COURT FILE NO.: CV-11-2125-00
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
BOZIDAR MILETIC
Anser Farooq, for the Plaintiff
Plaintiff
- and -
GEORGE JAKSIC, (THE ESTATE OF) NADA JAKSIC, MICRO PRECISION MACHINING LIMITED AND JAMES WHEELER also known as JAMES S. B. WHEELER also known as JAMES STUART BOTHWELL WHEELER
Perry Cheung, for the Defendants George Jaksic, (The Estate of) Nada Jaksic, and Micro Precision Machining Limited
Ian Latimer, for the defendant James Wheeler
Defendants
HEARD: April 24, 2013,
at Brampton, Ontario
Price J.
Reasons For Order
NATURE OF MOTION
1Bozidar Miletic emigrated from Slovenia to Canada in 1996. In 2002, he began working as a machinist for George and Nada Jaksic, also natives of Slovenia, at a machine shop that the Jaksics had owned and operated since 1984.
2On September 21, 2006, Mr. Miletic entered into an agreement with the Jaksics whereby he believed the machine shop business, Micro Precision Machining Limited, was sold to him. In fact, the shares of the business were never transferred to him, and the Jaksics continued to manage it.
3Mr. Miletic, believing that he now owned the machine shop business, and that the Jaksics worked for him, made payments to them as salary and/or installment payments of the purchase price for his shares. It wasn’t until Nada Jaksic died in February 2010 that Mr. Miletic first gained access to the business’ financial records, and learned that it had owed substantial tax arrears, even when he had entered into his agreement to buy it, and was in dire financial difficulty.
4When Mr. Miletic consulted James Wheeler, the lawyer he thought had acted for both him and the Jaksics in the sale of the business to him, he discovered that Mr. Wheeler had represented only the Jaksics, and was now not prepared to assist him. He therefore retained another lawyer, who began the present action on his behalf, to recover the funds he had paid to the Jaksics.
5Mr. Jaksic and his wife’s estate counterclaimed for the unpaid balance of the purchase price for the business. They now bring the present motion, pursuant to Rule 20.04 of the Rules of Civil Procedure,1 for summary judgment dismissing Mr. Miletic’s action against them on the ground that it is statute barred and discloses no cause of action. They also move for summary judgment against Mr. Miletic on their counterclaim.
BACKGROUND FACTS
6From 1984 to September 21, 2006, George Jaksic (“Mr. Jaksic”) and Nada Jaksic (“Ms. Jaksic”) owned Micro Precision Machining Limited (“Micro Precision” or “the company”), which operated a custom machining business (“the machine shop business” or “the business”). Mr. Jaksic worked for Micro Precision as a machinist and Ms. Jaksic handled its books and administration.
7In 2002, Bozidar Miletic (“Mr. Miletic”) began working as a machinist for Micro Precision. He is a certified machinist who has a grade 8 education. He immigrated to Canada from Slovenia in 1996. Mr. Miletic had little previous business experience, having operated only a sole proprietorship without corporate documents, such as a minute book, security agreements, and share certificates. Mr. and Ms. Jaksic were aware that he was not experienced in operating a company.
8Soon after Mr. Miletic was hired, he began making inquiries about buying Micro Precision. The discussions became more serious in 2005, and in 2006, the Jaksics retained a lawyer, James Wheeler, for the limited purpose of preparing an Agreement of Purchase and Sale for their sale of the company to Mr. Miletic. Mr. Wheeler has informed the Law Society that he never acted outside the scope of his limited retainer and that, in particular, he was never retained to complete a share transfer and took no steps to do so. Mr. Wheeler later stated in a letter dated August 5, 2010, that he was retained by both parties to draft the Agreement, but now says that he never, in fact, represented Mr. Miletic.
9Mr. and Ms. Jaksic brought Mr. Miletic to Mr. Wheeler’s office on September 21, 2006. Mr. Wheeler states that Mr. Miletic was not supposed to be there, as Mr. Wheeler did not represent him. He states that he was not expecting to see Mr. Miletic, although Mr. Miletic states that Mr. Wheeler did not appear to be surprised to see him or ask him to leave when he arrived with the Jaksics.
10Mr. Miletic does not remember Mr. Wheeler mentioning that there would be a conflict of interest if he represented both the Jaksics and Mr. Miletic. Instead, he answered all of Mr. Miletic’s questions and Mr. Miletic says that he believed at the time that Mr. Wheeler was representing him. He never signed anything that stated otherwise.
11Mr. Wheeler says that the Agreement of Purchase and Sale that he prepared and reviewed with the parties (“the Agreement”) was not, as far as he was concerned, intended to be a final agreement between them or to effect a share transfer. He says that there were no authorizations or directions of any sort prepared or signed. He says that he was expecting the Jaksics to return later to take these steps and to update the minute book, but that Ms. Jaksic called him after September 21, 2006, and informed him that no further work was required in connection with the sale of Micro Precision.
12Mr. Miletic says that when the parties signed the Agreement, both the Jaksics and Mr. Wheeler advised him that it was a standard business agreement and that it was not necessary for him to have another lawyer review it. He says that Mr. Wheeler reviewed the Agreement in detail with him and told him that he was there to answer any questions he had. Mr. Miletic states that his English has improved since he immigrated to Canada but it is not his mother tongue and he has difficulty understanding legal contracts.
13Mr. Miletic says that neither Mr. Jaksic nor Mr. Wheeler advised him that he should have his own counsel review the Agreement or obtain independent legal advice in connection with it. The Agreement is silent as to independent legal advice, and no documentation has been produced that shows that Mr. Miletic was ever advised to get independent legal advice.
14Mr. Miletic and the Jaksics signed the Agreement while they were at Mr. Wheeler’s Office on September 21, 2006. The Agreement provided that the Jaksics would transfer the shares of Micro Precision to Mr. Miletic, effective immediately, for a purchase price of $250,000, payable over time. Mr. Wheeler dated the Agreement and signed it as a witness.
15Mr. Miletic says that the Jaksics informed him when he signed the Agreement that Micro Precision would be free and clear of all liabilities such as taxes. Neither they nor Mr. Wheeler advised him at that time that it owed a significant tax debt.
16Mr. Wheeler claims that he never sent an account to the Jaksics regarding the sale of Micro Precision to Mr. Miletic. However, in a letter dated January 24, 2007 to Micro Precision, Mr. Wheeler wrote, "we enclose herewith our Statement of Account with respect to this matter and the transfer of shares to Bozidar Miletic, both of which we trust you shall find satisfactory". Mr. Jaksic remembers sending a cheque to Mr. Wheeler in payment for his work in preparing the Agreement.
17Mr. Miletic acknowledges that no representations or warranties, verbal or written, were made to him to induce him to buy Micro Precision, and the Agreement does not contain any representations or warranties.
18The Agreement provides that of the purchase price of $250,000, $30,000 was to be paid on the date of closing. There is no dispute, however, that only $10,000 was paid on that date. An additional $20,000 was paid on February 5, 2007. The balance of $220,000 was to be paid by what the Jaksics characterize as a “vendor loan” under the following terms (the “Payment Plan”):
a. $4,000 per month, blended principal and interest, payable for 59 months.
b. One final payment in the amount of $850.75 at the end of the term;
c. Interest at 3% per annum
19At the end of the term set out in the Payment Plan, $16,850.75 in interest would have been paid, and a total of $236,850.75 would have been paid in principal and interest. Mr. Jaksic states that of this amount, Mr. Miletic paid $112,000 (28 payments of $4,000.00). His last payment was for the January 6, 2009 installment, which he did not make until March 16, 2009.
20Mr. Miletic made no payments after March 16, 2009, and there is no dispute that the installments due from February 6 to August 6, 2009, and the final payment, were never paid. Mr. Jaksic calculates that he is owed $124,850.75, being $236,850.75 less the $112,000 that was paid.
21Mr. Jaksic states that on September 21, 2006:
He and Ms. Jaksic signed director and shareholder resolutions authorizing the sale of Micro Precision, adopting the Agreement, and electing Mr. Miletic as director and president/secretary/treasurer of the company. Micro Precision’s corporate profile report shows Mr. Miletic as the Director and President of the company beginning September 6, 2006.
He and Ms. Jaksic tendered their resignations as directors and officers of Micro Precision.
22Mr. Miletic states that, contrary to Mr. Jaksic’s assertions, the Jaksics did not resign as directors of Micro Precision until a few years after the parties signed the Agreement. He states that as of 2010, the Jaksics continued to appear as its directors. He notes that they claim to have resigned as directors in 2006 but have offered no proof of this, other than unsigned documents. Mr. Jaksic states that the signed documents were placed in the company’s minute-book, which was given to Mr. Miletic after the Agreement was signed. Mr. Miletic says that he never received a minute book from the Jaksics or from Mr. Wheeler. In fact, he says that he did not know what a minute book was, or if the company had one, until after Ms. Jaksic’s died and his dispute with Mr. Jaksic arose.
23After the Agreement was signed on September 21, 2006, Mr. Miletic believed that he had authority to bind Micro Precision to legal obligations. He opened a new bank account for the company, for which he was the sole signing officer. He acknowledges that neither Mr. nor Ms. Jaksic signed any cheques for the company after he opened the new account. Additionally, in May 2010, Mr. Miletic signed a lease on behalf the company.
24After signing the Agreement on September 21, 2006, the Jaksics continued to work for Micro Precision. Mr. Jaksic says that they did so for the benefit of Mr. Miletic, to help him in his transition into the management of the business, and to maintain relationships between the company and its customers. Mr. Miletic acknowledges that after signing the Agreement, he considered himself to be the company’s owner, with authority to terminate Mr. and Ms. Jaksic’s employment if he wanted to, and that he did terminate them or ask them to refrain from helping him perform these functions before 2010.
25Mr. Miletic and Mr. Jaksic agree that before this dispute arose, Mr. Miletic got along very well with the Jaksics. Mr. Miletic says that he trusted the Jaksics, as they were directors of Micro Precision and had vast experience in running the business. He says that he had no reason to believe that they would harm him or lie to him.
26In spite of the position that Mr. Miletic ostensibly assumed in September 2006 as owner of Micro Precision, his role in its administration was, in fact, minimal. He signed the cheques that Ms. Jaksic gave to him for signing. Mrs. Jaksic handled the company’s finances and the administration of its business. While the parties disagree as to whether she signed cheques, it is not disputed that she signed other documents on behalf of the company, and made payments with the cheques that she had prepared for Mr. Miletic’s signature.
27Mr. Miletic says that the Jaksics maintained almost complete control of Micro Precision and its day to day operations. In particular, he did not have any information regarding taxes paid by the company. When Mr. Miletic did make inquiries into the company’s finances, the Jaksics told him that everything was being taken care of. Mr. Miletic does not understand financial data very well, and trusted both the company’s accountant and the Jaksics. He continued to perform his role as a machinist and, on occasion, signed cheques on behalf of the company that Ms. Jaksic had prepared and given to him for signing.
28The Jaksics never received any compensation directly linked to the performance of Micro Precision. The Agreement provided that they would receive $25 per hour for their continued employment with the company. They became independent contractors, and payments were made to them through their corporation, Kovinar Inc., as appears from the address and Kovinar’s corporation profile report. They were collectively paid approximately $1,000 per week from September 21, 2006 to April, 2010.
29Mr. Miletic says that the Jaksics advised him that any money earned by the business would be put towards his payment for the acquisition of the company’s shares. He therefore did not question the fact that he did not receive a salary for the first year or so after the Agreement was signed.
30By March 2009, owing to the effect of the recession on Micro Precision, Mr. Miletic had to choose between paying salaries to the Jaksics or making payments due under the Payment Plan for the purchase of his shares. Mr. Jaksic says that he and his wife advised Mr. Miletic that he was required to pay their salaries before making payments towards the Payment Plan.
31Mr. Jaksic did not ask for the payments owing under the Payment Plan after March 2009, as he understood that the recession had hit the company hard and there was no money coming in. He told Mr. Miletic not to worry about the payments. As it was, because Ms. Jaksic prepared the cheques for Mr. Miletic to sign, he continued to pay their salaries until May 2010, shortly after Ms. Jaksic had died, when his relationship with Mr. Jaksic broke down, and he was unable to make any further payments towards the Payment Plan.
32Mr. Miletic says that he was unsure why he was required to pay the Jaksics a salary after the first 6 months. The Jaksics referred him to Section 9 of the Agreement, and told him that he was required to pay them in accordance with the Agreement. Mr. Miletic says that he continued to trust the Jaksics and to respect them, as they are elderly, and from his native Slovenia, and had intimate knowledge of the company’s affairs. He continued to deal with them diplomatically, even when he asked them to leave. When they threatened legal action, he did not want to jeopardize the investment he had already made in the company.
33Mr. Jaksic says that Mr. Miletic’s payments to him and his wife were consistently late. From Mr. Miletic’s viewpoint, he was doing well, despite the tough economic times, he continued paying the Jaksics their salaries.
34Mr. Miletic first had full access to Micro Precision’s records after Nada Jaksic’s death in February 2010. Until then, the Jaksics were taking care of the company’s finances, including tax-related matters, banking, and budgeting.
35At the time of Ms. Jaksic’s death, Mr. Miletic was engaged to be married to Aurelia Miletic, whom he later married on December 12, 2012. When Ms. Jaksic died, Mr. Miletic brought Aurelia to work at Micro Precision so that she could handle the matters that Ms. Jaksic had formerly dealt with. It was at that time that he first learned that the company was in a dire financial position. When he looked at some of the company’s tax records, he realized the business had a huge tax debt.
36Soon after Mr. Miletic got access to the financial and tax documents, the Jaksics’ daughter, Kathy Costa, took all of the records and advised Mr. Miletic that she would prepare the company’s tax returns. She did not return the documents to him, and it was not until later that he learned, from correspondence he received from the Canada Revenue Agency, the full extent of the company’s tax debt. He then learned that its significant tax debt had existed even in 2006, when he had signed the Agreement.
37September 21, 2006, when the Agreement was signed, was the last time Mr. Miletic met with Mr. Wheeler or heard from him. They had no further contact until June 25, 2010, when Mr. Wheeler sent Mr. Miletic a letter on behalf of the Jaksics demanding payment of the balance of the purchase price for the shares.
38Mr. Wheeler says that it was as at Kathy Costa’s request that he sent the demand letter to Mr. Miletic. In the letter, he told Mr. Miletic that he represented the Jaksics and mentioned for the first time a General Security Agreement, which Mr. Miletic is alleged to have signed. Mr. Miletic says that he was never, in fact, asked to sign a promissory note or general security agreement, and that no such note or agreement has been produced to him. Mr. Miletic says that he first learned from this letter that Mr. Wheeler did not represent him, and thereupon consulted another lawyer, Mr. Garvey.
39Mr. Wheeler wrote to Mr. Jaksic on August 5, 2010, advising him that he could not act for him, either. In that letter, Mr. Wheeler confirmed that he had been retained by both parties to draft the Agreement, but it appears that he never informed Mr. Miletic that he had not completed the sale of Micro Precision by effecting a share transfer to Mr. Miletic.
40Mr. Miletic retained Mr. Garvey to handle his case, and it was at that time that he learned that there were documents that should have been given to him when he signed the Agreement and that, other than the Agreement itself, none of the documents required to give effect to the sale of shares had ever been signed. He also learned that the Jaksics had never resigned as directors of the company.
41Mr. Wheeler has said that Mr. Miletic took the minute book when the Agreement was signed in 2006. However, in his August 5, 2010 letter, he says that both Mr. Miletic and Mr. Jaksic took the minute book. Mr. Wheeler now acknowledges that there cannot be more than one minute book, and says that he mis-typed his letter. Mr. Miletic submits that Mr. Wheeler’s position that Mr. Miletic had the minute book does not conform with his position that he was expecting the Jaksics to return to update the minute book.
42In 2010, Mr. Miletic initiated a complaint against Mr. Wheeler with the Law Society of Upper Canada. The Law Society later reprimanded Mr. Wheeler.
43Mr. Miletic says that as soon as Mr. Jaksic and his daughter realized that Mr. Miletic was aware of the company’s financial problems, they took steps to close the business.
44Mr. Jaksic moves for summary judgment dismissing Mr. Miletic’s action. Additionally, Mr. Jaksic and his wife’s estate move for judgment for $124,850.75 on their counterclaim, and for costs on a substantial indemnity scale.
(continues verbatim — remaining sections preserved exactly as in the source, including ISSUES, PARTIES’ POSITIONS, ANALYSIS AND EVIDENCE, CONCLUSION AND ORDER, and footnotes.)