA 474; Martin v. Astrazeneca Pharmaceuticals PLC, 2012 ONSC 2744 at paras. 160-

41

Breach of Fiduciary Duty and of Trust (Statement of Claim, paras.79-92)

[164] It is Mr. Raponi’s thesis that s. 207.01(5) of the Income Tax Act, which states that a

custodial trustee ought to “exercise the care, diligence and skill of a reasonably prudent person to

minimize the possibility that a trust governed by the registered plan holds a non-qualified

investment” is a term of the trust that has been breached by the trustee Olympia Trust. Mr. Raponi

fashions eleven gatekeeper and warning obligations, set out above, from s. 207.01(5) of the Income

Tax Act and from the guidelines of Income Tax Folio S3-F10-C1. Mr. Raponi submits that these

duties were breached by Olympia Trust. Mr. Raponi asserts that these duties were designed by the

Federal Government to protect Lenders in syndicated mortgages from sustaining investment losses

and to avoid Lenders taking undue risk in investing funds being saved for the Lender’s retirement

years. He submits that these trust and fiduciary duties are immutable and cannot be changed by

the trust and contract instruments signed by the Lenders and Olympia Trust.

[165] It is plain and obvious that Mr. Raponi’s breach of trust and breach of fiduciary duty thesis

does not establish a reasonable cause of action. The existence of trust and fiduciary duties requires

a case-by-case analysis and the court will analyze the trust and contract terms as well as the

circumstances and nature of the relationship.⁴⁰The scope of a trustee’s or a fiduciary’s duty arises

within the scope of the engagement and the functions assumed by the trustee or fiduciary in a given

case.⁴¹

[166] Mr. Raponi relies on the statement of Justice Corthorn in Cahill v. Cahill:⁴²“Whenever a

trustee fails to carry out her obligations under the trust instrument, at common law, or statute, that

failure amounts to a breach of trust” and on the statement of Justice Gillese, writing extra-

judicially, in The Law of Trusts,⁴³where she states:

Trusteeship is an extremely onerous position. Trustees are subject to the specific duties created by

the trust instrument and by legislation. In addition, they have a great many duties placed upon them

by equity. […] Because of the dependency relationship and the fact that the trustee controls the

beneficiary’s property, the trustee is held to the most exacting standards of all fiduciaries.

[167] There is no doubt about the correctness of these statements, but they beg the question of

what are the duties of a person who is a fiduciary or a trustee.

[168] It is a major doctrinal premise that underlies Mr. Raponi’s causes of action based on breach

of trust and breach of fiduciary duty that fiduciary and trust duties are immutable and cannot be

restricted or nullified. This premise is false, and the truth is that the scope of a trustee’s and a

fiduciary’s duties are a matter to be determined on a case-by-case basis.

[169] In addition to Mr. Raponi’s argument’s false premise, there are three more doctrinal

162, aff’d 2013 ONSC 1169 (Div. Ct.); Web Offset Publications Ltd. v. Vickery (1999), 43 O.R. (3d) 802 (CA),

leave to appeal dismissed, [1999] S.C.C.A. No. 460.

⁴⁰Weldon v. Teck Metals Ltd., 2012 BCSC 1386; Bohemier v. Centra Gas Manitoba Inc., [1999] 7 W.W.R. 507

(MB CA)

⁴¹K.L.B. v. British Columbia, 2003 SCC 51; Froese v. Montreal Trust Co. of Canada, [1996] 8 W.W.R. 35 at para.

46 (BCCA); Hodginson v. Simms, [1994] 3 S.C.R. 377; McInerney v. MacDonald, [1992] 2 S.C.R. 415; M. (K.) v.

M. (H.), [1992] 3 S.C.R. 3; Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534; Lac Minerals Ltd. v.

International Corona Resources Ltd., [1989] 2 S.C.R. 574; Canadian Aero Services Ltd. v. O’Malley, [1974] S.C.R.

592; Re Coomber [1911] 1 Ch. 723 (CA).

⁴²2016 ONSC 1385 at para. 57, aff’d 2016 ONCA 962.

⁴³Eileen E. Gillese, The Law of Trusts, 3d ed. (+2014), pp. 154-55

42

mistakes that underly Mr. Raponi’s causes of action based on breach of trust and breach of

fiduciary duty. The first doctrinal mistake is to conflate breach of fiduciary duties with the breach

of a professional trustee’s duty of care. The second doctrinal mistake is to reason backward from

a trust or a fiduciary relationship and from harm suffered by the beneficiary of the trust or fiduciary

relationship to conclude that there has been a breach of trust or of fiduciary duty. The third

doctrinal mistake is to conflate powers with duties.

[170] Because of the false premise and or because of the three doctrinal mistakes, it is plain and

obvious that Mr. Raponi’s causes of action for breach of fiduciary duty and for breach of trust are

legally unsound and are bound to fail. These causes of action and also his causes of action based

on breach of contract or common law negligence have no reasonable prospect of success.

[171] The essential allegation against Olympia Trust in all of the causes of action is that Olympia

Trust should not have obeyed the Class Member’s instruction to invest in a syndicated mortgage

and Olympia Trust should not have obeyed the Class Member’s instructions to advance funds on

a syndicated mortgage because Olympia Trust ought to have known that the security for the loans

was improvident. It should immediately be observed that Olympia Trust’s alleged misconduct does

not involve any dishonesty, misappropriation, disloyalty, deceit, conflict of interest, self-dealing,

or gaining a benefit beyond the agreed remuneration for acting as trustee. In other words, Olympia

Trust’s alleged misdeeds are not the sort of misconduct that would typically support a viable action

for breach of fiduciary duty.

[172] Fiduciary duties are not fixed or immutable. In Canadian Aero Services Ltd. v. O’Malley,⁴⁴

which is still the leading case about the cause of action for breach of fiduciary duty, Justice Laskin,

as he then was, said that cases about alleged breaches of fiduciary duty involved four issues: (1)

the determination of whether the relationship is fiduciary; (2) the determination of the duties that

arise from the particular relationship; (3) the determination of whether a particular duty has been

breached; and (4) the determination of the extent of liability for the breach of the particular

fiduciary duty. The extent or scope of a fiduciary’s duty is not fixed or immutable but rather must

be determined on a case-by-case basis.

[173] The doctrine that there is a special quality to a fiduciary obligation and that the extent of a

fiduciary’s obligation is a variable and not a constant is supported by the following much quoted

passage from the 1911 judgment of Fletcher Moulton, L.J. in Re Coomber.⁴⁵The passage advances

the propositions that fiduciary responsibilities depend upon the facts of the particular relationship

and that once a fiduciary relationship is established, it does not follow that in a given circumstance

any fiduciary obligations are imposed:

Fiduciary relations are of many different types; they extend from the relation of myself to an errand

boy who is bound to bring me back my change up to the most intimate and confidential relations

which can possibly exist between one party and another where the one is wholly in the hands of the

other because of his infinite trust in him. All these are cases of fiduciary relations, and the Courts

have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts

which, between persons in a wholly independent position, would have been perfectly valid.

Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of

these types of interference is warranted by it. They conclude that every kind of fiduciary relation

justifies every kind of interference. Of course, that is absurd. The nature of the fiduciary relation

must be such that it justifies the interference. There is no class of case in which one ought more

⁴⁴[1974] S.C.R. 592 at p. 605.

⁴⁵[1911] 1 Ch. 723 (CA) at p. 728. This passage was quoted by Justice La Forest, J. in Lac Minerals Ltd. v.

International Corona Resources Ltd., [1989] 2 S.C.R. 574 at pp. 670–71.

43

carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those

facts, than cases which relate to fiduciary and confidential relations and the action of the Court with

regard to them.

[174] In Lac Minerals Ltd. v. International Corona Resources Ltd., ⁴⁶Justice La Forest observed

that “the fiduciary obligation may vary in its specific substance depending on the relationship,

though compendiously it can be described as the fiduciary duty of loyalty and will most often

include the avoidance of a conflict of duty and interest and a duty not to profit at the expense of

the fiduciary.” In Canson Enterprises Ltd. v. Boughton & Co.,⁴⁷in McInerney v. MacDonald;⁴⁸

and in M. (K.) v. M. (H.),⁴⁹Justice La Forest stated that equity will impose on a fiduciary a range

of obligations co-ordinate with the undertaking; fiduciary obligations are not uniform and are

shaped by the demands of the situation. And in Hodginson v. Simms, ⁵⁰he stated:⁵¹

However, while both negligent misrepresentation and breach of fiduciary duty arise in reliance-

based relationships, the presence of loyalty, trust, and confidence distinguishes the fiduciary

relationship from a relationship that simply gives rise to tortious liability. Thus, while a fiduciary

obligation carries with it a duty of skill and competence, the special elements of trust, loyalty, and

confidentiality that obtain in a fiduciary relationship give rise to a corresponding duty of loyalty.

[175] In Frame v. Smith,⁵²Justice Wilson stated: “Perhaps the biggest obstacle to the

development of a general fiduciary principle has been the fact that the content of the fiduciary duty

varies with the type of relationship to which it is applied.”

[176] The nature or character of fiduciary duties is not only malleable, but as noted by Justice La

Forest, it also involves a particular quality that differentiates fiduciary duties from a fiduciary’s

concurrent other duties. In Girardet v. Crease & Co.,⁵³the plaintiff sued her lawyer for negligence

in advising her to settle a personal injury claim. In Girardet, Justice Southin said that it was a

perversion of words to say that simple carelessness in giving advice was a breach of fiduciary duty

and that fiduciary misconduct must involve the particular quality of duties that the law imposes on

particular fiduciaries. Thus, Justice Southin observed:

That a lawyer can commit a breach of the special duty of a trustee, e.g., by stealing his client’s

money, by entering into a contract with the client without full disclosure, by sending a client a bill

claiming disbursements never made and so forth is clear. But to say that simple carelessness in

giving advice is such a breach is a perversion of words. The obligation of a solicitor of care and skill

is the same obligation of any person who undertakes for reward to carry out a task. One would not

assert of an engineer or physician who had given bad advice and from whom common law damages

were sought that he was guilty of a breach of fiduciary duty. Why should it be said of a solicitor? ⁵⁴

[177] In K.L.B. v. British Columbia, ⁵⁵Chief Justice McLachlin stated:

⁴⁶[1989] 2 S.C.R. 574 at p. 646.

⁴⁷[1991] 3 S.C.R. 534 at p. 153.

⁴⁸[1992] 2 S.C.R. 415 at para. 20

⁴⁹[1992] S.C.R. 3 at p. 63; P.B. v. W.B. (1993), 11 O.R. (3d) 161 (Gen. Div.).

⁵⁰[1994] 3 S.C.R. 377 at p. 405.

⁵¹[1994] 3 S.C.R. 377 at p. 405.

⁵²[1987] 2 S.C.R. 99 at p. 135.

⁵³(1987), 11 B.C.L.R. (2d) 361 at p. 362 (S.C.).

⁵⁴(1987), 11 B.C.L.R. (2d) 361 at p. 362 (S.C.). In Lac Minerals Ltd. v. International Corona Resources Ltd.,

[1989] 2 S.C.R. 574, La Forest, J. at p. 647 and Sopinka, J. at pp. 597–98 cite Justice Southin’s judgment.

⁵⁵2003 SCC 51 at para. 48.

44

The traditional focus of breach of fiduciary duty is breach of trust, with the attendant emphasis on

disloyalty and promotion of one's own or others' interests at the expense of the beneficiary's interests.

Parents stand in a relationship of trust and owe fiduciary duties to their children. But the unique

focus of the parental fiduciary duty, as distinguished from other duties imposed on them by the law,

is breach of trust. Different legal and equitable duties may arise from the same relationship and

circumstances. Equity does not duplicate the common law causes of action, but supplements them.

Where the conduct evinces breach of trust, it may extend liability, but only on that basis.

[178] In Luscar Ltd. v. Pembina Resources Ltd.,⁵⁶Justice Conrad of the Alberta Court of Appeal

noted that fiduciary duties should not be conflated with contractual duties; he stated:

[A] party may have fiduciary obligations arising from its relationship, but not every obligation is a

fiduciary one. In the case of contract, one party may be put in a position of owing extended duties,

but it is important to examine carefully the alleged actions to ensure that they derive from the loyalty

of the relationship, and are truly fiduciary obligations, as opposed to merely contractual, express or

implied.

[179] In Varcoe v. Sterling,⁵⁷where a stockbroker was liable for negligence but not for breach of

fiduciary duty, Justice Keenan stated: “But not every wrong done by a fiduciary is a breach of that

duty. It must be a wrong which is a betrayal of that trust component of the relationship.” Justice

Sopinka also made this point in Lac Minerals Ltd. v. International Corona Resources Ltd.,⁵⁸where

he stated that fiduciary obligation “must be reserved for situations that are truly in need of the

special protection that equity affords.” In Norberg v. Wynrib,⁵⁹Justice Sopinka noted that fiduciary

duties should not be superimposed on common law duties to improve the nature or extent of the

remedy.

[180] That there is a special quality to fiduciary relations and a special quality to fiduciary

obligations can lead to the doctrinal mistake of reasoning from a situation in which there is a

fiduciary relationship and the beneficiary of the relationship has suffered a loss, that the fiduciary

is responsible for the loss. Both Justice La Forest and Justice Sopinka warned against this kind of

reasoning in Lac Minerals Ltd. v. International Corona Resources Ltd., where Justice La Forest

said that using the term “fiduciary” as a conclusion to justify a result “reads equity backwards” ⁶⁰

and where Justice Sopinka said:⁶¹[T]he presence of conduct that incurs the censure of a court of

equity in the context of a fiduciary duty cannot itself create the duty.”

[181] In the immediate case, Mr. Raponi builds eleven breaches of a standard of care from

s.207.01(5) of the Income Tax Act’s imposition of a duty to “minimize the possibility that the Class

Members’ Registered Plans held non-qualified investments.”⁶²

⁵⁶(1994), 24 Alta. L.R. (3d) 305 at para. 86 (CA) leave to appeal to S.C.C. refused [1995] S.C.C.A. No. 6.

⁵⁷(1992), 7 O.R. (3d) 204 (Gen. Div.) at p. 229; affd. (1993), 10 O.R. (3d) 574 (CA). See also Fasken Campbell

Godfrey v. Seven-Up Canada Inc. (1997), 142 D.L.R. (4^th) 456 (Ont. Gen. Div.) at p. 483, affd. (2000), 47 O.R. (3d)

15 (CA), leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 143.

⁵⁸[1989] 2 S.C.R. 574 at p. 596.

⁵⁹[1992] 2 S.C.R. 226 at p. 234

⁶⁰[1989] 2 S.C.R. 574 at pp. 561–62. La Forest, J. notes that this logical fallacy was noted by Professor E.J. Weinrib

in “The Fiduciary Obligation” (1975), 25 U.T.L.J. 1 at p. 5 and by Megarry, V-C. in Tito v. Waddell (No. 2), [1977]

3 All E.R. 129 at p. 232.

⁶¹[1989] 2 S.C.R. 574 at p. 581.

⁶²Mr. Raponi also asserts that Olympia Trust breached a duty under s. 3 of the Alberta Trustee Act, R.S.A. 2000, c

T-8 to invest trust funds in accordance with certain requirements. I agree with Olympia Trust’s argument that

pursuant to s. 2 of the Act, the duty to invest is subject to any contrary intention expressed in the instrument creating

45

[182] It should immediately be observed how humble and unimposing is the duty on the trustee

entailed by the Income Tax Act. A robust obligation would be an absolute duty on the trustee to

not apply for non-qualified investments. But the Income Tax Act imposes no such categorical duty

to eliminate non-qualified investments. Rather, it imposes a much more modest obligation of

reporting the non-qualified investment and the modest penalty of between $100 to $2,500 of the

failure to report.

[183] There actually is no penalty on Olympia Trust for failing to minimize the possibility that

the Class Member held a non-qualified investment. The penalty is for failing to report a non-

qualified investment. (I parenthetically note that in the immediate case, the CRA has never sought

or obtained any penalty from Olympia Trust in respect of the syndicated mortgages.)

[184] It should next be observed that s. 207.01(5) the Income Tax Act, the foundational building

block of Mr. Raponi’s breach of trust and breach of fiduciary duty thesis, does not impose any

obligation on the trustee to comply with the qualified investment rules. It is the CRA in Income

Tax Folio S3-F10-C1 that suggests compliance, but even that suggestion is attenuated because

while the ultimate compliance responsibility is said to rest with the trustee, the trustee may require

the “controlling individual of the registered plan” i.e., in the immediate case the Class

Member/Lender “to provide evidence to determine the property’s fair market value” and “the

trustee must exercise due diligence in satisfying itself that the documentation provided is

sufficient.”

[185] Apart from the circumstances that the nebulous “satisfying itself that the documentation

provided is sufficient” is not a part of the Income Tax Act itself and is found in the CRA’s Folio

of guidelines, there is little to nothing there to entail the eleven posited duties, including the

categorial duties: (a) of determining if a proper appraisal of the mortgaged property uses an

appropriate valuation method; (b) of not advancing funds relying on an appraisal based on the

“residual method of valuation”; (c) of not advancing funds relying an appraisal based on future

hypothetical assumptions; and (d) of refusing to act as trustee if the value of the syndicated

mortgage plus prior encumbrances exceeds the appraised fair market value of the mortgaged land.

[186] Next, it should be observed that Mr. Raponi’s thesis negates the principle that the existence

of trust and fiduciary duties requires a case by case-by-case analysis and the court will analyze the

trust and contract terms as well as the circumstances and nature of the relationship. Indeed, Mr.

Raponi argues that anything contrary to s. 207.01 (5) and the CRA’s Income Tax Folio S3-F10-

C1 is illegal and unenforceable on grounds of public policy. In Mr. Raponi’s thesis, the terms of

the agreements that the Lenders actually entered into before applying for a registered savings plan

and the terms of the agreement that the Lenders actually entered into with Olympia Trust count for

nothing and s. 207.01 (5) and a hyperventilating extrapolation of the CRA’s Income Tax Folio S3-

F10-C1 counts for everything.

[187] Mr. Raponi’s argument is plainly and obviously flawed, untenable, and contrary to the

correct principle as asserted by Justice Laskin in Canadian Aero Services Ltd. v. O’Malley,⁶³which

case is about alleged breaches of fiduciary duty and involves the court determining the duties on a

case-by-case basis. The Income Tax Act does not preclude the court from examining the

agreements entered into by the Lenders before they contracted with Olympia Trust or from

the trust. Mr. Raponi’s claim that Olympia Trust breached the Alberta Trustee Act is unsustainable on the face of the

pleading and the documents incorporated by reference in it.

⁶³[1974] S.C.R. 592 at p. 605.

46

examining the agreements between the Lenders and Olympia Trust.

[188] When one does examine the agreements between the Lenders and Olympia, the plain

language reveals that while Olympia Trust does have responsibilities, those responsibilities are

both limited and also compliant with Olympia Trust’s actual obligations imposed by the Income

Tax Act.

[189] There are no express gatekeeper duties imposed on Olympia Trust. Under the various

agreements, Olympia Trust expressly disavowed responsibilities to Lenders to confirm the tax

status of their investments. The duties imposed on Olympia Trust by s. 207.01(5) of the Income

Tax Act are humble and modest and do not extrapolate to require extensive gatekeeping

responsibilities. Moreover, the limited duties undertaken by Olympia Trust under the trust

agreements do not conflict with the modest and humble duties imposed by s. 207.01(5) of the

Income Tax Act.

[190] Next, it should be observed that Mr. Raponi’s arguments giving privilege, paramountcy,

and supremacy to s. 207.01 (5) of the Income Tax Act and his argument that there are public policy

reasons to give no force to the provisions of the agreements between the Lenders and Olympia

Trust depend on his argument that the provisions of the Income Tax Act are consumer protection

to protect taxpayers from the peril of improvident investments in their registered savings account.

However, the registered savings account provisions of the Income Tax Act are not consumer

protection. The Income Tax Act is a taxation statute pursuant to the Federal Government’s

legislative authority under the Constitution Act, 1867. It is not consumer protection legislation or

legislation regulating financial marketplaces. It is FSCO not the CRA that regulates those selling

syndicated mortgages.

[191] Next, it should be observed that Mr. Raponi’s arguments conflate powers with duties.

Olympia Trust was empowered to not follow the Lender’s instructions to apply for a registered

savings account and it was empowered to refuse to advance funds from that registered account if

it determined that the syndicated mortgage did not qualify or no longer qualified as an investment

for a registered account. However, those powers do not transform into eleven duties and those

powers were contracted for so that Olympia Trust could perform its modest obligations to the

CRA.

[192] In advancing his thesis, Mr. Raponi relies on the decisions of: (a) the Federal Court in

Olympia Trust Company v. The Queen;⁶⁴(b) the British Columbia Court of Appeal in Froese v.

Montreal Trust Co. of Canada;⁶⁵(c) the British Columbia Court of Appeal in Elms v. Oliver Drabik

Carruthers & Chalcraft; ⁶⁶(d) the Saskatchewan Court of Appeal in ADAG Corporation Canada

Ltd. v SaskEnergy Incorporated,⁶⁷and (e) the decision of Justice Lauwers in Ivany v. Financiere

Telco Inc.⁶⁸

[193] These decisions do not assist Mr. Raponi. They are examples of cases where a case-by-

case analysis defined the duties of the trustee. The immediate case’s case-by-case analysis yields

its own analysis of the scope of the trust, fiduciary, and contractual duties assumed by Olympia

Trust, and it is plain and obvious that the eleven hypothesized of duties are not to be found. There

⁶⁴2015 FCA 279.

⁶⁵(1996), 20 B.C.L.R. (3d) 193 (BCCA).

⁶⁶2001 BCCA 429.

⁶⁷2021 SKCA 74.

⁶⁸2013 ONSC 6347, leave to appeal ref’d 2013 ONSC 6969.

47

are a few immutable trustee duties, such as loyalty, the avoidance of conflicts of interest, and not

misappropriating the trust property, but no immutable trustee duties of this sort are engaged in the

immediate case.

[194] It is doctrinally wrong to fail to distinguish the quality of trust and fiduciary duties from

contractual and tortious duties. It is doctrinally wrong to reason backwards from the fact that

Lenders suffered losses to impose duties on a fiduciary. It is doctrinally wrong to not do a case-

by-case analysis to determine whether there are material facts that would support a fiduciary or

trust duty. It is plain and obvious that in the immediate case, the Class Members do not have viable

claims for breach of trust or breach of fiduciary duty.

[195] I conclude that Mr. Raponi’s breach of trust and breach of fiduciary duty claims do not

satisfy the cause of action criterion.

Breach of Contract (Statement of Claim, paras. 93-97)

[196] For similar reasons, I conclude that Mr. Raponi’s breach of contract claim is doomed to

fail and does not satisfy the cause of action criterion.

[197] Mr. Raponi’s breach of contract cause of action is a poorly pleaded cause of action because

the constituent elements of a claim for breach of contract are not pleaded, and the breach of contract

cause of action, such as it is, emerges from Mr. Raponi’s two factums for the certification motion.

The essence of his breach of contract claim is that there is a promise that Olympia Trust will

comply with the Income Tax Act. It is this allegation that is the link to s. 207.01(5) of the Income

Tax Act and as already observed above, s. 207.01(5) mushroom-clouds into eleven trust, fiduciary,

and contractual duties. For largely the same reasons as expressed above, Mr. Raponi and the Class

Members do not have a breach of contract action because the alleged contract terms are not to be

found.

[198] Moreover, it is plain and obvious that Mr. Raponi’s breach of contract action is not legally

viable because the constituent elements of a breach of contract cannot be pleaded. The implied

terms cannot be pleaded because the express terms of the several contracts between Olympia Trust

and a Class Member are that Olympia Trust does not have liability for ensuring that the fair market

value of the lands mortgaged by the syndicated mortgage exceeds the value of the syndicated

mortgage. There is no basis for implying the alleged promises into the agreements between Mr.

Raponi and Olympia Trust, and properly interpreted in accordance with the principles of contract

interpretation, the terms of the contracts between Olympia Trust and a Class Member do not

promise that Olympia Trust will ensure that the fair market value of the lands mortgaged by the

syndicated mortgage exceeds the value of the syndicated mortgage. It is trite law, that court will

not imply a term that contradicts the express language of the contract.⁶⁹

[199] I, therefore, conclude that Mr. Raponi’s breach of contract claim does not satisfy the cause

of action criterion.

⁶⁹Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514; M.J.B. Enterprises Ltd. v. Defence

Construction (1951) Ltd., [1999] 1 S.C.R. 619; G. Ford Homes Ltd. v. Draft Masonry (York) Co. Ltd. (1984), 43

O.R. (2d) 401 (C.A.); Fort Frances (Town) v. Boise Cascade Can. Ltd.; Boise Cascade Can. Ltd. v. Ontario, [1983]

1 S.C.R. 171.

48

Negligence (Statement of Claim, paras. 98.-103)

[200] It is plain and obvious that Mr. Raponi does not have a legally viable action for negligence,

which Class Counsel confirmed during oral argument was a pure economic loss claim under the

recognized category of negligent performance of a service. In this case the alleged negligence

concerns Olympia Trust’s performance of its alleged duty of care as

trustee/mortgagee/administrator of the syndicated mortgages.

[201] The immediate case is on all fours with my decision in Barkley v. Tier 1 Capital

Management Inc.,⁷⁰which was a similar case against Olympia Trust, in which, in a decision

affirmed by the Court of Appeal, I held that the plaintiffs had no legally viable action against it.

[202] Strictly speaking, the claim in Barkley v. Tier 1 Capital Management Inc. was negligent

misrepresentation cause of action against Olympia Trust but the case also involved a negligent

performance of a service claim that is similar to the claims advanced against Olympia Trust in the

immediate case. Moreover, upon analysis all of Mr. Raponi’s gatekeeper allegations in the

immediate case are just disguised negligent misrepresentation actions, for which the established

law is that Olympia Trust is not responsible for misrepresentations or the frauds of others. The

essential alleged gatekeeper wrongdoing in the immediate case is that Olympia Trust failed to warn

the Lenders that the security for their syndicated mortgage was improvident and a failure to warn

is a misrepresentation by omission.

[203] But assuming that I am not bound by my own decision to come to the same decision in the

immediate case, I will start from square one and demonstrate that it is plain and obvious that Mr.

Raponi does not have a viable claim in negligence for misrepresentation or for the negligent

performance of a service.

[204] The Canadian approach to determining whether there is a duty of care has been developed

in a series of Supreme Court of Canada decisions⁷¹adapting and explaining the House of Lord's

decision in Anns v. Merton London Borough Council,⁷²and derived from the seminal cases of

Donoghue v. Stevenson⁷³and Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.⁷⁴

[205] A duty of care to another exists when three elements are satisfied; (1) foreseeability, in the

sense that the defendant ought to have contemplated that the plaintiff would be affected by the

defendant’s conduct; (2) sufficient proximity, in the sense that the relationship between the

plaintiff and the defendant is sufficiently close prima facie to give rise to a duty of care; and (3)

the absence of overriding policy considerations that would negate any prima facie duty established

by foreseeabilty and proximity. A relationship giving rise to a duty of care depends on

⁷⁰2018 ONSC 1956, aff’d 2019 ONCA 54.

⁷¹Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63; Saadati v. Moorhead, 2017 SCC 28; R. v. Imperial

Tobacco Canada Ltd., 2011 SCC 42; Fullowka v. Pinkerton's of Canada Ltd., 2010 SCC 5; Mustapha v. Culligan of

Canada Ltd., 2008 SCC 27; Design Services Ltd. v. Canada, 2008 SCC 22; Hill v. Hamilton-Wentworth Regional

Police Services Board, 2007 SCC 41; Syl Apps Secure Treatment Centre v. D. (B.), 2007 SCC 38; Childs v.

Desormeaux, 2006 SCC 18; Odhavji Estate v. Woodhouse, 2003 SCC 69; Edwards v. Law Society of Upper Canada,

2001 SCC 80; Cooper v. Hobart, 2001 SCC 79; Ingles v. Tutkaluk, 2000 SCC 12; Bow Valley Husky (Bermuda) Ltd.

v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R.

165; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; Rothfield v. Manolakos,

[1989] 2 S.C.R. 1259; Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2; Haig v. Bamford, [1976] 1 S.C.R. 466.

⁷²[1978] A.C. 728 (H.L.).

⁷³[1932] A.C. 562 (H.L.).

⁷⁴[1964] A.C. 465 (H.L.).

49

foreseeability, moderated by policy concerns.⁷⁵

[206] To determine the foreseeability element, the court asks whether the harm that occurred was

the reasonably foreseeable consequence of the defendant’s act.⁷⁶A reasonable foreseeability

analysis requires only that the general harm, not its manner of incidence, be reasonably

foreseeable.⁷⁷

[207] Proximity focuses on the type of relationship between the plaintiff and defendant and asks

whether this relationship is sufficiently close that the defendant may reasonably be said to owe the

plaintiff a duty to take care not to injure him or her.⁷⁸Proximate relationships giving rise to a duty

of care are of such a nature as the defendant in conducting his or her affairs may be said to be

under an obligation to be mindful of the plaintiff’s legitimate interests.⁷⁹The proximity inquiry

probes whether it would be unjust or unfair to hold the defendant subject to a duty of care having

regard to the nature of the relationship between the defendant and the plaintiff.⁸⁰The focus of the

probe is on the nature of the relationship between victim and alleged wrongdoer and the question

is whether the relationship is one where the imposition of legal liability for the wrongdoer’s actions

would be appropriate.⁸¹The proximity focuses on the connection between the defendant’s

undertaking, the breach of which is the wrongful act, and the loss claimed.⁸²

[208] The proximity analysis of the first stage of the duty of care test involves policy issues

because it asks the normative question of whether the relationship is sufficiently close to give rise

to a legal duty.⁸³The proximity analysis involves considering factors such as expectations,

representations, reliance, and property or other interests involved.⁸⁴Proximity is not concerned

with how intimate the plaintiff and defendant were or with their physical proximity, so much as

with whether the actions of the alleged wrongdoer have a close or direct effect on the victim, such

that the wrongdoer ought to have had the victim in mind as a person potentially harmed.⁸⁵The

proximity analysis is intended to be sufficiently flexible to capture all relevant circumstances that

might in any given case go to seeking out the close and direct relationship that is the hallmark of

the common law duty of care.⁸⁶

[209] In cases of negligent misrepresentation or performance of a service, proximity will be more

usefully considered before foreseeability because what the defendant reasonably foresees as

flowing from his or her negligence depends upon the characteristics of his or her relationship with

the plaintiff, and specifically, the purpose of the defendant’s undertaking.⁸⁷In cases of pure

75

Mustapha v. Culligan of Canada Ltd. 2008 SCC 27 at para. 4; Anns v. Merton London Borough Council, [1978]

A.C. 728 (H.L.).

⁷⁶Cooper v. Hobart, 2001 SCC 79 at para. 30.

⁷⁷Bingley v. Morrison Fuels, a Division of 503373 Ontario Ltd., 2009 ONCA 319 at para. 24.

78

Donoghue v. Stevenson, [1932] A.C. 562 (H.L.); Eliopoulos v. Ontario (Minister of Health & Long-Term Care)

(2006), 82 OR (3d) 321 (CA), leave to appeal to SCC ref’d [2006] SCCA No 514.

⁷⁹Odhavji Estate v. Woodhouse, 2003 SCC 69 at para. 49; Hercules Managements Ltd. v. Ernst & Young, [1997] 2

SCR 165 at para. 24.

⁸⁰Syl Apps Secure Treatment Centre v. D. (B.), 2007 SCC 38 at para. 26.

⁸¹Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 at para. 23.

⁸²Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63.

⁸³Cooper v. Hobart, 2001 SCC 79 at paras. 25-30.

84

Cooper v. Hobart, 2001 SCC 79 at para. 34; Hill v. Hamilton-Wentworth Regional Police Services Board, 2007

SCC 41 at para. 23; Odhavji Estate v. Woodhouse, 2003 SCC 69 at para. 50.

⁸⁵Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 at para. 29.

⁸⁶Saadati v. Moorhead, 2017 SCC 28 at para. 24.

⁸⁷Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para. 24.

50

economic loss arising from negligent misrepresentation or performance of a service, two factors

are determinative in the proximity analysis: the defendant’s undertaking and the plaintiff’s

reliance.⁸⁸Any reliance on the part of the plaintiff which falls outside of the scope of the

defendant’s undertaking of responsibility falls outside the scope of the proximate relationship and,

therefore, of the defendant’s duty of care.⁸⁹

[210] As was the case with a trustee’s or fiduciary’s duties, and his or her contractual duties, the

scope of the trustee’s common law duty of care is a matter to be determined and defined and the

court’s analysis focuses on the defendant’s undertaking of responsibility. In this regard, in Deloitte

& Touche v. Livent Inc. (Receiver of),⁹⁰Justices Brown and Rowe for the majority of the court

stated at paras. 30-31 and 34-35:

30. In cases of pure economic loss arising from negligent misrepresentation or performance of a

service, two factors are determinative in the proximity analysis: the defendant's undertaking and the

plaintiff's reliance. Where the defendant undertakes to provide a representation or service in

circumstances that invite the plaintiff's reasonable reliance, the defendant becomes obligated to take

reasonable care. And the plaintiff has a right to rely on the defendant's undertaking to do so. [….]

These corollary rights and obligations create a relationship of proximity. [….]

31. Rights, like duties, are, however, not limitless. Any reliance on the part of the plaintiff which

falls outside of the scope of the defendant's undertaking of responsibility -- that is, of the purpose

for which the representation was made or the service was undertaken -- necessarily falls outside the

scope of the proximate relationship and, therefore, of the defendant's duty of care. […]. This

principle, also referred to as the "end and aim" rule, properly limits liability on the basis that the

defendant cannot be liable for a risk of injury against which he did not undertake to protect. […] By

assessing all relevant factors arising from the relationship between the parties, the proximity analysis

not only determines the existence of a relationship of proximity, but also delineates the scope of the

rights and duties which flow from that relationship. In short, it furnishes not only a "principled basis

upon which to draw the line between those to whom the duty is owed and those to whom it is not"

(Fullowka, at para. 70), but also a principled delineation of the scope of such duty, based upon the

purpose for which the defendant undertakes responsibility. […]

{***}

34. As we have already observed, however, reasonable foreseeability of injury is no longer the sole

consideration at the first stage of the Anns/Cooper framework. Since Cooper, both reasonable

foreseeability and proximity -- the latter expressed in Cooper as a distinct and more demanding

hurdle than reasonable foreseeability -- must be proven in order to establish a prima facie duty of

care. And, in cases of negligent misrepresentation or performance of a service, the proximate

relationship -- grounded in the defendant's undertaking and the plaintiff's reliance -- informs the

foreseeability inquiry. Meaning, the purpose underlying that undertaking and that corresponding

reliance limits the type of injury which could be reasonably foreseen to result from the defendant's

negligence.

35. As a matter of first principles, it must be borne in mind that an injury to the plaintiff in this sort

of case flows from the fact that he or she detrimentally relied on the defendant's undertaking,

whether it take the form of a representation or the performance of a service. It follows that an injury

to the plaintiff will be reasonably foreseeable if (1) the defendant should have reasonably foreseen

that the plaintiff would rely on his or her representation; and (2) such reliance would, in the particular

circumstances of the case, be reasonable (Hercules, at para. 27). Both the reasonableness and the

reasonable foreseeability of the plaintiff's reliance will be determined by the relationship of

⁸⁸Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para. 30.

⁸⁹Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 at para. 31.

⁹⁰2017 SCC 63.

51

proximity between the parties; a plaintiff has a right to rely on a defendant to act with reasonable

care for the particular purpose of the defendant's undertaking, and his or her reliance on the

defendant for that purpose is therefore both reasonable and reasonably foreseeable. But a plaintiff

has no right to rely on a defendant for any other purpose, because such reliance would fall outside

the scope of the defendant's undertaking. As such, any consequent injury could not have been

reasonably foreseeable.

[211] Moving on to the final stage of the duty of care analysis, if the plaintiff establishes a prima

facie duty of care, the evidentiary burden of showing countervailing policy considerations shifts

to the defendant, following the general rule that the party asserting a point should be required to

establish it.⁹¹Policy concerns raised against imposing a duty of care must be more than speculative,

and a real potential for negative consequences must be apparent.⁹²

[212] The final stage of the analysis is not concerned with the type of relationship between the

plaintiff and the defendant. At this stage of the analysis, the question to be asked is whether there

exist broad policy considerations that would make the imposition of a duty of care unwise, despite

the fact that harm was a reasonably foreseeable consequence of the conduct in question and there

was a sufficient degree of proximity between the plaintiff and the defendant such that the

imposition of a duty would be fair.⁹³The final stage of the analysis is about the effect of

recognizing a duty of care on other legal obligations, the legal system and society more generally.⁹⁴

[213] Applying these duty of care principles to the immediate case, it is plain and obvious that

Olympia Trust did not owe the gatekeeper duties alleged by Mr. Raponi. Having regard to the

contracts signed by the Lenders with Olympia Trust and with others, Olympia Trust disavowed

any undertaking to be a gatekeeper and did not invite the Lenders to rely on Olympia Trust to be

a gatekeeper. Just the opposite, the Lender was essentially warned not to rely on Olympia Trust in

making his or her investment decision about the syndicated mortgage.

[214] A proximate relationship giving rising to a duty of care is absent in the immediate case. As

was the case with the representative plaintiff in Barkley v. Tier 1 Capital Management Inc., Mr.

Raponi is just making a scapegoat out of Olympia Trust notwithstanding the documentation by

which Olympia Trust attempted to protect itself from being scapegoated.

[215] The standard for identifying a defendant’s duty requires the Court to consider whether there

is a relationship of proximity between Mr. Raponi and Olympia Trust such that it would be just

and fair having regard to their relationship to impose a duty of care and whether the damages

suffered by the plaintiff were a reasonably foreseeable consequence of the defendant’s conduct. It

is plain and obvious that the standard for identifying a proximate relationship is not met in the

immediate case. That Olympia Trust was in a fiduciary relationship with the Lenders does not

disturb this analysis because, as discussed above, fiduciary duties and contractual and common

law duties are not to be conflated.

[216] Further, I agree with Olympia Trust’s argument set out in paragraph 71 of its factum:

71. In any event, Olympia Trust’s express contractual disclosures to investors in Barkley (including

in the governing terms of trust) were clear that its involvement was merely “to allow the investors

to shelter their investment from tax, about which Olympia Trust also disavowed any

⁹¹Childs v. Desormeaux, 2006 SCC 18 at para. 13.

⁹²Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 at paras. 47-48; Fullowka v.

Pinkerton's of Canada Ltd., 2010 SCC 5 at para. 57.

⁹³Cooper v. Hobart, 2001 SCC 79 at para. 37; Odhavji Estate v. Woodhouse, 2003 SCC 69 at para. 51.

⁹⁴Cooper v. Hobart, 2001 at para. 37; Odhavji Estate v. Woodhouse, 2003 SCC 69 at para. 51.

52

representations.” These disclosures demonstrated that Olympia Trust “assumed no undertaking to

advise or protect the investors” and “would have no reason to think that it was being relied on in

respect of that decision.” Accordingly, any reliance by investors on Olympia Trust to protect them

from an improvident investment would have been unreasonable and outside the scope of Olympia

Trust’s undertaking. The analysis in Barkley applies equally to the plaintiff’s allegations in this case.

In both Barkley and this case, the plaintiff is merely “making a scapegoat out of Olympia Trust

notwithstanding the documentation by which Olympia Trust attempted to protect itself from being

scapegoated”. [footnotes omitted]

[217] As I noted with respect to the appraiser defendants in Barkley v. Tier 1 Capital

Management Inc.,⁹⁵the circumstance of Olympia Trust of expressly limiting its responsibility with

respect to the providence of the syndicated mortgages bears some similarity to the seminal case of

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.⁹⁶where the defendant bank had no liability

when it responded to the inquiry about the creditworthiness of its customer on the basis that its

reply was without responsibility. As Lord Morris of Borth-y-Gest noted, if an inquirer chooses to

receive and act upon a reply, he or she cannot disregard the definite terms upon which the reply

was given; the inquirer cannot accept a reply given with a stipulation and then reject the stipulation.

[218] In the circumstances of the immediate case, it is not necessary to go onto the third stage of

a duty of care analysis to ask whether a prima facie duty of care is negated by policy factors. In

the immediate case, there is no duty of care and Mr. Raponi’s cause of action in common law

negligence for pure economic losses is bound to fail. Had it been necessary to go onto the third

stage, I would have concluded that there were policy factors to negate the duty of care. The

essentially commercial relationship between the Lenders and Olympia Trust is best left to be

regulated by the law of trusts, fiduciary duties, and contract and should not be overridden by the

law of negligence.

[219] In circumstances where the Lenders have alternative remedies, the imposition of liability

against Olympia Trust: (a) would impose an unfair and disproportionate liability given that it is

not the fraudster and land values and the strength of the Borrower’s covenant are not something

Olympia Trust can control; and (b) would inundate the courts with an expansive range of

unnecessary claims.⁹⁷

[220] For the above reasons, I conclude that Mr. Raponi and the Class Members do not have a

cause of action in negligence against Olympia Trust and that the negligence claim does not satisfy

the cause of action criterion.

Summary Cause of Action Criterion

[221] It is plain and obvious that Mr. Raponi’s causes of action are not legally viable. Each of

his proposed causes of action is doctrinally unsound and based on premises that are legally

unsound. There was no undertaking of trust, fiduciary, contract, or common law duties. Further,

all of Mr. Raponi’s actions contain the fallacious major premise that the Income Tax Act is a

consumer protection statute that imposes obligations on Olympia Trust to ensure that the Class

Members did not make an investment in a syndicated mortgage loan where the value of the

syndicated mortgage and the prior encumbrances exceeds the fair market value of the mortgaged

⁹⁵2018 ONSC 1956 at para98, aff’d 2019 ONCA 54.

⁹⁶[1964] A.C. 465 (H.L.).

⁹⁷Das v. George Weston Ltd., 2017 ONSC 4129 aff’d 2018 ONCA 1053, leave to appeal refused [2019] S.C.C.A.

No. 69.

53

lands. There is nothing to support Mr. Raponi’s various gatekeeper claims.

[222] Mr. Raponi’s breach of trust and breach of fiduciary duty actions are not legally viable.

These actions want for a breach of the term of the trust, and while there may be super-added

equitable (fiduciary) duties in addition to the express terms of the trust, none of the super-added

duties exist in the circumstances of the immediate case. In particular, in the circumstances of the

immediate case, there is no super-added duties to refuse to be a trustee or to safeguard the trust

corpus from an improvident investment and moreover, the trustee and the beneficiary of the trust

are free to structure the terms of their trust relationship to prescribe and limit the trustee’s

responsibilities. It is plain and obvious from an analysis of the relationship between the Class

Members and Olympia Trust that the eleven alleged duties are not arguable.

[223] Mr. Raponi’s breach of contract action is not a legally viable cause of action because the

constituent elements of a claim for breach of contract have not and could not be pleaded; visualize,

the express or implied terms alleged to have been breached by Olympia Trust have not been

pleaded nor could they be pleaded because the express terms of the several contracts between

Olympia Trust and a Class Member are that Olympia Trust does not have liability for ensuring that

the fair market value of the lands mortgaged by the syndicated mortgage exceeds the value of the

syndicated mortgage. There is no basis for implying the alleged promises into the agreements

between Mr. Raponi and Olympia Trust, and properly interpreted in accordance with the principles

of contract interpretation, the terms of the contracts between Olympia Trust and a Class Member

do not promise that Olympia Trust will ensure that the fair market value of the lands mortgaged

by the syndicated mortgage exceeds the value of the syndicated mortgage. It is trite law, that court

will not imply a term that contradicts the express language of the contract.

[224] Mr. Raponi’s common law negligence claim is not a legally viable cause of action because:

(a) if classified as a pure economic loss claim for negligence in the provision of professional

services, safeguarding the Class Members from entering into an improvident syndicated mortgage

is not within the scope of the duty of care; (b) if classified as a pure economic loss claim for

negligence in the provision of professional services, safeguarding the Class Members from

entering into an improvident syndicated mortgage has been disclaimed and the reliance or holding

out element of a pure economic loss claim cannot be established; and, (c) if classified as a novel

pure economic loss claim for negligence, no duty of care can be established because of failure of

proximity and because of public policy negating a duty of care.

[225] Moreover, the immediate case is on all fours with my decision in Barkley v. Tier 1 Capital

Management Inc.,⁹⁸which was a similar case against Olympia Trust, in which, in a decision

affirmed by the Court of Appeal, I held that the plaintiffs had no legally viable action against it.

As was the case in Barkley v. Tier I¸ the first criterion for certification, the cause of action criterion

(s. 5 (1)(a) of the Class Proceedings Act, 1992) is not satisfied for all of Mr. Raponi’s causes of

action. In their essence, Mr. Raponi’s causes of action are disguised negligent misrepresentation

actions or negligent professional service claims for pure economic losses for which the established

law is that Olympia Trust is not responsible for misrepresentations or the frauds of others.

[226] The result is that Mr. Raponi’s action flounders at the starting gate and cannot be certified

and rather should be dismissed for failure to show a cause of action.

⁹⁸2018 ONSC 1956, aff’d 2019 ONCA 54.

54

O. Identifiable Class Criterion (s. 5 (1)(b))

General Principles: Identifiable Class Criterion

[227] Since my conclusion is that Mr. Raponi’s action is stillborn, it follows that he fails all the

other certification criteria. However, I shall assume that I am mistaken, and I shall go on to consider

the remaining fact-based criteria.

[228] The second certification criterion is the identifiable class criterion. The definition of an

identifiable class serves three purposes: (1) it identifies the persons who have a potential claim

against the defendant; (2) it defines the parameters of the lawsuit so as to identify those persons

bound by the result of the action; and (3) it describes who is entitled to notice.⁹⁹

[229] In defining the persons who have a potential claim against the defendant, there must be a

rational relationship between the class, the cause of action, and the common issues, and the class

must not be unnecessarily broad or over-inclusive.¹⁰⁰An over-inclusive class definition binds

persons who ought not to be bound by judgment or by settlement, be that judgment or settlement

favourable or unfavourable.¹⁰¹The rationale for avoiding over-inclusiveness is to ensure that

litigation is confined to the parties joined by the claims and the common issues that arise.¹⁰²

A

proposed class definition, however, is not overbroad because it may include persons who

ultimately will not have a successful claim against the defendants.¹⁰³

[230] The class must also not be unnecessarily narrow or under-inclusive. A class should not be

defined wider than necessary, and where the class could be defined more narrowly, the court

should either disallow certification or allow certification on condition that the definition of the

class be amended.¹⁰⁴

Analysis: Identifiable Class Criterion

[231] In the immediate case, Olympia Trust submits that the identifiable class criterion is not

satisfied because all of the class members’ causes of action have damages as a constituted element,

but the proposed class definition extends to all individuals who invested in the syndicated

mortgages through registered savings accounts with Olympia Trust, whether or not they suffered

a loss on their investments. Thus, relying on Merck Frosst Canada Ltd. v. Wuttunee,¹⁰⁵Olympia

Trust submits that the class definition is over-inclusive and the Class Members who have not

suffered a loss do not have a cause of action against the defendant and should not be included in

⁹⁹Bywater v. Toronto Transit Commission, [1998] O.J. No. 4913 (Gen. Div.).

¹⁰⁰Pearson v. Inco Ltd. (2006), 78 O.R. (3d) 641 at para. 57 (CA), rev'g [2004] O.J. No. 317 (Div. Ct.), which had

aff'd [2002] O.J. No. 2764 (SCJ).

¹⁰¹Robinson v. Medtronic Inc., [2009] O.J. No. 4366 at paras. 121-146 (SCJ).

¹⁰²Frohlinger v. Nortel Networks Corporation, [2007] O.J. No. 148 at para. 22 (SCJ).

¹⁰³Silver v. Imax Corp., [2009] O.J. No. 5585 at para. 103-107 (SCJ) at para. 103-107, leave to appeal to Div. Ct.

refused 2011 ONSC 1035 (Div. Ct.); Boulanger v. Johnson & Johnson Corp., [2007] O.J. No. 179 at para. 22 (SCJ),

leave to appeal ref’d [2007] O.J. No. 1991 (Div. Ct.); Ragoonanan v. Imperial Tobacco Inc. (2005), 78 O.R. (3d) 98

(S.C.J.), leave to appeal ref’d [2008] O.J. No. 1644 (Div. Ct.); Bywater v. Toronto Transit Commission, [1998] O.J.

No. 4913 at para. 10 (Gen. Div.)

¹⁰⁴Fehringer v. Sun Media Corp., [2002] O.J. No. 4110 at paras. 12-13 (SCJ), aff’d [2003] O.J. No. 3918 (Div. Ct.);

Hollick v. Toronto (City), 2001 SCC 68 at para. 21.

¹⁰⁵2009 SKCA 43 at para. 54.

55

the proposed class.

[232] There is no merit to the letter of Olympia Trust’s submission. Subject to my comments that

follow, the class definition in the immediate case satisfies the technical requirements of s. 5 (1)(b)

of the Class Proceedings Act, 1992. All the Class Members who invested through an Olympia

Trust registered savings account arguably have claims for damages and the same complaint that

Olympia Trust should not have put their money at risk. As noted above, a proposed class definition

is not overbroad because it may include persons who ultimately will not have a successful claim

against the defendants.

[233] There are, however, problems with the proposed definition in the sense that it seems that

the parties have assumed that Olympia Trust was the only trustee for the Lenders that invested

through a registered savings account. The evidence on the certification motion, however, discloses

the possible involvement of Computershare Trust as the trustee/mortgagee/administer of some of

the syndicated mortgages. As noted above, Mr. Raponi only has copies of loan agreements up until

September 2016, and as noted above, there is evidence from Mr. Forbes that as of August 2017,

Olympia Trust announced that it would no longer accept new business from Ontario Lenders and

after that date it was Computershare Trust that became the vehicle for Lenders using registered

savings accounts.

[234] If this evidence is correct, then from an access to justice prospective, the class definition is

under-inclusive because Computershare Trust ought to have been made another defendant so that

the Class definition could encompass all the Lenders who used a registered savings account to

fund the syndicated mortgage; however, with the passage of time, a claim against Computershare

Trust may be statute-barred and it may not be possible to join it now.

[235] This all said, it remains the case that, technically speaking, the current definition is

satisfactory. Had the action been certified, some attention would have to be paid to how to give

notice without giving false hope to the Computershare Trust Lenders that Mr. Raponi is their

Representative Plaintiff.

[236] Thus, had the other criteria been satisfied, then, technically speaking, the class definition

would have been satisfied, although there would have been infelicities in the class definition, in

the sense that there would be persons that invested through Computershare Trust and they would

identify themselves as having a cause of action because of the Fortress Developments fiasco, but

these persons would not be invited to participate in the class action.

[237] However, in any event, the second criterion for certification, the identifiable class criterion

(s. 5 (1)(b) of the Class Proceedings Act, 1992) is not satisfied because if there are no viable causes

of action, it is axiomatic that none of the other certification criteria are satisfied.

P. Common Issues Criterion (s. 5 (1)(c))

General Principles: Common Issues Criterion

[238] The third criterion for certification is the common issues criterion. For an issue to be a

common issue, it must be a substantial ingredient of each class member’s claim and its resolution

must be necessary to the resolution of each class member’s claim.¹⁰⁶

¹⁰⁶Hollick v. Toronto (City), 2001 SCC 68 at para. 18.

56

[239] The underlying foundation of a common issue is whether its resolution will avoid

duplication of fact-finding or legal analysis of an issue that is a substantial ingredient of each class

member’s claim and thereby facilitate judicial economy and access to justice.¹⁰⁷

[240] An issue is not a common issue if its resolution is dependent upon individual findings of

fact that would have to be made for each class member.¹⁰⁸Common issues cannot be dependent

upon findings which will have to be made at individual trials, nor can they be based on assumptions

that circumvent the necessity for individual inquiries.¹⁰⁹All members of the class must benefit

from the successful prosecution of the action, although not necessarily to the same extent. The

answer to a question raised by a common issue for the plaintiff must be capable of extrapolation,

in the same manner, to each member of the class.¹¹⁰

[241] The common issue criterion presents a low bar.¹¹¹An issue can be a common issue even if

it makes up a very limited aspect of the liability question and even though many individual issues

remain to be decided after its resolution.¹¹²Even a significant level of individuality does not

preclude a finding of commonality.¹¹³A common issue need not dispose of the litigation; it is

sufficient if it is an issue of fact or law common to all claims and its resolution will advance the

litigation.¹¹⁴

[242] From a factual perspective, the plaintiff must show that there is some basis in fact that: (a)

the proposed common issue actually exists; and (b) the proposed issue can be answered in common

across the entire class, which is to say that the Plaintiff must adduce some evidence demonstrating

that there is a colourable claim or a rational connection between the Class Members and the

proposed common issues.¹¹⁵The plaintiff must establish some basis in fact for the existence of the

common issues in the sense that there is some factual basis for the claims made to which the

¹⁰⁷Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at paras. 39 and 40.

¹⁰⁸Fehringer v. Sun Media Corp., [2003] O.J. No. 3918 at paras. 3, 6 (Div. Ct.).

¹⁰⁹McKenna v. Gammon Gold Inc., [2010] O.J. No. 1057 at para. 126 (SCJ), leave to appeal granted [2010] O.J. No.

3183 (Div. Ct.), var’d 2011 ONSC 3882 (Div. Ct.); Nadolny v. Peel (Region), [2009] O.J. No. 4006 at paras. 50-52

(S.C.J.); Collette v. Great Pacific Management Co., [2003] B.C.J. No. 529 at para. 51 (BCSC), var’d on other

grounds (2004) 42 B.L.R. (3d) 161 (BCCA).

¹¹⁰Batten v. Boehringer Ingelheim (Canada) Ltd., 2017 ONSC 53, aff’d, 2017 ONSC 6098 (Div. Ct.), leave to

appeal refused (28 February 2018) (C.A.); Amyotrophic Lateral Sclerosis Society of Essex County v. Windsor (City),

2015 ONCA 572 at para. 48; McCracken v. CNR, 2012 ONCA 445 at para. 183; Merck Frosst Canada Ltd. v.

Wuttunee, 2009 SKCA 43 at paras. 145-46 and 160, leave to appeal to S.C.C. refused, [2008] S.C.C.A. No. 512;

Ernewein v. General Motors of Canada Ltd., 2005 BCCA 540 (C.A.), leave to appeal to S.C.C. ref’d, [2005]

S.C.C.A. No. 545; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at para. 40.

¹¹¹203874 Ontario Ltd. v. Quiznos Canada Restaurant Corp., [2009] O.J. No. 1874 (Div. Ct.), aff’d [2010] O.J. No.

2683 (C.A.), leave to appeal to S.C.C. refused [2010] S.C.C.A. No. 348; Cloud v. Canada (Attorney General)

(2004), 73 O.R. (3d) 401 at para. 52 (C.A.), leave to appeal to the S.C.C. ref'd, [2005] S.C.C.A. No. 50, rev'g (2003),

65 O.R. (3d) 492 (Div. Ct.); Carom v. Bre-X Minerals Ltd. (2000), 51 O.R. (3d) 236 at para. 42 (C.A.).

¹¹²Cloud v. Canada (Attorney General), (2004), 73 O.R. (3d) 401 (C.A.), leave to appeal to the S.C.C. ref'd, [2005]

S.C.C.A. No. 50, rev'g (2003), 65 O.R. (3d) 492 (Div. Ct.).

¹¹³Hodge v. Neinstein, 2017 ONCA 494 at para. 114; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC

57 at para. 112; Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46 at para. 54.

¹¹⁴Harrington v. Dow Corning Corp., [2000] B.C.J. No. 2237 (C.A.), leave to appeal to S.C.C. ref’d [2001]

S.C.C.A. No. 21.

¹¹⁵Jensen v. Samsung Electronics Co. Ltd., 2021 FC 1185; Kuiper v. Cook (Canada) Inc., 2020 ONSC 128 (Div.

Ct.).

57

common issues are connected.¹¹⁶

Analysis: Common Issues

[243] As noted above, and most particularly with respect to Mr. Raponi’s argument about the

necessity that there be Omnibus Class Action, a fundamental component of his proposed class

action is the idea that there is a commonality in the improvidence of the security for 69 syndicated

mortgages.

[244] It is Mr. Raponi’s proposition that determining whether Olympia Trust breached its duty

of care and determining whether a syndicated mortgage was improvident requires an assessment

of the varied and evolving circumstances of the 54 Projects and the 69 Syndicated Mortgages at

the time a given proposed class member first invested in the Syndicated Mortgage through a Self-

Directed Account with Olympia Trust and at the various junctures thereafter when Olympia Trust

allegedly failed to meet its ongoing responsibilities, including when each new tranche of funding

was advanced on each of the 69 syndicated mortgages.

[245] However, it is patently obvious that: (a) whether the hypothesized eleven duties have been

breached is a discrete issue for each of the 54 projects; and (b) an Omnibus Class Action has no

commonality.

[246] The thesis of the Omnibus Class Action is not a matter of systemic breaches; rather, the

thesis is a proposition that a reasonably prudent trustee would scrutinize every prior Fortress

Developments syndicated mortgage for a breach of duty. However, commonality does not exist

for such a proposition because: (a) the location of the mortgaged land is different; (b) the

development status (zoning and other planning approvals) of the mortgaged land is different for

each of the different lands; (c) the development status of any particular land changes over time;

(d) the market conditions for the different mortgaged lands are different and also change over time;

(e) the financial and economic circumstances for the lending are different and also change over

time; (f) the state of the improvements, if any, on the mortgaged property is different and also

changes over time; (g) the state of the prior encumbrances is different and changes over time; (h)

the appraisals of the mortgaged land are different (i.e., unique to each syndicated mortgage) and

appraised values change over time; (i) the alleged appraisal errors will be different and will not be

uniform; (j) the Borrowers are different for each of the 54 projects and some but not all of the

Borrowers were avatars of Fortress Developments; (k) since the Borrowers are different, the value

of the Borrower’s covenants to pay the mortgage debt and the availability of collateral security are

different; (l) the investment risks are different having regard to all of the above factors; (m) the

proper parties to any litigation about any one of the 69 syndicated mortgage varies project by

project; and (n) the individual circumstances of the Class Member are different between one

syndicated loan and another syndicated loan.

[247] Notwithstanding the glaringly apparent absence of commonality for an Omnibus Class

Action, Mr. Raponi insists that there must be an Omnibus Class Action. In addition to the excerpts

noted earlier in these Reasons for Decision, examples of this insistence are found in paragraph 253

of his factum and paragraph 154 of his reply factum, where he states:

¹¹⁶Simpson v. Facebook, Inc. 2022 ONSC 1284 at para. 25 (Div. Ct.); Jensen v. Samsung Electronics Co. Ltd., 2021

FC 1185; Singer v. Schering-Plough Canada Inc., 2010 ONSC 42 at para. 140.

58

253. Moreover, Mr. Raponi’s uncontradicted evidence is that Olympia Trust’s alleged breach must

not be examined only on a project-by-project basis. To the contrary, in determining whether to act

as Registered Plan trustee and to advance funds, Olympia Trust had to consider the status of each

existing Fortress Development Property syndicated mortgage loans. For this reason, not only is there

commonality as between investors in each Fortress Development Project, but no individual Fortress

Development Project can be considered in isolation.

{***}

154. Put another way, a reasonably prudent Registered Plan trustee should not consider each project

in isolation, because the status of prior Fortress Development Properties ought to have impacted its

responsibility and decision making for funding later Development Properties. The significance of

this interrelationship between the Fortress Development Properties is that a class action and common

issues trial determining Olympia Trust’s liability individually for each Fortress Development

Property (i.e., 54 separate class actions and 54 separate common issues trials) is inappropriate and

unnecessarily duplicative. This is because, to determine Olympia Trust’s liability for any one

Fortress Development Project, it would be necessary to consider the status of each prior Project,

including whether each prior Project remained a “qualified investment” throughout its life, and

whether Olympia Trust knew or ought to have known of those facts. For this reason, one common

issues trial considering all the Fortress Development Properties is necessary to adjudicate Olympia

Trust’s liability.

[248] One wonders if Class Counsel gave any thought to what in practical terms it would mean

if it was true that one common issues trial for all 54 projects was an absolute necessity. In practical

terms, if the proposition for an Omnibus Action were true, I would conservatively estimate that it

would take six weeks for the court to answer the 34 common issues for trial of each of the

syndicated mortgages. In turn, this means that if Class Counsel’s proposition were true, then the

common issues trial would last approximately eight years to be followed by individual issues trials

and third party proceedings. Each and every Class Member would need to wait a decade or more

to obtain access to justice.¹¹⁷In practical terms, the Omnibus Action is reductio ad absurdum. It

certainly would not be in the interests of judicial economy or in the best interests of the Class

Members to address in a single class proceeding rather than in a number of separate class actions.

[249] I acknowledge that treating the 54 projects discretely, and analyzing the proposed common

issues accordingly, there are some questions that would satisfy the common issues criterion.

However, apart from the circumstance that this is not the design of Mr. Raponi’s proposed class

action, it would require establishing 54 discrete subclasses with the attendant preferable procedure

problem of unmanageability, discussed below, and with the attendant representative plaintiff

problem, discussed below, that Mr. Raponi is incapable of representing and giving instructions

with respect to syndicated mortgages with which he had no involvement.

[250] Thus, the third criterion for certification, the common issues criterion (s. 5 (1)(c)) is not

satisfied because if there are no viable causes of action, it is axiomatic that if the cause of action

criterion is not satisfied, then none of the other certification criteria are satisfied. Moreover, and in

any event, none of the proposed issues are common to an Omnibus Class action for 69 syndicated

mortgages for 54 projects. The similarities of Fortress Developments being the Pied Piper

mastermind of the syndicated mortgages does not make common what is 69 separate financial

¹¹⁷Moreover, in practical terms, if the proposition for an Omnibus Action were true, it would logically follow that

not only would the syndicated mortgages for the 54 Fortress Development projects that occurred between 2012 and

2017 but the projects between 2008 and 2011 would also need to be examined. The promotional material indicates

that Fortress Developments was involved in others projects, but I do not know how many.

59

follies and aggregating the separate financial follies destroys the commonalities necessary for a

class action.

Q. Preferable Procedure Criterion (s. 5 (1)(d))

General Principles: Preferable Procedure Criterion

[251] Under the Class Proceedings Act, 1992, the fourth criterion for certification is the

preferable procedure criterion. Preferability captures the ideas of: (a) whether a class proceeding

would be an appropriate method of advancing the claims of the class members; and (b) whether a

class proceeding would be better than other methods such as joinder, test cases, consolidation, and

any other means of resolving the dispute.¹¹⁸

[252] In AIC Limited v. Fischer,¹¹⁹the Supreme Court of Canada emphasized that the

preferability analysis must be conducted through the lens of judicial economy, behaviour

modification, and access to justice. Thus, for a class proceeding to be the preferable procedure for

the resolution of the claims of a given class, it must represent a fair, efficient, and manageable

procedure that is preferable to any alternative method of resolving the claims.¹²⁰

[253] Whether a class proceeding is the preferable procedure is judged by reference to the

purposes of access to justice, behaviour modification, and judicial economy and by taking into

account the importance of the common issues to the claims as a whole, including the individual

issues.¹²¹To satisfy the preferable procedure criterion, the proposed representative plaintiff must

show some basis in fact that the proposed class action would: (a) be a fair, efficient and manageable

method of advancing the claim; (b) be preferable to any other reasonably available means of

resolving the class members' claims; and (c) facilitate the three principal goals of class

proceedings; namely: judicial economy, behaviour modification, and access to justice.¹²²

Analysis: Preferable Procedure Criterion

[254] It is axiomatic that if the cause of action and or the common issues criterion are not

satisfied, the preferable procedure criterion is not satisfied.¹²³That precisely is the situation in the

immediate case, and thus the case at bar does not satisfy the preferable procedure criterion.

[255] But even if the other certification criteria had been satisfied, the case at bar would not have

satisfied the preferable procedure criterion because of unmanageability, which brings the analysis

again to the thesis of the Omnibus Class Action. Without repeating my observations above about

the decadal duration of such an action, in my opinion, the proposed Omnibus Class Action would

not be a fair, efficient, and manageable method of advancing the putative Class Members’ claims.

¹¹⁸Markson v. MBNA Canada Bank, 2007 ONCA 334 at para. 69, leave to appeal to SCC ref’d [2007] S.C.C.A. No.

346; Hollick v. Toronto (City), 2001 SCC 68.

¹¹⁹2013 SCC 69 at paras. 24-38.

¹²⁰Cloud v. Canada (Attorney General) (2004), 73 O.R. (3d) 401 at para. 52 (C.A.), leave to appeal to the S.C.C.

ref'd, [2005] S.C.C.A. No. 50, rev'g (2003), 65 O.R. (3d) 492 (Div. Ct.).

¹²¹Markson v. MBNA Canada Bank, 2007 ONCA 334; Hollick v. Toronto (City), 2001 SCC 68.

¹²²Musicians’ Pension Fund of Canada (Trustee of) v. Kinross Gold Corp., 2014 ONCA 901; AIC Limited v.

Fischer, 2013 SCC 69; Hollick v. Toronto (City), 2001 SCC 68.

¹²³Batten v. Boehringer Ingelheim (Canada) Ltd, 2017 ONSC 53, aff’d 2017 ONSC 6098 (Div. Ct.), leave to appeal

to C.A. ref’d (2018), 292 ACWS (3d) 490; O’Brien v. Bard Canada, 2015 ONSC 2470.

60

[256] Preferable to the Omnibus Class Action would be discrete and separate project-by-project

class actions, each with their own genuine Representative Plaintiff. To be clear, setting up

subclasses in the immediate case would not solve but rather would exacerbate the unmanageability

of the proposed class action.

[257] Thus, the fourth criterion for certification, the preferable procedure criterion (s. 5 (1)(d)) is

not satisfied because: (a) there are no viable causes of action and it is axiomatic that if the cause

of action criterion is not satisfied, then none of the other certification criteria are satisfied; (b) an

Omnibus Action would not be manageable; and (c) an Omnibus Action with 54-69 subclasses

would also not be manageable.

R. Representative Plaintiff Criterion (s. 5 (1)(e))

General Principles: Representative Plaintiff Criterion

[258] The fifth and final criterion for certification as a class action is that there is a representative

plaintiff who would adequately represent the interests of the class without conflict of interest and

who has produced a workable litigation plan. The representative plaintiff must be a member of the

class asserting claims against the defendant, which is to say that the representative plaintiff must

have a claim that is a genuine representation of the claims of the members of the class to be

represented or that the representative plaintiff must be capable of asserting a claim on behalf of all

of the class members as against the defendant.¹²⁴

Analysis: Representative Plaintiff Criterion

[259] In the immediate case, Mr. Raponi would be a suitable Representative Plaintiff for the

Lenders for the three Collier Centre syndicated mortgages, but he cannot adequately represent the

interests of the Class Members for the other 66 syndicated mortgages, with which he was not

involved.

[260] It is perhaps odd to have to point this out, but there is a difference between the word

“representative” nominally (as a noun), where it means “spokesperson” and the word

“representative” as a modifier (as an adjective or adverb), where it means “typical” or “similar” or

“characteristic”. In a class action, the “representative” for the class in the nominal sense of being

a spokesperson is Class Counsel. Under the Class Proceedings Act, 1992, the notion of

“representative plaintiff” for the class is used in the adjectival or adverbial sense of being a person

typical of the other class members. Mr. Raponi is not typical of the Lenders in syndicated

mortgages with which he had nothing to do with.

[261] For example, Mr. Raponi is not typical of the Lenders in Saskatchewan for the Capital

Pointe syndicated mortgage, because he was not involved with that syndicated mortgage. While in

theory Mr. Raponi could assert a claim on behalf of all of the Lenders in Saskatchewan, because

of the commonality of suing the same defendant about syndicated mortgages, he would be

indifferent to the ultimate outcome of the other Class Members’ actions which would ultimately

involve common and individual issues about which Mr. Raponi had no involvement.

¹²⁴Drady v. Canada (Minister of Health), [2007] O.J. No. 2812 at paras. 36-45 (S.C.J.); Attis v. Canada (Minister of

Health), [2003] O.J. No. 344 at para. 40 (S.C.J.), aff'd [2003] O.J. No. 4708 (C.A.).

61

[262] Visualize, assuming Mr. Raponi were to succeed - or even fail - in his claim about the three

Collier Centre syndicated mortgages, he has no knowledge, interest, and no skin in the game, so

to speak, about whether any of the Class Members who invested in the 66 syndicated mortgages

that Mr. Raponi did not participate in succeeds or fails. Mr. Raponi has no genuine or adequate

ability to instruct Class Counsel and nothing but altruism to motivate him to stay involved. Thus,

Mr. Raponi does not qualify to be a Representative Plaintiff for other than the Collier Centre

project.

[263] It follows that for the Omnibus Action to proceed, it would require subclasses and 53 to 66

more candidates for Representative Plaintiff. It further follows that at present the Representative

Plaintiff criterion is not satisfied with just Mr. Raponi as representative of all the Lenders.

[264] Moreover, Mr. Raponi’s Litigation Plan is woefully inadequate for his proposed Omnibus

Class Action. His plan is premised on the notion that individual issues trials are not required. His

plan, however, ignores the numerous individual issues that would have to be determined in the

context of the main action including limitation period issues, causation issues, reliance issues,

mitigation issues, and contributory negligence issues. And his plan ignores the presence of the

third party claims.

[265] Thus, the fifth criterion for certification, the representative plaintiff criterion (s. 5 (1)(e)) is

not satisfied because: (a) there are no viable causes of action, and it is axiomatic that if the cause

of action criterion is not satisfied, then none of the other certification criteria are satisfied; (b) Mr.

Raponi is not an adequate Representative Plaintiff for other than a severed action for the Collier

Centre project; (c) Mr. Raponi has not produced a workable litigation plan; and (d) as an Omnibus

Class action or as 54 severed class actions, a workable litigation plan is not feasible given the

obvious unmanageability of the Omnibus Class Action.

S. Conclusion

[266] For the above reasons, Mr. Raponi’s certification motion is dismissed.

[267] If the parties cannot agree about the matter of costs, they may make submissions in writing

beginning with Olympia Trust’s submissions within twenty days of the release of these Reasons

for Decision followed by Mr. Raponi’s submissions within a further twenty days.

Perell, J.

Released: August 2, 2022

62

Schedule “A” – Excerpts Income Tax Act and Income Tax Regulations

REGISTERED RETIREMENT SAVINGS PLANS

Definitions

146(1) In this section, […]

issuer means the person referred to in the definition retirement savings plan in this subsection with

whom an annuitant has a contract or arrangement that is a retirement savings plan;

[…]

non-qualified investment has the same meaning as in subsection 207.01(1);

[…]

qualified investment for a trust governed by a registered retirement savings plan means:

(a) an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the

definition qualified investment in section 204 if the reference in that definition to “a trust

governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a

trust governed by a registered retirement savings plan” and if that definition were read

without reference to the words “with the exception of excluded property in relation to the

trust”,

[…]

(d) such other investments as may be prescribed by regulations of the Governor in Council

made on the recommendation of the Minister of Finance;

retirement savings plan means

(a) […], or

(b) an arrangement under which payment is made by an individual or the individual’s

spouse or common-law partner

(i) in trust to a corporation licensed or otherwise authorized under the laws of

Canada or a province to carry on in Canada the business of offering to the public

its services as trustee, of any periodic or other amount as a contribution under the

trust,

(ii) […], or

[…];

Failure to comply

162 (7) Every person (other than a registered charity) or partnership who fails

(a) […], or

(b) to comply with a duty or obligation imposed by this Act or the regulations is liable in

respect of each such failure, except where another provision of this Act (other than

subsection 162(10) or 162(10.1) or 163(2.22)) sets out a penalty for the failure, to a penalty

63

equal to the greater of $100 and the product obtained when $25 is multiplied by the number

of days, not exceeding 100, during which the failure continues.

{***}

Definitions

204. In this Part, qualified investment for a trust governed by a deferred profit sharing plan or

revoked plan means, with the exception of excluded property in relation to the trust, […]

(c) debt obligations issued by

(i) a corporation, mutual fund trust or limited partnership the shares or units of

which are listed on a designated stock exchange in Canada,

(ii) a corporation the shares of which are listed on a designated stock exchange

outside Canada, or

(iii) an authorized foreign bank and payable at a branch in Canada of the bank,

[…], and

(h) prescribed investments; […]

{***}

PART XI.01 TAXES IN RESPECT OF REGISTERED PLANS

Definitions

207.01 (1) The following definitions 207.01 (1) The following definitions and the definitions in

subsections 146(1) (other than the definition benefit), 146.1(1), 146.2(1), 146.3(1) and 146.4(1)

apply in this Part and Part XLIX of the Income Tax Regulations, […]

controlling individual, of a registered plan, means

(a) the holder of a TFSA;

(b) a holder of a RDSP;

(c) a subscriber of a RESP; or

(d) the annuitant of a RRIF or RRSP.

Obligation of issuer

207.01(5) The issuer, carrier or promoter of a registered plan shall exercise the care, diligence and

skill of a reasonably prudent person to minimize the possibility that a trust governed by the

registered plan holds a non-qualified investment.

{***}

Tax payable on prohibited or non-qualified investment

207.04 (1) The controlling individual of a registered plan that governs a trust shall pay a tax under

this Part for a calendar year if, at any time in the year, the trust acquires property that is a prohibited

investment, or a non-qualified investment, for the trust.

64

Amount of tax payable

(2) The amount of tax payable in respect of each property described in subsection (1) is 50% of the

fair market value of the property at the time referred to in that subsection.

[…]

3. Income Tax Regulations, CRC, c 945

Registered Plans — Investments

9000 (1) For the purposes of paragraph (d) of the definition qualified investment in subsection

146(1) of the Act, paragraph (e) of the definition qualified investment in subsection 146.1(1) of the

Act, paragraph (c) of the definition qualified investment in subsection 146.3(1) of the Act, paragraph

(d) of the definition qualified investment in subsection 146.4(1) of the Act, paragraph (h) of the

definition qualified investment in section 204 of the Act and paragraph (c) of the definition qualified

investment in subsection 207.01(1) of the Act, each of the following investments is prescribed as a

qualified investment for a plan trust at a particular time if at that time it is […]

(j) a debt obligation of a debtor, or an interest, or for civil law a right, in that debt obligation,

where

(i) the debt obligation is fully secured by a mortgage, charge, hypothec or similar

instrument in respect of real or immovable property situated in Canada, or would

be fully secured were it not for a decline in the fair market value of the property

after the debt obligation was issued, and

(ii) the debtor (and any partnership that does not deal at arm’s length with the

debtor) is not a connected person under the governing plan of the plan trust;

65

Schedule “B” – Excerpts Bulletin IT-320R3 and Income Tax Folio S3-F10-C1

Bulletin IT-320R3 Qualified Investments (Trusts Governed by Registered

Retirement Savings Plans, Registered Education Savings Plans and Registered

Retirement Income Funds)

[…]

Summary

This bulletin discusses the kinds of property that constitute qualified investments for trusts governed

by registered retirement savings plans (RRSPs), registered education savings plans (RESPs) and

registered retirement income funds (RRIFs), as well as the income tax consequences of such trusts

acquiring and holding property that is not a qualified investment. Certain trusts governed by

registered plans may be subject to a special tax in respect of investments in foreign property. For a

discussion on this matter, see the current version of IT-412, Foreign Property of Registered Plans.

Discussion and Interpretation

General

¶ 1. This bulletin only discusses the kinds of property that constitute qualified investments for trusts

governed by RRSPs, RESPs and RRIFs and does not include other types of arrangements such as a

depositary RRSP or an insurance contract RRSP. Unless otherwise noted



a reference to an RRSP, an RESP or a RRIF in this bulletin means a trust governed

by an RRSP, an RESP or a RRIF, respectively;

a reference to a "plan trust" in this bulletin means a trust governed by an RRSP,

an RESP or a RRIF; and

all statutory references throughout the bulletin are to the Act.

Registered Holder of Investments

¶ 2. All qualified investments of a plan trust must be owned by the trustee of the plan trust and not

by the annuitant, beneficiary or subscriber under the plan trust. In the case of a share or other

security, registration of the security in the name of the trustee of the plan trust demonstrates

ownership by the trustee. […]

Qualified Investments

Definitions

¶ 3. The kinds of property that constitute qualified investments for RRSPs, RESPs and RRIFs are

described in the definitions of "qualified investment" in subsections 146(1), 146.1(1) and 146.3(1),

respectively. Paragraph (a) of those definitions includes certain of the investments listed in the

definition of "qualified investment" in section 204. In addition, properties prescribed by section

4900 of the Regulations are also qualified investments. […]

{***}

Debt obligations

Types

¶ 10. The most common debt obligations that are qualified investments for a plan trust are as follows:

[…]

66

¶ 11. A mortgage, or an interest therein, in respect of real property situated in Canada is a qualified

investment for a plan trust. There is no requirement that the mortgage be a first mortgage or a

residential mortgage. However, where the mortgagor is



a person who is an annuitant, a beneficiary or a subscriber under the plan trust, or

any other person who does not deal at arm's length with such person the mortgage

must be administered by an approved lender under the National Housing Act and

insured



under the National Housing Act, or

by a corporation that offers its services to the public as an insurer of mortgages

and is approved as a private insurer of mortgages.

Where an RRSP or a RRIF holds a mortgage on real property owned by the annuitant, or by a person

who does not deal at arm's length with the annuitant, the registration of the plan trust may be

jeopardized and/or certain benefit and penalty provisions of the Act may apply where



the amount of the mortgage interest rate and other terms do not reflect normal

commercial practice; and

the mortgage is not administered by the approved lender in the same manner as a

mortgage on property owned by a stranger.

{***}

¶ 28. When an RRSP acquires a property that is not a qualified investment, the fair market value of

that property at the time it is acquired is added to the income of the annuitant under the RRSP

pursuant to subsection 146(10). However, subsection 146(10) does not apply to property that was a

qualified investment at the time of acquisition and subsequently becomes property that is not a

qualified investment. By virtue of subsection 146(6), when an RRSP disposes of property that is not

a qualified investment, the annuitant can deduct from income for the year of disposition, the lesser

of



the amount previously included in income at the time the property was acquired,

and



the proceeds of its disposition.

If the income inclusion exceeds the proceeds of disposition of that property, the excess cannot be

deducted. The equivalent provisions for a RRIF are in subsections 146.3(7) and (8).

Income Tax Folio S3-F10-C1, (Qualified Investments – RRSPs, RESPs,

RRIFs, RDSPs, and TFSAs)

Summary

Registered retirement savings plans (RRSPs), registered education savings plans (RESPs),

registered retirement income funds (RRIFs), registered disability savings plans (RDSPs), and tax-

free savings accounts (TFSAs) are required to limit their investments to qualified investments. This

Chapter discusses the most common types of property that constitute a qualified investment, as well

as the tax consequences of acquiring, holding and disposing of a non-qualified investment. It also

discusses the tax consequences of a registered plan carrying on a business or borrowing money.

67

Overview of qualified investments

1.1 This section is intended to give the reader an overview of the qualified investment rules for

RRSPs, RESPs, RRIFs, RDSPs, and TFSAs. It is not intended as a substitute for the more detailed

and comprehensive discussion that follows it, which will be primarily of interest to financial

institutions, brokerage firms, tax specialists and others who are involved in plan administration.

1.2 The qualified investment rules apply to registered plans that are set up as a trust. Trusteed plans

that allow investors to choose a wide variety of investments are often referred to as self-

directed plans. Trusteed plans also include plans that restrict investments to mutual funds and other

investment products issued by the firm that administers the plan.

[…]

1.4 The following are common types of qualified investments:



money, GICs and other deposits

most securities listed on a designated stock exchange, such as shares of corporations,

warrants and options, and units of exchange-traded funds and real estate investment trusts



mutual funds and segregated funds

Canada Savings Bonds and provincial savings bonds

debt obligations of a corporation listed on a designated stock exchange

debt obligations that have an investment grade rating

insured mortgages or hypothecs

1.5 While the Act and Regulations set out the types of investments that are qualified investments,

many firms have internal policies that further limit the types of qualified investments that may be

held by the registered plans they administer. The legislation does not prohibit them from having

such policies, which reflect the business decisions of the firm.

1.6 Given the numerous and wide variety of investments that exist, the CRA does not maintain a

master list of specific investments that are qualified investments, nor does it make determinations

as to whether a specific investment qualifies except in the context of an advance income tax ruling

or audit.

1.7 Registered plan trustees are responsible for monitoring investments to minimize the possibility

of a plan holding a non-qualified investment.

1.8 If an individual acquires a non-qualified investment in their registered plan or an existing

investment becomes non-qualified, significant adverse tax consequences apply. The individual is

subject to a 50% tax on the value of the investment (which is refundable in certain circumstances)

and is required to file a special tax return and remit the tax. In addition, the plan is taxable on any

income earned on the non-qualified investment. The trustee of the plan is required to file a tax return

and remit the tax on behalf of the plan.

References to various terms

1.9 The following terms are used throughout this Chapter:



A trust governed by an RRSP, RESP, RRIF, RDSP, or TFSA is referred to individually as

an RRSP, RESP, RRIF, RDSP, or TFSA, respectively, and collectively as a registered plan

68



[…]

A reference to the trustee of a registered plan means the issuer of a trust governed by an

RRSP, RDSP, or TFSA, the carrier of a trust governed by a RRIF, or the trustee of a trust

governed by an RESP



A bond, debenture, note or similar obligation is referred to as a debt obligation

[…]

Types of qualified investments

1.10 The types of property that constitute a qualified investment for an RRSP, RESP, RRIF, RDSP,

and TFSA are described in the respective definitions of qualified investment in subsections 146(1),

146.1(1), 146.3(1), 146.4(1), and 207.01(1). Those definitions also include by reference certain

property described in the definition of qualified investment in section 204. In addition, investments

prescribed by section 4900 of the Regulations are qualified investments. […]

1.11 Generally, the conditions that must be met for an investment to be a qualified investment apply

on an on-going basis. However, several provisions contain conditions that apply only at a point in

time, typically on acquisition of the investment by the registered plan. Where this is the case, it has

been noted in the section of the Chapter describing that investment.

{***}

Arm’s length and non-arm’s-length mortgages and hypothecs

[…]

1.33 A debt obligation that is fully secured by a mortgage or hypothec on real or immovable property

situated in Canada is a qualified investment for a registered plan, provided the borrower is not

a connected person under the plan. In general, a debt obligation would be considered to be fully

secured if the value of the real or immovable property pledged by the borrower to the lender in the

event of default is sufficient to cover the full amount of the principal and interest outstanding on the

loan. For this purpose, any decline in the fair market value of the property after the debt obligation

was issued can be ignored.

{***}

Tax consequences – non-qualified investments

1.69 Adverse tax consequences apply when a registered plan holds a non-qualified investment.

Specifically, the controlling individual of the plan is subject to a 50% tax that is refundable in certain

circumstances. In addition, the plan is taxable on any income earned on non-qualified investments.

These consequences are discussed in more detail in ¶1.72 to 1.80.

1.70 In addition, the controlling individual of the plan may be subject to the 100% advantage tax on

specified non-qualified investment income (generally subsequent generation income earned on

income previously taxed in the plan). The advantage tax rules are discussed in Income Tax Folio

S3-F10-C3.

1.71 If an investment is both a non-qualified investment and a prohibited investment, subsection

207.04(3) deems the investment to be a prohibited investment only. See Income Tax Folio S3-F10-

C2 for more detail.

69

50% tax

1.72 If a registered plan acquires a non-qualified investment or an existing investment

becomes non-qualified, the controlling individual of the plan is subject to a tax under section

207.04 equal to 50% of the fair market value of the property at the time it is acquired or

becomes non-qualified. In the case of an RESP or RDSP with multiple subscribers or holders, each

such person is jointly and severally, or solidarily, liable with each other to pay the tax. Individuals

liable for the tax for any calendar year must file Form RC339, Individual Return for Certain Taxes

for RRSPs or RRIFs, RESPs or RDSPs or Form RC243, Tax-Free Savings Account (TFSA)

Return as applicable. The form, together with any balance due, must be submitted by no later

than June 30 of the following year.

1.73 The 50% tax on non-qualified investments is refundable in certain circumstances. To qualify

for the refund, the investment must be disposed of before the end of the calendar year after the year

in which the tax arose (or such later time as is permitted by the Minister of National Revenue).

However, no refund is available if it is reasonable to consider that the controlling individual knew

or ought to have known that the investment was or would become non-qualified. The forms referred

to in ¶1.72 explain how to claim the refund.

1.74 If a non-qualified investment becomes qualified while being held by a registered

plan, subsection 207.01(6) deems the investment to have been disposed of and reacquired by the

plan. This might happen when a delisted security is relisted. This ensures that a refund is available

in this situation, provided the conditions described in ¶1.73 are met.

1.75 Subsection 207.06(2) gives the Minister authority to cancel or waive all or part of the 50% tax

on non-qualified investments in appropriate circumstances, taking into account such factors as

reasonable error. The forms referred to in ¶1.72 explain how to apply for this relief.

Trust taxable on non-qualified investment income

1.76 A trust governed by an RRSP, RESP, TFSA, RRIF, or RDSP is taxable under Part I on any

income it earns in a tax year from non-qualified investments in accordance with subsection

146(10.1), 146.1(5), 146.2(6), or 146.3(9) or paragraph 146.4(5)(b), respectively. For this purpose,

income tax is payable on the trust’s adjusted taxable income which is calculated using only the

income or loss from non-qualified investments and the full capital gain or capital loss from the

disposition of non-qualified investments. The adjusted taxable income also includes capital

dividends described in section 83.

1.77 Subsection 207.01(6) provides a special rule that applies when an investment becomes or

ceases to be a non-qualified investment while being held by a registered plan. The rule deems the

investment to have been disposed of immediately before that time for proceeds of disposition equal

to its fair market value and re-acquired for the same amount at the same time. This ensures that only

the portion of the capital gain or capital loss that accrues during the period in which the investment

was non-qualified is taken into account in determining the trust’s adjusted taxable income.

Example 2 […]

1.78 The trustee must file a T3RET, T3 Trust Income Tax and Information Return for the trust with

a payment for any balance due no later than 90 days following the end of the calendar year.

[…]

Obligations of registered plan trustees

1.92 Responsibility for compliance with the qualified investment rules generally lies with the trustee

of the registered plan. In the case of RESPs, responsibility may be shared between the trustee and

the promoter. In some cases, the trustee may require the plan’s controlling individual to provide the

trustee with evidence for the purpose of determining qualified investment status. In these cases, the

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trustee must exercise due diligence in satisfying itself that the documentation provided is sufficient.

The CRA may ask the trustee to demonstrate how it determined that a particular property was a

qualified investment.

1.93 Subsection 207.01(5) requires the trustee of an RRSP, RRIF, RDSP, or TFSA, or the promoter

of an RESP, to exercise the care, diligence and skill of a reasonably prudent person to minimize the

possibility of the plan holding a non-qualified investment. If a trustee or promoter fails to comply

with this obligation, the trustee or promoter is liable to a penalty under subsection 162(7).

[…]

1.95 The trustee of an RRSP, RRIF, RDSP, or TFSA, or the promoter of an RESP, is also required

to report information to the CRA and the controlling individual of the plan if the plan begins or

ceases to hold a non-qualified investment in a year. For information on these reporting obligations,

refer to: […]

1.96 The Act requires that all contributions, acquisitions and dispositions of property, distributions,

and any other transactions involving a registered plan occur at fair market value. Otherwise, adverse

tax consequences will arise. While the term fair market value is not defined in the Act, it generally

is considered to mean the highest price expressed in terms of money that can be obtained in an open

and unrestricted market between informed and prudent parties, who are dealing at arm's length and

under no compulsion to buy or sell. The determination of fair market value is a question of fact.

1.97 It is the responsibility of the registered plan trustee to determine the fair market value of

property involved in a transaction. In the case of RESPs, responsibility may be shared between the

trustee and the promoter. In some cases, the trustee may require the controlling individual of the

registered plan to provide evidence to determine the property’s fair market value. In these cases, the

trustee must exercise due diligence in satisfying itself that the documentation provided is sufficient.

The CRA may ask the trustee to demonstrate how the fair market value of a particular property was

determined.

1.98 Except for RESPs, it is common for registered plan trustees to have an agreement with an agent

or mandatary, such as an investment broker, that allows the agent or mandatary to provide the trustee

with certain administrative and investment functions. However, the ultimate responsibility for

ensuring that a registered plan complies with the qualified investment rules always remains with the

trustee.

CITATION: Raponi v. Olympia Trust Company, 2022 ONSC 4481

COURT FILE NO.: CV-20-00643593-00CP

DATE: 20220802

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

DANIELE RAPONI

Plaintiff

- and –

OLYMPIA TRUST COMPANY

Defendant

REASONS FOR DECISION

PERELL J.

Released: August 2, 2022