ONTARIO - SUPERIOR COURT OF JUSTICE

COURT FILE NOS.: CV-17-5302 and CV-17-1481

DATE: 2024 12 06

BETWEEN: Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus, Monica Savona and Mike Klecina in his capacity as Estate Trustee of the Estate of Boris Klecina (also known as Borislav Klecina), Plaintiffs

AND:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp., 1857325 Ontario Ltd., and Brampton G&A Holdings Inc., Defendants

AND BETWEEN:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp. and 1857325 Ontario Ltd., Plaintiffs by Counterclaim

AND:

Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus, Monica Savona, Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic, Roberta Biondic, Mike Klecina in his capacity as Estate Trustee of the Estate of Boris Klecina (also known as Borislav Klecina), Anna Bilich, Emma Faria, Katarina Granic, Anton Granic, Marianne Martinovic, Frank Samardzic and Robert Sokic, Defendants by Counterclaim

AND BETWEEN:

Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic and Roberta Biondic, Defendants by Counterclaim

AND:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp. and 1857325 Ontario Ltd., Defendants by Counterclaim

AND BETWEEN:

Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited, Plaintiffs and Defendants by Counterclaim

AND:

Ante Kegalj, Anthony Vuletic, John Vuletic, Embleton Properties Corp., 1857325 Ontario Ltd. and Brampton G&A Holdings Inc., Defendants

BEFORE: M.T. Doi J.

COUNSEL: George Karayannides and Mark Mandelker, for Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic and Roberta Biondic

James S.G. Macdonald, for Robert Sokich and Jose Faria

Asher G. Honickman, for Anton Granic and Katarina Granic

Doug LaFramboise, for Frank Samardzic

R. Christopher M. Belsito, for Mike Klecina, in his capacity as Estate Trustee for the Estate of Boris Klecina (also known as Borislav Klecina)

Caroline Abela, for Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus and Monica Savona

Andrew J. MacDonald, for Anna Bilich

Douglas M. Cunningham, for Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited

HEARD: June 18, 19, and 20, 2024

Endorsement

Overview of this Distribution Motion

[1] Former investors in a Brampton land development project are raising competing claims for the distribution of funds related to the project, including funds paid into court.[^1] Broadly speaking, the claimants consist of two groups. The first is made up of claimants who settled their claims with the Defendants before trial and now seek judgment with equitable liens over funds traced to the sale of the subject property. The second consists of claimants who, after a hard-fought 41-day trial and three appeals, successfully obtained judgment with constructive and resulting trusts for having been defrauded in the land development scheme.[^2]

[2] The funds paid into court are not sufficient to satisfy all of the completing claims.

[3] On this distribution motion, the court is asked to evaluate the competing claims and decide how funds paid into court should be allocated and distributed. The preserved funds are subject to equitable lien claims by the parties who settled before trial, as well as constructive and resulting trusts granted to the parties who went to trial. Ultimately, the court must examine the conduct of the parties in all the circumstances to assess the equities and decide the priority of the competing interests to achieve an equitable and just result in allocating the funds for distribution.

[4] For the reasons that follow, I find that the parties that proceeded to trial should have priority over the distribution of the preserved funds that were paid into court.

The Parties to this Distribution Motion

[5] The following settled their claims and did not proceed to trial: a) Jurica Biondic, Renato Biondic, Roberta Biondic (the “Biondics”), and Milena Boland (collectively, the “Biondic Group”)[^3]; b) Robert Sokich (“Sokich”) and Jose Faria (“Faria”)[^4]; c) Anton Granic and Katarina Granic (the “Granics”); d) Frank Samardzic (“Samardzic”) and e) Boris Klecina (“Klecina”).[^5] Those who settled their claims are collectively referred to as the “Settling Parties.”

[6] Three (3) groups of plaintiffs proceeded to trial. The first and largest group consists of the following parties: Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus, and Monica Savona (the “Caroti Group”). The second consists of: Peter Pichelli, 958041 Ontario Limited, Todd Leslie, and Frank Toth (the “Pichelli Group”). The other party who proceeded to trial was Anna Bilich (“Bilich”). Collectively, the Caroti Group, the Pichelli Group and Bilich are referred to as the “Trial Parties”. They are judgment creditors in this litigation.

[7] The Defendants vigorously defended the claims against them at trial. However, they did not appear on this distribution motion.

[8] To some extent, all of the claimants on this distribution motion share a common story. Over 20 years ago, each invested in a real estate project (the “Project”) that involved acquiring and developing 12.5 acres of land located at 78 Cliffside Drive in Brampton, Ontario (the “Property”). Each contributed funds to invest in the Project that the Defendants promoted.

[9] According to the Settling Parties, the only difference between the groups is that the Settling Parties settled their disputes, purportedly at a discount, to achieve “finality and certainty” (i.e., in keeping with the court’s well-established policy to encourage settlement) while the Trial Parties chose to litigate their claims. The Settling Parties now seek judgment based on the respective terms of their settlements with the Defendants and seek an equitable lien over funds traced to the sale of the Property by asserting that the Defendants were unjustly enriched by not paying the settlements. The Settling Parties seek payment of their settlements based on a pro rata share of the preserved funds paid into court by claiming that this approach would allow for a fair and equitable distribution of available funds. They further assert that the punitive damages, interest, or costs awarded to the Trial Parties at trial fall outside of any constructive or resulting trusts and, therefore, should be excluded from the pro rata distribution of preserved funds sought on this motion in favour of giving priority to each party’s settlement amount or compensatory damages award, respectively, before any entitlements to punitive damages, interest, or costs are paid out.

[10] The Settling Parties claim that their respective interests in the preserved funds stand in equal priority to the interests of the Trial Parties in those funds because the equitable liens asserted by the Settling Parties are functionally equivalent to the constructive and resulting trusts awarded at trial to the Trial Parties. The Settling Parties also note that all parties agreed at the start of trial that the Settling Parties’ entitlements to Project funds would be decided after trial to avoid any prejudice to the Trial Parties’ claims that were to be adjudicated at trial.

[11] The Trial Parties oppose the payouts proposed by the Settling Parties and claim that any equitable liens granted on this distribution motion should not displace the constructive or resulting trusts awarded to the Trial Parties at trial. The Trial Parties claim that the Settling Parties had many prior opportunities to bring motions to preserve funds to properly secure their settlements with the Defendants, or to otherwise enforce their settlements when the Defendants had available funds to pay the settlements. The Trial Parties submit that it should not be the court’s function or responsibility to rehabilitate the Settling Parties’ failure to exercise appropriate diligence to secure funds to pay out or enforce the settlements at this time.

[12] The Trial Parties submit that the Settling Parties are now seeking to prop up their settlement agreements with a form of judgment that will put them on par with, or in priority to, the judgment awarded to them after a lengthy and difficult trial to effectively “leap frog” the trial determinations. The Trial Parties also take the position that the relief sought by the Settling Parties is neither fair nor equitable given the Settling Parties’ unexplained lack of action or delay in taking diligent steps to protect or enforce their settlements with the Defendants in the circumstances of this litigation.

The Proceedings

[13] All of the parties to this distribution motion invested in a land development scheme that never materialized. Instead, the land was sold in September 2016 for about $15.386 million as undeveloped land to Brampton G&A Holdings Inc. (“Brampton G&A”), a third-party developer.

[14] This litigation involves two (2) companion actions, being the Pichelli Action (CV-17-1481) and the Caroti/Bilich Action (CV-17-5302).

[15] In April 2017, the Pichelli Group investors brought their action against the Defendants for breach of contract, fraud, conspiracy, and breach of fiduciary duty, among other claims.

[16] In December 2017, the Caroti Group investors brought their separate action against the Defendants for fraud, negligence, unjust enrichment, conspiracy, breach of contract, breach of fiduciary duty, and remedies for constructive and resulting trusts. Bilich, another investor, brought and defended a crossclaim in the Caroti Action in respect of her interest in the Project.

[17] Both actions were defended at trial by the Defendants Anthony, John and Mira Vuletic (the “Vuletics”), Embleton Properties Corp., and 1857325 Ontario Ltd. (“185 Corp.”) (collectively “the Defendants”).

[18] At the beginning of 2018, then-counsel for the Caroti Group wrote to other investors, including Faria, Sokich, and the Granics, to ask if they wanted to join the action. Sokich and the Granics chose not to join the Carotis after the Defendant Anthony Vuletic threatened them with a lesser share in the Project if they joined the action.

[19] In April 2018, Jesus and Savona joined the Caroti/Bilich action. In addition, Boland, Demaria and the Biondics joined the Caroti Group in April 2018 but left by 2019 and retained separate counsel. Klecina was part of the Caroti Group until just a few days before trial when his estate settled his claim with the Defendants on September 12, 2021.

[20] On February 5, 2019, the Defendants counterclaimed against the Biondics, Sokich, Bilich, Faria, and the Granics.[^6] Other than as against the Granics, the counterclaim sought a) either a declaration that these investors’ agreements of purchase and sale in the Project be terminated and monies returned, or that they receive nothing, or alternatively b) an accounting to determine their entitlement to funds, if any. The Defendants proposed that the Granics receive Lot 60 in the Project, or an accounting of their share of the proceeds.[^7]

[21] The Biondics, Bilich and Sokic served statements of defence and counterclaims. Shortly before Faria settled, he delivered a statement of defence and counterclaim. Although told to get independent legal advice, the Granics did not deliver a pleading nor bring a claim against the Defendants despite knowing that the Vuletics were accused of fraud, allegedly had taken more than $500,000.00 from the Project for personal expenses, and allegedly had provided them with incorrect or false information. Mr. Granic is a sophisticated businessman. I accept that the Granics’ lack of action reflected a calculated decision to cooperate with the Vuletics to realize a return on their investment in the Project. Among other things, Mr. Granic indicated that he was content to receive Lot 60 or some other distribution. After the close of pleadings and over 2 years after the trial was heard, the Granics somehow had a statement of defence and counterclaim issued on March 27, 2024 shortly before the distribution motion returned. By issuing a claim in 2024, they implicitly conceded that they should have brought proceedings years ago to assert the claims they now seek to pursue.

Payment of Funds into Court and Preservation Order

[22] As noted earlier, the Defendants sold the Property to Brampton G&A in September 2016 for a price of about $15.386 million plus interest with a vendor-take-back mortgage.

[23] On September 12, 2017, the Pichelli Group brought a motion for a Mareva injunction in their action against the Defendants. In turn, a consent order was granted on September 12, 2017 for Brampton G&A to make all vendor-take-back mortgage payments to 185 Corp. in accordance with the mortgage terms and to pay $1.65 million in trust when the final mortgage payment for the sale proceeds came due. On February 2, 2018, a related order was made in the Pichelli Action to require, among other things, that the Defendants not assign, sell, transfer or dispose of any rights or interest in the vendor-take-back mortgage with Brampton G&A without leave of the court.[^8] The February 2, 2018 order, later amended on April 3, 2018, dismissed the claims against Brampton G&A and, among other things, directed Brampton G&A to not make payments for the vendor-take-back mortgage to anyone other than 185 Corp. that itself could not assign its interest in the vendor-take-back mortgage to any other entity or individual. The order also prevented Lots 49, 50, and 60 to the Project from being transferred, assigned, or conveyed by 185 Corp. or Brampton G&A, respectively. The affiant for the Pichelli Group conceded in her affidavit for this distribution motion that the group obtained both orders to protect the interests of all investors in the Project, including those who had not yet initiated a claim. The Pichelli injunction motion was resolved with the Defendants agreeing to pay $1.65 million in trust to their own counsel when Brampton G&A made the final mortgage payments.[^9] The funds were preserved only in the Pichelli Action, leaving the interests of others, including those of the Caroti/Bilich Group unprotected. Thereafter, the Defendants continued to receive the sale proceeds and interest payments under the terms of the vendor-take-back mortgage.

[24] In June 2019, the Caroti Group (i.e., that included Klecina at the time) changed counsel and, among other things, brought a motion to preserve and protect a) sale proceeds from the sale of the Property, and b) three (3) lots in the Project, being Lots 49, 50 and 60, respectively. Bilich and Sokic joined the Caroti Group motion. No other party moved to preserve proceeds or lots for the Project. By then, the Defendants had received over $2.3 million (i.e., excluding mortgages paid on closing). In total, the Defendants received $6.164 million of the $15.386 million purchase price, the payout of existing mortgages on closing, and vendor-take-back interest (i.e., in addition to other benefits, such as the Vuletics living rent-free on the Property). Also by this time, it was well-known that the Defendants had placed various liens and mortgages on the Property.

[25] On June 27, 2019, the Caroti/Sokich/Bilich Group obtained an interim preservation order to restrain the Defendants from disposing of, encumbering, or assigning the lots for the Project. The Defendants opposed the interim preservation motion.

[26] The Caroti/Sokich/Bilich Group and Brampton G&A exchanged materials with respect to the preservation motion. Three business days before the motion, Brampton G&A advised that it was not opposed to the motion to preserve the sale proceeds and the lots, but would oppose the motion for a certificate of pending litigation. Two business days before the motion, the Defendants advised that they were not opposed to the remaining sale proceeds being paid into court. By that point, the Caroti/Sokich/Bilich Group had assumed the risk and spent time and effort to bring the preservation motion, and successfully obtained a preservation order for the sale proceeds to be paid into court. To this end, LeMay J. granted an order on September 9, 2019, later amended on November 25, 2019 (the “Preservation Order”), that provides as follows:

1. THIS COURT ORDERS that the future principal and interest payments to be made pursuant to the vendor-take back mortgage by Brampton G&A Holdings Ltd. to 1857325 Ontario Ltd. … be paid to the Accountant of the Superior Court of Justice in accordance with the timetable and amounts set forth in Schedule “B” attached hereto pending the determination of the [Caroti] Plaintiffs’ claim and Robert Sokich’s and Anna Bilich’s claim on their merits or as agreed to by the [Caroti] Plaintiffs, Robert Sokich, Anna Bilich and the Defendants (but for Ante Kegalj).

2. THIS COURT FURTHER ORDERS that the Defendants … shall not, directly or indirectly, convey, encumber, dispose, assign or charge their alleged interest in Lots 49, 50 and 60 on the draft approved Plan of Subdivision for the Property … to any person(s), corporation(s), firm(s), or partnership(s) pending the determination of this Action in its merits. [Emphasis added]

[27] Pursuant to the Preservation Order, Brampton G&A paid the balance of the mortgage and principal payments from the sale of the Property into court to the credit of the Caroti/Bilich Action pending a decision of the claims on their merits. The funds paid into court, with interest, amounted to $11,281,847.15 as of May 29, 2024.

[28] The CPL motion brought by the Caroti/Sokich/Bilich Group was unsuccessful and they were ordered to pay costs.

[29] On this distribution motion, the Biondics suggest that little value ought to be placed on the Caroti/Sokich/Bilich Group’s preservation efforts because the Defendants eventually capitulated. However, the Biondics chose to do nothing and, in doing do, clearly prejudiced their position by not securing or enforcing their settlements. After the Preservation Order was granted, the Biondics belatedly tried to “piggy-back” on the same order obtained by the Caroti/Sokich/Bilich Group. When the issue came before LeMay J. on October 30, 2019, the case management judge pointedly declined the Biondics’ request to revisit or reopen the terms of the Preservation Order.

[30] Significantly, during the October 30, 2019 attendance, Le May J. made a rather prescient observation about priorities to the funds paid into court and whether these preserved funds were sufficient to satisfy all of the competing claims:

The Court: The second observation I would make is that any order that I am going to sign, even on consent [of the Caroti Group and Bilich, for example] must maintain – because I can envision a world in which the plaintiffs [potentially] recover more than the money that’s paid into Court, in which case I think Ms. Abela and Mr. McDonald will probably be standing there saying that they are, that they wish to stand in priority to [the other claimants], in terms of the funds that have been paid into Court, and that’s a matter that will have … that’s an issue that I am not going to argue about now, but that I think has to be reserved for the trial judge to determine at the end of the day. [Emphasis added]

Mr. Karayannides: Understood.

[31] As noted earlier, the motion by the Caroti/Sokich/Bilich Group effectively preserved about $11.2 million from the sale of the Property that is now being held in court to the credit of the Caroti/Bilich action. As LeMay J. predicted, these funds paid into court are insufficient to cover the judgment and costs awarded at trial to the Trial Parties.

[32] All of the claimants to this distribution motion had notice of the Preservation Order at the time they entered into their pre-trial settlement agreements with the Defendants except the Granics who chose to not retain counsel and were self-represented at that time.

The Abandoned Motion to Vary the Preservation Order

[33] On March 3, 2020, the Defendants and the Pichelli Group advised of their intention to vary the Preservation Order to access the sale proceeds paid into court to pay their respective legal fees. The Caroti Group and Bilich objected to the proposed payouts. On March 11, 2020, LeMay J. endorsed that the Defendants had to show that they had exhausted their own funds to pay for their living expenses and legal costs to successfully move to access preserved funds. Thereafter, the Defendants and the Pichelli Group chose to not pursue the motion to vary the Preservation Order.

The Settlements Prior to Trial

[34] Prior to trial, certain claimants settled with the Defendants.

[35] On or about March 6, 2020, Sokich and Faria settled with the Defendants who agreed to pay $250,000.00 to Sokich and $145,000.00 to Faria by September 30, 2020. Sokich had paid $69,187.20 to 185 Corp. and a further $35,000.00 to Granic for half a lot in the Project. Faria paid 185 Corp. the amount of $35,000.00. On April 22, 2020, the Defendants indicated that Sokich and Faria had settled but did not disclose the settlement terms. On June 12, 2020, LeMay J. ordered the terms of the settlement to be disclosed.

[36] On or about June 6, 2020, the Biondic Group settled with the Defendants who agreed to pay them $920,000.00 by September 30, 2020. It is unclear how the $920,000.00 is to be divided amongst the Biondic Group members. Boland and her then-husband De Maria paid $55,975.00 to 185 Corp., while Roberta and Renato Biondic paid $55,975.00 and Jurica Biondic paid $37,975.00, respectively.[^10]

[37] On July 2, 2020, Samardzic settled with the Defendants who agreed to pay him $160,000.00 by September 30, 2020. Although Samardzic settled, he did not serve a distribution motion until June 9, 2024 (i.e., 9 days before the distribution motions returned for hearing) nor participate in any steps leading up to the motion other than the initial case scheduling conference.

[38] On July 21 2020, Granic settled with the Defendants who agreed to pay him $250,000.00 by September 30, 2020 even though he never made a claim. The Granics initially bought two lots in the Project for a total of $114,000.00 and then received $35,000.00 from Sokic for the first lot. They paid cash calls of $9,500.00 despite paying a premium for their lots on the Defendants’ assurance that there would be no further fees. In total, the Granics paid $79,500.00 directly to Embleton/185 Corp. and $70,000.00 to Joe Vieira for a lot he recently bought from Embleton, and they received $35,000.00 from Sokic for the lot purchased through Vieira and not the second lot paid directly to Embleton. The Granics dealt exclusively with the Defendant Anthony Vuletic on both lot purchases, and the agreements of purchase and sale between the Granics and Embleton stipulate a price of $70,000.00 that presumably reflects the consideration the Defendants received.

[39] Around the time of the settlements (i.e., from March 6 2020 to July 21, 2020), the Caroti Group was bringing a motion for a further and better affidavit of documents from the Defendants. The Caroti Group succeeded on the motion and obtained an order on August 28, 2020 for the Defendants to produce various bank statements and tax returns: Caroti v. Kegalj, 2020 ONSC 5109 at para 34. As a result, the Settling Parties, albeit not the Granics, were privy to productions showing that the Vuletics had little to no income during the Project.

[40] Around September 12, 2021, Kelcina left the Caroti Group and settled his case with the Defendants just before trial. Klecina’s decision to settle was his alone and based on an apparent inability or unwillingness to pay to have his claims litigated at trial. His settlement required the Defendants to pay him $530,000.00 in damages plus interest at the rate prescribed under the Courts of Justice Act. Klecina retained new counsel to deal with his settlement.

[41] Collectively, the Settling Parties claim to be owed $2,425,500.00 plus interest based on their settlements with the Defendants. To date, none have been paid their settlements.

The Terms of the Minutes of Settlement

[42] In general, the parties who settled their claims with the Defendants entered into minutes of settlement with the following terms:

a. the Defendants were to pay a settlement amount to the settling parties by September 30, 2020. Importantly, the amount is owed by only the Defendants and no one else;

b. as a term of the settlements, the Defendants were to bring a motion on or after June 30, 2020 for the payment out of court of preserved funds to satisfy the settlement amounts. A failure to bring the payout motion and thereby have the motion heard was a breach of the minutes of settlement;

c. the Defendants and the Settling Parties agreed to adjourn examinations for discovery pending the court’s decision on the payout motion as contemplated by the minutes of settlement. If the Defendants were to breach the terms of settlement by not pursuing the payout motion, the Settling Parties had the option of resuming the case prior to trial;

d. if the payout motion was adjourned or denied, the Defendants were required to:

i. pay to the settling party interest of 5% per year on the settlement amount from September 30, 2020 until the principal is paid;

ii. admit at the commencement of the trial of the action, without prejudice to the position taken by the Defendants in respect of other parties and without prejudice to the rights of other parties, that the settling party is entitled to an equitable lien over:

1. the preserved proceeds paid into court;

2. a mortgage charge registered on title to the subject property for the Project municipally described as 78 Cliffside Drive in Brampton [n.b., with the mortgage to be discharged upon final payment on September 12, 2020];

3. a notice registered on title for Lots 49, 50, and 60 to the property located at 78 Cliffside Drive [n.b., by this time, the Defendants were prohibited from encumbering or assigning title to the lots pursuant to the Preservation Order dated November 25, 2019];

4. shares of Embleton and 185 Corp. [n.b., by then, it was known that Embleton was a defunct company];

5. occupation rent for the use of 78 Cliffside Drive when ordered to be paid by the Superior Court [n.b., at the time, the Caroti Group was seeking occupation rent as set out in its claim];

6. all property, real and personal, obtained and traced from monies received by the Defendants related to 78 Cliffside Drive.

e. the Settling Parties and the Defendants agreed to do everything necessary to ensure that the terms of the minutes of settlement would take effect;

f. any amendments to the minutes were to be in writing;

g. the minutes of settlement superseded and replaced all oral and written agreements made between the parties [n.b., this term would include all agreements such as the purchase agreements with 185 Corp. that the Settling Parties now seek to assert as claims on this distribution motion that is before the court]; and

h. there were no representations, collateral agreements, or conditions affecting the minutes of settlement unless expressed in the minutes [n.b., on the distribution motions, the Settling Parties now seek to rely on representations made before the minutes of settlement were executed when seeking their form of judgment].

[43] Other than the Granics, the Settling Parties each had independent legal advice when making their settlement agreements wit the Defendants. As Granic is a sophisticated businessman, I accept that the Granics chose to settle on terms that they understood and agreed upon.

[44] The Preservation Order was intended to preserve the sale proceeds pending a determination of who owned these proceeds and effectively: a) prohibited any assignments, encumbrances, or liens to be made on the lots to the Project, either directly or indirectly; b) required that the preserved proceeds be held in court pending a determination of the actions at trial; and c) required leave of the court to vary its terms to give effect to the settlements. Without leave, the various settlements could not be implemented by operation of the preservation order.

[45] The Settling Parties now seek an order that would give effect to their settlements with the Defendants by accessing the preserved funds at the expense of the Trial Parties who were not part of the settlements and instead went to trial and obtained judgment on their claims.

[46] The Settling Parties did not take steps to ensure that they were paid on their settlements when they made their minutes of settlement with the Defendants to obtain the “finality” they now claim to have sought. To this end, the Settling Parties made the following admissions or assertions under cross-examination in relation to their settlement agreements:

a. Granic admitted that when he signed the minutes of settlement: i) he did not actually know whether there were sufficient preserved proceeds to cover everyone’s claims or the settlement; ii) he was confident that he understood the minutes of settlement when he signed them, and did not rely on Mr. Adair, Defendants’ counsel, to tell him what would happen if he signed the minutes; iii) he assumed that the Vuletics had additional lots at their disposal that had value and thought that the Vuletics would get something at the end of the trial; iv) he understood that his entitlements to the preserved proceeds would be through the Vuletics’ entitlement to those funds; v) he did not expect the other parties to finance the settlement agreements; vi) he was aware that the Vuletics had another property; vii) in respect of the equitable lien, he knew that some of the listed assets did not exist, and he had no evidence that the Vuletics owned specific assets but was aware that the Vuletics claimed lots within the Property; and viii) he did not make any independent inquiries to verify those assets;

b. Granic claimed that he relied on Defendants’ counsel during the settlement process and admitted that he did not independently verify that the Vuletics had the ability to give him Lot 60 or the ability to pay the monies from court. In addition, Granic admitted that he was releasing any claims to Lot 60, but his notice of motion claims an equitable interest in that Lot;

c. Granic admitted knowing that there was no guarantee that he would be paid on the minutes of settlement. He took no action to ensure that the Defendants made the trial admissions required under the minutes of settlement;

d. Faria admitted that at the time he signed his minutes of settlement: i) he did not know what assets the Vuletics owned; ii) he did not know anything about most of the assets over which he agreed to have an equitable lien; and iii) he understood that the minutes did not prejudice the position of any other party who was making a claim against the Vuletics and were not to the prejudice of the Vuletics’ position at trial;

e. Faria admitted that: i) it was his decision alone to settle with the Vuletics on the terms that he did; ii) his understanding of the minutes of settlement was that the Vuletics had the obligation to pay him what he was owed from any monies or assets that they might own; and iii) he accepted that the Vuletics could not be trusted;

f. Faria would not admit that his claim was capped at the amount he settled for under the minutes of settlement, or that he was giving up his rights to pursue the Vuletics for the matters that he previously claimed;

g. Sokich admitted that at the time of his settlement: i) he knew that the ownership or entitlement to the Preserved Proceeds was the subject of a dispute between the parties going to trial; ii) he knew about the Grandview Property; iii) he knew that the Vuletics intended to keep lots for themselves without paying for them, contrary to his sworn affidavit; and iv) there are assets referred to in his minutes of settlement (i.e., over which he claims an equitable lien) that he knew did not exist at the time of the settlement;

h. Sokich admitted that: i) the payment of his settlement funds was the obligation of the Vuletics; ii) the representations in the minutes of settlement were the only ones that he could rely upon with respect to his dealings with the Vuletics; iii) after he signed the minutes of settlement, any allegations against the Vuletics would be with respect to any alleged breach of the minutes; and iv) any other agreements, including his agreement of purchase and sale with 185 Corp.;

i. Boland admitted that she believed it was the Vuletics’ obligation to pay the $920,000.00 settlement amount when the minutes of settlement with the Defendants were executed;

j. Boland admitted that in 2020 when her group made the settlement: i) she knew that there was no court finding or order saying that the preserved proceeds belonged to the Vuletics; ii) she did not believe that the other parties, such as those who proceeded to trial, had anything to do with their minutes of settlement; iii) she considered herself to be out of the litigation but knew that the Biondics were not done; iv) she had concerns with the honesty and integrity of the Vuletics; v) she knew that when the Vuletics said she had an equitable lien over certain assets, that some of those assets did not exist; vi) they were focussed on the preserved proceeds although she admitted that understanding what other personal assets the Vuletics had at the time was also important; vii) the fact that the settlements were to be paid from preserved proceeds was not based on any representation that the Vuletics did not have funds to pay them at the time; viii) she understood that the minutes of settlement superseded any oral or written agreements she had with the Vuletics, including her APS with 185 Corp.; and ix) she understood that any admissions by the Vuletics were not going to be used against other parties;

k. Boland admitted that: i) it was her decision to settle on the terms she did for De Maria and herself; ii) all of the terms of her settlement are set out in the minutes of settlement; and iii) she settled with no money exchanged as she wanted finality and closure and did not want the stress of litigation or to spend the time and money to pursue the claim. She cannot remember complaining to anyone after the judgment that the Vuletics had failed to make the trial admissions required under the minutes of settlement.

l. Jurica Biondic took no steps to ensure or determine whether the Vuletics made the admissions required by the minutes of settlement, had no real understanding of an “equitable lien” when he signed the settlement, does not recall the Vuletics giving any proof that they had any interest or entitlement in the funds paid into court or to Lots 49, 50 or 60, and took no steps after signing the minutes of settlement to ensure that the Vuletics abided by its terms nor pursue any of their assets;

m. Roberta Biondic had no information on the Vuletics’ ownership of assets listed in the minutes of settlement when she signed them, but believed that she was getting a share in Lots 49, 50 and 60. She was unsure of the meaning of the September 30, 2020 deadline for the $920,000.00 payment to Boland/Biondics. She eventually learned of Anthony Vuletic’s purchase of a property on Grandview Court but took no action to preserve that property, or any other property owned by the Vuletics;

n. Renato Biondic did not know the whereabouts of any funds paid under the Preservation Order when he signed the minutes of settlement. He assumed that the Vuletics had an ownership interest in the sale proceeds when he signed the minutes of settlement but knew nothing of the assets or liabilities of 185 Corp. and Embleton when he signed the settlement. He does not recall signing the minutes of settlement;

[47] Klecina’s terms of settlement differ from those of the other parties who settled their claims with the Defendants. No assets are specifically listed in his minutes of settlement, but they refer to the Defendants’ consent for the payment out of court of funds paid to the credit of this action. Klecina seeks payment of $700,000.00 from the Caroti Group’s share under the judgment with nothing from the Pichelli Group or Bilich’s share. He seeks equitable remedies although no such terms are set out in his minutes of settlement with the Defendants. Klecina admitted that when he signed the minutes of settlement: i) he was no longer part of a lawsuit going to trial; ii) he was aware that funds paid into court were subject to the Caroti Group’s claims; iii) he knew about the Preservation Order; iv) he knew that the Vuletics personally-owned assets at the time, such as the property on Grandview Court and the Dorham Funds;[^11] v) he knew that he was binding only himself to the minutes and no other party; vi) he knew about the appeals from the trial judgment and did not intervene in the appeals to amend the judgment to include his settlement; and vii) he did not take any steps after he signed the minutes of settlement to ask the Vuletics to do anything to give effect to the provisions in the settlement. When he signed the settlement, he knew that ownership rights over funds paid into court had not yet been determined but, nevertheless, believed that he had a right to take $700,000.00 from those funds.

The Payout Motion Brought in 2020 to Distribute the Funds Paid into Court

[48] During a case conference on June 8, 2020, Defendants’ counsel advised the Trial Parties of the existence of some settlement agreements that had been executed by that date.

[49] On June 12, 2020, LeMay J. scheduled the Defendants’ payout motion (i.e., to satisfy the payout terms in the minutes of settlement) for July 29, 2020 with a timetable for the exchange of motion materials.

[50] By Endorsement released June 15, 2020, LeMay J. referred to the settlement agreements and next steps:

Settlements

[10] Some of the parties have settled. A provision of the settlement requires the Vuletics to bring a motion to ask the Court to pay monies out of court to the settling investors. We discussed a number of issues relating to these settlements. It is not yet clear whether a motion is required.

[11] Based on our discussions, I ordered as follows:

a. The memorandum of settlement is to be disclosed by the Vuletics by no later than June 16, 2020.

b. Any party opposed to the payout of the monies is to advise all other parties by June 23, 2020.

c. If there is opposition to the payout, then the motion materials from the Vuletics must be served and filed by June 30, 2020. Filing is to be done electronically, and my judicial assistant is to receive a copy of all filings. Filings are not to be larger than 9.9 megabytes.

d. Any motion records from parties opposed to the payout are to be served and filed by June 22, 2020. Again, the rules with respect to filings are the same as set out in paragraph (c).

e. Any reply record is to be filed by June 27, 2020.

f. Parties are expected to file a statement of law, with hyperlinked cases by July 28th, 2020.

g. The motion will be heard on July 29th, 2020 at 9:00 am.

[51] On June 19, 2020, the Defendants served a notice of motion for an order to pay out the Sokich, Faria and Biondic/Boland settlements from funds paid into court (the “Payout Motion”).

[52] On June 23, 2020, the Caroti Group and Bilich objected to the Payout Motion. The Caroti Group opposed the motion by arguing that it was prejudicial to their interests in the preserved funds. At the time, Bilich did not specify the basis of her objection. However, the Caroti Group and Bilich asserted that the Defendants had sufficient funds to satisfy their various settlement obligations. In addition, the Caroti Group and Bilich argued that there would be no prejudice by having the parties who settled wait for a proper adjudication of their claims at trial to allow the merits of the case to be decided before considering which parties were entitled to the funds paid in court (i.e., given the possibility that the Defendants might not be entitled to any of the sale proceeds paid into court). The Defendants and the various Settling Parties disagreed with the objection by the Caroti Group and Bilich and proceeded with the Payout Motion.

[53] On June 23, 2020, the Pichelli Group advised that it took no position on the Payout Motion.

[54] On July 20, 2020, the Defendants late-served their materials for the Payout Motion (i.e., after the June 30, 2020 deadline for serving their materials had lapsed). The Defendants also had not served the productions ordered from the earlier production motion. As a result, the July 29, 2020 date for the Payout Motion was adjourned. The Defendants then served a supplementary record to add the Granics’ settlement to the Payout Motion. A revised schedule was proposed for the Payout Motion to return sometime in September 2020 when the court was available.

[55] On August 11, 2020, the Caroti Group (including Klecina) served their responding record for the Payout Motion on the Defendants, Sokich, Faria and the Biondic Group, that included an affidavit sworn by Nancy Kostelac (the “2020 Affidavit”). In the 2020 Affidavit, she stated:

a. in detail, the assets that the Defendants had at that time that could be used to satisfy their settlement obligations under the minutes of settlement. More specifically, she stated that the Defendant Anthony Vuletic had bought a home on Grandview Court on August 13, 2019 for $1.7 million with a $1 million mortgage before he later mortgaged the property for $1.7 million (i.e., its full value) on March 12, 2020 after Sokich and Faria settled with the Defendants. Kostelac also explained that the Defendant John Vuletic was the president of Dorham Holdings Inc. that owned a property in Oakville acquired in 1989 for $2,520,468.00 for which the Vuletics were thought to be the beneficial owners;

b. the Caroti Group’s claims were not limited to lot valuations but included allegations of fraud and misappropriation (i.e., as the Defendants had mortgaged the Property over many years for personal purposes) and, as such, its damages and costs claims could exceed the available preserved proceeds. If this were the case, Kostelac stated that the Caroti Group would be required to trace assets to pursue the Defendants for recovery, thereby defeating the very purpose of the Preservation Order;

c. the Defendants claimed that part of the proceeds of sale were allocated to the Teramoto and Ufkes sales, with lots to be reconveyed to 185 Corp. such that the Settling Parties knew the Defendants were seeking an allocation of the sale proceeds or lots for themselves, although the court could distribute the value of the Project to the Trial Parties who proceeded to trial. It follows that the Settling Parties were on notice in 2020 that the Defendants might not receive a portion of the preserved funds that had been paid into court;

d. 185 Corp. had received about $6.164 million from the sale of the Property prior to the Preservation Motion, and it was believed that the Vuletics had removed over $1.9 million from the Project in cash withdrawals, cheques or drafts, plus $698,000.00 in mortgage interest, with additional amounts taken for personal expenses of about $314,745.00 for groceries, pet care, clothes and other items, $1.1 million in legal fees, $189,000.00 to develop an Oakville property that was unrelated to the Project, and a $47,000.00 loan to Anthony Vuletic’s friend Steve Tjan. In addition, for reasons that are unclear, Anthony removed over $1 million from 185 Corp.’s bank account in January 2019 by way of a transfer from which $652,839.30 was then transferred on July 22, 2019 to an unknown account; and

e. if the Payout Motion were granted, there would be significant prejudice to the Caroti Group by: a) its inability to fully recover its damages and costs, b) paying the Settling Parties in first priority without first hearing the other parties’ claims on their merits, c) implying that the Caroti Group’s claims, and those of the other Trial Parties somehow lacked merit, and d) expecting the Trial Parties to present a damages calculation before discoveries and before trial.

[56] In addition, the Caroti Group objected to the Payout Motion by arguing, among other things, that their interests would be significant prejudiced if the motion were granted as damages and costs awarded at trial could exceed the available preserved funds and force them to trace funds and chase the Defendants for recovery. This outcome would clearly defeat the very purpose of the Preservation Order.

[57] On this distribution motion currently before the court, the Settling Parties point to the 2020 Affidavit to show why the earlier Payout Motion was not pursued. However, the 2020 Affidavit also shows why it would have been prudent for the Settling Parties to press the Defendants for payment on their settlements at that time, or take steps to preserve additional funds or assets to protect their settlements and prevent the further dissipation, transfer, or encumbrance of assets.[^12] Notably, the Grandview Property was further encumbered by $1.7 million shortly after the first minutes of settlement were signed before being further encumbered multiple times through April 2022. Had the Settling Parties moved diligently to protect or enforce their settlements in 2020 or any time before trial, the Defendants may well have had sufficient funds to pay their settlement obligations that would have left the Settling Parties with no need to infringe on the preserved funds paid into court. Instead, the Settling Parties did nothing to enforce their settlements, even after trial, and the Defendants dissipated Project funds, including $1.2 million in Dorham funds that they apparently sent offshore to Croatia, and further encumbered the Grandview Property.

[58] As Granic was self-represented and without counsel, he was not served with the materials for the Payout Motion in 2020. But even after not receiving payment on his settlement agreement by September 30, 2020 as required by its terms, he did not ask the Vuletics whether the Payout Motion had been brought, did not request a copy of the materials for the motion, and did not ask Defendants’ counsel any questions about the motion or when the settlement would be paid.

[59] The other Settling Parties were served with materials for the Payout Motion. However, on cross-examination, Boland claimed to: a) not recall that the Caroti Group had opposed the payout motion; b) not know why preserved funds were not paid out; and c) not have read the responding materials that opposed the motion.

[60] In August 2020, the Defendant Anthony Vuletic was cross-examined on his affidavit for the Payout Motion. During his cross-examination, it became clear that the Defendants had other assets that they could have used to pay out the settlements. However, they preferred to use funds not actually in their possession to pay the Settling Parties.

[61] On this distribution motion, the Settling Parties claim that the Caroti Group did not oppose their settlements. However, the Caroti Group’s responding record for the Payout Motion in 2020 shows this to be clearly incorrect.

[62] On September 21, 2020, LeMay J. endorsed that the trial date of January 2021 was extended to the May 2021 trial sittings and that the Payout Motion would need to be heard after a pre-trial conference (i.e., that the Pichelli Group had asked to adjourn from December 2020 to a date in February 2021) was conducted and the schedule for exchanging motion materials was adjusted. By letter dated September 30, 2020, the Defendants agreed to adjourn the pre-trial conference and asked to schedule the Payout Motion after the pre-trial conference as the motion might be rendered unnecessary if the Caroti/Bilich actions were resolved at the conference.

[63] Thereafter, the Defendants changed counsel and postponed the Payout Motion to at least after the pre-trial conference with the Caroti Group’s agreement as set out in an email exchange between counsel on October 28, 2020.

[64] By endorsement dated April 28, 2021, Ricchetti RSJ adjourned the trial date from the May 2021 trial sittings to September 13, 2021. For greater clarity, Ricchetti RSJ also confirmed that the funds paid into court would remain in court pending further order.

[65] Over time, it became apparent to the Trial Parties that the Defendants had effectively chosen to abandon the Payout Motion. As part of the distribution motion now before the court, the Caroti Group asked the Defendants and the Settling Parties for disclosure of their post-settlement communications. Apart from Granic, the Settling Parties refused to produce any such communications by asserting settlement privilege over them. Granic chose to produce an email dated September 16, 2020 that Defendants’ counsel had sent to each of the Settling Parties with a proposed strategy for dealing with the Payout Motion.[^13] The Settling Parties objected to the email being entered into evidence by asserting settlement privilege over this communication.

[66] Settlement privilege is an important common law rule of evidence that promotes settlement by making settlement communications inadmissible so parties may engage in candid settlement discussions knowing the communications cannot be used against them in litigation. This promotes honest and frank discussions that can make it easier for parties to reach a settlement: Sable Offshore Energy Inc. v. Ameron International corp., 2013 SCC 37 at paras 12-14; Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35 at paras 31-35. Whether settlement privilege applies in any given case calls for a contextual, fact-specific analysis of certain conditions: Emery Silfurtun Inc. (Re), 2018 ONCA 485 at para 22. Settlement privilege will attach to a communication or record where a) a litigious dispute must be in existence or within contemplation, b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event the negotiations failed, and c) the purpose of the communication must be to attempt to effect a settlement: Re Hollinger, 2011 ONCA 579 at para 16, leave to appeal denied 2012 CanLII 23665 (SCC); R. v. Delchev, 2015 ONCA 381 at para 24; Emery at para 22. The privilege is invoked based on the intent of the parties to settle a matter so any negotiations undertaken with this purpose are inadmissible: Sable Offshore at para 14. Settlement privilege applies even after a settlement is reached leaving the content of successful negotiations protected: Sable Offshore at paras 15-18; Union Carbide at para 34.

[67] In my view, the September 16, 2020 email is subject to settlement privilege and should be excluded from the evidentiary record on this distribution motion. I accept that a litigious dispute was contemplated when Defendants’ counsel circulated the email as a failure by the Defendants to bring the Payout Motion would have breached the terms of settlement and allowed the Settling Parties to resume their respective actions. I also accept that the communication was made to effect a settlement by arriving at terms for dealing with the Payout Motion (i.e., as the Defendants and the Settling Parties achieved) with the intention of not disclosing the email to the court in the event that negotiations failed: Hollinger at para 16; Sable Offshore at para 14. Although Granic, who was self-represented, disclosed a copy of the email, settlement privilege belongs to all parties to a settlement overture and cannot be unilaterally waived: Williams v. Williams, 2020 ABCA 15 at para 22; Howes v. Howes, 2018 ONSC 6297 at para 17.

[68] Having regard to the circumstances of this case, I see no principled basis or compelling policy reason for invoking an exception to the general application of settlement privilege in this matter. Settlement privilege is a class privilege with a prima facie presumption of inadmissibility, subject to exceptions when justice requires it: Sable Offshore at paras 12 and 19. To fall within an exception, a party must show on balance that, “a competing public interest outweighs the public interest in encouraging settlement”: Sable Offshore at para 19, citing Dos Santos Estate v. Sun Life Assurance Co. of Canada, 2005 BCCA 4 at para 20; Union Carbide at para 34. As Chief Justice Finch wrote for the Court of Appeal for British Columbia in Dos Santos Estate at para 20, “[a]n exception should only be found where the documents sought are both relevant and necessary in the circumstances of the case to achieve either the agreement of the parties to the settlement, or another compelling or overriding interest of justice.” [Emphasis in original] Exceptions are narrowly defined and seldom applied: Heritage Duty Free Shop Inc. v. Canada (Attorney General), 2005 BCCA 188 at para 25; Howes at para 19. The law has always encouraged resolution discussions between parties to civil litigation by encouraging them to speak freely and without concern that statements will be used against them to foster the resolution of disputes: R. v. Pubani, 1994 CanLII 8723 (ONCA) at para 12; leave to appeal denied [1994] SCCA No 294. I am not persuaded that excluding the privileged email would facilitate an abuse of settlement privilege or that an overriding interest of justice requires the email to be disclosed: Myers v. Dunphy, 2007 NLCA 1 at para 27.

[69] The Defendants ended up adjourning the payout motion in 2020 on the basis that no new evidence could be filed. They later brought and lost a motion to stay the entire proceedings by the Caroti Group that, if successful, would have entitled the Defendants to the preserved assets paid into court. Thereafter, on May 30, 2021, LeMay J. asked the Settling Parties whether they intended to bring a motion to have the preserved assets paid out of court before trial. The Settling Parties advised that they would not be bringing any such motion. Instead, they opted to appear on the first day of the trial to seek instructions from the trial judge on how to deal with the settlements.

The Trial and the Appeals

[70] On September 13, 2021, the Caroti Group, the Pichelli Group, and Bilich went to trial against the Defendants. On that first day of trial, Mr. J. Macdonald (for Faria and Sokich) and Mr. Ebrahim (for the Biondic Group) appeared to advise that their clients’ settlement agreements with the Defendants had not been paid and that they would be seeking judgment in accordance with the terms of their settlements, although the minutes of settlement were not shown or filed at that time. The settlement admissions the Defendants were to make pursuant to the minutes of settlements were not made on the first day of trial nor at any other time during the trial. Instead, the Settling Parties adopted the Defendants’ proposal made on September 11, 2021 (i.e., shortly before the first day of trial) for the settlement payouts and distribution of proceeds paid into court (i.e., including any priority issues between the Settling Parties and the Trial Parties) to be dealt with or addressed after the trial was concluded. In submission made to the court on September 13, 2021, Defendants’ trial counsel, Mr. Breedon, specifically stated that the settlement payouts might raise priority issues (i.e., as between the Settling and Trial Parties, respectively) depending on how the court decided the various claims and issues at trial. Despite this, Mr. J. Macdonald and Mr. Ebrahim advised that their clients would not be participating in the trial and asked to be advised of any hearing to address the preserved funds after trial given their intention to seek judgment pursuant to their settlements at that time. The Caroti Group and the Pichelli Group agreed to this approach, for which Bilich did not express any concern or opposition.

[71] Following a 41-day trial that unfolded over several months, the court found in favour of the Trial Parties after determining that the Defendants had perpetrated a large and complex fraud. The court granted judgment to the Trial Parties of about $13.8 million along with other remedies against the Defendants including constructive trusts and purchase money resulting trusts over $19.52 million in sale proceeds for the Property comprised of the following: a) the proceeds of sale of the Property; b) the Defendants’ interests in certain lots for the Project; c) the Grandview Property; d) any other assets that any of the Defendants had acquired or improved with, (i) funds taken from the sale proceeds available for distribution that the Vuletics had misdirected for personal and non-Project use, and (ii) funds that the Defendants appropriated by redirecting Project funds to unjustly enrich themselves. The Defendants’ counterclaims were dismissed with no relief or remedies granted to them.

[72] Judgment for trial was issued on August 15, 2022, and amended reasons for judgment were released on October 11, 2022. At the time, the court was aware of the settlements between the Defendants and the Settling Parties, and that a distribution motion was to be scheduled and heard. In addition, the Preservation Order as amended on November 25, 2019 was extended on October 11, 2021. The Trial Parties and the Defendants consented to costs judgments for the trial amounting to over $3.53 million for the Caroti Group, $869,616.64 for the Pichelli Group, and $554,203.83 for Bilich, all figures inclusive of disbursements and taxes.

[73] In total, the Defendants owe the Trial Parties $16,368,576.53 plus interest. However, the constructive or resulting trusts awarded to the Trial Parties, both individually and collectively, fall short of the total amount of preserved funds paid into court. The trial judgment did not expressly grant priority to the Trial Parties’ interests over those of the Settling Parties, or vice versa, nor state that any trust interests applied retrospectively or retroactively. Instead, the trial judgment left open the matter of the Settling Parties’ claims.[^14]

[74] The trial judgment was the subject of three (3) separate appeals by the Defendants against the Pichelli Group, the Caroti Group, and Bilich, respectively.[^15] The Settling Parties knew of the appeals but did not intervene nor suggest to the Court of Appeal that the trial judgment was missing relief that should have been included.

[75] While the appeals were pending, the Caroti Group brought a motion in the Court of Appeal to prevent John and Mira Vuletic from dissipating assets to put them beyond the reach of judgment creditors. The Pichelli Group and Bilich attended the Caroti Group motion to make submissions to support the motion but without formally bringing a similar motion themselves. The Defendants did not concede the motion, but George J.A. found it “patently obvious” that they had dissipated, encumbered, transferred, and tried to sell property after trial to shield their assets. John and Mira each had a 4.2105% interest in Dorham Holdings Inc. and Dorham Partnership (“Dorham”). Three months after the close of trial, and while the trial decision was under reserve, Dorham sold the Oakville property for $30 million with a $15 million vendor-take-back mortgage. In April 2022, John and Mira received $1.263 million as a first tranche of funds that apparently was sent offshore to Croatia. Around that time, both also sought to sell their Dorham shares. In addition, after the close of trial and before the release of the trial decision, Anthony Vuletic further encumbered the Grandview Property by $840,000.00, tried to sell it for $4.48 million, and later tried to sell it once again after a CPL was registered on title. Mortgage enforcement proceedings were taken against the Grandview Property but no excess funds were realized from the sale. On December 23, 2022, George J.A. granted the Caroti Group’s preservation motion and ordered the Vuletics to post a letter of credit for the first $1.263 million tranche of Dorham funds, and to pay the second tranche into court once the funds are due (i.e., that may be as late as April 29, 2026). On June 6, 2023, a panel of the Court of Appeal upheld the preservation decision: Caroti v. Kegalj, 2023 ONCA 455.

[76] Although aware of the Dorham shares and the Grandview Property as early as 2020, the Settling Parties did nothing to secure any of the assets held by the Defendants or to enforce their settlements with them.

[77] The Trial Parties made efforts to preserve the Defendants’ assets and assumed the risk of doing so. But for their efforts, there would be no further Dorham-related funds and the shares would have been sold to a bona fide purchaser leaving the associated second tranche out of reach. On this motion, the Caroti Group has undertaken to transfer the Dorham funds from the Court of Appeal to the Superior Court action if their $29,000.00 in costs awards (plus HST) is first paid out.

[78] The Caroti Group claims to have spent over $462,511.26 on preservation efforts that apparently included, i) obtaining the Preservation Order, ii) responding to the Payout Motion previously started by the Defendants, iii) communicating with an expert, iv) obtaining a CPL on the Grandview Property, v) securing the Dorham-related funds, vi) responding to the Defendants’ appeal of George J.A.’s order in connection with the Caroti Group’s motion to secure the Dorham funds, vii) communicating with Dorham’s counsel following the release of the trial judgment, and viii) communicating with Brampton G&A’s counsel after the trial judgment was released. In addition, the Caroti Group has tried to enforce the trial judgment against the Defendants, although those efforts have netted only $1,450.56 to date.

[79] In contrast, none of the Settling Parties took any steps before trial to enforce their settlement rights or to protect their settlements even after the Defendants failed to pay out the settlements by September 30, 2020 pursuant to the terms of their minutes of settlement. The Settling Parties made very little effort to pursue their rights or to even comprehend basic underlying facts or evidence in this litigation. Although all of the Settling Parties sought to rely on the trial reasons in arguing the distribution motion, most under cross-examination indicated that they were unfamiliar with the findings in the reasons or the steps taken to preserve funds in the Court of Appeal.

Post-Trial Proceedings

[80] During a case conference on October 11, 2022, the Settling and Trial Parties agreed that a motion to address the preserved funds paid into court did not need to be scheduled then. At the time, the appeals from the trial decision were pending before the Court of Appeal.

[81] In February 2023, the Granics learned that the Trial Parties were disputing their entitlement to be paid their settlements with the Defendants from the funds paid into court. As a result, they retained counsel.

[82] The Defendants’ appeals in respect of the Caroti Group and Bilich were administratively dismissed on February 16, 2023. The Defendants’ appeal in relation to the Pichelli Group was administratively dismissed on April 20, 2023.

[83] On February 28, 2023, the Biondic Group wrote to other counsel to propose asking for a case conference to timetable a distribution motion. The Caroti Group disagreed with the request, took the position that such a distribution motion was premature, and advised through counsel that they would give notice of their request to have funds paid out of court in due course.

[84] On May 5, 2023, the Granics’ counsel, on behalf of his clients and Faria, Sokich, and the Biondic/Boland Group, wrote to the court to request a case conference to arrange for a motion for judgment on their settlements with the Defendants.

[85] On July 11, 2023, I endorsed that any party could request a conference to address the return of the judgment and priority motions after the Court of Appeal had decided the Defendants’ motion to set aside the dismissal orders, consolidate the appeals, and perfect the appeals.

[86] In the end, the Court of Appeal dismissed the appeals due to the conduct of the Defendants who seemed to dissipate, encumber and transfer their assets while not complying with the order to post a $1.263 million letter of credit, not paying multiple costs orders, not adhering to court-imposed deadlines, and not perfecting the appeals with dispatch, among other things: Reasons for Decision of Coroza J.A dated September 5, 2023 at paras 10-13. As of January 2024, Dorham has paid into court only $24,908.53 to the credit of the Caroti appeal in the Court of Appeal. The exact amount expected for the second tranche of Dorham funds is unknown at this time.

[87] On September 22, 2023, the Caroti Group wrote to the other parties to propose a conference for the Settling Parties’ motion for judgment and payment of funds held in court as the appeals before the Court of Appeal had been determined. On October 13, 2023, Granics’ counsel wrote on behalf of his clients and Sokich, Faria and the Biondic/Boland Group by suggesting that the motion for judgment should be decided prior to the distribution/priority motions.

[88] On November 30, 2023, I timetabled the return of the judgment and distribution/priority motions as an omnibus distribution motion.

Analysis

The Settling Parties are Entitled to Judgment

[89] There is no real dispute that the Settling Parties are entitled to judgment for the amounts owed under their settlements with the Defendants. The real issue in dispute is whether, or to what extent, the Settling Parties should have an equitable lien along with judgment on the settlements.

[90] I am satisfied that the Settling Parties should have judgment on their respective settlement agreements with the Defendants. Settlement agreements are binding contracts over which a court may grant judgment under Rule 20.04(2): Bross v. Bross, 2023 ONSC 2104 at para 11.[^16] I am satisfied that the various Settling Parties settled their claims with the Defendants, and that the court’s discretion should be exercised to enforce the settlements: North York Excavating & Contracting Limited v. D’Urzo, 2023 ONSC 473 at para 36, citing Srajeldin v Ramsumeer, 2013 ONSC 6178 at para 36. Having not paid the Settling Parties under the settlements, the Defendants are in breach of the agreements. The court’s authority to award judgment to the Settling Parties is not negated by the trial judgment granted to the Trial Parties. Accordingly, I find that judgment on the settlement agreements should be awarded to the Settling Parties. Doing so would allow them to enforce their settlements with the Defendants and align with the court’s broad policy of encouraging and enforcing settlement agreements.

The Trial Parties Lack Standing to Raise the Limitations Issue

[91] I decline to refuse judgment on the settlement agreements on the basis that they are statute-barred. As the Settling Parties correctly assert, the Trial Parties lack standing to raise any limitation defences that only the Defendants could raise to oppose judgment on the settlement agreements: Strong v. Paquet (2000), 2000 CanLII 16831 (ON CA), 50 OR (3d) 70 (CA) at paras 34-36, leave to appeal refused [2000] SCCA No. 532 (SCC); Rule 25.07(4). Indeed, the Defendants had indicated that they would consent to judgment on the settlements. The Granics did not file timely pleadings, but their motion for judgment is grounded on their minutes of settlement with the Defendants, as set out in their notice of motion, that arose from the Defendants’ counterclaim for an accounting of what they were owed. In any event, the Granics delivered pleadings within two years of the trial decision being released and about a year after they learned that the Trial Parties were disputing their entitlement to be paid from the funds paid into court. Before then, the Granics expected to be paid on their settlement agreement with the Defendants.

The Settling Parties Should Not Have Equitable Liens

[92] I am satisfied that the court should not award equitable liens to the Setting Parties in relation to their respective settlement agreements.

[93] By settling their claims, the Settling Parties effectively discontinued or abandoned their claims against the Defendants: Fanelli v Fanelli-Bruno, 2023 ONSC 6501 at para 17. As a result, the basis of their claims for equitable interests arise contractually from the minutes of settlement they entered into with the Defendants.

[94] The test for a valid agreement to create an equitable interest is whether equity would degree that the agreement be specifically performed: Fraser v. Atkinson, 1982 CanLII 1292 (ABKB) at para 19. An equitable lien is a form of equitable charge that is based upon general considerations of justice or upon the principle that a person who seeks equitable relief to enforce some claim must admit the equitable rights of others associated with the subject matter: Silaschi v. 1054473 Ontario Ltd., 2000 CanLII 3021 (ONCA) at para 8, citing Halsbury’s Laws of England at Vol. 28, 4th ed. Reissue (1997) para 704 at p. 354. Although an equitable lien arises by operation of law, the term “equitable lien” may refer to an agreement between parties, also described as an “equitable charge” to ground an interest in property until certain claims are satisfied: Snell’s Principles of Equity, P.V. Baker and P. St. J. Langan, eds. 29th ed (London: Sweet & Maxwell Ltd., 1990), p. 456 as quoted in Barbara E. Cotton, “The Equitable Lien: New Life in an Old Remedy,” (1994) 16 Advocates’ Quarterly 385 note 68 at 2. It is not possible to state a general principle to account for the diversity of situations in which an equitable lien may arise: Silaschi at para 8. However, on a proper interpretation of such an agreement and upon considering all the surrounding circumstances, the court may find that it would be inequitable to enforce the lien: Freeborn v. Goodman, 1969 CanLII 23 (SCC), [1969] SCR 923 at 938-939; 4345142 Ontario Inc. v. Access Self Storage Inc., 2008 CanLII 34362 at para 21.

[95] Before setting out my reasons for not granting equitable interests to the Settling Parties, I shall address a number of threshold issues raised by the Trial Parties on this motion.

a. The Settling Parties are Not Barred from an Equitable Interest

[96] Respectfully, I am not persuaded by the Trial Parties’ submission that the constructive and resulting trusts awarded to them at trial operate to bar the Settling Parties from having an equitable interest in the funds paid into court.

[97] A constructive trust is a remedy that must be judicially declared: Leclair v. Leclair Estate, 1998 CanLII 4805 (BCCA) at para 46; Darte v. The Queen, 2008 TCC 66 at para 20. Proprietary rights flowing from a constructive trust can only arise and be exercised once a court has formally declared or recognized the existence of the constructive trust, thereby establishing the right to this relief: Leclair at paras 45-47, citing Rawluk v. Rawluk, [1990] 1 SCR 79 at 91-92; Darte at para 20; 306440 Ontario Ltd. v. 782127 Ontario Ltd. (Alrange Container Services), 2014 ONCA 548 at paras 24-25, citing Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 SCR 574 at 579 and 678. Once a declaration by a court of equity is made to find a constructive trust in property, the constructive trust is deemed to have come into existence when the unjust enrichment arose: Rawluk at 91; Ellingsen (Trustee of) v. Hallmark Ford Sales Ltd., 2000 BCCA 458 at para 38; Darte a para 20. The constructive trust crystallizes once the right to relief is established: Ontario Securities Commission v. York Rio Resources Inc., 2019 BCSC 776 at para 19.

[98] Based on the foregoing, the Trial Parties submit that a declaration of a constructive or resulting trust establishes a priority claim over the assets in question that allows them to collect on the trial judgment and costs judgment: Alrange at paras 24-25. But the constructive and resulting trusts awarded to the Trial Parties do not confer complete ownership over the property funds paid into court to fully preclude or extinguish the equitable interests that the Settling Parties are seeking.

[99] Constructive and resulting trusts do not automatically bestow full beneficial ownership over the subject property. Where a claimant’s loss is less than the value of the property over which the trust is imposed, the claimant has a partial beneficial interest in proportion to their actual loss: Taylor v. Wallbridge, [1879[ 1879 CanLII 1 (SCC), 2 SCR 616 at 682; A.H. Oosterhoff, Ooserhoff on Trusts, 6th ed (Scarborough: Carswell, 2004) at 703; Sidhu v. Bilin, 2023 BCCA 361 at paras 54-56. This reflects the general principle that a constructive trust cannot provide a claimant with a windfall: Vellenga v. Boersma, 2020 ONCA 537 at para 32. A constructive trust is a form of equitable relief that is imposed specifically to prevent windfalls from occurring: Nortel Networks Corporation (Re), 2010 ONSC 3061 at paras 50 and 52. A resulting trust arises when a party contributes funds for the purchase of a property but does not take legal title to the property: Nishi v. Rascal Trucking Ltd., 2013 SCC 33 at paras 1 and 29.[^17] Similar to a constructive trust, a resulting trust arises at the moment of transfer but crystalizes only when formally declared by the court: Archer v. St. John, 2008 ABQB 245 at para 8.

[100] In this case, the court granted trust interests to the Trial Parties on a value survived approach by which their proportionate contributions to the value of the Project entitled them to a comparative share in its value: Caroti v. Vuletic, 2022 ONSC 4695 (“Trial Reasons”) at para 597. The Defendants were found to hold the proceeds of the Property in trust for the Trial Parties who were awarded trust interests in proportion to their contributions for the Project, thereby entitling them to a pro rata share of the sale proceeds of the Property: Trial Reasons at paras 605 and 607. The proportionate contribution was also applied to recognize contributions to the Project by the Vuletics, who were granted a pro rata share of the available proceeds based on their respective capital contributions to the Project: Trial Reasons at para 645-649. The total distribution awarded to the parties at trial was found to be $12,776,159.00 (i.e., just over 65% of the total sale proceeds of $19,520,490.00) and included a share of $2,158,966.10 for Anthony and John Vuletic. It follows that the trial judgment granted the Trial Parties a partial beneficial interest in the Property. Applying this reasoning, the Settling Parties now seek equitable interests to effectively prioritize the payment of their settlements ahead of the Trial Parties’ costs judgment for the trial.

[101] The Trial Parties invoked the rules of tracing to assert a proprietary interest in funds paid or to be paid into court. They obtained a trial judgment granting them a constructive trust and, alternatively, a purchase money resulting trust over these funds that are said to be valued as much as $19,520,490.00. But their compensatory damages (i.e., based on their pro rata contributions to the Project) collectively amount to a lesser amount totalling $10,617,194.30. Even if prejudgment interest, punitive damages and costs were to be rolled into the trust interest (i.e., over the objections of the Settling Parties, who submit that doing so is contrary to trust law), the Settling Parties submit that total entitlement of the Trial Parties would still be less than the $16,368,576.53 value of the Property, leaving them with beneficial interests in the property funds that is only partial, not full.

[102] As the Trial Parties only have a partial beneficial interest in the property funds, I accept that their interests do not extinguish the equitable liens that the Settling Parties are seeking over the sale proceeds for the Property to enforce their settlements with the Defendants. Generally, there is an overriding public interest in favour of settlements to promote the interests of litigants by avoiding the expense of trial of disputed issues and reducing the strain upon an overburdened court system: Sable Offshore Energy Inc v. Ameron International Corp., 2013 SCC 37 at para 11, citing Sparling v. Southam Inc. (1988), 1988 CanLII 4694 (ON SC), 66 OR (2d) 225 (HC) at 230. The court has a well-established policy of upholding and enforcing settlement agreements absent a real risk of injustice: Srajeldin v. Ramsumeer, 2015 ONSC 6697 (Div Ct) at para 43; Brzozowski v. O’Leary, 2004 ONSC 4805 at para 44. Courts are not quick to find ambiguity or a lack of agreement for a settlement: Olivieri v. Sherman, 2007 ONCA 491 at para 44; Fehrman v Goodlife Fitness Centres Inc., 2017 ONSC 4348 at para 21. The discretion to not enforce a settlement agreement is exercised in only rare and exceptional circumstances: Srebot v. Srebot Farms Ltd., 2013 ONCA 84 at para 6; Catanzaro v. Kellogg’s Canada Inc., 2015 ONCA 779 at para 9; Silvera v. Taylor, 2021 ONSC 2214 at paras 31-34, affirmed 2022 ONCA 120. All of this furthers the court’s broader policy to promote settlement, particularly in complex litigation.

b. No Prejudice from Lack of Acknowledgment

[103] I am not persuaded that any prejudice arose from the Defendants’ failure to formally acknowledge the equitable interests that the Settling Parties are claiming under their settlements.

[104] The Defendants did not acknowledge the Settling Parties’ equitable interest at the outset of trial, as contemplated by the minutes of settlements, that may have resulted in a breach of the agreements.[^18] On their face, the various minutes of settlement expressly contemplate each Settling Party having an equitable interest in the property funds and the court affirming these interests so the Settling Parties could be paid their settlements from funds paid into court. Despite this apparent omission, I accept that no prejudice resulted from the omission as all interested parties knew of the settlement terms and were aware of the Settling Parties’ intention to seek equitable interests after the Trial Parties’ interests were determined at trial. In any event, the principle that equity considers done what ought to have been done applies here as: i) the minutes of settlement imposed obligations on the Defendants to make settlement payments that were not done, ii) the settlements can be specifically enforced, and iii) the principle is being invoked by the Settling Parties who are entitled to enforce the settlements: Grant Forest Products Inc. (Re), 2010 ONCA 355 at paras 11-15; Centurion Mortgage Capital Corp. v. Brightstar Newcastle Corp., 2022 ONSC 1059 at para 33. But this is not the end of the analysis.

c. Nature of Equitable Liens

[105] The simple fact that the minutes of settlement contemplate the Settling Parties being granted equitable interests does not automatically grant them this relief.

[106] The Settling Parties submit that their settlement agreements with the Defendants expressly contemplate the court granting equitable liens over funds paid into court and other Project assets. But an equitable lien is a form of equitable charge upon property until the claims are satisfied: Silaschi at para 8; Ristimaki at paras 10 and 21. Equitable liens arise by operation of equity from the relationship of the parties, and not by any act of theirs: Trez v Wynford, 2015 ONSC 2794 at paras 24-25; Pierce v. Belows, 2019 ONSC 3014 at para 43. To this end, an equitable lien does not arise from a common intention or agreement of the parties. In Steeves v. Steeves, 1995 CanLII 10369 (NBKB) at 8, the court adopted an observation made by Professor G.B. Klippert, Unjust Enrichment (Butterworth) 1983 at pp. 201-202 who described the fundamental nature or character of an equitable lien as follows:

[A]n equitable lien, like a constructive trust, does not arise from the common intention or agreement of the parties. This remedial device enables the plaintiff to secure a monetary claim against a definable piece of property in the hands of the defendant. The pressing of such a lien arises as a matter of law and is supposed to prevent unjust enrichment...The constructive trust entitles the claimant to compel the legal title owner to hold the beneficial ownership, in part or in whole as a trustee. An equitable lien is a security mechanism. [Emphasis added]

[107] The general approach that courts have taken is to declare an equitable lien where there is a finding of an unjust enrichment or a constructive trust. The equitable lien is then impressed upon the trust property as a security interest: St. Paul (County) v. Genereux Workshop (Bonnyville) Ltd., 1984 ABCA 218 at para 10. Professor Duggan summarized the distinction between equitable liens and constructive trusts as follows:

An equitable lien is a security interest arising by operation of law to secure performance of a monetary or other obligation. For example, as an alternative to granting constructive trust relief, the court might award damages secured by an equitable lien over the disputed property. An equitable lien may be worth more to the plaintiff than a constructive trust if the disputed property has depreciated in value.

See A. Duggan “Constructive Trusts in Insolvency: A Canadian Perspective” 2016 94-1 Canadian Bar Review 86, 2016 CanLIIDocs at 95; citing D.W.M. Waters, M. Gillen & L. Smith eds Water’s Law of Trusts in Canada, 4th (Toronto: Carswell, 2012) at 502-503 and 1341, and P.D. Maddaugh & J.D. McCamus, The Law of Restitution (Toronto: Canada Law Book, 2014) Looseleaf, note 10 at ch 5 at 300.

d. The Need for Ownership by the Defendants

[108] The Defendants do not own the preserved funds paid into court. It follows that the Settling Parties cannot be granted an equitable interest over these funds based on their minutes of settlement with the Defendants.

[109] As noted earlier, the Settling Parties are claiming equitable liens over the preserved funds based on their respective minutes of settlement with the Defendants. To show an unjust enrichment to justify awarding the Settling Parties with equitable liens in this case, I accept that the Defendants needed to beneficially own the preserved assets at the material time when the equitable lien purportedly arose. As noted earlier, the remedy of an equitable lien enables a claimant to secure a monetary claim against a definable piece of property in the hands of a defendant: Steeves at 8, citing Klippert at 201-202. However, the Defendants had no such ownership. The remedial rights over assets that the Settling Parties seek are contractually derived and flow from the Defendants’ ownership of the assets. By not enforcing or securing their settlements prior to trial, and by not going to trial, the Settling Parties effectively chose to wait and see whether the court would declare that the Defendants owned any assets from the Project, including any of the preserved assets. As it turned out, the court determined that the Defendants did not own any such funds and dismissed their counterclaims with no relief being granted to them.

e. The Settling Parties Cannot Assert Pre-Settlement Conduct

[110] I am satisfied that the Settling Parties cannot bolster their position on this distribution motion by seeking to argue an entitlement to trust interests based on facts or circumstances going beyond their settlements with the Defendants.

[111] The Settling Parties seek to raise an unjust enrichment argument by alluding to the fact that they, like the Trial Parties, contributed funds to the Project that should result in all such investors having beneficial interests in Project assets in proportion to their contributions. Applying the reasoning in Re Ontario Securities Commission and Greymac Credit Corp. (1986), 1986 CanLII 2693 (ON CA), 55 OR (2d) 673 (CA), affirmed 1988 CanLII 56 (SCC), [1988] 2 SCR 172, as approved in Law Society of Upper Canada v. Toronto Dominion Bank (1998), 1998 CanLII 4774 (ON CA), 42 OR (3d) 257 (CA), leave to appeal denied [1999] SCCA No 77, the Settling Parties submit that they are innocent beneficiaries who should be allowed to share equally with the Trial Parties in the protected funds in proportion to their respective traceable contributions. In making this submission, the Settling Parties submit that each of the Settling and Trial Parties contributed to the Project and, therefore, should have an interest in the protected funds with all ranked equally to the other in proportion to their respective contributions. However, by entering into the settlement agreements, the Settling Parties effectively relinquished their rights to pursue relief for any pre-settlement conduct and agreed to exchange full and final mutual releases on completion of the terms of settlement: Fanelli at para 17. It follows that the basis of the Settling Parties’ claims for judgment and equitable relief on this motion arises from their minutes of settlement and the failure by the Defendants to pay the amounts owed under the settlements.

[112] The Settling Parties submit that they have standing to argue for equitable relief by relying on evidence of their purported beneficial interests in the Property based on their proportional investments or contributions to the Project. To this end, and in seeking to interpret the settlement agreements to establish a binding contract to be enforced, they submit that they are entitled to give context on this distribution motion in seeking summary judgment to enforce the settlements and obtain the equitable relief sought. They claim that this contextual evidence includes providing evidence of the underlying agreements of purchase and sale and the Defendants’ pre-settlement conduct. With respect, I do not accept this submission.

[113] A settlement agreement is a contract that is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties mutually intended to create a legally binding contract and reached agreement on all of the essential terms of the settlement: Olivieri v. Sherman, 2007 ONCA 491 at para 41. Where the agreement is in writing, it is to be measured by an objective reading of the language chosen by the parties to reflect their agreement: Olivieri at para 44. Whether the parties mutually intended to be bound by an agreement is an objective inquiry to be made in light of the words and actions of the parties and surrounding circumstances: Owners Strata Plan LMC 3905 v. Crystal Square Parking Corp, 2020 SCC 29 at para 37; S&J Gareri Trucking Ltd v. Onyx Corporation, 2016 ONCA 505 at paras 7-8.

[114] To establish that the Settling Parties entered into binding minutes of settlement with the Defendants, I accept that they may adduce some contextual evidence in support of their summary judgment motion to enforce the settlements. This reasonably includes leading some contextual evidence of the underlying facts giving rise to the settlements for the limited purpose of being able to understand that the parties mutually intended to create a binding contract by agreeing on the essential terms of the settlement. However, I am not persuaded that this limited purpose should somehow allow the Settling Parties to adduce evidence for the further purpose of obtaining rulings beyond relief to enforce obligations under the settlements that were not performed. Having settled with the Defendants and agreed as a term of settlement to exchange mutual releases on completion of the settlement, I find that it would be unfair for the Settling Parties to obtain equitable relief in the nature of constructive or resulting trusts not arising from their settlements with the Defendants but rather a post-trial application of the trial reasons to have what the Trial Parties successfully got at trial to displace their claims by gaining priority over Project funds, including protected funds.

[115] The Settling Parties essentially seek to be awarded the same or higher priority in respect of the claims of the Trial Parties who endured years of pre-trial discovery, motions, and preparation before ultimately succeeding after a lengthy and hard-fought trial and related appeals, all of which involved rather significant litigation burdens and risks. In contrast, the Settling Parties assumed no such burdens or risks yet now seek equitable relief at the Trial Parties’ expense by using the same trial reasons the Trial Parties successfully obtained to claim a beneficial interest and ground an equitable lien over preserved funds in priority to costs and other relief granted at trial to the Trial Parties. Such an outcome would effectively deprive the Trial Parties of priority to their trial costs, after succeeding at trial and on appeal, and be manifestly unfair and unconscionable.

[116] The Settling Parties notionally seek judgment and equitable liens based on their settlements with the Defendants, but effectively seek to align themselves more closely with the Trial Parties by claiming that the Defendants equally duped and defrauded all of the Settling and Trial Parties (i.e., as all invested in the Project) by seeking to apply the trial reasons to their own situations. In effect, the Settling Parties submit that they should equally be entitled to relief by virtue of the same constructive and resulting trusts that the Trial Parties obtained at trial by arguing that all Project investors were equally defrauded by the Defendants. The Settling Parties claim to refer to the trial reasons to show what the court has already decided and what issues are outstanding. But they also clearly seek to raise equitable lien claims by inviting the court to make substantive findings about the nature and implications of their investments in the Project that should properly have been pursued at trial had they wanted any such findings, and not on a post-trial distribution motion after they had relinquished their rights to pursue the Defendants for their pre-settlement conduct or behaviour. On this distribution motion, the Settling Parties cannot relitigate aspects of the trial by inviting the court to make new or expanded findings to place them on equal or more favourable footing vis-à-vis the Trial Parties. Indeed, the Settling Parties seek findings of constructive and resulting trusts on disputed evidence of what they purportedly invested in the Project without any expert evidence to appropriately quantify their losses. Although I am not prepared to preclude the Settling Parties from referring to the trial reasons on this distribution motion, I am mindful that their claims on the motion should properly be grounded by their minutes of settlement and not on substantive findings related to their pre-settlement claims against the Defendants that they clearly abandoned by settling their claims.

f. Priority over Preserved Funds and Equitable Interests

[117] A key issue on this distribution motion is whether the Trial Parties should be entitled to their costs judgment and other relief awarded at trial from the preserved funds in priority to any equitable interest granted to the Settling Parties.

[118] Applying the equitable principle of indemnification, I find it to be fair and equitable for the Trial Parties to be awarded just allowances for having obtained the constructive and resulting trusts over the subject funds: Sproule v. Clements, [1939] BCR 28 (CA) at 39. To this end, I accept that litigants who create or protect a fund may recover their reasonable costs from the fund, or from other beneficiaries of the fund: Hollander v. Mooney, 2017 BCCA 238 at para 65, leave to appeal denied 2018 CanLII 28109 (SCC); P.D. Maddaugh and J.D. McCamus, Law of Restitituion, Looseleaf Edition § 33.7. Solicitor-client costs have been paid from recovered funds where a trial judgment established the entitlement to the fund and others seek to benefit from the judgment: Shabinsky v. Horwitz, 1971 CanLII 729 (ON SC), [1973] 1 OR 745 (HCJ) at 751-752; Macdonald v. McCall, [1887] OJ No 292 (HCJ) at paras 7-8.

[119] The trial judgment provides that the Trial Parties are awarded their costs of the trial as agreed upon by the Defendants. The costs judgment specifies the amount of costs agreed upon by the parties who went to trial. However, neither the trial judgment nor the costs judgment confers an equitable interest or priority for the Trial Parties over their judgment for costs of the trial.

[120] The Settling Parties seek equitable priority over the Trial Parties to the protected funds by arguing, among other things, an equitable interest based on the Defendants’ failure to pay the amounts owed under the settlement agreements (i.e., despite knowing that the Defendants could not be trusted to honour their commitments after purportedly duping or defrauding them and other investors in the Project). Granting this relief to the Settling Parties would effectively reward their clear inactivity in this litigation and their strategic decision to side with the Defendants (i.e., in the hopes that they would be awarded sufficient funds at trial to pay the settlements) while taking no steps to enforce or secure their settlement, and thereby penalize the Trial Parties by depriving them of their trial costs after succeeding at trial and on appeal. Granting the Settling Parties an equitable interest on this basis would result in a perverse outcome that, if supported by the courts, would encourage parties to settle and stand back, avoid the burdens and risks of trial, have others perform heavy lifting at trial on their behalf, use the trial reasons obtained by others to seek substantive equitable claims, and unfairly burden those who went to trial by displacing their priority to their trial costs and other relief. In my view, allowing the Settling Parties to achieve such an outcome would be grossly unfair to the Trial Parties.

[121] I am satisfied that fairness and equity favour the Trial Parties. They took on the burdens and risks of litigating a lengthy and hard-fought trial and, therefore, should have their costs and other remedies awarded at trial: Sproule at para 27.[^19] In the particular circumstances of this case, I am satisfied that the indemnification principle outweighs the broader policy goals of promoting settlements. The minutes of settlement filed by the Settling Parties on this distribution motion do not direct nor require immediate payment, and do not provide for the earlier enforcement of the settlements when the Defendants had sufficient assets available to satisfy what they owed under the settlements. The settlements purport to confer certain rights on the Settling Parties but without prejudice to any positions taken by the Defendants or the other parties to the litigation.

[122] Given the settlement amounts at issue, I accept that many if not all of the Settling Parties negotiated settlement amounts with the Defendants that include compensatory amounts for legal costs and interest, if not additional remedies, even though the settlements do not disclose or reveal the various component elements of each settlement. Based on this, I am satisfied that it would be unjust for the court to award equitable interests to the Settling Parties on their settlements (i.e., that compensate them for costs and interest, among other things) in priority to what was granted to the Trial Parties for their legal costs, interest or other relief simply because these items of relief fell outside of any equitable interests. In my view, such an outcome would be quite unfair.

[123] In any event, the Defendants were not found to have any interest in Project or preserved funds, as noted earlier. Accordingly, I am not persuaded that the Settling Parties should be awarded an equitable interest in any such funds based on their settlements with the Defendants.

[124] Equitable remedies are discretionary and are awarded to prevent unfairness. Having considered the entire record as filed, I accept that the Settling Parties made a strategic decision to settle with the Defendants on the terms they did rather than litigate their claims at trial. In the circumstances, I am satisfied that it would be unfair to impair the Trial Parties’ ability to recover their trial costs and other remedies to enrich the Settling Parties who did not contribute to the legal battle at trial nor to the financial burdens associated with the litigation.

[125] In general, equitable remedies operate on the maxim that, “equity aids the vigilant, not the indolent:” Perry, Farley & Onyschuk v. Outerbridge Management Ltd., 2000 CanLII 22491 (ONSC) at para 40, citing P.V. Baker and P. St. J. Langan, Snell’s Equity, 29th ed (London: Sweet & Maxwell, 1990) at 35, reversed but not on this point 2002 CanLII 5678 (ONCA). In addition, equity operates on the maxim: “between equal equities the first in order of time shall prevail,” subject to an exception to the “first-in-time rule” where a party has the “better equity”: McKillop & Benjafield v. Alexander, 1912 CanLII 31 (SCC) at 554; Everingham Brothers Ltd. (In Bankruptcy), 2000 CanLII 5709 (ONCA) at paras 76-78, leave to appeal denied [2000] SCCA No 259. Further, the doctrine of laches provides that a claimant will be precluded from bringing a claim if: a) there is acquiescence on the claimant’s part, or b) a change of position arising from reasonable reliance on the claimant’s acceptance of the status quo: M.(K.) v. M.(H.), 1992 CanLII 31 (SCC), [1992] 3 SCR 6 at 76-80; Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14 at paras 145-146; Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201 at para 289. Acquiescence in the context of laches leads to an inference that the parties’ rights have been waived: M.(K.) at 78; Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764 at paras 10 and 61.

[126] Here, the Settling Parties chose to settle their claims with the Defendants before trial, did not actively seek to enforce their settlements before assets were dissipated, and did not previously take action to protect their settlements even after the Defendants failed to pay the settlements by September 30, 2020 as required under the terms of settlement. In light of this, and the equitable principle of indemnification, I find that it would be unfair and inequitable to give the Settling Parties an equitable priority over Project and protected funds to displace the Trial Parties’ ability to recover their trial costs and remedies from these funds.

[127] In support of their position, the Trial Parties rely on the basic rule that equitable interests primarily rank in the order in which they are created: Mamillan Inc. v. Bishopsgate Investment Trust (No. 3), [1995] 1 WLR 978 at 99-1000; Molinski v. Chebib, 2012 MBQB 123 at para 21; Diamond Mines Inc. v. Tahera Diamond Corp., 2009 NUCJ 5 at paras 14-18; Elias Markets Ltd., Re, 2006 CanLII 31904 (ON CA) at para 69; Boreta v. Primrose Drilling Ventures Ltd., 2010 ABQB 381 at para 63, affirmed 2010 ABCA 387. They also rely on the maxim that the one who is earlier in time is strong in law: McGee et al., Snell’s Principles of Equity, 33rd Ed. (London: Sweet & Maxwell, 2015) at 4-002. Based on these rules, the Trial Parties submit that in cases of competing equitable interests, the general rule of equity is that the person whose equity attached first to the property has priority over the other: Ibid. However, the basic rule and the maxim do not always prevail as all of the equities must be considered in deciding the priority of equitable interests: McDougall v. MacKay (1922), 1922 CanLII 52 (SCC), 64 SCR 1 at 12, citing Rice v. Rice, (1853), 2 Drewry 73, 61 ER 646; Canada Life Assurance Co. v. Kennedy, 1978 CanLII 1433 (ONCA). As Anglin J. noted in McDougall at 12,

I fully recognize that a court of equity will not prefer one equity to another on the mere ground of priority of time until it has found by examination of their relative merits that there is no other sufficient ground of preference between them; that such examination must cover the conduct of the parties and all the circumstances; and that the test of preference is the broad principle of right and justice which courts of equity apply universally.

[128] I am mindful that the Preservation Order was obtained on motion brought by the Caroti Group, Bilich, Sokich, and Klecina, respectively. As a result, Sokich and Klecina seek to have at least a portion of their settlements paid in priority to the other Settling Parties from the preserved funds. However, the record filed on this motion does not provide a breakdown of their settlements to meaningfully understand them. Moreover, Sokich and Klecina, along with all of the other Settling Parties, chose to strategically settle their claims with the Defendants who were found at trial to not have an interest in the protected funds. Both knew that the ability to collect on their respective settlements would depend on the Defendants winning sufficient funds in the Project at trial to pay their settlement obligations. In the circumstances, I decline to award Sokich or Klecina equitable interests over Project or preserved funds to avoid prejudicing the Trial Parties’ ability to recover their costs and other remedies from these funds.

[129] I am not persuaded that Klecina should have his $700,000.00 settlement claim paid from the Caroti Group’s share of the preserved funds. Like the other Settling Parties, Klecina knew full well that payment of his settlement was contingent on the Defendants succeeding with their case. The Defendants did not succeed. In addition, Defendants’ counsel acknowledged at the start of trial that there may not be enough money to pay the Settling and Trial Parties. This followed an email exchange where the Settling Parties were clearly advised of the Trial Parties’ position that, a) any recovery of the settlements would follow any judgment granted in favour of the Trial Parties, and b) the Settling Parties would have no claim to the preserved funds if the Defendants had no entitlement to these funds. In the circumstances, I find that it would be unfair and unreasonable to award Klecina his settlement claim as requested.

[130] I have some sympathy for Klecina’s claim for reimbursement of the legal fees that he contributed to the Caroti Group before he settled his claim. Klecina was a founding member of the Caroti Group. He claims to have paid $400,000.00 for the Caroti Group’s legal costs before he left the group and settled with the Defendants. Based on this, he seeks reimbursement for this funding in priority on equitable principles: Re 4519922 Canada Inc., 2015 ONSC 4648 at para 35. The $400,000.00 figure includes all of his litigation costs before his claim was settled and does not necessarily relate to any preservation efforts. That said, I accept that Klecina settled his claim against the Defendants for an amount that included his litigation costs. He now seeks to have the Caroti Group pay for all his legal costs after contractually settling these costs through minutes of settlement with the Defendants, even though the Caroti Group was not a party to the settlement. Notably, the Caroti Group entered into post-trial negotiations to settle costs of the trial with the Defendants. They did not include Klecina’s legal costs in these negotiations as he had separately resolved those costs through minutes of settlement with the Defendants and gave no notice that he would be seeking to have the group reimburse these costs. In light of this, I find that it would be unjust and inequitable to require the Caroti Group to pay for Klecina’s legal costs at this time.

g. The Settlements Do Not Breach the Preservation Order

[131] I am not persuaded by the Trial Parties’ position that the minutes of settlement violate the terms of the Preservation Order. Although the order clearly requires the Defendants to not assign, well, dispose of, or transfer their rights, interests, or obligations in the Property without first obtaining leave of the court, the settlements clearly contemplate leave of the court being sought to affirm the settlement terms including the equitable interests (i.e., to which the Defendants agreed to give their consent) as contemplated in the settlement agreements. In light of this, I accept that the minutes were drafted to conform with the terms of the Preservation Order, and that the Settling Parties took adequate steps to enforce their rights under the settlements. Taking this all into consideration, I am satisfied that there is no mischief arising from the settlement agreements as the Trial Parties have suggested.

h. No Unjust Preference

[132] I do not accept the Pichelli Group’s submission that the minutes of settlement between the Settling Parties and the Defendants constitute unjust preferences that are contrary to ss. 4(2) of the Assignments and Preferences Act, RSO 1990, c A.33 (the “Act”). Subsection 4(1) to (3) of the Act provides as follows:

Nullity of gifts, transfers, etc., made with intent to defeat or prejudice creditors

4 (1) Subject to section 5, every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person when insolvent or unable to pay the person’s debts in full or when the person knows that he, she or it is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced.

Unjust preferences

(2) Subject to section 5, every such gift, conveyance, assignment or transfer, delivery over or payment made by a person being at the time in insolvent circumstances, or unable to pay his, her or its debts in full, or knowing himself, herself or itself to be on the eve of insolvency, to or for a creditor with the intent to give such creditor an unjust preference over other creditors or over any one or more of them is void as against the creditor or creditors injured, delayed, prejudiced or postponed.

When there is presumption of intention if transaction has effect of unjust preference

(3) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, in and with respect to any action or proceeding that, within sixty days thereafter, is brought, had or taken to impeach or set aside such transaction, be presumed, in the absence of evidence to the contrary, to have been made with the intent mentioned in subsection (2), and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure.

[133] To establish that a transaction is void as an unjust preference under ss. 4(2) of the Act, the onus is on the Pichelli Group to prove, on a balance of probabilities, that

a) a transfer or conveyance was made,

b) to a pre-existing creditor,

c) at a time when the Defendants were insolvent, or know they were on the eve of insolvency,

d) that in granting the transfer or conveyance, the Defendants intended to prefer the Settling Parties over other creditors, and

e) the Settling Parties intended to receive a preference in priority over other creditors.

Krates v. Crate, 2018 ONSC 2399 at para 28.

[134] I am satisfied that the Pichelli Group cannot meet its onus to show an unjust preference under ss. 4(2) as no transfer or conveyance has been made. In addition, whether the Defendants were on the eve of insolvency when they entered into the minutes of settlement or now is, at best, unclear on the evidentiary record before the court. In any event, I am satisfied that the language of the minutes of settlement show that they were made without prejudice to the rights of the Trial Parties or others and, therefore, were not intended to unjustly prefer the Settling Parties.

i. Appellate Intervention Not Required

[135] I am not persuaded by the Trial Parties submission that the Settling Parties ought to have taken further steps to enforce the minutes of settlement by intervening at the Court of Appeal. During the case conference held on October 11, 2022, all of the Settling and Trial Parties agreed that an omnibus motion to enforce the settlements and distribute the preserved funds should be heard after the appeals. Thereafter, on July 11, 2023, I endorsed that the parties could seek to return for a case conference to address the judgment and priority motions after the Court of Appeal had decided the motion by the Defendants to restore their appeals. Having regard to the directions of this court, I do not find that the Settling Parties were obliged to intervene in the appeals.

j. No Stop Order Required

[136] I do not accept Bilich’s position that the Settling Parties ought to have sought a stop order under Rule 72.05.[^20] In my view, there is nothing in that rule to suggest that such relief was appropriate in this matter. A stop order is used to ensure that parties claiming an interest in funds held in court are given notice of any attempt by another party to deal with such funds. In this case, there is no need for the Settling Parties to obtain a stop order as the issue of entitlement to the preserved funds paid into court is being addressed on notice to all parties. Indeed, Caroti Group’s counsel expressly advised that notice would be given, and the court agreed to hear the Settling Group’s motion for judgment and corollary relief.

Outcome

[137] As set out earlier, I find that the Settling Parties should have judgment on their respective minutes of settlement with the Defendants together with post-judgment interest of 5% per annum starting September 30, 2020.

[138] I am not persuaded that the Settling Parties should have an equitable lien over Project funds to remedy the Defendants’ non-payment of their obligations under the settlement agreements. The minutes of settlement themselves contemplate that any equitable lien is without prejudice to the rights or claims of other parties. In addition, the Defendants have not been shown to have ownership interests in the preserved funds or other Project funds to ground an equitable interest. The Settling Parties were well aware that their ability to be paid their settlements depended on the Defendants gaining ownership of sufficient Project assets at trial to pay out the settlements. The Settling Parties essentially “rolled the dice” by entering into their respective settlements and simply lost. In my view, not granting the Settling Parties an equitable lien is a just and fair outcome in the circumstances of this case as it gives them exactly what they knowingly bargained for. Accordingly, no equitable remedies are granted to the Settling Parties.

[139] The following chart summarizes the claims of the Trial Parties in the two actions that were heard together at trial and on appeal:

Caroti Group

Pichelli Group

Bilich

Total

Trial Judgment dated Aug. 15, 2022

$7,251,861.86

$2,851,943.53

$513,388.88

$10,617,194.30

Pre-judgment Interest

$423,229.38 [1.245% per year from Dec. 8 , 2017 to Aug. 15, 2022]

$183,587.01 [1.2% per year from Apr. 5, 2017 to Aug. 15, 2022]

$31,900.43

[2% per year from July 8, 2019 to Aug. 15, 2022]

$638,716.82

Punitive Damages

$102,454.50

$40,292.33

$7,253.17

$150,000.00

Total Judgment

$7,777,545.74

$3,075,822.87

$552,542.48

$11,405,911.10

Interest on Judgment

3% per year

$432,133.23

3% per year

$170,897.78

3% per year

$30,700.17

$633,731.17

Costs Judgment

dated Jan. 27, 2023

$3,538,844.97

$869,616.64

$554,203.83

$4,962,665.44

Interest on Costs

5% per year

$327,706.74

5% per year

$80,528.88

5% per year

$51,320.79

$459,556.42

Court of Appeal

Costs

$28,250.00

$15,750.00

$15,750.00

$59,750.00

Total

(without interest)

$11,344,640.70

$3,961,189.51

$1,122,496.31

$16,428,326.50

Total

(with interest)

$12,104,480.70

$4,212,616.17

$1,204,517.27

$17,521,614.10

[140] As of June 21, 2024, the total amount of the judgments plus legal costs and interest came to a total of $17,521,614.10 that cannot be satisfied by the $11,281,847.15 in funds paid into court with further accrued interest. In the circumstances, I find that the amounts should be paid out on a proportional or pro rata basis amongst the Trial Parties, subject to the Pichelli Group not collecting on the assets of the Defendant Mira Vuletic as they did not sue her, and further subject to Bilich collecting only her costs judgment against Mira’s assets.

[141] But for the actions of the Caroti Group and Bilich to preserve funds paid into court, there is a good chance that nothing would have been preserved from the sale proceeds beyond the amount of the Mareva injunction obtained by the Pichelli Group. Although the Pichelli Group did not participate in the Caroti Group/Bilich motion to pay funds into court, I accept that all of the Trial Parties collaborated throughout the litigation, including the trial and the appeals, in largely a joint effort to reasonably share the litigation burdens and realize costs savings or efficiencies. As a result, I decline to limit the Pichelli Group’s recovery to the Mareva-related funds and find that it is just and equitable for all of the Trial Parties to share in all of the preserved funds paid into court on a pro rata basis in light of how they worked collaboratively throughout the litigation.

[142] There are competing claims to other assets of the Defendants, namely ownership of Lots 49, 50 and 60 in the Project (i.e., purportedly retained by the Vuletics upon the sale of the Property and confirmed by Brampton G&A to be ascertainable), and the over $1.2 million of the so-called Dorham funds (i.e., of which $12,997.06 has been paid into court to the credit of the Caroti Appeal in COA-22-CV-0106).[^21] To the extent that the distribution of those assets may require the court’s ongoing assistance to resolve valuations or allocations of proceeds amongst judgment creditors, or preserving assets pending resolution, I am prepared to remain seized to deal with those issues.

[143] As set out below, I am not persuaded that the Caroti Group should have $120,000.00 on a quantum meruit basis for their efforts to preserve the Dorham funds. In claiming this relief, the Caroti Group claims that their efforts benefitted others to warrant being paid on a restitutionary quantum meruit basis: Nicholson v. Brown Estate, 2018 BCSC 141 at paras 87-88; Reichmann v. Vered, 2003 ONSC 49295 at para 241. But for the Caroti Group’s efforts, there would be no further Dorham-related funds and the shares likely would have been sold to a bona fide purchaser leaving the associated second tranche out of reach. I accept that the Caroti Group undertook the burden and risk of preserving the Dorham funds. The Pichelli Group and Bilich submit that the Caroti Group did comparatively little to preserve the Dorham funds that have been or will be paid into court on consent. However, I accept that the Caroti Group undertook reasonable efforts to preserve the funds and successfully responded to an appeal. Although Dorham agreed, through its counsel, to pay these funds into court to the credit of the Caroti Appeal, I am mindful that this consent may not have been forthcoming unless the preservation motion was brought. However, George J.A. awarded $6,000.00 in costs to the Caroti Group for the preservation motion, and a panel of the Court of Appeal dismissed an appeal from the decision on the motion with costs. In light of this, I see no basis to award further costs for these efforts at this time, let alone $120,000.00 in super priority costs over the Dorham funds that were paid into court on consent.

[144] On this motion, the Caroti Group has undertaken to transfer the Dorham funds from the Court of Appeal to the Superior Court action if their $29,000.00 in costs awards plus HST is first paid out. I find this proposal to be fair and reasonable.

[145] Orders shall issue in accordance with these reasons.

[146] I encourage counsel to settle the issue of costs for the distribution motion. However, if they are unable to do so, a case conference may be requested to address costs for the motion.

Date: December 6, 2024 M.T. Doi J.

COURT FILE NOS.: CV-17-5302 and CV-17-1481

DATE: 2024 12 06

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN: Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus, Monica Savona and Mike Klecina in his capacity as Estate Trustee of the Estate of Boris Klecina (also known as Borislav Klecina), Plaintiffs

AND:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp., 1857325 Ontario Ltd., and Brampton G&A Holdings Inc., Defendants

AND BETWEEN:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp. and 1857325 Ontario Ltd., Plaintiffs by Counterclaim

AND:

Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus, Monica Savona, Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic, Roberta Biondic, Mike Klecina in his capacity as Estate Trustee of the Estate of Boris Klecina (also known as Borislav Klecina), Anna Bilich, Emma Faria, Katarina Granic, Anton Granic, Marianne Martinovic, Frank Samardzic and Robert Sokic, Defendants by Counterclaim

AND BETWEEN:

Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic and Roberta Biondic, Defendants by Counterclaim

AND:

Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp. and 1857325 Ontario Ltd., Defendants by Counterclaim

AND BETWEEN:

Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited, Plaintiffs and Defendants by Counterclaim

AND:

Ante Kegalj, Anthony Vuletic, John Vuletic, Embleton Properties Corp., 1857325 Ontario Ltd. and Brampton G&A Holdings Inc., Defendants

BEFORE: M.T. Doi J.

COUNSEL: George Karayannides and Mark Mandelker, for Milena Boland, Frank Demaria, Jurica Biondic, Renato Biondic and Roberta Biondic

James S.G. Macdonald, for Robert Sokich and Jose Faria

Asher G. Honickman, for Anton Granic and Katarina Granic

Doug LaFramboise, for Frank Samardzic

R. Christopher M. Belsito, for Mike Klecina, in his capacity as Estate Trustee for the Estate of Boris Klecina (also known as Borislav Klecina)

Caroline Abela, for Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek, Marielle Pelchat-Morris, Wilma Jesus and Monica Savona

Andrew J. MacDonald, for Anna Bilich

Douglas M. Cunningham, for Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited

ENDORSEMENT

M.T. Doi J.

DATE: December 6, 2024

[^1]: The funds were paid into court to the credit of the action in CV-17-5302. In addition, there are competing claims to other assets including the ownership of Lots 40, 50 and 60 as retained by the Defendants Anthony Vuletic, John Vuletic, and Mira Vuletic upon the sale of the property at 78 Cliffside Drive to Brampton G&A Holdings Inc., and funds paid into court by Dorham Holdings to the credit of the appeal in COA-22-CV-0106, among others.

[^2]: The trial reasons are reported at Caroti v. Vuletic, 2022 ONSC 4695.

[^3]: The Biondic Group counterclaimed against the Defendants for the following: a) damages in breach of contract, fiduciary and/or equitable duties, fraud, negligence, negligent and/or fraudulent misrepresentations, deceit, and/or unjust enrichment; b) an accounting of profits made by the Defendants in breach of their contractual, fiduciary and/or equitable duties; c) a declaration that the Defendants held all sums received by them in fraud as resulting or constructive trustees and an order that they repay those sums; d) a declaration of an equitable interest in the Property and vendor-take-back mortgage of $11,539,500.00 registered on title by 185 Corp.; e) an interlocutory order for the Defendants to pay into court all funds previously received and to be received in the future for the sale of the Property and the vendor-take-back mortgage; f) a declaration that the Defendants are liable to account as constructive trustees over the funds obtained through the charges registered against the Property and the sale of the Property; g) the sale of Lots 49, 50, and 60 to the Property and the proceeds distributed to the Biondic Group and other investors; h) an order restraining the Defendants from selling, encumbering, disposing, assigning an interest, or charging Lots 49, 50 and 60; and i) costs and interest.

[^4]: Sokich and Faria counterclaimed against the Defendants for, among other things, the following: a) beneficial ownership, by constructive trust, tracing and resulting trust of all rights and interests held by the Defendants in respect of the sale of the Property and the vendor-take-back mortgage; b) an accounting, disgorgement, and damages for breach of fiduciary duty, restitution, knowing receipt, and breach of contract; and c) costs and interest.

[^5]: The Granics, who were self-represented and opted to not deliver a statement of defence or counterclaim, purportedly understood from Anthony Vuletic’s repeated representations that they had retained ownership over Lot 60 that had been promised to them in an amended agreement of purchase and sale in 2013. They apparently were unaware that Brampton G&A had an option to retain Lot 60 as part of the sale of the Property (i.e., due to a purported misrepresentation by the Defendants) and allegedly understood that it was unnecessary to plead into the action based on assurances by Defendants’ counsel that they had been added to the Defendants’ counterclaim to affirm their status as “lot holders in good standing.”

[^6]: As the case was not an appropriate class proceeding, the case management judge, LeMay J., directed the Defendants to name the Biondics, Sokich, Bilich, Faria, and the Granics in their counterclaim.

[^7]: However, the agreement of purchase and sale with Brampton G&A for the subject property indicated that Lot 60 was subject to a repurchase by the Defendant 1857325 Ontario Ltd. for a set price.

[^8]: See Order of LeMay J. dated February 18, 2018.

[^9]: See Order of LeMay J. dated September 12, 2017.

[^10]: Boland signed the minutes of settlement for De Maria but not in a representative capacity as she claims that her ex-husband ceased to have an interest in the Project on October 30, 2018. Under cross-examination, Boland stated that she had settled the litigation on behalf of De Maria under a power of attorney despite not bringing the action as his attorney for property. De Maria is named as a plaintiff in the amended statement of claim issued on November 5, 2018 (i.e., after Boland claims that De Maria no longer had an interest and after the power of attorney). When asked on cross-examination whether Boland would be paying for costs against De Maria resulting from a failed motion, the question was refused.

[^11]: The Grandview Property and the Dorham assets are discussed later in these reasons.

[^12]: The Caroti group did not place a CPL on Grandview until after the reasons for judgment that granted a constructive trust over this property. There was no constructive trust in respect of Dorham Holdings Inc. in 2020 and the exact amount the Vuletics used to fund the Oakville property was not known until the expert report was delivered in support of the damages quantification at trial. The Dorham funds were

[^13]: See email from g. Adair to A. Granic and others dated September 16, 2020, Brief of Answers, Granic Answers Tab D(3), p. 370.

[^14]: Para 656 of the trial reasons expressly contemplated that there may be further litigation following judgment, namely in respect of the issues relating to the funds preserved in court and the lots addressed in the order of LeMay J. dated September 9, 2019 as amended on November 25, 2019. Having regard to the statements from the first day of trial, and other statements in the reasons, these issues encompass all issues relating to the disposition of the funds paid into court including the claims and entitlements of the Settling Parties. Among other things, para 657 of the trial reasons states that counsel for the Trial Parties are to provide dates for a case conference that are “mutually convenient to them and counsel for the other affected parties,”(i.e., being the Settling Parties).

[^15]: See Notice of Appeal filed September 14, 2022 in COA-22-CV-0094, Notice of Appeal filed September 15, 2022 in COA-22-CV-0106, and Notice of Appeal filed September 19, 2022 in COA-CV-0116.

[^16]: It was largely acknowledged during submissions that Rule 49.09 is inapplicable to negotiated minutes of settlement reached outside of a Rule 49 offer, such that the appropriate procedure for a party seeking to enforce minutes of settlement is under Rule 20: Bross at para 11, citing Vanderkop v. Manufacturers Life Insurance Co. (2005), 2005 CanLII 39686 (ON SC), 78 OR (3d) 276 (SCJ) at paras 14-16 and 38, Exponents Canada Inc. v. Sharma, 2015 ONSC 2940 at paras 6-7; Rosso v. Rosso, 2024 ONSC 1109 at para 28.

[^17]: In such circumstances, equity presumes bargains rather than gifts such that the person who contributed purchase funds is presumed to have intended to assume the beneficial interest in the property in proportion to their contribution to the purchase price: Ibid; Kerr v. Baranow, 2011 SCC 10 at para 25; Bradshaw v. Hougassian, 2024 ONCA 425 at paras 16-17.

[^18]: A finding of a breach of the minutes of settlement by the Defendants would be subject to any settlement or resolution of the issue with the Settling Parties, respectively.

[^19]: The Settling Parties cite Nolan v. Kerry (Canada) Inc., 2009 SCC 39 for the proposition that “only in limited non-contentious cases should parties be awarded costs from a trust fund.” However, the law related to costs recovery from settled trusts differs from the facts of this case. Nolan has no application here. A settled trust has different characteristics than a remedial constructive trust, such as the three certainties of trust law (i.e., certainty of intention, certainty of subject matter, and certainty of object): Bank of Nova Scotia v. Societe General (Canada), 1988 CanLII 166 (ABCA), citing Waters, Law of Trusts in Canada, 2nd ed. (1984) at 107. It is settled law that trustees of a settled trust or estate who dispute with beneficiaries about a breach of duty or their own administration cannot simply look to the coffers of the trust for litigation fees: Thompson Estate Re, [1945] CarswellOnt 97 at para 24 and 28. In Nolan, the specific provisions in the trust agreement set out in the exclusive benefits language in the pension trust agreement. An issue was whether the pension trust agreement precluded the use of trust assets for any other use: Kerry (Canada) Inc. v. Ontario (Superintendent of Financial Services), 2009 SCC 39 at paras 169-170. The key question in that case was whether the litigation was adversarial to the beneficiaries: Kerry at para 124. Here, the litigation was adversarial to the Defendants who, as perpetrators of fraud, cannot be analogized to beneficiaries. To the extent that the Settling Parties analogize the Defendants to trustees, that would simply preclude their own costs from being paid from the trust. To the extent that the Settling Parties suggest that the Trial Parties were adverse to them during the litigation against the Defendants, this would confirm the notion that the Settling Parties were banking on the Defendants winning the trial (i.e., as payouts on their settlements were contingent on the Defendants being found to own sufficient Project assets to pay the settlements).

[^20]: Rule 72.05 provides as follows:

Stop Order

72.05 (1) On motion without notice in a proceeding or, where there is no proceeding pending, on application without notice by a person who claims to be entitled to money or securities held or to be held in the future by the Accountant for the benefit of another person, the court may make a stop order (Form 72C) directing that the money or securities shall not be dealt with except on notice to the moving party or applicant.

(2) On a motion or application for a stop order, the moving party or applicant shall, unless the court orders otherwise, undertake to abide by any order concerning damages that the court may make if it ultimately appears that the granting of the order has caused damage to any person for which the moving party or applicant ought to compensate the person.

(3) A person who has obtained an order under subrule (1) may make a motion on notice to all interested parties for an order for payment out

[^21]: There were two tranches of Dorham funds, both valued at about $1.2 million. On the preservation motion before George J.A. in the Court of Appeal, the main issue related to the first tranche of Dorham funds and the requirement for the Vuletics to post security of $1.2 million for these funds that had already been paid by Dorham to a family member in Croatia. Security for that amount was never posted. There is no real prospect that this first tranche of $1.2 million will ever be paid into court. Accordingly, and despite the Caroti Group’s efforts, none of these funds have been preserved. The second tranche of $1.2 million is presently being paid into court to the credit of the Caroti Appeal. These funds represented payments that Dorham owed to the Vuletics.