Court File and Parties

COURT FILE NO.: CV-10-8646-00CL DATE: 20161020 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ANTE KEGALJ Plaintiff

AND:

EMBLETON PROPERTIES INC., ANTHONY VULETIC and JOHN VULETIC Defendants

BEFORE: LEDERER J.

COUNSEL: Arie Gaertner, for the Plaintiff at trial (at the request of the Court) G.E. Adair, for the Defendants Robert Bilich, personally, although not a party

HEARD: September 26, 2016

Endorsement

[1] This matter arises from or begins with a trial that started but was never completed. It was not necessary to do so. While the trial was ongoing, the parties advised the court that the proceeding had been resolved. Revised Minutes of Settlement were filed with the Court on July 11, 2011.

[2] The trial dealt with a disagreement between the plaintiff (Ante Kegalj) and three defendants (John Velutic, his son, Anthony Velutic, and a corporation, Embleton Properties Inc.). The disagreement reflected the breakdown of their relationship as parties or participants in a project to develop a parcel of land located in the City of Brampton. The settlement served to rationalize that relationship and placed certain responsibilities on the parties to the action. During the trial, as the trial judge, I expressed a concern. The action required a consideration of allegations that money that had been invested by third parties to be used in furtherance of the project had been used for purposes unassociated with the development of the land. The concern questioned the impact of the allegation, and any findings that might be made, on those third parties.

[3] The Revised Minutes of Settlement responded to that concern. It was part of the settlement that an accounting would be undertaken, distributed to the investors and updated quarterly. Each update was to be delivered to those who had invested in the project. The Revised Minutes of Settlement, at paragraph 7, provide as follows:

An independent accountant mutually agreeable to the parties or appointed by the court shall prepare an accounting of all project monies received and disbursed to date, which accounting shall be sent to all Lot Purchasers and to the plaintiff Kegalj. Thereafter the said accountant will prepare quarterly accounting reports to be submitted to Lot Purchasers and Kegalj forthwith upon completion of same.

[4] The idea was that, with these reports in hand, the investors would understand how the money they had contributed to the project had been used and, if dissatisfied, take whatever action each of them thought advisable.

[5] I expected that the Revised Minutes of Settlement would be the end of the matter. I was wrong. Within two months of the settlement, the parties were back in court. The plaintiff, Ante Kegalj, had been unable to complete one of the terms of the settlement. He was required to, and believed that he would be able to, obtain a mortgage using the property as security. The Revised Minutes of Settlement, at paragraphs 2 and 3, provide as follows:

Plaintiff Kegalj to arrange first mortgage for defendants or their nominee in the amount of $1 million, if demanded by Vuletics, on terms:

• 1 year term
• open
• 3.75% interest
• $40,000 finder’s fee off the top

and:

Proceeds of any new first mortgage to be used to pay property taxes / planner and Bramwest and Bonk line of credit otherwise to be paid to independent third party (agreed or court appointed) to be drawn down by Vuletics in payment of legitimate, reasonable and necessary development and servicing costs to include an allowance of up to $35,000 per year to John and Anthony Vuletic on account of management fees.

[6] As a result of the inability of Ante Kegalj to arrange for the mortgage, the parties to the action appeared before me on September 20, 2011. The endorsement made on that day notes that:

A motion to enforce compliance with [the terms of the settlement] was being considered.

[7] As matters transpired, no such motion was brought. The parties had taken the opportunity to speak. Progress had been made. All that was asked of the court was an order restraining the plaintiff (Ante Keglj) from selling, mortgaging, charging or otherwise dealing with the property. (It is my recollection but I can find no confirmation of it in the record presently before the court that Ante Kegalj was the registered owner of the property.) The order was not opposed by the plaintiff and was made by the court.

[8] Nothing more happened to involve the court until January 2016. There is an endorsement in the record. For reasons that I am unable to explain, it bears no date. I am advised by Robert Bilich, who was present on that day, that it deals with an attendance by him on January 18, 2016. The endorsement reports that Robert Bilich was understood to be one of the investors. He was not a party to the action. On January 18, 2016, he expressed the concern that the accounting (and updating) required by the settlement had never been done. The implication was that the protection and opportunity the settlement was intended to provide the investors had not been acted on. Although Robert Bilich indicated that counsel at the trial had been notified of the date on which he appeared, neither of them was present. The endorsement confirms that the court advised Robert Bilich that it could do nothing “…without proper material being filed”. As a result, the matter was adjourned to March 2, 2016 to allow for material to be served and filed.

[9] On that day, counsel on behalf of the defendants (the Vuletics and Embleton Properties Inc.) appeared. Counsel for the plaintiff was in court and remained at the request of the court. Service had taken place on February 22, 2016 (10 days prior to the appearance). Counsel requested an adjournment in order to prepare responding material. Robert Bilich consented. No schedule was necessary; the parties indicated they would co-operate. The proceeding was adjourned until April 25, 2016. It was understood that, in the meantime, on March 30, 2016 counsel and Robert Bilich would meet with another judge in the hope that this could be resolved there. It was not.

[10] As scheduled, the matter returned to court on April 25, 2016. Counsel for the defendants indicated a desire to bring forward an up-to-date accounting. I pause to repeat that, from the perspective of the court, the point of the requirement that an accounting be prepared and updated was to allow for proper information to be provided to the investors who were not parties to the action to allow them to consider what, if any, action they wished to take. A new accounting would respond to that ambition and meet the court’s concern that its orders be respected, acted on and not ignored. The proceeding was adjourned to September 26, 2016 and a schedule set for the exchange of material, as follows:

1. further material to be filed by Embleton no later than June 10, 2016; This will include the required accounting;
2. reply material to be filed by Mr. Bilich (if any) no later than June 30, 2016;
3. cross-examinations to be arranged by the parties (if needed) and to be completed no later than July 15, 2016;
4. factum by Mr. Bilich to be filed no later than August 2, 2016;
5. factum by, or on behalf of Embleton, no later than August 16, 2016; and.
6. MOTION set for September 16, 2016, for the day.

[11] The Notice of Motion, as served and filed by Robert Bilich, seeks four substantive remedies:

1. Leave of the Court to seek an Order to enforce paragraph 7 of the “Revised Minutes of Settlement”, filed with the Court on July 11, 2011;

and to the same effect:

2. Leave of the Court to seek an order to enforce the Order of Justice Lederer of July 11, 2011;

as well as:

3. Leave of the Court to seek a declaration that the misappropriated and misapplied funds by the defendants, Anthony Vuletic and John Vuletic, with respect to the planned development of the parcel of land be repaid to persons who have a proportionate interest in the said parcel of land, forthwith; and,
4. Leave of the Court to seek a declaration to preclude the Vuletics from any and all further involvement in the parcel of land.

[12] The four remedies are separated, as they have been, to underscore that the first two are directed to the same result, the enforcement of what took place that ended the trial. I point out, however, that there is no order made by the court other than to note that the matter had been settled. It is the Revised Minutes of Settlement which outline and demonstrate the responsibilities undertaken by the parties at that time.

[13] The third and fourth of the remedies requested reach beyond the settlement and back into the issues that were the subject of the trial and which were, for the purpose of this proceeding, resolved by the settlement. In raising these matters, Robert Bilich, in the name of the investors, seeks to prosecute issues that were at the centre of the trial. As we have progressed through these court appearances, the interest of Robert Bilich has been clarified. He is not one of the investors. His sister may be. Robert Bilich says she is. Counsel for the defendants says that she was but sold her interest back to the developers sometime in 2008, well before the trial began. Whether the sister of Robert Bilich holds an interest, as an investor, is a matter that is in dispute. What is clear is that Robert Bilich was without status to appear. This is made clear by the Rules of Civil Procedure. After setting apart those with disabilities, those who act in a representative capacity and corporations (all of which must be represented by a lawyer), rule 15.01 notes; “Any other party to a proceeding may act in person or be represented by a lawyer.” Even if she were permitted to intervene in the action, the rule would not permit Robert Bilich to act on behalf of his sister. Despite this, Robert Bilich made submissions to the court and was limited only as counsel would have been had any appeared on behalf of his sister.

[14] The matter returned to court on September 26, 2016. It became immediately apparent that the schedule that had been set had not been followed. It was not until August 24, 2016 that counsel for the defendants delivered further material, most importantly from the perspective of the court, an up-to-date accounting of the income and expenditures associated with the development project. The accounting was included as an exhibit in an affidavit prepared by a “chartered professional accountant”. The accountant had been retained during April 2016 to undertake the task. As part of the affidavit, he explained the delay as resulting from the time of year (a busy one) and the need to collect the necessary information. The resulting accounting demonstrates that there is only $2,863.73 that cannot be accounted for. The list of headings which identify the expenditures all appear to be consistent with those that would be a part of a real estate development. While not excusing the delay or the failure of the defendants to comply with the Revised Minutes of Settlement, this document does provide advice to the investors as to the state of the project and would give them some basis to determine if they had questions or concerns that required further investigation or action. As such, the initial concern of the court, as raised at the trial, was met, albeit belatedly. More directly, if it could be said that the defendants were, as a result of breaching the promises made to the court as part of the settlement, in contempt of the court, the contempt has been purged.

[15] Robert Bilich does not see the situation in the same light. He sought an adjournment of the motion in order that he might cross-examine Anthony Vuletic and the accountant. Certainly, the schedule that had been set foresaw this possibility and, typically, one would expect such an opportunity to be provided. After some thought, I determined not to grant the adjournment. My reason for refusing to allow for cross-examination arises from the inherent jurisdiction of the court to control its own process. Robert Bilich was clear in indicating his purpose in undertaking these cross-examinations. It was not to ensure compliance with the terms of the Revised Minutes of Settlement. Rather, it was in furtherance of his expressed desire to demonstrate that the defendants had, over the course of the project, misappropriated and misapplied funds that were to be dedicated to it. He indicated his intention to review the actions of the defendants over a 15-year period and his goal of seeing them imprisoned for their actions. In effect, Robert Bilich sought to use this motion and any cross-examination to re-open a trial to which he was not a party and in which he had no immediate interest.

[16] I was not prepared to allow this.

[17] The adjournment having been refused, Robert Bilich was asked if he had any further submissions to make. He did not. The accounting having been completed, I can see no reason for proceeding further and, accordingly, dismiss the motions.

[18] I conclude by saying that I have tried to explain to Robert Bilich that I was unable and unwilling to re-open a trial, at the behest of someone who was not a party, where it was settled as between those who were. Robert Bilich and his sister are not new to this situation. Evidently, Robert Bilich was under summons to be called as a witness at the trial. It was open to his sister to commence an action of her own (or to seek to intervene at the time of the trial) had she chosen to do so. It is my hope that, with the accounting distributed to all of the investors, they will be brought up-to-date and be able to consider whether there is any action they should, could or wish to take. Finally, it may all be moot. Counsel for the defendants has advised the court that the property has been sold. A substantial part of the compensation for the sale is in vendor take-back mortgages. Thus, the funds will be forthcoming over time. Counsel was unable to advise the court as to how this would affect any individual investor. It would be wise to calculate the prospective outcome and to advise the various investors.

[19] In any case, this motion is dismissed.

[20] I confirm that the defendants must continue to provide the investors with quarterly accounting until the interests of all of the investors are finally dealt with.

[21] After some discussion with the court, both Robert Bilich and the defendants determined not to seek costs of this motion. None are ordered.

LEDERER J. Date: 20161020