Tier 1 Mortgages: ten years on, the lawsuit money is split by loss

The investments carried the names of the buildings they were meant to finance: Textbook Student Suites at 445, 525 and 555 Princess Street in Kingston, on Bronson Avenue in Ottawa and at Ross Park in London; the Memory Care projects in Burlington, Oakville and Kitchener; the Boathaus in Whitby, Legacy Lane in Huntsville, McMurray in Bracebridge, Keele Medical in North York, Silver Seven in Kanata, Hazelton in Mississauga, Guildwood in Scarborough, and Vaughan Crossings. Through them the investing public lent approximately $131 million to 16 developers, each loan secured by a mortgage that one of 11 special-purpose trustee corporations was to hold in trust for the investors and enforce on their behalf, per the Seventeenth Report of the Trustee, June 10, 2026, paras. 2, 4, 11 and Apps. 4, 7. In the large majority of cases those mortgages did not rank first, the trustee reports, so most of the almost $100 million later realized from real property and other assets went to the lenders ahead of them, per the Seventeenth Report, para. 58.

On July 2, 2026, Justice W.D. Black of the Ontario Superior Court of Justice (Commercial List) approved Grant Thornton Limited's plan for the money that the trustee's and receiver's lawsuit had produced: $17,635,050, net of professional fees, to be shared among the investments that took part in the litigation in proportion to their estimated losses, per the Interim Distribution Order, July 2, 2026, para. 3 and the Seventeenth Report, App. 20. Once it is paid, the trustee says, investors will have received approximately $43,600,000 since its appointment in 2016. It puts the investors' combined losses on the projects, before any litigation money and after the cash still in its trust accounts goes out, at $103.6 million, per the Seventeenth Report, paras. 63, 70.

A regulator's application, then a lawsuit

The proceeding began with the Superintendent of Financial Services. Its supporting affidavit, as the trustee's report summarizes it, described Raj Singh as at once the president, chief executive and a shareholder of Tier 1 Transaction Advisory Services Inc., a mortgage agent of First Commonwealth Mortgage Corporation, a director, officer, shareholder or profit participant in at least 11 of the developers, and the sole director, officer and shareholder of all but two of the trustee corporations. The affidavit described a conflict of interest not properly disclosed to investors: he was required to administer and enforce the mortgages "as against borrowers in which he had a financial interest in the majority of cases," in the report's words. It also raised a concern that the appraisals given to investors reflected the projected values of finished projects rather than the actual value of the land, per the Seventeenth Report, paras. 4–7.

Justice Newbould appointed Grant Thornton as trustee of the 11 corporations on October 27, 2016, under s. 37 of the Mortgage Brokerages, Lenders and Administrators Act, 2006, per the Appointment Order, Oct. 27, 2016, para. 2. John Davies, principal of 11 of the developers, opposed it, as did Gregory Harris of Harris + Harris LLP, a lawyer involved in the transactions. "In my view, the appointment of Grant Thornton as Trustee is the appropriate relief to protect the interests of the investors," the judge wrote, per the Unofficial Transcript of the Endorsement of Justice Newbould, Oct. 27, 2016 and the Seventeenth Report, para. 8. The Davies developers asked the Divisional Court to stay parts of the order, lost, were ordered to pay the trustee $5,000 in costs, and abandoned their appeal; as of the trustee's June 2026 report, the costs remained unpaid. Nine of them then applied for protection under the CCAA, and Justice Penny dismissed the application on December 15, 2016, per the Seventeenth Report, paras. 17–18.

With prior mortgagees moving to enforce, the trustee had KSV Kofman Inc. appointed receiver of the Boathaus developer's property on February 2, 2017, and of the property of six more Davies developers that April. KingSett Mortgage Corporation put KSV over 445 Princess; the trustee put MNP Ltd. over Ross Park; lenders sold Bronson and McMurray privately; and KSV became receiver of certain residual assets on May 30, 2018, per the Seventeenth Report, paras. 19–20. KSV later became KSV Restructuring Inc. and is now AlixPartners Restructuring, Inc., per the Factum of the Trustee, June 26, 2026, para. 16. The receiver's review of bank records, the trustee reports, identified "extensive transfers of money" among the Davies developers, entities and trusts controlled by Mr. Davies, and entities controlled by Mr. Singh. The receiver obtained a Mareva injunction; a settlement approved on May 2, 2019 paid it approximately US$600,000, or 72.5% of the sale proceeds of the Davies Arizona Trust's former assets, lifted the injunction, and did not release the Mareva defendants from the lawsuit, per the Seventeenth Report, paras. 23–26.

The trustee and the receiver commenced that lawsuit together on October 3, 2018. It named Mr. Davies and related trusts and companies; a business partner of his; Mr. Singh and related companies, including Tier 1 Transaction; current and former directors and officers of the trustee corporations, the Davies developers and Tier 1 Transaction; Harris + Harris and Mr. Harris, alleged to have acted for all the trustee corporations and 14 of the 16 developers; a second lawyer and her professional corporation, alleged to have acted for the trustee corporations on loans to 13 developers and to have delegated substantially all of those duties to Harris + Harris; and an appraiser alleged to have acted for 14 of the developers and to have prepared "faulty and/or misleading appraisals." It sought $106 million, the investors' anticipated losses, per the Seventeenth Report, paras. 10–11. Apart from one default judgment, the claim was resolved by settlements, all but the Mareva settlement releasing the defendants who paid; the trustee and receiver believe they have concluded the litigation "through a series of settlements and related recoveries," per the Factum of the Trustee, para. 24 and the Seventeenth Report, paras. 56–57.

Settlements the size of insurance policies

As the trustee had reported when it sought approval of each settlement, "the quantum of each settlement was largely a function of each Defendant's available insurance proceeds," and was not directly tied to the losses on each project or to what each defendant was alleged to have done, per the Seventeenth Report, para. 68. The appraiser's $1,500,000 was "virtually the full value" of the coverage left on a $2 million policy that defence costs had partly eroded; the trustee has collected $1 million of it. The business partner's side paid $3,500,000, "a sizeable recovery" on a $5 million policy, also partly eroded. Bruce Stewart and The Traditions Development Company Ltd. settled for $7,000,000, a "material recovery" on four AIG Insurance Company of Canada policies with total potential coverage of $12 million. The Harris defendants agreed to pay $2,552,215, the maximum under their LAWPRO policy plus $100,000 more in 12 monthly instalments, the last expected on August 13, 2026, per the Seventeenth Report, paras. 39–50.

Justice Conway approved the Stewart and Harris settlements on September 9, 2025, after what she described as significant productions, discoveries and a full-day judicial mediation before her. "The insurance proceeds funding the settlements represent the only material source of recovery against these defendants," she wrote; both were Pierringer agreements, leaving the non-settling defendants liable only for their proportionate share of the losses, per the Endorsement of Justice Conway, Sept. 9, 2025, paras. 3–5.