COURT FILE NO.: 05-CV-294945
DATE HEARD: November 30, 2012
ENDORSEMENT RELEASED: December 6, 2012
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MIODRAG STOJANOVIC v. NIKOLA BULUT (also known as Nicholas Bulut), STEVEN BULUT, MARKO N. BULUT, 1091369 ONTARIO INC. and 1112618 ONTARIO INC.
BEFORE: Master Dash
COUNSEL: William J. Genereux, for the Plaintiff
Peter R. Jervis, for the Defendants Steven Bulut, Marko N. Bulut, 1091369 Ontario Inc. and 1112618 Ontario Inc.
REASONS FOR DECISION
[1] The defendants (except Nikola Bulut) move to dismiss the action for abuse of process and breach of court order to attend discovery in Toronto and produce documents or in the alternative to compel a further and better affidavit of documents, post security for examination for discovery in Belgrade, strike a Notice registered on title to property owned by the defendant 1091369 Ontario Inc. (“109”) and restrain further registrations. The plaintiff brings a cross-motion to extend the time for his discovery in Toronto.
Failure to Attend Examination for Discovery
[2] On August 20, 2012 I ordered pursuant to the parties’ consent that the plaintiff attend for his examination for discovery in Toronto by October 31, 2012 and if he fails to attend he will be examined in Belgrade and post funds for the travel expenses of the defendants in the sum of $18,185 by November 30, 2012. The parties then agreed to fix October 22 to 25 for the examination. On October 18 the plaintiff cancelled the discoveries when his visa to enter Canada was refused. I accept this was because a letter from Mr. Genereux explaining the purpose for the trip did not reach the visa office in Vienna in time. The rejection form listed as reasons a failure to satisfy the official both as to the purpose of the trip and the plaintiff’s personal financial situation. At the time of the hearing of the motion the plaintiff had reapplied and was awaiting a response. Although the plaintiff did not apply in August when the order was made and waited until dates for the examinations were fixed, and although it may have been more prudent to apply earlier given that the visa would be in effect for six months, it was not unreasonable for him to rely on the government web site indicating that visa applications would ordinarily be processed in 20 days. I found that the breach was not so egregious as to convince me to dismiss the plaintiff’s action, an extreme measure, and that he should be granted an extension. By coincidence, the plaintiff received his visa on the day of the motion, but this was discovered by counsel and conveyed to the court only after the motion was heard.
[3] Notwithstanding the extension, the plaintiff should not be permitted to resile from the consent order made to post security for the examination in Belgrade if he failed to attend in Toronto, nor should he be permitted to contest the amount to which he consented. Compelling the payment will be an added incentive to attend in Toronto on the dates agreed by counsel at the hearing, which dates are reflected in the operative terms of this endorsement.
Breach of Productions Order
[4] An additional term to the consent order made on August 20, 2012 was to compel the plaintiff to provide a further and better affidavit of documents in accordance with an identified list and to produce copies of those documents “in his possession, control or power” by September 30, 2012. He was to reference documents he is aware of that used to exist but no longer exist. The plaintiff was to provide documents proving the events surrounding the fraud and his honouring of the guarantee. He was to include documents relating to the plaintiff’s historical involvement with Umka, agreements between Umka and Nick Bulut, any non-disclosure agreements among the participants, guarantees among Umka, Nick and the plaintiff, the terms under which the guarantee was given and evidence of repayment on the guarantee. The plaintiff agreed to provide all documents filed in the Serbian and Montenegrin civil and criminal proceedings. He agreed to provide financial productions to support his claim of impecuniosity (although it is difficult to understand how that could be relevant to issues remaining in the action).
[5] I start with the proposition that an agreement to produce documents not in the plaintiff’s personal possession but in the possession of others which he has the power or authority to obtain is satisfied if best efforts are made, even if it results in imperfect production.
[6] The plaintiff produced many documents in response to my order but the defendants claim there are deficiencies.
[7] For example, the plaintiff only produced one witness statement from the Serbian proceedings. While that may be true the plaintiff provided substantial productions from those proceedings. He swears he retained a lawyer in Serbia to attend the courts and check for documents. In fact the lawyer attended twice. The plaintiff swears there are no additional documents. I am satisfied as to his best efforts. If the defendants believe something from the Serbian courts have been omitted, they can retain their own lawyer in Serbia to double check.
[8] The defendants claim that the plaintiff failed to provide the documents from the enforcement proceedings in Ontario. The plaintiff says he produced them. The parties have not provided to me the further and better affidavit of documents so that I may satisfy myself. The onus of proving breach is on the moving defendants. In any event these are public documents in the Ontario Superior Court and are easily obtainable by defendants’ counsel.
[9] The defendants claim the plaintiff has failed to produce all documents obtained by Mr. Genereux from William Carter in the 2010 London action including the minute books of 109 and 111. The plaintiff claims he has produced all relevant documents and many were returned to Mr. Carter. Mr. Genereux is assuming the role of custodian of the minute books pending the determination of which of the Buluts are entitled to them, and this was said to have been suggested to him by the judge in the London proceedings. Nonetheless Mr. Genereux is content to either list the documents still in his possession or allow Mr. Jervis to inspect them at his office. Mr. Jervis chose the latter course.
[10] The defendants complain that the plaintiff has not produced original source business documents of the plaintiff and his companies, including proof of actual payment for the pulp supplied to Umka to satisfy the guarantee (other than a handwritten ledger), including payment both by Nougat from outside suppliers and by Celpap to Nougat. This should include proof of payment including cheques or wire transfers or other bank records and purchase orders. The actual supplier of the pulp and the dates and quantities of purchase and price were not revealed in any of the records produced. The plaintiff claims he has provided a number of productions relating to his obligation to reimburse Umka. He swears that he has produced everything he has with respect to the pulp and he has “no additional business records dating back that far.” While it may be understandable that a retired businessman might not keep business records dating back 18 years, particularly after he was already granted judgment against Nick in Serbia and then recognized for enforcement in Ontario, the answer is incomplete.
[11] There must be an explanation given as to what business records or other documents once existed, what happened to them and what searches were made to find them. This would include searches for documents in the plaintiff’s personal possession, the banks, exhibits filed in the Serbian court and other possible searches in places known only to the plaintiff. I appreciate that the plaintiff has sworn under oath that he has nothing more and that if it turns out to be untrue not only will his credibility be questioned, but he may be exposing himself to a second attendance in Ontario for a follow up examination. Nonetheless the records are important to the defendants’ defence and certain additional searches and explanation must be provided as reflected in the operative terms of this endorsement. If the plaintiff intends to allege that satisfaction of the guarantee is based not on the price that the plaintiff paid for the pulp, but rather on the value of the pulp to Umka (i.e. what Umka would have paid for the pulp), then there should be records of what Umka paid the plaintiff for delivery of similar pulp shipments.
[12] In terms of the plaintiff’s proof of impecuniosity, the statements from the bank as to the total on deposit at three bank accounts, one for each of the plaintiff, his wife and son on the date of the letters are obviously insufficient. Further, although he swears as to his total in the Austrian account there are no records provided to substantiate that. There are no records of any balances in corporate accounts or indication that such accounts no longer exist. All banks must be listed and records provided for a full year as reflected in the order made herein, and not just at an isolated point in time.
[13] Despite the fact that his best efforts may be insufficient in several areas, the plaintiff has made substantial production. It would not be just to dismiss his action for breach of his production obligations as set out in my August order. Some further attempts however must be made and explanations provided prior to his examination for discovery. If the plaintiff still insists no further documents are available despite best efforts, it would be no more than speculation on the part of the defendants that additional documents are still in existence and not produced. The plaintiff has in fact sworn in his affidavit of documents that all relevant documents are listed in one of Schedules A, B or C. Any perceived deficiencies in production will not constitute grounds to delay the examination for discovery. The defendants can cross-examine the plaintiff on his affidavit of documents and ascertain what other documents may exist and what happened to documents that no longer exist as part of the examination for discovery pursuant to rule 31.06(1)(c). Further production motions may be made after examinations for discovery if evidence becomes available of deficient production.
Abuse of Process
[14] In my view there has not been an abuse of process by the plaintiff or his lawyer, or alternatively such abuse of process as might constitute sufficient grounds to dismiss the action. There is nothing improper in one party (the plaintiff) seeking to form a strategic alliance with another party (Nick Bulut) to their common benefit, provided of course that if an agreement is reached that changes the adversarial orientation of this action, it must be immediately disclosed to the other parties and provided that counsel has done nothing illegal or unethical in furtherance of that alliance. It was not improper for Mr. Genereux to encourage Nick to advance a claim to ownership of 109. I do not believe that Mr. Genereux was suborning perjury in suggesting to Nick that he assert a claim to ownership of 109 despite earlier testimony from Nick that Steven owns 109. Indeed there is considerable evidence supporting ownership by Nick of 109, some of which I outlined in my reasons of February 25, 2011, and some of which was given subsequently in the London and Barrie actions. From the plaintiff’s perspective he wanted Nick to now tell the truth. There is of course also evidence supporting ownership of 109 by Steven, including several affidavits from Nick. I am advised that in the Barrie proceedings Nick swore that his earlier evidence in support of Steven’s ownership was perjured and that his evidence in Barrie in support of Nick’s ownership of 109 was the truth. Issues of ownership of 109 will be determined in the Barrie action, this action or both.
[15] It would not be improper for Mr. Genereux to provide assistance in strategy and drafting of court documents in support of the plaintiff’s and Nick’s common goal of ensuring that ownership of 109 is awarded to Nick (although there is no evidence he actually prepared any documents for Nick). Nick and the plaintiff have a common interest in establishing Nick’s ownership of 109. It would certainly have been improper if Mr. Genereux had encouraged or even suggested to Nick that he try to sell the Barrie property before the courts determined who owned 109. I have reviewed Mr. Genereux’s letters and when the suggestion was made by Nick, Mr. Genereux consistently pointed out that it could be considered fraudulent if Nick attempted to sell the property. I also accept that the attempted sale to Briarwood Homes was Nick’s idea with no involvement by Mr. Genereux and that Mr. Genereux was unaware of it until he was contacted by the purchaser’s lawyer.
[16] Also, it was not improper for Mr. Genereux to have suggested to Nick that Mr. Jervis had a conflict of interest for which he might be removed as counsel for the defendants. There is certainly some evidence, for example the Lerners retainer letter of July 12, 2000 in the Global Resorts litigation, that Mr. Jervis at one time acted for both Nick and Steven, although such evidence is far from conclusive. I do not however condone Mr. Genereux’s stated purpose for suggesting the removal of Mr. Jervis – that new counsel, not so personally involved in the history of the many court proceedings, would be more amenable to and realistic about settling the plaintiff’s claim. The defendants have a right to their counsel of choice. In any event that issue is scheduled to be determined in the Barrie action. It is not however cause to dismiss the plaintiff’s action.
[17] I do not accept that these proceedings have been brought without reasonable grounds and for improper purposes. Clearly the plaintiff’s hand is stronger following the amendments to assert beneficial ownership by Nick and to assert a tracing remedy, but even the original claim based in fraudulent conveyance or preference is not defeated based on the fact that there was no direct transfer of the land or the shares in 109 since there was a gift of the seed monies to acquire the lands in the manner set out in my February 25, 2011 reasons. “Gift” is included in the definition of conveyance in section 1 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 and is included as a transaction to prejudice creditors in section 4 of the Assignments and Preferences Act, R.S.O. 1990, c. A.33.
[18] I do not accept that the plaintiff has caused undue delay in prosecuting this action. All parties were content to leave this action in abeyance for a number of years while the Grossi and Walker-Fairen actions proceeded to a final determination given their respective certificates of pending litigation on the land. The Walker-Fairen action trial did not conclude until the fall of 2008. If either of those actions had been successful it would have made the current action moot. I also note that although the defendants had difficulty securing the cross-examination of the plaintiff on interlocutory motions given the plaintiff’s residence in Serbia, they did not start to seek his examination for discovery until May 2012. The dispute then was not whether the plaintiff would submit to examination for discovery, but where it would take place. This led to the motion heard and consent order made in August 2012. Also, prior to July 2012, when the plaintiff received a pacemaker, he was medically advised not to fly. That motion also involved the defendants seeking commission evidence of Nick, but failing to serve him, at least initially, with the notice of motion.
[19] The plaintiff long ago set the action down for trial by filing a trial record in November 2008, but the defendants refused to fix a mediation date, which would have allowed the plaintiff to set pre-trial and trial dates, until they dealt with their motion for security for costs and then an appeal from that decision. That process began in March 2010 and ended with the dismissal of the appeal in July 2011, causing a substantial delay in this action and resulting in the action being struck from the trial list. In my view the cause of that delay lies at the feet of the defendants. The few months delay resulting from the failure of the plaintiff to come to Canada in October is a relatively minor delay in the history of this action. The defendants have played a substantial role in the delay in moving this action to trial.
[20] As noted, the plaintiff’s failure to comply with the court ordered discovery has been explained. While his productions were deficient, there was substantial compliance and an order is being made to produce, or in some cases make efforts to obtain, further documents. These failures to not amount to an abuse of process.
[21] The action should not be dismissed or stayed for abuse of process.
Removing Notice from Title
[22] The defendants ask that I remove from title the caution and subsequent notice registered against the lands after the certificate of pending litigation was discharged and that I enjoin the plaintiff from registering further instruments or restrictions on title. As a master I clearly have no jurisdiction to grant an injunction: rules 37.02(2)(a) and 40.01 and section 101 of the Courts of Justice Act. In my view a master does not have jurisdiction to order a document removed from title to property. Our jurisdiction is restricted to that granted by the rules of civil procedure or by statute. Rule 42.02(1) gives masters the jurisdiction to discharge a certificate of pending litigation, but here is no comparable provision in the rules or any statute giving masters the authority to order the discharge or striking from title of any other instruments registered on title to land.
[23] I accept that I have jurisdiction under rules 1.05 and 37.13(1) to order that the plaintiff attend to removing the instrument registered on title as a term of an order made on a motion to dismiss for abuse of process or as a condition for permitting the plaintiff’s action to proceed. It is however not appropriate to make such order at this time.
[24] I have already determined that the plaintiff has not engaged in activities that would constitute an abuse of process and that the plaintiff has not been primarily responsible for the lengthy delay in this action. In my view the plaintiff does assert a reasonable interest in the lands. At a minimum the plaintiff calls into question ownership of the lands. He is an execution creditor who seeks to enforce his judgment against lands owned by a company that he says properly belong to the judgment debtor, Nick Bulut, or which should revert to Nick Bulut as a result of a fraudulent conveyance or preference. He further claims an interest in the lands by seeking to trace funds defrauded from him into the lands.
[25] Further, although the defendants refer to a possibility that there “may” be a requirement to refinance the lands for development and the notice on title is an impediment thereto there is no evidence as to when that may be required and under what conditions. There is no application for credit produced. It is no more than speculation at this stage. It is equally speculation to assert that the cloud on title may lead to these lands not being included in the Barrie Official Plan amendment or that a plan of subdivision may not be approved or that it would have a negative impact on sale to a developer. On the other hand this dispute has not dampened the continuing efforts by Briarwood Homes to enforce their agreement to purchase the lands. In any event the injunction ordered in the Barrie litigation prevents any party from dealing with the land. This is a greater impediment to refinancing and rezoning than the plaintiff’s notice on title. I also note that the plaintiff agreed on an earlier occasion to lift the caution to permit refinancing and there is no evidence he would not co-operate again. There is no evidence that he has been asked. I gave the defendants the opportunity to consider if they would agree to post other security to the value of the plaintiff’s claim or provide an undertaking to pay into court from any refinancing. This was not acceptable to the defendants except to the extent of the $300,000 gift of the seed monies. That amount would not provide alternate security for the plaintiff’s claims.
[26] No order will be made with respect to lifting the notice from title.
Adjournment or Dismissal
[27] At the conclusion of the hearing I advised counsel that while I would not dismiss the action for abuse of process I would consider adjourning that part of the motion until after the completion of the discovery process in this action and final disposition of the Barrie action. I have determined not to make such order at this time for several reasons. Firstly, although the Barrie proceeding may determine who owns 109, it would not be the end of the plaintiff’s claim if it is determined that 109 is owned by Steven. That would only determine who legally owns the company. Even if Steven is declared to be the owner as between Nick and Steven that will not end the plaintiff’s action since it will not dispose of the claim to trace the plaintiff’s money into the lands nor would it dispose of the claim that ownership revert from Steven back to Nick as a result a fraudulent transfer or preference to the prejudice of the plaintiff and other creditors of Nick. Secondly, if the plaintiff fails to attend his examination for discovery or to post the security as ordered, the defendants would have a remedy to seek a dismissal of the action under rule 60.12 for breach of the order made today. The remedy of dismissal for abuse of process is neither necessary nor appropriate and disposition of the motion should be made at this time.
[28] On the other hand if evidence comes out of the examination for discovery of the plaintiff in this action or if findings are made in the Barrie action that would give new life to an abuse of process argument the defendants should be permitted to re-apply for that relief. Similarly if there is a material change in circumstances, the defendants may reapply for an order respecting the removal of the Notice from title. For example if the injunction in the Barrie action is vacated and Steven is declared the owner of 109 and he has a specific and timely need to sell or refinance supported by documentary evidence and if accommodation cannot be made with the plaintiff, then the defendants could reapply for the appropriate relief. Whether the motion is to a master or a judge will depend on the precise nature of the relief sought. Security for the plaintiff’s claim may be a term, if appropriate at the time.
Costs
[29] In my view there has been a division of success such that no party should have costs of this motion. Much time was spent on the defendants’ motion to dismiss the action and remove the caution or Notice, which motions were not successful. The defendant was successful in compelling the plaintiff to pay into court security for the costs of possible travel to Belgrade for examinations for discovery and an indulgence was granted to the plaintiff to extend the time of discoveries in Toronto. There was divided success on the productions motion.
[30] If however any party is seeking costs of this motion I am prepared to receive brief submissions from that party within 10 days and responding submissions within a further seven days. Any party seeking costs shall provide a Costs Outline (Form 57B) and supporting dockets.
Order
[31] I hereby order as follows:
(1) The motion by the defendants Steven Bulut, Marko N. Bulut, 1091369 Ontario Inc. and 1112618 Ontario Inc. to dismiss the action for abuse of process is dismissed without prejudice to re-applying if appropriate but only after completion of the discovery process in this action and the final determination of proceedings in Barrie action number 12-1001.
(2) The motion by the defendants Steven Bulut, Marko N. Bulut, 1091369 Ontario Inc. and 1112618 Ontario Inc. to strike the Caution or Notice registered by the plaintiff against title to 883 Mapleview Drive, Barrie, Ontario and to restrain the registration of further cautions or notices on title is dismissed without prejudice to re-applying in the event of a material change in circumstance supported by further and better evidence. Such motion shall be made to a master or a judge as appropriate to the nature of the relief sought
(3) The plaintiff shall attend for his examination for discovery on January 28, 29, 30 and 31, 2013 in Toronto unless all parties agree to different dates. If he fails to attend his examination for discovery in Toronto as ordered, then the plaintiff shall attend for his examination for discovery in Belgrade, Serbia on February 18, 19, 20 and 21, 2013 unless all parties agree to different dates.
(4) The plaintiff shall by January 14, 2013 post the sum of $18,125 with the Accountant of the Ontario Superior Court of Justice as security for the costs of the plaintiff’s examination for discovery.
(5) If the plaintiff attends his examination for discovery as ordered in Toronto, the monies paid into court pursuant to this order will be paid out of court together with any interest accumulated thereon to the plaintiff after the completion of his examination for discovery and any follow up examination.
(6) If the plaintiff fails to attend his examination for discovery as ordered in Toronto, the monies paid into court pursuant to this order will be paid out of court together with any interest accumulated thereon to the moving defendants after completion of examinations for discovery in Belgrade.
(7) The plaintiff shall use best efforts to obtain banking records throughout calendar year 1994 for all bank accounts in all jurisdictions in his own name, in the name of Celpap Stojanovic and in the name of Nougat Trading by sending letters of request to the respective banks and providing to the lawyers for the moving defendants all letters of request and responses.
(8) The plaintiff shall search any business records of himself, Celpap Stojanovic and Nougat Trading that remain in his possession, power and control for source documents, such as purchase orders and proof of payment for the pulp products provided to Umka to honour the guarantee the plaintiff had given to Umka in 1994. If records cannot be located the plaintiff must advise what records were once available and what became of them.
(9) The plaintiff will request from all banks in all jurisdictions actual statements or other banking records of transactions for himself, his wife and his companies for the year 2012 to date.
(10) The plaintiff shall permit the lawyer for the moving defendants to inspect at the offices of William Genereux the contents of the boxes of documents obtained by William Genereux from William Carter in the London legal proceedings in 2010 that remain in the possession of Mr. Genereux and to make such copies as requested; however no original documents shall be taken from the offices of William Genereux without consent or court order.
(11) The plaintiff shall at least five days prior to his examination for discovery serve a further and better affidavit of documents listing in Schedule A all documents obtained pursuant to this order and better specifying in Schedule C what documents once existed that are no longer in the plaintiff’s possession, power or control. The affidavit may be unsworn at that time with a sworn copy to be provided at the examination for discovery.
Master Dash
Date: December 6, 2012