It sounds like he was judged inadmissible under section 41 of the Immigration and Refugee Protection Act which is inadmissibility for non-compliance with the Act (in this case, for not having a passport). Officers are expected to take into account the person's actions, character, intent, and other equally important factors that led to the person's contravention of the law before deciding on an enforcement action. If he had his legitimate passport confiscated by a foreign authority through no fault of his own, this would certainly be a mitigating factor. An inadmissibility report followed by an exclusion order was not the only option they had. A temporary resident permit could have been issued. It would surprise me if there was not more to this story; it doesn't make much sense to me.