Plaintiffs in the class action invested in syndicated mortgage loans (SMLs) purportedly intended to fund FRD’s Orchard Calgary project. It was one of about 80 construction projects across Canada that FRD co-founders Jawad Rathore and Vincenzo Petrozza helped fund through SML investments from 2008 to 2022, when they were each charged by the RCMP with one count of fraud and one count of "secret commissions" under the Criminal Code.
Despite the class action victory, Toronto lawyer and co-counsel for the plaintiffs Mitchell Wine said the settlement with the so-called FMP Defendants — FMP Mortgage Investments and its former executives Michael Daramola, Tonino Amendola and Graham McWaters — falls far short of fully reimbursing the plaintiffs for their losses.
The representative plaintiffs were listed as investors Arlene McDowell and the estate of Bryan Madryga by his litigation administrator Rebecca Shaw.
“This was a fair settlement with this defendant in light of the available insurance,” said Wine, who served as co-counsel with lawyer Margaret Waddell, a partner with Toronto-based class actions specialist Sotos LLP.
“But investors in these mortgages — many of whom were retirees with little investment knowledge and limited incomes — will not nearly recover their investments let alone interest to be paid to them,” he added in an email to Law360 Canada. “So, viewing it through that lens, I am not happy with any outcome that does not fully compensate the investors.”
Wine said about 340 people invested in the Orchard Calgary project, and the representative class members alleged breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, fraudulent misrepresentation and conspiracy by the FMP defendants.
According to facts detailed in the Jan. 30 decision in McDowell v. Fortress Real Capital Inc. 2025 ONSC 635, the representative class members alleged that class members were misled about the value of the property on which the syndicated mortgage would be registered, the risks involved in participating in the syndicate mortgage, how the mortgage proceeds would be used by the developers and the mortgage trustees/administrators, and that the mortgage would qualify to be held in registered accounts.
“Investors were told these mortgages were safe and secure and they were the opposite,” explained Wine.
Still, in his decision, Ontario Superior Court Justice Ed Morgan concluded that, “Given all of the circumstances, the Settlement Agreement is fair and reasonable and in the best interests of the class.”
“This settlement fund represents 75 per cent of the maximum aggregate insurance originally available under FMP’s insurance policy, and is $1million more than the total primary coverage under that policy, which is an eroding mortgage brokers professional liability policy,” Justice Morgan noted. “FMP is bankrupt, and the settlement calls for the FMP Defendants to pay substantially all of the remaining available insurance to settle the Plaintiffs’ and class members’ claims.”
The class was defined as “all persons in Canada who invested in a syndicated mortgage in respect of the Orchard Project, registered against title to lands located at 602, 606, 610, 620, 624, 626 and 628 12th Avenue S.E., in Calgary, Alberta as Registration Number 141 112 373.”
From the settlement fund, Justice Morgan also approved class counsel fees of $750,000 plus HST — for a total of $847,500 — reimbursement of class counsel disbursements of $11,821, and an amount of $169,500 to be held in trust by class counsel to pay for future disbursements and any adverse costs awards.
“Each of these requests is reasonable under the circumstances,” wrote Justice Morgan. “The counsel fee is 25 per cent of the settlement fund, which is well within the range that this court has on numerous occasions determined to be a reasonable counsel fee. The disbursements are also relatively modest.
“Although it is a bit unusual,” he added, “under the circumstances and given the financial realities facing the parties, the request to hold funds in trust for future fees or expenses is a prudent one.”
Wine said that four other class action lawsuits are ongoing related to other Fortress Real Developments projects, Collier Centre in Barrie, Ont., The Kemp in Barrie, Progress Manors Ten88 in Toronto, and Sutton/The Link in Burlington, Ont.
The criminal trial for Rathore and Petrozza began on Oct. 28 of last year and has not yet been resolved.
Counsel for the FMP defendants was Stephen Libin, a Toronto partner with Branch MacMaster LLP. Lawyer Sierra Farr with Osler, Hoskin & Harcourt LLP in Toronto represented the claims administrator, Toronto-based Faan Mortgage Administrators.
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