ontario superior court of justice (commercial list)...

Court File No. CV-18-596204-00CL

Ontario SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

THE SUPERINTENDENT OF FINANCIAL SERVICES

Applicant

- and -

BUILDING & DEVELOPMENT MORTGAGES CANADA INC.

Respondent

APPLICATION UNDER SECTION 37 OF THE

MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

MOTION RECORD OF FAAN MORTGAGE ADMINISTRATORS INC., IN

ITS CAPACITY AS COURT-APPOINTED TRUSTEE

December 13, 2018

OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8

Michael De Lellis (LSUC# 48038U) Jeremy Dacks (LSUC# 41851R) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee of Building & Development Mortgages Canada Inc.

TO: SERVICE LIST

1

Court File No. CV-18-596204-00CL Ontario

SUPERIOR COURT OF JUSTICE COMMERCIAL LIST


Applicant - and -

BUILDING & DEVELOPMENT MORTGAGES CANADA INC. Respondent



SERVICE LIST

TO: OSLER, HOSKIN & HARCOURT LLP

100 King Street West 1 First Canadian Place Suite 6200, P.O. Box 50 Toronto, ON M5X 1B8 Michael De Lellis Tel. +1.416.862.5997 Jeremy Dacks Tel. +1.416.862.4923 Patrick Riesterer Tel. +1.416.862.5947 [email protected] [email protected] [email protected] Counsel for the Trustee

AND TO:

FAAN MORTGAGE ADMINISTRATORS INC. 20 Adelaide Street East Suite 920 Toronto, ON M5C 2T6 Naveed Manzoor Tel. +1.416.258.6415 Daniel Sobel Tel. +1.647.272.8383 Lana Bezner Tel. +1.416.966.7646 [email protected] [email protected] [email protected] Trustee

mailto:[email protected]






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AND TO:

AIRD & BERLIS LLP Brookfield Place 181 Bay Street, Suite 1800 Toronto, ON M5J 2T9 Steven L. Graff Tel. +1.416.865.7726 Ian Aversa Tel. +1.416.865.3082 Miranda Spence Tel. +416.865.6414 [email protected] [email protected] [email protected] Counsel for the Superintendent of Financial Services

AND TO:

CHAITONS LLP 5000 Yonge Street, 10th Floor Toronto, Ontario M2N 7E9 Harvey Chaiton Tel. +1.416.218.1129 George Benchetrit Tel. +1.416.218.1141 [email protected] [email protected] Court-Appointed Representative Counsel for Investors

AND TO:

HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ONTARIO AS REPRESENTED BY THE MINISTER OF FINANCE P.O. Box 620 33 King Street West, 6th Floor Oshawa, ON L1H 8E9 Kevin O’Hara Tel: +1.905.433.6934 Fax: +1.905.436.4510 [email protected]

AND TO:

NORTON ROSE FULBRIGHT CANADA LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, Ontario M5J 2Z4 Jennifer Teskey Tel: +1.416.216.2303 Jeremy Devereux Tel: +1.416.216.4073 Fax: +1.416.216.3930 [email protected] [email protected]

AND TO:

FINANCIAL SERVICES COMMISSION OF ONTARIO (“FSCO”) 5160 Yonge Street, 16th Floor Toronto, Ontario M2N 6L9 Mark Bailey Tel: +1.416.250.7250 Brendan Forbes Tel: +1.416.250.7250 Fax: +1.416.590.7070 [email protected] [email protected]

AND TO:

BRAUTI THORNING ZIBARRAS LLP 161 Bay Street, Suite 2900, Toronto, ON M5J 2S1 Jay Naster Tel. +1.416.507.2442 [email protected] Counsel to Building and Development Mortgages Canada Inc., Canadian Development Capital & Mortgage Services Inc. and Ildina Galati











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AND TO:

BUILDING AND DEVELOPMENT MORTGAGES CANADA INC. (“BDMC”) 25 Brodie Drive, Unit 8 Richmond Hill, ON L4B 3K7 Ildina Galati [email protected]

AND TO:

CANADIAN DEVELOPMENT CAPITAL & MORTGAGE SERVICES INC. (“CDCM”) 25 Brodie Drive, Unit 7 Richmond Hill, ON L4B 3K7 Julie Galati [email protected]

AND TO:

ROBINS APPLEBY LLP 120 Adelaide Street West Suite 2600 Toronto, ON M5H 1T1 David Taub Tel. +1.416.360.3354 John Fox Tel. +1.416.360.3349 [email protected] [email protected] Counsel to Fortress Real Developments Inc.

AND TO:

FORTRESS REAL DEVELOPMENTS INC. 25 Brodie Drive, Unit 1 Richmond Hill, ON L4B 3K7 [email protected] [email protected]

AND TO:

BLANEY MCMURTRY LLP 2 Queen Street East, Suite 1500 Toronto, Ontario M5C 3G5 David Ullmann Tel. +1.416.596.4289 [email protected]

AND TO:

PAUL BATES BARRISTER 100 Lombard St., Suite 302 Toronto, ON M5C 1M3 Paul Bates [email protected]

AND TO:

NOBLETON SOUTH HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Domenic Fazari [email protected] Borrower

AND TO:

NOBLETON NORTH HOLDING INC. 368 Four Valley Drive Concord, Ontario L4K 5Z1 Giuseppe Valela [email protected] Borrower











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AND TO:

BROOKHILL HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, ON M5E 1A7 Giuseppe Valela

[email protected] Borrower for Bowmanville

AND TO:

SOUTH WEST QUEENSVILLE HOLDINGS INC. 56 The Esplanade, Suite 206 Toronto, Ontario M5E 1A7 Giuseppe Valela [email protected] Borrower for Highlands of York

AND TO:

OWENS WRIGHT 20 Holly Street, Suite 300 Toronto, Ontario M4S 3B1 David Forgione [email protected] Counsel to numerous Borrowers

AND TO:

MILLER THOMSON LLP 40 King Street West, Suite 5800 Toronto, ON M5H 3S1 Craig Mills [email protected] Counsel to Brookhill Holdings Inc.

AND TO:

WELLINGTON HOUSE INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

GOLDMAN, SLOAN, NASH & HARBER LLP 480 University Avenue, Suite 1600 Toronto, ON M5G 1V2 David Nakelsky [email protected] Counsel to Wellington House Inc.

AND TO:

O’CONNOR MACLEOD HANNA LLP 700 Kerr Street Oakville, ON L6K 3W5 Orie Niedzviecki [email protected] Counsel to JW Roberts Enterprises Inc.

AND TO:

FFM CAPITAL INC. 35 Silton Road Woodbridge, ON L4L 7Z8 Tony Mazzoli Krish Kochhar [email protected] [email protected]

AND TO:

FDS BROKER SERVICES INC. 160 Traders Blvd, Suite 202 Mississauga, ON L4Z 3K7 Zafar Khawaja [email protected]

AND TO:

ROSEN GOLDBERG INC. 5255 Yonge Street, Suite 804 Toronto, ON, M2N 6P4 [email protected] Trustee to FDS Broker Services Inc.












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AND TO:

ROYAL CANADIAN MOUNTED POLICE Integrated Market Enforcement Team 20 Queen Street West, 15th Floor Toronto, ON M5H 3R3 Jeff Francis [email protected]

AND TO:

TSUNAMI TECHNOLOGY GROUP INC. 215 Traders Blvd. East, Suite 16 Mississauga, ON L4Z 3K5 Don Tanner [email protected]

AND TO:

COMPUTERSHARE TRUST COMPANY OF CANADA 100 University Avenue 12th Floor, South Tower Toronto, ON M5J 2Y1 David Kerr [email protected] Robert Armstrong [email protected]

AND TO:

OLYMPIA TRUST COMPANY 200, 125-9 Avenue SE Calgary, AB T2G 0P6 Jonathan Bahnuik Johnny Luong [email protected] [email protected]

AND TO:

DUNSIRE (LANDSDOWN) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

RSM CANADA LIMITED 11 King Street West Suite 700, PO Box 27 Toronto, Ontario M5H 4C7 Jeffrey Berger [email protected] Court-appointed Receiver of Dunsire (Landsdown) Inc.

AND TO:

LAMB BAUHAUS INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

BEL CALGARY INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower











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AND TO:

SUNRISE ACQUISITIONS (BOND HEAD) INC. 50 West Wilmot Street, Suite 100 Richmond Hill, ON L4B 1M5 Sajjad Hussain

[email protected] Borrower

AND TO:

BRAESTONE DEVELOPMENT CORPORATION 85 Bayfield Street, Suite 500 Barrie, ON L4M 3A7 J. David Bunston James Massey [email protected] Borrower

AND TO:

FORTRESS BROOKDALE INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

RSM CANADA LIMITED 11 King Street West, Suite 700 Toronto, ON M5H 4C7 Arif Dhanani [email protected]

Private Receiver of Brookdale

AND TO:

MEYER, WASSENAAR & BANACH LLP Royal Bank Bldg. 301-5001 Yonge St. North York, Ontario M2N 6P6 Joseph Fried [email protected] Counsel to Private Receiver of Brookdale Project

AND TO:

EMERALD CASTLE DEVELOPMENTS INC. 361 Connie Crescent, Suite 200 Concord, ON L4K 5R2 Desi Auciello [email protected] Borrower

AND TO:

AVERTON (RUTHERFORD) INC. 101 Riele Drive, Suite 310 St. Alberta, Alberta T8N 3X4 Paul Lanni [email protected]

Borrower

AND TO:

CARLYLE COMMUNITIES (CRESTVIEW) INC. 20 Rivermede Road, Suite 204 Concord, ON Naram Mansour [email protected]

Borrower










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AND TO:

LAMB EDMONTON CORP. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

AVERTON HOMES (PRESCOTT) INC. 101 Riele Drive, Suite 310 St. Alberta, AB T8N 3X4 Paul Lanni [email protected] Borrower

AND TO:

THE HARLOWE INC. 778 King Street West Toronto, ON M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

GOLDMAN SLOAN NASH & HARBER LLP 480 University Avenue Suite 1600 Toronto, ON M5G 1V2 Robert Jackson [email protected] Counsel to The Harlowe Inc.

AND TO:

THICKSON ROAD 407, WHITBY LIMITED 9000 Keele Street, Unit 4 Concord, Ontario L4K 0B3 Mario Bottero [email protected] Borrower

AND TO:

HARRIS, SHEAFFER LLP 4100 Yonge Street, Suite 610 Toronto, ON M2P 2B5 Raz Nicolae [email protected] Counsel to Whitby Borrower

AND TO:

2309918 ONTARIO INC. 30 Wertheim Court, Unit 3, Building A, Richmond Hill, Ontario L4B 1B9 Dino Sciavilla [email protected] Eden Borrower

AND TO:

DAVID CHONG 1370 Don Mills Road Don Mills, ON M3B 3N7 David Chong Tel. +1.416.510.2233 [email protected] Counsel to 2309918 Ontario Inc.









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AND TO:

2301132 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower

AND TO:

2309840 ONTARIO INC. 11025 Lakeridge Road Port Perry, Ontario L9L 1V7 Brian Tilley [email protected] Borrower

AND TO:

DLA PIPER 1 First Canadian Place 100 King Street West, Suite 6000 Toronto, ON M5X 1E2 Edmund Lamek [email protected] Danny Nunes [email protected] Counsel to 2301132 Ontario Inc. and 2309840 Ontario Inc.

AND TO:

KSV KOFMAN INC. 150 King Street Westm Suite 2308 Toronto, ON M5H 1J9 Bobby Kofman [email protected] Jonathan Joffe [email protected] Proposal Trustee for Georgetown Borrower

AND TO:

BENNETT JONES LLP 1 First Canadian Place 100 King Street West, Suite 3400 Toronto, ON M5X 1A4 Sean Zweig [email protected] Counsel to Georgetown Proposal Trustee

AND TO:

WORTHINGTON HOMES (HUMBERTON) INC. 164 Nelson Street Oakville, Ontario L6L 3J2 Daniel Marion [email protected] Borrower

AND TO:

BEL-EDMONTON INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

KING SQUARE LTD. 50 Acadia Avenue, Suite 310 Markham, Ontario L3R 0B3 Wen Yi Wang [email protected] Borrower











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AND TO:

KINGRIDGE DEVELOPMENT CORPORATION 235 Speers Road Oakville, Ontario L6K 2E8 Daniel Marion [email protected] Borrower

AND TO:

WORTHINGTON HOMES (HUMBERTON) INC. 164 Nelson Street Oakville, Ontario L6L 3J2 Daniel Marion [email protected] Borrower

AND TO:

DUNSIRE (1041 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

DUNSIRE (1407 LAKESHORE) INC. 203A-465 Phillip Street Waterloo, Ontario N2L 6C7 Shawn Keeper [email protected] Borrower

AND TO:

KINGRIDGE (OAKVILLE EAST) INC. 1660 North Service Road East, Suite 109B Oakville, Ontario N6H 7G3 Daniel Marion [email protected] Borrower

AND TO:

L RICHMOND CORP. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

2382917 ONTARIO INC. 500 Hanlon Creek Blvd Guelph, Ontario N1C 0A1 Lee Piccolo [email protected] Borrower

AND TO:

MILLER THOMSON LLP 40 King Street West, Suite 5800 Toronto, ON M5H 3S1 Kyle Hampson [email protected] Counsel to 2382917 Ontario Inc

AND TO:

1177 DANFORTH AVENUE LTD. 156 Duncan Mill Road, Suite 23A Toronto, Ontario M3B 3N2 Morris Hansun [email protected] Borrower

AND TO:

GORDIN & TARR LLP 1 Director Court, Suite 105 Woodbridge, ON L4L 4S5 Jessica Tarr [email protected] Counsel to 1177 Danforth Borrower











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AND TO:

LAMB CALGARY INC. 778 King Street West Toronto, Ontario M5V 1N6 Brad Lamb [email protected] Borrower

AND TO:

TORKIN MANES LLP 151 Yonge Street, Suite 1500 Toronto, ON M5C 2W7 Michael Tamblyn Tel. +1.416.777.5366 [email protected]

AND TO:

SMYGINE (LAKEEAST) INC. 6021 Yonge Street, Suite 229 Toronto, Ontario M2M 3W2 Mike Petrovski [email protected] Borrower

AND TO:

HALO TOWNHOMES INC. 229-6021 Yonge Street Toronto, Ontario M2M 3W2 Mike Petrovski Sayf Hassan Konstantine Simionopoulos [email protected] Borrower

AND TO:

TENENBAUM & SOLOMON LLP 7181 Woodbine Avenue Markham, ON L3R 1A3 Samantha Solomon [email protected] Counsel to Borrower to Halo and Smygine

AND TO:

AMADON-WESTWATER PROJECTS LTD. 426B William Street Victoria, British Columbia V9A 3Y9 Max Tomaszewski [email protected] Borrower

AND TO

UNION WATERFRONT INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

MSI SPERGEL msi Spergel Inc. 21 King Street West, Suite 1602 Hamilton, Ontario, L8P 4W7 [email protected] Court Appointed Receiver of Union Waterfront

AND TO:

LEVINE SHERKIN BOUSSIDAN BARRISTERS 23 Lesmill Road, Suite 300 Toronto, ON M3B 3P6 Kevin Sherkin

AND TO:

MCAP INC. 400-200 King Street West Toronto, ON M5H 3T4 Mark Adams [email protected]










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Tel: +1.416.224.2400 ext. 120 Mitchell Wine Tel: +1.416.224.2400 ext. 116 [email protected] [email protected] Counsel for certain proposed representative plaintiffs in class action proceedings against BDMC and other parties

Philip Frank [email protected] Bruno Iacovetta [email protected]

AND TO:

WESTGATE PROPERTIES LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore

Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

FORTRESS CHARLOTTE 2014 INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore [email protected]

Borrower

AND TO:

FORTRESS COLLIER CENTRE LTD. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore


AND TO:

FORTRESS CARLYLE PETER STREET INC. 20 Rivermede Road, Suite 204 Concord, Ontario L4K 3N3 Naram Mansour Jawad Rathore [email protected] Borrower

AND TO:

6566074 MANITOBA LTD. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore Vincenzo Petrozza [email protected] [email protected] Borrower

AND TO:

FORTRESS KEMPENFELTBAY DEVELOPMENTS INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Jawad Rathore

Vincenzo Petrozza [email protected] [email protected]















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Borrower

AND TO:

OLD MARKET LANE INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

FORTRESS TRIPLE CREEK INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

2221563 ONTARIO INC. 1-25 Brodie Drive Richmond Hill, Ontario L4B 3K7 Vincenzo Petrozza [email protected] Borrower

AND TO:

2283020 ONTARIO INC. FORTRESS PORT PLACE (2014) INC. 1 – 25 Brodie Drive Richmond Hill, ON L4B 3K7 Jawad Rathore







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Email List: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]

























mailto:[email protected];%[email protected]




















































INDEX

TAB DOCUMENT Page No.

1. Notice of Motion dated December 13, 2018

2. Fourth Report of the Trustee dated December 13, 2018

3. Draft Harlowe Settlement Approval Order

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12

120


Ontario SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

NOTICE OF MOTION (Motion for Approval of Harlowe Settlement)

FAAN Mortgage Administrators Inc., in its capacity as Court-appointed trustee

(“Trustee”) of all of the assets, undertakings and properties of Building & Development

Mortgages Canada Inc. (“BDMC”) pursuant to section 37 of the Mortgage Brokerages, Lenders

and Administrators Act, 2006, S.O. 2006, c. 29, as amended, (“MBLAA”) and section 101 of the

Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, will make a motion before a judge of the

Ontario Superior Court of Justice (Commercial List) on December 20, 2018 at 10:00 a.m., or as

soon after that time as the motion can be heard, at 330 University Avenue, Toronto, Ontario.

PROPOSED METHOD OF HEARING: The motion is to be heard orally.

THE MOTION IS FOR:

1. An Order (the “Harlowe Settlement Approval Order”) substantially in the form attached

to the Motion Record, inter alia:

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(a) if necessary, abridging the time for service of this Notice of Motion and the Motion

Record and dispensing with service on any person other than those served;

(b) approving the Settlement Agreement dated as of November 6, 2018 (the “Harlowe

Settlement Agreement”) among The Harlowe Inc. (“Harlowe”), the Trustee and

Olympia Trust Company (“OTC”), with such minor amendments as the parties to

the Harlowe Settlement Agreement may agree upon to permit the completion of the

transaction contemplated thereby;

(c) directing Harlowe to pay $15,562,896.38 forthwith to the Trustee in accordance with

the terms of the Harlowe Settlement Agreement (such funds, the “Harlowe Realized

Property”);

(d) approving and ratifying the execution of the Harlowe Settlement Agreement by the

Trustee and OTC and authorizing and directing the Trustee and OTC to comply with

all of their obligations under the Harlowe Settlement Agreement;

(e) releasing, extinguishing, expunging and discharging all of the Harlowe Loan

Obligations and the Loan Encumbrances (each as defined below) upon the delivery

of the Trustee’s Certificate (as defined below), and ordering that none of the Trustee,

BDMC, OTC or any Harlowe Individual Lenders (as defined below) have any claim

against Harlowe in respect of the Harlowe Loan Obligations or the Loan

Encumbrances; provided, however, that Harlowe is not released from any

obligations under the Harlowe Settlement Agreement;

(f) declaring that the Release Agreement be given to the Releasees (as defined below)

by Harlowe on behalf of itself, its affiliates, and their respective shareholders,

agents, directors, officers, employees, and each of their respective successors and

assigns (collectively, the “Releasors”) and shall be binding and effective on the

Releasors in favour of the Releasees upon the delivery of the Trustee’s Certificate;

(g) authorizing the Trustee to make a further distribution to Investors of Realized

Property following the filing of the Trustee’s Certificate certifying, among other

things, the receipt by the Trustee of the Harlowe Realized Property, with the Court

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in an amount equal to 5% of the Realized Property held on or received after April

20, 2018;

(h) further amending the Realized Property Order (which was initially amended by

paragraph 10 of the Braestone Settlement Approval Order) upon delivery of the

Trustee’s Certificate certifying, among other things, the receipt by the Trustee of the

Harlowe Realized Property, to require the Trustee to distribute 85% of all other

Realized Property obtained, including the Harlowe Realized Property, pro rata to

the Investors entitled to such funds, whether received before or after the date of the

proposed Harlowe Settlement Approval Order; and

2. Such further and other relief as this Court may deem just.

THE GROUNDS FOR THE MOTION ARE:

Background

1. Pursuant to the Order of the Court in respect of BDMC dated April 20, 2018 (the

“Appointment Order”), FAAN Mortgage was appointed as the Trustee, without security, of all

of the assets, undertakings and properties of BDMC, including, without limitation, all of the assets

in the possession or under the control of BDMC, its counsel, agents and/or assignees but held on

behalf of any other party, including, but not limited to, Investors (as defined below), brokers, or

borrowers, in each case whether or not such property is held in trust or is required to be held in

trust;

2. The purpose of the Trustee’s appointment is to protect the interests of the members of

the investing public who invested in syndicated mortgage loans made by BDMC in respect of

certain real estate development projects secured by mortgages (typically third-ranking or lower

priority charges) registered on title to the applicable real property (the “Investors”);

3. Concurrently with the filing of this notice of motion, the Trustee is filing the Fourth

Report of the Trustee dated December 13, 2018 (the “Fourth Report”) with the Court, which

describes the Trustee’s activities to date in carrying out its mandate under the Appointment Order.

Capitalized terms used but not defined herein have the meanings given in the Fourth Report;

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4. The First Report of the Trustee dated June 19, 2018 (the “First Report”) described the

need for certain interim stabilization measures, including, among other things, clarification related

to the use of certain funds held in BDMC’s accounts, to allow the Trustee to discharge its

obligations pursuant to the Appointment Order, perform BDMC’s administrative tasks, and to

commence an in-depth review of the real estate development projects that were funded in part

through the syndicated mortgage loans that were administered by BDMC;

5. The Interim Stabilization Order was issued on June 26, 2018 and, among other things:

(a) appointed Chaitons LLP as representative counsel in respect of the common interests

of all Investors in these proceedings unless and until an Investor opts out of such

representation (“Representative Counsel”);

(b) authorized the Trustee to retain all of the funds held by BDMC on the date of the

Appointment Order, or paid or payable to BDMC or the Trustee thereafter, including

interest where principal is not repaid, other than Realized Property (“Estate

Property”) and to use the Estate Property to fund certain matters in connection with

the administration of BDMC’s estate;

(c) required the Trustee to hold, in a separate account, until further order of the Court

(I) all funds held or received by the Trustee as a result of a repayment (in whole or

in part) of principal on any loan or other indebtedness administered by BDMC on

behalf of Investors, whether or not (i) secured by any Real Property Charges in the

name of BDMC or an RRSP Trustee, (ii) received before or after the date of the

Appointment Order, or (iii) paid or payable in trust, plus (II) all interest paid or

payable to BDMC or the Trustee at the time such repayment (in whole or in part) of

principal is made (collectively, “Realized Property”) other than 50% of the

Realized Property consisting of realizations on the Victoria Medical SML Loans;

(d) directed the Trustee to pay 50% of the Realized Property consisting of realizations

on the Victoria Medical SML Loans pro rata to the Investors entitled to such funds;

and

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(e) required the Trustee to report to the Court by October 31, 2018 with a

recommendation regarding next steps with respect to the Realized Property,

including any potential distribution of Realized Property to the Investors;

6. The Second Report of the Trustee dated October 23, 2018 (the “Second Report”)

provided a further comprehensive update on the Trustee’s activities undertaken since the date of

the First Report, including a detailed description of the in-depth analysis the Trustee is conducting

with respect to each real estate development project and a status update for each of those projects.

The Second Report contained information in support of the Realized Property Order;

7. The Realized Property Order was issued on October 30, 2018 and, among other things:

(a) required the Trustee to distribute (when aggregated with previous distributions) 70%

of the Realized Property (including funds originally obtained with respect to the

Victoria Medical SML Loans);

(b) required the Trustee to retain 30% of all Realized Property; and

(c) authorized the Trustee to use the retained Realized Property to aid the Trustee in

complying with the Appointment Order and in carrying out its mandate, as the

Trustee, in its sole discretion, considered necessary or desirable for the

administration of the estate, including in respect of those matters set out in paragraph

17 of the Interim Stabilization Order (collectively, the “Required Trustee

Activities”);

8. The Third Report of the Trustee dated November 19, 2018 (the “Third Report”)

provided the Court and the stakeholders with the Trustee’s recommendation in favor of a

settlement agreement reached with Braestone Development Corporation (the “Braestone

Borrower”) that provided for an early payout of the Investors under the loan agreement dated

December 1, 2012 between the Braestone Borrower and BDMC (the “Braestone Settlement

Agreement”). The Third Report also included information in support of the Braestone Settlement

Approval Order;

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9. The Braestone Settlement Approval Order was issued on November 28, 2018 and

approved, among other things:

(a) the Braestone Settlement Agreement and the transactions contemplated thereby;

(b) an amendment to the Realized Property Order that required the Trustee to distribute

(when aggregated with previous distributions) 80% of all Realized Property to

Investors following receipt of the payment from the Braestone Borrower; and

(c) the approval of the Trustee’s and its counsel’s activities and fees to date;

Need for the Harlowe Settlement Approval Order

10. The Trustee understands that 80% of the available units in Harlowe’s real estate

development project situated at Bathurst and Richmond Street in Toronto, Ontario (the “Harlowe

Project”) have been sold;

11. Harlowe has advised that there have been significant changes to the marketplace since

the commencement of the Harlowe Project, which have created difficulties in completing the sale

of outstanding units and have impacted project cash flows. Harlowe has informed the Trustee that

it does not expect to complete remaining unit sales until the spring of 2021;

12. BDMC is party to a loan agreement with Harlowe dated June 10, 2013 (the “Loan

Agreement”, and such loan, the “Harlowe Loan”). The Trustee understands that the material

delays in the sales of the remaining units required to complete the Harlowe Project would result in

corresponding delays in the repayment of the Harlowe Loan;

13. Harlowe has advised the Trustee that it does not expect to be able to repay the Harlowe

Loan in the near term, and expects that repayment in full may not occur until spring 2021, or later.

The extended term under the Loan Agreement expired on September 1, 2017;

14. Harlowe is seeking to obtain an inventory loan to fund the costs of holding and selling

the remaining units. Harlowe has advised that it has been unable to obtain such inventory loan

while the Harlowe Loan remains outstanding and the Loan Encumbrances remain on title due to

6

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recent negative media coverage surrounding Fortress, BDMC and the syndicated mortgage loan

market;

15. Accordingly, Harlowe is seeking to repay the debt owing to the individual lenders under

the Loan Agreement (the “Harlowe Individual Lenders”) at a discount to the total amount that

would be owing at the completion of the Harlowe Project in order to release and discharge the

obligations and the Loan Encumbrances;

16. The Trustee’s negotiations with Harlowe in respect of a potential payout culminated

when, on November 6, 2018, Harlowe presented the Trustee with an offer to accept payment by

Harlowe of $15,562,896.38 in full satisfaction of the amounts due under the Loan Agreement,

which represents approximately 98% of the outstanding principal balance of $15,863,400 currently

owing under the Loan Agreement. The offer contained the proposed Harlowe Settlement

Agreement (the “Harlowe Offer”);

17. As described in the Fourth Report, the full amount due under the Harlowe Loan

(including interest and certain deferred lender fees) exceeds $20 million; however, when

previously paid interest of approximately $2.7 million is included, the proposed payout would

result in a full payment of the principal owing on the Harlowe Loan plus compensation of

approximately 15% above the principal amount of the Harlowe Loan;

18. The Harlowe Offer is conditional upon the release and discharge of all of Harlowe’s

obligations to BDMC, OTC, and the Harlowe Individual Lenders under the Harlowe Loan

Agreement, the Security and the Loan Documents (each as defined in the Harlowe Loan

Agreement) (collectively, the “Harlowe Loan Obligations”) and all security interests granted to

BDMC, OTC or the Harlowe Individual Lenders in and to the assets of Harlowe to secure the

Harlowe Loan Obligations (the “Loan Encumbrances”) and provides that Harlowe is to deliver

a release agreement (“Release Agreement”) to the Trustee, BDMC, OTC, and the Harlowe

Individual Lenders, each of their respective officers, directors, agents, employees, and each of their

respective successors and assigns (collectively, the “Releasees”), which would release such

Releasees from all obligations under the Harlowe Loan Documents;

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19. The Trustee consulted extensively with Representative Counsel regarding the Harlowe

Offer and has been informed by Representative Counsel that it also supports the acceptance of the

Harlowe Offer;

20. The Trustee delivered a notice to the Harlowe Individual Lenders on November 16, 2018

advising the Harlowe Individual Lenders of the Trustee’s recommendation in support of accepting

the Harlowe Offer and requesting the Harlowe Individual Lenders to provide their feedback,

whether for or against the acceptance of the Harlowe Offer, and any other general feedback (the

“Harlowe Consent Request”);

21. As described in the Fourth Report, the Trustee received 133 formal votes in response to

the Harlowe Consent Request. Over 98% of the Harlowe Individual Lenders that voted in response

to the Harlowe Consent Request, representing almost 99% in value of such loans, voted in favour

of the Trustee accepting the Harlowe Offer; whereas less than 2% of voting Harlowe Individual

Lenders, representing approximately 1% in value of such loans, voted against the Harlowe Offer;

22. The rate of response to the Harlowe Consent Request was approximately 44% of all

Harlowe Individual Lenders, which was slightly in excess of the rate of response received with

respect to the consent request relating to the proposed Braestone Settlement Agreement. Further,

this rate of response was much higher than the rate of response to other general notices or requests

for consent that the Trustee has sent to date;

23. Following receipt of feedback from the Harlowe Individual Lenders and Representative

Counsel, the Trustee has accepted the Harlowe Offer and the Trustee and OTC executed the

Harlowe Settlement Agreement. However, the Harlowe Settlement Agreement is only binding on

the Trustee, BDMC and OTC upon approval of the agreement by the Court. The Trustee is

therefore seeking the Harlowe Settlement Approval Order from the Court;

24. If the Court issues the proposed Harlowe Settlement Approval Order, then the settlement

set out therein would become effective upon the issuance by the Trustee of a Trustee’s certificate

confirming, among other things, the Trustee’s receipt of the $15,562,896.38 payment (the

“Trustee’s Certificate”);

8

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Need for Approval of Certain Realized Property Matters

25. The Trustee has determined that, should the $15,562,896.38 in Harlowe Realized

Property be received, it will be appropriate to further reduce the percentage of Realized Property

that it needs to retain to fund the Required Trustee Activities;

26. Therefore, the Trustee is seeking the Court’s authorization to, upon the filing of the

Trustee’s Certificate certifying, among other things, the receipt by the Trustee of the Harlowe

Realized Property, distribute an additional amount equal to 5% of the Realized Property held by

the Trustee on or after April 20, 2018, such that 85% of the Realized Property received to date will

have been distributed by the Trustee;

27. The Trustee is also, subject to the delivery of the Trustee’s Certificate, seeking a further

amendment to paragraph 3(b) of the Realized Property Order to authorize the Trustee to distribute

85% of any future Realized Property received by the Trustee after the date of the Harlowe

Settlement Approval Order;

28. As described in the Second Report, the Trustee predicts that there will be a limited

number of projects that give rise to recoveries in the near term and that recoveries on many of the

syndicated mortgage loans are at risk. The Trustee understands that Representative Counsel agrees

with the proposed retention of 15% of all Realized Property and the proposed distribution of all

other Realized Property in the circumstances;

General

29. The provisions of the MBLAA, including section 37 thereof;

30. The Appointment Order;

31. The Interim Stabilization Order;

32. The Realized Property Order;

33. The Braestone Settlement Approval Order;

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34. Rules 1.04, 1.05, 2.03, 3.02, 16, 37 and 41 of the Ontario Rules of Civil Procedure,

R.R.O. 1990, Reg. 194, as amended;

35. Sections 101 and 106 of the Ontario Courts of Justice Act, R.S.O. 1990, c. C.43 as

amended;

36. The inherent and equitable jurisdiction of this Honourable Court; and

37. Such further and other grounds as counsel may advise and this Court may permit.

THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of this

motion:

1. The Fourth Report of the Trustee and the appendices thereto; and

2. Such further and other evidence as counsel may advise and this Court may permit.

December 13, 2018 OSLER, HOSKIN & HARCOURT LLP

Box 50, 1 First Canadian Place Toronto, ON M5X 1B8 Michael De Lellis (LSUC# 48038U) Jeremy Dacks (LSUC# 41851R) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee

TO: SERVICE LIST

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ONTARIO SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

BETWEEN


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.

29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

FOURTH REPORT OF THE TRUSTEE

DECEMBER 13, 2018

FAAN Mortgage Administrators Inc. Court-Appointed Trustee of the Respondent

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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 1

PURPOSE OF THE FOURTH REPORT ................................................................................................ 4

SCOPE AND TERMS OF REFERENCE ................................................................................................ 6

HARLOWE SETTLEMENT OFFER ...................................................................................................... 7

RECOMMENDATION REGARDING REALIZED PROPERTY .............................................................. 14

CONCLUSION AND RECOMMENDATION ...................................................................................... 15

13

INDEX OF APPENDICES

Appendix 1 Appointment Order dated April 20, 2018

Appendix 2 Realized Property Order dated October 30, 2018

Appendix 3 Third Report of the Trustee dated November 19, 2018, without exhibits

Appendix 4 Braestone Settlement Approval Order dated November 28, 2018

Appendix 5 Harlowe Offer and Harlowe Settlement Agreement

Appendix 6 Harlowe Consent Request dated November 16, 2018

14



(COMMERCIAL LIST)

BETWEEN


Applicant

- and -


Respondent



FOURTH REPORT OF THE TRUSTEE

December 13, 2018

INTRODUCTION

1. On April 20, 2018, pursuant to an order (“Appointment Order”) of the Honourable Mr.

Justice Hainey of the Ontario Superior Court of Justice (Commercial List) (“Court”), FAAN

Mortgage Administrators Inc. (“FAAN Mortgage”) was appointed as trustee (“Trustee”)

over all of the assets, undertakings and properties of Building & Development Mortgages

Canada Inc. (“BDMC”) including, without limitation, all of the assets in the possession or

under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any

other party, including, but not limited to, lenders under syndicated mortgage loans

(“Investors”), brokers, or borrowers, in each case whether or not such property was or is

held in trust or was or is required to be held in trust (collectively, the “Property”). The

Appointment Order was issued following an application made by the Superintendent of

Financial Services (“Superintendent”) pursuant to section 37 of the Mortgage

Brokerages, Lenders and Administrators Act, 2006 (Ontario), as amended, and section

101 of the Courts of Justice Act (Ontario), as amended. A copy of the Appointment Order

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is attached as Appendix “1”.

2. On June 19, 2018, the Trustee submitted its first report in these proceedings (“First Report”). The First Report provided a comprehensive update on the Trustee’s activities

during the first two months of these proceedings, including additional background

information regarding BDMC and its business and updated information on the status of

the real estate development projects in which the Investors hold syndicated mortgage

loans.

3. On October 23, 2018, the Trustee submitted its second report in these proceedings

(“Second Report”). The Second Report provided a further comprehensive update on the

Trustee’s activities undertaken since the date of the First Report, including a detailed

description of the in-depth analysis the Trustee is conducting with respect to each real

estate development project and a status update for each of those projects. The Second

Report also included information in support of the Realized Property Order (described

below). Capitalized terms not otherwise defined in this Report have the meanings ascribed

to them in the Second Report, or other previous reports of the Trustee.

4. On October 30, 2018, this Court issued an Order (“Realized Property Order”) that,

among other things,

(a) required the Trustee to distribute (when aggregated with previous distributions)

70% of (I) all funds held or received by the Trustee as a result of a repayment (in

whole or in part) of principal on any loan or other indebtedness administered by

BDMC on behalf of Investors (including funds originally obtained with respect to

the Victoria Medical SML Loans), whether or not (i) secured by any Real Property

Charges in the name of BDMC or an RRSP Trustee, (ii) received before or after

the date of the Appointment Order, or (iii) paid or payable in trust, plus (II) all

interest paid or payable to BDMC or the Trustee at the time such repayment (in

whole or in part) of principal is made (collectively, “Realized Property”);





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administration of the estate, including in respect of those matters set out in

paragraph 17 of the Interim Stabilization Order (collectively, the “Required Trustee Activities”).

A copy of the Realized Property Order is attached as Appendix “2”.

5. On November 19, 2018, the Trustee submitted its third report in these proceedings (“Third Report”). The Third Report provided the Court and the stakeholders with the Trustee’s

recommendation in favor of a settlement agreement reached with Braestone Development

Corporation (the “Braestone Borrower”) that provided for an early payout of the Investors

under the loan agreement dated December 1, 2012 between the Braestone Borrower and

BDMC (the “Braestone Settlement Agreement”). The Third Report also included

information in support of an Order of the Court (the “Braestone Settlement Approval Order”) approving, among other things: (i) the Braestone Settlement Agreement and the

transactions contemplated thereby; (ii) an amendment to the Realized Property Order that

would require the Trustee to distribute (when aggregated with previous distributions) 80%

of all Realized Property to Investors following receipt of the payment from the Braestone

Borrower; and (iii) the approval of the Trustee’s and its counsel’s activities and fees. A

copy of the Third Report, without exhibits, is attached as Appendix “3”. A copy of the

Braestone Settlement Approval Order dated November 28, 2018 is attached as Appendix “4”.

6. The Trustee indicated in the Third Report that it intended to return to Court in the near

term to seek this Court’s approval of a settlement agreement with respect to the obligations

owing by The Harlowe Inc. (“Harlowe”) to BDMC under the loan agreement dated June

10, 2013 (the “Loan Agreement”, and such obligations, the “Harlowe Loan”) relating to

Harlowe’s real estate development project situated at Bathurst and Richmond Street in

Toronto, Ontario (the “Harlowe Project”).

7. At the time of the Third Report, the Trustee had recommended that the Harlowe Investors

accept the Harlowe settlement and was seeking feedback from the Harlowe Investors in

that regard. This Fourth Report sets out the Trustee’s recommendation regarding the

Harlowe Project based on Investor feedback, and supports the Trustee’s motion for an

Order, among other things, approving the Settlement Agreement made as of November

6, 2018 (the “Harlowe Settlement Agreement”) among Harlowe, the Trustee and

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Olympia Trust Company (“OTC”) that provides for a payment to the Trustee of

$15,562,896.38 in full and final satisfaction of the Harlowe Loan Obligations, as more fully

described in this Fourth Report.

8. Materials filed with the Court with respect to these proceedings, including the First Report,

the Second Report, the Third Report, the affidavit of Brendan Forbes, legal counsel at the

Ministry of the Attorney General Civil Law Division, Financial Services Commission of

Ontario (“FSCO”) branch, sworn on April 19, 2018, the Superintendent’s application

record, the Appointment Order, the Interim Stabilization Order, the Realized Property

Order, the Braestone Settlement Approval Order and the endorsements issued by the

Court, are accessible on the Trustee’s website at: www.faanmortgageadmin.com

(“Trustee’s Website”). The Trustee intends to maintain the Trustee’s Website for the

currency of these proceedings and will be updating it as appropriate.

PURPOSE OF THE FOURTH REPORT

9. The purpose of this fourth report of the Trustee (“Fourth Report”) is to provide the Court

and stakeholders with the Trustee’s recommendation regarding the Harlowe Settlement

Agreement and to support the Trustee’s request for an Order (the “Harlowe Settlement Approval Order”) that, among other things:

(a) approves the Harlowe Settlement Agreement, with such minor amendments as the

Trustee and the other parties to the Harlowe Settlement Agreement may agree

upon to permit the completion of the transaction contemplated thereby; (ii) directs

Harlowe to pay $15,562,896.38 forthwith to the Trustee in accordance with the

terms of the Harlowe Settlement Agreement (such funds, the “Harlowe Realized Property”); and (iii) approves and ratifies the execution of the Harlowe Settlement

Agreement by the Trustee and OTC and authorizes and directs the Trustee and

OTC to comply with all of their obligations under the Harlowe Settlement

Agreement;

(b) releases, extinguishes, expunges and discharges all of Harlowe’s obligations to

BDMC, OTC, and the individual lenders under the Harlowe Loan Agreement

(“Harlowe Individual Lenders”), the Security and the Loan Documents (each as

defined in the Harlowe Loan Agreement) (collectively, the “Harlowe Loan

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Obligations”) and all security interests granted to BDMC, OTC or the Harlowe

Individual Lenders in and to the assets of Harlowe to secure the Harlowe Loan

Obligations (the “Loan Encumbrances”) upon the delivery of a Trustee’s

certificate confirming, among other things, the Trustee’s receipt of the

$15,562,896.38 payment (the “Trustee’s Certificate”), and ordering that none of

the Trustee, BDMC, OTC or any Harlowe Individual Lender have any claim against

Harlowe in respect of the Harlowe Loan Obligations or the Loan Encumbrances;

provided, however, that Harlowe is not released from any obligations under the

Harlowe Settlement Agreement;

(c) declares that the release agreement (“Release Agreement”) to be given to the

Trustee, BDMC, OTC, and each Harlowe Individual Lender who loaned funds

through BDMC or OTC to Harlowe pursuant to the Loan Agreement and all related

Loan Documents, each of their respective officers, directors, agents, employees,

and each of their respective successors and assigns (collectively, the

“Releasees”) by Harlowe on behalf of itself, its affiliates, and their respective

shareholders, agents, directors, officers, employees, and each of their respective

successors and assigns (collectively, the “Releasors”) shall be binding and

effective on the Releasors in favour of the Releasees upon the delivery of the

Trustee’s Certificate;

(d) orders the Trustee to make a further distribution to Investors following the filing of

the Trustee’s Certificate certifying, among other things, the receipt by the Trustee

of the Harlowe Realized Property, with the Court in an amount equal to 5% of the

Realized Property held on or received after the date of the Appointment Order,

including the Realized Property obtained with respect to the Victoria Medical SML

Loans, pro rata to the Investors entitled to such funds, such that, when combined

with the distribution made pursuant to the Interim Stabilization Order, the Realized

Property Order and the Braestone Settlement Approval Order, 85% of such funds

shall have been distributed on a pro rata basis to the Investors entitled to such

funds; and

(e) further amends paragraph 3(b) of the Realized Property Order (which was initially

amended by paragraph 10 of the Braestone Settlement Approval Order) upon the

delivery of the Trustee’s Certificate certifying, among other things, the receipt by

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the Trustee of the Harlowe Realized Property, to require the Trustee to distribute

85% of all other Realized Property obtained, including the Harlowe Realized

Property, pro rata to the Investors entitled to such funds, whether received before

or after the date of the proposed Harlowe Settlement Approval Order.

10. In support of the Trustee’s request for the Harlowe Settlement Approval Order, this Fourth

Report describes the following matters:

(a) The details of the Harlowe Settlement Agreement; and

(b) Information that supports the Trustee’s recommendation that the Harlowe Settlement Agreement be approved.

11. The Trustee is required under the Realized Property Order to report back to the Court by

no later than April 30, 2019 with a further comprehensive update regarding these

proceedings. The Trustee anticipates that it will likely be necessary to prepare additional,

shorter project specific reports similar to this Fourth Report or other general reports during

the intervening period and to attend before the Court to seek relief or advice and directions

from the Court regarding general file administration matters or project specific issues,

which may include the approval of settlement and repayment arrangements for other real

estate development projects.

SCOPE AND TERMS OF REFERENCE

12. In preparing this Fourth Report, the Trustee has relied upon unaudited financial

information provided by, inter alia, BDMC, Fortress, Canadian Development Capital &

Mortgage Services Inc. (“CDCM”), the mortgage brokerage who assumed the mortgage

brokerage duties of BDMC, Harlowe and certain other individual borrowers who have

borrowed funds from BDMC under various syndicated mortgage loans administered by

BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM, and

applicable borrowers (including, among other things, unaudited internal information,

appraisals and financial projections), the Trustee’s review does not constitute an audit or

verification of such information for accuracy, completeness or compliance with Generally

Accepted Assurance Standards (“GAAS”), Generally Accepted Accounting Principles

(“GAAP”), or International Financial Reporting Standards (“IFRS”). Accordingly, the

Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or

IFRS, or any other guidelines, with respect to such information.

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13. Some of the information used and relied upon in preparing this Fourth Report consists of

financial projections and other information received from various third parties, including

appraisals and project cost information. The Trustee cautions that the projections and

other information used and relied upon are generally based upon assumptions and

estimates about future events and/or market conditions that are not ascertainable or that

could change. As such, the information presented in this Fourth Report may vary from the

projections and information used to prepare this Fourth Report and the actual results may

differ both from the results projected therein and herein. Even if the assumptions relied

upon therein or herein materialize, the variations from the projections could be significant.

The Trustee’s review of the future oriented information used to prepare this Fourth Report

did not constitute an audit or review of such information under GAAS, GAAP or IFRS or

any other guidelines.

14. This Fourth Report has been prepared for the use of this Court and BDMC’s stakeholders

as general information relating to BDMC and the Harlowe Project and to assist the Court

with respect to the Trustee’s request for the proposed Harlowe Settlement Approval Order.

Accordingly, the reader is cautioned that this Fourth Report may not be appropriate for

any other purpose.

15. All references to dollars are in Canadian currency unless otherwise noted.

HARLOWE SETTLEMENT OFFER

16. As set out in the Second Report and the Third Report, the Trustee has been engaged in

negotiations with Harlowe for some time regarding the payment of the amounts due to

BDMC under the Loan Agreement. These negotiations commenced after the Trustee was

informed that Harlowe must enter into additional financing arrangements to fund costs

associated with holding and selling the remaining units in the Harlowe Project, and that

obtaining such financing would be difficult while the obligations under the Loan Agreement

remain outstanding.

17. The Trustee has provided information to Investors regarding certain matters related to the

Harlowe Project, primarily through previous Reports and responding to individual Investor

calls and emails.

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18. On November 6, 2018, as part of the negotiations between the parties, Harlowe presented

the Trustee with an irrevocable offer to accept payment by Harlowe of $15,562,896.38 in

full satisfaction of the amounts due under the Loan Agreement and incorporating other

components negotiated by the Trustee (“Harlowe Offer”). The Harlowe Offer was open

for acceptance until November 30, 2018.

19. For the reasons set out below, the Trustee has accepted the Harlowe Offer and executed

the Harlowe Settlement Agreement. The Harlowe Settlement Agreement requires the

Trustee to use commercially reasonable efforts to seek the Harlowe Settlement Approval

Order, but the remaining terms of the Harlowe Settlement Agreement are only binding on

the Trustee, BDMC and OTC should the agreement be approved and ratified by the Court.

20. The Harlowe Offer and the Harlowe Settlement Agreement provide for a lump sum

payment by Harlowe of $15,562,896.38, which is approximately 98% of the outstanding

principal balance owing under the Loan Agreement of $15,863,400. The full amount due

under the Loan Agreement on project completion (including interest and certain deferred

lender fees) is estimated to be approximately $20.8 million. When previously paid interest

of approximately $2.7 million (“Paid Interest”) is factored into the analysis, the proposed

payout plus the Paid Interest already received would result in the full repayment of the

principal owing to the Harlowe Individual Lenders, plus a further 15% above the

outstanding principal amount.

21. The Harlowe Offer is conditional, among other things, upon the release and discharge of

all Harlowe Loan Obligations and all Loan Encumbrances, and a Court order being

obtained providing that none of the Trustee, BDMC, OTC or any Harlowe Individual

Lenders have any claim against Harlowe in respect of the Harlowe Loan Obligations or

the Loan Encumbrances (though Harlowe is not to be released from any obligations under

the Harlowe Settlement Agreement) in consideration of the payment due under the

Harlowe Settlement Agreement.

22. The Harlowe Settlement Agreement also provides that Harlowe is to deliver a Release

Agreement to the Trustee providing that Harlowe, on behalf of itself and the other

Releasors, release all of the Releasees (namely, the Trustee, BDMC, OTC, and each

Harlowe Individual Lender who loaned funds through BDMC or OTC to Harlowe pursuant

to the Loan Agreement and all related Loan Documents, each of their respective officers,

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directors, agents, employees, and each of their respective successors and assigns) from

all obligations under the Harlowe Loan Documents.

23. Harlowe has also made certain customary representations and warranties and has agreed

to provide such further assurances as are necessary to effectuate the transaction set out

in the Harlowe Offer.

24. If the Court issues the proposed Harlowe Settlement Approval Order, then the settlement

set out therein will be effective upon the issuance by the Trustee of the Trustee’s

Certificate certifying that the conditions precedent set out in the Harlowe Settlement

Agreement are satisfied.

25. A copy of the Harlowe Offer, including the executed Harlowe Settlement Agreement, is

attached as Appendix “5”.

Overview of Current Status of Harlowe Project

26. Harlowe commenced construction on the Harlowe Project in the summer of 2016. The

Harlowe Project is 14 stories tall and contains 218 units, ranging from 489 sf to 1,535 sf.

Harlowe has advised that over 80% of the available units have been sold, with initial

occupancy having already commenced and registration of the building estimated to occur

in the summer of 2019. Upon registration of the building, the sale of the units subject to

existing sale agreements will be completed and the proceeds will be realized. The

proceeds from these sales will be used to repay the priority loans in the amount of $59.5

million.

27. The Trustee understands that there have been significant changes to the marketplace

since the commencement of the Harlowe Project, which have created difficulties in

completing the sale of outstanding units and have impacted project cash flows. Harlowe

has advised that the final sales of outstanding units of the Harlowe Project are unlikely to

be completed until the spring of 2021.

28. Harlowe has informed the Trustee that it requires additional financing (specifically, an

inventory loan) in order to complete the Harlowe Project and to fund the additional costs

associated with holding and selling the remaining units.

29. Without an inventory loan, Harlowe has advised that it will take substantially longer to pay

off the Harlowe Loan Obligations due to additional project proceeds being realized on a

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piece meal basis as individual units are sold. Harlowe estimates that, without an inventory

loan, the Harlowe Loan Obligations would not be paid off until the spring of 2021, or later.

30. The Trustee understands that, following recent media coverage relating to Fortress,

BDMC and the syndicated mortgage market generally, Harlowe has found it difficult to

obtain an inventory loan, as lenders are not willing to provide financing that would require

any portion of the Harlowe Loan Obligations to remain on title (even if such obligations are

subordinate to the new financing arrangements).

31. Therefore, in order to secure an inventory loan, Harlowe indicated that it would like to

repay the debt owing to the Harlowe Individual Lenders under the Loan Agreement at a

discount to the total amount that would be owing at the completion of the Harlowe Project,

in order to ensure that the Loan Encumbrances are released from title.

32. The Trustee engaged in discussions and negotiations with Harlowe and reviewed the

information provided to it with respect to the proposed payout. On the basis of these

discussions and information, the Trustee agreed that it would be unlikely that the proceeds

realized from the completion of the sales of previously sold units would be sufficient to pay

out the Harlowe Loan in full, and that it is unlikely that Harlowe will have sufficient

additional proceeds to repay the amounts due under the Loan Agreement in the near term.

33. The Trustee has been engaged in negotiations with Harlowe and its representatives

regarding the amount of any discount and the other terms of a potential settlement of the

Harlowe Loan. Harlowe has advised that it is unable to repay the full amount of the

Harlowe Loan; but has proposed a payout that would provide for payment of approximately

98% of the outstanding principal balance due. Taking into account the Paid Interest of

approximately $2.7 million, the payment of $15,562,896.38 pursuant to the proposed

Harlowe Offer would result in full repayment of the principal amount advanced and a net

return of approximately 15% on that principal amount. The return is calculated as follows:

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$ Principal outstanding (A) 15,863,400 Loan repayment 15,562,896 Interest paid 2,723,478 Total payments (B) 18,286,374 Net recovery in excess of principal (B-A) 2,422,974

34. Acceptance of the Harlowe Offer by the Trustee would result in the Harlowe Individual

Lenders foregoing certain amounts that would otherwise become due pursuant to the Loan

Agreement upon completion of the Harlowe Project, including if certain profit milestones

were achieved. These amounts, as estimated by the Trustee, are as follows:

$ Remaining principal 300,504 Accrued interest to October 15, 2018 2,695,184 Estimated deferred lender fee 2,220,876 Total potential foregone recoveries (before additional accrued interest) 5,216,564

35. As noted above, Harlowe has advised the Trustee that it does not expect the final unit

sales to be completed until the spring of 2021. Additional interest has continued to accrue

since October 15, 2018, and would continue to accrue until the date that the Harlowe Loan

was repaid. Harlowe ceased making interest payments due under the Loan Agreement as

of September 2, 2016 and has indicated to the Trustee that it does not intend to resume

paying interest but would instead accrue interest until the final units are sold and the

Harlowe Loan is repaid in full.

36. The deferred lender fee included in the table above is dependent upon the Harlowe Project

achieving certain profit milestones. These profit milestones are subject to market

fluctuations as the remaining units are sold, and if these milestones are not ultimately

achieved, the amount of deferred lender fees due under the Loan Agreement would

decrease.

37. The profits obtained by Harlowe are subject to changes in market conditions and the terms

of any additional financing it may be able to obtain. Accordingly, there can be no assurance

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that Harlowe will be able to repay all amounts due under the Loan Agreement upon

completion of the Harlowe Project.

Assessment of the Offer and Recommendation

38. The extended term of the Loan Agreement expired on September 1, 2017, and, as noted

above, Harlowe has advised that the Harlowe Project will not be completed in the near

term. The Trustee understands that Harlowe is unlikely to obtain an inventory loan in an

amount sufficient to pay out the Harlowe Loan Obligations in full prior to completion of the

final unit sales. Further, given the terms of the Loan Agreement and Harlowe’s expressed

need to obtain an inventory loan in order to hold and sell the remaining units on the

Harlowe Project, BDMC would likely be required to postpone and standstill to any such

loan that Harlowe is able to obtain, and the standstill agreement would likely remain in

effect until such time as the final unit sales have been completed and the inventory loan

is repaid (which the Trustee understands would not be until such time that the Harlowe

Project is completed). Accordingly, and based on the estimates provided by Harlowe, it is

possible that the amounts due under Loan Agreement may not be repaid until 2021 or

later and there is a risk that it will not be repaid in full at that time, or ever.

39. In completing its assessment of the Harlowe Offer, the Trustee engaged a real estate

appraiser to provide a current as-is appraised value of the property and the remaining

inventory. In the Trustee’s view, the appraised value provided supports the value attributed

by Harlowe to the remaining units, assuming a marketing period of at least 12 months.

Although the appraiser provided a shorter estimate of the time required to sell the units,

the potential sales prices (and, accordingly, the recoveries to Harlowe Individual Lenders)

would be subject to any changes in market conditions during this period, leaving the

Harlowe Individual Lenders at risk of lower realizations in the future. Based on its review

of the appraisal and taking into account the approximately $59.5 million of outstanding

debt ranking in priority to the BDMC Loan that would be required to be repaid prior to the

amounts due under the Loan Agreement, the Trustee is of the view that there is value in

the certainty and finality provided by accepting the Harlowe Offer and crystallizing returns

to Harlowe Individual Lenders at this time.

40. Given the above considerations and the general uncertainty as to the future of the market,

the Trustee is of the view that the Harlowe Offer is fair and reasonable in the

circumstances, despite providing potentially discounted returns to the Harlowe Individual

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Lenders. Further, as noted above, the Harlowe Offer does result in an overall net positive

return of approximately 15% on the principal amount advanced by BDMC.

Consultation with Representative Counsel and Harlowe Individual Lenders

41. The Trustee consulted extensively with Representative Counsel regarding the Harlowe

Offer, and, following that consultation, delivered a notice to the Harlowe Individual Lenders

in the Harlowe Project on November 16, 2018 advising the Harlowe Individual Lenders of

the Trustee’s recommendation in support of accepting the Harlowe Offer and requesting

Harlowe Individual Lenders to provide their feedback, whether for or against the

acceptance of the Harlowe Offer, and any other general feedback (“Harlowe Consent Request”). Further, the Trustee advised that it would serve all Harlowe Individual Lenders

with its motion materials seeking approval of the Harlowe Settlement Agreement should

the Harlowe Offer be accepted. A copy of the Harlowe Consent Request is attached as

Appendix “6”.

42. Following the delivery of the Harlowe Consent Request, the Trustee and Representative

Counsel received and responded to a number of inquiries regarding the Harlowe Offer

and the Trustee’s and Representative Counsel’s views on the Harlowe Offer, including the

amounts that would become immediately payable to Harlowe Individual Lenders pursuant

to the terms of the Realized Property Order and the Braestone Settlement Approval Order.

43. As of December 13, 2018, the Trustee has received 133 formal votes in response to the

Harlowe Consent Request. 131 Harlowe Individual Lenders representing approximately

$6,800,450 of the $15,863,400 in principal outstanding under the Loan Agreement voted

in favour of the Trustee accepting the Harlowe Offer. 2 votes, representing approximately

$75,000 in principal outstanding under the Loan Agreement voted against the Trustee

accepting the Harlowe Offer. In summary, over 98% of Harlowe Individual Lenders voting

on the Harlowe Offer, representing almost 99% of the value of such loans, voted in favour

of the Trustee accepting the Harlowe Offer. Less than 2% of Harlowe Individual Lenders

voting on the Harlowe Offer, representing approximately 1% in value of such loans, voted

against the Trustee accepting the Harlowe Offer. The Harlowe Individual Lenders voting

in favour of the acceptance of the Harlowe Offer represent approximately 43% in number

and 42% in value of all Harlowe Individual Lenders under the Loan Agreement, whereas

Harlowe Individual Lenders voting against the acceptance of the Harlowe Offer represent

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less than 1% in number and less than 0.5% in value of all Harlowe Individual Lenders

under the Loan Agreement.

44. The Trustee notes that, similar to the Consent Request with respect to the Braestone

Settlement Agreement, the rate of response to the Harlowe Consent Request

(approximately 44% of Harlowe Individual Lenders) is much higher than the rate of

response to other general notices or requests for consent that the Trustee has sent to

date.

45. On the basis of the Trustee’s analysis of the facts and circumstances surrounding the

Harlowe Project and the overwhelming positive responses received from Harlowe

Individual Lenders, the Trustee determined that the Harlowe Offer should be accepted.

The Trustee has been informed by Representative Counsel that it also supports the

acceptance of the Harlowe Offer. While the Trustee recognizes that a small number of

Harlowe Individual Lenders have voted against the acceptance of the Harlowe Offer, the

Trustee must act in the best interests of all Harlowe Individual Lenders who made loans

in respect of the Harlowe Project notwithstanding the views expressed by certain Harlowe

Individual Lenders. The Trustee has determined that it is in the best interests of all Harlowe

Individual Lenders to accept the Harlowe Offer.

46. The Trustee therefore executed the Harlowe Settlement Agreement and has brought a

motion seeking this Court’s approval of the Harlowe Settlement Agreement and the

issuance of the Harlowe Settlement Approval Order.

RECOMMENDATION REGARDING REALIZED PROPERTY

47. The Trustee has determined that, should the $15,562,896.38 in Harlowe Realized

Property be received, it will be appropriate to further reduce the percentage of Realized

Property that it needs to retain to fund the Required Trustee Activities.

48. The Trustee is therefore seeking this Court’s authorization to, upon the filing of the

Trustee’s Certificate certifying, among other things, the receipt by the Trustee of the

Harlowe Realized Property, distribute an additional amount equal to 5% of the Realized

Property held by the Trustee on the date of the Appointment Order or received following

such date, including the Realized Property received in respect of the Victoria Medical SML

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Loans. Following this distribution, 85% of the Realized Property received to date will have

been distributed by the Trustee.

49. The Trustee is also, subject to the delivery of the Trustee’s Certificate, seeking a further

amendment to the Realized Property Order to authorize the Trustee to distribute 85% of

any future Realized Property received by the Trustee after the date of the Harlowe

Settlement Approval Order.

50. The Trustee has consulted with Representative Counsel regarding this recommendation,

and Representative Counsel agrees that the proposed retention of 15% of all Realized

Property and the proposed distribution of all other Realized Property is fair and reasonable

in the circumstances.

51. As noted in previous reports, the Trustee predicts that there will be a limited number of

projects that give rise to recoveries in the near term and that recoveries on many of the

syndicated mortgage loans are at risk. As such, the Trustee is of the view that it must

retain 15% of the Realized Property at this time and utilize the retained Realized Property

to maximize the recovery of additional Realized Property in the future.

52. The Trustee understands that these proceedings may have a disproportionate impact on

Investors whose projects have generated or will generate Realized Property at earlier

dates than other projects. As more fully described in the Second Report, the Trustee will

provide the Court with a recommendation regarding an appropriate allocation of the costs

that will be borne by specific projects, including the Harlowe Project, at a later date to fairly

and equitably allocate the use of Realized Property among Investors.

CONCLUSION AND RECOMMENDATION

53. The Trustee recommends that the proposed Harlowe Settlement Approval Order be

granted by the Court. The Trustee has negotiated the Harlowe Settlement Agreement and

has obtained an overwhelming positive response from affected Harlowe Individual

Lenders with respect to the execution and implementation of the terms of the Harlowe

Settlement Agreement. The Harlowe Settlement Agreement contemplates the payment

(when combined with Paid Interest) of the full principal amount due under the Loan

Agreement plus a further 15% recovery on that principal. If implemented, the Harlowe

Settlement Agreement will result in approximately $15.6 million of Harlowe Realized

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Property in the near term, which will permit the Trustee to make a further distribution of

Realized Property pro rata to Investors who are entitled to same. The Trustee is of the

view that it is in the best interests of all Investors to obtain the Harlowe Realized Property

now rather than to wait for an uncertain result in the future.

54. The process followed for approval of the Harlowe Settlement Agreement is substantially

similar to the process followed in respect of the Braestone Project, which led to the Court

approving the Braestone Settlement Agreement. The Trustee believes that this payout

process provides clarity for Investors and borrowers, and the Trustee intends to continue

to follow a similar approval process with respect to any other future repayment

opportunities. The Trustee will continue to attend to all BDMC matters in an effort to

maximize recoveries to Investors.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 13th day of December, 2018.

FAAN MORTGAGE ADMINISTRATORS INC., SOLELY IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OF BUILDING & DEVELOPMENT MORTGAGES CANADA INC., AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY

Faan Mortgage Administrators Inc.

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Appendix 1:

Appointment Order dated April 20, 2018

31


ONTARIOSUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

THE HONOURABLE MR. ) FRIDAY, THE 20™ DAY)

JUSTICE HAINEY ) OF APRIL, 2018

BETWEEN:


- and -


Applicant

Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, c.


APPOINTMENT ORDER

THIS APPLICATION, made by The Superintendent of Financial Services (the

"Superintendent”), for an Order, inter alia, pursuant to section 37 of the Mortgage Brokerages,

Lenders and Administrators Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and

section 101 of the Courts of Justice Act, R.S.O. 1990, c, C.43, as amended (the "CJA”), appointing FAAN Mortgage Administrators Inc. (“FAAN Mortgage") as trustee (in such capacity,

the “Trustee”), without security, of all of the assets, undertakings and properties of Building &

Development Mortgages Canada Inc. (the “Respondent”), was heard this day at 330 University

Avenue, Toronto, Ontario;

ON READING the affidavit of Brendan Forbes sworn April 19, 2018 and the exhibits

thereto (the "Supporting Affidavit") and the consent of FAAN Mortgage to act as the Trustee,

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and on hearing the submissions of counsel for the Superintendent, counsel for FAAN Mortgage

and such other counsel as were present, no one appearing for any other person on the service

list, as appears from the affidavit of service of Miranda Spence sworn April 19, 2018, filed;

SERVICE

1. THIS COURT ORDERS that the time for service and filing of the notice of application

and the application record is hereby abridged and validated so that this application is properly

returnable today and hereby dispenses with further service thereof.

APPOINTMENT

2. THIS COURT ORDERS that pursuant to section 37 of the MBLAA and section 101 of

the CJA, FAAN Mortgage is hereby appointed Trustee, without security, of all of the assets,

undertakings and properties of the Respondent, including, without limitation, all of the assets in

the possession or under the control of the Respondent, its counsel, agents and/or assignees but

held on behalf of any other party, including, but not limited to, lenders under any syndicate

mortgage ("Investors”), brokers, or borrowers, in each case whether or not such property is

held in trust or is required to be held in trust (collectively, the “Property”), which Property, for

greater certainty, includes any and all real property charges in favour of the Respondent (the

"Real Property Charges”), including, without limitation, any and all monetary and non-monetary

entitlements in respect to the assets and values thereunder, the period of which appointment

shall run from 12:01 a.m. on the date hereof until such date that all assets under all syndicated

mortgage loans have been realized and all Property has been distributed to those entitled to it.

TRUSTEE’S POWERS

3. THIS COURT ORDERS that the Trustee is hereby empowered and authorized, but not

obligated, to act at once in respect of the Property and, without in any way limiting the generality

of the foregoing, the Trustee is hereby expressly empowered and authorized to do any of the

following where the Trustee considers it necessary or desirable:

(a) to take possession of and exercise control over the Property and any and all

proceeds, receipts and disbursements arising out of or from the Property;

(b) to receive, preserve, protect and maintain control of the Property, or any part or

parts thereof, including, but not limited to, the holding of mortgage security in

33

trust on behalf of Investors, the administering of the mortgages, the changing of

locks and security codes, the relocating of Property to safeguard it, the engaging

of independent security personnel, the taking of physical inventories and the

placement of such insurance coverage as may be necessary or desirable;

to manage, operate, and carry on the business of the Respondent, including,

without limitation, the powers to enter into any agreements, incur any obligations

in the ordinary course of business, cease to carry on all or any part of the

business, or cease to perform any contracts of the Respondent;

to engage consultants, appraisers, agents, experts, auditors, accountants,

managers, counsel and such other persons from time to time and on whatever

basis, including on a temporary basis, to assist with the exercise of the Trustee's

powers and duties, including, without limitation, those conferred by this Order;

to purchase or lease such machinery, equipment, inventories, supplies, premises

or other assets to continue the business of the Respondent or any part or parts

thereof;

to receive and collect all monies and accounts now owed or hereafter owing to

the Respondent and to exercise all remedies of the Respondent in collecting

such monies, including, without limitation, to enforce any security held by the

Respondent, including, without limitation, such security held on behalf of

Investors;

to settle, extend or compromise any indebtedness owing to the Respondent;

to execute, assign, issue and endorse documents of whatever nature in respect

of any of the Property, whether in the Trustee’s name or in the name and on

behalf of the Respondent for any purpose pursuant to this Order, including,

without limitation, any documents in connection with any registration, discharge,

partial discharge, transfer, assignment or similar dealings in respect of any

mortgage (“Land Title Document”) and, for greater certainty, the applicable land

registry office, registrar or other official under the Land Registration Reform Act

(Ontario), the Land Titles Act (Alberta), or any other comparable legislation in any

other jurisdiction be and is hereby directed, upon being presented with a certified

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true copy of this Order and such Land Title Document, to register, discharge,

partially discharge, transfer or otherwise deal with such mortgage in accordance

with such Land Title Document without any obligation to inquire into the propriety

of the execution or effect of such Land Title Document;

(i) to initiate, prosecute and continue the prosecution of any and all proceedings and

to defend all proceedings now pending or hereafter instituted with respect to the

Respondent, the Property or the Trustee, and to settle or compromise any such

proceedings. The authority hereby conveyed shall extend to such appeals or

applications for judicial review in respect of any order or judgment pronounced in

any such proceeding;

(j) to market any or all of the Property, including advertising and soliciting offers in

respect of the Property or any part or parts thereof and negotiating such terms

and conditions of sale as the Trustee in its discretion may deem appropriate;

(k) with the approval of this Court, to sell, convey, transfer, lease or assign the

Property or any part or parts thereof out of the ordinary course of business, and

in such case notice under subsection 63(4) of the Ontario Personal Property

Security Act or section 31 of the Ontario Mortgages Act, as the case may be,

shall not be required;

(l) with the approval of this Court, to restructure the Property in a manner that the

Trustee considers reasonable, including, without limitation, the conversion, in

whole or in part, of the Property or any part or parts thereof, out of the ordinary

course of business, into an alternative or different interest in the capital structure

of the Property or any part or parts thereof, including, without limitation, an

ownership interest therein;

(m) to apply for any vesting order or other orders necessary to convey the Property

or any part or parts thereof to a purchaser or purchasers thereof, free and clear

of any liens or encumbrances affecting such Property;

(n) to report to, meet with and discuss with such affected Persons (as defined below)

as the Trustee deems appropriate on all matters relating to the Property and the

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Trustee’s mandate, and to share information, subject to such terms as to

confidentiality as the Trustee deems advisable;

(o) to register a copy of this Order and any other Orders in respect of the Property

against title to any of the Property;

(p) to apply for any permits, licences, approvals or permissions as may be required

by any governmental authority and any renewals thereof for and on behalf of

and, if thought desirable by the Trustee, in the name of the Respondent;

(q) to enter into agreements with any trustee in bankruptcy appointed in respect of

the Respondent, including, without limiting the generality of the foregoing, the

ability to enter into occupation agreements for any property owned or leased by

the Respondent;

(r) to exercise any shareholder, partnership, joint venture or other rights which the

Respondent may have; and

(s) to take any steps reasonably incidental to the exercise of these powers or the

performance of any statutory obligations,

and in each case where the Trustee takes any such actions or steps, it shall be exclusively

authorized and empowered to do so, to the exclusion of all other Persons (as defined below),

including the Respondent, without interference from any other Person and without regard to any

arrangement in existence as of the date hereof between the Respondent and Investors as to

how and when such actions or steps are to be taken. For greater certainty, the Trustee shall be

and is empowered to take such actions or steps without seeking instructions from Investors

where the Trustee determines, in its sole discretion, that it is necessary and appropriate to do so

(having regard for the interests of Investors), and in all other cases, the Trustee is specifically

authorized to continue to comply with the existing arrangements, including any deemed consent

provisions contained therein.

DUTY TO PROVIDE ACCESS AND CO-OPERATION TO THE TRUSTEE

4. THIS COURT ORDERS that: (i) the Respondent; (ii) all of its current and former

directors, officers, employees, agents, accountants, legal counsel and shareholders, and all

other persons acting on its instructions or behalf; (iii) all other individuals, firms, corporations,

36

Ccn«lt«f)fc C^sM, 4 3€/’¥4|aIr^e,- 6 -

governmental bodies or agencies/or other entities having notice of this Order, including, without

limitation, Tsunami Technology ®roup Inc., Fortress Real Developments Inc. (“FRDI”), all of its

direct or indirect affiliates, and (any entity under common control with FRDI (collectively with

FRDI, the "Fortress Entities"), any entity that is a joint venture among a Fortress Entity and

another entity, and each director, officer, employee and agent of any Fortress Entity^aTofthe"

foregoing, collectively, being "Persons” and each being a "Person”) shall forthwith advise the

Trustee of the existence of any Property in such Person’s possession or control, shall grant

immediate and continued access to the Property to the Trustee, and shall deliver all such

Property to the Trustee upon the Trustee’s request.

5. THIS COURT ORDERS that, pursuant to and without limiting the generality of paragraph

4 of this Order, all Persons shall, unless otherwise instructed by the Trustee: (i) deliver to the

Trustee (or, in the case of RRSP or other registered funds administered by Olympia Trust

Company (“OTC") or Computershare Trust Company of Canada ("Computershare”), not

release to any Person without further Order of this Court) any and all monies held in trust that

are related to the Respondent or its business (collectively, the "Trust Funds’), which Trust

Funds, for greater certainty, include any and all monies in any OTC or Computershare account

that are purported to be held in trust for the Investors in or beneficiaries under any of the Real

Property Charges, including, without limitation, all monies held by way of interest reserves to

satisfy interest payments to such Investors or beneficiaries, which Trust Funds are to be held or

used by the Trustee in accordance with the terms of this Order and any further Order of this

Court; and (ii) upon the Trustee’s request, provide an accounting of all funds received from or

on behalf of the Respondent or its associated businesses.

6. THIS COURT ORDERS that all Persons shall forthwith advise the Trustee of the

existence of any books, emails, user accounts, documents, securities, contracts, orders,

corporate and accounting records, and any other papers, records and information of any kind

related to the business or affairs of the Respondent, and any computer programs, computer

tapes, computer disks, or other data storage media containing any such information, including

copies of any previously performed electronic back ups (the foregoing, collectively, the

"Records”) in that Person’s possession or control, and shall provide to the Trustee or permit the

Trustee to make, retain and take away copies thereof and grant to the Trustee unfettered

access to and use of accounting, computer, software and physical facilities relating thereto,

provided however that nothing in this paragraph 6 or in paragraph 7 of this Order shall require

the delivery of Records, or the granting of access to Records, which may not be disclosed or

37

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provided to the Trustee due to the privilege attaching to solicitor-client communication or due to

statutory provisions prohibiting such disclosure.

7. THIS COURT ORDERS that if any Records are stored or otherwise contained on a

computer or other electronic system of information storage, whether by independent service

provider or otherwise, all Persons in possession or control of such Records shall forthwith give

unfettered access to the Trustee for the purpose of allowing the Trustee to recover and fully

copy all of the information contained therein whether by way of printing the information onto

paper or making copies of computer disks or such other manner of retrieving and copying the

information as the Trustee in its discretion deems expedient, and shall not alter, erase or

destroy any Records without the prior written consent of the Trustee. Further, for the purposes

of this paragraph, all Persons shall provide the Trustee with all such assistance in gaining

immediate access to the information in the Records as the Trustee may in its discretion require

including providing the Trustee with instructions on the use of any computer or other system and

providing the Trustee with any and all access codes, account names and account numbers that

may be required to gain access to the information. Paragraphs 6 and 7 of this Order do not

apply to any materials obtained by the Royal Canadian Mounted Police pursuant to any warrant

issued under the Criminal Code, R.S.C. 1985, c. C-46.

8. THIS COURT ORDERS that the Trustee shall provide each of the relevant landlords

with notice of the Trustee’s intention to remove any fixtures from any leased premises at least

seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled

to have a representative present in the leased premises to observe such removal and, if the

landlord disputes the Trustee's entitlement to remove any such fixture under the provisions of

the lease, such fixture shall remain on the premises and shall be dealt with as agreed between

any applicable secured creditors, such landlord and the Trustee, or by further Order of this

Court upon application by the Trustee on at least two (2) days’ notice to such landlord and any

such secured creditors.

NO PROCEEDINGS AGAINST THE TRUSTEE

9. THIS COURT ORDERS that no proceeding or enforcement process in any court or

tribunal (each, a "Proceeding”), shall be commenced or continued against the Trustee except

with the written consent of the Trustee or with leave of this Court.

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NO PROCEEDINGS AGAINST THE RESPONDENT OR THE PROPERTY

10. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders

(as such term is defined in the Supporting Affidavit): (i) no Proceeding against or in respect of

any of the Respondent, the Property or the Superintendent (in the last case, with respect to any

matters arising from the Respondent or the Property) shall be commenced or continued except

with the written consent of the Trustee or with leave of this Court; and (ii) any and all

Proceedings currently under way against or in respect of any of the Respondent or the Property

are hereby stayed and suspended pending further Order of this Court.

NO EXERCISE OF RIGHTS OR REMEDIES

11. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders,

all rights and remedies against the Respondent, the Trustee, or affecting the Property

(including, without limitation, pursuant to any arrangement in existence as of the date hereof

between the Respondent and Investors as to how and when the actions or steps contemplated

by paragraph 3 of this Order are to be taken), are hereby stayed and suspended except with the

written consent of the Trustee or leave of this Court, provided however that this stay and

suspension does not apply in respect of any "eligible financial contract” as defined in the

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”), and further

provided that nothing in this paragraph shall: (i) empower the Trustee or the Respondent to

carry on any business which the Respondent is not lawfully entitled to carry on; (ii) exempt the

Trustee or the Respondent from compliance with statutory or regulatory provisions relating to

health, safety or the environment; (iii) prevent the filing of any registration to preserve or perfect

a security interest; (iv) prevent the registration of a claim for lien; or (v) prevent the filing and

service of a statement of claim solely to permit the perfection of a lien, provided that no further

proceedings on such statement of claim shall be permitted other than pursuant to paragraph 10.

NO INTERFERENCE WITH THE TRUSTEE

12. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter, interfere

with, repudiate, terminate or cease to perform any right, renewal right, contract, agreement,

licence or permit in favour of or held by the Respondent, without written consent of the Trustee

or leave of this Court, including, for greater certainty, any licenses granted to the Respondent to

act as an administrator of or lender under or administer syndicated mortgage loans under the

MBLAA, The Mortgage Brokers Act (Manitoba), The Mortgage Brokerages and Mortgage

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Administrators Act (Saskatchewan), the Real Estate Act (Alberta), the Mortgage Brokers Act

(British Columbia) or any other comparable legislation in any other jurisdiction where the

Respondent is currently licensed.

CONTINUATION OF SERVICES

13. THIS COURT ORDERS that all Persons having oral or written agreements with the

Respondent, or statutory or regulatory mandates for the supply of goods and/or services,

including, without limitation, all computer software, communication and other data services

(including, for greater certainty, all goods and/or services provided by Tsunami Technology

Group Inc. in respect of the Respondent), centralized banking services, payroll services,

insurance, transportation services, utility or other services to the Respondent are hereby

restrained until further Order of this Court from discontinuing, altering, interfering with or

terminating the supply of such goods or services as may be required by the Trustee, and that

the Trustee shall be entitled to the continued use of the Respondent’s current telephone

numbers, facsimile numbers, internet addresses and domain names, provided in each case that

the normal prices or charges for all such goods or services received after the date of this Order

are paid by the Trustee in accordance with normal payment practices of the Respondent or

such other practices as may be agreed upon by the supplier or service provider and the

Trustee, or as may be ordered by this Court.

TRUSTEE TO HOLD FUNDS

14. THIS COURT ORDERS that all funds, monies, cheques, instruments, and other forms of

payments received or collected by the Trustee from and after the making of this Order from any

source whatsoever, including, without limitation, the sale of all or any of the Property and the

collection of any accounts receivable in whole or in part, whether in existence on the date of this

Order or hereafter coming into existence, shall be deposited into one or more accounts

controlled by the Trustee or, if the Trustee determines it is advisable, new accounts to be

opened by the Trustee (the “Post Trusteeship Accounts") and the monies standing to the

credit of such Post Trusteeship Accounts from time to time, net of any disbursements provided

for herein, shall be held by the Trustee to be paid in accordance with the terms of this Order or

any further Order of this Court.

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EMPLOYEES

15. THIS COURT ORDERS that all employees of the Respondent shall remain the

employees of the Respondent until such time as the Trustee, on the Respondent’s behalf, may

terminate the employment of such employees. The Trustee shall not be liable for any

employee-related liabilities, including any successor employer liabilities as provided for in

subsection 14.06(1.2) of the BIA, other than such amounts as the Trustee may specifically

agree in writing to pay, or in respect of its obligations under subsections 81.4(5) and 81.6(3) of

the BIA or under the Wage Earner Protection Program Act.

PIPEDA

16. THIS COURT ORDERS that, pursuant to clause 7(3)(c) of the Canada Personal

Information Protection and Electronic Documents Act and any other applicable privacy

legislation, the Trustee shall disclose personal information of identifiable individuals to

prospective purchasers or bidders for the Property and to their advisors, but only to the extent

desirable or required to negotiate and attempt to complete one or more sales of the Property

(each, a "Sale”). Each prospective purchaser or bidder to whom such personal information is

disclosed shall maintain and protect the privacy of such information and limit the use of such

information to its evaluation of the Sale, and if it does not complete a Sale, shall return all such

information to the Trustee, or in the alternative destroy all such information. The purchaser of

any Property shall be entitled to continue to use the personal information provided to it, and

related to the Property purchased, in a manner which is in all material respects identical to the

prior use of such information by the Respondent, and shall return all other personal information

to the Trustee, or ensure that all other personal information is destroyed.

LIMITATION ON ENVIRONMENTAL LIABILITIES

17. THIS COURT ORDERS that nothing herein contained shall require the Trustee to

occupy or to take control, care, charge, possession or management (separately and/or

collectively, "Possession”) of any of the Property that might be environmentally contaminated,

might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release

or deposit of a substance contrary to any federal, provincial or other law respecting the

protection, conservation, enhancement, remediation or rehabilitation of the environment or

relating to the disposal of waste or other contamination including, without limitation, the

Canadian Environmental Protection Act, the Ontario Environmental Protection Act, the Ontario

41

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Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations

thereunder (the "Environmental Legislation”), provided however that nothing herein shall

exempt the Trustee from any duty to report or make disclosure imposed by applicable

Environmental Legislation. The Trustee shall not, as a result of this Order or anything done in

pursuance of the Trustee’s duties and powers under this Order, be deemed to be in Possession

of any of the Property within the meaning of any Environmental Legislation, unless it is actually

in possession.

LIMITATION ON THE TRUSTEE’S LIABILITY

18. THIS COURT ORDERS that the Trustee shall incur no liability or obligation as a result of

its appointment or the carrying out the provisions of this Order, save and except for any gross

negligence or wilful misconduct on its part, or in respect of its obligations under subsections

81.4(5) or 81.6(3) of the BIA or under the Wage Earner Protection Program Act. Nothing in this

Order shall derogate from the protections afforded the Trustee by section 14.06 of the BIA or by

any other applicable legislation.

TRUSTEE’S ACCOUNTS

19. THIS COURT ORDERS that the Trustee and counsel to the Trustee shall be paid their

reasonable fees and disbursements, in each case at their standard rates and charges unless

otherwise ordered by the Court on the passing of accounts, which fees and disbursements shall

be added to the indebtedness secured by the Real Property Charges and that the Trustee and

counsel to the Trustee shall be entitled to and are hereby granted a charge (the Trustee’s

Charge") on the Property, as security for such fees and disbursements, both before and after

the making of this Order in respect of these proceedings, and that the Trustee’s Charge shall

form a first charge on the Property in priority to all security interests, trusts, liens, charges and

encumbrances, statutory or otherwise, in favour of any Person, but subject to subsections

' 4.06(7), 81.4(4) and 81.6(2) of the BIA.

20. THIS COURT ORDERS that the Trustee and its legal counsel shall pass their accounts

from time to time, and for this purpose the accounts of the Trustee and its legal counsel are

hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.

21. THIS COURT ORDERS that prior to the passing of its accounts, the Trustee shall be at

liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its

42

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fees and disbursements, including legal fees and disbursements, incurred at the standard rates

and charges of the Trustee or its counsel, and such amounts shall constitute advances against

its remuneration and disbursements when and as approved by this Court.

FUNDING OF THE APPOINTMENT

22. THIS COURT ORDERS that the Trustee be at liberty and it is hereby empowered to

borrow by way of a revolving credit or otherwise, such monies from time to time as it may

consider necessary or desirable, provided that the outstanding principal amount does not

exceed $1,000,000 (or such greater amount as this Court may by further Order authorize) at

any time, at such rate or rates of interest as it deems advisable for such period or periods of

time as it may arrange, for the purpose of funding the exercise of the powers and duties

conferred upon the Trustee by this Order, including interim expenditures. The whole of the

Property shall be and is hereby charged by way of a fixed and specific charge (the "Trustee’s

Borrowings Charge”) as security for the payment of the monies borrowed, together with

interest and charges thereon, in priority to all security interests, trusts, liens, charges and

encumbrances, statutory or otherwise, in favour of any Person, but subordinate in priority to the

Trustee's Charge and the charges as set out in subsections 14.06(7), 81.4(4) and 81.6(2) of the

BIA.

23. THIS COURT ORDERS that neither the Trustee’s Borrowings Charge nor any other

security granted by the Trustee in connection with its borrowings under this Order shall be

enforced without leave of this Court.

24. THIS COURT ORDERS that the Trustee is at liberty and authorized to issue certificates

substantially in the form annexed as Schedule “A” hereto (the “Trustee’s Certificates ”) for

any amount borrowed by it pursuant to this Order.

25. THIS COURT ORDERS that the monies from time to time borrowed by the Trustee

pursuant to this Order or any further order of this Court and any and all Trustee's Certificates

evidencing the same or any part thereof shall rank on a pari passu basis, unless otherwise

agreed to by the holders of any prior issued Trustee’s Certificates.

SERVICE AND NOTICE

26. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the

“Protocol”) is approved and adopted by reference herein and, in these proceedings, the service

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of documents made in accordance with the Protocol (which can be found on the Commercial

List website at http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-

commercial/) shall be valid and effective service. Subject to Rule 17.05 of the Rules of Civil

Procedure (the "Rules"), this Order shall constitute an order for substituted service pursuant to

Rule 16.04 of the Rules. Subject to Rule 3.01(d) of the Rules and paragraph 21 of the Protocol,

service of documents in accordance with the Protocol will be effective on transmission. This

Court further orders that a Case Website shall be established in accordance with the Protocol

with the following URL: www.faanmortgaqeadmin.com.

27. THIS COURT ORDERS that if the service or distribution of documents in accordance

with the Protocol is not practicable, the Trustee is at liberty to serve or distribute this Order, any

other materials and orders in these proceedings, any notices or other correspondence, by

forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or facsimile

transmission to the Respondent’s creditors or other interested parties at their respective

addresses as last shown on the records of the Respondent and that any such service or

distribution by courier, personal delivery or facsimile transmission shall be deemed to be

received on the next business day following the date of forwarding thereof, or if sent by ordinary

mail, on the third business day after mailing.

GENERAL

28. THIS COURT ORDERS that the Trustee may from time to time apply to this Court for

advice and directions in the discharge of its powers and duties hereunder.

29. THIS COURT ORDERS that nothing in this Order shall prevent the Trustee from acting

as a trustee in bankruptcy of the Respondent.

30. THIS COURT ORDERS that Confidential Exhibits (as defined in the Supporting Affidavit)

be and are hereby sealed until further Order of this Court.

31. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,

regulatory or administrative body having jurisdiction in Canada or in the United States to give

effect to this Order and to assist the Trustee and its agents in carrying out the terms of this

Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully

requested to make such orders and to provide such assistance to the Trustee, as an officer of

44

http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-commercial/

http://www.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-commercial/

http://www.faanmortgaqeadmin.com

-14-

this Court, as may be necessary or desirable to give effect to this Order or to assist the Trustee

and its agents in carrying out the terms of this Order.

32. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and

empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,

for the recognition of this Order and for assistance in carrying out the terms of this Order, and

that the Trustee is authorized and empowered to act as a representative in respect of the within

proceedings for the purpose of having these proceedings recognized in a jurisdiction outside

Canada.

33. THIS COURT ORDERS that any interested party may apply to this Court to vary or

amend this Order on not less than seven (7) days’ notice, or such shorter period of time as the

Court may permit, to the Trustee and to any other party likely to be affected by the order sought

or upon such other notice, if any, as this Court m;

ENTERED AT /INSCRITATOHUmw

APR 2 Q 2018

mimi

45

SCHEDULE“A”

TRUSTEE CERTIFICATE

CERTIFICATE NO.______________

AMOUNT $______________________

1. THIS IS TO CERTIFY that FAAN Mortgage Administrators Inc., the Trustee (in such

capacity, the "Trustee") of all of the assets, undertakings and properties of Building &

Development Mortgages Canada Inc. (the "Respondent”), including, without limitation, all of the

assets in possession or under the control of the Respondent, its counsel, agents and/or

assignees but held on behalf of any other party, including, but not limited to, lenders under any

syndicate mortgage (“Investors”), brokers, or borrowers, in each case whether or not such

property is held in trust or is required to be held in trust (collectively, the “Property”) appointed

by Order of the Ontario Superior Court of Justice (Commercial List) (the "Court") dated the 20th

day of April, 2018 (the "Order”) made in an application having Court file number CV-18-596204-

OOCL, has received as such Trustee from the holder of this certificate (the "Lender”) the

principal sum of $<:*>|, being part of the total principal sum of $'<*> which the Trustee is

authorized to borrow under and pursuant to the Order.

2. The principal sum evidenced by this certificate is payable on demand by the Lender with

interest thereon calculated and compounded [daily][monthly not in advance on the <*>. day of

each month] after the date hereof at a notional rate per annum equal to the rate of <*>' per cent

above the prime commercial lending rate of Royal Bank of Canada from time to time.

3. Such principal sum with interest thereon is, by the terms of the Order, together with the

principal sums and interest thereon of ail other certificates issued by the Trustee pursuant to the

Order or to any further order of the Court, a charge upon the whole of the Property (as defined

in the Order), in priority to the security interests of any other person, but subject to the priority of

the charges set out in the Order and in the Bankruptcy and Insolvency Act, and the right of the

Trustee to indemnify itself out of such Property in respect of its remuneration and expenses.

4. All sums payable in respect of principal and interest under this certificate are payable at

the main office of the Lender at Toronto, Ontario.

5. Until all liability in respect of this certificate has been terminated, no certificates creating

charges ranking or purporting to rank in priority to this certificate shall be issued by the Trustee

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to any person other than the holder of this certificate without the prior written consent of the

holder of this certificate.

6. The charge securing this certificate shall operate so as to permit the Trustee to deal with

the Property (as defined in the Order) as authorized by the Order and as authorized by any

further or other order of the Court.

7. The Trustee does not undertake, and it is not under any personal liability, to pay any

sum in respect of which it may issue certificates under the terms of the Order.

DATED the_____ day of_______________ , 2018.

FAAN MORTGAGE ADMINISTRATORS INC.,solely in its capacity as Trustee of the Property (as defined in the Order), and not in its personal capacity

Per: ____________________________________Name:Title:

47

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48

Appendix 2:

Realized Property Order dated October 30, 2018

49

Appendix 3:

Third Report of the Trustee dated November 19, 2018, without exhibits

54

BETWEEN



(COMMERCIAL LIST)


- and


Applicant

Respondent



THIRD REPORT OF THE TRUSTEE

NOVEMBER 19, 2018

FAAN MORTGAGE

ADMINISTRATORS

FAAN Mortgage Administrators Inc. Court-Appointed Trustee of the Respondent

55

TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 1

PURPOSE OF THE THIRD REPORT .................................................................................................... 4

SCOPE AND TERMS OF REFERENCE ................................................................................................ 6

BRAESTONE SETTLEMENT OFFER ................................................................................................... 7

NEGOTIATIONS REGARDING OTHER PAYOUTS ............................................................................. 13

RECOMMENDATION REGARDING REALIZED PROPERTY .............................................................. 15

APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES .................................................. 16

CONCLUSION AND RECOMMENDATION ...................................................................................... 19

56

INDEX OF APPENDICES

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Appendix 6

Appendix 7

Appendix 8

Appendix 9

Appointment Order dated April 20, 2018

First Report of the Trustee dated June 19, 2018, without exhibits

Second Report of the Trustee dated October 23, 2018, without

exhibits

Realized Property Order dated October 30, 2018

Braestone Updates

Braestone Offer and Braestone Settlement Agreement

Braestone Consent Request dated October 23, 2018

Manzoor Fee Affidavit

De Lellis Fee Affidavit

57

BETWEEN



(COMMERCIAL LIST)


Applicant

- and


Respondent



THIRD REPORT OF THE TRUSTEE

November 19, 2018

INTRODUCTION

1. On April 20, 2018, pursuant to an order ("Appointment Order'') of the Honourable Mr.

Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Court"),

FAAN Mortgage Administrators Inc. ("FAAN Mortgage") was appointed as trustee

("Trustee") over all of the assets, undertakings and properties of Building &

Development Mortgages Canada Inc. ("BDMC") including, without limitation, all of the

assets in the possession or under the control of BDMC, its counsel, agents and/or

assignees but held on behalf of any other party, including, but not limited to, lenders

under syndicated mortgage loans ("Investors"), brokers, or borrowers, in each case

whether or not such property was or is held in trust or was or is required to be held in

trust (collectively, the "Property"). The Appointment Order was issued following an

application made by the Superintendent of Financial Services ("Superintendent")

pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators Act,

2006 (Ontario), as amended, and section 101 of the Courts of Justice Act (Ontario), as

58

amended. A copy of the Appointment Order is attached as Appendix "1".

2. On June 19, 2018, the Trustee submitted its first report in these proceedings ("First

Report"). The First Report provided a comprehensive update on the Trustee's activities

during the first two months of these proceedings, including additional background

information regarding BDMC and its business and updated information on the status of

the real estate development projects in which the Investors hold syndicated mortgage

loans. A copy of the First Report, without exhibits, is attached as Appendix "2".

3. On October 23, 2018, the Trustee submitted its second report in these proceedings

("Second Report"). The Second Report provided a further comprehensive update on the

Trustee's activities undertaken since the date of the First Report, including a detailed

description of the in-depth analysis the Trustee is conducting with respect to each real

estate development project and a status update for each of those projects. The Second

Report also included information in support of the Realized Property Order (described

below). A copy of the Second Report, without exhibits, is attached as Appendix "3".

Capitalized terms not otherwise defined in this Report have the meanings ascribed to

them in the Second Report.

4. On October 30, 2018, this Court issued an Order ("Realized Property Order") that,

among other things,

(a) required the Trustee to distribute (when aggregated with previous distributions)

70% of (I) all funds held or received by the Trustee as a result of a repayment (in

whole or in part) of principal on any loan or other indebtedness administered by

BDMC on behalf of Investors (including funds originally obtained with respect to

the Victoria Medical SML Loans), whether or not (i) secured by any Real Property

Charges in the name of BDMC or an RRSP Trustee, (ii) received before or after

the date of the Appointment Order, or (iii) paid or payable in trust, plus (II) all

interest paid or payable to BDMC or the Trustee at the time such repayment (in

whole or in part) of principal is made (collectively, "Realized Property");




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59


administration of the estate, including in respect of those matters set out in

paragraph 17 of the Interim Stabilization Order (collectively, the "Required

Trustee Activities").

A copy of the Realized Property Order is attached as Appendix "4".

5. The Trustee indicated in the Second Report that it intended to return to Court in the near

term to seek this Court's approval of a settlement agreement with respect to the

obligations owing by Braestone Development Corporation ("Braestone") to BDMC under

the loan agreement dated December 1, 2012 ("Loan Agreement'') relating to

Braestone's real estate development project in Moonstone, Ontario ("Braestone

Project"), and to seek a further distribution of Realized Property to Investors upon

receipt of the payment contemplated by that settlement.

6. At the time of the Second Report, the Trustee had recommended that the Braestone

Investors accept the Braestone settlement and was seeking feedback from the

Braestone Investors in that regard. This Third Report sets out the Trustee's

recommendation regarding the Braestone Project based on Investor feedback, and

supports the Trustee's motion for an Order, among other things, approving the

Settlement Agreement made as of October 17, 2018 (the "Braestone Settlement

Agreement") among Braestone, the Trustee and Olympia Trust Company ("OTC") that

provides for a payment to the Trustee of $10 million in full and final satisfaction of

Braestone's obligations under the Loan Agreement, as more fully described in this Third

Report.

7. Materials filed with the Court with respect to these proceedings (other than confidential

materials filed under seal), including the First Report, the Second Report, the affidavit of

Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil Law Division,

Financial Services Commission of Ontario ("FSCO") branch, sworn on April 19, 2018,

the Superintendent's application record, the Appointment Order, the Interim Stabilization

Order, the Realized Property Order and the endorsements issued by the Court, are

accessible on the Trustee's website at: www.faanmortgageadmin.com ("Trustee's

Website"). The Trustee intends to maintain the Trustee's Website for the currency of

these proceedings and will be updating it as appropriate.

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PURPOSE OF THE THIRD REPORT

8. The purpose of this third report of the Trustee ("Third Report") is to provide the Court

and stakeholders with the Trustee's recommendation regarding the Braestone

Settlement and to support the Trustee's request for an Order (the "Braestone

Settlement Approval Order") that, among other things:

(a) approves the Braestone Settlement Agreement, with such minor amendments as

the Trustee and the other parties to the Braestone Settlement Agreement may

agree upon to permit the completion of the transaction contemplated thereby; (ii)

directs Braestone to pay $10 million forthwith to the Trustee in accordance with

the terms of the Braestone Settlement Agreement (such funds the "Braestone

Realized Property"); and (iii) approves and ratifies the execution of the

Braestone Settlement Agreement by the Trustee and OTC and authorizes and

directs the Trustee and OTC to comply with all of their obligations under the

Braestone Settlement Agreement;

(b) releases, extinguishes, expunges and discharges all of Braestone's obligations to

BDMC, OTC, and the individual lenders under the Braestone Loan Agreement

("Braestone Individual Lenders"), the Security and the Loan Documents (each

as defined in the Braestone Loan Agreement) (collectively, the "Braestone Loan

Obligations") and all security interests granted to BDMC, OTC or the Braestone

Individual Lenders in and to the assets of Braestone to secure the Braestone

Loan Obligations (the "Loan Encumbrances") upon the delivery of a Trustee's

certificate confirming, among other things, the Trustee's receipt of the $1 O million

payment (the "Trustee's Certificate"), and ordering that none of the Trustee,

BDMC, OTC or any Braestone Individual Lender have any claim against

Braestone in respect of the Braestone Loan Obligations or the Loan

Encumbrances; provided, however, that Braestone is not released from any

obligations under the Braestone Settlement Agreement;

(c) declares that the release agreement ("Release Agreement") to be given to the

Trustee, BDMC, OTC, and each Braestone Individual Lender who loaned funds

through BDMC or OTC to Braestone pursuant to the Loan Agreement and all

related Loan Documents, each of their respective officers, directors, agents,

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61

employees, and each of their respective successors and assigns (collectively, the

"Releasees") by Braestone on behalf of itself, its affiliates, and their respective

shareholders, agents, directors, officers, employees, and each of their respective

successors and assigns (collectively, the "Releasors'') shall be binding and

effective on the Releasers in favour of the Releasees upon the delivery of the

Trustee's Certificate;

(d) orders the Trustee to make a further distribution to Investors following the filing of

the Trustee's Certificate with the Court in an amount equal to 10% of the

Realized Property held on the date of the Appointment Order, including the

Realized Property obtained with respect to the Victoria Medical SML Loans, pro

rata to the Investors entitled to such funds, such that, when combined with the

distribution made pursuant to the Interim Stabilization Order and the Realized

Property Order, 80% of such funds shall have been distributed on a pro rata

basis to the Investors entitled to such funds; and

(e) amends paragraph 3(b) of the Realized Property Order upon the delivery of the

Trustee's Certificate to require the Trustee to distribute 80% of all other Realized

Property obtained, including the Braestone Realized Property, pro rata to the

Investors entitled to such funds, whether received before or after the date of the

proposed Braestone Settlement Approval Order.

9. In addition, the Trustee is seeking this Court's approval of the First Report, the Second

Report, the Third Report, the activities described in each of the Reports, and the

professional fees of the Trustee and its counsel for the period from the date of the

Appointment Order to September 30, 2018, as more fully described herein and in the fee

affidavits attached hereto.

10. In support of the Trustee's request for the Braestone Settlement Approval Order, this

Third Report describes the following matters:

(a) The details of the Braestone Settlement Agreement;

(b) Information that supports the Trustee's recommendation that the Braestone

Settlement Agreement be approved;

(c) A summary of the Trustee's activities to date: and

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62

(d) Information regarding the Trustee's and its counsel's fees and disbursements

from the date of the Appointment Order through to September 30, 2018.

11. The Trustee is required under the Realized Property Order to report back to the Court by

no later than April 30, 2019 with a further comprehensive update regarding these

proceedings. The Trustee anticipates that it will likely be necessary to prepare shorter

project specific reports similar to this Third Report during the intervening period and to

attend before the Court to seek relief or advice and directions from the Court regarding

project specific issues, which may include the approval of settlement and repayment

arrangements for other real estate development projects.

SCOPE AND TERMS OF REFERENCE

12. In preparing this Third Report, the Trustee has relied upon unaudited financial

information provided by, inter a/ia, BDMC, Fortress, Canadian Development Capital &

Mortgage Services Inc. ("CDCM"), the mortgage brokerage who assumed the mortgage

brokerage duties of BDMC, Braestone and certain other individual borrowers who have

borrowed funds from BDMC under various syndicated mortgage loans administered by

BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM, and

applicable borrowers (including, among other things, unaudited internal information,

appraisals and financial projections), the Trustee's review does not constitute an audit or

verification of such information for accuracy, completeness or compliance with Generally

Accepted Assurance Standards ("GAAS"), Generally Accepted Accounting Principles

("GAAP"), or International Financial Reporting Standards ("IFRS"). Accordingly, the

Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or

IFRS, or any other guidelines, with respect to such information.

13. Some of the information used and relied upon in preparing this Third Report consists of

financial projections and other information received from various third parties, including

appraisals and project cost information. The Trustee cautions that the projections and

other information used and relied upon are generally based upon assumptions and

estimates about future events and/or market conditions that are not ascertainable or that

could change. As such, the information presented in this Third Report may vary from the

projections and information used to prepare this Third Report and the actual results may

differ both from the results projected therein and herein. Even if the assumptions relied

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63

upon therein or herein materialize, the variations from the projections could be

significant. The Trustee's review of the future oriented information used to prepare this

Third Report did not constitute an audit or review of such information under GMS,

GMP or IFRS or any other guidelines.

14. This Third Report has been prepared for the use of this Court and BDMC's stakeholders

as general information relating to BDMC and the Braestone Project and to assist the

Court with respect to the Trustee's request for the proposed Braestone Settlement

Approval Order. Accordingly, the reader is cautioned that this Third Report may not be

appropriate for any other purpose.

15. All references to dollars are in Canadian currency unless otherwise noted.

BRAESTONE SETTLEMENT OFFER

16. As set out in the Second Report, the Trustee has been engaged in negotiations with

Braestone for some time regarding the payment of the amounts due to BDMC under the

Loan Agreement. These negotiations commenced after the Trustee was informed that

Braestone faces significant environmental issues on certain aspects of the Braestone

Project. The Trustee understands that these environmental issues will likely result in

material delays in the progress of the project and in the repayment of the BDMC loans

made to Braestone.

17. The Trustee has provided notices to Investors regarding certain matters related to the

Braestone Project, including through previous Reports and notices dated April 11, 2018

and May 31, 2018 ("Braestone Updates"). Copies of the Braestone Updates are

attached hereto as Appendix "5".

18. On October 17, 2018, as part of the negotiations between the parties, Braestone

presented the Trustee with an irrevocable offer to accept payment by Braestone of $10

million in full satisfaction of the amounts due under the Loan Agreement and

incorporating other components negotiated by the Trustee ("Braestone Offer"). The

Braestone Offer was open for acceptance until November 9, 2018. The Braestone Offer

was subsequently extended to November 16, 2018 by Braestone to permit OTC some

additional time to execute the Braestone Offer, subject to the terms of the Braestone

Settlement Approval Order.

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64

19. For the reasons set out below, the Trustee has accepted Braestone's offer and executed

the Braestone Settlement Agreement. The Braestone Settlement Agreement requires

the Trustee to use commercially reasonable efforts to seek the Braestone Settlement

Approval Order, but the remaining terms of the Braestone Settlement Agreement are

only binding on the Trustee, BDMC and OTC should the agreement be approved and

ratified by the Court.

20. The Braestone Offer and the Braestone Settlement Agreement provide for a lump sum

payment by Braestone of $1 O million in respect of the outstanding principal balance

owing under the Loan Agreement of $13.35 million. The full amount due under the Loan

Agreement on project completion (including interest and certain deferred lender fees)

exceeds $16 million; however, when previously paid interest of approximately $5.4

million ("Paid Interest") is factored into the analysis, the proposed payout plus the Paid

Interest would result in the full repayment of the principal owing to the SMLs, plus a

further 15% above the outstanding principal amount.

21. The Braestone Offer is conditional, among other things, upon the release and discharge

of all Braestone Loan Obligations and all Loan Encumbrances, and a Court order being

obtained providing that none of the Trustee, BDMC, OTC or any Braestone Individual

Lenders have any claim against Braestone in respect of the Braestone Loan Obligations

or the Loan Encumbrances (though Braestone is not to be released from any obligations

under the Braestone Settlement Agreement) in consideration of the payment due under

the Braestone Settlement Agreement.

22. The Braestone Settlement Agreement also provides that Braestone is to deliver a

Release Agreement to the Trustee providing that Braestone, on behalf of itself and the

other Releasers, release all of the Releasees (namely, the Trustee, BDMC, OTC, and

each Braestone Individual Lender who loaned funds through BDMC or OTC to

Braestone pursuant to the Loan Agreement and all related Loan Documents, each of

their respective officers, directors, agents, employees, and each of their respective

successors and assigns) from all obligations under the Braestone Loan Documents.

23. Braestone has also made certain customary representations and warranties and has

agreed to provide such further assurances as are necessary to effectuate the transaction

set out in the Braestone Offer.

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65

24. If the Court issues the proposed Braestone Settlement Approval Order, then the

settlement set out therein will be effective upon the issuance by the Trustee of the

Trustee's Certificate certifying that the conditions precedent set out in the Braestone

Settlement Agreement are satisfied.

25. A copy of the Braestone Offer, including the executed Braestone Settlement Agreement

is attached as Appendix "6".

Overview of Current Status of Braestone Project

26. Braestone has developed Phase 1 of the Braestone Project, but is awaiting approvals to

complete Phase 2. Braestone has advised that it will be unable to complete the

Braestone Project prior to July 2019, being the end of the extended term as set out in

the Loan Agreement, due to unexpected delays and challenging market conditions.

Therefore, Braestone does not expect to be able to pay the amounts due under the Loan

Agreement in full on the extended maturity date.

27. The Trustee therefore engaged in discussions and negotiations with Braestone and

reviewed the information provided to it. On the basis of these discussions and

information, the Trustee understands that the market and other challenges affecting the

completion of the Braestone Project include, but are not limited to:

(a) the slowdown in the overall real estate market in the area, which has resulted in

slower than expected home sales; and

(b) unforeseen environmental issues that have stalled the environmental approvals

required for the development of Phase 2. The Trustee understands that the

delay in environmental approvals relate to the following outstanding issues:

i. Species at risk (specifically, brown bats);

ii. Forestry at risk (specifically, butternut trees);

iii. Fisheries;

iv. Approval for a river crossing which accesses Phase 28; and

v. A re-assessment of previously approved wetland boundaries.

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Braestone has provided the Trustee with a copy of an environmental report dated May

11, 2018 prepared by its environmental consultants.

28. Braestone has advised that there are no established guidelines to resolve certain of

these environmental issues, and therefore longer than usual delays may result.

Braestone further advised that it has sought advice from environmental consultants and

has been informed that it could take 2 to 7 years to remedy the environmental conditions

and prepare the lands to commence construction of Phase 2.

29. As a result of these developments, Braestone is seeking to refinance the Braestone

Project, but has advised that it must reduce its overall debt in order to do so.

Accordingly, Braestone is seeking to repay the debt owing to the Braestone Individual

Lenders under the Loan Agreement at a discount to the total amount that would be

owing at the completion of the Braestone Project.

30. The Trustee has been engaged in negotiations with Braestone and its representatives

regarding the amount of any such discount and the other terms of a potential settlement

of the Braestone Loan Obligations. Braestone has advised that it is unable to repay the

full principal amount due under the Loan Agreement; however, given that BDMC

received the Paid Interest when due (up to and including the July 15, 2018 interest

payment) of approximately $5.4 million, the payment of $10 million pursuant to the Offer

plus the Paid Interest would result in full repayment of the principal amount advanced

and a net return of approximately 15% on that principal amount. The return is calculated

as follows:

Principal outstanding (A)

Loan repayment Interest paid Total payments (8)

Net recovery in excess of principal (8-A)

13,350,100

10,000,000 5,455,870

15,455,870

2,105,770

31. Acceptance of the Braestone Offer by the Trustee would result in the Investors foregoing

the amounts set out in the table below, which would otherwise become due pursuant to

the Loan Agreement if the amounts due were repaid on or about October 15, 2018

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(assuming, with respect to the deferred lender fee, that the project had been completed

by October 15, 2018).

Remaining principal Accrued interest to October 15, 2018 Extension fees (incl. additional deferred lender fee) Project completion/deferred lender fee Total potential foregone recoveries (before additional accrued interest)

$ 3,350,100

267,000 400,000

2,003,000 6,020,100

However, Braestone anticipates that the Braestone Project will not be completed for

many years and there can be no assurance that Braestone will be able to repay all

amounts due under the Loan Agreement upon completion of the Braestone Project.

32. Additional interest has continued to accrue since October 15, 2018, and would be

payable on the date that the BDMC Loan was repaid. As of July 15, 2018, Braestone

ceased paying interest due under the Loan Agreement. Braestone has advised that it

will not make further interest payments in the event the Braestone Offer is not accepted

and the Loan Agreement continues in force.

Assessment of the Offer and Recommendation

33. Braestone has advised that the Braestone Project will not be completed by the time the

Loan Agreement matures in July 2019, and that Braestone is unlikely to obtain

replacement financing sufficient to repay the amounts due under the Loan Agreement in

full on the maturity date. Further, given the terms of the Loan Agreement and

Braestone's expressed need to refinance the Braestone Project, BDMC would likely be

required to postpone and standstill to additional priority loans to permit the Braestone

Project to continue towards completion, and the standstill agreement would likely remain

in effect until such time as the priority loans are repaid (which the Trustee understands

would not be until such time that the Braestone Project is completed). Accordingly, and

based on the estimates provided by Braestone, it is possible that the amounts due under

Loan Agreement may not be repaid until 2025 and there is a risk that it will not be repaid

in full at that time, or ever.

34. In completing its assessment of the Braestone Offer, the Trustee engaged a real estate

appraiser to provide a current as-is appraised value of the property. Based on its review

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of the appraisal and taking into account the approximately $1 O million of outstanding

debt ranking in priority to the BDMC Loan that would be required to be repaid prior to the

amounts due under the Loan Agreement, the Trustee is of the view that the Braestone

Offer is reasonable in the circumstances.

35. Given the environmental issues encountered by Braestone, the uncertainty as to the

timing by which they will be remedied and the general uncertainty as to the future of the

market, the Trustee is of the view that, although the Braestone Offer potentially provides

discounted returns to the Investors, there is value in the certainty provided by accepting

the Braestone Offer and crystalizing the outcome of the Loan Agreement. Further, as

noted above, the Braestone Offer does result in an overall net positive return of

approximately 15% on the principal amount advanced by BDMC.

Consultation with Representative Counsel and Investors

36. The Trustee consulted extensively with Representative Counsel regarding the Braestone

Offer, and, following that consultation, delivered a notice to Investors in the Braestone

Project on October 23, 2018 advising the Investors of the Trustee's recommendation in

support of accepting the Braestone Offer and requesting Investors to provide their

feedback, whether for or against the acceptance of the Braestone Offer, and any other

general feedback ("Braestone Consent Request"). Further, the Trustee advised that it

would serve all Investors with its motion materials seeking approval of the Braestone

Settlement Agreement should the Braestone Offer be accepted. A copy of the Braestone

Consent Request is attached as Appendix "7".

37. Following the delivery of the Braestone Consent Request, the Trustee and

Representative Counsel received and responded to a number of inquiries regarding the

Offer and the Trustee's and Representative Counsel's views on the Braestone Offer,

including the impact of the Realized Property Order on the amounts immediately payable

to Investors.

38. As of November 13, 2018, the Trustee has received 86 formal votes in response to the

Braestone Consent Request. 83 Investors representing approximately $5,292,700 of the

$13,350,100 in principal outstanding under the Loan Agreement voted in favour of the

Trustee accepting the Braestone Offer. 3 votes (from 2 Investors), representing

approximately $49,500 in principal outstanding under the Loan Agreement voted against

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the Trustee accepting the Braestone Offer. In summary, over 96% of Investors voting on

the Braestone Offer, representing over 99% of the value of such loans, voted in favour of

the Trustee accepting the Braestone Offer. Less than 4% of Investors voting on the

Braestone Offer, representing less than 1 % in value of such loans, voted against the

Trustee accepting the Braestone Offer. The Investors voting in favour of the acceptance

of the Braestone Offer represent approximately 33% in number and 40% in value of all

Investors under the Loan Agreement, whereas Investors voting against the acceptance

of the Braestone Offer represent approximately 1 % in number and less than 0.4% in

value of all Investors under the Loan Agreement.

39. The Trustee notes that the rate of response to the Braestone Consent Request

(approximately of 34% of Investors) is much higher than the rate of response to any

other notice or request for consent that the Trustee has sent to date.

40. On the basis of the Trustee's analysis of the facts and circumstances surrounding the

Braestone Project and the overwhelming positive responses received from Investors, the

Trustee has determined that the Braestone Offer should be accepted. The Trustee has

been informed by Representative Counsel that it also supports the acceptance of the

Braestone Offer. While the Trustee recognizes that a small number of Investors have

voted against the acceptance of the Braestone Offer, the Trustee must act in the best

interests of all Investors who made loans to the Braestone Project notwithstanding the

views expressed by certain Investors. The Trustee has determined that it is in the best

interests of all Investors to accept the Braestone Offer.

41. The Trustee therefore executed the Braestone Settlement Agreement and has brought a

motion seeking this Court's approval of the Braestone Settlement Agreement and the

issuance of the Braestone Settlement Approval Order.

NEGOTIATIONS REGARDING OTHER PAYOUTS

42. Since the date of the Second Report, the Trustee has continued to engage in

negotiations with certain borrowers and with Fortress and CDCM on behalf of certain

borrowers regarding potential payouts of the applicable loans. As recoveries under

certain of the projects are uncertain, the Trustee has actively engaged in discussions

with respect to a number of payout opportunities. Many of the payout discussions remain

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at early stages, but the Trustee is seeking to advance these discussions in

circumstances where the Trustee believes a payout would be in the best interest of

Investors.

43. Notably, the Trustee has engaged in negotiations with The Harlowe Inc. ("Harlowe

Borrower") regarding the amounts due to BDMC under the loan agreement dated June

10, 2013 in respect of a real estate development project in Toronto, Ontario ("Harlowe

Project"). The Trustee understands that the Harlowe Borrower has sold over 80% of

available units for the Harlowe Project, and registration of the building is estimated to

occur in the summer of 2019. Upon registration of the building, the sale of the units

subject to existing sale agreements will be completed, at which time the majority of the

sale proceeds will be used to repay the priority loans. However, the Harlowe Borrower

has advised the Trustee that it must enter into an inventory loan to fund costs associated

with holding and selling the remaining units. The Harlowe Borrower has advised that

significant changes in the marketplace since the project commenced, combined with the

negative publicity related to Fortress and BDMC, has made it difficult to obtain additional

financing. In particular, the Harlowe Borrower advises that it cannot obtain an inventory

loan while any portion of the BDMC debt remains on title. The Harlowe Borrower has

also advised that the final sale of outstanding units of the Harlowe Project are unlikely to

be completed until spring of 2021.

44. The Trustee has negotiated a settlement agreement with the Harlowe Borrower whereby

the Harlowe Borrower would pay approximately $15.5 million to the Trustee in full and

final satisfaction and compromise of all the Harlowe Borrower's obligations to BDMC and

the individual lenders who loaned funds to the Harlowe Borrower under the applicable

loan agreement. The principal owing to BDMC under the Harlowe loan is approximately

$15.9 million. If the Harlowe Project had been completed on October 15, 2018, and

certain assumptions regarding profitability had been realized, the full amount due under

the Harlowe loan (including interest and certain deferred lender fees) is estimated to

exceed $20 million; however, when previously paid interest of approximately $2. 7 million

is factored into the analysis, the proposed payout would result in a full payment of the

principal owing to the Investors plus a further 15% above the principal amount. The

Trustee has recommended that the settlement agreement proceed and is currently

seeking feedback from Investors. The Trustee anticipates that it will be returning to Court

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in the near term to seek the Court's approval of the proposed settlement. Full details of

the proposed settlement will be provided when Court approval is sought.

45. As noted in the Second Report, the Trustee intends to follow a similar approval process

with respect to the potential payout by the Harlowe Borrower and other future repayment

opportunities in order to give clarity on the process to Investors and borrowers.

RECOMMENDATION REGARDING REALIZED PROPERTY

46. The Trustee has determined, based on its expectations regarding the ability to generate

further Realized Property in the next reporting period, that should the $10 million in

Braestone Realized Property be received, it will be appropriate to further reduce the

percentage of Realized Property that it needs to retain to fund the Required Trustee

Activities.

47. The Trustee is therefore seeking this Court's authorization to distribute an additional

amount equal to 10% of the Realized Property held by the Trustee on on the date of the

Appointment Order, including the Realized Property received in respect of the Victoria

Medical SML Loans. Following this distribution, 80% of the Realized Property received to

date will have been distributed by the Trustee.

48. The Trustee is also seeking an amendment to the Realized Property Order to authorize

the Trustee to distribute 80% of any future Realized Property received by the Trustee

after the date of the Braestone Settlement Approval Order.

49. The Trustee has consulted with Representative Counsel regarding this recommendation,

and Representative Counsel agrees that the proposed retention of 20% of all Realized

Property and the proposed distribution of all other Realized Property is fair and

reasonable in the circumstances.

50. As noted in the Second Report, the Trustee currently predicts that there will be a limited

number of projects that give rise to recoveries in the near term and that recoveries on

many of the syndicated mortgage loans are at risk. As such, the Trustee is of the view

that it must retain 20% of the Realized Property at this time and utilize the retained

Realized Property to maximize the recovery of additional Realized Property in the future.

As more Realized Property is generated, the Trustee will continue to reevaluate the

appropriate percentage of Realized Property that needs to be retained.

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51. The Trustee understands that these proceedings may have a disproportionate impact on

Investors whose projects have generated or will generate Realized Property at earlier

dates than other projects. As more fully described in the Second Report, the Trustee will

provide the Court with a recommendation regarding an appropriate allocation of the

costs that will be borne by specific projects, including the Braestone Project, at a later

date to fairly and equitably allocate the use of Realized Property among Investors.

APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES

52. The Trustee is seeking the approval of the First Report, the Second Report, this Third

Report, its activities as set out in the First Report, the Second Report, and this Third

Report, and its fees and its counsel's fees from the date of the Appointment Order to

September 30, 2018.

53. The Trustee's activities are described at length in the First Report, attached hereto as

Appendix 2, the Second Report, attached hereto as Appendix 3, and this Third Report.

In summary, the Trustee's activities have included, among other things:

(a) attending the ordinary course administration duties required in connection with

BDMC's syndicated mortgage loans;

(b) communicating with Investors;

(c) sending 46 of notices to Investors as of November 13, 2018;

(d) holding meetings with certain Investors;

(e) communicating with borrowers, senior lenders and other lenders;

(f) responding to enforcement actions by senior lenders on distressed projects;

(g) negotiating with borrowers regarding potential payouts and settlement offers in

respect of certain BDMC loans;

(h) seeking to recover amounts advanced by Investors where standstill

arrangements do not prevent the Trustee from taking action;

(i) responding to requests for postponements and taking other actions to permit the

projects to continue and to prevent enforcement by senior lenders;

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U) performing an in-depth review of each real estate development project, including

obtaining new appraisals;

(k) investigating the BDMC loan structure;

(I) preparing three Reports to the Court and attending hearings before the Court;

(m)distributing 70% of the Realized Property to the applicable Investors pro rata as

required by the Interim Stabilization Order and the Realized Property Order;

(n) attending to partial discharges of BDMC's security interests to facilitate sales of

individual units or the development of properties;

(o) continuing to engage with other stakeholders of BDMC and related parties,

including Ms. lldina Galati, BDMC's shareholder, and her counsel, Fortress and

its counsel, and CDCM and its counsel, regarding refinancing efforts,

enforcement actions, regulatory matters and the funding of these proceedings;

(p) continuing to engage with borrowers and with CDCM, as broker to some of the

borrowers, regarding the postponements and enforcement matters noted above

and to obtain detailed updates on the progress on projects and associated

financial reporting;

(q) engaging with FSCO and its legal counsel;

(r) engaging with mortgage brokerage and administration licensing authorities

outside of Ontario to discuss the Trustee's mandate and the Appointment Order

and to address matters related to BDMC's licenses in such jurisdictions, including

regulators in Manitoba, Saskatchewan, Alberta and British Columbia; and

(s) supervising the day to day business activities of BDMC, including supervising the

payment of payroll, rent and related matters.

54. Pursuant to the terms of the Appointment Order, the Trustee and its legal counsel shall

be paid their reasonable fees and disbursements and shall pass their accounts from time

to time.

55. The Trustee and its legal counsel are tracking their time by project. For certain tasks that

affect all Investors, including general notices and the preparation of the First Report, the

Second Report and certain components of this Third Report and the related Court

materials, the time will be charged to a general account that will, at a later date once the

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totality of realizations are more clear, be allocated to the various projects based on

appropriate considerations and in accordance with further Court orders.

Trustee Fees

56. The fees (excluding HST) of FMN Mortgage Administrators Inc., in its capacity as

Trustee for the period April 20, 2018 to September 30, 2018, total $734,428.20; and HST

applicable to such amounts totals $95,475.67, for an aggregate amount of $829,903.87.

Invoices for the fees of the Trustee, including summaries of the activities of the Trustee

for the applicable period are provided in the affidavit of Naveed Manzoor ("Manzoor

Affidavit"), attached as Appendix "8".

57. Detailed docket information in respect of the fees and disbursements of the Trustee for

this period are included in the confidential exhibit to the Manzoor Affidavit that is being

filed separately with this Court ("Confidential Manzoor Exhibit"). The Trustee is

seeking a sealing order with respect to the Confidential Manzoor Exhibit due to the fact

that the information contained in the Trustee's detailed invoices includes privileged and

commercially sensitive information regarding the projects and BDMC generally, and the

disclosure of that privileged and/or commercially sensitive information could have a

material adverse effect on the recoveries that may ultimately be available to Investors in

these proceedings.

58. The average hourly rate for the Trustee over the referenced billing period was

approximately $350.48/hour.

Fees of the Trustee's Counsel

59. The fees (excluding disbursements and HST) of Osler, Hoskin & Harcourt LLP ("Osler")

as counsel to the Trustee for the period April 20, 2018 to September 30, 2018, total

$782,270.50; Osler incurred $6,288.38 disbursements during the period; and HST

applicable to such amounts totals $102,427.65, for an aggregate amount of

$890,986.53. Invoices for the fees, reimbursable expenses and applicable taxes of

Osler, including summaries of Osier's the activities in respect of the invoices, are

provided in the affidavit of Michael De Lellis ("De Lellis Affidavit"), attached as

Appendix "9".

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60. Full accounts in respect of the fees and disbursements of Osler for this period are

included in the confidential exhibit to the De Lellis Affidavit that is being separately filed

with this Court ("Confidential De Lellis Exhibit"). The Trustee is seeking a sealing

order with respect to the Confidential De Lellis Exhibit due to the fact that the information

contained in Osier's detailed invoices includes privileged and commercially sensitive

information regarding the projects and BDMC generally, and the disclosure of that

privileged and/or commercially sensitive information could have a material adverse effect

on the recoveries that may ultimately be available to Investors in these proceedings.

61. The average hourly rate for Osler over the referenced billing period was $691.91/hour.

62. The Trustee is of the view that the hourly rates charged by Osler are consistent with the

rates charged by major law firms practicing in the area of insolvency and restructuring in

the Toronto market, and that the fees charged are reasonable in the circumstances.

Fee Recoveries

To date, the Trustee and its counsel have recovered approximately $153,500 on account of

professional fee reimbursements in connection with postponements, refinancings and other

significant transactions. The Trustee has succeeded in negotiating these fee recoveries on a

case by case basis and continues to seek to recover fees when appropriate.

CONCLUSION AND RECOMMENDATION

63. The Trustee recommends that the proposed Braestone Settlement Approval Order be

granted by the Court. The Trustee has negotiated the Braestone Settlement Agreement

and has obtained an overwhelming positive response from affected Investors with

respect to the execution and implementation of the terms of the Braestone Settlement

Agreement. The Braestone Settlement Agreement contemplates the payment (when

combined with Paid Interest) of the full principal amount due under the Loan Agreement

plus a further 15% recovery on that principal. If implemented, the Braestone Settlement

Agreement will result in $10 million of Braestone Realized Property in the near term,

which will permit the Trustee to make a further distribution of Realized Property pro rata

to Investors who are entitled to same and will also provide additional funding for these

proceedings to facilitate Required Trustee Activities. The Trustee is of the view that it is

in the best interests of Investors to obtain the Braestone Realized Property now rather

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than to wait for an uncertain result in the future. The Trustee also seeks approval of its

activities to date and the fees and disbursements of the Trustee and its legal counsel in

connection with those activities. The Trustee will continue to attend to all BDMC matters

in an effort to maximize recoveries to Investors.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 19th day of November, 2018.

FAAN MORTGAGE ADMINISTRATORS INC.,

SOLELY IN ITS CAPACITY AS

COURT-APPOINTED TRUSTEE OF

BUILDING & DEVELOPMENT MORTGAGES CANADA INC.,

AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY

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Appendix 4:

Braestone Settlement Approval Order dated November 28, 2018

78

Court File No.: CV-18-596204-00CL


COMMERCIAL LIST

THE HONOURABLE MR WEDNESDAY, THE 28TH

JUSTICE HAINEY DAY OF NOVEMBER, 2018

BETWEEN


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c.29 and, SECTION 101 OF TIJE COURTS OF JUSTICE AC?i R.S.O. 1990 c. C.43

BRAESTONE SETTLEMENT APPROVAL ORDER

THIS MOTION, rnade by FAAN Mortgage Administrators Inc. ("FAAN Mortgage"),

in its capacity as Court-appointed trustee (in such capacity, the "Trustee"), of all of the assets,

undertakings and properties of Building 8. Development Mortgages Canada Inc. (the

"Respondent") pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators

Act, 2006, S.O. 2006, c. 29, as amended (the "MBLAA"), and section 101 of the Courts of

Justice lcl, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia, (i) approving and

ratifying the Settlement Agreernent dated as of October 77, 2078 (the "Braestone Settlement

)

)

)

,EURç, ¡€

5þ,

c,OUlf

(,m

79

2

Agreement") among Braestone Development Corporation ("Braestone"), the Trustee and

Olympia Trust Company ("OTC"); (ii) ordering Braestone to pay $10 million to the Trustee

pursuant to the Braestone Settlement Agreement; (iii) ordering Braestone, the Trustee and OTC

to comply with the Braestone Settlement Agreement; (iv) authorizing the Trustee to make a

further distribution of Realized Property to Investors; and (v) approving the Trustee's activities,

and the fees and disbursements of the Trustee and its Legal Counsel, was heard this day at 330

University Avenue, Toronto, Ontario;

ON READING the Third Report of the Trustee dated November 19,2018 (the "Third

Report"), the affidavit of Naveed Manzoor swom November 19,2078 and attached as Appendix

"8" to the Third Report (the "Manzoor Affidavit") and the affrdavit of Michael De Lellis sworn

November 19,2018 and attached as Appendrx"g" to the Third Report (the "De Lellis Affidavit"

and, collectively, with the Manzoor Affidavit, the "Fee Affidavits"), and on hearing the

submissions of counsel for the Trustee, Chaitons LLP, in its capacity as Representative Counsel,

counsel for The Superintendent of Financial Services, counsel to Braestone and such other

counsel as were present, no one appearing for any other person on the service list, as appears

from the affidavit of service of Justine Erickson swom November 22,2018, filed;

SERVICE AND INTERPRETATION

1. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion

Record and the Third Report is hereby abridged and validated so that this Motion is properly


2. THIS COURT ORDERS that all capitalized terms used but not defined herein shall

have the meanings given to them in the Third Report and the Braestone Settlement Agreement.

APPROVAL OF THE BRAESTONE SETTLEMENT AGREEMENT

3. THIS COURT ORDERS that (i) the Braestone Settlement Agreement be and is hereby

approved in its entirety, with such minor amendments as the Trustee and the other parties to the

Braestone Settlement Agreement may agree upon to permit the completion of the transaction

contemplated thereby; (ii) Braestone is hereby directed to pay $10 rnillion forthwith to the

Trustee in accordance with the terms of the Braestone Settlement Agreement (such funds the

"Braestone Realized Property"); and (iii) the execution of the Braestone Settlement Agreement

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by the Trustee and OTC is hereby ratifìed and approved, and the Trustee and OTC are hereby

authorized and directed to comply with all of their obligations under the Braestone Settlement

Agreement.

4. THIS COURT ORDERS AND DECLARES that upon the delivery of a Trustee's

certificate to Braestone substantially in the form attached as Schedule "A" hereto (the "Trustee's

Certificate"), all of Braestone's obligations to Building & Development Mortgages Canada Inc.

("BDMC"), OTC, and the individual lenders (the "Braestone Individual Lenders") under the

Loan Agreement dated as of December l, 2012 between BDMC and Braestone (the "Loan

Agreement"), the Security and the Loan Documents (each as defined in the Loan Agreement)

(collectively, the "Braestone Loan Obligations") and all security interests granted to BDMC,

OTC or the Braestone Individual Lenders in and to the assets of Braestone to secure the

Braestone Loan Obligations and related registrations on title (the "Loan Encumbrances") are

hereby released, extinguished, expunged, discharged and deleted and that none of the Trustee,

BDMC, OTC or any Braestone Individual Lender shall have any claim against Braestone in

respect of the Braestone Loan Obligations or the Loan Encumbrances; provided, however, that

Braestone shall not be released from any obligations under the Braestone Settlement Agreement.

5. THIS COURT ORDERS AND DECLARES that upon the delivery of the Trustee's

Certifìcate, the Braestone Realized Property is and shall be deemed to be "Realized Property" as

defined in the Order of this Court dated June 26,2018 (the "Interim Stabilization Order") and

that all of the Braestone Individual Lenders' rights and claims under the Loan Agreement, the

Security and the Loan Documents shall attach to the Braestone Realized Property and shall have

the same nature and priority as they had prior to the consummation of the Braestone Settlement

Agreement, including pursuant to the Appointment Order and the Interim Stabilization Order.

6. THIS COURT ORDERS that upon the registration in the Land Registry Office for the

Registry Division of Sirncoe (#51) of an Application for Vesting Order in the form prescribed by

the applicable Land Registry Office and attaching a copy of this Order and the executed

Trustee's Certificate, the Land Registrar is hereby directed to delete and expunge from title to the

real property identified in Schedule "B" hereto (the "Real Property") all of the Loan

Encumbrances listed in Schedule"C2' hereto.

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l. THIS COURT ORDERS that upon the delivery of the Trustee's Certifìcate, the release

agreement in the form attached as Schedule "D" hereto ("Release Agreement") to be given to

the Trustee, BDMC, OTC, and each Braestone Individual Lender who loaned funds through

BDMC or OTC to Braestone pursuant to the Loan Agreement and all related Loan Documents,

each of their respective officers, directors, agents, employees, and each of their respective

successors and assigns (collectively, the "Releasees") by Braestone on behalf of itself, its

affiliates, and their respective shareholders, agents, directors, offtcers, employees, and each of

their respective successors and assigns (collectively, the "Releasors") shall be binding and

effective on the Releasors in favour of the Releasees.

8. THIS COURT ORDERS AND DIRECTS the Trustee to file with the Court a copy of

the Trustee's Certificate, as soon as practicable after delivery thereof.

REALIZED PROPERTY

9. TIIIS COURT ORDERS that upon the delivery of the Trustee's Certificate, the Trustee

shall make a further distribution to Investors in an amount equal Io 10o/o of the Realized Property

held on the date of the Appointment Order, including the Realized Property obtained with

respect to the Victoria Medical SML Loans, pro rata Io the Investors entitled to such funds, such

that, when combined with the distributions made pursuant to the Interim Stabilization Order and

the Order of this Court dated October 30, 2018 ("Realized Property Order"), 80% of such

funds shall have been distributed on a pro rata basis to the Investors entitled to such funds.

10. THIS COURT ORDERS that upon the delivery of the Trustee's Certificate, paragraph

3(b) of the Realized Property Order is hereby amended to provide that the Trustee shall distribute

80% of all other Realized Property obtained, including the Braestone Realized Property, pro rata

to the Investors entitled to such funds, whether received before or after the date of this Order.

TRUSTEE'S ACTIVITIES, FEES AND DISBURSEMENTS

11. THIS COURT ORDERS that the First Report, the Second Report and the Third Report

and all of the actions, conduct and activities of the Trustee as set out in therein, are hereby

approved.

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12. THIS COURT ORDERS that the fees and disbursements of the Trustee and its counsel,

as set out in the Third Report and the Fee Affidavits, are hereby approved, as follows:

(a) The following fees and disbursements of the Trustee for the period from April 20,

2018 to September 30,2018 are approved: fees of 5734,428.20 (plus applicable

taxes of 995,475.67 for an aggrega|e amount of $829,903.87); and

(b) The following fees and disbursements of Osler, Hoskin & Harcourt LLP, counsel

to the Trustee, for the period from April 20, 2018 to September 30, 2018 are

approved: fees of 5782,270.50 and disbursements of $6,288.38 (plus applicable

taxes of $102,421.65 for an aggregate amount of $890,986.53).

SEALING

13. THIS COURT ORDERS that the Conhdential Manzoor Exhibit and the Confidential

De Lellis Exhibit shall be sealed, kept confidential and not form part of the public record, but

rather shall be placed, separate and apart from all other contents of the Court file, in a sealed

envelope attached to a notice that sets out the title of these proceedings and a statement that the

contents are subject to a sealing order and shall only be opened upon further Order of the Court.

AID AND RECOGNITION OF FOREIGN COURTS



effect to this Order and to assist the Trustee and its agents in carrying out the terms of this Order.

All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to

make such orders and to provide such assistance to the Trustee, as an officer of this Court, as

may be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in

carrying out the terms of this Order.




that the Trustee is authorized and ernpowered to act as a representative in respect of the within

83

-6-

proceedings for the pu{pose of having these proceedings recognized in a jurisdiction outside

Canada.

e.

ßl/FEB/PAB;

84

Schedule ('A') - Form of Trustee's Certificate



COMMERCIAL LIST


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c.29 and SECTION 101 OF TH.E COURTS OF JUSTICE AC4 R.S.O. 1990 c. C.43

TRUSTEE'S CERTIFICATE

RECITALS

A. Pursuant to an Order of the Honourable Justice Hainey of the Ontario Superior Court of

Justice fCommercial List] (the "Court") dated April 20, 2018, FAAN Mortgage Administrators

Inc. was appointed as the trustee (the "Trustee") of the undertaking, property and assets of

Building & Development Mortgages Canada Inc. ("BDMC").

B. Pursuant to an Order of the Court dated IDATE] (the "Braestone Settlement Approval

Order"), the Court approved and ratified the Settlement Agreement made as of Octob er 77 ,2018

(the "Braestone Settlement Agreement") among Braestone Development Corporation

("Braestone"), the Trustee and Olympia Trust Cornpany ("OTC") and ordered that all of

85

8

Braestone's obligations to BDMC, OTC, and the individual lenders ("Braestone Individual

Lenders") under the Loan Agreement, the Security and the Loan Documents (each as defined in

the Loan Agreement) (collectively, the "Braestone Loan Obligations") and all security interests

granted to BDMC, OTC or the Braestone Individual Lenders in and to the assets of Braestone to

secure the Braestone Loan Obligations (the "Loan Encumbrances") are hereby released,

extinguished, expunged and discharged and that none of the Trustee, BDMC, OTC or any

Braestone Individual Lender shall have any claim against Braestone in respect of the Braestone

Loan Obligations or the Loan Encumbrances; provided, however, that Braestone shall not be

released from any obligations under the Braestone Settlement Agreement; and that the release of

the Braestone Loan Obligations and the Loan Encumbrances is to be effective upon the delivery

by the Trustee to Braestone of a certificate confirming (i) the payment of $10 million to the

Trustee by Braestone; (ii) that the conditions precedent to the Braestone Settlement Agreement

as set out in section 9 of the Braestone Settlernent Agreement have been satisfied or waived by

the Trustee; and (iii) the settlement has been completed to the satisfaction of the Trustee.

C. Unless otherwise indicated herein, terms with initial capitals have the meanings set out in

the Braestone Settlement Approval Order.

THE TRUSTEE CERTIFIES the following:

Braestone has paid and the Trustee has received $10 million pursuant to the BraestoneSettlement Agreement;

Braestone has provided the Release Agreement to the Releasees;

Braestone has certified that all of the representations and warranties contained in thisBraestone Settlement Agreement continue to be true as of the Effective Date;

Braestone continues to be, in the reasonable opinion of the Trustee, in compliance withall of the terms of the Braestone Settlement Agreement;

The other conditions set out in the Braestone Settlernent Agreement have been satisfiedor waived by the Trustee; an

6. The settlement has been completed to the satisfaction of the Trustee.

1

2

J

4

5

This Certificate was delivered by the Trustee at ITIME] on IDArE]

86

9

FAAN Mortgage Administrators Inc., solelyin its capacity as Court-appointed Trustee ofthe undertaking, properfy and assets ofBuilding & Development Mortgages CanadaInc., and in no other capacity

Per

Name:

Title:

87

10

Schedule ((B') - Real Property

PIN DESCRIPTION REGISTERED OWNER

s8532-02r4 (LT) LOT 10, PLAN 5lMl 1 1 3; TOWNSHIPOF ORO-MEDONTE

BRAESTONEDEVELOPMENTCORPORATION

s8s32-021s (LT) LOT 11, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02t6 (LT) LOT 12, PLAN 5lMl113; TOV/NSHIPOF ORO-MEDONTE

s8s32-02n (LT) LOT 13, PLAN 5lMl113; TOWNSHIPOF ORO-MEDONTE

s8s32-0218 (LT) LOT 14, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE



s8s32-0221 (LT) LOT 17 , PLAN 51M1 1 13; TOWNSHIPOF ORO-MEDONTE

58s32-0222 (LT) LOT 18, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE







s8s32-0236 (LT) LOT 32, PLAN 51M I I 1 3; TOWNSHIPOF ORO-MEDONTE

s8s32-0244 (LT) LOT 40, PLAN 5lMI113, SAVING AND

88

11


RESERVING FROM THE E 1I2LT2CON 9, ALL MINES AND MINERALS,WHETHER SOLID, LIQUID ORGASEOUS, WHICH MAY BE FOUNDTO EXIST WITHIN, UPON OR UNDERSUCH LANDS T/W FULL POWER TOWORK THE SAME AND FOR THISPURPOSE TO ENTER UPON, USE ANDOCCUPY THE SAID LANDS OR SOMUCH THEREOF AND TO SUCHEXTENT AS MAY BE NECESSARYFOR THE EFFECTUAL WORKINGAND EXTRACTING OF THE SAIDMINERALS, AS DESCRIBED INORO17078; TOWNSHIP OF ORO-MEDONTE

s8s32-02s3 (LT) LOT 49, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02ss (LT) LOT 51, PLAN 5lMl113;TOWNSHIPOF ORO-MEDONTE

s8s32-02s6 (LT) LOT 52, PLAN 5lMl l13; TOWNSHIPOF ORO-MEDONTE

s8s32-0257 (LT) LOT 53, PLAN 51Ml113; TOWNSHIPOF ORO-MEDONTE

s8s32-02s8 (LT) LOT 54, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02s9 (LT) LOT 55, PLAN 5lMl113; TOWNSHIIOF ORO-MEDONTE

s8s32-0260 (LT) LOT 56, PLAN 5lMl113; TOWNSHIPOF ORO.MEDONTE

s8532-0261 (LT) LOT 5'7, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-0262 (LT) LOT 58, PLAN 5lMl113; TOWNSHIIOF ORO-MEDONTE

s8s32-027s (LT) PCL2-I SEC 51-ORO-9; LT 3 CON 9

ORO BEING THE E 112 &.W 112;LT 2

CON 9 ORO BEING THE E 112 &.W 112;

PT 1, 51R21804, EXCEPT PT 1,

s1R28741& EXCEPT PLAN 51M1070 8.

89

12


51M1113; SAVING AND RESERVINGFROM THE E II2 LT2 CON 9, ALLMINES AND MINERALS, WHETHERSOLID, LIQUID OR GASEOUS, WHICHMAY BE FOUND TO EXIST WITHIN,UPON OR UNDER SUCH LANDS T/WFULL POWER TO V/ORK THE SAMEAND FOR THIS PURPOSE TO ENTERUPON, USE AND OCCUPY THE SAIDLANDS OR SO MUCH THEREOF ANDTO SUCH EXTENT AS MAY BENECESSARY FOR THE EFFECTUALWORKING AND EXTRACTING OFTHE SAID MINERALS, ASDESCRIBED IN OROll}lS; ORO-MEDONTE TOWNSHIP OF ORO-MEDONTE; SUBJECT TO ANEASEMENT IN GROSS OVER PT EII2LOT 2 CON 9 ORO BEING PT 1 ON PLs1R40262 AS IN 5C1266952

90

13

Schedule '(C)) - Loan Encumbrances

Resístrøtíon No. Døte Tvpe of Instruntentsc1039835 2013 02 0l Charge/Mortgagesc122810s 20t5 07 20 Transfer Of Charge

sc1039845 2013102107 Transfer Of Charge

sct043202 20t3103101 Transfer Of Charge


sc10s3414 2013/04129 Transfer Of Charge

sc10s5391 201310s108 Noticesc1055397 201310s108 Transfer Of Charge

sc10s8805 2013losl28 Transfer Of Charge

sc1064131 2013106/20 Noticesc1065073 2013106125 Transfer Of Charge

sc10698s0 2013107115 Transfer Of Charge


sc1087288 20t3109124 Transfer Of Charee

sc1092496 20t3lr0lr6 Noticesc1101397 2013/1y26 Transfer Of Charee

sctrÙ7522 2013112120 Transfer Of Charee

scl113714 2014102103 Transfer Of Charee

sc112s391 2014104116 Transfer Of Charge

sc1128168 20t410sl0t Transfer Of Charge

sc1 159897 2014109115 Postponement Of Interest

sc122810s 2015107120 Transfer Of Charge

sc1237512 201s107130 Postponement Of Interest

sc1295590 20161041t3 Postponement Of Interest

scl331143 20r61081t2 Application To Change Name-Instrument

sc1339671 20r6/09106 Postponement Of Interest

scl421440 2017106119 Postponement Of Interest

91

l4

Schedule '(D" - Release Agreement

IDate]

TO: FAAN Mortgage Administrators Inc. (the "Trustee")

AND TO: Olympia Trust Company ("OTC")

Re: Release granted in connection with repayment and settlement of the Obligationspursuant to Braestone Settlement Agreement

Dear Sirs/Mesdames

Reference is made to the Loan Agreement dated as of December l, 2012 (the "LoanAgreement") between Braestone Development Corporation ("Braestone") and Building &Development Mortgages Canada Inc. ("BDMC") and the related Security and Loan Documents.

All capitalized terms used in this agreement (the "Release Agreement") shall, unless otherwise

defined herein, have the same meanings given to them in the Loan Agreement or the Settlement

Agreement dated as of [date] among Braestone, the Trustee and OTC (the "SettlementAgreement").

1. Braestone hereby certifies that all of the representations and warranties contained in the

Settlement Agreement are true and accurate as of the date hereof and that it is incompliance with all covenants, terms and provisions of the Settlement Agreement.

2. Braestone has paid the Trustee $10,000,000 pursuant to the Settlement Agreement and

waives any right of set-off or any other defence.

In consideration of the acceptance of $10,000,000 in fuIl and final satisfaction ofObligations payable to BDMC by Braestone under the Loan Agreement in excess of516,020,120 and for other good and valuable consideration, the receipt and sufficiency ofwhich is hereby acknowledged, Braestone (on behalf of itself, its affiliates, and theirrespective shareholders, agents, directors, officers, employees, and each of theirrespective successors and assigns) (collectively, the "Releasors")) hereby releases,

discharges and acquits the Trustee, BDMC, OTC, and each lender or investor who loaned

funds through BDMC or OTC to Braestone pursuant to the Loan Agreement and allrelated Loan Documents, each of their respective officers, directors, agents, employees,

and each of their respective successors and assigns (collectively, the "Releasees") fromany and all claims, demands, rights, liabilities, and causes of action, whether in law or inequity, whether known or unknown, that any Releasot, at any time had or has, or that

they or their respective successors or assigns hereafter have or may have against the

Releasees directly or indirectly arising out of or in any way related to the LoanAgreernent, the Loan Documents, the proceedings initiated by the Order of the Ontario

Superior Court of Justice (Comrnercial List) dated April 20, 2078, or any transactions

hereunder or thereunder.

aJ

92

15

This Release Agreement shall be effective immediately upon the delivery of the Trustee'sCertificate and may be relied upon by any of the Releasees, whether or not such Releasee is aparty to this Release Agteement or the Settlernent Agreement.

This Release Agreement may be executed in any number of counterparts and by the differentparties hereto in separate counterparts, and may be executed and delivered by facsimile or .pdffile transmitted by email, and all such counterparts, .pdf files and facsimiles when so executed

and delivered shall be deemed to be an original and all of which when taken together shallconstitute but one and the same Release Agreement.

This Release Agreement shall be construed in accordance with and governed by the laws of theProvince of Ontario.

Yours truly,

BRAESTONE DEVELOPMENTCORPORATION

By:

Name:

Title:

Accepted and agreed to by:

FAAN MORTGAGEADMINISTRATORS INC., solely in itscapacity as Court-appointed Trustee ofBuilding & Development Mortgages CanadaInc. and in no other capacity

By:

Name:

Title:

93

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Appendix 5:

Harlowe Offer and Harlowe Settlement Agreement

95

Lana Bezner Managing Director

103

Appendix 6:

Harlowe Consent Request dated November 16, 2018

104

FAAN MORTGAGE ADMINISTRATORS INC. | 920-20 Adelaide Street East Toronto, Ontario, M5C 2T6

November!16,!2018!

Dear!Lender:!

Re: Syndicated Mortgage Loan (“Loan”) made to The Harlowe Inc. (the “Borrower”)

pursuant to the loan agreement dated June 10, 2013 (“Loan Agreement”) regarding the

property located at 604-618 Richmond Street W, Toronto, ON (“Harlowe Project” or

“Property”)

Request for approval regarding the Syndicated Mortgage Loan to Harlowe Development

Corporation.

As!you!are!aware,!on!April!20,!2018,!FAAN!Mortgage!Administrators!Inc.!(�FAAN Mortgage�!or!the!�Trustee�)!was!appointed!as!trustee!over!the!assets,!property!and!undertakings!of!Building!&!Development! Mortgages! Canada! Inc.! (�BDMC�)! under! a! court! order! (�Appointment Order�)!issued!pursuant!to!section!37!of!the!Mortgage Brokerages, Lenders and Administrators Act, 2006

and! section! 101!of! the!Courts of Justice Act.! By!order! of! the!Ontario! Superior! Court! of! Justice!(Commercial!List)!(�Court�)!dated!June!26,!2018,!Chaitons!LLP!was!appointed!as!representative!counsel! to!persons!who!made! loans!through!BDMC!(�Representative Counsel�).!Notices!have!previously! been! sent! to! you! regarding! the! appointment! of! FAAN!Mortgage! as! Trustee! and! of!Chaitons!LLP!as!Representative!Counsel.!

We!are!writing!to!you!in!our!capacity!as!Trustee!regarding!the!syndicated!mortgage!loan!made!by!you!as!a!syndicated!mortgage!lender!(�SML�)!to!the!Borrower!in!respect!of!the!Harlowe!Project!pursuant! to! the! Loan! Agreement! between! BDMC! and! the! Borrower! (�BDMC Loan�),! and! the!various!associated!documents.!!

The!Borrower!has!presented!the!Trustee!with!an!offer!for!the!repayment!of!the!BDMC!Loan.!For!the!reasons!set!out!below,!the!Trustee!recommends!accepting!the!offer!in!full!satisfaction!of!all!amounts!due!or! that!may!become!owing! to!you!under! the!Loan!Agreement,!and!would! like! to!request!your!feedback!in!advance!of!accepting!the!offer.!

The! offer! provides! for! payment! by! the! Borrower! of! $15,562,896.38! (�Offer�),! which! is!approximately!98%!of!the!outstanding!principal!balance!of!the!BDMC!Loan.!!The!full!amount!that!would! be! due! at! this! time! under! the!BDMC!Loan! assuming! that! the! project! had! already! been!completed!is!estimated!to!be!$20.8!million!(including!accrued!interest!and!certain!deferred!lender!fees!assuming!profit!targets!were!met);!however,!when!previously!paid!interest!of!approximately!$2.7!million!(“Paid Interest�)!is!factored!into!the!analysis,!the!Offer!plus!the!Paid!Interest!would!result!in!the!full!repayment!of!the!principal!owing!to!the!SMLs,!plus!approximately!15%!above!the!outstanding!principal.!The!Offer! is! conditional!upon!Court!approval! and!a!release!of!all! future!obligations!of!the!Borrower!with!respect!to!the!Loan!Agreement!and!the!BDMC!Loan.!!

The!Offer!also!includes!the!extinguishment!of!all!further!rights!and!obligations!of!BDMC!and!the!

105


SMLs!under!the!Loan!Agreement,!related!documents!and!the!associated!mortgage!on!the!Property.!If!approved,!payment!is!expected!to!be!made!by!the!Borrower!to!the!Trustee!shortly!following!Court!approval.!

A!copy!of!the!Offer!is!attached!hereto!as!Schedule!�A�.!

Overview of Current Status of Harlowe Project

The!Borrower!began!construction!on! the!Property! in! the!summer!of!2016.! !The!Borrower!has!advised!that!over!80%!of!available!units!for!the!Harlowe!Project!have!been!sold,!with!occupancy!expected! to! be! completed! for! these! units! by! the! end! of! 2018! and! registration! of! the! building!estimated!to!occur!in!the!summer!of!2019.!Upon!registration!of!the!building!the!sale!of!the!units!subject! to! existing! sale! agreements!will! be! completed,! at! which! time! the!majority! of! the! sale!proceeds!will!be!used!to!repay!the!priority!loans.!!!

The!Borrower!advised!that!it!intends!to!obtain!an!inventory!loan,!secured!against!the!remaining!units,!to!fund!costs!associated!with!holding!and!selling!the!remaining!units!as!the!last!step!in!the!completion!of! the!Harlowe!Project.!The!Borrower!has!also!advised!that! it!has! faced!significant!changes! in! the!marketplace! since! the!project!commenced!and! is! therefore! currently!unable! to!enter!into!an!acceptable!inventory!loan!because!lenders!are!unwilling!to!provide!a!loan!while!any!portion!of!the!BDMC!Loan!charge!remains!on!title.!

The!Borrower!has!advised!that,!without!an!inventory!loan,!it!will!take!substantially!longer!to!repay!the! BDMC! Loan,! as! the! BDMC! Loan! would! need! to! be! repaid! over! time! from! the! sale! of! the!remaining!units.! The!Borrower! estimates! that! repayment! could!be!delayed!until! the! spring! of!2021,!or!longer.!

Accordingly,! the! Borrower! is! seeking! to! repay! the! debt! owing! to! the! SMLs! under! the! Loan!Agreement!at!a!discount.!!The!Borrower!has!advised!that!it!is!unable!to!repay!the!full!amount!of!the!BDMC!Loan;!however,! if! interest!previously!paid!to!BDMC!of!approximately!$2.7!million! is!taken!into!account!the!Offer!would!result!in!full!repayment!of!the!principal!amount!advanced!by!BDMC!and!a!net!return!of!approximately!15%!on!that!principal!amount.!!

The!return!is!calculated!as!follows:!

! !Principal!outstanding!(A)! 15,863,400!! !Loan!repayment! 15,562,896!Interest!paid! 2,723,478!

Total!payments!(B)! 18,286,374!! !Net!recovery!(B-A)! $2,422,974!

!%!recovery!(B/A)!

!115%!

! !

106


Assessment of the Offer and Recommendation!

The! Borrower! has! advised! that! the! final! sale! of! outstanding! units! of! the!Harlowe! Project! are!unlikely!to!be!completed!until!spring!of!2021.!Failure!of!the!Borrower!to!acquire!an!inventory!loan!to!facilitate!the!repayment!of!the!BDMC!Loan,!would!delay!the!repayment!of!the!BDMC!Loan!until!the!unit!sales!are!completed.!Accordingly,!and!based!on!the!estimates!provided!by!the!Borrower,!it!is!possible!that!the!BDMC!Loan!would!not!be!repaid!until!2021,!or!later.!

Further,! the!Borrower! ceased!making! interest!payments!due!under! the!Loan!Agreement!as! of!September!2,!2016!and!has!indicated!that!it!does!not!intend!to!resume!paying!interest!but!will!instead!accrue!interest!until!the!final!units!are!sold!and!the!BDMC!Loan!is!repaid!in!full.!

Acceptance!of!the!Offer!by!the!Trustee!would!result!in!the!SMLs!foregoing!the!following!amounts,!which!would!otherwise!become!due!on!the!BDMC!Loan!if!the!project!was!completed!and!certain!profit!milestones!were!achieved,!and!the!BDMC!Loan!was!repaid!on!or!about!October!15,!2018:!!

! !Estimated!Deferred!Lender!Fee! 2,220,876!Accrued!interest!(September,!2016!to!October!15,!2018)! 2,695,184!

Total!potential!foregone!recoveries!! $4,916,060!

! !

!

Since!October!15, 2018,!additional!interest!has!continued!to!accrue!and!would!be!payable!on!the!date!that!the!BDMC!Loan!was!repaid.!!

The!following!considerations!were!taken!into!account!by!the!Trustee!in!completing!its!assessment!of!the!Offer:!

· The!Trustee! engaged! an! independent! real! estate! appraiser! to! provide! a! current! �as! is�!appraisal!of!the!remaining!inventory.!!The!appraised!value!provided!substantially!supports!the!value!attributed!by!the!Borrower!to!the!remaining!units,!assuming!a!marketing!period!of!at!least!12!months;!!

· The!Offer!provides!certainty!regarding!the!amount!and!time!frame!for!the!repayment!of!the!BDMC!Loan.!Absent!the!acceptance!of!the!Offer,!the!repayment!of!the!BDMC!Loan!would!be! dependent! upon! the! sale! of! the! remaining! units.! Although! the! appraiser! provided! a!shorter!estimate!of!the!time!required!to!sell!the!units,!continuing!to!wait!for!the!sale!of!the!units!to!be!completed!leaves!the!SMLs!vulnerable!to!market!conditions,!which!could!result!in!a!lower!realization!at!a!later!date;!!

· The!approximately!$59.5!million!of!debt!that!ranks!in!priority!to!the!BDMC!Loan;!

· Approximately!45%!of! the! forgone! recoveries!outlined! in! the!chart!above! is!dependent!upon!the!project!achieving!certain!profit!milestones.!If!those!milestones!are!ultimately!not!

107


achieved,!the!ultimate!recoveries!would!be!lower;!and!!

· The!Offer!results!in!a!net!positive!return!of!approximately!15%!on!the!BDMC!Loan.!

Given!the!above!considerations,!in!addition!to!the!market!changes!encountered!by!the!Borrower,!and!the!Borrower�s!advice!that!it!is!unable!to!obtain!an!acceptable!inventory!loan!in!the!current!circumstances,!the!Trustee!is!of!the!view!that,!although!the!Offer!potentially!provides!discounted!returns!to!the!SMLs,!there!is!value!in!the!certainty!provided!by!accepting!the!Offer!and!crystalizing!the!outcome!of!the!BDMC!Loan.!Further,!as!noted!above!the!Offer!does!result! in!an!overall!net!positive!return!of!approximately!15%!on!the!principal!amount!advanced!by!BDMC.!!

Next Steps

At! this! time,! you! should! review! this! notice! and! the! Offer! carefully! and! arrange! to! obtain!independent!legal!advice!regarding!these!matters.!If!desired,!you!can!consult!with!Chaitons!LLP,!in!its!capacity!as!Representative!Counsel.!Representative!Counsel�s!contact!information!is!below.!

Attached! as! Schedule! �B�! hereto! is! an! instruction! letter! to! the! Trustee! that! gives! you! an!opportunity!to!indicate!whether!you!are!in!favour!of!or!against!the!acceptance!of!the!Offer!in!full!satisfaction!of!your!investment!under!the!BDMC!Loan.!!

If you have any objections to the acceptance of the Offer described herein, you should

return the instruction letter to us by mail, email, or fax, within ten (10) days.!If!you!agree!with!the!Trustee�s!recommendation!to!accept!the!Offer,!please!also!return!the!instruction!letter!to!us!by!mail,!email,!or!fax,!within!ten!(10)!days!to!indicate!your!agreement.!

After!ten!(10)!days,!the!Trustee,!in!consultation!with!Representative!Counsel,!will!decide!whether!to!accept!the!Offer!by!an!exercise!of!the!discretion!granted!to!the!Trustee!under!the!Appointment!Order.!Any!acceptance!by!the!Trustee!of!the!Offer!would!not!be!binding!on!the!Trustee!or!the!SMLs!until!the!Offer!is!approved!by!the!Court.!In!the!event!that!the!Trustee!accepts!the!Offer,!copies!of!the!Court!materials!will!be!served!upon!you!prior!to!the!proposed!Court!date.!

A!prompt!response!is!required!in!the!circumstances.!!

! !

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Should! you! have! any! questions! of! the! Trustee,! our! contact! information! is! below! (if! you! are!contacting!us!by!phone!or!email,!please!reference!Harlowe Project).!!!

Email:!!! ! ! ! [email protected]!Local!Telephone!Number:! ! 416-606-3338!Toll-Free!Telephone!Number:!! 1-833-495-3338!

Should!you!wish!to!contact!Representative!Counsel,!their!contact!information!is!below!(if!you!are!contacting!Representative!Counsel!by!phone!or!email,!please!reference!Harlowe Project).!

Email:!!! ! ! ! [email protected]!Toll-Free!Telephone!Number:!! 1-888-203-0509!

!

Yours!very!truly,!

!

FAAN MORTGAGE ADMINISTRATORS INC.

SOLELY IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OF


AND IN NO OTHER CAPACITY

Faan Mortgage Administrators Inc.

109109


Schedule “B”

Harlowe Project Instruction Form

Re: Harlowe Project Notice & Request for Approval

TO: FAAN Mortgage Administrators Inc. (“Trustee”), in its capacity as Court-appointed trustee of Building & Development Mortgages Canada Inc. (“BDMC”)

RE: Repayment of the BDMC loan made to The Harlowe Inc. (“Borrower”)

I, ______________________ (Lender Name) have received a request for the following:

my authorization to the Trustee:

(i) to accept the $15,562,896.38 offer (“Offer”) made by the Borrower for the repayment of the loan advanced by BDMC to the Borrower under the Loan Agreement dated June 10, 2013 (“Loan Agreement”) in substantially the form attached as Schedule “A” to the Notice to Lenders dated November 16, 2018, which includes a release of BDMC, the Trustee and individual lenders with respect to all rights and obligations under the Loan Agreement and related documents; and

(ii) to negotiate, on my behalf, matters related to the Offer and all agreements reasonably needed in connection with same.

((i) and (ii) hereinafter collectively called the “Proposal”).

Acceptance of the Proposal:

The undersigned hereby provides the following feedback with respect to all of its interest in the Loan Agreement as described above (mark one only):

Yes, I agree with the Trustee’s recommendation to accept the Proposal as described above; or

No, I object to the acceptance of the Proposal as described above.

If you have additional feedback with respect to the Proposal and the proposed acceptance thereof, please provide full details regarding the nature of your feedback, question or concern below:

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Certification:

By returning this instruction form and signing below, I certify that (a) I have full power and authority to give instructions with respect to the Proposal and its effect on my investment under the Loan Agreement; (b) I have read this Notice & Request for Approval and the Trustee’s Notice to Lenders dated November 16, 2018; (c) I have obtained such independent legal advice as I believe is necessary in the circumstances; and (d) I hold the following interest in debt administered by BDMC under the Loan Agreement:

Debt in the amount of $_______________________.

Name_________________________________

Signature_______________________________

Date___________________________________

Please return this form using one of the following methods:

i) if by email: [email protected] Subject line “Harlowe Approval Form”

ii) if by mail to the following address:

Building & Development Mortgages Canada Inc.

c/o FAAN Mortgage Administrators Inc.920-20 Adelaide St. E.Toronto, ON M5C 1H6

Attention: Harlowe Approval Form

iii) if by fax: 905-508-3957, attention Harlowe Approval Form

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ftCourt File No.: CV-18-596204-00CL


COMMERCIAL LIST

THE HONOURABLE MR.

JUSTICE HAINEY

) ) )

THURSDAY, THE 20TH

DAY OF DECEMBER, 2018

BETWEEN:


Applicant

- and -


Respondent

APPLICATION UNDER SECTION 37 OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c. 29 and SECTION 101 OF THE COURTS OF JUSTICE ACT, R.S.O. 1990 c. C.43

HARLOWE SETTLEMENT APPROVAL ORDER

THIS MOTION, made by FAAN Mortgage Administrators Inc. (“FAAN Mortgage”),

in its capacity as Court-appointed trustee (in such capacity, the “Trustee”), of all of the assets,

undertakings and properties of Building & Development Mortgages Canada Inc. (the

“Respondent”) pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators

Act, 2006, S.O. 2006, c. 29, as amended (the “MBLAA”), and section 101 of the Courts of

Justice Act, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia, (i) approving and

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ratifying the Settlement Agreement dated as of November 6, 2018 (the “Harlowe Settlement

Agreement”) among The Harlowe Inc. (“Harlowe”), the Trustee and Olympia Trust Company

(“OTC”); (ii) ordering Harlowe to pay $15,562,896.38 to the Trustee pursuant to the Harlowe

Settlement Agreement; (iii) ordering Harlowe, the Trustee and OTC to comply with the Harlowe

Settlement Agreement; and (iv) authorizing the Trustee to, upon the delivery of the Trustee’s

Certificate (as defined below), make a further distribution of Realized Property to Investors, was

heard this day at 330 University Avenue, Toronto, Ontario;

ON READING the Fourth Report of the Trustee dated December 13, 2018 (the “Fourth

Report”), and on hearing the submissions of counsel for the Trustee, Chaitons LLP, in its

capacity as Representative Counsel, counsel to Harlowe and such other counsel as were present,

no one appearing for any other person on the service list, as appears from the affidavit of service

of Justine Erickson sworn December , 2018, filed;

SERVICE AND INTERPRETATION

1. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion

Record and the Fourth Report is hereby abridged and validated so that this Motion is properly


2. THIS COURT ORDERS that all capitalized terms used but not defined herein shall

have the meanings given to them in the Fourth Report and the Harlowe Settlement Agreement.

APPROVAL OF THE HARLOWE SETTLEMENT AGREEMENT

3. THIS COURT ORDERS that (i) the Harlowe Settlement Agreement be and is hereby

approved in its entirety, with such minor amendments as the Trustee and the other parties to the

Harlowe Settlement Agreement may agree upon to permit the completion of the transaction

contemplated thereby; (ii) Harlowe is hereby directed to pay $15,562,896.38 forthwith to the

Trustee in accordance with the terms of the Harlowe Settlement Agreement (such funds the

“Harlowe Realized Property”); and (iii) the execution of the Harlowe Settlement Agreement by

the Trustee and OTC is hereby ratified and approved, and the Trustee and OTC are hereby

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authorized and directed to comply with all of their obligations under the Harlowe Settlement

Agreement.

4. THIS COURT ORDERS AND DECLARES that upon the delivery of a Trustee’s

certificate to Harlowe substantially in the form attached as Schedule “A” hereto (the “Trustee’s

Certificate”), all of Harlowe’s obligations to Building & Development Mortgages Canada Inc.

(“BDMC”), OTC, and the individual lenders (the “Harlowe Individual Lenders”) under the

Loan Agreement dated as of June 10, 2013 between BDMC and Harlowe (the “Loan

Agreement”), the Security and the Loan Documents (each as defined in the Loan Agreement)

(collectively, the “Harlowe Loan Obligations”) and all security interests granted to BDMC,

OTC or the Harlowe Individual Lenders in and to the assets of Harlowe to secure the Harlowe

Loan Obligations and related registrations on title (the “Loan Encumbrances”) are hereby

released, extinguished, expunged, discharged and deleted and that none of the Trustee, BDMC,

OTC or any Harlowe Individual Lender shall have any claim against Harlowe in respect of the

Harlowe Loan Obligations or the Loan Encumbrances; provided, however, that Harlowe shall

not be released from any obligations under the Harlowe Settlement Agreement.

5. THIS COURT ORDERS AND DECLARES that upon the delivery of the Trustee’s

Certificate, the Harlowe Realized Property is and shall be deemed to be “Realized Property” as

defined in the Order of this Court dated June 26, 2018 (the “Interim Stabilization Order”) and

that all of the Harlowe Individual Lenders’ rights and claims under the Loan Agreement, the

Security and the Loan Documents shall attach to the Harlowe Realized Property and shall have

the same nature and priority as they had prior to the consummation of the Harlowe Settlement

Agreement, including pursuant to the Appointment Order and the Interim Stabilization Order.

6. THIS COURT ORDERS that upon the registration in the Land Registry Office for the

Registry Division of Toronto (#66) of an Application for Vesting Order in the form prescribed

by the applicable Land Registry Office and attaching a copy of this Order and the executed

Trustee’s Certificate, the Land Registrar is hereby directed to delete and expunge from title to the

real property identified in Schedule “B” hereto (the “Real Property”) all of the Loan

Encumbrances listed in Schedule “C” hereto.

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7. THIS COURT ORDERS that upon the delivery of the Trustee’s Certificate, the release

agreement in the form attached as Schedule “D” hereto (“Release Agreement”) to be given to

the Trustee, BDMC, OTC, and each Harlowe Individual Lender who loaned funds through

BDMC or OTC to Harlowe pursuant to the Loan Agreement and all related Loan Documents,

each of their respective officers, directors, agents, employees, and each of their respective

successors and assigns (collectively, the “Releasees”) by Harlowe on behalf of itself, its

affiliates, and their respective shareholders, agents, directors, officers, employees, and each of

their respective successors and assigns (collectively, the “Releasors”) shall be binding and

effective on the Releasors in favour of the Releasees.

8. THIS COURT ORDERS AND DIRECTS the Trustee to file with the Court a copy of

the Trustee’s Certificate, as soon as practicable after delivery thereof.

REALIZED PROPERTY

9. THIS COURT ORDERS that upon the delivery of the Trustee’s Certificate, the Trustee

shall make a further distribution to Investors in an amount equal to 5% of the Realized Property

held on the date of the Appointment Order, including the Realized Property obtained with

respect to the Victoria Medical SML Loans, pro rata to the Investors entitled to such funds, such

that, when combined with the distributions made pursuant to the Interim Stabilization Order, the

Order of this Court dated October 30, 2018 (“Realized Property Order”) and the Order of this

Court dated November 28, 2018, 85% of such funds shall have been distributed on a pro rata

basis to the Investors entitled to such funds.

10. THIS COURT ORDERS that upon the delivery of the Trustee’s Certificate, paragraph

3(b) of the Realized Property Order is hereby further amended to provide that the Trustee shall

distribute 85% of all other Realized Property obtained, including the Harlowe Realized Property,

pro rata to the Investors entitled to such funds, whether received before or after the date of this

Order.

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AID AND RECOGNITION OF FOREIGN COURTS



effect to this Order and to assist the Trustee and its agents in carrying out the terms of this Order.

All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to

make such orders and to provide such assistance to the Trustee, as an officer of this Court, as

may be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in

carrying out the terms of this Order.




that the Trustee is authorized and empowered to act as a representative in respect of the within

proceedings for the purpose of having these proceedings recognized in a jurisdiction outside

Canada.

____________________________________

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Schedule “A” – Form of Trustee’s Certificate



COMMERCIAL LIST


Applicant

- and -


Respondent



TRUSTEE’S CERTIFICATE

RECITALS

A. Pursuant to an Order of the Honourable Justice Hainey of the Ontario Superior Court of

Justice [Commercial List] (the “Court”) dated April 20, 2018, FAAN Mortgage Administrators

Inc. was appointed as the trustee (the “Trustee”) of the undertaking, property and assets of

Building & Development Mortgages Canada Inc. (“BDMC”).

B. Pursuant to an Order of the Court dated [DATE] (the “Harlowe Settlement Approval

Order”), the Court approved and ratified the Settlement Agreement made as of November 6,

2018 (the “Harlowe Settlement Agreement”) among The Harlowe Inc. (“Harlowe”), the

Trustee and Olympia Trust Company (“OTC”) and ordered that all of Harlowe’s obligations to

BDMC, OTC, and the individual lenders (“Harlowe Individual Lenders”) under the Loan

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Agreement, the Security and the Loan Documents (each as defined in the Loan Agreement)

(collectively, the “Harlowe Loan Obligations”) and all security interests granted to BDMC,

OTC or the Harlowe Individual Lenders in and to the assets of Harlowe to secure the Harlowe

Loan Obligations (the “Loan Encumbrances”) are hereby released, extinguished, expunged and

discharged and that none of the Trustee, BDMC, OTC or any Harlowe Individual Lender shall

have any claim against Harlowe in respect of the Harlowe Loan Obligations or the Loan

Encumbrances; provided, however, that Harlowe shall not be released from any obligations

under the Harlowe Settlement Agreement; and that the release of the Harlowe Loan Obligations

and the Loan Encumbrances is to be effective upon the delivery by the Trustee to Harlowe of a

certificate confirming (i) the payment of $15,562,896.38 to the Trustee by Harlowe; (ii) that the

conditions precedent to the Harlowe Settlement Agreement as set out in section 9 of the Harlowe

Settlement Agreement have been satisfied or waived by the Trustee; and (iii) the settlement has

been completed to the satisfaction of the Trustee.

C. Unless otherwise indicated herein, terms with initial capitals have the meanings set out in

the Harlowe Settlement Approval Order.

THE TRUSTEE CERTIFIES the following:

1. Harlowe has paid and the Trustee has received $15,562,896.38 pursuant to the Harlowe Settlement Agreement;

2. Harlowe has provided the Release Agreement to the Releasees;

3. Harlowe has certified that all of the representations and warranties contained in this Harlowe Settlement Agreement continue to be true as of the Effective Date;

4. Harlowe continues to be, in the reasonable opinion of the Trustee, in compliance with all of the terms of the Harlowe Settlement Agreement;

5. The other conditions set out in the Harlowe Settlement Agreement have been satisfied or waived by the Trustee; and

6. The settlement has been completed to the satisfaction of the Trustee.

This Certificate was delivered by the Trustee at ________ [TIME] on _______ [DATE].

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FAAN Mortgage Administrators Inc., solely in its capacity as Court-appointed Trustee of the undertaking, property and assets of Building & Development Mortgages Canada Inc., and in no other capacity

Per: Name: Title:

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Schedule “B” – Real Property

PIN 21239-0519 (LT)

PART OF LOTS 21 TO 26 PLAN D111, PARTS 1, 3, 4, 5, 6, 7 AND 8 PLAN 66R29958; SUBJECT TO AN EASEMENT AS IN AT3640549; SUBJECT TO AN EASEMENT IN FAVOUR OF LOT 8 PLAN D111 AS IN AT4127651; SUBJECT TO AN EASEMENT OVER PART 3 PLAN 66R29958 IN FAVOUR OF PART OF LOTS 21 TO 26 PLAN D111, PART 2 PLAN 66R29958 AS IN AT4939549; TOGETHER WITH AN EASEMENT OVER PART OF LOTS 21 TO 26 PLAN D111, PART 2 PLAN 66R29958 AS IN AT4939549

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Schedule “C” – Loan Encumbrances

Registration No. Date Type of Instrument AT3428381 October 10, 2013 Charge AT3428575 October 10, 2013 Transfer of Charge AT3436925 October 24, 2013 Transfer of Charge AT3439420 October 28, 2013 Transfer of Charge AT3485881 December 20, 2013 Transfer of Charge AT3497057 January 13, 2014 Transfer of Charge AT3530200 February 28, 2014 Notice of Amending Agreement AT3530201 February 28, 2014 Transfer of Charge AT3537271 March 13, 2014 Transfer of Charge AT3561924 April 22, 2014 Transfer of Charge AT3624957 July 4, 2014 Notice of Amending Agreement AT3671510 August 26, 2014 Transfer of Charge AT3706643 October 3, 2014 Transfer of Charge AT3728529 October 31, 2014 Transfer of Charge AT3738320 November 12, 2014 Transfer of Charge AT3749625 November 26, 2014 Transfer of Charge AT3763762 December 11, 2014 Transfer of Charge AT3783153 January 9, 2015 Transfer of Charge AT3811062 February 13, 2015 Notice of Amending Agreement AT3812523 February 18, 2015 Transfer of Charge AT3945778 July 14, 2015 Notice of Amending Agreement AT3945995 July 14, 2015 Transfer of Charge AT3974731 August 12, 2105 Transfer of Charge AT4014833 September 21, 2015 Notice of Amending Agreement AT4020009 September 28, 2015 Transfer of Charge AT4095416 December 15, 2015 Transfer of Charge AT4127132 January 26, 2016 Postponement AT4138805 February 5, 2016 Postponement AT4166503 March 14, 2016 Transfer of Charge AT4197452 April 20, 2016 Transfer of Charge AT4224419 May 24, 2016 Transfer of Charge AT4233310 June 1, 2016 Transfer of Charge AT4271518 July 7, 2016 Transfer of Charge AT4282089 July 18, 2016 Transfer of Charge AT4483560 February 9, 2017 Transfer of Charge AT4486694 February 14, 2017 Transfer of Charge

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Schedule “D” – Release Agreement

[Date]

TO: FAAN Mortgage Administrators Inc. (the “Trustee”)

AND TO: Olympia Trust Company (“OTC”)

Re: Release granted in connection with repayment and settlement of the Obligations pursuant to Harlowe Settlement Agreement

Dear Sirs/Mesdames

Reference is made to the Loan Agreement dated as of June 10, 2013 (the “Loan Agreement”) between The Harlowe Inc. (“Harlowe”) and Building & Development Mortgages Canada Inc. (“BDMC”) and the related Security and Loan Documents. All capitalized terms used in this agreement (the “Release Agreement”) shall, unless otherwise defined herein, have the same meanings given to them in the Loan Agreement or the Settlement Agreement dated as of November 6, 2018 among Harlowe, the Trustee and OTC (the “Settlement Agreement”).

1. Harlowe hereby certifies that all of the representations and warranties contained in the Settlement Agreement are true and accurate as of the date hereof and that it is in compliance with all covenants, terms and provisions of the Settlement Agreement.

2. Harlowe has paid the Trustee $15,562,896.38 pursuant to the Settlement Agreement and waives any right of set-off or any other defence.

3. In consideration of the acceptance of $15,562,896.38 in full and final satisfaction of Obligations payable to BDMC by Harlowe under the Loan Agreement in excess of $20,779,460 and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Harlowe (on behalf of itself, its affiliates, and their respective shareholders, agents, directors, officers, employees, and each of their respective successors and assigns) (collectively, the “Releasors”)) hereby releases, discharges and acquits the Trustee, BDMC, OTC, and each lender or investor who loaned funds through BDMC or OTC to Harlowe pursuant to the Loan Agreement and all related Loan Documents, each of their respective officers, directors, agents, employees, and each of their respective successors and assigns (collectively, the “Releasees”) from any and all claims, demands, rights, liabilities, and causes of action, whether in law or in equity, whether known or unknown, that any Releasor, at any time had or has, or that they or their respective successors or assigns hereafter have or may have against the Releasees directly or indirectly arising out of or in any way related to the Loan Agreement, the Loan Documents, the proceedings initiated by the Order of the Ontario Superior Court of Justice (Commercial List) dated April 20, 2018, or any transactions hereunder or thereunder.

This Release Agreement shall be effective immediately upon the delivery of the Trustee’s Certificate and may be relied upon by any of the Releasees, whether or not such Releasee is a party to this Release Agreement or the Settlement Agreement.

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This Release Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, and may be executed and delivered by facsimile or .pdf file transmitted by email, and all such counterparts, .pdf files and facsimiles when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same Release Agreement.

This Release Agreement shall be construed in accordance with and governed by the laws of the Province of Ontario.

Yours truly,

THE HARLOWE INC.

By:

Name:

Title:

Accepted and agreed to by:

FAAN MORTGAGE ADMINISTRATORS INC., solely in its capacity as Court-appointed Trustee of Building & Development Mortgages Canada Inc. and in no other capacity

By:

Name:

Title:

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OLYMPIA TRUST COMPANY

By:

Name:

Title:

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THE SUPERINTENDENT OF FINANCIAL SERVICES - and - BUILDING & DEVELOPMENT MORTGAGES CANADA INC.

Applicant Respondent Court File No. CV-18-596204-00CL


(COMMERCIAL LIST)

Proceedings commenced at Toronto

MOTION RECORD OF FAAN Mortgage Administrators Inc., in its capacity

as Court-appointed Trustee

OSLER, HOSKIN & HARCOURT LLP P.O. Box 50, 1 First Canadian Place Toronto, ON M5X 1B8

Michael De Lellis (LSUC# 48038U) Jeremy Dacks (LSUC# 41851R) Patrick Riesterer (LSUC# 60258G) Tel: (416) 362-2111 Fax: (416) 862-6666 Lawyers for FAAN Mortgage Administrators Inc., in its capacity as Court-appointed Trustee of Building & Development Mortgages Canada Inc.