CITATION: Caroti v. Vuletic, 2022 ONSC 4695  
COURT FILE NOS.: CV-17-5302-00 and CV-17-1481-00  
DATE: 2022 08 15  
SUPERIOR COURT OF JUSTICE - ONTARIO  
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:  
Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited,  
Plaintiffs and Defendants by Counterclaim  
AND:  
Ante Kegalj, Anthony Vuletic, John Vuletic, Embleton Properties  
Gorp., 1857325 Ontario Ltd., and Brampton G&A Holdings Inc.,  
Defendants and Plaintiffs by Counterclaim  
BEFORE: Doi J.  
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COUNSEL: Caroline Abela and Michael Statham, for the Plaintiffs 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  
Andrew J. MacDonald, for the Defendant and Plaintiff by  
Counterclaim Anna Bilich  
Douglas M. Cunningham, for the Plaintiffs Peter Pichelli, Todd  
Leslie, Frank Toth and 958041 Ontario Limited  
Ryan Breedon and Jessica Mor, for the Defendants Anthony Vuletic,  
John Vuletic, Mira Vuletic, Embleton Properties Corp. and 1857325  
Ontario Ltd.  
HEARD:  
September 13-17, 20-24 and 27-29, October 1, 4-8, 12-15, 18-22,  
and 25-29, November 1-5 and 18, 2021, and January 12-13, 2022.  
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Contents  
Overview  
Background  
a. The Actions and the Parties  
b. The Project  
c. The Restaurant Meeting  
d. Ms. Bilich’s Investment in the Project  
e. The Workplace Group Members’ Investment in the Project.  
f. The Savonas’ Investment in the Project  
g. The Investment by the Pichelli Group  
h. The Investment by Ms. Nizalek and Mr. McDowell in the Project  
i.  
Ms. Ceifets’ Retainer  
j. Omissions about the Project  
k. The Investor APS Contracts  
l. Anthony’s Status as a Lawyer  
m. Acquisition of the Property  
n. Poor Retention of Project Records and Documents  
o. Poor Corporate Governance  
p. Mortgages on the Property  
q. Mortgages were Serviced from New Mortgage Proceeds  
r. Servicing or “Cash Call” Payments  
s. Ratio of Personal to Project Expenses  
The Development  
a. Project Status Updates and Cash Calls  
b. Cash Call #1 March 31, 2003  
c. Cash Call #2 October 28, 2005  
d. Cash Call #3 January 29, 2007  
e. Dissolution of Embleton  
f. Cash Call #4 September 23, 2008  
g. The December 2009 “Statement of Intention”  
h. The OPA  
i. Cash Call #5 December 2012  
j. Accounting Issues  
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k. The 2013 Draft Plan of Subdivision  
l. The Savonas and the “Lost” Lot Interest  
n. Alleged Default by Mr. and Ms. Caroti  
o. Management Fees  
p. Control Over Project Funds  
q. The Kegalj Action in 2010-2011  
r. The Project in Crisis  
s. The Project Corporations  
t. The Ufkes and Teramoto Lands  
u. The Accounting  
v. Draft Plan of Subdivision and Decision to Sell the Property  
w. Agreement to Sell the Property  
x. The Bilich Motion Materials  
y. Mr. Adair’s Letter to Investors  
z. The Accounting Reports  
aa. Details Regarding the Sale of the Property  
bb. Proceeds from the Sale of the Property  
Plaintiffs’ Expert Evidence  
a. Errol Soriano  
b. Michael Parsons  
c. John Galluzzo  
d. No Defence Expert Evidence  
Analysis  
a. Credibility  
b. Limitations Defence  
c. Investment Relationship under the APS  
d. Anna Bilich’s Interest  
e. The Pichelli APS  
f. The APSs were Not Forfeited for a Failure to Pay Cash Calls  
g. Breach of Contract  
h. Fraud, Deceit and Fraudulent Misrepresentation  
i. Breach of Fiduciary Duty  
j. Conspiracy  
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k. The Remedy of a Constructive Trust  
l. Purchase Money Resulting Trust  
m. The “But-For” Analysis  
i. Overview of KSV’s Methodology  
ii. Use of Relative Capital Contributions to Calculate the But-For Proceeds  
aa. But-For Cash Inflows  
bb. But-For Cash Outflows  
Punitive Damages  
Outcome  
REASONS FOR JUDGMENT  
Overview  
[1] The Plaintiffs and others invested funds in a land development scheme in  
Brampton that never materialized as the subject land was sold in 2016 as  
undeveloped land to a third-party developer for over $15.38 million. In actions  
brought in 2017, the Plaintiffs claim that the Defendants devised the development  
scheme to perpetrate a fraud and unjustly enrich themselves at the expense of  
investors by taking funds that had been invested in the scheme and by heavily  
mortgaging the subject land and taking its mortgage proceeds. The Plaintiffs seek  
damages against the Defendants, jointly and severally, for breach of contract,  
fraud, conspiracy, breach of fiduciary duty and unjust enrichment, among other  
relief. They also seek punitive damages.  
[2]  
The Defendants concede that the land development project never came to  
fruition and that lots on the subject land were never delivered to investors as  
promised. They also concede that investors in good standing are entitled to share  
in the proceeds from the sale of the subject land. In addition, they assert that  
certain lots interests held by some Plaintiffs were terminated due to a non-payment  
of servicing costs. By working on the development project, the Defendants claim  
that they advanced the development process, albeit without actually developing  
the subject lands, for which they claim an entitlement to significant management  
fees despite clear and obvious irregularities with the method they adopted to draw  
these purported fees from project funds. They deny any fraudulent intent.  
 
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[3]  
For the reasons that follow, the actions for breach of contract, fraud,  
conspiracy and breach of fiduciary duty are allowed. Damages are assessed in  
the aggregate amount of $10,617,193.00, and punitive damages are fixed at  
$150,000.00.  
Background  
a. The Actions and the Parties  
[4]  
Two actions came before me. One of the actions (CV-17-5302) was brought  
by a group of investors that included Aleardo and Jacinta Caroti, Ian and Moraig  
Grounds, Nancy Kostelac, Marielle Pelchat-Morris, Brian McDowell, Biljana  
Nizalek, Wilma Jesus and Monica Savona (collectively the “Caroti Plaintiffs”). Mr.  
and Ms. Caroti are spouses who entered into an agreement to buy one lot interest  
in the development project, as further discussed below. Similarly, Mr. and Ms.  
Grounds are spouses who contracted to buy a lot interest in the project. Ms.  
Kostelac contracted to purchase two (2) lot interests in the project. Ms. Pelchat-  
Morris and her late husband, Ron Morris, acquired two (2) lot interests. Mr.  
McDowell and Ms. Nizalek are spouses who bought one lot interest. Ms. Jesus  
and Ms. Savona are sisters who bought four (4) lot interests in the development  
project under an arrangement with their father, Antonio Savona. Included in this  
action was another investor, Anna Bilich, who brought and defended a crossclaim  
in respect of the single lot interest that she acquired in the development project.  
   
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[5]  
The second action (CV-17-1481) was brought by another group of investors  
consisting of Peter Pichelli, Todd Leslie, Frank Toth and 958041 Ontario Limited  
(“958 Ontario”), a corporation of which Mr. Pichelli was the principal officer and  
director (collectively the “Pichelli Group”). Mr. Pichelli entered into an agreement  
to acquire a total of five (5) lot interests in the development project held in trust for  
himself, 985 Ontario, Mr. Leslie, Mr. Toth and Frank Campli. Mr. Pichelli later took  
an assignment of Mr. Campli’s lot interest.  
[6]  
Both actions were defended by Anthony, John and Mira Vuletic and  
Embleton Properties Corp. (“Embleton”) and 1857325 Ontario Ltd. (“185 Corp.”)  
(collectively the “Defendants”).1 Anthony Vuletic (“Anthony” ) is the son of John  
Vuletic (“John”) and Mira Vuletic (“Mira”) who are spouses.2 As discussed below,  
Anthony and John established Embleton and later 185 Corp. (i.e., following  
Embleton’s dissolution) as corporate entities which they could use in managing or  
dealing with the development project and the subject land itself. Mira served as  
the bookkeeper for Embleton and 185 Corp. and maintained financial ledgers for  
the development project.  
b. The Project  
[7]  
One evening in 2001, John met a long-time family friend, Ante Kegalj, to  
discuss a project to acquire a 12 ½ - acre property at 78 Cliffside Drive in Brampton  
(the “Property”), known as the Taylor Farm, as a land development opportunity.  
The Property had a bungalow and a garage and was located just outside  
 
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Huttonville, a Brampton neighbourhood. John had been monitoring the Property  
since 1972, liked its surrounding area, and wanted to acquire the Property to  
pursue what he believed was its good land development potential. But John lacked  
the necessary funds to purchase the Property or finance its acquisition.  
[8]  
Earlier in the year, John and Anthony had considered a possible venture  
with a criminal lawyer to have him put up the funds to acquire the Property that  
John and Anthony would develop. After those talks ended, John asked Mr. Kegalj  
to help finance the purchase of the Property through his contacts. Mr. Kegalj had  
no experience in developing real estate, but he was intrigued by the opportunity  
and eventually agreed to approach others in a bid to raise funds to acquire the  
Property as a land development project (the “Project”). Using his circle of then-  
current and former work colleagues at a downtown Toronto law firm, Mr. Kegalj  
solicited interest in the Project from Ms. Pelchat-Morris and her late husband Mr.  
Morris, Ms. Kostelac, Ms. Caroti and Mr. Caroti, and Ms. Grounds and Mr. Grounds  
(collectively, the “Workplace Group”). Mr. Kegalj also solicited interest from Ms.  
Bilich after initially approaching her brother, Robert Bilich, who was a friend.  
[9]  
The Workplace Group and Ms. Bilich were all relatively unsophisticated  
investors. Some speak English as a second language, others have rather modest  
formal education, and most had little or no experience with real estate development  
or investing in land development projects.  
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c. The Restaurant Meeting  
[10] To promote interest in the Project, Mr. Kegalj invited the Workplace Group,  
Ms. Bilich and other potential investors to attend a presentation at a Mississauga  
restaurant in late November or early December 2001 (the “Restaurant Meeting”).  
[11] A number of potential investors attended the Restaurant Meeting. John  
acted as the main speaker at the presentation. He claimed to have 30 years of  
real estate development experience, and he spoke in positive, passionate and  
enthusiastic terms about the Project. He shared his view that it was time to  
purchase and develop the 12 ½-acre land that he had been monitoring for quite  
some time. He described his plan to divide the Property into 51 lots, including 4  
ravine lots, with each of the non-ravine or “standard” lot to be 50 feet across and  
140 feet in depth. He envisioned building executive homes on the Property.  
[12] John told those in attendance that each lot in the Project would cost  
$35,500.00 and that a deposit of $5,000.00 per lot would have to be paid by the  
end of January 2002. He shared his intention to service the Property with utilities,  
and indicated that servicing infrastructure was to be installed up to the lot lines.  
Given the pricing, John told attendees that Project lots would sell without difficulty.  
He also stated his intention to sell lots to others if attendees did not buy them.  
John described the Project as a two-to-five year development and indicated that  
investors would double their money within that timeframe.  
 
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[13] Based on the presentation, some attendees initially thought that John was  
selling actual lots in the Project but later came to realize that he was actually selling  
rights to acquire future lots, as further explained below. Once the lots were ready  
to be transferred, John indicated that investors would obtain title to the lots after  
which they could sell the lots or build on them (i.e., once the architectural style of  
a home to be built on the Property was approved). Along the way, he stated that  
investors would be told of the servicing costs that would be charged to develop the  
Property and obtain municipal approval for a draft plan of subdivision. He  
estimated that servicing costs would approach about $50,000.00 per lot and  
advised that those with lot interests would pay their proportionate share of the  
servicing costs that were to be allocated to all lot holders.  
[14] John explained that he would be responsible for making decisions on the  
Project, and that his son, a lawyer who had worked in New York, would help to  
manage the Project. He indicated that a management fee would be invoiced to lot  
holders and that he would be compensated for the installation of services at the  
end of the Project. John told attendees that he was investing in the Project, that  
he would be buying the ravine lots on the Property which he had set aside for  
himself, and that he planned to live on the lots that he purchased. He explained  
that there were residential homes in the area, and that expensive homes would be  
in the planned subdivision for the Property.  
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[15] During his presentation, John told attendees that Embleton would acquire  
and hold title to the Property that was expected to cost about $800,000.00 to  
purchase.  
[16] John explained that he was not buying the Property alone because he  
preferred to share the risk of developing the Project with other investors. As a  
result, he stated that he was looking for so-called “lot purchasers” to contribute  
funds and pay for the right to acquire lots on the Property in due course. However,  
as set out below, actual lots were never delivered.  
[17] After hearing John’s remarks, the Plaintiffs who attended the presentation  
were favourably impressed and saw him as a trustworthy and honest person who  
was confident about the Project. These factors, together with John’s purported  
30-years of experience in real estate development and his other representations  
about the development opportunity, persuaded attendees to invest in the Project.  
John successfully won the trust of attendees by convincing them that any money  
they invested in the Project would be in safe hands. This was an important  
outcome for John as he was soliciting people that he did not know to invest in the  
development scheme.  
[18] Equally important was what John and Anthony did not reveal at the  
Restaurant Meeting. Although John had some limited development experience at  
best, he held himself out as being highly experienced in real estate development.  
But at trial, John conceded that he was not a land use planner, surveyor or  
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engineer, that he had never taken any real estate development or real estate  
courses, and that he was not a licenced contractor. For his part, Anthony had no  
land development experience or training, was only to help John manage the  
Project, and was not supposed to actually run the Project as he later ended up  
doing. Neither John nor Anthony had any professional training or credentials for  
developing real property. Although Anthony claimed that John had been a  
registered builder with Tarion from 2000 to 2016, the Defendants never produced  
any supporting records to corroborate this. Instead, the only evidence of John’s  
connection to Tarion was through two companies, being Archom Ltd. and Lapad  
Development Ltd., that were registered with Tarion for brief periods in the late  
1980s and early 1990s prior to John’s bankruptcy around 1994 or 1995.  
[19] John and Anthony both admitted that they did not inform attendees at the  
Restaurant Meeting about:  
a) John’s prior bankruptcy  
b) Anthony’s outstanding student loans and lack of creditworthiness  
c) their plan to have Mr. Kegalj enter into an agreement of purchase and  
sale with Ms. Taylor to acquire the Property on their behalf, as further  
discussed below.  
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d. Ms. Bilich’s Investment in the Project  
[20] Based on what she had heard, Ms. Bilich believed that the Project was a  
good investment opportunity. Following the presentation at the Restaurant  
Meeting, Ms. Bilich agreed to advance funds to Mr. Kegalj to help raise the initial  
$60,000.00 required to submit an offer to purchase the Property from Ms. Taylor.  
[21] On January 14, 2002, Ms. Bilich gave Mr. Kegalj a $5,000.00 bank draft as  
part of her investment in the Project.  
e. The Workplace Group Members’ Investment in the Project.  
[22] Based on the information presented at the Restaurant Meeting, Ms.  
Kostelac, Mr. and Ms. Grounds, and Ms. Pelchat-Morris believed that the Project  
was a good investment and they all paid deposits before signing an Agreement of  
Purchase and Sale (“APS”) with Embleton to invest in the development  
opportunity. Upon learning of the Project and being told that it was almost sold  
out, Ms. Caroti immediately paid funds to secure her investment in the Project.  
John and Anthony cultivated a sense of urgency with investors to quickly raise  
funds and acquire the Property.  
[23] Members of the Workplace Group received documents with details of the  
development opportunity, some of which they received before they decided to  
invest in the Project.  
   
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[24] According to Mr. Kegalj, John and Anthony gave him a document entitled  
Embleton Property Prospectus” (the “Prospectus”) which they had prepared to  
explain the development to potential investors. Although Anthony denies that he  
and John drafted the Prospectus, its content is consistent with the emails that he  
wrote to describe the Project to potential investors. In addition, and certain  
changes to the Prospectus are consistent with notes prepared by Karen Ceifets,  
the real estate solicitor that John and Anthony had retained to prepare agreements  
to support the acquisition of the Property. The content of the Prospectus is also  
consistent with the information that Anthony claims to have shared with attendees  
at the Restaurant Meeting. Furthermore, as Mr. Kegalj had only limited insight or  
experience with land development, it seems unlikely that he could have prepared  
the Prospectus given the level of detail that it contained and his limited ability to  
comment on any such matters. To this end, Anthony testified that Mr. Kegalj took  
copious notes of his conversations with John about the Project, and would later  
ask for clarification, but ultimately did not really understand real estate  
development and had difficulty appreciating, comprehending or capturing the  
development concepts that John explained to him. In the circumstances, I accept  
that John and Anthony made the representations found in the Prospectus.  
[25] The Prospectus disclosed information about the Project. Among other  
things, it claimed that the Property was zoned for executive housing (i.e., homes  
in excess of 2,900 square feet) under a Primary Plan that purportedly had been  
approved in 1998, although this claim was not accurate. The Prospectus also set  
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out a proposal to subdivide the Property into roughly 47 lots, with each lot having  
a minimum 50 foot frontage and 140 foot depth. It gave an all-inclusive asking  
price for each lot of $35,500.00 with no hiddencosts, and explained that  
Embleton was to be the holding company for the Project that was to be run by John  
(i.e., described as a developer and builder for over 30 years with a personal  
interest tied in the property) as he worked to establish a plan of subdivision for the  
Property. According to the Prospectus, Anthony’s stated role was to supervise the  
development process during all of its stages and phases. Once the plan of  
subdivision was approved by the City of Brampton, investors could then choose  
their lot (i.e., with any disputes by investors over the same lot to be resolved by an  
open lottery) and have their lot ownership registered with the municipality.  
Investors were told that they could buy multiple lots and sell them at any time. The  
Prospectus stated that the subdivision process would take about two (2) years,  
that digging for the installation of servicing infrastructure would begin in the Spring  
of 2003, and that John would receive a salary for his work over this two-year period  
after all duties and responsibility has been complied with.” In a side note, the  
Prospectus advised that an earlier reference to “Management Fees” had been  
changed to “Administrative Costs” to capture fax, printing and filing costs that  
would apply only if the Property was subdivided. The Prospectus described the  
Project as “a strong and very, very safe investment.” Anthony’s name and email  
address were set out at the end of the document.  
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[26] Ms. Kostelac obtained the Prospectus from Mr. Kegalj before she signed her  
APS to invest in the Project.  
[27] After signing her APS, Ms. Grounds obtained a copy of the Prospectus from  
Ms. Caroti to remind her of what had been said at the Restaurant Meeting.  
According to Ms. Grounds, the Prospectus was generally consistent with what  
John had explained during his presentation at the Restaurant Meeting.  
[28] On March 22, 2002, Ms. Grounds received an email from Mr. Kegalj that  
provided information about the Project. Mr. Kegalj advised that he had obtained  
this further information from Anthony which was forwarded on to her. The email  
gave a general breakdown of the costs to service the Property including the costs  
for planners, electrical engineers, surveyors, sewer engineers, road and sewer  
construction, and municipal levies, and estimated the final servicing costs to  
approach $40,000.00 to $45,000.00 per lot. When she received the email, Ms.  
Grounds had understood that John, whose name was at the bottom of the email,  
had written the message. However, Anthony testified that he wrote the email using  
information that John had given to him. Ms. Grounds stated that the email was  
consistent with what had been presented at the Restaurant Meeting in December  
2001 and during a subsequent meeting with Workplace Group members that  
Anthony attended in January 2002. Anthony testified that the estimated  
$40,000.00 to $45,000.00 cost per lot to service the Property was true. But his  
evidence on this point was inconsistent with other evidence he gave in which he  
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indicated that no one could possibly know in 2002 how much it would cost to  
service the Property in the future.  
[29] On March 22, 2002, Anthony wrote another email to Mr. Kegalj under the  
subject line “Ante: Important Added Notation” which stated:  
Ante,  
I forgot to mention to the notes below, that the work  
required for the services is a “work in progress”  
schedule meaning payments are paid as each  
services is first completed In the end, the only  
remaining amount will be the levy (18K approx..) –  
which does NOT have to be paid until the owners of  
such lots intend to sell to a buyer in the future. So, in  
essence, the services in the end can be only 25-30K  
and the levy to paid whenever the owner intends to sell.  
More importantly, you can pass the levy price to the  
purchaser ie. When you sell the lot the new purchaser  
must pay the LEVY (tax/charge) etc. Therefore the  
levy charge need not be a concern to the original  
purchasers at all. [Emphasis in original]  
[30] According to Anthony, his email was intended to assure potential investors  
who were later unable to pay $45,000.00 to $50,000.00 in servicing costs that they  
could decide how much of the services they could pay and then quit the investment  
if they could not pay the full servicing cost. This email is consistent with the  
evidence given by Ms. Nizalek who understood that she would not have to pay  
servicing cost until much later. It is also inconsistent with the representation that  
every investor would pay their proportionate share of the servicing costs for the  
Project. It follows that the Vuletics knew by March 2002 that not every investor  
would pay their proportionate share of the servicing costs.  
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[31] On March 23, 2002, Anthony wrote another email to Mr. Kegalj with  
information to share with potential investors if they asked. Under the subject line  
Ante: Breakdown and Brochure” the email stated the following:  
Ante,  
Below, you will find a general breakdown of excess  
cost of the property and its later use.  
Hopefully, this is sufficient, if not, please contact me to  
address any further issue(s).  
Please know, that when lots are mentioned as lost to  
“conservation, and new cul de sac” that such incidents  
were taken into consideration originally and estimated  
as such.  
This of course does not affect the purchaser, and that  
everyone who purchases a lot is of course  
GUARANTEED to receive them. Lots have not been  
over sold here rather under sold, and I want to make  
sure that it is reiterated if anyone were to ask and that  
no panic ensues, etc. [Emphasis in original]  
In effect, the email guaranteed the delivery of lots to those who bought lot interests.  
At trial, Anthony admitted that investors were guaranteedto receive their lots.  
[32] By email dated June 5, 2002 under the subject line “Embleton Properties  
Ante, Anthony wrote another email to Mr. Kegalj (the “Email Guarantee”) stating:  
EMBLETON PROPERTIES  
ANTHONY Vuletic, L.L.B.  
2372 Glengarry Rd., Mississauga, ON L5C 1Y2  
Tel (905) 276-3019  
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EMBLETON PROPERTIES (Mississauga/Brampton LIONSHEAD Golf  
Course) is envisaged to be a high end residential neighbourhood that will  
provide prestige housing in a very private and intimate setting.  
PRESENT  
There are approximately 45 lots (only 5 remaining) [Emphasis added] on  
EMBLETON PROPERTIES. The lots are situated across the prestigious  
LIONSHEAD golf course. They overlook a private entrance upon a hill with  
ravine and forests on the exclusive Mississauga Road.  
1. The property has been zoned four (4) years ago as “Upscale Executive  
Housing”.  
2. Lot size is guaranteed at 50’ x 140’ although frontage will increase for  
those who care to do so with multiple lot (blocks) of purchases.  
3. Initial Purchase price is 36K. Services are estimated to be approximately  
40-45K per lot at a later date. Total cost of lot range of 75K -80K.  
4. Estimated profit margin (conservative) values per lot range from 70K-  
120K clear. Lot value will be between 150K to 200K per lot when plan of  
subdivision registered dependent on market.  
5. FULL SERVICE lots less than one year (10-12 months) guaranteed.  
6. A money back guarantee in the agreement of 1 year plus an option at 2%  
above prime rate shall be included to ensure that all services are  
guaranteed to present and conditions met.  
7. There is no mortgage on the property, nor can the property be mortgaged  
by purchaser until title passes. This is to ensure that property is free and  
clear when title given to purchaser, as well as offering further guarantees  
of the property value.  
* Please Note: Since the property as of yet, is not subdivided ie A plan of  
subdivision registered title cannot be given to the purchase holder which  
at present is held by Embleton Corp. All available guarantees will be available  
to the purchaser namely, money back guarantee, clear title, no mortgage  
allowance, etc. In addition, if the client/purchaser wishes to make further  
adjustments or amendment to the agreement to offer further and greater  
security, etc. Embleton Corp will be amenable to such suggestions.  
Anthony Vuletic, L.L.B.  
Embleton Corp.  
[33] According to Mr. Kegalj, Anthony drafted the Email Guarantee as a form of  
“summary prospectus” to give prospective investors information that was  
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consistent with Mr. Kegalj’s understanding of the Project at the time. For his part,  
Anthony claimed that he did not draft the entire Email Guarantee but only portions  
of it. He also asserted that someone hacked his emails (i.e., to suggest that  
someone else sent the Email Guarantee from his email account) and that the  
document was not an email but instead a scanned document (i.e., inferring that it  
had been altered), but without offering any corroboration of his evidence on this  
point. Ultimately, Anthony conceded that he wrote parts of the Email Guarantee  
except for portions that were later shown to be false or incorrect which he now  
denies having written. His evidence on this lacked credibility.  
[34] Another document that is similar to the Email Guarantee was also circulated  
to potential investors (the “Brochure”). The only differences between the Email  
Guarantee and the Brochure are found in paragraphs 7 and 8 of the Brochure,  
which state:  
7. In the enclosed general sketch of layout of homes,  
there will be two (2) cul de sacs, not one as presently  
shown resulting in 45 lots.  
8. If a buyer wishes to make amendments to the  
agreement that are reasonable we have no problem in  
doing so. in addition, whatever further securities the  
purchaser may need we will provide.  
[35] Anthony testified that he did not draft the Brochure, in particular paragraph  
7, but his name and contact information are found on the document that appears  
to have been signed by him.  
- 17 -  
[36] According to Ms. Caroti, Mr. Kegalj gave her a copy of the Email Guarantee  
on June 7, 2002 before she signed her APS and after she received a copy of the  
Brochure. Mr. Kegalj also spoke with Ms. Caroti to share some information about  
the Project which she felt was consistent with John’s presentation at the  
Restaurant Meeting and the content of the Brochure. For instance, Ms. Caroti was  
informed that the lot sizes were guaranteed to be 50 feet x 140 feet, that Embleton  
was to purchase the Property, and that she would double her investment in a fairly  
short period. Mr. Kegalj told Ms. Caroti that she had only limited remaining time to  
obtain a lot, and the Brochure indicated that the Project was almost sold out, which  
led Ms. Caroti to understand that she had to decide on whether to invest in the  
Project fairly quickly. From the information provided, Mr. and Ms. Caroti came to  
believe that the Project was a good investment. Ms. Caroti testified that John  
convinced her that the Project would be done well given his good reputation as a  
builder.  
[37] Before signing their APSs to invest in the Project, Ms. Kostelac and Ms.  
Grounds attended a meeting on May 22, 2002 with Anthony and members of the  
Workplace Group that was held in a boardroom at their offices. According to Ms.  
Kostelac and Ms. Grounds, the discussion at the meeting repeated much of what  
had previously been shared at the restaurant meeting.  
[38] Believing Anthony to be a lawyer, Ms. Kostelac inquired about various  
provisions in the APS which he explained to her. Ms. Kostelac made these  
- 18 -  
inquiries with him as the investors were not permitted to make any changes to the  
APS and certain terms concerned her. In particular, she inquired about the “use  
of land” term in the APS which provided that Embleton would decide the use of the  
Property during its development. Believing at the time that the Property was  
farmland, Ms. Kostelac asked what was going to happen with it as she felt there  
might be an opportunity to earn some revenue by renting the land to a farmer or  
by having billboards on the Property to defray servicing costs. According to Ms.  
Kostelac, Anthony assured her that Embleton would decide how to use the  
Property by making the best decisions for the Project. At the time, Ms. Kostelac  
was unaware that a bungalow was located on the Property or that the home was  
being rented to tenants. Notably, Anthony did not disclose that the Vuletics  
intended to occupy the home and live rent-free on the Property as reflected in Ms.  
Ceifets’ notes of her meetings with John and Anthony.  
[39] Ms. Kostelac stated that Anthony assured her of the intention to deliver 50  
x 140 ft. lots as the Vuletics planned to make the future subdivision their home and  
wanted it to look nice. He is also said to have advised that lot dimension changes  
would only be made if the City of Brampton or some other government body  
required a change that left them with no other alternative. After speaking with  
Anthony, Ms. Kostelac felt that her concerns had been addressed and she  
accepted that decisions regarding the Property would be made in the Project’s best  
interests. She proceeded to sign her APS and gave it to Anthony at the meeting.  
- 19 -  
Anthony denies that any such Workplace Group meeting occurred. He further  
stated that if the meeting had unfolded as Ms. Kostelac had suggested, then he  
would have signed back her APS at the meeting. But Ms. Kostelac testified that  
Anthony informed her that he needed to take her signed APS with him to execute  
it on behalf of Embleton with a corporate seal. Ms. Kostelac’s account is  
corroborated by Ms. Ceifet’s notes which show that she advised John and Anthony  
to place Embleton’s corporate seal on the APS contracts. In light of this, I accept  
the accounts given by Ms. Kostelac and Ms. Grounds of the May 22, 2002 meeting  
which I find took place that day.  
f. The Savonas’ Investment in the Project  
[40] In March 2002, Antonio Savona, the father of the Plaintiffs Wilma Jesus and  
Monica Savona, was approached by John Biondic, a real estate agent, about the  
Project. Mr. Savona and Mr. Biondic previously had been shareholders in an  
unrelated investment in which Mr. Savona had made a profit. Mr. Biondic told Mr.  
Savona that the Project was being run by a developer who was a family friend, and  
that the Project would take about 5 to 6 years to develop.  
[41] According to Mr. Savona, John and Anthony attended his home with Mr.  
Biondic to discuss the Project. John does not remember meeting Mr. Savona in  
2002 and testified that Anthony had dealt with the Savonas. Anthony claimed that  
he first met Mr. Savona, who initially had dealt with Mr. Biondic, only after Mr.  
Savona submitted the APS for the Savonas’ investment in the Project. However,  
 
- 20 -  
Mr. Savona produced contemporaneous notes that he had prepared to record  
events as the Project unfolded which indicate that he met John and Anthony in  
2002. Given Mr. Savona’s recollection as supported by his contemporaneous  
notes, I am satisfied that he met with John and Anthony at his home where they  
made representations about the Project before the Savonas signed their APS with  
Embleton.  
[42] During the 2002 meeting with Mr. Savona, Mr. Biondic introduced John as  
an experienced developer and Anthony as a lawyer. John and Anthony advised  
that the Property consisted of roughly 12 acres that would be divided into 50 lots  
with each lot being 50 x 140 feet and having a price of $35,000.00 per lot. They  
told Mr. Savona that other investors would contribute funds to the Project, that the  
cost to install services would approach $75,000.00 to $95,000.00 per lot, that it  
would take about 10 years to develop the Property, and that the Project was a  
good investment.  
[43] Intrigued by the Project, Mr. Savona said that he wanted to buy four lots –  
two for himself and one for each of his two daughters. When Mr. Savona asked if  
he would be a shareholder in the Project, John or Anthony indicated that Mr.  
Savona would be a 5% shareholder like he was in his other unrelated investment  
with Mr. Biondic. John also explained that he would be in charge of developing  
the Project. Anthony advised Mr. Savona that he was a lawyer, offered to explain  
the terms of the APS, reassured Mr. Savona that he did not need to take the APS  
- 21 -  
to a lawyer for review, and advised Mr. Savona to save on legal fees by relying on  
him to explain everything he needed to know. Anthony then outlined portions of  
the APS to Mr. Savona who did not read the agreement and relied on Anthony in  
forming his understanding of the terms for the APS.  
[44] Mr. Savona arranged for both of his daughters to sign the APS. The next  
day, Mr. Biondic witnessed the APS.  
[45] During the 2002 meeting with Mr. Savona, John and Anthony did not  
disclose that John was a bankrupt and lacked funds, that the Vuletics intended to  
live rent-free in the house on the Property, that management fees would be  
charged, or that funds raised for the Project would be used to pay for their personal  
expenses. They also did not disclose that Project investors would not be buying  
actual lots on the Property but instead would acquire rights to buy lots there in the  
future. For his part, Mr. Savona believed that he had bought lots on the Property  
as reflected in a signed declaration dated June 26, 2002 that Anthony gave Mr.  
Savona to acknowledge receipt of his $122,000.00 payment to Embleton as  
follows:  
I hereby declare that I have received from Tony Savona  
an amount of ($122,000) one hundred twenty thousand  
for the property he has purchased from Embleton  
Properties Corp.  
Anthony Vuletic]  
Please see contract.  
[signed  
[46] Despite this signed declaration, however, Embleton did not actually own any  
land, whether beneficially or otherwise, as the transaction for the purchase of the  
- 22 -  
Property from Ms. Taylor had not yet occurred. In reality, Mr. Savona did not buy  
any land but instead had subscribed for future lots that Embleton was to develop  
on the Property. John and Anthony would clearly have known that Mr. Savona  
could not have purchased any lots as of June 26, 2002 as no plan of subdivision  
for the Property had been registered with the municipality. Simply put, the lots did  
not exist.  
g. The Investment by the Pichelli Group  
[47] During a meeting on July 3, 2002, John and Anthony met with Mr. Pichelli to  
sign an APS for five (5) lot subscriptions in the Project for the Pichelli Group  
members. But the content of the APS for the Pichelli Group is materially different  
from the APS that other investors have signed. On its face, the Pichelli APS varies  
significantly from the APS template that Ms. Ceifets drafted for Embleton as  
substantial and important terms that she included in the APS template are clearly  
missing from the Pichelli APS. As a result, the Pichelli Plaintiffs and the  
Defendants strongly disagree on the actual terms of the Pichelli APS which led  
both sides to call highly conflicting evidence on this point, as detailed further below  
in these reasons.  
h.  
The Investment by Ms. Nizalek and Mr. McDowell in the  
Project  
[48] In October 2002, Biljana Nizalek and Brian McDowell joined John, Anthony  
and Mira for dinner at their home on the Property. Ms. Nizalek had immigrated to  
   
- 23 -  
Canada from Eastern Europe in 1993, spoke Croatian, and had formed a good  
friendship with John, a person of Croatian descent, after both had worked together  
on several construction and renovation projects. Ms. Nizalek’s husband, Mr.  
McDowell, described John as having been a father figure to her.  
[49] During the dinner party, the conversation turned to the Project and the  
investment opportunity that it offered. Ms. Nizalek and Mr. McDowell were  
reluctant to invest in the Project because they had a new baby, a mortgage, and  
wanted to save for their child’s education. In addition, both were financially helping  
to support Ms. Nizalek’s family in Eastern Europe at the time, which John was  
aware of.  
[50] John advised Ms. Nizalek and Mr. McDowell that he had bought the Property  
and wanted them “in on itto make some money. He explained that the investment  
would only be for two years and that he would quickly develop the land. He told  
Ms. Nizalek that she could double her money in two years. He also indicated that  
Embleton owned the Property.  
[51] John told Ms. Nizalek and Mr. McDowell that they would be buying a 50 x  
140 foot lot in an upscale 51-lot development. He did not explain that they would  
not receive an actual lot but rather a right to purchase a future lot.  
[52] John informed Ms. Nizalek and Mr. McDowell that he had bought three  
ravine lots and would build homes on them for his daughter, his son, and himself.  
- 24 -  
While walking the Property, he told Mr. McDowell where his home and his  
children’s homes would be built, and he shared his excitement to develop the  
Property. John also told Ms. Nizalek where his ravine lots would be located on the  
Property. John indicated that he moved to the Property so that he could develop  
it quickly, be closer to the Project, and act more efficiently. Ms. Nizalek felt that  
John’s interests would be aligned with hers as he wanted to live on the Property  
and make the development into his neighbourhood.  
[53] John told Mr. McDowell that he needed investors for the Project to alleviate  
the risk that he was assuming by pursuing the development. He also told Ms.  
Nizalek that he was one of a group of investors and that Ms. Nizalek and Mr.  
McDowell could also be investors in the Project.  
[54] John told Ms. Nizalek that he had developed land before and spoke of the  
developers that he knew. He also told Ms. Nizalek and Mr. McDowell that he knew  
a planner, Uri Salmona, who had prepared a draft plan of subdivision for the  
Property.  
[55] John told Ms. Nizalek that he only had two or three lots left in the Project.  
Other investors also believed that the Project was “sold out” based on information  
given to them by Mr. Kegalj or contained in the pre-contract documents mentioned  
earlier.  
- 25 -  
[56] John told Ms. Nizalek that an investor could either sell their lot or invest in  
services after a site plan for the Property was developed and approved. He told  
Ms. Nizalek and Mr. McDowell that servicing would cost $45,000.00. However, he  
did not explain that investors would have to pay cash calls before services were  
installed. He did not mention anything about a management fee, a mortgage on  
the Property, the lands adjacent to the Property, or any further costs when Ms.  
Nizalek and Mr. McDowell chose to invest in the Project. He did not tell them to  
see a lawyer.  
[57] After much laughter and drinks, John brought out the APS for discussion.  
During the party, Ms. Nizalek and Mr. McDowell signed an APS to acquire a lot  
interest and Ms. Nizalek gave John a deposit cheque.  
[58] Mr. McDowell testified that he and Ms. Nizalek did not intend to live on the  
Property but wanted to sell their lot as an investment and might not have invested  
in the servicing costs.  
[59] John never advised that the Vuletics saw the investment in the Project by  
Ms. Nizalek and Mr. McDowell, and the funds they paid, to constitute the Vuletics’  
own contribution to the Project.  
i. Ms. Ceifets’ Retainer  
[60] John and Anthony retained Karen Ceifets, a real estate lawyer, to act for  
themselves and Embleton to acquire the Property in 2002 and to prepare a  
 
- 26 -  
template agreement for use in signing on investors to the Project. From the  
evidence, I am satisfied that Ms. Ceifets obtained instructions from both John and  
Anthony. To distance himself from Ms. Ceifets’ evidence, John claimed that he  
had no dealings with her. However, Ms. Ceifets produced her file containing  
extensive notes and work products that documented her various interactions with  
John and Anthony. Although her memory of her engagement with John and  
Anthony in 2002 has faded over time, she carefully gave her evidence by using  
her detailed contemporaneous file notes and correspondence that recorded her  
engagement in some detail. In addition, both John and Anthony, who resided  
together, testified that they jointly made decisions for the Project. Moreover, Ms.  
Ceifets directed her communications to John and Anthony together. Taking this  
all into account, I am satisfied that both instructed her about the Property and the  
Project over the course of her retainer.  
[61] On February 13, 2002, Ms. Ceifets met with John and Anthony to discuss  
their preliminary plan to buy the Property to create a 51-lot subdivision. Lots were  
to be sold for $35,000.00 each to eager friends and family members. In turn, the  
solicited proceeds were to be used to purchase the Property with a May 31, 2002  
closing date. To implement the plan, John and Anthony required a contract to sell  
lots to investors in order to raise funds, as well as a further contract to purchase  
the Property from its owner, Ms. Taylor.  
- 27 -  
[62] In her notes to file for the February 13, 2002 meeting, Ms. Ceifets recorded  
that she had not previously seen a similar type of transaction which she regarded  
as unusual as funds from investors were to be used to buy land without first having  
a subdivision in place. This led her to flag a concern with John and Anthony that  
lawyers acting for lot purchasers might not like this kind of deal given the potential  
for fraud and other legal problems. At the time, it was unlawful to sell lots, or  
otherwise offer or agree to sell lots, in an unregistered plan of subdivision except  
for lots on a draft plan of subdivision that was approved: s. 52 of the Planning Act,  
RSO 1990, c. P.13.  
[63] Given her concerns with the proposed scheme, Ms. Ceifets consulted with  
a senior real estate lawyer at a different law firm to discuss her engagement with  
respect to the Project. From her consultation, Ms. Ceifets considered the following  
precautions which the senior lawyer had recommended to avoid or mitigate  
potential issues or disputes with the Project:  
a) not having her firm hold deposits from investors;  
b) having the vendor hold investor funds in a segregated account pending the  
completion of the transaction;  
c) having the vendor give a personal covenant to hold deposits if a purchaser  
or investor wanted this;  
d) having purchasers or investors obtain independent legal advice;  
- 28 -  
e) including an arbitration clause in the APS;  
f) setting out certain items in the APS, such as the vendor’s intention to  
develop the Property, to clarify the nature of the Project;  
g) advising John and Anthony to act above board” by disclosing in the APS  
that they are keeping lots and can mortgage the Property;  
h) placing a corporate seal on documents so investors cannot go behind the  
corporate entity; and  
i) having a discussion with John and Anthony to address all foreseeable issues  
in the event that the Project fails or succeeds, and confirming that nothing  
fraudulent is associated with the Project.  
[64] In discussions with John and Anthony, Ms. Ceifets cautioned them about the  
potential for the proposed transaction with investors to be considered fraudulent  
and advised them to avoid any appearance of impropriety. Specifically, Ms.  
Ceifets advised John and Anthony of the following over the course of her retainer:  
a) There is a benefit to being transparent and not withholding  
anything from investors;  
b) They must be as clear, detailed and forthright as possible with  
investors to avoid any appearance of impropriety or possible  
claims for misrepresentation or other wrongdoing;  
c) They could not sell more lots than they intend to have;  
d) Failing to disclose an intention to live in the house on the  
Property may be seen as not being forthright and cause  
investors to claim that their funds were improperly used to  
allow them to live in the house rent and mortgage free;  
- 29 -  
e) To complete the APSs, Embleton was required to comply with  
s. 50 of the Planning Act;  
f) The lots could not be conveyed to investors before a plan of  
subdivision was available;  
g) Investors needed to get independent legal advice;  
h) The APS with investors should not be changed to vary the  
terms for different investors;  
i) When accepting an APS from an investor, an authorized  
signing officer of Embleton should sign the APS and affix  
Embleton’s corporate seal;  
j) The agreement of purchase and sale for the initial purchase of  
the Property from Ms. Taylor indicated that the Property is  
zoned only for residential agriculture and not for executive  
housing;  
k) The APS with investors was not conditional if something  
prevented John and Anthony from developing the Property,  
and there were no “outs” for them if they were to determine  
that the Property could not be used for what they intended;  
l) Ms. Ceifets would not be involved in any misrepresentations to  
mortgage lenders, and the mortgage for any purchase had to  
be in the name of whoever was taking title;  
m) The APS with investors provided (at para 9f of the agreement)  
that Embleton could mortgage the Property only for the  
purpose of raising funds to service and develop the land, and  
that Embleton may be in breach of this term as a result of non-  
compliance with this term of the APS by mortgaging the  
Property to initially purchase the land in 2002, which could be  
construed as a misrepresentation. Anthony indicated that he  
understood Ms. Ceifets’ advice on this point; and  
n) The transaction with Ms. Taylor to initially purchase the  
Property was inconsistent with how transaction documents  
were signed on July 11, 2002 as Mr. Kegalj originally assigned  
all rights under the agreement of purchase and sale with Ms.  
Taylor to Embleton and gave notice of the assignment to  
advise that Embleton was the purchaser before he later signed  
another document indicating that there was no trust as he had  
signed the agreement with Ms. Taylor in his personal capacity.  
- 30 -  
[65] Ms. Ceifets testified that she did not know whether John or Anthony took her  
advice for the Project. With hindsight, it is apparent that much of her advice was  
not followed.  
[66] Over the course of Ms. Ceifets’ retainer, John and Anthony advised of their  
intention to reside in the house on the Property. Nevertheless, they instructed her  
to not disclose this in the APS with investors and to remove any term in the  
agreement for the house to be demolished.  
[67] John and Anthony explained that the Project was to be based on a 51 lot  
concept with no ravine lots available to investors. After indicating that the actual  
number of lots might vary by a few lots due to possible changes by the municipality  
and adjacent developments, they instructed Ms. Ceifets to ensure that Embleton  
did not lose any of its lots if the overall number of lots were reduced (i.e., as any  
lost lots were to be borne by investors). However, if the Project ended up with more  
than 51 lots, they instructed her that Embleton was to assume the additional lots  
as its bonus. Both also instructed Ms. Ceifets to not raise this in the APS in a  
deliberate effort to not disclose to investors how many lots Embleton would retain,  
as Anthony conceded in his evidence at trial. They also instructed her that the  
balance of any funds received from investors would constitute profits for Embleton  
which, at one point in 2002, they intended to use to purchase their own lots. In  
addition, they instructed her to not draft an APS term to require deposits from  
investors to be held in a segregated account.  
- 31 -  
[68] Initially, John and Anthony instructed Ms. Ceifets that the Property could not  
be mortgaged to raise funds to initially purchase the land. Later on, however, they  
advised her of their intention to mortgage the Property to raise funds for its  
purchase despite their earlier instructions which led to the inclusion of a term in the  
APS that did not permit the land to be mortgaged for this purpose. They also  
advised her that the mortgage was to be obtained on the basis that the Property  
was owner-occupied and that the house on the land would not be demolished.  
[69] John and Anthony advised Ms. Ceifets that John would invoice any  
management or administration fees in service costs that were billed to investors.  
However, as discussed later in these reasons, no such invoices were ever  
prepared or issued. Both instructed her to change the term “management fee” in  
the APS to “administration fee” after potential investors expressed reluctance to  
paying management fees for the Project. In light of this, I accept that both  
instructed Ms. Ceifets to make this terminology change to obfuscate their intention  
to charge management fees and thereby side-step any hesitation by potential  
investors to commit funds to the Project.  
[70] In his testimony, Anthony admitted that Ms. Ceifets called him to discuss  
and review the APS terms but that he did not care for these calls. Ultimately, I  
accept that John and Anthony did not take the APS terms seriously or necessarily  
consider themselves to be strictly bound by them.  
- 32 -  
j. Omissions about the Project  
[71] John and Anthony did not disclose important facts about the Project to  
investors.  
[72] John admitted that he lacked sufficient funds the buy the Property. He also  
admitted that he devised the scheme for investors to pay now for future lots to fund  
the acquisition of the land, and that this was the first land development project in  
which he and his son had sold future interests in lots to obtain project financing.  
None of this was disclosed to investors.  
[73] Anthony admitted that the Property was zoned for only 12 lots when it was  
acquired and acknowledged that more lots could not be developed for the Project  
while this zoning designation (i.e., the so-called “Village Residential” zoning status)  
stayed in place. He admitted that investors were not told that some had more  
favourable APS terms than others (i.e., such as Workplace Group investors having  
a preferential opportunity to select their lots on the Property), or that he had eased  
some APS restrictions for certain investors to secure their funds and close on the  
purchase of the Property. He also admitted that an APS could only be amended  
in writing.  
[74] Anthony conceded that everyone having a lot interest in the Property,  
including investors and the Vuletics alike, were supposed to pay their proportionate  
share of the Project costs. He also admitted that any mortgages on the Property  
were only to be used to further the development while conceding that Embleton  
 
- 33 -  
entered into a vendor take-back mortgage to finance the acquisition of the Property  
after its purchase price increased, as further set out below, to avoid having to sell  
more lots that otherwise would have left the Vuletics with fewer remaining lots for  
themselves. From the evidence, I am satisfied that the Vuletics always intended  
from the outset to keep any unsold lots for themselves and maximize the number  
of these unallocated lots on the Property with no intention of using their own funds  
to pay for them. Anthony conceded that he made no efforts to sell any unallocated  
lot interests to investors after 2004 as he wanted to keep them all for himself  
without paying for them. None of this was disclosed to investors.  
[75] Anthony admitted that the Defendants never signed an APS for any unsold  
ravine or standard lots in the Project. Instead, the Vuletics simply claimed the  
ravine and unallocated lots for themselves. He asserted that Embleton was not  
required to pay servicing calls for any of the unsold lots, and admitted that the  
Defendants paid no cash call for any unallocated lots despite making cash call  
demands. None of this was disclosed to investors.  
[76] Anthony testified that the Vuletics intended from the outset of the Project to  
use proceeds from a mortgage on the Property to pay for their personal living  
expenses. John admits that he did not disclose that Project funds were used to  
pay the Vuletics’ personal expenses, and claims that he was under no obligation  
to disclose this. Mr. Grounds and Ms. Caroti testified that they would not have  
invested had they known that Project funds would be used to pay for personal  
- 34 -  
expenses. The fact that the Vuletics had taken mortgage and cash call funds to  
pay for their personal expenses only came to light when Robert Bilich served his  
motion materials in Mr. Kegalj’s action to enforce a requirement for investors to  
receive an accounting of Project funds, as further discussed below.  
[77] Although Anthony claims that he told a number of investors that he was living  
on the Property, he admitted that he never disclosed that he was living there rent-  
free. Initially, investors including Ms. Kostelac, Ms. Pelchat-Morris, Ms. Caroti and  
Ms. Grounds were unaware of the house on the Property or the intention of the  
Vuletics to reside there. Mike Klecina testified to the same effect. When Ms.  
Kostelac visited the Property in July 2011, she entered the home to use the  
washroom and thought that it was unoccupied due to its sparsely decorated  
interior which appraisal photos taken of the home later corroborated. Only during  
this litigation did the Plaintiffs learn that a tenant previously occupied the house on  
the Property and paid $1,250.00 in monthly rent before the Vuletics moved in after  
obtaining vacant possession from Ms. Taylor on closing the sale of the Property in  
2002.  
[78] From the evidence, I am satisfied that the Defendants purposefully did not  
disclose to investors that:  
a) the Defendants intended to claim the unsold or unallocated lots  
on the Property for themselves without paying for them;  
b) the Defendants intended to pay nothing for the servicing costs  
related to the unsold or unallocated lots on the Property which  
- 35 -  
they had claimed for themselves, all while demanding that  
investors pay the servicing costs;  
c) the Defendants planned to mortgage the Property, initially to  
fund the purchase of the Property from Ms. Taylor and later to  
fund their personal spending; and  
d) the Vuletics intended to live rent-free in the home on the  
Property.  
Moreover, I am satisfied on the evidence before me that the Plaintiffs would not  
have invested in the Project had the Defendants made these disclosures to them  
beforehand.  
k. The Investor APS Contracts  
[79] As set out below, each Plaintiff investor signed an APS with Embleton for  
the right to later purchase a standard-sized 50 foot x 140 foot lot (“Standard Lot”)  
under the agreement. The term “APS” broadly refers to the agreement that Project  
investors had with Embleton. Some investors signed an APS earlier in 2002 that  
had slightly different content than what other investors signed later that year.  
[80] On March 18, 2002, Ms. Jesus and Ms. Savona each signed an APS with  
Embleton and their father, Mr. Savona, paid a total of $142,000.00 to Embleton  
that year for the right to purchase four (4) Standard Lots.  
[81] On April 12, 2002, Ms. Grounds and Mr. Grounds signed an APS with  
Embleton and paid a total of $35,000.00 that year for the right to buy a Standard  
Lot in the Project. Before signing the APS, they arranged for their lawyer, Stan  
Joffe, to review the agreement. Mr. Joffe inquired about making changes to the  
 
- 36 -  
APS but Ms. Ceifets, Embleton’s lawyer, refused to make changes. After deciding  
that they were prepared to trust John and Anthony to develop the Property, the  
Ground proceeded to invest in the Project. For reasons that are unclear, the  
Grounds’ APS was not signed by Embleton.  
[82] Ms. Pelchat-Morris and her late husband Ron Morris also signed an APS  
with Embleton on April 12, 2002, and Ms. Pelchat-Morris paid Embleton a total of  
$71,000.00 in 2002 for the right to buy two (2) Standard Lots under the agreement.  
[83] On May 22, 2002, Ms. Kostelac signed her APS with Embleton for the right  
to purchase two (2) Standard Lots under the agreement and paid a total of  
$71,000.00 to Embleton that year.  
[84] On June 11, 2002, Ms. Caroti and Mr. Caroti each signed an APS with  
Embleton and paid a total of $35,000.00 to Embleton in 2002 for the right to buy  
one Standard Lot. The Carotis did not receive back a signed copy of the APS.  
[85] On July 3, 2022, Mr. Pichelli signed an APS on behalf of the Pichelli Group  
members for a five (5) lot subscription in the Project for which Embleton was paid  
$175,000.00 that year.  
[86] On October 1, 2002, Ms. Nizalek and Mr. McDowell signed an APS with  
Embleton and paid a total of $37,000.00 that year for the right to purchase one  
Standard Lot under the agreement. As mentioned earlier, they signed the APS  
while attending a dinner party with the Vuletics. They did not read the APS, relied  
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on John’s explanation of the terms of the agreement, and were never advised to  
obtain independent legal advice on the investment.  
[87] Schedule A to each APS states that Embleton was to provide investors,  
referred to as “Purchasers” under the agreement, with title to the lots upon closing  
(i.e., with closing defined in section 3 of Schedule A to the APS). Each APS also  
provided as follows:  
a. 1b. Recital. Embleton “intends to take all necessary proceedings required in order  
to have the Land zoned to permit single family residential dwellings including the  
servicing of the Land and the registration of a plan of subdivision to create  
residential building lots.  
b. 1c. Recital. The “initial concept …, which is subject to modification, is the  
registration of a plan of subdivision with 51 lots. …”  
c. 1f. Recital. Embleton “will be using such portion of the [deposit monies from the  
investors] as it may require, to complete its purchase of the Land. …”  
d. 2. Use of Land. Embleton “may permit the Land to be used for any purpose, and  
on such terms and conditions, as [Embleton] may determine in its sole and  
absolute discretion. [Embleton] covenants to proceed diligently with its plans to  
develop [the Property].”  
e. 4. Services. Embleton was to install services to the lot line of the lots. The term  
“Services” was defined in the APS to include services to be installed within the  
Property or within a registered plan of subdivision.  
f. 4. Servicing Costs. “Servicing Costs” were defined to “mean and include all costs  
incurred, by [Embleton] in developing the Land and registering a plan of  
subdivision” and were to “include such reasonable charges of [Embleton] or any  
associated company or entity, for services provided in connection with the  
development of the Land and registration of the plan of subdivision, including,  
without limitation the management and administration of the installation and  
completion of the Services (“Administration Fee”). The Servicing Costs shall be  
allocated equally among all lots which form part of the plan of subdivision.”  
g. 4. Servicing Costs to be Invoiced. Prior to the closing date, which is when the  
Purchaser under the APS was to receive the lot, the agreement directed that  
Embleton “shall invoice the Purchaser from time to time, for the Purchaser’s share  
of the Servicing Costs …”  
h. 8a. Reduction in Number of Lots. “In the event, there is a reduction in the  
number of Standard Lots to be included in the plan of subdivision, [Embleton” shall  
- 38 -  
have the right, in its sole discretion, to reduce the number of Lots being sold to the  
Purchaser.”  
i. 8b. Change in Lot Frontage. In the event there is a change in the dimensions of  
the Lots, “with the result that any of the Lots have frontages of less than fifty (50)  
feet, the Purchase Price will be decreased. The amount of the decrease will be  
based on the Fair Market Value (as hereinafter defined) of the reduced linear feet  
of frontage for the Lots at the time of closing …” “Fair Market Value” was defined  
to mean the value determined by Embleton based on the average of two appraisals  
conducted by independent licensed appraisers within 120 days of the closing.  
j. 9f. Purchaser’s Covenants. There is an express restriction in the APS on the  
corporate Defendants’ ability to mortgage the Property. The Plaintiffs agreed that  
Embleton (and later 185 Corp.) “is permitted to mortgage the Land for purposes of  
completing the Services and the development of the Land …”  
k. 17b. Amendments in Writing. All amendments to the APS must be in writing.  
The APS featured no provision to allow for the sale of the Property in bulk.  
l. 17g. General. Each Purchaser agreed that they were not “a partner, associate,  
joint venturer, or any other participant” with Embleton with respect to the Property  
and the development, and that “the Purchaser’s only interest is as purchaser of the  
Lots as provided for herein and that [Embleton] owes no fiduciary obligation to the  
Purchaser.”  
[88] In his evidence, John admitted that he had a responsibility to be honest with  
the investors who had signed an APS with Embleton, and that he was required to  
deliver 50 foot x 140 foot lots to investors who had trusted him to do this. He  
admitted that the investors looked to him as the person with development  
experience to ensure that the plan of subdivision for the Property was registered  
with the municipality. He also admitted that he was responsible for ensuring that  
the funds given to him by the investors was spent on the Project and not on other  
things. For his part, Anthony admitted that Embleton and 185 Corp.’s obligations  
under the APS were to be carried out to further the development of the Property.  
He also admitted that any management fees were to be charged in connection with  
the development of the Property.  
- 39 -  
l. Anthony’s Status as a Lawyer  
[89] In my view, Anthony’s status as a lawyer was strategically employed to instill  
investor confidence in the Project.  
[90] Anthony graduated from law school in 1998 and was called to the Ontario  
Bar in 2006. In 2018, his licence to practice law in Ontario was administratively  
suspended.  
[91] On various occasions, John and Anthony told investors that Anthony was a  
lawyer even before 2006 when he was called to the Ontario Bar. For instance, at  
the 2001 restaurant meeting, John told attendees that his son, Anthony, was a  
lawyer. In addition, Anthony introduced himself as a lawyer to Mr. Grounds at the  
meeting. Later on, during a meeting in 2002, John and Anthony introduced  
Anthony as a lawyer to Mr. Savona when they met to discuss the Project and  
reiterated this point in discussing Anthony’s role in the Project. Similarly, at the  
2002 dinner party, John told Ms. Nizalek that Anthony was a lawyer and informed  
Mr. McDowell that John was a lawyer who had practiced in New York and was  
helping with Project-related work. In addition, Anthony told Mr. McDowell directly  
that he had been an entertainment lawyer in New York.  
[92] Anthony described himself as a lawyer in 2002 to Mr. Kegalj who later  
overheard Anthony tell others that he was a lawyer in the entertainment industry.  
In turn, Mr. Kegalj told Ms. Caroti in 2002 that Anthony was a lawyer who had  
worked in New York before coming back to help his father. In somewhat similar  
 
- 40 -  
fashion, John told Mr. Kegalj in 2007 that Anthony could afford the charges that he  
had incurred while borrowing Mr. Kegalj’s credit card because he was practising  
law on the side at the time (i.e., in addition to working on the Project).  
[93] In correspondence with investors, Anthony repeatedly referred to his LL.B.  
degree and his “attorney” designation to inform readers of his status as a lawyer.  
His email address continues to be [email protected] which suggests an  
involvement with the practice of law. Collectively, these efforts led some, including  
Mr. Klecina, to believe that Anthony was a practising lawyer.  
[94] Anthony denied telling investors that he was a lawyer, but then conceded  
that he may have introduced himself as a lawyer to investors. Anthony admitted  
that he referred to his law degree in communications with investors as he felt that  
doing so added credibility to his statements. John denied telling anyone that  
Anthony is a lawyer and specifically denied saying that his son was a lawyer at the  
2001 restaurant meeting because the issue purportedly never came up. But John  
also claimed that he explicitly told attendees at the Restaurant Meeting that  
Anthony was not a lawyer. In my view, John’s evidence was inconsistent and not  
credible.  
[95] Based on this, I am satisfied that John and Anthony referred to Anthony as  
a lawyer to leverage their credibility by using his status as legal professional to  
gain the trust and confidence of Project investors.  
- 41 -  
m. Acquisition of the Property  
[96] In mid-July 2002, Mr. Kegalj bought the Property from Carol Taylor for a total  
purchase price of $1,262,878.00, inclusive of transaction fees. Mr. Kegalj held title  
to the Property from July 2002 until its transfer to 185 Corp. on February 16, 2012,  
and understood that it was being held in trust for investors. Embleton never held  
title to the Property.  
[97] John and Anthony made no net capital contribution towards the purchase  
the Property.  
[98] From the total purchase price, $23,331.90 related to transaction costs.  
Although Anthony claims that he paid $19,400.00 of the fees and disbursements  
for the July 2002 purchase, Embleton fully reimbursed him for the $19,400.00  
almost immediately in August 2002 when proceeds from a mortgage with Maple  
Trust were received, as further described below.  
[99] John directed a $60,000.00 cash contribution towards the purchase of the  
Property. These funds came from a bank draft that Brithuron gave to John who  
signed over the draft to Anthony Klemencic, a real estate solicitor who acted on  
the purchase of the Property, when the deal closed in July 2002.  
Shortly  
thereafter, Embleton repaid the $60,000.00 to Brithuron in August 2002 using the  
Maple Trust mortgage proceeds and paid $3,932.00 to Mr. Klemencic for his legal  
fees (i.e., which formed part of the $23,331.90 transaction costs).  
 
- 42 -  
[100] $1,015,500.00 of the total purchase price was financed by cash  
contributions from investors between January and July 2002, of which a collective  
$427,000.00 was paid by Mr. and Ms. Caroti, Mr. and Ms. Grounds, Ms. Kostelac,  
Ms. Pelchat-Morris, Mr. Savona on behalf of Ms. Jesus and Ms. Savona, and Mr.  
Klecina. Anna Bilich initially paid $5,000.00 towards the initial $60,000.00 down  
payment, and later subscribed for one lot on the Property. Members of the Pichelli  
Group contributed $175,000.00 towards the capital cost of the Property. Ms.  
Nizalek and Mr. McDowell paid for their investment contribution in October 2002.  
[101] To fund the remaining balance of the total purchase price, John and Anthony  
arranged for Mr. Kegalj to act as the borrower for a short term vendor take-back  
(“VTB”) mortgage that charged 10% annual interest and matured on September  
15, 2002. On August 6, 2002, the Vuletics arranged for the VTB mortgage to be  
discharged with a $165,178.63 payment and replaced with a $320,000.00  
mortgage from Maple Trust with Mr. Kegalj as the borrower. As mentioned earlier,  
John and Anthony used the Maple Trust mortgage proceeds to reimburse  
themselves for their contributions to the purchase of the Property.  
[102] In the result, John and Anthony contributed nothing on a net basis to acquire  
the Property. In effect, to close the Property acquisition, the Vuletics gave the  
Project a bridge loan that was repaid to them in full in August 2002.  
[103] Until the discovery process in this litigation, John and Anthony did not advise  
the Plaintiffs of how the Property acquisition was financed or how many lots were  
- 43 -  
sold. Only through this litigation did the Plaintiffs come to know that Mr. Kegalj,  
rather than Embleton, was the borrower under the mortgages obtained for the  
Property, and that a VTB mortgage was taken out on the Property to close its  
purchase. As John was a bankrupt and Anthony had poor credit, neither could  
qualify for a mortgage. Accordingly, both arranged for Mr. Kegalj to obtain a  
mortgage on their behalf. Doing so required Mr. Kegalj to hold title to the Property.  
Neither John nor Anthony disclosed to investors that the registered owner of the  
Property was Mr. Kegalj, who was someone not previously known to Mr. Savona,  
Ms. Jesus, Ms. Savona, the Pichelli Group, Ms. Nizalek or Mr. McDowell. Some  
of the Workplace Group members, including Ms. Kostelac, came to learn that Mr.  
Kegalj was the Property’s registered owner only after he started an action in 2010,  
but neither John nor Anthony disclosed this fact beforehand.  
n. Poor Retention of Project Records and Documents  
[104] From the outset of the development, the Defendants’ handling of the Project  
documents and records was haphazard and left much to be desired.  
[105] Anthony confirmed that he was responsible for overseeing the execution,  
collection and safeguarding of the APS contracts that Embleton entered into with  
its Project investors. However, for reasons that are unclear, Embleton neglected  
to sign a number of APS contracts even though the corporation received the initial  
capital investments from signing investors and also received subsequent cash  
calls from them.  
 
- 44 -  
[106] Anthony testified that he kept all of the APS contracts in a box at his home  
office and that he never reviewed them after they were collected from investors.  
From the evidence, I accept that Anthony’s record-keeping practices were poor  
and reflected a high degree of inattention which likely revealed the lack of  
importance that he placed on these records.  
[107] Anthony claims that he was unaware in 2002 that contracts relating to  
interests in land had to be in writing. When pressed, he conceded that investor  
agreements for the Project had to be in writing, and that any revisions or changes  
to an APS had to be in writing under its terms.  
For reasons that are unclear, a number of Project records and documents  
apparently were lost over the years. As a result of the lost records, Anthony  
claimed to be unable to corroborate many of the assertions that he made at trial.  
o. Poor Corporate Governance  
[108] Anthony oversaw Embleton’s corporate affairs. However, by his own  
admission, he had little if any meaningful knowledge of corporate governance  
matters in 2002. He did not know about Ontario law governing corporations, was  
unaware of the duties of directors and officers for a corporation, and conceded that  
he had not known that Embleton should appoint officers to manage its affairs and  
records. He acknowledged that Embleton did not have a minute book or a  
shareholders register, and admitted that he had no records to prove who its  
shareholders had been. Although Anthony had graduated from law school in the  
 
- 45 -  
late 1990s and had been called to the Ontario Bar in 2006, he purportedly had  
cleansed … [himself] personally and psychologically of anything that had to do  
with the law,testified that he had somehow forgotten the distinction between an  
individual and a corporation, and claimed to not know the difference between legal  
and beneficial interests in property. He claimed to know that directors and officers  
of corporations had to avoid placing themselves in a conflict of interest and avoid  
self-dealing, and claimed to see no distinction between John and himself on the  
one hand and Embleton as a company on the other.  
[109] Anthony claimed that 185 Corp. at one point had a minute book and  
shareholders register but both apparently were lost and no steps were taken to  
replace them. He conceded that he was unable to prove who 185 Corp.’s  
shareholders were.  
[110] Under cross-examination at trial, Anthony admitted that he was not aware  
of any financial statements ever being prepared for Embleton. Despite claiming  
that Mr. Pichelli had been retained in 2002/2003 to deal with Embleton’s tax  
returns, Anthony was not aware of any retainer letter with Mr. Pichelli or his firm  
and did not know whether Embleton had ever filed any tax returns. Anthony  
deferred questions about whether Mr. Pichelli or his firm had filed any tax returns  
for Embleton or 185 Corp. to Mira who did bookkeeping for the companies. When  
presented with his sworn testimony in March 2018 that Mr. Pichelli was never  
retained to act for Embleton, Anthony tried to resile from his own evidence at trial.  
- 46 -  
For his part, Mr. Pichelli denied that Embleton or 185 Corp. ever retained his firm  
to provide tax services. Anthony admitted that it had been his responsibility to  
address Embleton’s annual filing requirements but that these filings were never  
done for reasons that are unclear.  
[111] In February 2014, Anthony took on the role of secretary and treasurer of 185  
Corp. but did not conduct any due diligence to learn what those duties were. When  
the general responsibilities of these roles were put to him in cross-examination, he  
professed to be ignorant about the duties.  
[112] Anthony claimed that Embleton employed Mira to perform bookkeeping work  
but did not know of any T-4 slips ever being issued by Embleton or 185 Corp. for  
her employment.  
[113] For his part, John testified that he did not care whether he was a director,  
president or vice-president of Embleton and, in fact, could not recall his actual title  
or role with Embleton apart from knowing that he was “in the company.” He did  
not take any steps to determine what a director was required to do and claimed  
that he never discussed with Anthony who would be president of Embleton. John  
knew nothing about Embleton’s corporate minute books, shareholders register,  
directors meetings, or corporate by-laws. He repeatedly stated that Anthony was  
responsible for dealing with any documents or paperwork. Significantly, John  
claimed that he never reviewed any APS agreements and claimed that Anthony  
was responsible for all negotiations with investors. Under cross-examination, John  
- 47 -  
admitted that he relied on Anthony to manage documents, receive and pay  
invoices from planners and consultants, handle corporate matters, and deal with  
any legal matters that involved reading and writing. In effect, John testified that he  
entirely deferred to Anthony when it came to any responsibility for managing the  
Project from 2002 onwards.  
p. Mortgages on the Property  
[114] From August 2002 to May 2015, John and Anthony arranged to have various  
mortgages registered on the Property that led to about $1,43 million in total net  
mortgage proceeds being paid to Embleton and 185 Corp. over this period. As set  
out below, Embleton and 185 Corp. received the following net mortgage payments:  
a. $153,450.00 from the Maple Trust mortgage in 2002;  
b. $75,000.00 from the First Line mortgage in 2003;  
c. $140,000.00 drawn on the MCAP line of credit in 2008;  
d. $59,000.00 drawn on the MCAP line of credit in 2009;  
e. $117,475.29 from the TD mortgage in March 2012;  
f. $64,235.85 from the Atrium mortgage in February 2014;  
g. $279,871.18 from the Van Der Avoird mortgage in April 2014; and  
h. $540,115.30 from the Rathcliffe mortgage in May 2015.  
[115] Using these net mortgage proceeds, John and Anthony paid for personal  
and non-Project expenses which are further discussed below.  
 
- 48 -  
[116] From July 2002 when the Property was purchased from Ms. Taylor until  
February 2012 when title to the Property was transferred to 185 Corp., Mr. Kegalj  
was the titleholder to the Property. Unable to obtain financing themselves due to  
their poor credit history, John and Anthony arranged for Mr. Kegalj to apply for  
residential mortgages by submitting mortgage applications in which Mr. Kegalj  
falsely claimed to maintain his principal residence at the Property. In doing so, Mr.  
Kegalj obtained financing as the borrower on the Maple Trust mortgage, the First  
Line mortgage, and the MCAP lines of credit, respectively.  
[117] In August 2011, Mr. Kegalj obtained a further $768,750.00 mortgage from  
TD Bank to comply with his obligations, as he then understood them, under the  
terms of a settlement reached with John and Anthony on July 11, 2011 to resolve  
an action that Mr. Kegalj had brought to claim an interest in the Project. In  
December 2011, John and Anthony appeared before Justice Lederer, the trial  
judge for Mr. Kegalj’s action, to seek relief on the basis that the mortgage had had  
obtained breached the terms of their settlement agreement. To resolve the matter,  
the proceeds of the TD mortgage from August 2011 were applied to discharge the  
MCAP line of credit, a line of credit related to Bonk Productions, an adult-  
entertainment business that Anthony had started, and certain personal debts  
unrelated to the Project that Mr. Kegalj had incurred.  
[118] Embleton was not a party to any of the mortgages that Mr. Kegalj obtained  
and serviced by directly paying Maple Trust, First Line and MCAP, respectively,  
- 49 -  
using a combination of funds received from Embleton that he “topped up” with his  
own funds to make the servicing payments. According to Mr. Kegalj, who initially  
paid for one lot interest in the Project, his “top up” payments from his own funds  
constituted his method of paying for a second lot on the Property by instalment.  
Once Mr. Kegalj transferred title of the Property to 185 Corp. in February 2012, the  
corporation thereafter made the mortgage servicing payments directly to the  
lenders.  
q. Mortgages were Serviced from New Mortgage Proceeds  
[119] As a general matter, Embleton and 185 Corp. arranged for the proceeds  
obtained from each new mortgage to be applied to pay off previous mortgage  
obligations. To do this, portions of new net mortgage proceeds were held back to  
provide a ready pool of funds from which monthly debt servicing payments were  
made. In effect, borrowed funds were used to service debt obligations as they  
came due. Over time, as the available pool of borrowed funds was depleted, new  
mortgages were obtained against the Property to replenish the pool of borrowed  
funds from which payments to service the ever-growing debt were drawn to  
continue the cycle of indebtedness. Neither John nor Anthony disclosed any of  
this to investors who had no idea of how the Project was financed.  
[120] In 2014 and 2015, 185 Corp. obtained financing through the Atrium, Van Der  
Avoird and Rathcliffe mortgages. Each one of these mortgages:  
a) had an interest rate of 8% or higher;  
 
- 50 -  
b) was subordinate to the TD mortgage that 185 Corp. obtained after Ms.  
Kostelac agreed to personally guarantee that mortgage;  
c) had larger principal amounts and higher interest rates (i.e., when compared  
to the mortgages obtained earlier in the Project); and  
d) were obtained after a decision had been made to sell the Property.  
According to Anthony’s testimony, these additional mortgage were obtained to  
raise sufficient funds to pay monthly debt servicing obligations as they came due  
to keep the Project solvent in order to develop the Property. But from 2014 to  
September 12, 2016, 185 Corp. obtained total net mortgage proceeds of  
$884,864.00 while spending just $52,121.00 on development costs, property taxes  
and office or other expenses, and $145,519.00 to service the TD mortgage from  
March 2012. The $197,640.00 in total spending outflow reflected only 22.3% of  
the $884,864.00 in total net mortgage proceeds that 185 Corp. obtained over this  
period.  
[121] In comparison, the Vuletics took $319,877.00 from 185 Corp. for personal  
and non-Project uses reflecting 36.1% of the total net mortgage proceeds obtained  
over this period. The amount to service just the Van Der Avoird and Rathcliffe  
mortgages alone was $315,333.00 or 35.6% of the total net mortgage proceeds  
obtained from these mortgages and the Atrium mortgage during this period. It  
- 51 -  
follows that about 71.7% of the total net proceeds from the 2014-2015 mortgages  
was spent on paying the Vuletics and mortgage servicing costs.  
[122] Taking this all into account, I am satisfied that the plain and overriding  
purpose of securing the 2014-2015 second mortgages was to primarily structure a  
personal cash flow mechanism that benefitted the Vuletic family. The cash  
outflows tracked in 185 Corp.’s own records give ample evidence to show that the  
second mortgages were not required to retain or develop the Property but instead  
were used by the Vuletics to make non-Project payments of a clearly personal  
nature.  
[123] On September 12, 2016, 185 Corp. closed on its sale of the Property to  
Brampton G&A Holdings Inc. (“Brampton G&A”). At the time of closing, three (3)  
charges remained on the Property, namely:  
a) the March 2012 TD mortgage;  
b) the April 2015 Rathcliffe second mortgage; and  
c) the $700,000.00 lien registered on the Property on April 22, 2016 by  
Geoff Adair, or his spouse, for legal services provided to Embleton, John  
and Anthony for defending the action that Mr. Kegalj had started in 2010.  
These outstanding charges amounted to $3,389,861.00 collectively as of  
September 12, 2016 when the sale transaction closed and each remaining charge  
- 52 -  
was fully discharged from the sale proceeds that 185 Corp. received from the  
transaction.  
r. Servicing or “Cash CallPayments  
[124] Between 2003 and 2013, the Plaintiffs collectively made cash call payments  
to Embleton and 185 Corp. totalling $294,494.00. In contrast, however, the  
Defendants paid no cash calls despite claiming over half the lots in the Project for  
themselves.  
[125] As set out earlier, s. 4 of the APS provided that, “[t]he Servicing Costs shall  
be allocated equally among all lots which form part of the plan of subdivision.” It  
follows that Servicing Costs for the Project were to be divided proportionately (i.e.,  
on an equal per lot basis) amongst the lot subscribers who had invested in the  
Project. The Plaintiffs understood from this that lot subscribers were to give  
proportionate contributions for these costs by making cash call payments.  
[126] By the end of 2008, four of the five cash calls for the Project had been paid.  
Understanding that most of the Project lots had been fully subscribed for, and that  
investors were required to pay their proportionate share of the servicing costs for  
the Project, Ms. Pelchat-Morris and Ms. Caroti came to believe that the subscribers  
were paying cash calls to make their proportionate servicing cost payments. For  
her part, Ms. Kostelac believed that 45 lots in the Project had been sold, that all of  
the investors were paying cash calls, and that John and Anthony were paying their  
proportionate share of the servicing costs for the ravine and other lots that  
 
- 53 -  
Embleton presumably held. However, in January 2013 around the time of the fifth  
and final cash call, Ms. Kostelac learned from John and Anthony that a few  
investors in the Project, namely Anna Bilich, Kim Gushu (Whyte) and Ann-Marie  
Leveriza, had not paid cash calls that had been demanded.  
[127] By March 2016, Ms. Kostelac discovered that Anthony had not applied the  
proportionate approach to collect cash calls as required by the APS after reviewing  
the materials that Mr. Bilich served on his motion in the Kegalj’s action to enforce  
the requirement for investors to receive a full accounting of Project funds. Among  
other things, Ms. Kostelac learned from Mr. Bilich’s materials that Anthony had  
pro-rated the servicing costs over only 28 lots (i.e., instead of a figure closer to 50  
that she believed more accurately reflected the actual number of lots in the  
Project). As a result, Ms. Kostelac learned that she and other investors had  
contributed disproportionately to the servicing costs which were not being shared  
equally on a per lot basis across the Project.  
[128] For his part, Anthony acknowledged that investors were not informed that  
Embleton was not paying Servicing Calls for its lots in the Project. He also  
explained that cash call obligations were based on the number of people who had  
subscribed for a lot in the Project, and not the number of actual lots in the Project,  
which was contrary to the term under s. 4 of the APS for servicing costs to be  
allocated equally among all of the lots in the plan of subdivision which, in my view,  
properly encompassed all of the lots in the Property based on how it was notionally  
- 54 -  
divided in the initial concept for the Project. Anthony further explained that  
servicing costs payments had been waived at various times for certain investors,  
including Mr. Kegalj, Mr. Sokic and Mr. Granic, by apparently exercising his sole  
and absolute discretion without disclosing this to other investors.  
s. Ratio of Personal to Project Expenses  
[129] Between July 2002 and September 2016, the Defendants used a total of  
$923,020.00 of Project funds for personal and non-Project expenditures. In doing  
so, they spent over 2 ½ times on themselves as they did on direct development  
costs for the Project that totalled $378,904.00.  
[130] As Anthony explained, investor Cash Calls and mortgage proceeds were  
comingled in company bank accounts. Although he claimed to rarely use funds  
from investor cash call payments (i.e., as opposed to mortgage proceeds) to pay  
for his personal expenses, he admitted having no way of knowing, due to the  
comingling, whether Project funds used to pay for personal expenses were  
originally received as mortgage or cash call proceeds.  
[131] There is no dispute that the Defendants used Project funds to pay for  
personal and non-Project expenses, as corporate records have confirmed and the  
Defendants have acknowledged. Among other things, Project funds were used:  
a) to pay for costs incurred by Bonk Productions, an adult film business that  
Anthony had started;  
 
- 55 -  
b) to purchase an engagement ring for Anthony’s fiancé;  
c) to pay for John’s trips to Europe and cash withdrawals in Europe;  
d) to buy furniture for the Vuletic family;  
e) to acquire two (2) vehicles, including a luxury German car; and  
f) to transfers funds to the Defendants or their other companies.  
There is some dispute over the actual extent to which Project funds were used by  
the Defendants to pay for non-Project expenses. However, Anthony’s own  
estimates indicate that the Defendants used Project funds to pay for non-Project  
expenses totalling between $822,000.00 and $888,000.00.  
[132] After analysing the Defendants’ accounting records and other related  
financial information, KSV, the Plaintiff’s valuation firm, reported that a total of  
$866,436.00 in Project funds were used to pay for non-Project expenses. In  
addition, KSV reported that a further $56,584.00 in Project funds were diverted  
from 185 Corp.’s TD bank account between September 2014 and August 2016 to  
pay for legal and other professional fees for an unrelated development project in  
Oakville that John and Anthony had pursued. According to KSV, the Defendants  
spent a total of $923,020.00 of Project funds on personal and non-Project  
expenses from July 2002 until September 2016.  
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[133] To put these figures into perspective, the Defendants spent roughly 2 ½  
times as much on themselves as they did on the $378,904.00 in direct  
development costs for the Project, and took over 4 ½ times as much on personal  
and non-Project expenses as they put into the Project by making $184,000.00 in  
capital contributions.  
[134] Despite having not invoiced or disclosed these expenses to investors, the  
Defendants claim that all of their personal and non-Project expenses constituted  
proper management fees to which they were entitled. They also claim that they  
had absolute control and discretion regarding the use of any funds held by  
Embleton and 185 Corp., respectively, and that John and Anthony, as the directing  
minds of the companies. As set out later below, I am not persuaded that these  
expenses constituted proper management fees.  
The Development  
[135] In November 2002, Embleton’s planner, Gagnon Law Bozzo (“GLB”) wrote  
to the City of Brampton to advise of its retainer by Mr. Kegalj in connection with a  
redevelopment plan for the Property (the “Kegalj Redevelopment Plan”) and its  
review of the Bram West Secondary Plan and Community Design Study. Without  
mentioning Embleton, GLB wrote that Mr. Kegalj took issue with the Village  
Residential (i.e., low density) designation for the Property. GLB also advised of an  
intention to develop the Property with lots having 40 foot frontages. At trial,  
 
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Anthony admitted that the intention to have lots with less than 50 foot frontages  
was never disclose to investors.  
[136] In February 2003, the Planning Department at the City of Brampton  
commented internally on its pre-application review of GLB’s proposal and clearly  
indicated that the unique character and image of the Village of Huttonville, in which  
the Property was located, was to be maintained. The Planning Department gave  
no indication that the Village Residential designation, which only allowed for 12  
lots to be developed on the Property, would be changed. To change the zoning  
designation for the Property, detailed community design guidelines would need to  
be submitted to the City under the Bram West plan and policies for the area, among  
other things. At trial, Anthony agreed that the City was not receptive to rezoning  
the Property to allow suburban development on the land.  
[137] In March 2003, Embleton’s other planner, Salmona Tregunno, prepared a  
subdivision site plan which envisioned intensive development on the Property and  
the neighbouring Teramoto property.  
This detailed site plan was tied to a  
proposed development of the lands located to the south of the Property where  
intensive development was also being sought. Significantly, this site plan did not  
contemplate a neighbourhood on the Property consisting of 50 foot x 140 foot lots  
as promised to investors in the APSs.  
[138] By late March 2003, Embleton retained a consulting firm, Ander Engineering  
Limited, to prepare a cost estimate for the proposed physical servicing of the  
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Property based on the assumption that municipal water and sewage services,  
which were non-existent in the area, would be brought to the Property and  
surrounding area by the Region of Peel and the City of Brampton. The cost  
estimate prepared by the firm in 2003 for servicing the Property and the  
neighbouring Teramoto and Ufkes lands, as discussed below, exceeded $5.715  
million. The estimate would later increase by 30 to 40% the following year. None  
of the cost estimates prepared by Ander Engineering Limited were given to  
investors. Anthony claimed that it made no sense to share this information with  
investors due to their different levels of sophistication and because actual servicing  
costs are never known until the installation of services begins.  
[139] In March 2003, the City of Brampton approved a Block Plan Review Process  
that required the preparation and approval of a block plan for all new secondary  
plans adopted after September 1, 2002. As a result, individual plans for  
subdivision would not be reviewed or approved in the Bram West region until a  
block plan, whose boundaries would be determined by the City, had been  
established. In effect, all of the City’s design objectives, land use determinations,  
technical issues, environmental impacts and management, community services,  
transportation, public consultation, and water and sewage infrastructure had to first  
be addressed at the block plan level.  
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a. Project Status Updates and Cash Calls  
[140] The Defendants periodically gave Project updates that sounded positive and  
led investors to believe that the development was progressing well and on track.  
In turn, investors paid cash calls to the Project believing that their contributions  
would be used to further develop the Property. The development progress, or lack  
thereof, is further discussed below. Regrettably, the Project updates often misled  
investors about the Project’s true status and did not give complete or accurate  
disclosure by failing to give important information. Ultimately, I find that these  
updates deceived investors regarding the actual circumstances of the Project or  
how it was being run and managed.  
[141] Between 2003 and 2010, Anthony attended several meetings with the  
Workplace Group investors to update them on the Project’s status. He also shared  
update letters at the meetings, and asked investors to pay cash calls at a number  
of these meetings.  
b. Cash Call #1 March 31, 2003  
[142] By letter dated March 31, 2003, Anthony informed investors that Embleton  
had engaged development firms in Oakville and Brampton to obtain municipal  
planning approval for “the Embleton Properties.” However, the letter did not  
disclose that Embleton had retained both firms to also develop two (2) adjacent  
properties to the north of the Property, the first having been acquired from Marilyn  
and Michael Ufkes (the “Ufkes”) and the other from Emiko Teramoto and Shirly  
   
- 60 -  
Mitsuko Teramoto (the “Teramotos”), in addition to developing the actual Property  
itself. The March 31, 2003 letter also claimed that both development firms were  
working in diligent cooperation to progress the development as expeditiously as  
possible, but without disclosing that:  
a) Embleton had no application for a plan of subdivision prepared or filed  
with the City;  
b) the Property was zoned “Village Residential” which allowed for only  
12 lots to be developed on the land;  
c) the City of Brampton was not interested in changing the Village  
Residential zoning designation at that time;  
d) Embleton intended to make a joint development application with the  
neighbouring landowners (i.e., Mr. Ufkes and the Teramotos) whose  
planning costs would be paid for by Project investors;  
e) John and Anthony knew before the Property was acquired that it was  
not expected to be serviced (i.e., with water, sewage, or other such  
infrastructure) until about 2016 (i.e., being roughly 13 years into the  
future); and  
f) the cost to service the Property would be quite significant as set out  
in a cost estimate by Ander Engineering Limited.  
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[143] The March 31, 2003 letter reported that Embleton had submitted a plan of  
subdivision to the City of Brampton for approval. This was not true, as Embleton  
had not submitted a plan of subdivision by that date. Earlier, in November 2002,  
the Defendants had wanted to develop the Property together with the adjacent  
Ufke and Teramoto lands into single detached residential lots with 40 feet  
frontages, but Embleton’s first plan of subdivision was only filed on March 23, 2004  
(i.e., well after the March 31, 2003 letter) which contemplated 98 units on all three  
properties. The Defendants never advised investors of any application, or  
contemplated application, having more than 51 lots in total. Project investors,  
including the Plaintiffs, paid for the various draft plans of subdivision that Embleton  
filed with the municipality. In addition, the March 31, 2003 letter told investors that  
the Region of Peel would start building a main sewer trunk line by November 1,  
2003 which implied that the Property would soon be serviced, although this was  
not the case. Despite clear and obvious barriers to developing the Project with a  
plan approaching 50 lots on the Property, the March 31, 2003 letter claimed that  
the Project was running “ahead of schedule,” which clearly was not true.  
[144] The Defendants never told investors that Project funds were being used to  
pay for personal expenses or disclose the amount of Project funds they took for  
this purpose. In addition, they did not inform investors that cash call funds were  
being used to develop the adjacent north properties owned by Mr. Ufkes and the  
Teramotos together with the Property. Furthermore, investors were not informed  
- 62 -  
that John and Anthony planned to claim unsold lots on the Property for themselves,  
or that neither Embleton nor the Vuletics were paying any cash calls.  
[145] In May 2003, Embleton obtained additional cost estimates from surveying  
and engineering firms for certain services related to the Property. In July 2003,  
GLB sent a memo to John making it clear that no application for a plan of  
subdivision had been filed with the City as the memo set out all of the information  
that was needed to prepare an application. Despite this, the Vuletics never  
advised investors of any errors or misrepresentations in the March 31, 2003 cash  
call letter.  
[146] In January 2004, the City of Brampton released a lengthy (130 page) report  
entitled “Bram West Secondary Plan Review: Land Use & Growth Management  
Strategy” (the “January 2004 Report”) that detailed the City’s approach to  
developing the 6,050 acre Bram West area in which the Property was a modest 12  
½ acre parcel in the historic Huttonville neighbourhood with “Village Residential”  
zoning status. The report revealed the complicated and multi-layered framework  
for suburban development in the Bram West area, which the City has carefully  
managed and controlled, which complemented the earlier Block Plan Review  
Process from March 2003. The January 2004 Report also confirmed that Bram  
West had been divided into five block plan areas and two sub-areas. The block  
plan area in which the Property was found is Block Plan 40-3 that comprises over  
1,100 acres of undeveloped land.  
- 63 -  
[147] Significantly, the January 2004 Report clearly set out two distinct phases of  
approval for development related to the Property. First, block plans would need to  
be prepared (i.e., requiring the interests of various land owners and developers  
within each block plan to be coordinated). Thereafter, the City would consider  
applications for plans of subdivision. Despite this, and without any block plan, GLB  
wrote to the Mayor and City Council in March 2004 to advise that it had reviewed  
the January 2004 Report and intended to submit an application for a plan of  
subdivision in relation to the Property, together with the neighbouring Ufkes and  
Teramoto lands, to develop 98 lots with only 21 lots having 50 foot frontages under  
the plan.  
[148] In late March 2004, Anthony instructed GLB to submit a joint application to  
develop the 98 subdivided lots on the three properties. At trial, Anthony conceded  
that the joint application lacked a sufficient number of 50 foot lots to fulfill  
Embleton’s contractual obligations to deliver the lots which investors had been  
promised under the APSs. He asserted that the lack of 50 foot lots in the joint  
application plan was no secret as he had disclosed this with investors in mid-2002,  
but he did not produce any records or evidence to independently corroborate his  
assertion. He also asserted that he was not required to seek the consent of  
investors to amend their APS terms or otherwise give investors any notice of the  
changes to the Project concept.  
- 64 -  
[149] Initially, Anthony denied that a block plan had to be prepared and approved  
before subdivision development could proceed on the Property and other lands in  
the block plan area, which he characterized as a City “wish list” that was not a  
formal requirement under years later. He also denied that GLB submitted the  
March 2004 application outside of the block plan process, and tried to suggest that  
the process contemplated individual subdivision applications coming first before  
block plans were later created. However, as set out below, the City’s response to  
the March 2004 application makes it clear that Anthony’s explanation was simply  
wrong as the City held that the application that GLB submitted was entirely  
premature.  
[150] By letter dated May 13, 2004, Anthony advised investors that an application  
for “site plan approval” of the Property had been submitted to the City. He also  
identified the planners working with Embleton, and wrote that he was pleased with  
the rate of progress. However, as GLB had actually made an application for a plan  
of subdivision and not an application for site plan approval (i.e., which is a distinct  
part of the development process), his update to investors was false and  
misleading.  
Enclosed with the May 13, 2004 letter was the City’s  
acknowledgement of an application by Embleton to amend the Official Plan and  
Zoning By-laws, but this was not a site plan application or the draft plan of  
subdivision that GLB had submitted for City approval. In addition, Anthony did not  
disclose that the Property had Village Residential zoning status, or that no  
development or rezoning of the Property could occur until a block plan was  
- 65 -  
approved and implemented, among other things. Furthermore, the letter did not  
disclose that the layout for the Property in the subdivision application lacked a  
sufficient number of 50 foot lots to satisfy Embleton’s contractual obligations to  
investors, that Mr. Kegalj actually held title to the Property, that Embleton had  
mortgaged the Property to close the purchase transaction, that the Vuletics had  
used the Maple Trust mortgage proceeds to fully reimburse themselves for what  
they paid to close the purchase deal (i.e., leaving them with no net capital  
investment in the Project), that investors were paying to develop the neighbouring  
Ufkes and Teramoto lands, that the Vuletics were not paying any cash calls despite  
having reserved a number of Project lots for themselves, or that Anthony had taken  
at least $120,000.00 in Project funds to pay expenses related to his adult film  
business. The Defendants concede that investors did not receive any invoices to  
disclose or substantiate the amounts taken from Project funds. The letter  
concluded by stating Embleton’s satisfaction with “the present rate of progress,  
and [the anticipated] further work and continued efforts to ensure that the site plan  
approval is expedited in a timely manner, along with the necessary expenses and  
services for the property.” The letter’s optimistic tone reassured investors who  
relied on Embleton to advise them on how the Project was advancing. In reality,  
however, Embleton made only very limited if any material progress to meaningfully  
develop the Property.  
[151] Importantly, about one week later, John, Anthony and Embleton learned of  
significant obstacles for the development of the Property. After conducting an  
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initial review of Embleton’s March 2004 application, the City of Brampton advised  
Embleton that it would not support the rezoning of the Property or the proposed  
residential densities in the application. More importantly, the City advised that  
servicing infrastructure for the area in which the Property was located was not  
planned to be in place until 2016. As a result, the City concluded that Embleton’s  
application for a plan of subdivision was premature. In a later memo, the City  
reiterated that the application remained premature as:  
a) the area lacked a block or tertiary plan; and  
b) sanitary services were not planned for the area until 2016.  
With hindsight, it is clear that the City’s projection in 2004 for bringing services to  
the area was overly optimistic as water and sanitary services remained  
unconnected in the area by late 2021. As well, the Credit Valley Conservation  
Authority decided not to support Embleton’s application given the Property’s  
proximity to the Credit River Valley and the lack of environmental implementation  
reports. Based on all of this, the City maintained that Embleton’s application was  
premature and would not be further processed.  
[152] Clearly, these outcomes raised obstacles for Embleton’s efforts to develop  
the Property. However, none of this information was shared with investors who  
were kept unaware of the misstatements about the Project’s development status  
in the May 13, 2004 letter. Claiming to have believed that the information from the  
- 67 -  
City was either preliminary, speculative or otherwise wrong, Anthony chose to not  
share any of it with investors. As a result, investors were deprived of any  
opportunity to meaningfully assess their investment in the Project and make  
informed decisions.  
[153] Under cross-examination, Anthony claimed that investors were verbally  
warned that the Property had Village Residential zoning that constituted a  
significant risk for the Project. but the Defendants adduced no records to confirm  
that investors were warned about the Property’s zoning status or the City’s  
opposition to having its zoning changed. Anthony repeatedly stated that he orally  
disclosed the Project’s problems and risks to investors, but his evidence about  
what he actually said to whom and when was vague and unclear. There is no  
dispute that the Defendants never held a plenary meeting for all investors to meet  
each other and discuss the Project, and did not circulate a contact list to allow  
investors to know and contact each other.  
[154] In July 2004, GLB was advised that City Council had rejected Embleton’s  
request to remove the Village Residential designation from the Property’s zoning  
status in favour of its proposed development densities. In late August 2004, GLB  
reported negative feedback from various City departments, including the Planning  
Department’s comment that Embleton’s March 2004 application was premature.  
[155] In late 2004, the City was preparing an official plan amendment to deal with  
land use changes in the Bram West area. By this time, Anthony clearly knew that  
- 68 -  
the City would not be supporting a change to the Village Residential designation  
for the Property. Nevertheless, he chose to not disclose this information to  
investors because, in his opinion, nothing had changed and he anticipated a long  
fight with the City before obtaining a zoning change. He also felt that it was not  
necessary to inform investors, whom he felt were unsophisticated people, that the  
Property would have to be part of the block plan process in order to be developed.  
Instead, he claimed to follow an approach by which he gave investors status  
reports every two years and encouraged them to ask if they had any questions.  
However, there is no record to show that Anthony or the other Defendants gave  
status reports to investors every two years, or that question and answer sessions  
were held with investors. Instead, Anthony sent periodic letters that gave  
favourable but misleading accounts of the progress being made for the Project  
while asking investors to pay increasingly larger cash call amounts.  
[156] In a functional servicing report in late 2004, Ander Engineering Limited  
stated that it was unable to quantify area-wide water and sewage service routing  
for the Property because there was no approved block plan for the land. Ander  
also reported that there was no available municipal sanitary servicing infrastructure  
(i.e., no existing local or trunk sewer facilities) in the Property’s vicinity, and no  
feasible way to provide municipal sanitary servicing to the Property. As a result,  
before the Property could be developed, significant external sanitary servicing  
would be required. According to Ander, sanitary service for the area would most  
likely be provided through servicing infrastructure for the Bram West development  
- 69 -  
area that was not expected to be ready before 2009. Therefore, in addition to the  
City’s own report that servicing infrastructure would not extend to the Property until  
2016, Embleton’s own consultant was advising that servicing would not be built  
before 2009.  
[157] Under cross-examination, Anthony explained that he did not share the  
servicing-related information with investors because he believed that the  
information was not correct based on the advice he purportedly received from  
Great Gulf Homes (“Great Gulf”), a major developer that Embleton had worked  
with to coordinate development plans and harmonize a block plan for the area  
where the Property was located. According to Anthony, Great Gulf advised in 2005  
that services for the Property would be available imminently. However, he  
provided no records to corroborate his claim that Great Gulf gave this information.  
Anthony also testified that his approach was to not share detailed information with  
investors regarding Project reports unless they specifically asked. The obvious  
problem with his alleged approach is that investors could never ask questions  
about reports or information of which they were unaware.  
[158] Around January 2005, Anthony became aware of the City of Brampton’s  
concern that the municipality lacked capital funding to provide servicing  
infrastructure for the Bram West area and that new statutes and regulations would  
complicate the planning process. Anthony did not disclose this to all investors as  
- 70 -  
he purportedly saw his role as “delivering a product” by placing emphasis on the  
progress being made rather than the problems being encountered.  
[159] By early 2005, Embleton was developing a new layout for the Property that  
was consistent with Great Gulf’s proposed Riverview Heights development to the  
west and south. Anthony did not circulate the layout or draft plans of subdivision  
to investors, or advise that the Property would likely be the last piece in the block  
plan development process, or that lot sizes and layouts for the Property would have  
to be consistent with the proposals being made by other developers. Although he  
claimed that he showed draft plans to investors at every possible meeting, he did  
not identify these investors nor give any meaningful evidence of these meetings.  
By this time, Anthony clearly understood that the development of the Property  
would occur within a block plan to coordinate the development activities of  
numerous area landowners within Block 40-3 that covered 1,100 acres. In  
February 2005, GLB wrote to Great Gulf to confirm Embleton’s interest in having  
its planned development fall in line with Great Gulf’s vision.  
[160] In May 2005, GLB filed with the City an amended application for a plan of  
subdivision for the Property and adjacent Ukfes and Teramoto lands to increase  
the total number of subdivided lots from 98 lots to 118 lots. The amended  
application indicated that its layout generally reflected the high-density Riverview  
Heights development proposal that Great Gulf had designed. Given its increased  
number of lots, the amended application clearly signalled that Embleton was  
- 71 -  
abandoning the Project’s initial concept under the APSs and its commitment to  
deliver the 50 foot x 140 foot lots that investors had contracted for.  
[161] In June 2005, the City advised Embleton that its amended application was  
premature as various studies, land use concepts, and official plan amendments for  
the Bram West Secondary Plan were not expected to be reviewed and approved  
by the City until late 2004. As the revised plan of subdivision reflected an entirely  
reconfigured proposal, the City also charged Embleton a $3,000.00 fee due to the  
addition of 20 lots in the revised plan. After Embleton paid the fee, the City  
returned the funds in early October 2005 with a direction to re-file a fresh  
application:  
[T]his revised submission constitutes a totally re-  
configured draft plan of subdivision that requires  
complete internal and external circulation to various  
agencies and the preparation of new reports to  
committees involved with this type of development  
application. In this regard, we require you to make a  
new application and pay related fees in accordance  
with the type of application. [Emphasis added]  
In giving this direction, the City gave no indication that the Village Residential  
zoning designation for the Property would be changed.  
[162] The Defendants did not disclose Embleton’s reconfigured proposal to  
develop 118 lots on the lands to investors.  
- 72 -  
c. Cash Call #2 October 28, 2005  
[163] By letter dated October 28, 2005, Embleton sent a second cash call letter to  
investors that requested payment of $2,649.00 per lot. Claiming “recent positive  
developments,” the completion of “substantial planning work,” and the need for  
additional work to [achieve] the goal of site plan approval,Embleton advised  
investors that annual cash call payments would be required. As set out below, the  
letter gave investors a positive but misleading account of the Project’s progress.  
[164] Embleton advised investors that it had been waiting for the City of Brampton  
to make a final or conclusive finding on an amended block plan for the area of  
Huttonville (i.e., where the Property was located) and its surroundings. This was  
entirely false. No plan for Block 40-3 had been prepared or filed leaving the City  
with no block plan to consider. In addition, the letter did not disclose to investors  
that:  
a) there had been no movement by the City to install water or sanitary  
infrastructure to the Property, which was not expected until 2009 if not later  
in 2016  
b) the City had turned down Embleton’s development application in 2004  
c) City officials had told Embleton that any application for a plan of subdivision  
was premature and would not be circulated for formal review or comment  
 
- 73 -  
until the Bram West Secondary Plan Review was done and a revised plan  
amendment was approved; and  
d) there was no block or tertiary plan for the City to use in considering a proper  
application to develop the Property, which meant that Embleton’s ability to  
obtain development approval for the Project could well be significantly  
delayed.  
Despite these serious obstacles, Embleton did not inform investors of any  
obstacles to developing the Property.  
[165] The October 28, 2005 letter further advised that Embleton’s planners had  
met with another developer, Great Gulf, over the past few months to collaboratively  
ensure that Embelton’s design plans and lots met with Great Gulf’s vision for the  
area that it planned to submit to the City of Brampton for approval. Critically,  
Embleton did not disclose to investors its plan to increase the number of lots on  
the Property by supporting Great Gulf’s design proposal for Riverview Heights that  
would allow Embleton to increase its “yield” (i.e., number of lots) on the Property.  
In addition, Embleton did not disclose that the City did not support any changes to  
the Village Residential zoning designation for the Property, or inform investors that  
the Vuletics intended to keep the unallocated lots on the Property for themselves.  
[166] Embleton claimed that investors had to pay annual cash calls until further  
notice to cover its “substantial planning work both in the past years and present,  
- 74 -  
along with necessary additional work to the goal of site plan approval for out lots.”  
However, Embleton did not disclose that direct Project development costs  
approached only $69,000.00 by then, or that very little Project funds were being  
spent to develop the Property even as further cash calls were being demanded.  
In addition, Embleton did not disclose that Anthony was waiving cash calls for  
select persons that he chose, including himself, despite not waiving them for others  
including a number of the Plaintiffs.  
[167] On October 28, 2005 (i.e., the same date as Embleton’s second cash call  
letter to investors), the City issued a recommendation report as part of the Bram  
West Secondary Plan Review. The report confirmed that the City was not  
contemplating any change to the Village Residential zoning designation for the  
Property. After mentioning the previous March 2004 (98-lot) and May 2005 (118-  
lot) development proposals that Embleton had submitted, GLB’s request to have  
the Property included with the Village of Riverview Heights project by Great Gulf  
(i.e., for the development of its own lands), and the existing Village Residential  
designation for the Property and the Ufkes and Teramoto lands, the City gave the  
following response:  
In a previous report to [the Planning Department] staff  
did not support the proposal as submitted, noting such  
issues as incompatible densities with the Village of  
Huttonville and visual impact on the valley. Staff  
continue to express the same concerns and believe it  
is premature to remove the subject lands from the  
Village Residential designation and revise its land use  
designations.  
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Staff note that the subject lands are within the Special  
Study Area designation that applies to the Villages of  
Riverview Heights concept. This designation provide  
[sic] a broader planning context for staff to evaluate this  
proposal which wasn’t the case when GLB Urban  
Planners made their submission in the Spring of 2004.  
Therefore, staff are of the view that [the Property and  
the Ufkes and Teramoto lands] should continue to be  
subject to the Special Study Area designation and that  
it be evaluated together with Great Gulf’s Riverview  
Heights proposal. Further development approvals for  
[Embleton’s] application will be subject to the City’s  
Block Plan and Grown Management Programs.  
[Emphasis added]  
[168] Embleton did not disclose the City’s recommendation report nor its ongoing  
refusal to change the Village Residential zoning designation for the Property to  
investors. It also chose to not retract nor correct the misrepresentations in its  
October 28, 2005 cash call letter. Although Anthony claimed that he showed  
investors the draft plans of subdivision (i.e., without providing them with copies),  
no supporting evidence was adduced to corroborate his claim.  
[169] In April 2006, the City released a major 300-page report entitled Draft Official  
Plan that set out its vision for development in Brampton. Among other things, the  
plan addressed residential, commercial and employment lands development,  
transportation systems and road networks, environmental management and the  
preservation of natural areas, recreational open space, the installation of servicing  
infrastructure and utilities, institutional and public uses of lands, cultural heritage,  
urban design, financial issues, and special study area. Notably, the plan confirmed  
the City’s very restrictive approach to development, particularly in respect of  
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properties within fill or flood regulation areas subject to the Credit River  
Conservation Authority, as was the case with the Property.  
[170] In May 2006, GLB delivered Embleton’s revised draft plan of subdivision for  
the Property to the City that featured a 105-lot layout that was quite different from  
an earlier 107-lot layout that GLB had prepared for the Property in January 2006.  
From these development plans, it is apparent that Embleton had effectively  
abandoned the Project’s initial concept by then and was acting as though it were  
not bound by its contractual obligations to investors under the APS. Embleton did  
not inform investors that it had filed yet another draft plan of subdivision with the  
City nor disclose the above-mentioned developments to investors.  
[171] Around June 2006, the Vuletics and Embleton provided the Pichelli Group  
with a purported summary of Project costs incurred since 2002 that allegedly  
totalled $208,223.00 and purportedly matched the amount of the first two cash  
calls (i.e., that combined to total $4,265.00 per lot) that investors having interests  
in 45 lots on the Property allegedly paid by proportionally contributing to the Project  
development costs. However, the summary was misleading as it failed to disclose  
that the actual Project expenses or costs were nowhere near $208,223.00, that  
neither Embleton nor the Vuletics were paying cash calls for unallocated lots they  
had reserved for themselves, that investors were paying to develop the  
neighbouring Ufkes and Teramoto lands, that Embleton had not paid its planners  
or consultants in timely fashion, or that Embleton had not paid municipal property  
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taxes in respect of the Property. Moreover, the summary did not disclose any of  
the municipal development issues mentioned earlier.  
[172] By late 2006, the City had not processed any of Embleton’s applications for  
subdivision nor recognized the Property as part of the Riverview Heights  
development proposal submitted by Great Gulf. In mid-October 2006, the City  
granted an Official Plan Amendment (“OPA”) that did not change the Property’s  
Village Residential zoning designation nor remove the Property from the historic  
Village of Huttonville despite Embleton’s earlier development applications. In mid-  
November 2006, Embleton appealed the OPA to the Ontario Municipal Board  
(“OMB”). None of these developments were disclosed to investors.  
[173] By the end of 2006, the Property was not formally included in the block plan  
process for Block 40-3 and the City continued to regard Embleton’s subdivision  
applications as premature. Despite its pending OMB appeal, Embleton filed yet  
another draft plan of subdivision on December 22, 2006 which emphasized that its  
site layout for the Property and Ufkes and Teramoto lands had been designed to  
reflect the layout submitted by Great Gulf on December 19, 2006. Although  
Anthony claimed that he showed the new draft plan to investors, he did not lead  
any evidence to corroborate his account. He also agreed that he did not circulate  
the plan to investors.  
[174] In late 2006, a number of developers and landowners formed the Bram West  
Landowners Group (“BWLG”). By early 2007, Embleton and other landowners had  
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joined the group to address or coordinate development issues at the block plan  
level. The block plan process was complex and involved four (4) levels of  
government giving their approval under the following tandem approvals process:  
a) a review of the block plan and corresponding OPA  
as approved by the City plus an Environmental Study  
Report for the 1,100 acres in block Plan 40-3; and  
b) a review of a complete functional design for roads,  
water and sewage services, and utilities to be installed  
in the block plan area.  
d. Cash Call #3 January 29, 2007  
[175] By letter dated January 29, 2007, Embleton asked investors to pay a cash  
call of $3,649.00 per lot. Based on previous cash call responses, Embleton stood  
to raise about $100,000.00 under this third cash call letter.  
[176] The January 29, 2007 letter from Anthony advised investors that the Region  
of Peel was bringing water and sewer services to the Property that year. This claim  
was clearly false. No such services were being brought to the 1,100-acre Block  
40-3, let alone the Property. As Anthony well knew from Ander Engineering  
Limited and the City of Brampton itself, services were not due to arrive to the  
Property until at least 2009 if not 2016. In fact, by the start of trial in 2021, sewer  
and water line infrastructure had still not arrived. The letter also misrepresented  
that the installation of sewer and water services was ahead of original forecasts  
and that Embleton was pleased as those services were integral to the development  
process. Embleton never issued a correction.  
 
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[177] The letter of January 29, 2007 falsely claimed that development costs had  
increased due to new policies instituted by the City that introduced more expensive  
land development policies with up-front conservation charges and fresh taxes that  
had raised Embleton’s development consulting and planning costs. The letter did  
not disclose that:  
a) Embleton had not paid the Conservation Authority apart from $500.00  
on April 16, 2004 (i.e., roughly three years earlier);  
b) property taxes for the Property were not being paid in timely fashion  
as the Vuletics believed that they had a two-year payment window;  
c) Project funds were being taken to pay the Vuletics’ personal expenses  
which, by that time, came to at least $150,000.00 and exceeded  
Embleton’s actual development-related costs;  
d) GLB had invoiced Embleton only $47,297.43 in planning charges  
which remained unpaid as Anthony felt the invoice amount was  
excessive;  
e) Embleton’s other planner, Salmona Tregunno, had carried most of its  
work-in-progress for years and allowed most of its accounts with  
Embleton to go unpaid until 2016 after the Property was sold; and  
f) work on the block plan process had started in 2004 but the City of  
Brampton had no budget to review the block plan.  
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The letter also purported to enclose reports showing the extent of outstanding work  
that had to be addressed, but it only gave the cover pages for the reports that had  
been commissioned by BWLG (i.e., the group of developers with interests in the  
area were the Property was situated) and not by Embleton although it paid dues  
to BWLG as member of the group.  
[178] The January 29, 2007 letter misrepresented that Embleton would have to  
pay hundreds of thousands of dollars towards various consulting fees (i.e., about  
$250,000.00 for an environmental assessment, $105,000.00 for an environmental  
implementation report, plus a “small percentage” of other consulting fees for a  
newly formed development group estimated to approach between $350,000.00  
and $500,000.00). In reality, however, the various consulting fees were incurred  
through BWLG with Embleton’s share being just $9,800.00, which was not  
disclosed to investors. Around this time in 2007, Embleton owed BWLG about  
$15,000.00. But the Defendants were purposely vague as to what BWLG was  
owed which understandably left investors with the likely impression that Embleton  
had incurred expensive consulting fees. The January 29, 2007 letter also advised  
investors that Embleton had to pay cash calls to BWLG on time or face strict  
penalties with very high interest charges and, more damagingly, a permanent  
exclusion or removal from the developers group. However, Embleton’s share of  
the first BWLG cash call was only $6,890.00. Moreover, despite leaving investors  
with the impression that BWLG strictly enforced the terms of its cost sharing  
agreement with its members, Embleton’s payments to BWLG were late and had  
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fallen into arrears after its first February 2007 invoice was paid. The letter’s  
request for timely cash call from Project investors led them to believe that everyone  
with lot interests would pay their proportionate share, but this was false. Finally,  
the letter strongly suggested that the upcoming cash call payment due in March  
2007 would be the last or second last payment before site plan approval,  
depending on the pace and efficiency of the planning department and city council  
at the City of Brampton. By stating this in the letter, Anthony gave investors the  
misleading impression that municipal site plan approval was imminent which was  
clearly not true. The Property still had its Village Residential zoning status and  
Embleton’s various development applications to the City were still premature and  
outside of any approvals process. Moreover, the recent OPA by the City had not  
changed the permitted land use for the Property which had led Embleton to appeal  
the OPA to the OMB. None of this was disclosed to investors. The assertion of a  
last or next to last cash call was simply a ruse to convince investors that the  
development process was almost over when, in fact, it was nowhere near  
complete.  
[179] In late October 2007, BWLG issued a second cash call to its members.  
Embleton’s share was a modest $8,638.00. However, it only paid $1,000.00 of the  
$15,285.00 owed to BWLG for the first two cash calls. Embleton later had its third  
BWLG cash call of just $5,646.00 fall into arrears. By early 2008, Embleton was  
not paying its own planners for their development work or BWLG’s cash calls which  
Anthony had warned Project investors had to be paid in a timely manner. Instead,  
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the Vuletics took Project funds to travel abroad and pay for personal expenses,  
including an $18,000.00 engagement ring that Anthony bought for someone he  
was pursuing romantically.  
e. Dissolution of Embleton  
[180] In January 2008, the Ontario Government served Embleton with a notice of  
dissolution for failing to comply with the Corporations Tax Act, RSO 1990, c. C40  
by not submitting its filings. Among other things, Embleton never filed any financial  
statements for its business activities and never obtained a GST number for its  
operations. Embleton never filed any income tax returns with CRA nor pay any  
taxes to the federal or provincial governments before its dissolution.  
[181] Anthony claims that he was initially unaware that Embleton had been  
dissolved and only learned of the dissolution by 2010 at the latest (i.e., due to an  
apparent combination of factors including a failure to update the corporation’s  
mailing address). After discovering the dissolution, neither Anthony nor John took  
any steps to revive the company after instructing their lawyer, Geoff Adair, to  
inquire into the matter. As a result, Embleton’s corporate filings remained  
outstanding and its taxes remain unpaid. None of the Defendants disclosed  
Embleton’s dissolution to investors.  
[182] Anthony’s lack of awareness until sometime in 2010 that Embleton had been  
dissolved in 2008 reveals a dismal failure to administer the corporation’s affairs  
with appropriate due diligence. The subsequent failure by any of the Defendants  
 
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to disclose Embleton’s dissolution to investors seems quite incredible as it difficult  
to see a more significant obligation than advising investors that the corporation  
that is holding their funds in exchange for future lot interests on land it owns no  
longer exists. The fact that the Vuletics went on to demand cash call payments  
from investors by continuing to use Embleton’s name without disclosing its  
dissolution was highly improper and clearly deceptive. As well, the Vuletics  
continued use of a dissolved corporate entity is noteworthy by strongly signaling  
that Embleton’s contractual relationships and corresponding obligations to  
investors were irrelevant or inconsequential to them.  
[183] In February 2008, Embleton brought a second appeal to the OMB from the  
Region of Peel’s decision to support the City’s October 2006 OPA that preserved  
the Village Residential zoning designation for the Property which remained in the  
Village of Huttonville neighbourhood. The Defendants did not disclose either of  
the two pending OMB appeals to investors.  
[184] In late March 2008, the City issued a detailed report on its 2008 development  
allocation strategy to manage the rate, direction and quality of growth in Brampton.  
The report cautioned that a “development allocation” (i.e., the number of lots that  
the City would allow for development in a block plan area in any given year) would  
not guarantee draft approval of any subdivision plans, as Planning Act  
requirements would have to be satisfied for each development proposal before any  
draft plan was approved. In the report, the City also confirmed that it was facing  
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significant challenges in funding growth infrastructure due to deficiencies in the  
Development Charges Act, 1997, SO 1997, c 27, the operating costs of new  
facilities (e.g., fire stations), and the limited available tax base. Block plan areas,  
such as Block Plan Area 40-3 where the Property was found, had no existing  
suburban development and lacked a residential and commercial tax base to fund  
the extension of municipal services. To address this, the City’s report advised that  
infrastructure resources would be concentrated in fewer areas to maximize existing  
infrastructure and minimize operational costs (i.e., instead of being spread thinly  
across all block plan areas), and that “growth allocations would be directed to  
areas that are already served or about to be served by fire stations, outdoor and  
indoor recreational facilities, transit routes and road capacity, and [areas]  
surrounded by or contiguous to existing development.” The report also advised  
that the allocation of units in a particular area would ordinarily lead to subdivisions  
and construction several years later assuming that infrastructure funding was  
available to match the allocation of units. Although Anthony was aware of the  
development caps and capital funding limitations which the City of Brampton and  
the Region of Peel were facing, the Defendants not share any of these barriers to  
development with investors. Given the nature of these barriers, I find that the  
representations in the cash call letters to Project investors suggesting that “site  
plan approvals” for the Property were imminent were quite false and misleading.  
[185] In July 2008, R.J. Burnside & Associates Limited released a report (the “July  
2008 Report”) that BWLG commissioned to address stormwater management and  
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functional servicing for Block Plan 40-3, which was primarily an agricultural area,  
to address the City’s requirement for an environmental implementation study.  
Among other things, the July 2008 Report noted that the 1,100 acres of Block 40-  
3 did not have sanitary sewer services, that the Region of Peel was upgrading  
services in the area, and that existing systems had to be expanded before Block  
40-3 could be fully developed. At trial, Anthony repeatedly asserted his belief that  
municipal services for Block 40-3 would come to the Property from the east via  
Mississauga Road, but the July 2008 Report confirmed that the Property would be  
serviced by an extension of two primary trunk sewers from Steeles Avenue  
northward to Block 40-3. Stormwater management for Block Plan 40-3 and  
protecting the Credit River Valley, which was in close proximity to the Property,  
were significant issues in the July 2008 Report which identified numerous tasks  
that had to be completed and clearly signalled that development of municipal  
infrastructure and construction on serviced lots on the lands were not likely  
imminent in all of the circumstances.  
[186] In July 2008, BWLG issued a fourth cash call to its members. Financial  
information from the group showed that Embleton had paid only $11,890.00 of its  
$35,290.00 share of the first four BWLG cash calls, which left Embleton owing  
$23,400.00 in arrears which Anthony had warned Project investors must be paid  
on time. In August 2008, Anthony was pressed by the BWLG secretary to pay  
Embleton’s outstanding cash calls and agreed to make a payment to BWLG in  
September 2008 but failed to do so. In September 2008, the Vuletics terminated  
- 86 -  
their relationship with GLB, its former principal planner, after the firm substantially  
discounted its unpaid account and the parties released each other from any further  
obligations.  
f. Cash Call #4 September 23, 2008  
[187] By letter dated September 23, 2008, Anthony circulated a fourth cash call to  
Project investors that required a “final paymentof $5,595.00 per lot interest.  
[188] The September 23, 2008 letter misrepresented to investors that the  
development of the Property was in its “final stage” and that the Project would  
receive block plan approval in the last quarter of 2008. At trial, Anthony claimed  
that he had relied on Great Gulf and other developers in forming the view that  
municipal approval for Block Plan 40-3 was imminent, as he asserted in the letter.  
However, Anthony did not provide any evidence from other developers to  
corroborate his claim. In any event, for the reasons explained earlier, I am satisfied  
that his assertion of imminent block plan approval was clearly false and misleading.  
The letter advised investors that, “[i]n the second quarter of 2009, we will be  
compete and [sic] finish in this project with draft plan and site plan approval.  
[Emphasis in original]” However, at the time, Block Plan 40-3 was still being  
articulated, the Property was still part of the Village of Huttonville (i.e., outside the  
block plan) with Village Residential zoning status, and no site plan for the Property  
had been prepared for municipal approval. Ultimately, municipal approval for  
Block Plan 40-3 came in 2011/2012, several years after his purported timeframe.  
In my view, Anthony’s claim that the Project would finish in 2009 was simply untrue  
and misleading.  
[189] The letter of September 23, 3008 asked investors to contribute one final  
$5,595.00 cash call payment to cover all 2008 and 2009 costs for the Project that  
purportedly arose in large part due to increased municipal fees and the added  
 
- 87 -  
development complexity due to various unforeseen ordinances, by-laws and  
regulations by municipal and provincial bodies, particularly in relation to  
environmental issues. Although the Defendants’ explanation for some of the  
added regulatory development costs are not disputed per se, the Plaintiffs submit  
that the need for added funds would not have arisen had the Vuletics not wrongfully  
taken Project funds for their personal expenses. The letter also suggested that  
funds were needed to pay for professional reports totalling about $480,000.00 to  
progress the Project which was said to be nearing final completion, and that cash  
call funds were needed as soon as possible to avoid punitive BWLG cost sharing  
penalties. However, the letter did not disclose that Embleton, now a dissolved  
entity, bore only a fraction of the report costs, or that BWLG did not strictly enforce  
sanctions against its members for late payments. And while the letter falsely gave  
investors the impression that major costs would be incurred, only $123,669.00 was  
spent on direct Project development costs by the end of 2008.  
[190] Meanwhile, during 2007 and 2008, Anthony had travelled and vacationed in  
Europe, the United Kingdom, and the United States by using Project funds drawn  
from mortgage proceeds and investor cash call payments. At the same time,  
accounts for GLB, Salmona Tregunno, BWLG and municipal taxes went unpaid.  
[191] In November 2008, Marshall Macklin Monaghan Group (“MMM”), a  
consultant retained by BWLG, delivered a lengthy and detailed draft environmental  
study report that was prepared to satisfy provincial environmental assessment  
requirements for proposed suburban and commercial development in Block Plan  
40-3. Drawing from municipal documents and guidance, the MMM report  
described the many complicated issues that required investigation in the block plan  
process. Among other things, MMM reported the need for landowners to complete  
the following studies to support a block plan application:  
a. environmental impact studies/implementation reports;  
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b. functional servicing reports;  
c. detailed community design guidelines including architectural and  
landscape guidelines;  
d. preliminary noise assessment;  
e. transportation impact study, including transit;  
f. phase 1 archaeological study and heritage impact statement;  
g. planning justification;  
h. growth management analysis;  
i. staging and sequencing analysis; and  
j. landowner cost sharing agreement(s).  
[192] The block plan process followed a two (2) stage process. Stage 1 required  
the identification and completion of sufficient research and study to ensure a  
comprehensive understanding of key structural requirements of the block,  
including the community design vision, transportation infrastructure, servicing  
requirements, school locations and natural features. To this end, MMM indicated  
that the above-listed studies would be needed. During stage 2, the component  
studies were to be finalized and approved by the City if they met the requirements  
of the complete community block plan. Given the layered complexity of the  
impending block plan process, I find that Anthony’s claim in the September 23,  
- 89 -  
2008 cash call letter that the Project would receive block plan approval in the last  
quarter of 2008 was clearly untrue and lacked any credibility.  
[193] In February 2009, BWLG made its fifth cash call to members including  
Embleton whose share was $26,402.00 excluding its $18,400.00 in cash call  
arrears. By the end of March 2009, BWLG was following up with Embleton to  
obtain payment. By the end of September 2009, Embleton had $25,391.00 in cash  
call arrears to BWLG and was the group’s single largest debtor despite accounting  
for only 2.8% of the group’s total cash call payments.  
[194] By April 2009 (i.e., the second quarter in 2009 when the Project was to have  
been completed based on Anthony’s representation to investors in September  
2008), the City of Brampton had only confirmed that proposed land uses in the  
area where the Property was located would be the subject of a study. On April 9,  
2009, BWLG held a meeting to discuss Riverview Heights (i.e., Block 40-3) and  
the many tasks that had to be completed before any stage 1 approvals for the block  
could be obtained from the City. From April 2009 onwards, BWLG agendas and  
notes, together with reports from Burnside, show that many outstanding tasks had  
to be completed before the City would consider Block Plan 40-3 for approval.  
Among other things, the federal Department of Fisheries and Oceans declined to  
approve the large storm water pond proposed by Great Gulf near the Property over  
concerns that the pond would likely have significant impacts on fish and marine  
habitats that could implicate an environmental assessment under the Canadian  
- 90 -  
Environmental Assessment Act, SC 1992, c. 37. Instead, the Department  
proposed meetings to consult on the issue. The Department’s involvement was  
not disclosed to investors despite the obvious delay to the Project that arose from  
having to address the storm water management issue.  
[195] In October 2009, Steve Vuceta, a mortgage broker engaged by the Vuletics  
and Embleton to obtain mortgage financing against the Property, make inquiries  
with the City of Brampton in an apparent effort to obtain additional financing.  
According to Mr. Kegalj, proceeds from an earlier $600,000.00 line of credit  
obtained in January 2008 had been almost depleted by late 2009. Around this  
time, Mr. Kegalj had become suspicious and concerned with how the Vuletics were  
managing the Project and taking Project funds for their personal use. Mr. Kegalj  
was particularly concerned by Anthony’s accumulation of significant charges on a  
credit card under Mr. Kegalj’s account that he had allowed Anthony (i.e., who did  
not have his own credit card given his bad credit history) to use. Over time, Mr.  
Kegalj grew concerned as he saw Anthony’s credit card charges climb while his  
only apparent source of funding to pay the charges remained Project funds.  
[196] On October 9, 2009, Mr. Vuceta wrote to Robert Nykyforchyn, a senior  
official with the City’s planning department, to confirm the Village Residential  
zoning for the Property that had not been subdivided. On October 16, 2009, Mr.  
Nykyfortyn confirmed the various development applications for the Property that  
Embleton had filed with the City and wrote the following:  
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This is to clarify that a development application was file  
for the properties at 49, 62 and 78 Cliffside Drive on  
March 25, 2004 and which requested that the lands be  
subdivided and zoned for 98 lots containing single  
detached dwellings.  
This application was later  
amended on May 16, 2005 for 118 lots and amended  
again on May 16, 2006 for 105 lots and amended again  
on December 16, 2006 for 108 lots.  
Notwithstanding these submissions, the applicant was  
advised on June 30, 2005 that these submissions were  
deemed to be premature and would not be circulated  
for formal review and comment until after the Bram  
West Secondary Plan Review had taken place and a  
revised amendment to the secondary plan had been  
approved. In this regard, it is noted that the [Brampton  
City Council] endorsed Bram West Second Plan  
Amendment which has been appealed to then [sic]  
Ontario Municipal Board, and that it appears that the  
OMB may not be in a position to approval [sic] this  
document until either the summer or fall of next year.  
In summary, the aforementioned development  
application has not been formally reviewed by staff, has  
no planning status, and therefore has no approval  
status at this point in time. [Emphasis in original]  
[197] When confronted with this at trial, Anthony asserted that the City had given  
conflicting responses on Embleton’s development application, being an “external”  
response that confirmed with Mr. Nykyfortyn’s communication on October 16, 2009  
and an “internal” response that allegedly supported Anthony’s more optimistic view  
that Project development was progressing. However, Anthony led no evidence to  
corroborate his account of the City’s “internal” response. In the circumstances, I  
find that his account lacks credibility. Under cross-examination, Anthony  
confirmed that he never informed Project investors that Embleton’s development  
applications had no planning status before the City. He also conceded that it would  
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be fruitless to file an application for a plan of subdivision unless and until Block  
Plan 40-3 had been completed and approved.  
g. The December 2009 “Statement of Intention”  
[198] In December 2009, Anthony wrote a document “Statement of Intentionthat  
revealed his plan to sell the Property for profit without giving any lots to investors.  
Believing that his life was in danger, Anthony wrote the statement for his mother  
or friend, Stephen Tjan, to read if he died so they would know his plans for  
managing the Project. The document was written after investors paid cash calls  
in 2008 and clearly revealed Anthony’s thinking and strategy for managing the  
Project to best preserve the Defendants’ financial interests at the expense of  
others.  
[199] In the Statement of Intention, Anthony revealed his belief that the Property  
was worth about $6.3 million, or roughly $500,000.00 per acre, in its unserviced  
state. He then ranked the order of debts for the Project and gave instructions to  
first service the mortgage on the Property and then pay taxes and planners. To  
preserve funds, he instructed the reader to defer paying property taxes as he  
believed that taxes could go unpaid for three years. Although Embleton owed  
$40,000.00 to BWLG in 2009, Anthony instructed the reader to not pay this debt  
because it was incurred by Embleton which, “DOES not own the [P]roperty I do,  
under a trust with ANTE KEGALJ who is the trustee.” This passage reveals  
Anthony’s belief that he was not accountable to anyone for obligations incurred by  
 
- 93 -  
Embleton because he personally owned the Property. To defeat potential claims  
from BWLG, Anthony instructed the reader to move Embleton’s funds to prevent  
BWLG from collecting the debt that Embleton owed, writing “Tell BRAMWEST  
group we will play [sic] etc but they can never ever enforce it since all they can do  
is sue EMBLETON so if that ever happens, make sure to move EMBLETON  
funds … I cannot stress strongly enough do not pay BRAMWEST.Anthony  
further gave instructions for the reader to finance the Project through investor cash  
calls until a draft plan of subdivision was in place at which point the reader could  
sell the Property for the best price. In setting this out, Anthony admitted that his  
plan was for investors to continue financing the Project despite his underlying  
intention to sell the Property.  
[200] Importantly, Anthony disclosed his strategy in the Statement of Intention as  
follows:  
Strategy –  
Of course, you will not develop the property but rather  
sell the lots all in one shot, or half one year and then  
half [document cut off] … keep one for yourself, and  
give 3 to KEGALJ or one lot ravine to kegalj plus money  
equalling two lots to him.  
For investors … to keep them at bay – when you sell  
you can give them a little money back, it all depends on  
the sale – if you sell everything … then double there  
[sic] investment, (do not double there [sic] payments for  
services, that’s [sic] an equal refund, no doubles here..)  
mama [Mira] will know what I mean … [Emphasis  
added]  
- 94 -  
[201] By this point, the Project was about seven years old during which time the  
Property had jumped in value from $1.26 million (i.e., when it was purchased in  
2002) to about $6.3 million (i.e., based on Anthony’s own estimate in 2009) which  
was a significant increase. In revealing statements, Anthony clearly disclosed to  
the reader his strategy to not develop the Property but instead sell it for a profit  
while keeping investors “at bay” by paying them a double-return on what they  
invested in the Project. Anthony’s strategy in the Statement of Intention effectively  
mirrors the Defendants’ position in this litigation, namely that each eligible Project  
investors should get a double-return per lot subscription, less expenses, while the  
Vuletics get to keep for themselves the lion’s share of the proceeds from the sale  
of the Property in its undeveloped state (i.e., the value of all unsold or unsubscribed  
lots plus the value of lots subscribed by investors that are purportedly no longer in  
good standing).  
[202] When he wrote the Statement of Intention in 2009, Anthony harboured real  
concerns that John was too elderly to develop the Project. Given the central role  
that John ostensibly had to lead the development of the Property, Anthony’s  
concerns raised serious questions about the ongoing viability of the Project. At  
trial, Anthony testified that he had concluded by 2009 that John was incapable of  
developing the Project due to his age and heart condition. This gives strong  
support for the view that the Defendants, with Anthony in the lead, effectively  
abandoned any real intention of developing the Property by that point in time.  
Importantly, the evidence at trial shows that the Defendants effectively stopped  
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taking any meaningful steps from 2009 onwards to physically develop the Property  
and provide serviced lots to any of the investors.  
[203] In the end, the Defendants did not develop the Project past the draft plan  
approval stage, and did not install any services (i.e., hydro, sewers, cable, etc.) for  
the Property. Instead, they sold the unserviced Property as a block after making  
little to no financial contributions to the Project in a manner that effectively followed  
the strategy outlined in the 2009 statement.  
[204] Pursuant to the strategy of keeping investors “at bay,” Anthony did indeed  
“give a little money back” to Mr. Savona by paying him $32,000.00. He also made  
the following comments in the Statement of Intention which are revealing and  
noteworthy:  
For example, the italian guy who owns 4 lots …  
this is what happens to him …  
2 lots double up ie he paid 35k gets back 70k  
per lot …  
Remaining two lots he has he paid 35k gets  
35k plus small bonus of 5k  
Why does he get so little? Agreements states if there  
is not enough lots to give back, or we decide it is not a  
good situation, at any time we can give back lots with  
full refund …  
[205] The “Italian guy” referred to is clearly Mr. Savona, who is the only investor  
of Italian background who held 4 lot subscriptions. The Vuletics earlier tried to  
implement their scheme to remove one of Mr. Savona’s lots (i.e., by falsely  
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claiming that the City of Brampton wanted to build on the Property) and only  
reimburse him for what he had paid for the lot interest. Anthony asserted that the  
APS entitled him to take the lot by giving Mr. Savona $35,000.00 plus a $5,000.00  
bonus, and testified that his intention, depending on the individual, was to just  
return a Project investor’s money with a small bonus.  
[206] In similar fashion, Anthony shared his intended approach in the following  
comments in the Statement of Intention:  
These are the people that get only equal, refund  
not double …  
Italian guy refund 2 lots out of 4  
Biondic return one lot out of 4  
Antes Group = there is a girl who has not made  
consistent payments give her a full refund …  
Tax man I think we took 2 lots over due to  
nonpayment, and they get full refund plus interest  
HOWEVER, remember clearly, you control all the shots  
… if your sale is not in FULL but rather partial, then you  
only give partial refund, let them wait, etc. …  
REMEMBER, take care of yourself FIRST, so you are  
comfortable … !!!!!!!!!!!!  
[207] Anthony implemented his strategy with Kim Gushue and Anne-Marie  
Leveriza, who were Project investors who only obtained a refund of their  
investments and later sued the Vuletics and Embleton in separate proceedings.  
[208] Having regard to how events later unfolded, I am satisfied that the Statement  
of Intention captured the broad strategy taken by the Vuletics after 2009 to take  
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care of themselves first and place their own self-interest ahead of the interests of  
Project investors. As Anthony exhorted his mother and Mr. Tjan, “REMEMBER,  
take care of yourself FIRST, so you are comfortable!”  
h. The OPA  
[209] On January 28, 2010, the City of Brampton approved an OPA for phase 1  
of Block Plan 40-3 as submitted by BWLG, subject to the application of its  
development allocation strategy.  
[210] In March 2010, Mr. Kegalj brought an action against John, Anthony and  
Embleton in which he claimed an interest in the Property and alleged that the  
Vuletics were misusing Project funds. The Kegalj action is discussed in more detail  
later on in these reasons.  
[211] In mid-March 2010, Embleton’s new planner, Glen Schnarr & Associates  
Inc. (“Schnarr”), filed yet another draft plan of subdivision with a 94-lot layout for  
the Property and the Ufkes and Teramoto lands. But like before, the Defendants  
did not disclose the application to investors nor advise their planner, the City or  
investors that Embleton was dissolved. In April 2010, the City staff circulated an  
internal memo stating that a notice of incomplete application was sent to Schnarr  
to advise that a list of supplemental information and studies had to be filed before  
the application could be comprehensively reviewed. The memo also advised that  
a final recommendation report for the draft plan would not be prepared until all of  
the technical submissions in support of phase 2 of Block Plan 40-3 had been  
 
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submitted either by BWLG or Embleton. In addition, the memo stated that the  
Property was still zoned as “Village Residential” but that a further amendment  
would not be required to implement Embleton’s development proposal pending  
approval of phase one of Block Plan 40-3 such that its proposal would be fully  
addressed under Block Plan 40-3.  
[212] In May 2010, the City released an information report to propose a public  
meeting, later scheduled for June 7, 2010, to discuss the proposals by Embleton  
and other developers for Block Plan 40-3. In its notice of the meeting, the City  
cautioned that the Property’s development could be impacted by its growth  
management program which required the timing and staging of the development  
to be delayed or coordinated with the provision of essential community services  
and infrastructure. Schnarr also filed documents for Embleton’s incomplete draft  
plan of subdivision. None of this was disclosed to investors.  
[213] From 2010, the Defendants gave verbal Project updates to some of the  
Plaintiffs.  
[214] In June 2010, John, Anthony and Colin Chung, a planner, met with the  
Workplace Group members to give a status update on the Project. Investors were  
told that the Project was progressing towards development approvals, despite  
some setbacks. However, investors were not advised of Embleton’s 2010  
application to rezone the Property and the adjacent Ufkes and Teramoto lots from  
Village Residential” to “Residential Single Detached” and develop 94 lots that  
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would reflect a significant departure from the original Project concept. Investors  
were also not told of the June 2010 public meeting for the application or the  
outstanding planning issues that had to be addressed before the City would  
consider the application. In addition, investors were not told that:  
a. on March 25, 2004, a prior development application had been filed for  
approval to subdivide these three (3) properties into 98 lots;  
b. on May 16, 2005, the application had been amended to seek approval  
for 118 lots;  
c. on May 16, 2006, the application was further amended to seek 105  
lots;  
d. on December 16, 2006, the application was further amended to seek  
108 lots;  
e. City planning staff had not formally reviewed the applications which  
therefore had no planning status nor any approval status in 2009; and  
f. The City would not consider an application for subdivision for approval  
until the broader block plan for the block where the lands were  
situated had been confirmed, as Anthony conceded. At the time, the  
impugned block plan had been undergoing numerous changes and  
iterations which had stalled Embleton’s ability to submit an application  
for subdivision approval.  
In light of this, the development of the Property was clearly nowhere close to being  
completed in 2010 while the City gave warnings that development within Block  
Plan 40-3 would be contingent on the availability of public services and  
infrastructure development that were still non-existent. Despite all of this, John  
assured the attendees that the Project was being capably managed and was  
progressing. He also expressed being upset about the Kegalj litigation, as further  
discussed below.  
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[215] In August 2010, the OMB gave phase one approval for Block Plan 40-3. But  
as Schnarr conceded in its October 2010 letter to the City, there were preliminary  
requirements including the phase two submissions for Block Plan 40-3 that had to  
be completed before the City would even begin to process Embleton’s March 2010  
draft plan of subdivision. By this time, the litigation of Mr. Kegalj’s action was well  
underway and shining light on the Vuletics’ personal use of Project funds that were  
being depleted. As of September 2010, the Vuletics had allowed $24,561.00 in  
municipal tax arrears for the Property to accumulate.  
[216] On May 28, 2011, Anthony met with the Workplace Group and circulated an  
agenda which suggested that investors would realize an increased “profit margin”  
on each lot.  
[217] In July 2011, the Vuletics settled the litigation with Mr. Kegalj by providing  
him with a very lucrative payout that was financed by placing a larger mortgage on  
the Property. To this end, a $768,000.00 mortgage was obtained for the Property  
in August 2011, in large part to pay out the overdue $600,000.00 line of credit in  
the face of a foreclosure on the Property by the debtholder.  
[218] After Mr. Kegalj’s litigation had settled, Anthony met the Workplace Group  
at a restaurant in July 2011 to view the area and visit model homes unrelated to  
the Project that were in the vicinity of the Property. Although Anthony swore an  
affidavit a few months later claiming that the Project was in disarray, he did not  
raise any concerns about the Project during this meeting.  
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[219] In October 2011, the City gave partial phase two approval for Block Plan 40-  
3 to further refine its stage one approval of the plan. But before giving stage one  
and two approvals, the City still required a number of reports and investigations to  
be completed as BWLG later noted in its July 2012 report.  
[220] In November 2011, the Vuletics returned to court claiming that Mr. Kegalj  
had failed to implement the terms of the July 2011 settlement. To this end, Anthony  
swore an affidavit claiming to have run out of money to carry on with the Project  
leaving its mortgage, planners, municipal taxes, and BWLG cash calls unpaid and  
in arrears. He also claimed that the BWLG arrears led to Embleton’s exclusion  
from the group’s activities which left it without any knowledge of decisions that may  
be undertaken that would affect the value of the Project. Although Anthony’s  
affidavit blamed Mr. Kegalj for the Project’s host of financial problems, I find that  
most of these problems resulted from the Vuletics’s undisclosed personal use of  
substantial Project funds and their prior decisions to not pay planners, taxes or  
BWLG cash calls which Mr. Kegalj cannot be faulted for. In my view, Anthony’s  
affidavit revealed the aftermath of years of persistent mismanagement by the  
Vuletics, and Anthony’s propensity to say whatever he felt was expedient, without  
regard to its truth or accuracy, to avoid responsibility for misdeeds and to retain  
control over Project funds.  
[221] In February 2012, a $900,000.00 TD Bank mortgage was taken against the  
Property by 185 Corp., a new corporate the Vuletics established in August 2011,  
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with Ms. Kostelac guaranteeing the debt. Thereafter, 185 Corp. purported to carry  
on developing the Property, for which 185 Corp. had become its registered owner,  
without any assignment or transfer of the dissolved Embleton’s rights, interests or  
entitlements under the APSs with respect to Project investors.  
[222] In an email to Ms. Kostelac on July 9, 2012, Anthony gave assurances that  
all services to the Property were to be paid and installed by 2012, with Embleton’s  
service costs to be staggered, and that home construction on the lots to the  
Property were to start in 2013 as part of a “second stage”. However, in a July 1,  
2012 report that was not disclosed to investors, the City advised that first  
occupancy would not be until at least 2015. Anthony’s email also advised Ms.  
Kostelac that the value of each lot (i.e., once fully serviced) had gone from  
$175,000.00 as initially projected to a figure between $300,000.00 and  
$325,000.00 based on “conservative internal estimates” from a bank that valued  
the lots at $6,400.00 per linear foot based on a 50 foot frontage.  
[223] Anthony’s assurances regarding the Project’s progress were essentially  
dispelled by BWLG’s comprehensive report entitled “Growth Management Phasing  
and Sequencing Strategy” released in July 2012, which gave a framework for a  
graduated development of the 1,100 acres in Block Plan 40-3 once the required  
planning approvals had been obtained. The report, which was not disclosed to  
investors, showed the enormity and complexity of the municipal planning process  
to develop Block Plan 40-3 and clearly revealed the overly simplistic and  
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misleading assurances in Anthony’s earlier cash call letters to investors and his  
recent July 2012 email. Among other things, this lengthy report detailed the  
servicing infrastructure or features that had to be developed before lots could be  
subdivided and homes could be built, including:  
a) sanitary and water services and upgrades outside the block plan  
b) stormwater management  
c) road improvements  
d) new roads  
e) intersection improvements  
f) bridges  
g) public transit  
h) schools  
i) recreational facilities  
j) emergency services  
k) natural systems  
l) heritage protection  
m) employment and economic development.  
The BWLG report was prepared by Malone Given Parsons Ltd., the longstanding  
consultant for Great Gulf, and set out the phasing and sequencing of each  
developer’s property within the broader development strategy. Notably, the report  
put the Property in Phase 2 (i.e., after Phases 1A and 1B) and stated that  
residential development on the Property would, at the earliest, be possible in 2015,  
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which corresponded with the City’s own development estimates. Based on this, I  
find that Anthony’s claim that Great Gulf allegedly advised him that infrastructure  
development and lot construction would be imminent from 2009 onwards was  
unfounded.  
[224] As part of the Phase 2 approval of Block Plan 40-3, the City required BWLG  
members to enter into a cost sharing agreement to coordinate and finance  
servicing infrastructure (i.e., to make suburban development possible) before it  
would review or approve any draft plans for subdivision. However, BWLG had  
expelled Embleton from the group for its non-payment of cash calls that clearly  
resulted from a decision by the Vuletics to not pay Embleton’s contributions to the  
group. As Embleton’s own cash call letters to Project investors clearly warned that  
BWLG could impose draconian sanctions if its cash calls went unpaid, Embleton’s  
expulsion from BWLG was quite foreseeable and clearly jeopardized the timely  
development of the Property. By the end of 2012, BWLG prepared a cost sharing  
agreement in which Embleton or 185 Corp. were excluded.  
i. Cash Call #5 December 2012  
[225] During a December 2012 meeting with the Workplace Group, Anthony  
announced another cash call but without explaining why more funds were being  
collected. Anthony allowed attendees to be the first investors to “pick” their lots  
from drawing that set out a number of lots on a subdivision plan that combined the  
Property with the Ufke and Teramoto lands. However, he did not explain that  
 
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certain lots could not be picked as Embleton did not own them. For example,  
Anthony did not disclose that lots 33 and 34, which were picked at the meeting,  
were found on the Teramoto property. In any event, as Anthony conceded at trial,  
lots could not be assigned until December 2013 as a draft plan did not exist before  
then. Given the restriction on transferring lots before a draft plan of subdivision  
was in place, having investors “pick” their lots was meaningless despite raising  
some excitement that likely assured some investors that the Project had sufficiently  
progressed to make a further cash call payment more palatable.  
[226] Upon examining the draft plan of subdivision at the December 2012 meeting,  
Ms. Grounds noticed that the lots were not 140 feet in depth as the Project initially  
conceived. When asked about this, Anthony claimed that the City of Brampton  
imposed a 115 foot lot depth which the Defendants were forced to accept.  
However, this explanation was false and failed to disclose that the Defendants  
wanted more lots (i.e., higher lot density) to increase their returns without giving  
notice to investors that the number of lots for the Project would be anything other  
than 51 lots. Other than the Workplace Group members, none of the other  
investors were shown a draft plan of subdivision for the Project prior to this  
litigation.  
[227] In late December 2012, Anthony contacted Mr. Pichelli to demand  
$20,000.00 in cash calls for two lots (i.e., $10,000.00 per lot) which Mr. Pichelli  
paid in early 2013. In demanding the cash call, Anthony promised to give Mr.  
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Pichelli a payment statement with confirmation of his lot numbers and further  
details to “close out” the Project. But Mr. Pichelli did not get any lot numbers given  
the lack of a registered plan of subdivision for the Property at the time. Moreover,  
by 2014, Anthony was trying to sell blocks of up to 40 lots to third parties despite  
his inability to legally transfer title to any lots on the Property due to the absence  
of a registered plan of subdivision.  
[228] From the evidence, I find that the Vuletics were strategic and selective in  
choosing which investors to approach for a fifth cash call by only approaching  
those whom they believed would likely pay a $10,000.00 per lot cash call with  
minimal or no hesitation. For instance, Mr. Pichelli complied with the $20,000.00  
cash call demand while other investors were not approached with a fifth demand  
for a cash call payment. Bookkeeping records confirm that the fifth cash call raised  
$120,000.00 in contributions from Project investors.  
[229] In January 2013, Anthony advised Ms. Kostelac that the impending cash call  
would be used to pay for legitimate Project development and servicing costs. He  
did not disclose that Project funds taken from cash calls or mortgage proceeds  
would be used to pay for personal expenses. He also falsely told Ms. Kostelac  
that financial accounting for the Project had to first be approved by his lawyer, Mr.  
Adair, before it could be shared with investors. For his part, Mr. Adair expressly  
denied this and emphasized that it had been Anthony’s responsibility under the  
July 2011 settlement with Mr. Kegalj to provide investors with the accounting.  
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j. Accounting Issues  
[230] By late January 2013, Ms. Kostelac was complaining about the lack of  
transparency in the limited accounting information that she and other investors had  
received. She noted the lack of meaningful detail in the accounting and observed  
that it lacked any figures for 2010 to 2012. In response, Anthony tried to reassure  
her by claiming that the accountant, Mr. Hinchcliffe, had verified all of the figures  
in the accounting with receipts and statements that Mr. Adair’s law firm had  
provided. Anthony also asserted that the APSs had always contemplated that any  
financial accounting or information would be given at the end of the Project, and  
that he had agreed under the settlement with Mr. Kegalj to temporarily open the  
books to show the costs that Embleton had incurred on behalf of the lot holders  
which led him to send lot holders “mid-term” statements. He later disclosed to Ms.  
Kostelac many unpaid expenses including $25,000.00 per year in municipal taxes,  
$24,000.00 in conservation authority charges, about $60,000.00 per year in  
mortgage costs, $35,000.00 owed to BWLG, and $15,000.00 in outstanding  
planning costs. He also promised to provide an accounting for 2010-2012 but only  
disclosed this information in October 2016 when Mr. Adair and Mr. Hinchcliffe gave  
financial summaries to investors after the Property was sold. None of the Pichelli  
Group members received any accounting in 2013.  
 
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k. The 2013 Draft Plan of Subdivision  
[231] In April 2013, Schnarr filed a new draft plan of subdivision for the Property  
and the Ufkes and Teramoto lands which proposed to subdivide the lands into 94  
lots (i.e., with a mix of differently sized lots from 11.6 metres (38 feet) to 18.3  
metres (60 feet) in width) and thereby departed from its previous plan submission.  
In May 2013, planning staff at the City of Brampton recommended that the April  
2013 plan be approved in principle, and that an appropriate amendment to the  
zoning by-law should be drafted with proper notice under the Planning Act after  
certain conditions for draft plan approval had been satisfied. Accordingly, eleven  
(11) years after the Property had been acquired, City planning staff had finally  
reviewed a draft plan of subdivision from Embleton and recommended giving it  
draft approval without knowing that the company was dissolved in January 2008  
or that it had agreed to deliver 50 foot x 140 foot lots to investors under the terms  
of its APSs for the Project.  
[232] In a Project update given in May 2013, Anthony advised Ms. Kostelac that  
Embleton had hired Urban Tech, an engineering firm, to perform work that was  
projected to cost $250,000.00. Ms. Kostelac believed that the installation of  
services was moving forward and that large amounts of money were being spent  
to advance the development. However, servicing infrastructure was still not close  
to the Property, subdivided lots could not be allocated nor legally transferred to  
 
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investors, and a host of outstanding pre-approval conditions still had to be  
satisfied.  
[233] In June 2013, Schnarr learned that City Council had accepted the planning  
department’s recommendation for Embleton’s revised draft plan of subdivision  
dated May 31, 2013 be approved in principle subject to various pre and post-  
approval conditions that included, among other things, the requirement for a  
subdivision agreement between the City and the subject landowners, namely the  
Ufkes, Teramotos and Embleton. The subdivision agreement, which John later  
signed for 185 Corp. and not Embleton, required a homebuyer’s information map  
and other materials to be given to prospective lot purchasers to protect their  
interests although none of this was given to investors.  
[234] In June 2013, Anthony assured Ms. Kostelac that the Project was on track  
and draft plan approval was imminent, to be followed by construction financing,  
servicing the Property, and a registration of the lots for the Project. He then  
continued to give her similar representations despite receiving Urban Tech’s  
projection in 2013 that it would take between 5 to 10 years for services to reach  
the Property. Anthony did not disclose this projection in 2013 to any of the Plaintiffs  
who accepted the updates they received, believed that the Project was progressing  
well despite taking longer than originally anticipated, understood that all lot holders  
were paying their proportional cash call shares, and had no reason to suspect that  
anything wrong was happening with the Project. Anthony agreed that the Plaintiffs  
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had no reason to not trust him or what he was saying about the Project which  
included a representation that investors would receive an accounting at the end  
when management fees for the Project would be determined.  
[235] In November 2013, the Defendants obtained confirmation from BWLG that  
185 Corp. had entered into the Cost Sharing Agreement with the other developers  
in Block Plan 40-3 after negotiating the cash call arrears that Embleton had owed  
BWLG. By letter dated November 15, 2013, BWLG advised the City that 185 Corp.  
had entered into the cost sharing agreement and that draft plan approval could  
proceed once the BWLG trustee gave the City a release after 185 Corp. paid its  
share of the infrastructure and adjustment costs to the group under the agreement.  
[236] On December 18, 2013, the City of Brampton gave draft approval of the plan  
of subdivision dated July 14, 2013 which had been filed on behalf of 185 Corp. by  
Schnarr. As a condition of granting draft plan approval, the City set out a 24-page  
schedule that revealed the massive work required to satisfy numerous conditions  
for developing the plan, which would be staged pursuant to the Block Plan Area  
40-3 Growth Management Phasing and Sequencing Strategy based on the timing  
for the provision of roads and essential services and facilities for the subdivision.  
The time and cost to address the many growth management issues (i.e., servicing,  
grading, roads, stormwater management, overland flow issues, soil concerns,  
easements, utilities relocation, hydro facilities, future road connections, street  
lighting, landscaping, fencing, open space requirements, tree preservation and  
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protecting natural features, along with others) was not insignificant. Moreover,  
servicing infrastructure remained undeveloped for the Property. In any event,  
despite having draft plan approval, the Defendants remained unable to legal  
transfer title to any lots on the Property as a registered plan of subdivision was still  
not in place. In mid-February 2014, the City confirmed draft approval of the plan  
of subdivision from 185 Corp. as the periods under the Planning Act for bringing  
an appeal had expired without any appeals having been initiated.  
[237] By report dated January 28, 2014, UrbanTech West gave Embleton a  
preliminary estimate for the cost to service the Property. In its consulting report,  
UrbanTech advised that the internal servicing costs for the Property, including  
earthworks, road work, and sewage and watermain connections, would exceed  
$3.3 million (i.e., before paying the amount owed to BWLG under the cost sharing  
agreement, and excluding costs related to landscaping, hydro, street lights,  
intersection improvements, reworks, and sanitary and storm outfall works, among  
others, which UrbanTech was unable to estimate). The report was not disclosed  
to investors. Later, to support a court attendance before Justice Lederer, Anthony  
swore an affidavit on August 22, 2016 in which he claimed to have concluded that  
it would take another 4 to 7 years with projected a cost of between $4-7 million to  
develop the Property after considering the requirements, timelines and costs to do  
so which likely was informed by UrbanTech’s report. At trial, Anthony testified that  
the total cost to develop the Property would be $10-12 million. Given the Vuletics’  
poor credit history and purported lack of income based on their tax filings in the  
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record, it seems unlikely that John and Anthony would have obtained the financing  
needed to complete the development Project despite their evidence at trial that  
they had remained open to finishing the Project. Under cross-examination,  
Anthony claimed that TD Bank had offered a further $1 million loan to cover “soft”  
development costs, but his evidence was not corroborated and lacked credibility  
in the absence of any supporting documentation. He also led no other evidence  
to explain how the other remaining development work for the Property would  
possibly be funded.  
[238] Thereafter, Anthony abruptly changed course and began trying to sell blocks  
of lots on the Property to third parties. Although Anthony claimed that he continued  
to consider the option of completing the Project, John testified that he stopped  
talking to Anthony for several weeks after Anthony announced his intention to sell  
the entire Property in its un-serviced state. Although John was upset to learn of  
the impending sale and claimed that his dream had been to see the Project to its  
end, I am satisfied that John and Anthony both agreed around this time to sell the  
Property as un-serviced land. Their decision to sell followed the intention disclosed  
in Anthony’s December 2009 “will” or self-titled Statement of Intention to not  
develop the Property nor deliver the 50 foot x 140 foot lots to investors and thus  
ignore their contractual obligations under the APSs for the Project. Their decision  
to sell was also likely informed by a March 2014 appraisal report to 185 Corp. that  
found the Property to be worth $9 million in an un-serviced condition and $24.5  
million after being subdivided with serviced lots (i.e., without any houses built on  
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the lands) following a development horizon that was estimated to take about 3 to  
5 years. From the appraisal report, I accept that 185 Corp., which was not a going  
concern, could not have realistically raised the funding that it would have needed  
to service the Property given the Vuletics’ poor credit history and limited means  
which led them to continue taking Project funds to pay their personal expenses. I  
also accept that the figures in the appraisal report gave a true picture of the time  
and expense required to service the Property. Moreover, Anthony had come to  
recognize by this time that John could not develop the Project due to his advanced  
age and poor health. Taking this all into account, I am satisfied that Anthony and  
John came to their decision to sell the un-serviced Property after concluding that  
they could not service the land as Embleton had been contractually obliged to do.  
In addition, I accept that investors were not informed of the Vuletics’ intention to  
sell the Property. Although the Defendants claim that certain investors were  
consulted on the impending sale, they led no evidence to corroborate this claim or  
otherwise show that written authorization had been sought or obtained from  
investors to sell blocks of lots in the Property or otherwise sell the subject land as  
a whole.  
l. The Savonas and the “Lost” Lot Interest  
[239] In December 2011, Anthony visited the Savona home to give Mr. Savona  
and his daughter, Monica Savona, an update on the Project. During the meeting,  
Anthony advised that the value of lots on the Property had gone up although the  
 
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City of Brampton might build on the Property which would lower its value and make  
it “worthless”. In addition, Anthony said that the Property would be worth $15  
million in 5 years, and indicated that Mr. Savona could view the Property.  
[240] In August 2012, Mr. Savona, his late wife, and Monica Savona met with  
Anthony to discuss the Project. According to Mr. Savona and Ms. Savona,  
Anthony told them during the meeting that the City of Brampton wanted to  
construct a bridge and other community facilities and would be taking 10% of the  
Property for this purpose. They also claim that Anthony told them that any  
Embleton investor with a subscription for more than two lots would see their  
interest in the Project reduced by a lot (e.g., an investor having an interest in 4 lots  
would have the interest reduced to 3 lots, and that 3-lot interests would similarly  
be reduced to 2-lot interests). To this end, Anthony informed the Savonas that  
their collective subscription with Embleton for 4 lots in the Project would be  
reduced by one lot and become a 3-lot interest with reimbursement for the reduced  
lot to be paid within 90 days after the City had approved the plan of subdivision for  
the Project. Hearing this, Mr. Savona grew agitated and insisted that the Savonas  
receive each of the 4 lots which they had subscribed for.  
[241] For his part, Anthony claims that Mr. Savona wanted to sell him the lot. On  
balance, I am not persuaded by Anthony’s account and prefer the evidence of Mr.  
Savona and Ms. Savona which is supported by certain contemporaneous records.  
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[242] Anthony did not produce any documents from the City showing its intention  
to build on the Property. However, a contemporaneous email from Ms. Savona to  
Anthony after the meeting confirms that he sought to take a lot from the Savonas’  
subscription to “build a bridge” as follows:  
Hi Anthony,  
It’s Monica, how [are] you?  
Thank you for your time last Saturday. There is some  
miss [sic] information since your visit only three days  
ago. Its understood that from our four lots we will be  
“losing” one lot. The lot will be going towards a bridge  
or the road or the school.  
Ms. Savona specifically sent the email to Anthony to ensure that she correctly  
understood what he had said at the meeting.  
[243] In a responding email, Anthony wrote the following:  
Hi Monica,  
Thanks for your email.  
In the contract it states, that if the development  
becomes too expensive for reason unforeseeable –  
such as the addition of new costs due to policy changes  
then the amount of lots would be reduced.  
Meaning, everyone has to “chip in” for additional costs  
primarily for external costs which are a number of  
things. Ie services outside our property, new roads,  
bridge, etc.  
However, for your lot reduction you will be receiving a  
refund and more:  
1. the original purchase price back  
2. the service fees paid for it  
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3. plus interest on the lot over the course of the 10  
years.  
I want to make sure your[r] father/family still make  
some money on that lot. Your only one of two people I  
offered this to since your father was one of the first  
buyers, a friend of John Biondichs [sic], and I want to  
make sure he is well taken care of.  
As mentioned, the profit of the 3 lots will be greater that  
the original estimation for 4 lots So, everything works  
out in profit column in the end, as well as taking  
responsibility for additional costs.  
If you need any further clarification, always feel free to  
ask any questions.  
[244] Based on this email exchange, Ms. Savona believed that all of the investors  
were “chipping in” for these additional costs. Trusting what Anthony was saying,  
she also believed that Anthony was trying to get a “better deal” for the Savona  
family.  
[245] There is also evidence that Anthony tried to reduce the frontage of lots that  
other investors had subscribed for in the Project by attributing the change to  
something imposed by the City of Brampton. On this point, Mr. Klecina testified  
that Anthony informed him that one of his lots (measuring 40 feet by 103 feet) had  
its frontage reduced from 45 feet to 40 feet because the City had required smaller  
individual lot frontages in the plan of subdivision for the Project.  
[246] Taking this all into account, and particularly the contemporary email  
exchanges between Ms. Savona and Anthony, I find that Anthony’s account lacks  
credibility and that the account given by the Savonas should be preferred over his  
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evidence. Anthony’s evidence is inconsistent with the words in his email exchange  
with Ms. Savona and seems strained and improbable in light of his own email  
message that speaks to a “reduction” in the Savonas’ subscription in the Project  
and poorly aligns with his position at trial that Mr. Savona wanted to sell him back  
a lot.  
[247] In January 2013, Anthony sent a letter to Mr. Savona to provide a Project  
update and to request a $10,000.00 cash call for each lot. In the letter, Anthony  
advised that all services for the Property were to be in place or substantially  
completed in 2013 with the construction of homes on the Property to start in 2014.  
The letter purportedly was written for Embleton but Anthony asked Mr. Savona to  
make his cash call cheque payable to 185 Corp. as Embleton was dissolved by  
then although the Defendants did not disclose this. In addition, Anthony advised  
Mr. Savona that the Savonas’ entire lot subscription in the Project would be lost if  
the cash call went unpaid. The letter further advised that individual lot numbers  
would be forwarded to investors once the cash call payment was made, although  
lot numbers were never given after the cash call was paid. Finally, the letter gave  
assurances that, “profit margins are much higher than originally anticipated or  
forecast and we look forward to completing the project to everyone’s financial  
satisfaction.”  
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[248] In March 2013, Anthony met with Mr. Savona to advise that:  
a) the Savonas would be paying servicing costs for 3 lots rather than 4  
lots because one of their lots had been taken for City uses  
b) the Savonas had to pay $10,000.00 for each lot, for a total of  
$30,000.00  
c) the Savonas would be reimbursed for the lot reduction 90 days after  
the plan of subdivision was approved and  
d) the Savonas would be losing 9 feet per lot because the City had taken  
this away.  
The Defendants never showed Mr. Savona a draft plan of subdivision for the  
Project.  
m. Alleged Defaults by Ms. Nizalek and Mr. McDowell  
[249] Sometime in either 2005 or 2007, Ms. Nizalek and Mr. McDowell joined the  
Vuletics for dinner at their home on the Property and met Anthony for the first time.  
During the dinner party, Anthony demanded payment from Ms. Nizalek and Mr.  
McDowell for their outstanding cash calls. After Mr. McDowell and Ms. Nizalek  
responded that they could not make any further payments, Anthony threatened to  
kick them out of the Project. Ms. Nizalek grew upset and began to cry. As Mr.  
McDowell and Ms. Nizalek testified, Ms. Vuletic also began to cry, told Anthony,  
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we are not crooks,and reassured Ms. Nizalek by stating, “we are not going to  
cheat you.” Ms. Vuletic testified that she did not discuss any Project related  
matters with Ms. Nizalek but did not deny making these statements. On balance,  
I am satisfied that Ms. Vuletic made these statements.  
[250] At that point, John hugged Ms. Nizalek and told her not to worry. Mr.  
McDowell claims that John then told her that other investors had gotten their  
money back. This led Ms. Nizalek to propose that she and Mr. McDowell get their  
money back, which they were prepared to accept to in exchange for ending their  
involvement in the Project but Anthony refused to return their money. To comfort  
Ms. Nizalek, John said that she could pay what she could afford and then “make  
less money.” Ms. Nizalek states that John knew that she had been sending money  
to help support her mother and brother who had been displaced by the war in  
Bosnia, and John conceded that he told Anthony to give Ms. Nizalek and Mr.  
McDowell a break. Once excused from paying the demand, Ms. Nizalek and Mr.  
McDowell stayed at the dinner party to have coffee and dessert.  
[251] I am satisfied that the Vuletics gave Ms. Nizalek and Mr. McDowell a break  
from having to make further payments. It would have been unlikely that Ms.  
Nizalek and Mr. McDowell would have stayed for coffee and dessert had the  
Vuletics not excused them from the payments. Anthony claims that he gave Ms.  
Nizalek and Mr. McDowell a demand letter at the dinner party, but they flatly deny  
this and no such letter or document was every produced by the Defendants. Apart  
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from one default letter given to Anna Bilich, the Defendants produced no default  
letters in this litigation. Docket entries made by Alexa Sulzenko, a lawyer who  
acted for the Defendants and spoke with Anthony about Ms. Nizalek in October  
2011, show that Ms. Nizalek was not an intended default letter recipient. Moreover,  
after the alleged default letter was delivered, Ms. Nizalek continued to receive  
Project update letters and called John to follow up about the Project. In addition,  
both Ms. Nizalek and Mr. McDowell attended another social dinner with the  
Vuletics at their home which likely would not have occurred if the Defendants had  
served them with notice of default.  
[252] John and Anthony allege that Ms. Nizalek asked them to buy her lot for  
$200,000.00 during the 2005 or 2007 dinner party, but Mr. McDowell claims that  
the $200,000.00 was not mentioned and Ms. Nizalek claims that she just wanted  
her money back. It also it seems rather unlikely that Ms. Nizalek would have asked  
to sell her lot for $200,000.00 right after getting a default letter  
[253] In January 2017, Ms. Nizalek called John who advised her that the Property  
had been sold and that funds would be distributed after Project expenses were  
calculated. Only after the litigation began did Ms. Nizalek and Mr. McDowell come  
to learn of the purported default. Their revelation was similar to how other Project  
investors, like the Carotis and Mr. Klecina, also learned of their alleged defaults  
after the litigation had commenced.  
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n. Alleged Default by Mr. and Ms. Caroti  
[254] After this litigation was commenced, the Defendants took the position that  
Mr. Caroti and Ms. Caroti were in default for having not paid a cash call in 2008.  
Ms. Caroti claims that she never received the 2008 cash call request that allegedly  
triggered the default. Subsequently, she made a cash call payment in 2013 which  
was accepted after the time when the Defendants allege that the Carotis fell into  
default. Although Anthony claims that he verbally informed Ms. Caroti that she  
was in default, he did not remember her name and conceded that he never gave  
her a default letter. Taking this all into account, I find that the Carotis were not in  
default.  
[255] After the Property sold, John and Anthony met with Mr. Savona in 2019. At  
the meeting, Anthony told Mr. Savona that there were 61 lots rather than 51 lots  
on the plan of subdivision, and further explained that Mr. Savona could now get all  
4 lots which he had subscribed for (i.e., despite previously purporting to take away  
a lot leaving him with only 3 lots) after paying a $10,000.00 cash call that he  
allegedly owed for the additional lot. Mr. Savona, who had otherwise fully paid all  
other cash call contributions, responded by demanding compensation (i.e., by  
getting a payment or more lots) for the reduced frontage to each of his subscribed  
lots as a result of the higher number of Project lots. The dispute was not resolved.  
After the litigation was started, the Defendants took the position that Mr. Savona  
was in default because the cash call was not paid. However, there is no evidence  
 
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to show that this cash call was demanded from Mr. Savona on a proportional basis  
as required by the APS by which cash calls are to be paid proportionately by  
investors. In turn, I am not satisfied that Mr. Savona’s alleged default has been  
properly established.  
[256] Similarly, Mr. Klecina, who settled his claim with the Defendants, was never  
told that he was in default until after this litigation was commenced.  
o. Management Fees  
[257] When Ms. Ceifets prepared the APS in 2002, John and Anthony wanted the  
agreement to contain a provision for management or administration fees for the  
work they would perform for the Project. In particular, John and Anthony clearly  
wanted to charge or bill investors for “time and efforts” in “carrying the whole  
process” that, at least initially, were contemplated as billed amounts forming part  
of the Project servicing costs that would be invoiced from time to time.  
[258] Based on instructions given by John and Anthony, Ms. Ceifets drafted s. 4  
of the APS. The second paragraph of s. 4 defined “Servicing Costs” to include a  
“Management Fee” comprising reasonable charges for services provided to  
develop the Property, register the plan of subdivision, and manage the installation  
of services, as set out in the following provision:  
In addition, the Servicing Costs for the Lots shall include such reasonable charges  
of the Vendor or any associated company or entity, for services provided in  
connection with the development of the Land and registration of the plan of  
subdivision including, without limitation, the management and administration of the  
installation and completion of the Services (the “Management Fee”).  
 
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Although some of the Plaintiffs signed a later version of the APS in which the term  
“Management Fee” was replaced by the term “Administration Fee,” the substantive  
text of s. 4 was unchanged.  
[259] Under cross-examination, John conceded that a management fee was  
necessary given the large amount of work that the Project would entail, based on  
his own development experience. However, John was evasive and tried to deflect  
questions about management fees by denying that he met with Ms. Ceifets, apart  
from an initial meeting on February 13, 2002, and by asserting that he was  
uninvolved and uninterested in the drafting and content of the APS. John also  
maintained that the concept of a management fee was discussed with investors at  
the 2001 restaurant meeting. John was unresponsive when asked whether he  
advised Ms. Ceifets in 2002 that management fees would be billed or otherwise  
communicated to investors.  
[260] During his examination in-chief, Anthony testified that a management fee  
was included in the services charged to investors under the APS to mirror a private  
equity-inspired practice that would allow him to recover a reasonable fee,  
regardless of whether the Project succeeded, so that his time working on the  
Project wasn’t wasted”. In cross-examination, Anthony acknowledged discussing  
management fees with Ms. Ceifets but claimed that they did not discuss how these  
fees would be paid.  
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[261] Having regard to Ms. Ceifets’ evidence and contemporaneous notes of her  
client meetings, I accept that John and Anthony informed her that management  
fees would be billed or otherwise communicated to Project investors. In addition,  
I find that Ms. Ceifets diligently prepared the management fee clause at s. 4 of the  
APS pursuant to the instructions that John and Anthony gave to her. However, the  
Defendants chose to ignore the terms under s. 4 and instead devised their own  
unilateral method to charge and collect management fees for the Project.  
[262] The Defendants did not invoice the investors for any management fees, or  
otherwise give any prior notice before taking management fees from funds on  
deposit in company bank accounts. In addition, the Defendants did not give  
investors any disclosure of the management fees taken from Project funds, or a  
budget to explain how management fees would be taken during the Project.  
Although Anthony claimed that all Project funds (i.e., mortgage and cash call  
proceeds) which the Vuletics’ used to pay their personal expenses or give  
themselves cash were drawn as management fees, he testified that he told  
nobody, except for possibly Mr. Kegalj, that Project funds were being taken in this  
way. John admitted that invoices for management fees were never sent to  
investors. According to Anthony, no explanations were owed to anyone about the  
management fees.  
[263] Anthony unilaterally and arbitrarily decided the amount of management fees  
that would be drawn from Project funds. Without any invoices or budget  
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whatsoever, he unilaterally decided to set management fees based on the sum of  
his family’s personal use of Project funds up to an alleged “internal limit” of between  
$50,000.00 to $55,000.00 per year, on average, based on his apparent  
understanding of private equity practices that he claimed to apply as a standard  
industry approach at the time. As part of this approach, he instructed his mother,  
Mira, who maintained Embleton’s accounts, that all personal and non-Project  
expenditures incurred by the Vuletics were to be construed as management fees.  
Mira admitted that she simply accepted Anthony’s justification (i.e., without looking  
behind it) for using Project funds to pay for personal expenses, and that she  
recorded these payments in her company ledgers as instructed.  
[264] By their own admission, the Defendants did not disclose the use of Project  
funds to pay for personal expenses to the investors. In addition, Anthony  
conceded that management fees in private equity structures (i.e., of the type that  
he claims to have followed) are expressly disclosed in governing agreements,  
usually as a fixed percentage, so that a party who is required to pay the fees will  
understand what they are paying and how the amount is calculated.  
[265] Anthony also conceded that the APS gave the only contractual basis to allow  
Embleton, or any of the other Defendants, to charge investors a management fee.  
However, the unilateral and undisclosed approach adopted by the Vuletics to pay  
themselves management fees from Project funds was totally inconsistent with the  
requirements under the APS. Furthermore, the approach taken by the Vuletics did  
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not follow standard industry practices. They did not issue any invoices to investors  
or otherwise give any disclosure to explain the management fees to investors who  
were unaware that Project funds were being taken as management fees to pay for  
the Vuletics’ personal expenses.  
[266] Anthony claims that the Plaintiffs knew in 2010 and 2011 that the Vuletics  
were continuing to use Project funds to pay for personal and non-Project expenses  
by justifying these expenses as management fees under the APS. He claims that  
told Ms. Kostelac during meetings at her house with John in April 2010 and  
November 2011 that he took mortgage proceeds to pay his personal expenses  
and “[i]t may have come up in regards to management fees” as this is how he took  
management fees which he claims were not capped at $100,000.00. However,  
under cross-examination, Anthony testified that he did not think that he ever  
discussed with Ms. Kostelac his management fees (i.e., as opposed to his personal  
use of Project mortgage funds) at all. In contrast, Ms. Kostelac testified that  
Anthony told her at the April 2010 meeting that Embleton had obtained a  
$600,000.00 mortgage from MCAP against the Property from which $100,000.00  
had been carved out for Anthony’s use, with John’s knowledge, as a personal loan  
from Embleton that was recorded on the company’s books. She testified that  
Anthony had reassured her that he would repay the company his loan which would  
not impact any of the investors or any of the service calls. According to Ms.  
Kostelac, neither Anthony nor John suggested at the April 2010 meeting that the  
$100,000.00 was a management fee for their work on the Project which Embleton  
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or the other Defendants had to pay. Ms. Kostelac also testified that during the  
November 2011 meeting when John and Anthony asked her to guarantee a  
$900,000.00 TD Bank mortgage against the Property, neither said anything about  
their past or intended future use of mortgage proceeds for their personal expenses.  
Geoff Adair, the Defendants’ former counsel, testified that Ms. Kostelac was  
concerned by the Defendants’ personal spending and “certainly knew all about”  
their use of Project funds from mortgage proceeds for personal expenses but gave  
no particulars of what she allegedly knew. Given its brief and generalized nature,  
Mr. Adair’s evidence did not undermine Ms. Kostelac’s testimony that Anthony  
directly told her that his personal use of mortgage proceeds comprised a loan from  
Embleton that he would repay, or that neither John nor Anthony were claiming  
personal expenses as management fees which Anthony did not recall discussing  
with her.  
[267] On balance, I find from Ms. Kostelac’s specific account of the April 2010  
meeting that she was told that the $100,000.00 carved from the $600,000.00  
MCAP mortgage was a personal loan to Anthony that he was to repay Embleton.  
I am not persuaded by the Defendants’ position that the disclosure by John and  
Anthony to Ms. Kostelac, regardless of its actual content, relieved them from the  
requirements under the APS for charging investors with management fees. From  
the evidence, I am not satisfied that John and Anthony told Ms. Kostelac of their  
unilateral practice of taking mortgage proceeds as management fees.  
Furthermore, I am not persuaded that Ms. Kostelac could or would have relieved  
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the Defendants of their obligations under the APS to provide the Plaintiffs with  
basic details and transparency about management fees which was not discussed  
at either of these meetings.  
[268] The Defendants also claim that the Plaintiffs knew about their use of Project  
funds to pay for personal or non-Project expenses as management fees through  
Mr. Grounds’ attendance at the trial of Mr. Kegalj’s action in July 2011 which heard  
evidence on the issue of management fees. Anthony testified that Ms. Kostelac  
told him that the Workplace Group would send somebody to attend each day of  
the trial and take notes to update group members, and stated that Mr. Grounds  
attended the trial for this purpose. But Mr. Grounds was not cross-examined on  
the proposition that the Workplace Group sent him to the trial each day to take  
careful notes and give daily reports. In his evidence, Mr. Grounds explained that  
he agreed with Ms. Grounds that he would attend the trial to see what was going  
on. However, he missed portions of the trial as he only attended at intervals, and  
he found it difficult to follow the trial as he could not see the documents being used  
and could not clearly hear the proceedings due to poor acoustics in the courtroom.  
As such, he did not understand the claim or the evidence at trial. Although he  
periodically spoke with John and Anthony in the courtroom, they did not discuss  
the substantive issues. Instead, they repeatedly told him how good their lawyer  
was, how Mr. Kegalj did not have a case, and how they expected to easily win the  
trial. When the trial ended with a settlement, Mr. Grounds recalled the trial judge,  
Justice Lederer, reading the court’s endorsement that required investors to receive  
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a periodic accounting for the Project and the Vuletics to have a management fee  
of up to $35,000.00 per year.  
[269] I am not persuaded that Mr. Grounds’ attendance at the Kegalj trial in July  
2011 supports the Defendants’ position that the Plaintiffs somehow approved the  
Defendants’ unilateral and undisclosed approach for taking management fees from  
the Project, or that they otherwise waived the APS requirements for charging  
management fees. Mr. Grounds did not attend the trial for any such purpose and  
did not convey, nor could he have conveyed, the sort of information which the  
Plaintiffs would have required to give their approval or waiver as asserted by the  
Defendants.  
[270] Anthony testified that he met with the Workplace Group after the Kegalj trial  
had ended to discuss all of the issues that came up during the trial as group  
members wanted answers. However, his evidence about these meetings was  
quite general and devoid of specifics to show that investors knew or approved of  
the management fee practices or waived the APS requirements for charging  
management fees. In contrast, Ms. Kostelac gave specific evidence of the  
Workplace Group’s lunch meeting with the Vuletics in July 2011 after the Kegalj  
action had settled when the Vuletics expressed how happy and relieved they were  
that the Kegalj action had settled without discussing their management fees. From  
the evidence, I am satisfied that the Workplace Group members did not discuss or  
approve the Defendants’ management fee practices after the Kegalj trial settled,  
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or otherwise waive the need for strict compliance with the APS terms for charging  
management fees.  
p. Control Over Project Funds  
[271] During their evidence, John and Anthony emphasized that they could  
exercise complete control and discretion over the use of Project funds on deposit  
in company bank accounts. Anthony believed that he could deal with Embleton’s  
funds as he saw fit, while John did not worry about whether management fees  
were obtained in a manner that complied with the APS requirements as he  
believed that the Defendants deserved to be paid. John was unconcerned with  
how or through what means Project funds were paid to Anthony who handled  
company finances and all associated paperwork. To this end, it is clear that John  
simply abdicated any oversight of Anthony’s financial management with complete  
indifference to the unilateral and undisclosed manner in which all of the Vuletics  
simply took Project funds for their personal use and benefit. In rather simplistic  
terms, John claimed to believe that none of this should have concerned investors  
who trusted him as the experienced developer to capably run the Project and  
ensure that its funds were properly used.  
[272] By not disclosing their management fees, the Defendants avoided any  
scrutiny from the Plaintiffs regarding the amount of their management fees.  
Through their silence, the Defendants took it upon themselves to charge unlimited  
management fees in amounts of their own choosing without any apparent need or  
 
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wish to justify the reasonableness of the fees in light of the services they provided  
to develop the Property, as required under the terms of the APS. Apart from a self-  
imposed “internal limit” ranging between $50,000.00 and $55,000.00 per year that  
Anthony claimed to follow, the Defendants’ practice of taking Project funds as  
management fees was truly unconstrained. Applying the average of these figures  
over the 14 ½ year lifespan of the Project, the Defendants claim that $822,000.00  
in management fees was taken from Project funds. An accounting given by Mr.  
Hinchcliffe to satisfy Justice Lederer’s order made in July 2011 seems to support  
the claimed $822,000.00 total management fee figure.  
[273] At trial, Anthony claimed that management fees should be set at $95,000.00  
per year.  
[274] In my view, the Vuletics knew that investors would likely object to  
management fees being charged in amounts that far outpaced actual Project  
development costs which led them to surreptitiously take Project funds as  
undisclosed management fees to avoid detection or opposition. Without question,  
this was highly improper. As their own former lawyer, Mr. Adair, candidly stated in  
his evidence, the Defendants’ approach for taking Project funds as management  
fees to pay for personal or non-Project expenses was “not sound and proper  
business practice in any way, shape or form” and was “not the right way to go  
about doing things.”  
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[275] Despite the “internal limit” which Anthony purportedly applied to cap what  
the Vuletics took as management fees from Project funds, John and Anthony  
signed minutes of settlement with Mr. Kegalj on July 11, 2022 that expressly  
provided, among other things, for “an allowance of up to $35,000.00 per year to  
John and Anthony Vuletic on account of management fees” as set out in the  
following provision:  
Proceeds of any new first mortgage to be used to pay  
property taxes/planner and Bramwest and Bonk line of  
credit otherwise by paid to independent third party  
(agreed or court appointed) to be drawn down by  
Vuletics in payment of legitimate, reasonable and  
necessary development and servicing costs, such  
development costs to include an allowance of up to  
$35,000 per year to John and Anthony Vuletic on  
account of management fees.  
[276] When confronted with this term which provided that management fees were  
limited up to only $35,000.00 per year, Anthony offered a number of explanations  
in an effort to deny the term. In my view, none of his explanations are plausible or  
credible.  
[277] In his evidence, Anthony stated that the $35,000.00 figure in the minutes of  
settlement “wasn’t my numberas it was Mr. Kegalj who allegedly proposed the  
figure. However, Mr. Kegalj testified that it was the Vuletics who had proposed the  
$35,000.00 figure in settlement discussions. Under cross-examination, John  
claimed that Mr. Adair, his lawyer at the Kegalj trial, suggested the substance of  
the $35,000.00 annual cap on management fees to settle the action. For his part,  
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Mr. Adair confirmed the accuracy of the following extract from an affidavit he sworn  
in January 2018 stating that the management fee cap in the settlement was agreed  
upon to protect investors:  
The [settlement had] the benefit of freeing the  
development of the Property from any interference  
from Kegalj, and added protections for the other Lot  
Purchasers to address certain concerns expressed at  
trial by the presiding judge, Justice Lederer, regarding  
the position of the Lot Purchasers collectively. Some  
of these added protections included: (1) an  
independent accounting of the funds received and  
disbursed in connection with the development; and (2)  
a cap on the amount of management fees the Vuletics  
could claim.  
[278] At the Kegalj trial, Justice Lederer had raised concerns about the Project  
investors which led Mr. Adair to believe that it was important to address the  
concerns. Mr. Adair testified that the limit on what the Vuletics could claim in  
management fees was an “added protection” in the minutes of settlement to  
address these concerns, which was consistent with his explanation in the above-  
reproduced excerpt from his January 2018 affidavit.  
[279] In uncontradicted evidence, Ms. Kostelac testified that John and Anthony  
told her during the November 2011 meeting at her home that the trial judge had  
come up with the $35,000.00 figure, purportedly after being told (i.e., incorrectly if  
he indeed was so informed) that the Vuletics were not getting paid for their work  
on the Project. But the claim by John and Anthony about them not getting paid is  
clearly refuted by their own admissions and their own bookkeeping records.  
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[280] Anthony relentlessly avoided acknowledging the relatively straightforward  
proposition drawn in the above-reproduced term of the Kegalj settlement that John  
and Anthony were to have up to a maximum of $35,000.00 per year in  
management fees. This term in the Kegalj settlement is neither ambiguous nor  
difficult to understand. Nevertheless, Anthony steadfastly denied that this term  
“cappedthe amount of management fees. Instead, he claimed that the  
$35,000.00 figure was actually an “allowance” to be distinguished from a “cap”  
(i.e., which he characterized as a more permanent restriction) because the  
allowance was somehow time-limited and was to expire when “the deal was over”  
once Mr. Kegalj had been paid out his entitlements under the other terms of the  
settlement. Later in his evidence, Anthony relented to using the term “cap” by  
characterizing the $35,000.00 figure as “a cap on the allowance” in contrast to a  
cap on management fees.  
[281] I find that Anthony’s distinctions do not assist the Defendants. In my view,  
nothing in the minutes of settlement support his claimed interpretation of the  
$35,000.00 term. There is simply no temporal element to the term, let alone any  
indication that the $35,000.00 cap would expire at any point in time or upon any  
specific event. As drafted, and in the context of the settlement of the Kegalj action,  
I find that the provision simply gave John and Anthony “an allowance of up to  
$35,000.00 per year” up to that maximum amount or capwhich they could receive  
on account of management fees. In any event, as explained below, there are  
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references in Anthony’s own sworn affidavits and pleadings to the $35,000.00 cap  
on management fee which he was unable to explain or reconcile.  
[282] On February 29, 2016, Anthony swore an affidavit in response to the motion  
brought by Mr. Bilich in the Kegalj action that attached (as Exhibit I to the affidavit)  
an accounting prepared by Mr. Hinchcliffe in 2012 summarizing Project  
disbursements for the years 2002-2009 which Anthony swore as being correct to  
the best of his knowledge. The accounting at Note 1 of the Management and  
Appraisal Fees line item explained that Project disbursements “[i]ncluded  
management fees (not exceeding $35,000 per year).Earlier in January 2013, Mr.  
Hinchcliffe had advised Ms. Kostelac that the Management and Appraisal Fees  
line item in the Project accounting which he had given to her and other investors  
had, “a maximum of $35,000 in each year of the Vuletic management fee.” When  
questioned about Note 1 under cross-examination, Anthony disavowed any  
knowledge of Mr. Hinchcliffe having applied the $35,000.00 cap on management  
fees from Kegalj settlement, stated that Mr. Hinchcliffe had applied this cap in error,  
and claimed that limiting management fees to only $35,000.00 per year never  
entered my head ever, never.”  
[283] Later, on August 30, 2017, Anthony swore an affidavit in response to a  
motion in the Pichelli action for a Mareva injunction order. In the affidavit, Anthony  
referenced Mr. Hinchliffe’s accounting for 2002-2015 which had a $382,208.69  
“Management” line item to show the Vuletics’ personal expenses related to  
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management fees. The affidavit then made specific reference to the $35,000.00  
cap on management fees in the Kegalj minutes of settlement, as follows:  
It should be remembered, however, in considering  
these expenses that Embleton and its successor  
property owner [185 Corp.] were entitled to charge a  
management fee for the hundreds if not thousands of  
hours spent by myself and my father in the  
management of the project. The personal expenses of  
$382,204.89 works out to an average management fee  
of approximately $25,480.00 a year over the fifteen  
years of the project up to the date of that accounting.  
While the court is not bound to accept that as a fair  
management fee, it is to be noted that in the settlement  
of the Kegalj action on July 11, 2010, my father and I  
were to be allowed a management fee of $35,000 per  
year which while not specifically approved by the  
Honourable Justice Lederer, was certainly not the  
subject of adverse comment by him.  
When Anthony had swore this affidavit, the Defendants’ financial obligations to Mr.  
Kegalj were long discharged that Anthony testified would end the alleged  
“temporary” $35,000.00 allowance under the minutes of settlement.  
[284] In cross-examination, Anthony was asked whether his intention had been to  
communicate the reasonableness of an average $25,480.00 annual management  
fee to Justice LeMay on the Mareva injunction motion by referring to the maximum  
$35,000.00 annual management fee under the July 2011 minutes of settlement  
with Mr. Kegalj. Anthony responded that both figures were “unacceptable” and  
“unrealistic” and characterized his affidavit as having provided a simple  
explanation of the annual expenses for which he took Project funds as  
management fees.  
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[285] Anthony’s position on this point is inconsistent. His earlier and unqualified  
evidence on the Mareva motion before Justice LeMay was that the Vuletics took  
$382,208.69 in Project funds as management fees which reflected a $25,480.00  
average annual fee that was reasonable and justified in view of the $35,000.00  
cap on annual management fees under the Kegalj settlement. To distance himself  
from those figures, Anthony testified that his actual personal expenses were much  
higher than previously disclosed and totalled $826,000.00 by the end of the Project  
(i.e., or about $55,000.00 per year on average) which was taken from Project funds  
as management fees. To explain the discrepancy with these figures, Anthony  
claimed at trial that Mr. Hinchliffe had kept two charts of personal expenses or  
management fees to further a poorly explained tax strategy, so that both charts  
had to be added together to arrive at a true or full accounting of the Vuletics’ total  
personal expenses and management fees. The problem with this explanation is  
that it clearly undercuts Anthony’s claim before Justice LeMay that the Vuletics  
took only $25,480.00 in average annual management fees (i.e., without any  
mention of a “second chart) which is less than half the alleged “full” average  
management fee of about $55,000.00 per year.  
[286] The Defendants took a similar approach in their statement of defence and  
counterclaim. Until their most recent amendments in 2021, their pleading claimed  
an entitlement to management fees of $38,800.00 per year based on $582,204.89  
in total personal expenses divided by a 15-year Project horizon. When asked  
about this in cross-examination, Anthony responded by essentially mirroring his  
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approach to justifying the Project funds taken as management fees in his August  
30, 2017 affidavit, saying, if you divided by the 15 years, we took out $38,000 a  
year as management fees. There’s no cap or total to this. And, so again, that is  
accurate, but I’m no way saying that’s my cap at all.”  
[287] In answers to undertaking provided in February 2021, the Defendants  
claimed for the first time an entitlement to a management fee approaching  
$95,000.00 annually, or $1,377,500.00 in total for the 14 ½ year period from  
August 2002 through to the end of 2016. In their view, charging management fees  
of this nature was reasonable given the size of the Project, the time and expertise  
which they invested in the Project, the risk they assumed in managing the Project,  
and their administration of the Project and is ultimate positive outcome. The  
Defendants then amended their statement of defence and counterclaim to plead  
this figure.  
[288] In his evidence at trial, Anthony tried to justify the substantial increase to the  
alleged self-imposed “internal limit” of $50,000.00 to $55,000.00 in annual  
management fees by repeatedly stating his belief that, “I’m worth more than that.”  
According to Anthony, his decision to increase management fees to $95,000.00  
per year resulted from a review of comparable management fees for real estate  
projects, primarily in Canada, which showed that management fees ranged  
between $75,000.00 and $160,000.00 per year. By setting management fees at  
$95,000.00 per year, he also claimed that the fees reflected the lower end of the  
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spectrum which he felt would reasonably compensate the Vuletics for working on  
the Project. But the Defendants produced no documents or records from the  
management fee review and called no expert evidence in respect of this matter.  
Accordingly, there is no evidence before the court to support the reasonableness  
of the Defendants’ new and significantly increased figure of $95,000.00 for annual  
management fees.  
[289] To put the management fees into context in relation to the overall Project, it  
is instructive to consider that the total amount that Embleton and 185 Corp. paid  
to all of its three planners (i.e., Mr. Gagnon, Mr. Salmona and Mr. Chung) over the  
entire life of the Project was $169,340.00, and that the total direct development  
costs (i.e., the amounts paid to the planners, other consultants, the BWLG  
consortium, and the City of Brampton) amounted to $378,904.00. The Defendants  
fully admit these figures. Expressed arithmetically, the $1,377,500.00 figure which  
they now claim as management fees is over 8 times higher than what Project  
planners were paid, and over 3 ½ times the total direct development costs incurred  
over the entire Project.  
[290] At the beginning of the Project in 2002, Anthony had less land development  
experience than John who led the Project. Both relied heavily on the work  
performed by planners and various other consultants (i.e., working in their  
respective areas of expertise) to prepare submissions and give expert advice  
throughout the process for developing the Property. Based on John’s evidence,  
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which Anthony largely mirrored in his own evidence on this point, planners and  
other consultants played a critical role in the Project and engaging the right  
development professional was critical to the success of the development process.  
In turn, the answer to undertakings from the Defendants to explain the work they  
personally performed for which management fees are claimed was more akin to  
chronicling the work done by the planners and consultants which they had  
engaged rather than showing the work or services which the Vuletics had  
performed themselves. Similarly, in cross-examination, Anthony had difficulty  
clearly delineating the work that he and John had performed independently from  
the work which their planners and consultants had provided.  
[291] I accept that John and Anthony made various contributions on their own to  
progress the Project. This included meeting with investors to raise funds and  
provide updates on the Project, instructing planners and consultants on the  
Project, meeting or engaging with various municipal officials and developers about  
the Project and related matters, and regularly updating their strategy for developing  
the Project, among other things. Despite these efforts, I find that the $1.377 million  
management fee which the Defendants are now seeking is grossly  
disproportionate to the nature and extent of their contributions to the Project having  
regard to the fees paid to planners and consultants for their work to advance the  
development process. Accordingly, I am satisfied that the $1.377 million  
management fee is unjustified on its face and cannot possibly be a “reasonable  
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charge” as required under s. 4 of the APS to constitute a valid management fee  
for the Project.  
[292] There is a decidedly ex post facto nature to the Defendants’ assertion that  
they always claimed their personal expenses as management fees, albeit without  
any disclosure to investors. In cross-examination, Anthony acknowledged giving  
discovery evidence in the Kegalj action that neither he nor John had received any  
remuneration from Embleton for services they had provided up to January 2011.  
He later sought to reconcile the clear inconsistency between that evidence and his  
evidence in this proceeding by contending that he had claimed his personal  
expenses as management fees all along by classifying those expenses as loans  
rather than as management fee for “tax” reasons. But his explanation of the nature  
of those tax reasons and the basis on which he considered a loan to be  
synonymous with a management fee was incoherent and unpersuasive. In any  
event, and regardless of what “tax” reasons there were for classifying management  
fees as loans, Anthony acknowledged that he declared no income and reported no  
shareholder loans in any of his filed tax returns until at least 2016 after the Property  
was sold. With Mr. Hinchcliffe’s help that started in 2016, Anthony began declaring  
income of roughly $30,000.00 per year in purported management fees for which  
he paid taxes. When asked in cross-examination whether taxes were paid on the  
$822,000.00 taken from Project funds as management fees, Anthony stated that  
taxes were paid but conceded that the Defendants produced no documents to  
corroborate this, other than their 2016-2019 tax returns themselves.  
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[293] A second example of the ex post facto nature of the Defendants’ position on  
management fees arose from John’s testimony about his conversation with Mr.  
Kegalj in 2007 about Anthony’s use of Project funds to pay for personal charges  
which Anthony has incurred on Mr. Kegalj’s credit card. John testified that he  
reassured Mr. Kegalj that he would cover his son’s charges and “stay behind the  
company and cover my son’s bills” where company funds had been used to pay  
for Anthony’s personal expenses. However, when asked in cross-examination  
whether he would have told Mr. Kegalj that he would “stay behind the company  
and cover my son’s bills” if he believed in 2007 that Anthony’s use of Project funds  
for personal expenses was justified as a management fee under the APS, John  
answered that Embleton was his company and that he had no obligation to say  
anything to Mr. Kegalj, a Project investor and a party to an APS, about  
management fees.  
q. The Kegalj Action in 2010-2011  
[294] In March 2010, Mr. Kegalj brought an action against Embleton, John and  
Anthony. In the action, he claimed an interest in the Property and alleged, among  
other things, that the Vuletics had been misusing Project funds.  
[295] Before starting his action, Mr. Kegalj invited certain Workplace Group  
investors to a meeting in February 2010 with his lawyer, Arie Gaertner, to discuss  
the alleged misuse of Project funds and to ask the investors to join his action and  
uncover what was going on. Ms. Kostelac, Ms. Grounds and Ms. Caroti attended  
 
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the meeting where Mr. Kegalj laid out the general nature of his concerns with the  
Vuletics’ misuse of Project funds. During the meeting, Mr. Gaertner advised that  
the APS was weak and might leave investors with nothing unless they retained  
him, which he asked them to do by the following day.  
[296] At a lunch meeting the next day, Mr. Kegalj showed Ms. Kostelac, Ms.  
Grounds and Ms. Caroti an email from Anthony dated November 20, 2009 which  
Mr. Kegalj considered to be proof of Anthony’s dishonesty. Sent to Mr. Kegalj as  
part of a discussion for him to obtain a new mortgage for the Property to replace  
the MCPA line of credit which had been exhausted, Anthony’s email stated the  
following:  
To tell a lender that you have people who purchased  
lots is not a good thing at all since it means once your  
property “hits” (is divided) you are LOSING LOTS –  
rather what is always stated is that you own the  
property […] as well, any institution that sees the  
purchase agreements and goes through a lawyer will  
see the agreements are not strong for the purchaser,  
meaning the purchasers have no power to title at all  
unless we deliver which we will of course.  
[297] Neither Ms. Kostelac, Ms. Grounds nor Ms. Caroti considered this single  
email to be persuasive evidence of wrongdoing or dishonesty by John or Anthony,  
and none of these investors nor Ms. Pelchat-Morris (i.e., who missed the meetings  
while on vacation but spoke with other Workplace Group members upon her  
return) joined Mr. Kegalj’s action. Instead, they chose to stick with John and  
Anthony and see the Project through to its completion.  
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[298] In April 2010, John and Anthony visited Ms. Kostelac at her home to discuss  
Mr. Kegalj’s action. During the meeting, the Vuletics advised that:  
a) Mr. Kegalj was claiming to be a partner in the Project  
b) Mr. Kegalj was claiming that the investors that he had  
introduced to the Project comprised his own investment; and  
c) John felt betrayed by Mr. Kegalj and was upset that he was put  
in the position of having to defend the action to save the  
Property in circumstances where the investors were all counting  
on him. The Vuletics also expressed disbelief at what Mr.  
Kegalj was doing to them and the Project by bringing his action.  
[299] In June 2010, John and Anthony brought Colin Chung, a planner retained  
by Embleton, to a meeting with the Workplace Group at Ms. Pelchat-Morris’ home.  
John testified that the purpose of the meeting was to reassure the Workplace  
Group investors that the Project was being capably run, notwithstanding Mr.  
Kegalj’s allegations. Ms. Pelchat-Morris, Ms. Grounds and Ms. Caroti testified that  
John told them at the meeting how hurt and upset he was by Mr. Kegalj’s action,  
and that Mr. Kegalj’s allegations were untrue. Ms. Pelchat-Morris testified that  
John expressed thanks and gratitude to the group for sticking with him, and  
conveyed that he would deliver on the Project.  
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[300] At John and Anthony’s request, each of the Plaintiffs in the Workplace  
Group, other than Ms. Caroti, met with lawyers at Geoff Adair’s office in connection  
with his firm’s defence of the Kegalj action. Lawyers at Mr. Adair’s office then  
prepared witness statements for Ms. Kostelac, Ms. Pelchat-Morris and Ms.  
Grounds. Mr. Adair did not consider the interests of the investors to be adverse to  
the interests of Embleton and the Vuletics in the Kegalj action.  
[301] In July 2011, Mr. Kegalj’s action proceeded to trial. Partway through the  
trial, Mr. Kegalj and the Vuletics agreed to settle the action by minutes of settlement  
signed on July 11, 2013. Despite this outcome, Anthony incorrectly told Workplace  
Group investors at a meeting held on July 23, 2011 that the Vuletics had “won” the  
trial against Mr. Kegalj and had defeated him, which Anthony conceded in this  
proceeding.  
[302] Among other things, the minutes of settlement gave the Vuletics an  
allowance up to $35,000.00 per year on account of management fees, as set out  
earlier.  
[303] The minutes of settlement also called for an independent accountant to be  
appointed by agreement or court order. Under this term of the settlement, John  
and Anthony were to see that the accountant:  
a) prepared an accounting of all Project funds received and  
distributed until then;  
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b) sent the account to lot investors, including Mr. Kegalj; and  
c) thereafter prepared quarterly accounting reports and gave them  
to investors and Mr. Kegalj upon completion. On being advised  
of the settlement on July 11, 2011, Justice Lederer endorsed  
the following which he read in Court:  
This case has been settled. [Minutes of settlement] will  
be filed by July 15, 2011. The file should be held until  
then. The [minutes of settlement] will contain an  
additional paragraph that will require the appointment  
of an independent accountant who will, within 3 months  
of his or her appointment, provide a full accounting of  
all project fund(s) received and a report outlining the  
results prepared for distribution to all holders of lot  
purchase agreements.  
[304] Mr. Kegalj, Mr. Adair and Ms. Sulzenko testified that the agreement for an  
independent accounting was reached in response to concerns expressed by  
Justice Lederer regarding the position of lot investors who were not parties to the  
Kegalj action and were not represented at trial. In effect, having this term in the  
settlement was intended to give investors an accounting to allow them to  
understand the finances for the Project.  
[305] Despite the above-stated evidence from Mr. Kegalj and the Defendants’  
former lawyers, Anthony maintained that Justice Lederer “had nothing to do with”  
the accounting requirement in paragraph 7 of the minutes of settlement while  
stating that he had “no issue” with engaging an accountant to give investors,  
including Mr. Kegalj, an accounting of Project monies received and disbursed up  
- 147 -  
to the date of the settlement. In addition, despite the clearly stated obligation to  
give quarterly accounting reports thereafter under the terms of the settlement,  
Anthony claimed that the accounting was merely a “one off” obligation which the  
Defendants fully discharged by delivering a single accounting report for the Project  
for the period running up to the date of settlement. He also testified that he was  
unaware of the quarterly accounting requirement because that the original  
settlement negotiations were supposed to be for a one-off accounting, and he  
claimed that he was unaware of the quarterly accounting requirement until Robert  
Bilich served his motion materials in March 2016, almost five (5) years later, to  
enforce the accounting requirement under the Kegalj settlement, as explained  
further below. Claiming to have misunderstood the obligation to give the quarterly  
accounting reports, Anthony resolved to take full responsibility … for my mistake”  
stating that he did “not blame anybody else but himself” for his apparent  
misunderstanding. However, given the clearly-stated obligations under the  
settlement and the evidence of his own former counsel, I do not believe Anthony’s  
evidence on this point which strains credulity. I also find that his credibility is  
undercut by Ms. Kostelac’s evidence about the accounting requirements, as  
discussed further below.  
[306] For his part, John refused to acknowledge that he personally assumed any  
obligation under the minutes of settlement to engage an accountant to prepare and  
deliver the required accounting to Project investors. Instead, John testified that he  
agreed to settle the Kegalj action by following Mr. Adair’s advice without actually  
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considering the accounting requirements. John also distanced himself from the  
accounting obligation by repeating his oft-cited position that he relied on Anthony  
to handle any and all paperwork associated with the Project. I was not persuaded  
by John’s self-serving evidence by which he clearly sought to abdicate his  
responsibility to make informed decisions and lead the Project’s affairs in a  
reasonably diligent and responsible way.  
[307] Once the minutes of settlement were signed, and after agreeing with Mr.  
Kegalj to have Mr. Hinchcliffe serve as the independent accountant as required by  
the minutes of settlement, the Vuletics engaged Mr. Hinchcliffe to fulfill this role.  
Mr. Hinchcliffe then took about eighteen (18) months (i.e., from July 2011 to  
January 2013) to prepare just a single page accounting report for investors that  
covered only part of the pre-settlement period (2002-2009) instead of the entire  
pre-settlement period (2002-2011) as required by the terms of the settlement  
agreement. The reason for Mr. Hinchcliffe’s slow progress in preparing the  
required accounting report is rather unclear.  
[308] Ms. Kostelac testified that in or around November 2011 after the Vuletics  
came to her home to ask her to guarantee a new mortgage for 185 Corp., she met  
Mr. Adair at his law office where he advised, among other things, that Mr.  
Hinchcliffe was preparing accounting reports for investors as a result of the Kegalj  
settlement. Sometime later, Ms. Kostelac met Mr. Hinchcliffe before they had a  
lengthy call on November 9, 2011 when Mr. Hinchcliffe advised her that Project  
- 149 -  
investors were to receive quarterly accounting reports or statements under the  
terms of the Kegalj settlement. Ms. Kostelac’s account is corroborated by  
contemporaneous notes that she made. Although the Defendants did not share  
the minutes of settlement with Ms. Kostelac, she later saw a copy in Mr. Bilich’s  
motion materials which she received in March 2016.  
[309] In late 2011, the Vuletics claimed that Mr. Kegalj had breached the minutes  
of settlement dated July 11, 2011 and brought a motion to enforce its terms that  
Lederer J. heard and decided on December 20, 2011. In deciding the motion,  
Lederer J. ordered revisions to the revised minutes of settlement and ordered Mr.  
Kegalj to pay to Mr. Hinchcliffe:  
a) $46,000.00 which Mr. Kegalj had used to pay off his personal debts  
by taking this amount from a TD mortgage that he had obtained for  
the Project and  
b) $19,000.00 that remained in the TD mortgage after the MCAP line of  
credit and other Project debts stated in the July 11, 2011 minutes of  
settlement were discharged.  
[310] In his Endorsement dated December 20, 2011, Justice Lederer noted the  
following:  
The substantive problem will be whether the requisite  
mortgage can be obtained. Counsel for the defendants  
[Mr. Adair] acknowledged this will be difficult. They  
have put in place a new structure. A new company had  
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been incorporated. A new partner brought in the act as  
guarantor and the defendant Anthony Vuletic has  
withdrawn from any ownership interest. [Emphasis  
added]  
[311] From the clear wording of Justice Lederer’s endorsement, it follows that a  
representation was made that Anthony had withdrawn from any ownership interest  
in the Project. In his evidence, Mr. Adair acknowledged that, “generally speaking  
on any serious matter, I have to have my client’s instructions.When Anthony was  
cross-examined on the proposition that he had represented to the court, through  
Mr. Adair, that he had withdrawn from any ownership interest in the Project by  
December 20, 2011, he claimed that the endorsement had been written in the  
wrong tense because Justice Lederer was advised only that he would be  
withdrawing (i.e., in the future), not that he had already done so. Anthony also  
denied that he had disclosed his withdrawal from any ownership interest in the  
Project due to concerns by the court over his continued involvement.  
r. The Project in Crisis  
[312] By Affidavit sworn November 22, 2011 in support of the motion that returned  
before Justice Lederer to enforce the Kegalj settlement of July 11, 2011, Anthony  
claimed that the Project was in disarray and facing dire financial circumstances, as  
set out in the following excerpt:  
The placing of this first charge [by Mr. Kegalj] in favour  
of the TD Bank has left our plans to develop the subject  
property as a residential subdivision in disarray and  
has caused us substantial damages. We have run out  
of money to carry on with the development. We have  
 
- 151 -  
no idea how mortgage payments to the TD Bank are  
being made, if at all, nor do we know whether the TD  
Bank is taking any default proceedings on the said first  
charge. The planner remains unpaid. Municipal taxes  
remain in arrears. We have been unable to repair our  
relationship with the Bramwest Group by paying debts  
owing to them. Our exclusion from group activities has  
left us without any knowledge of decisions that may be  
undertaken that affect the value of our project. We  
have a real and legitimate fear that we will soon lose  
our property if we are not able to overcome the  
devastation by the plaintiff [Mr. Kegalj] unilaterally  
increasing the debt on our property with little in the way  
of benefit to us.  
[313] Under cross-examination, Anthony acknowledged that the Project indeed  
had run out of funds to continue the development by November 2011, and  
conceded that the Project was not in a good position. Mira agreed that Anthony’s  
affidavit accurately descried the nature of the financial crisis facing the Project  
given the state of Embleton’s bank account balances as of July 11, 2011 ($111.17),  
August 31, 2011 ($0.34) and November 30, 2011 ($7.34), respectively.  
[314] Despite the Project’s apparent crisis and impending risk of collapse, the  
Defendants did not disclose any of these material facts to investors. Anthony’s  
stated rationale for not disclosing the crisis to investors was that the situation was  
his responsibility to address and resolve, while John claimed that his son managed  
the paperwork and financing issues. In my view, the more compelling inference,  
which John and Anthony both disputed in their evidence, is that they both believed  
that it would be impossible to disclose the crises to investors, or solve it by  
demanding additional cash calls, as doing so would necessarily invite scrutiny and  
require them to disclose that they:  
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a) had expended large amounts of project funds on personal and non-project  
expenses over the course of about ten (10) years and claimed these  
amounts as undisclosed management fees;  
b) were the authors of this self-inflicted crisis by consistently prioritizing their  
personal use of Project funds over actual Project-related expenses; and  
c) had not mentioned the true nature and extent of their personal spending of  
Project funds in the affidavit which he had filed with the court in November  
2011 for the motion to enforce the Kegalj settlement.  
To avoid having to engage in a series of difficult conversation that would inevitably  
had followed any such disclosure, the Vuletics chose to disclose nothing to  
investors and weather the crisis in the hopes of later arriving at a solution that  
would allow them to advance the Project. At the same time, Anthony resorted to  
blaming the crisis on Mr. Kegalj by testifying that he “drained us for seven months  
while we looked for a mortgage,” which left Mr. Kegalj as the purported reason why  
Embleton exhausted its development funds for the Project. But Anthony’s criticism  
of Mr. Kegalj, that largely centred on his inability to obtain a new $800,000.00  
mortgage for the Property in 2009 was rather overstated. In my view, Anthony’s  
significant personal use of Project funds understandably caused Mr. Kegalj to  
develop serious concerns about placing yet another mortgage on the Property (i.e.,  
that would have been the fourth mortgage in his name since 2002) and personally  
incurring further debt to pay for Anthony’s lifestyle and other business interests.  
- 153 -  
[315] Ms. Kostelac testified that John and Anthony advised her during a November  
2011 meeting at her home that $600,000.00 in MCAP mortgage proceeds had  
been spent on planners, property taxes, Bram West Group levies, and other  
development-related costs to advance the development of the Property. However,  
the explanation they gave her is irreconcilable with the substance of Antony’s  
November 2011 affidavit that did not attribute the crisis to “too much Project  
spendingor the Vuletics depleting their personal funds to inject capital into the  
Project. To this end, I am satisfied that the Vuletics did not truthfully tell Ms.  
Kostelac that the MCAP mortgage proceeds were depleted largely due to their use  
of Project funds for personal charges. As Ms. Kostelac could not access company  
bank records that would have shown her that the Vuletics had spent substantial  
Project funds on personal expenses, she was easily misinformed about the  
Project’s finances. That said, John and Anthony did not hesitate to ask Ms.  
Kostelac for her help in securing new financing for the Project by obtaining another  
mortgage and assuring her that the new mortgage proceeds would be paid into a  
trust account with Mr. Hinchcliffe who agreed on a November 9, 2011 call to control  
how these funds were spent. To ease Ms. Kostelac’s concerns about her personal  
exposure to financial risk by guaranteeing the mortgage, Anthony gave her  
guarantees and declarations to her purported benefit although none had any real  
value as:  
a) Embleton, which was the corporate entity set out in the documents,  
no longer existed by then  
- 154 -  
b) 185 Corp., the new entity incorporated for the Project, was not  
mentioned anywhere in the mortgage-related documents  
c) no corporate entity had signed the “guarantees”  
d) the purported promises given by John and Anthony to assume full  
financial responsibility were empty guarantees as neither had any  
money or assets.  
[316] Trusting John and Anthony, Ms. Kostelac guaranteed the $900,000.00 TD  
mortgage that Mr. Kegalj had obtained in February 2012 and paid overdue  
amounts on the mortgage totalling about $12,000.00 for the period from October  
2011 through to January 2012. She also became a director of 185 Corp. in early  
2012 as this was required in order for her to guarantee the mortgage. Ms. Kostelac  
did not seek and was not offered independent legal advice on the guarantee or the  
directorship. Shortly after the mortgage was obtained, Ms. Kostelac was given  
papers to resign as a 185 Corp. director which she promptly signed.  
s. The Project Corporations  
[317] Embleton was incorporated on February 19, 2002. Contemporaneous notes  
that Ms. Ceifets made from her consultations with John and Anthony indicate that  
shares were not issued and the corporation was not organized. There are no  
records to show that Embleton ever issued shares to either John or Anthony. In  
light of this, I accept that Embleton was an unorganized corporation.  
 
- 155 -  
[318] In 2008, Embleton was dissolved for non-compliance with provincial  
corporate tax filing requirements. Anthony filed Embleton’s article of incorporation  
by giving the company’s address as his parents’ former residence on Glengarry  
Road. He later failed to notice that Embleton was dissolved (i.e., presumably  
because notice of the dissolution went to the former address, and not to his current  
address at the Property) until about three years after the dissolution when the issue  
apparently surfaced during the Kegalj action.  
[319] Given that Anthony was a director and officer of Embleton, and that he and  
John were its purported shareholders, Anthony apparently formed the view that he  
could deal with Embleton’s funds in his sole discretion as he deemed fit. It appears  
that he did so despite claiming to appreciate the basic difference between a  
shareholder and a corporation, ostensibly from his corporate law studies at law  
school and his other experiences in the legal profession.  
[320] On August 24, 2011, 185 Corp. was incorporated. Anthony was the  
treasurer and made financial decisions for the corporation while Mira handled all  
of the company’s bookkeeping. Anthony testified that he and John exercised sole  
and absolute control over the decisions made for Embleton and 185 Corp.,  
respectively.  
[321] In their evidence and submissions, the Defendants take the position that 185  
Corp. simply stepped into the shoes of Embleton and assumed its obligations  
under the APSs. This position is consistent with information that Mr. Adair gave  
- 156 -  
Ms. Kostelac in or around 2011-2012, and with other records including a letter from  
Anthony to Mr. Savona dated March 26, 2013 which advised that 185 Corp. was  
formerly Embleton Properties”.  
[322] In the Fall of 2011, John and Anthony advised Ms. Kostelac of their plan to  
dissolve and wind down Embleton, although it already was dissolved by then, and  
create a “new” numbered company despite the fact that 185 Corp. was already  
incorporated. Trusting John and Anthony, Ms. Kostelac believed that everything  
that Anthony and John had told her about Embleton would apply to 185 Corp. and  
understood from Mr. Adair that investors would not sign new APS contracts as the  
existing APSs remained valid. In his evidence, Mr. Adair stated that no one took  
the position that the Embleton APSs were invalid in the face of Embleton’s  
dissolution. Throughout the balance of the Project, the parties continued to act as  
though the APS were valid and communications continued to be sent as if  
Embleton still existed. Some Plaintiffs had been unaware that Embleton no longer  
existed before this proceeding was brought.  
[323] By early 2012, the Defendants emerged from the 2011 funding crisis which  
the Project had faced. Having $117,000.00 in net mortgage proceeds from the TD  
mortgage obtained in February 2012 that Ms. Kostelac had guaranteed, and with  
185 Corp. in place, Anthony and John continued their earlier practice of taking  
Project funds for their personal use as management fees without any disclosure to  
investors. John broadly claimed that “everything” was discussed with Ms. Kostelac  
- 157 -  
and other Workplace Group investors, but his evidence on this point was decidedly  
nonspecific and lacked credibility. He also stated that Anthony managed Project  
financing and took care of the associated paperwork. Later on, after the crisis  
passed, even larger mortgages were obtained in 2014 and 2015 that yielded net  
mortgage proceeds far in excess of the comparatively modest development costs  
incurred during that period in which the dominant activity for the Project was  
Anthony’s effort to sell the Property.  
t. The Ufkes and Teramoto Lands  
[324] The Defendants admit to using Project funds (i.e., mortgage proceeds and  
cash calls) to develop neighbouring lands owned by the Ufkes and the Teramotos,  
respectively, which bordered the Property. As a result, $378,904.00 in  
development costs were paid from Project funds for the benefit of these  
neighbouring lands.  
[325] From the outset of the Project, Anthony knew that he wanted to work with  
neighbouring landowners to develop their adjacent properties with the Property.  
Although he claimed that he did not remember whether he told the Plaintiffs that  
he was using Embleton and 185 Corp. funds to pay to develop the adjacent  
properties, he testified that he did not tell investors before they signed their APS  
that mortgage proceeds and cash calls would be used to develop the adjacent  
properties. Regardless, there is overwhelming evidence that the Vuletics did not  
disclose to investors that Project funds would be used to develop the adjacent  
 
- 158 -  
properties. In effect, the Vuletics used Project funds to develop the adjacent  
properties while reserving for themselves all of the benefits flowing from that  
adjacent land development without disclosing the scheme to investors.  
[326] The Defendants did not require the Ufkes or Teramotos to pay any cash  
calls. In addition, the Defendants did not require the Teramotos to pay any of the  
costs for developing their land that were incurred by Embleton or 185 Corp.,  
respectively.  
[327] Between 2007 and 2019, Mr. Ufkes paid Embleton a total of $56,895.00  
towards the costs that Embleton incurred using Project funds (i.e., from mortgage  
proceeds and investor cash calls) to develop his land that Embleton had included  
in its draft plan which it filed with the municipality for draft plan approval. The funds  
which Mr. Ufkes paid to Embleton were deposited to its CIBC bank account.  
Although Anthony regarded the funds as personal compensation, he never claimed  
those funds as personal income. Given the circumstances, I am satisfied that Mr.  
Ufkes’ payments were payments to Embleton and not personal compensation to  
Anthony or the other Vuletics.  
[328] On June 2, 2014, Mr. Ufkes and 185 Corp. signed a land exchange  
agreement that included provisions for:  
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a) certain portions of lands to be transferred without payment between  
Mr. Ufkes and 185 Corp. following the registration of a last plan of  
subdivision and  
b) Mr. Ufkes and 185 Corp. to cooperate and share the costs for  
registering a single plan of subdivision.  
The agreement did not provide that any lands transferred by Mr. Ufkes to 185 Corp.  
were to compensate either John or Anthony personally. In the end, Mr. Ufkes did  
not transfer any land to 185 Corp. and 185 Corp. never transferred any portion of  
the Property to Mr. Ufkes.  
[329] In 2014, 185 Corp. and the Vuletics brought an action against the Teramotos  
that settled by minutes of settlement dated September 18, 2014. Under the terms  
of the settlement, the Vuletics agreed to transfer over title to certain portions of the  
Property to the Teramotos and in turn the Teramotos agreed to transfer over title  
to certain parts of their lands to “the Vuletics.In addition, the settlement called for  
all costs related to the transfers, including surveys, severances, and application  
and registration fees, to be paid entirely by “the Vuletics”. Paragraph 8 of the  
Teramoto minutes of settlement states: “[t]he Vuletics agree that they bear the sole  
responsibility for all expenses incurred, up to the receipt of draft plan approval on  
December 19, 2013, billed or unbilled, and shall indemnify the Teramotos for the  
expenses up to receipt of draft plan approval on December 19, 2013, personally  
and on behalf of their company, 185 [Corp.].” The minutes of settlement defined  
- 160 -  
the Vuleticsto encompass each of 185 Corp., Anthony and John. Later on, 185  
Corp., John, Anthony and the Teramotos entered into a land exchange  
implementation agreement to implement their settlement with an effective date of  
October 8, 2014 which the parties signed on January 21, 2015. However, the  
exchange of properties under the Teramoto settlement did not occur before the  
Property was sold in September 2016.  
[330] The Defendants admit that the Teramoto settlement contained no provision  
or term stating that the lands to be transferred from the Teramotos to “the Vuletics”  
were personal compensation to or for John or Anthony. But despite this admission  
and the plain text of the minutes of settlement and the related land exchange  
implementation agreement, Anthony testified that “all land went to me.” He also  
asserted that the land exchange agreement was not about exchanging land but,  
rather, about his personal compensation. However, the text of the agreement  
belies this and there is no evidence to support his account which is not consistent  
with his own admissions and is not credible.  
[331] The Defendants claim that about two acres acquired by 185 Corp. from Mr.  
Ufkes and the Teramotos under the agreements belong exclusively to the  
Defendants despite their admission that the May 2016 agreement to sell the  
Property to Brampton G&A does not allocate any part of the total purchase price  
of the lands which are the subject of those agreements.  
- 161 -  
[332] The Defendants never disclosed any of the Ufkes or Teramoto agreements  
to investors. Even prior to the 2014 agreements, Anthony did not disclose the  
Ufkes or Teramoto agreements in late 2012 when he let Ms. Caroti and Ms.  
Pelchat-Morris “pick” their lots that were partially on Teramoto lands which 185  
Corp did not yet own. In his evidence, Anthony claimed that Ms. Caroti and Ms.  
Pelchat-Morris insisted on picking these lots despite his warning that they not pick  
these so-called “part” lots as they exceeded the boundaries of the Property. But  
in a contemporaneous email message, Anthony told Ms. Kostelac that it did not  
matter which lot the Workplace Group investors picked. On balance, I find that the  
Defendants did not intervene to warn Ms. Caroti or Ms. Pelchat-Morris that they  
were selecting lots that extended beyond the Property onto adjacent lands that  
185 Corp. would not acquire until 2014. In the alternative, Anthony took the  
position that the Workplace Group investors had been shown the 2010 draft plan  
and “must therefore have known” about the lot boundaries for the Property and the  
details of his dealings with neighbours that somehow relieved the Vuletics of any  
obligation to say anything. I am not persuaded by this assertion. Given the  
circumstances of the Project and the asymmetrical knowledge between the  
Vuletics and the investors who trusted them, I do not accept that the Defendants  
should be relieved of the obligation to disclose such important facts by suggesting  
that investors should have figured things out for themselves or did not ask the right  
questions.  
- 162 -  
u. The Accounting  
[333] Following the Kegalj settlement, eighteen months passed (July 2011 to  
January 2013) before investors received any accounting report from Mr.  
Hinchcliffe. Ms. Kostelac testified that she followed up with Anthony on several  
occasions in 2012 and in January 2013 to ask when the accounting reports would  
be available. In July 2012, Anthony advised her that some delay was incurred as  
one of Mr. Hinchcliffe’s partners had died but that Ms. Sulzenko expected Mr.  
Hinchcliffe “would have it all ready to go end of July.” In October 2012, Anthony  
advised her that “the years 2002 to 2009 have been completed for months now.  
They were supposed to be released, and send the additional 2 years 2010-2012  
in a month or two. It seems now they will be waiting for the additional 2 years to  
send as a complete package.In addition, Ms. Kostelac testified that Anthony told  
her that he discussed the accounting reports with Mr. Adair who apparently  
advised that the delay was somehow his fault. Despite this, however, Anthony  
stated in his affidavit sworn February 29, 2016 in response to Mr. Bilich’s motion,  
I verily believe that this accounting was sent to all Lot Purchasers in or about  
September 2012 by Mr. Hinchcliffe directly.”  
[334] By email dated January 7, 2013, Ms. Kostelac told Anthony that she had  
reminded the other Workplace Group investors of an impending cash call and  
wanted to again follow-up on the status of the accounting reports, stating that  
investors “are expecting to see the financial statements and some kind of evidence  
 
- 163 -  
of what the money is being used for. Since the settlement last year with Kegalj,  
everyone’s been anticipating greater transparency into the numbers behind the  
project.” That day, Anthony responded “[t]he accounting report is done up to 2010  
(date of lawsuit) that has been in Geoff hands the past few months- it has to be  
signed off by him and I’m assuming Kegalj’s lawyer.” When Ms. Kostelac asked  
why Mr. Adair had to approve the accounting report, Anthony shared his purported  
belief that the report had to be approved by both sides to address any questions  
or outstanding issues. However, in cross-examination, Anthony agreed that  
nothing in the settlement documents required Mr. Adair to approve the accounting  
report before it could be delivered to investors. In his evidence, Mr. Adair denied  
having anything to do with approving Mr. Hinchcliffe’s accounting prior to its  
distribution.  
[335] On January 23, 2013, Mr. Hinchcliffe’s firm delivered a single page  
accounting report entitled “Embleton Properties Corporation Project Receipts and  
Disbursements for the Years 2002 to 2009 Inclusive” to each Plaintiff investor,  
except for Ms. Nizalek and Mr. McDowell as they were considered to be in default.  
The accounting report did not cover the period up to July 2011, as directed by  
paragraph 7 of the Kegalj minutes of settlement dated July 11, 2011, as work was  
still pending on the disbursement report for 2010-2011, as well as for 2012. The  
single page report comprised two short tables that provided only aggregated or  
high-level information. The first “Deposits” tale featured a single line setting out  
the contributions made by the recipient investor without detailing any other  
- 164 -  
contributions such as deposits from other investors, mortgage proceeds, or  
deposits by the Vuletics if any. The second “Expenditure” table had seven lines of  
general expenditure categories, including Land”, “Mortgage Interest” and  
Management and Appraisal Fees, without disclosing any information of the  
constituent elements comprising these broad categories in the 2002-2009 period.  
Total reported expenditures were $2,046,484.77 of which about $1.2 million was  
attributed to “Land” and just over $500,000.00 was attributed to “Management and  
Appraisal Fees”.  
[336] Plaintiff investors were largely dissatisfied with the high-level nature of the  
January 2013 accounting report as it gave only a limited summary of the Project’s  
finances. After receiving the report, Ms. Kostelac emailed Anthony on January 24,  
2013 to express her disappointment with the “few lines of information” in the report  
which she believed did not give enough detail for investors to have sufficient  
transparency in respect of the Project’s finances. She also offered to speak with  
Mr. Hinchcliffe and Mr. Adair to discuss the kind of information that she wanted in  
the report. In a lengthy response that day, Anthony:  
a) defended the substantive accuracy of the contents of the report  
b) claimed to have intentionally delayed the report’s delivery to give Mr.  
Kegalj “some of his own medicine”  
c) misstated terms in the APS and the Kegalj minutes of settlement (i.e.,  
by incorrectly stating that financials were to be given at the end of the  
Project under the APS which had no such term, and by referring to  
the accounting report obligations under the Kegalj settlement as  
- 165 -  
temporary measures despite nothing in the Kegalj settlement making  
it a “temporary” obligation); and  
d) commented on the work and expenses incurred to develop the Project  
all while obscuring the fact, omitted from the report, that the Vuletics’  
use of Project funds for personal expenses far exceeded the relatively  
modest amounts spend on direct Project development costs. After  
drawing some reassurance from portions of Anthony’s response, and  
on the prevailing facts as she knew them at the time, Ms. Kostelac  
decided to “back off” and leave the accounting report to Mr.  
Hinchcliffe, Mr. Adair and the Vuletics to sort through.  
[337] In contrast to his January 24, 2013 email defence of the accounting report,  
Anthony tried to distance himself from the report at trial. Under cross-examination,  
Anthony acknowledged that the report did not disclose the principle amounts or  
net proceeds obtained from the Maple Trust, First Line and MCAP mortgages  
taken on the Property, nor the use of mortgage proceeds to pay for the Vuletics’  
personal expenses. He also conceded that the combination of management and  
appraisal fees into one aggregated line item in the report left the reader unable to  
discern what portion of that amount comprised management fees. Ms. Kostelac  
testified that she inquired with Mr. Hinchcliffe about whether the management and  
appraisal fee line item included the annual $35,000.00 allowance or management  
fee from the Kegalj settlement, and was advised that this line item included up to  
$35,000.00 per year as the Vuletic management fee.  
[338] Anthony claimed that he was not given a copy of the accounting report that  
went to investors in January 2013 and, thus, was unaware of what investors had  
received. He also testified that Mr. Hinchcliffe independently prepared the report  
- 166 -  
without any instructions or input from him about its content or presentation to  
preserve the integrity of the report’s figures and amounts. However, Anthony  
testified that he reviewed drafts of the report as it was being finalized which  
satisfied him that its final version would not be inaccurate. He also testified that  
he and Mira had worked with Mr. Hinchcliffe to provide him with whatever  
information he needed to prepare the report. Given Anthony’s apparent  
involvement in this process, I am satisfied that Anthony had knowledge of the  
content and presentation of the January 2013 accounting report.  
[339] Despite Mr. Hinchcliffe’s assurance in January 2013 that work to prepare a  
disbursement report for 2010, 2011 and 2012 was continuing, no such report was  
ever provided to the investors. Ms. Kostelac testified that she inquired with  
Anthony and Mr. Hinchcliffe in March 2016 about the status of the report after she  
received a copy of Mr. Bilich’s motion materials which contained a copy of the  
Kegalj settlement and prompted her to follow-up on this report. Anthony  
responded by emailing her several documents described as “the years 2021, 2011  
and 2012,” However, Ms. Kostelac testified that the document were not accounting  
reports (i.e., showing amounts in or out of the Project) but, rather, a series of trial  
balances or adjusting journal entries that were confusing, illegible, or otherwise  
lacking meaningful information. In April 2016, Ms. Kostelac asked Mr. Hinchcliffe  
for a breakdown by year from 2002 to 2012 of the payees for the “Legal and  
Accounting” and “Management and Appraisal Fees” line items, but did not receive  
- 167 -  
a response. Thereafter, no further accounting reports were provided to investors  
until October 2016, as further discussed below.  
v. Draft Plan of Subdivision and Decision to Sell the Property  
[340] In December 2013, the draft plan of subdivision for the Project was approved  
after about 11 ½ years. The Defendants did not advise some investors of the draft  
plan approval. The Plaintiff investors did not receive a copy of the approved draft  
plan until this litigation.  
[341] Until January 2014, investors continued to expect that the Defendants would  
be delivering the 50 x 140 ft. lots which they had subscribed for. In late 2012,  
Anthony allowed some investors to “pick” their lots. In addition, Ms. Kostelac had  
asked for a budget for the servicing costs in 2012 before asking about registering  
the plan of subdivision and again inquiring about servicing costs in October 2013.  
In response, Anthony advised of his meetings with engineers which he described  
in an email to her dated October 10, 2013 which she shared with other Workplace  
Group investors. In that email, Anthony raised the option for investors to sell their  
lots:  
You can also tell the ladies if the would like to sell their  
lots after the draft plan approval they certainly can.  
We have been approached by many builders and we  
can package lots together including one or two of our  
own to make the sale easier since, I remember some  
people were hesitant at service costs, etc. this can all  
[be] explained and discussed at the meeting. We want  
to make sure that everyone gets a great ROI.  
 
- 168 -  
[342] By email dated November 5, 2013, Anthony canvassed with Ms. Kostelac  
whether any Workplace Group investors wanted to sell their lots:  
[343] As well, do [investors] want to sell their lots now ie early spring or earlier, or  
continue to move forward ie joint venture.  
[344] Anthony contended that investors had expressed interest in selling their lots,  
but the record from this period shows that it was Anthony who was canvassing the  
potential sale of lots by investors who were not otherwise indicating any desire to  
sell their lots at the earliest opportunity. Ms. Kostelac testified that Ms. Caroti was  
the only Workplace Group investor who may have been interested in selling her lot  
at the time, but Ms. Caroti testified that she was not looking to sell her lot then and  
only wanted to know when the Project might finally be coming to an end.  
[345] On January 11, 2014, Ms. Kostelac, Ms. Pelchat-Morris, Ms. Caroti and the  
Grounds met with Anthony at Ms. Pelchat-Morris’ home. John testified that he was  
not at the meeting, but the Workplace Group attendees testified that John was  
present and Ms. Kostelac and Mr. Grounds gave evidence that John made specific  
comments at the meeting. On balance, I find that John was in attendance.  
Regardless, as John and Anthony made all key Project decisions together, I accept  
that John’s attendance at the meeting is not material to its outcome.  
[346] According to the Workplace Group investors, John and Anthony brought to  
the meeting documents related to a new development project which they were  
- 169 -  
pursuing in Oakville. During the meeting, the Vuletics announced that servicing  
costs would be over $5 million which led them to decide to sell the entire Property,  
namely the full 12 ½ acres, as they did not want to incur such a substantial debt.  
In particular, John is said to have advised investors that the costs to service the  
Property would be too expensive before turning to discuss the Oakville  
development which the Vuletics wanted to promoted to attendees as a good  
investment opportunity. Ms. Kostelac’s contemporaneous handwritten notes of the  
January 11, 2014 meeting corroborate the account of the meeting given by  
attendees from the Workplace Group.  
[347] Ms. Kostelac felt blindsided and upset with the Vuletics’ decision to sell the  
Property just after getting draft plan approval, particularly as she had only recently  
discussed servicing issues and costs with Anthony. For his part, Anthony  
concedes that Ms. Kostelac was “furious” at not being able to service the Property  
so that she could actually receive the future lots that she had subscribed for. Ms.  
Pelchat-Morris had a mixed reaction in being disappointed at not getting a lot but  
also happy that sale proceeds would be distributed to investors, and she trusted  
John’s assessment to sell the Property while believing that he would act in the best  
interests of investors to maximize their returns. Ms. Grounds was not pleased with  
the decision to sell the Property and felt that she was given no opportunity to decide  
on the matter.  
- 170 -  
[348] A similar account was given by Mr. Klecina who testified that Anthony  
advised him and his late-father, Boris Klecina, around this time that the Vuletics  
were not going to install services and would instead simply sell the Property which  
would generate the most value and offer the quickest way to get money from the  
land. According to Mr. Klecina, the Vuletics did not ask Boris, the lot investor, for  
his permission to sell the Property.  
[349] Anthony testified that Ms. Nizalek had wanted to sell based on a  
conversation from a dinner in 2007. However, Ms. Nizalek testified that she had  
no knowledge that the Vuletics were trying to sell the Property. John testified that  
Mr. Savona wanted to sell for the money, but Mr. Savona testified that he  
suggested holding a vote to see if a majority of investors wanted to sell, which  
Anthony refused to hold. Mr. Savona also testified that Anthony did not ask for his  
permission to sell the Property nor explain why he was selling.  
[350] The Vuletics did not disclose to Project investors that they were also trying  
to sell the Ufkes and Teramoto lands that 185 Corp. had acquired under the 2014  
agreements mentioned earlier, or that the net sale proceeds from those lands were  
to belong exclusively to the Vuletics.  
[351] Anthony contends that Ms. Kostelac could have continued with the Project  
and that he told her that she could wait for her lot like Mr. Sokic and Mr. Granic.  
Ms. Kostelac denies this and claims that Anthony, despite having every opportunity  
before the sale occurred, never told her after the January 2014 meeting that she  
- 171 -  
had the option to keep her lots and did not have to sell. In June 2014, Ms. Kostelac  
inquired about working out a servicing cost-sharing agreement to keep her lots.  
Anthony responded by agreeing to discuss this “to make sure everyone in the  
group understands, and is taken care of property and can make their own  
decisions,” but no such discussion occurred. In the end, like Ms. Kostelac, neither  
Mr. Sokic nor Mr. Granic ended up receiving lots.  
[352] Anthony testified that it was the Plaintiffs, and not the Vuletics, who made  
the decision to sell the Property, ostensibly due to the servicing-related and costs  
issues. However, his evidence is clearly contradicted by his own affidavit sworn  
August 22, 2016 (i.e., in response to the Bilich motion), in which he states:  
6. Over the years the Embleton Group draft plan  
changed 9 times until it was finally approved in  
December 2013.  
7. I then started to investigating [sic] the requirements,  
timelines and costs to continue developing the project  
to service the lots. Servicing was dependant on  
several factors, including the pace of builds in other  
neighbourhoods in the development, when a major  
road would be completed, and the build of a Storm  
Water management Pond on a large corporate  
neighbour’s property. I hired professionals [who]  
where [sic] required to estimate costs. I estimated that  
it would take an additional 4 to 7 years and between $4  
to $5 million to service the lots.  
8. On my final analysis, I determined that it would be  
too risky to carry this level of debt over the projected  
time frame with no cash flow, particularly given how  
long the Lot Purchasers had been invested.  
9. In or about early 2014 I contacted the Lot  
Purchasers and discussed the status of the project and  
my plan to put the project up for sale. They agreed and  
were content to receive money from their investment  
rather than the property itself. [Emphasis added]  
- 172 -  
Based on the foregoing, I am satisfied that Anthony’s affidavit evidence  
corroborates the account of the January 2014 meeting given by the Workplace  
Group investors in attendance.  
[353] The Plaintiffs’ account of the January 2014 meeting is also corroborated by  
the quote from Urbantech Engineering which gave a $3.3 million estimate for a  
portion of the costs to service the Property and adjacent lands. This supports the  
investors’ account that the Vuletics claimed the servicing costs were too high which  
led them to decide not to proceed with the development. For his part, Anthony  
admits that he told the Biondics that servicing costs for the Property would  
approach $5 to $6 million.  
[354] Notably, Anthony’s account is clearly contradicted by the Defendants’ own  
pleading which states, in part, the following:  
84. Once draft plan approval was received, the  
Vuletics had to seriously consider their ability at that  
time to raise sufficient funds and manage the business  
of servicing the property. The Vuletics took the advice  
of Urbantech Engineering concerning the servicing of  
the lands. Based on the advice received, they  
determined it would be better to sell the lands rather  
than continue to install services. [Emphasis added]  
[355] In his evidence at trial, Anthony sought to purportedly clarify his stated plan  
to put the project up for salein his August 2016 affidavit by saying that he initially  
did not intend to sell the entire Project but only a portion that would depend on how  
many investors wished to sell. To support this assertion, Anthony pointed to an  
- 173 -  
email from David Jordon from 2014, copied to Ms. Kostelac, which discussed  
selling forty lots. However, Ms. Kostelac did not have a copy of the approved draft  
plan of subdivision until this litigation and was unaware of now many lots made up  
the plan, respectively. In any event, Anthony later abandoned any notion that only  
part of the Property would be sold when he emailed Ms. Kostelac in July 2015 to  
clearly convey his intention to sell the entire Property.  
[356] From December 2014 to October 2016, no updates were given to the  
Plaintiffs apart from Ms. Kostelac and Mr. Savona who received only general or  
non-specific progress updates on the efforts to sell the Property. Although Anthony  
broadly claimed that the difficulty in closing a deal came down to its specific terms,  
he did not share any meaningful details about any offers that were received.  
Importantly, Anthony did not disclose that the Vuletics were trying to keep lots for  
themselves, or that they were holding out for a deal by which lots could be  
reconveyed to them for their own personal benefit. Trusting the Vuletics, and  
thinking that Property lots had “sold out” (i.e., with the Vuletics having acquired the  
premium lots), investors understandably thought that John and Anthony were  
trying to obtain the best value for all lot subscribers, including themselves,  
believing that everyone was on equal footing and would have an equal share of  
the sale proceeds as they all had ostensibly funded the development Project on  
an equal basis. At no point did the Vuletics disclose their intention to sell the  
Property on terms that would benefit them alone.  
- 174 -  
w. Agreement to Sell the Property  
[357] In May 2016, 185 Corp. entered into an agreement, amended in July 2016,  
with a numbered company purchaser to sell the Property and give title to Brampton  
G&A Holdings Inc. (“Brampton G&A”). Under the agreement, 185 Corp. warranted  
that it was not aware of any development or other agreements dealing with the  
development of the lands, and did not disclose to the purchaser or to Brampton  
G&A that Embleton had signed contracts for serviced lots in the Property that were  
owed to Project investors, who were unaware of the sale of the Property until after  
it had closed.  
[358] The purchase price for the sale was $15.386 million, less a $206,000.00  
adjustment in favour of the buyer, with $16,535,000.00 in monetary consideration  
(i.e., being two initial deposits, cash on closing, plus VTB mortgage principal and  
interest that 185 Corp. granted to Brampton G&A). In addition to monetary  
consideration, the Vuletics negotiated a right to continue residing in the house on  
the Property without paying rent until the Property lots were to be serviced and the  
house was to be removed. The fair market value of the rent-free accommodation  
in the house from late 2016 to late 2021 is about $110,000.00. The agreement  
also provided for Lots 49, 50 and 60 to be conveyed by Brampton G&A to 185  
Corp. after a registered plan of subdivision was on title to the Property. Shortly  
before trial, the parties agree that the total value of all three lots, including the  
embedded value for servicing the lots at cost and the reduced building costs for  
 
- 175 -  
Lots 49 and 50, is over $3,832,500.00 which exceeds the $3.58 million value in the  
KSV report prepared for the Plaintiffs. Based on the foregoing, the total value  
generated by the sale of the Property came to $20,478,061.00 (i.e.,  
$16,535,561.00 + $3,832,500.00 + $110,000.00).  
[359] From the sale proceeds that went to 185 Corp., the Defendants admit that  
over $1 million was diverted to Anthony’s personal bank account with a portion  
used to purchase an executive-style residence on Grandview Court located in a  
well-established neighbourhood in the Village of Huttonville located about 1 km  
north of the Property.  
x. The Bilich Motion Materials  
[360] In March 2016, Ms. Kostelac, Ms. Pelchat-Morris, Ms. Grounds and Ms.  
Caroti received materials from Robert Bilich for his motion to enforce the  
accounting requirement under the terms of the Kegalj minutes of settlement. In  
his motion, Mr. Bilich raised concerns that the Vuletics had never prepared or  
distributed the quarterly accounting reports required by the settlement.  
[361] The Bilich motion materials, which included John and Anthony’s discovery  
transcripts in the Kegalj action, allowed Workplace Group investors to learn more  
about the Project. Among other things, they discovered that:  
a) Mira was the bookkeeper for the Project  
b) Anthony was not a lawyer in 2002  
 
- 176 -  
c) the Vuletics had lived in the house on the Property since 2002  
d) John had been bankrupt prior to 2002 and had credit issues  
e) Anthony had defaulted in student loans and had a poor credit rating  
f) Anthony had used Mr. Kegalj’s credit card for years  
g) the Vuletics had used Project funds (i.e., mortgage proceeds and cash  
calls) to pay for personal or non-Project expenses, including  
Anthony’s adult film business, Bonk Productions  
h) John knew that Anthony was spending Project funds to pay personal  
or non-Project expenses and intended to pay back the money  
i) John did not know the extent of Anthony’s spending of Project funds  
j) the Vuletics did not “win” the Kegalj action but instead settled the  
action by minutes of settlement dated July 11, 2011 that, among other  
things, required accounting reports to be prepared and given to  
investors  
k) Embleton had delinquent accounts with its planners as the Vuletics  
either had not paid or delayed the payment of legitimate Project  
expenses for years  
- 177 -  
l) actual development expenses were far less than Anthony had led  
investors to believe  
m) cash calls had been charged based on 28 instead of the 51 lots per  
the APSs that had different terms for different investors and  
n) the Statement of Intentions that Anthony had drafted in 2009  
disclosed his true plan to pay investors scant amounts if anything  
once the Project was concluded.  
[362] As a result of reading the Bilich motion materials, the Workplace Group  
investors came to believe that their earlier trust in John and Anthony had been  
misplaced given the inaccurate or incomplete information which the Vuletics had  
given them about the Project. Other investors, such as Ms. Nizalek, Mr. McDowell  
and Mr. Savona did not learn of the above-mentioned facts until 2017 or until they  
joined this litigation.  
[363] On April 25, 2016, Justice Lederer adjourned the Bilich motion to September  
26, 2017 and set a schedule for the exchange of motion materials in an  
endorsement which stated, in part, the following:  
The responding party has failed to comply with  
settlement entered into. The settlement called for  
quarterly accountings. They have not been completed.  
Mr. Adair say he wished to bring an updated  
accounting forward when the motion is argued. This  
will or should clarify the present state of affairs.  
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[364] On the return of Mr. Bilich’s motion, Mr. Adair advised Justice Lederer that  
the Property had been sold and that a substantial part of the purchase price would  
be paid over time under a vendor take-back mortgage. In addition, an updated  
accounting by Mr. Hinchcliffe showing Project funds received and disbursed from  
2002 through to 2015 was put before the court.  
[365] In the end, Justice Lederer dismissed Mr. Bilich’s motion for a lack of  
standing. In his endorsement dismissing this motion, Justice Lederer made the  
following comments:  
The trial dealt with a disagreement between the plaintiff  
(Ante Kegalj) and three defendants (John Velutic [sic],  
his son, Anthony Velutic, and a corporation, Embleton  
Properties Inc.). The disagreement reflected the  
breakdown of their relationship as parties or  
participants in a project to develop a parcel of land  
located in the City of Brampton. The settlement served  
to rationalize that relationship and placed certain  
responsibilities on the parties to the action. During the  
trial, as the trial judge, I expressed a concern. The  
action required a consideration of allegations that  
money that had been invested by third parties to be  
used in furtherance of the project had been used for  
purposes unassociated with the development of the  
land. The concern questioned the impact of the  
allegation, and any findings that might be made, on  
those third parties.  
The Revised Minutes of Settlement responded to that  
concern. It was part of the settlement that an  
accounting would be undertaken, distributed to the  
investors and updated quarterly. Each update was to  
be delivered to those who had invested in the project.  
[…]  
The idea was that, with these reports in hand, the  
investors would understand how the money they had  
contributed to the project had been used and, if  
- 179 -  
dissatisfied, take whatever action each of them thought  
advisable. […]  
As scheduled, the matter returned to court on April 25,  
2016. Counsel for the defendants indicated a desire to  
bring forward an up-to-date accounting. I pause to  
repeat that, from the perspective of the court, the point  
of the requirement that an accounting be prepared and  
updated was to allow for proper information to be  
provided to the investors who were not parties to the  
action to allow them to consider what, if any, action they  
wished to take. A new accounting would respond to  
that ambition and meet the court’s concern that it  
orders be respected, acted on, and not ignored. The  
proceeding was adjourned to September 26, 2016 and  
a schedule set for the exchange of materials […]  
It was not until August 24, 2016 that counsel for the  
defendants delivered further material, most importantly  
from the perspective of the court, an up-to-date  
accounting of the income and expenditures associated  
with the development project […] The list of headings  
which identify the expenditures all appear to be  
consistent with those that would be a part of a real  
estate development. While not excusing the delay or  
the failure of the defendants to comply with the Revised  
Minutes of Settlement, this document does provide  
advice to the investors as to the state of the project and  
would give them some basis to determine if they had  
questions or concerns that required further  
investigation or action. As such, the initial concern of  
the court, as raised at the trial, was met, albeit  
belatedly. More directly, if it could be said that the  
defendants were, as a result of breaching the promises  
made to the court as part of the settlement, in contempt  
of the court, the contempt has been purged. […]  
It is my hope that, with the accounting distributed to all  
of the investors, they will be brought up-to-date and be  
able to consider whether there is any action they  
should, could or wish to take. Finally, it may all be  
moot. Counsel for the defendants has advised the  
court that the property has been sold. A substantial  
part of the compensation for the sale is in vendor take-  
back mortgages. Thus, the funds will be forthcoming  
over time. Counsel was unable to advise the court as  
to how this would affect any individual investor. It  
would be wise to calculate the prospective outcome  
and to advise the various investors.  
- 180 -  
[366] At trial, Mr. Adair testified that he had no oversight role to ensure that the  
Vuletics abided by their obligations under the Kegalj settlement. Mr. Adair had no  
recollection of ever having raised the subject of the quarterly accounting reports  
with the Vuletics in the period after the Kegalj settlement was reached until the  
time that Mr. Bilich served his motion materials. Mr. Adair was unaware of whether  
the Vuletics provided a copy of the Kegalj settlement to any investors, and testified  
that he had no responsibility or obligation to inform investors, who were not clients,  
about the accounting requirements under the settlement. He also testified that it  
was not his responsibility to advise investors about the Vuletics’ use of Project  
funds for personal expenses.  
[367] In cross-examination, Anthony conceded the continuing quarterly  
accounting obligation that Justice Lederer set down but testified that his counsel  
had instructed him to not make the required disclosure. Anthony also agreed that  
quarterly accounting reports were not provided to investors between April 2017  
and the start of the Plaintiffs’ actions in December 2017 or thereafter although  
financial records were ultimately produced during the litigation.  
y. Mr. Adair’s Letter to Investors  
[368] On October 21, 2016, a day after Justice Lederer’s endorsement on Mr.  
Bilich’s motion was released, Mr. Adair sent a letter to Project investors to advise  
of the sale of the Property and his clients’ “distribution plan” for the sale proceeds.  
Anthony was aware that Mr. Adair’s letter would be sent to investors.  
 
- 181 -  
[369] Mr. Adair’s letter advised readers of the following:  
a) on or about September 12, 2016, the Property had been sold  
to Brampton G&A for $15,386,000.00;  
b) on closing, the funds available to 185 Corp. amounted to  
$143,891.84 after various encumbrances were discharged  
and adjustments were paid;  
c) Anthony believed the purchaser would pay off the vendor take-  
back mortgage prior to the end of its four year term;  
d) Anthony and John were having the accounting for the Project  
brought up to date and anticipated that it would be done by the  
end of the year;  
e) there were “obviously” insufficient funds available at present  
for a distribution; and  
f) the “distribution plan for the future” was that “partial or full  
distributions to each Lot Purchaser in good standing will be  
made when funds are available on the basis of the following  
formula: lot frontage/total lot frontage x amount available for  
distribution.”  
The letter did not provide any figures to show the inputs for the purported formula  
under the distribution plan (i.e., lot frontage ÷ total lot frontage x amount available  
for distribution).  
[370] Mr. Adair’s letter had two attachments. The first was a trust ledger statement  
prepared by 185 Corp.’s real estate lawyers, Arnold Foster LLP, disclosing that  
proceeds from the purchaser on closing amounted to just over $3.64 million from  
which about $3.38 million was paid to discharge:  
a) the 2012 TD Mortgage;  
b) the Rathcliffe second mortgage; and  
- 182 -  
c) a third mortgage that had been granted to Tracy Adair for legal fees.  
In addition, about $93,000.00 was paid for legal fees related to the sale, and about  
$14,800.00 was paid to the City of Brampton for tax arrears. Other small payments  
aside, the $143,891.84 residue was paid to 185 Corp. as noted in the letter.  
[371] The second attachment to Mr. Adair’s letter was Mr. Hinchcliffe’s accounting  
report for the 2002-2015 period titled “Project Receipts and Disbursements for the  
Years 2002 to 2015 Inclusive” (the “2002-2015 Accounting Report”. Mr. Adair  
testified that it was likely intended to fulfill the requirements of Justice Lederer’s  
endorsement for investors to receive an updated accounting for the Project so they  
could consider their positions in respect of their investments.  
[372] The October 21, 2016 letter from Mr. Adair did not disclose 185 Corp.’s right  
under its purchase agreement with Brampton G&A to have two (2) of the ravine  
lots (i.e., Lots 49 and 50) reconveyed to 185 Corp. once a plan of subdivision was  
registered, which the Vuletics also did not disclose at their meeting with Workplace  
Group investors in January 2017. This arrangement, which was negotiated as part  
of the sale of the Property, also provided for both lots to be serviced at cost with  
185 Corp. obtaining preferential building rates from Brampton G&A for residential  
homes to be built on the lots. 185 Corp. also acquired a third lot, namely Lot 60,  
from Mr. Granic but the Defendants did not fully explain the details of that  
transaction. In addition, Mr. Adair’s letter did not disclose the position later adopted  
by the Defendants in their amended pleading that the “amount available for  
- 183 -  
distributionfigure under the purported distribution plan formula would be lower  
than the total purchase price in order to reserve for the Defendants’ exclusive  
benefit a share of the sale proceeds for the adjacent north lands that 185 Corp.  
acquired under its land exchange agreements with Mr. Ufkes and the Teramotos  
in June and October 2014, respectively.  
[373] At trial, Anthony insisted that the lands acquired by 185 Corp. from Mr. Ukfes  
and the Teramotos represented personal compensation that fell entirely outside  
the APSs for which the Vuletics had no obligation to account to Project investors.  
However, his evidence is undercut by the Defendants’ trial admission that none of  
a) 185 Corp.’s land exchange agreement with Mr. Ufkes dated June 2,  
2014,  
b) 185 Corp.’s and the Vuletics’ settlement agreement with the  
Teramotos dated September 18, 2014, nor  
c) 185 Corp.’s and the Vuletics’ land exchange implementation  
agreement with the Teramotos dated October 8, 2014, have any  
provisions or text stating that the lands to be transferred …  
thereunder constituted personal compensation to or for Anthony  
Vuletic or John Vuletic.”  
[374] Mr. Adair’s letter of October 21, 2016 did not mention any process for making  
the sort of accounting adjustments that Anthony, by his own admission, previously  
- 184 -  
had indicated (i.e., at least to Ms. Kostelac) would be made to reapportion  
distributions to “penalize” the investors that had not made their cash call payments.  
Moreover, in cross-examination, Anthony agreed that it would be necessary to  
reapportion out at the endto adjust for the fact that none of the Defendants paid  
any cash calls to the Project for their lot interests. Although Anthony claimed that  
the letter’s reference to future updated accounting reports implicitly addressed how  
the reapportioning would occur, Mr. Hinchcliffe’s subsequent two (2) single page  
accounting reports provided in early 2017 contain nothing to reapportion the  
Defendants’ unpaid cash calls which Anthony claims was stalled due to this  
litigation. Anthony also conceded that he had advised investors of his expectation  
that management fees would be figure[d] out at the endonce he had undertaken  
a comparison of his purported “internal limit” to “other asset classes”, but nothing  
in Mr. Adair’s letter even hints at any such exercise. As events unfolded, the  
Defendants made no effort “at the end” of the Project to explain why they felt  
entitled to have substantially higher management fees than what they had already  
taken from the Project on an undisclosed basis. Only when giving answers to  
undertakings in February 2021 did the Defendants disclose their proposed  
$95,000.00 annual management fee before later amending their pleading to reflect  
this fee amount.  
[375] Anthony testified that he devised the distribution plan formula found in Mr.  
Adair’s letter dated October 21, 2016 without having any specific language in the  
APS for allocating proceeds from a sale of the Property as a whole (i.e., before  
- 185 -  
investors received their lots) as this scenario had not been contemplated in the  
APS. Despite initially asserting that the distribution plan formula reflected the  
Change in Lot Frontages” terms in the APS to adjust the purchase price of a lot  
that ended up having a larger or smaller frontage at closing (i.e., by using the lot’s  
fair market value), Anthony later admitted in cross-examination that the distribution  
plan formula in Mr. Adair’s letter was not found in the APS.  
[376] There are key inconsistencies in the financial summaries that Mr. Hinchcliffe  
prepared, purportedly based on information from the Vuletics, which the  
Defendants could not explain at trial. The initial financial summary for Embleton  
from 2002 to December 2015 represented that the total costs of the Project,  
including the purchase of the Property and obtaining draft approval of a plan of  
subdivision (i.e., without any servicing of the Property) was $7.1 million. However,  
by changing certain previous figures, Embleton’s financial summary for 2002 to  
September 2016 represented that the total costs of the Project was $8.3 million.  
Similarly, Embleton’s subsequent financial summary for 2002 to December 2016  
represented that the total Project costs were in excess of $10 million based on  
changed previous figures that cannot be attributed simply to accumulated  
expenses. Having regard to the lack of corroborating records for Mr. Hinchcliffe’s  
financial summaries, which was contrasted by the methodical review of available  
financial records that Mr. Soriano considered and documented in preparing the  
KSV Report, I am satisfied that the summaries prepared by Mr. Hinchcliffe  
summaries are unreliable including the claim that Anthony purportedly advanced  
- 186 -  
upwards of $1 million to the Project when, in fact, subsequent information later  
revealed the advances to actually have been withdrawals. In other evidence,  
Anthony tried to distance himself from Mr. Hinchcliffe’s financial summaries by  
asserting that they were prepared for tax purposes and strategy and were not  
intended to give investors an accounting of the Project despite giving them to  
investors and claiming that the records gave accurate summaries of receipts and  
expenditures for the development.  
[377] Anthony sought to justify the distribution plan formula by asserting that its  
linear foot-based formula reflected an “industry standard” for the sale of land with  
draft plan approval, as shown, on his account, by various purchase offers made  
on a per linear foot basis that he claimed to have received for the Property in the  
2014-2016 period. However, Anthony did not explain how or why an alleged  
industry standard for purchasing land should be incorporated into a formula for  
distributing the sale proceeds of land for which investors had paid its purchase  
price by subscribing for future lots which they could no longer receive due to the  
sale. When asked about other possible methods for distributing the sale proceeds,  
such as the fair market value of a 50 x 140 foot serviced lot, or allocations based  
on the capital contributions from investors, Anthony gave no meaningful or  
substantive answer. According to Anthony, investors had somehow forfeited their  
interests in the lots which they had subscribed for by purportedly choosing to have  
the Defendants to sell the Property which left them unable to deliver the lots post-  
sale. In response to the capital contribution method, Anthony asserted that lot  
- 187 -  
subscriptions were valued “strictly based on linear feet” and that no one was  
buying a percentage”.  
[378] In the alternative, Anthony sought to justify the distribution plan formula by  
claiming that the Workplace Group investors tacitly consented to have their  
allocation of the sale proceeds calculated on a per linear foot basis based on a  
series of conversations or exchanges in the 2012-2015 period when they  
purportedly discussed these terms. Among other things, Anthony noted Ms.  
Kostelac’s slogan “frontage drives value” which reflected her appreciation, keenly  
shared by the Workplace Group investors, of how the total frontage would impact  
their lot values. Anthony testified that this was particularly apparent after investors  
lobbied him to have 55-foot frontages for their lots to address a purported 5 foot  
discrepancy in the frontages which he claims they later shrugged off after he  
resisted their efforts to expand their lot frontages.  
[379] In cross-examination, Ms. Kostelac admitted that in July 2015 she thought  
that the proceeds of the sale would be distributed on a per linear foot basis based  
on her understanding at the time that the Property had been sold and that all  
investors had paid their proportionate share of cash call contributions. In turn, she  
accepted at the time that a linear foot-based distribution was fair because  
everyone, including the Vuletics, had contributed proportionately to the costs of the  
Property. But after reading the Bilich motion materials in August 2016, Ms.  
Kostelac no longer felt that the lot frontage approach was a fair method for  
- 188 -  
distributing the sale proceeds. After Anthony advised on August 20, 2016 that the  
Property had been sold and that he intended to distribute proceeds to investors in  
October 2016, Ms. Kostelac asked to meet him before October to review an  
accounting in order to understand how proceeds were to be calculated for  
distribution. The meeting that she requested did not take place until January 14,  
2017, and Anthony did not discuss the distribution formula with her before she  
received Mr. Adair’s letter dated October 21, 2016.  
[380] John and Anthony had a clear opportunity to explain the distribution plan  
formula to the Workplace Group investors at their January 14, 2017 meeting.  
However, they did not do so.  
[381] Anthony believed that there were two January 2017 meetings, which were  
“kind of a blur” for him, and was unable to recall anything specific about either  
meeting that he felt had occurred. However, he testified that he had a “brief  
discussion” with the Workplace Group members in which he explained,  
everything’s going to be proportionately done by the amount of [lots], by the  
amount of linear footage and everything would have been done by Mark  
Hinchcliffe. That was always the way we were going to do it from the very first  
day.” He agreed that none of the investors signed any documents regarding how  
the proceeds from the sale of the Property would be divided.  
[382] Using contemporaneous notes that she made at the January 14, 2017  
meeting, Ms. Kostelac testified that:  
- 189 -  
a) the Vuletics brought no accounting documents to the meeting and did  
not engage in any detailed discussion to sort out the accounting at the  
end of the Project, as she had expected;  
b) Anthony mentioned the schedule for the purchaser to make payments  
under the vendor take-back mortgage but explained that the  
Workplace Group investors could not share these proceeds as they  
would be used to pay taxes;  
c) according to Anthony’s “off the top of his head” analysis, unsupported  
by any documents, the lot frontages on the Property totalled about  
3,000 feet which gave the investors $200,000.00 per lot given their 50  
foot lot frontages;  
d) Anthony felt that group investors should be pleased with $200,000.00  
per lot, that other investors were getting $150,000.00 to $155,000.00  
per lot, and the higher payment to group investors reflected the  
special treatment which he had promised to them;  
e) Anthony advised that Justice Lederer was satisfied with the  
accounting given to the court in August 2016, and that there was no  
appetite for any additional accounting;  
f) John said little at the meeting; and  
- 190 -  
g) to answer her specific question, the Vuletics advised that they had  
decided around late 2012 to sell the Property and not move forward  
with the Project.  
Ms. Kostelac’s evidence of the January 14, 2017 meeting was largely consistent  
with the evidence given by Ms. Pelchat-Morris, Ms. Grounds and Ms. Caroti.  
[383] On balance, I find that Anthony’s limited account of the January 2017  
meetings compares unfavourably with Ms. Kostelac’s account of the January 14,  
2017 meeting. Where their evidence conflicts, I prefer her evidence over his on  
this point. I am satisfied that John and Anthony did not engage group investors in  
a detailed discussion of their distribution plan formula knowing that the formula  
was ungrounded and might expose their undisclosed claim to about 65% of the lot  
without ever having paid for them, all while leaving group investors with the false  
impression that the Project had been “sold out”. In turn, I accept that the Vuletics  
presented the formula and the $200,000.00 per lot of proceeds as a fait accompli  
to the investors at the January 2017 meeting.  
[384] At trial, Anthony confirmed the Defendants’ position for the application of the  
distribution plan formula in Mr. Adair’s October 21, 2016 letter by claiming that  
Workplace Group investors should be entitled to $3,884.00 per linear foot, or  
$194,200.00 for each 50 foot lot (i.e., 50 feet of lot frontage ÷ 3330 feet of total lot  
frontage x $12,933,758.00 as the “amount available for distribution” =  
$194,200.00). Anthony also claimed that this figure should be subject to additional  
- 191 -  
deductions for project expenses, including management fees, but led no evidence  
to quantify the alleged further deductions.  
[385] In cross-examination, Anthony made several key admissions that reinforce  
the investors’ concerns of the inherent unfairness of the Defendants’ distribution  
formula, namely:  
a) investors had no disclosure that Embleton paid nothing for the unsold  
“residual” lots that 185 Corp. now claims at its own  
b) the Defendants had no intention of paying for these lots as they  
viewed them as their compensation  
c) the APS has no terms to support the Defendants’ alleged entitlement  
to these lots at no cost, nor did he feel that any such provision were  
required and  
d) investors were never told that Embleton had not paid cash calls.  
In the circumstances, applying the distribution formula in Mr. Adair’s October 21,  
2016 letter would allow the Defendants to take from the sale proceeds about 65%  
of the so-called “residual” lots that 185 Corp. purportedly owns but without  
requiring the Defendants to pay for them, a fact which they assiduously hid from  
investors. In effect, the Defendants designed the formula to give themselves a  
significant majority of the proceeds from the sale of the Property in exchange for  
- 192 -  
incurring only comparatively limited costs related to their development work for  
which they took management fees.  
z. The Accounting Reports  
[386] The 2002-2015 Accounting Report prepared by Mr. Hinchcliffe, which was  
attached to Mr. Adair’s letter dated October 21, 2016, was the first occasion that  
investors were provided with the names of all the other investors in the Project. It  
was also the first occasion when investors learned which investors had paid cash  
calls and, in particular, how few had paid the 2013 cash call. Anthony conceded  
that investors were never given a list identifying all of the investors before the 2002-  
2015 Accounting Report was distributed.  
[387] The second table in the 2002-2015 Accounting Report contains a single line  
titled “Mortgage Proceeds” showing an accumulated total of $5.38 million  
comprised of proceeds from unnamed mortgages in 2002, 2003, 2008, 2012, 2014  
and 2015. The third table in the report titled “Expenditure” sets out, among other  
things, total mortgage payouts of about $3.56 million which was part of the  
$7,164,536.09 total expenditure for the Project over the 2002 to 2015 period.  
Given its aggregated figures, it is unclear from the report what funds were spent  
on development or what the mortgage proceeds relate to, and it is difficult to  
discern the total costs of the Project.  
[388] When questioned in cross-examination about Mr. Hinchcliffe’s subsequent  
accounting report for the 2002 to 2016 period, Anthony agreed that a reader could  
 
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reasonably believe that the $10,959,022.00 total expenditure figure in the last line  
showed total Project expenses. Although this was how the report conveyed this  
information, he testified that total Project expenses were actually $3.5 million and  
not $10.9 million (or the $7.1 million figure as reported in the earlier 2002-2015  
report).  
[389] Anthony testified that the Vuletics’ total management fee is determined by  
adding together the total “Management” and “A. Vuletic Loan Repayments” line  
items in Mr. Hinchcliffe’s reports, and that his use of these two separate line items  
resulted from a “tax strategy” that he had applied. However, Anthony did not  
clearly explain the purported tax strategy nor adduce any records, tax or otherwise,  
to corroborate his account. In any event, I am not satisfied that the “A. Vuletic  
Loan Repayments” line item of $461,395.62 should be considered as further  
management fees, which are reported to be $401,992.96 in the “Management” line  
item, without more to support his claim. Notably, the Defendants did not call Mr.  
Hinchcliffe or a tax witness to give evidence on this point.  
[390] The final line item in the “Deposits” table to the 2002-2015 Accounting  
Report is a line item titled “A. Vuletic Advances” for $610,786.62. Anthony testified  
that that this figure roughly showed the cash that he and his family had contributed  
to the Project from 2002 to 2015, which he unpacked by stating that:  
a) three lots were sold in 2002 and 2004 from which $160,000.00 in  
proceeds went to Embleton;  
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b) Mr. Ufkes paid about $60,000.00 over the course of 11 years which  
went to the company;  
c) he paid $100,000.00 to the Bram West Group;  
d) he paid $70,000.00 to repurchase in 2012 the interest in two lots held  
by Ms. Gushue and Ms. Leveriza;  
e) Mr. Salmona paid $10,000.00 for work that John had performed;  
f) John further contributed $110,000.00; and  
g) the Vuletics contributed $30,000.00 in petty cash and $70,000.00 in  
office expenses.  
[391] Anthony claims that the above-mentioned $160,000.00 was a personal cash  
contribution, but it is clear from the Defendants’ bookkeeping records, Mr.  
Hinchcliffe’s accounting reports, and Mira’s evidence that these funds came from  
lot subscriptions that Ms. Nizalek (who gave a $37,000.00 by cheque on October  
9, 2002 on behalf of herself and Mr. McDowell), Mr. Sokic (who gave a $52,620.00  
cheque drawn in US funds on March 1, 2004) and Mr. Granic (who gave a  
$70,749.00 cheque on November 15, 2004) paid to Embleton. Anthony has  
conceded that these payments totalling $160,369.00 were made. In light of this, I  
am quite satisfied that his above-mentioned $160,000.00 figure was not actually  
paid by Anthony or his family to Embleton. While Anthony claimed the $160,000.00  
as a personal cash payment by contending that he owned the lots which he sold  
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to put cash into Embleton, there is no evidence of any such personal ownership to  
distinguish the sale of the lot subscriptions from any others in the Project.  
[392] The other items identified by Anthony as cash contributions from his family  
to the Project are addressed and accounted for in Mr. Soriano’s analysis in the  
KSV Report. The funds paid by Mr. Ufkes from 2003 to 2010 totalling $56,895.00  
were deposited into Embleton’s CIBC bank account and not paid to Anthony  
personally, which Anthony has conceded. Mr. Soriano treated Mr. Ufkes’  
payments as a cash inflow to Embleton and included it in his But-For proceeds  
analysis. The $100,000.00 paid to the Bram West Group from John’s and Mira’s  
personal bank account in three installments between August 2012 and October  
2013 is included as a development cost cash outflow of 185 Corp. in Mr. Soriano’s  
But-For proceeds analysis and is credited to the Defendants in his economic  
benefit analysis. The $70,000.00 that John and Mira paid from their personal bank  
account in December 2012 to acquire the lot interests held by Ms. Gushue and  
Ms. Leveriza is included as an investor payment cash outflow for 185 Corp. in Mr.  
Soriano’s But-For proceeds analysis and is credited to the Defendants in the  
economic benefit analysis. In addition, Anthony made a $14,000.00 property tax  
payment for the Property from his personal bank account on December 15, 2011.  
The $104,694.00 that the Vuletic family deposited into Embleton and 185 Corp.  
bank accounts between 2002 and 2019 is accounted for as a cash inflow to  
Embleton, is removed as a cash inflow in the But-For proceeds analysis, and is  
credited to the Defendants in the economic benefit analysis in the KSV Report.  
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The $9,000.00 paid by Mr. Salmona to 185 Corp. in two tranches, namely  
$5,000.00 in July 2013 and $4,000.00 in November 2013, is accounted for in the  
KSV Report in the “other deposits” and treated as a cash inflow to 185 Corp. in the  
But-For proceeds analysis.  
[393] Apart from Anthony’s verbal claims in his testimony, there is no evidence to  
corroborate the alleged $30,000.00 in petty cash and $70,000.00 in office  
expenses that his family purportedly contributed to the Project. Mira gave no  
detailed evidence on these amounts, other than stating that she paid for office  
items on occasion using her personal account rather than a company bank account  
when the company lacked sufficient funds to cover the purchases. Mr. Soriano  
and his team reviewed the Defendants’ bookkeeping records and found only  
$16,687.00 in total of “Office and Other Expenses” which are included as a cash  
outflow in the But-For proceeds analysis. In an affidavit sworn on May 1, 2020 (i.e.,  
years after the 2002-2015 Accounting Report was sent to investors in October  
2016 showing the $610,786.22 line item under “A. Vuletic Advances”), Anthony  
stated that, “[t]he Vuletic Personal Defendants contributed $489,162.40 to the  
project, all of which is recorded in the books and records of the project” and  
provided a list of the individual elements that comprised the $489,162.40 amount  
which omitted the alleged $30,000.00 petty cash and $70,000.00 office expenses  
amounts. Although Anthony claimed that he inadvertently omitted the petty cash  
and office expenses items in his May 1, 2020 affidavit, I am not persuaded that  
such a substantial omission was inadvertent. In my view, the appropriate inference  
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to draw is that these items were not contemplated when he swore his affidavit,  
prepared with assistance from counsel, and only came to light in Anthony’s  
evidence at trial as he sought to attribute the $610,000.00 in the 2002-2015  
Accounting Report as his family’s cash contributions.  
[394] Taking this all into consideration, I am satisfied that the Vuletic family paid a  
total of $184,000.00 for certain Project costs from their personal accounts, as set  
out in the KSV Report. I shall address this further below in discussing my analysis  
for valuing interests in the Project and quantifying damages for the action.  
[395] In January 2017, Mr. Hinchcliffe provided Ms. Kostelac and some other  
investors an updated accounting report covering the period from 2002 through  
September 30, 2016 (the “2002-September 2016 Accounting Report”) which,  
among other things, showed:  
a) $899,029.42 for the A. Vuletic Advancesline item, with $288,242.80  
of “advances” for the period from January 1, 2016 to September 30,  
2016;  
b) $438,741.94 as “Management” expenses with $56,533.25 of those  
expenses incurred between January 1, 2016 and September 30,  
2016; and  
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c) $8,343,120.89 as the overall “Expenditure” figure, with $1,178,584.80  
of expenditures attributed to the period from January 1, 2016 to  
September 30, 2016.  
[396] In her effort to decipher the 2002-September 2016 Accounting Report, Ms.  
Kostelac testified that she understood that the Vuletics had advanced almost  
$900,000.00 to the Project which had spent over $8 million to develop the Property  
up to that point. However, Anthony testified that the $899,000.00 “Advances”  
figure was an error by Mr. Hinchcliffe as his family did not advance or contribute  
that amount of money to the Project. In cross-examination, Anthony testified that  
he did not realize the error when that report was prepared.  
[397] After receiving the 2002-September 2016 Accounting Report, Ms. Kostelac  
emailed Mr. Hinchcliffe and asked, in preparation for the January 14, 2017  
meeting, whether he had provided any guidance to the Vuletics on the method for  
distributing sale proceeds to investors. In response, Mr. Hinchcliffe stated that  
they had only been asked to do the accounting.  
[398] In the Spring of 2017, Mr. Hinchcliffe provided Ms. Kostelac and some  
investors with a further updated accounting report covering the period 2002  
through year-end 2016 (the “2002-2016 Accounting Report”). Among other things,  
the update showed:  
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a) “$1,064,832.73 of “A. Vuletic Advances” with $425,978.05 of  
“advances” that were incurred in 2016;  
b) $401,992.96 in Management” expenses with $69,784.27 attributed in  
2016 (i.e., for a reduction from the previous report);  
c) $383,768.17 in A. Vuletic Loan Repayments” expenses (i.e.,  
reflecting another reduced line item from the previous report); and  
d) a $10,959,022.00 overall “Expenditure” figure with $3,872,113.16 of  
expenditures attributed to 2016.  
[399] In cross-examination, Anthony agreed that the figure $1.06 million figure for  
A. Vuletic Advances” was “obviously an error because we did not [contribute]  
$1,064,000.” Later in cross-examination, he was questioned about an answer that  
his former lawyers had delivered on February 8, 2021 to convey Mr. Hinchcliffe’s  
correction of a previous written answer to explain the meaning of the “A. Vuletic  
Advances” line item in the 2002 to 2016 Accounting Report. The answer stated,  
in relevant part, as follows:  
Mr. Hinchcliffe was asked to explain the row entitled “A.  
Vuletic Advances”. Specifically, how he came up with  
the number”, “what they mean”, and “where they came  
from”. Mr. Hinchcliffe previously erred in describing “A.  
Vuletic Advances” as money the Vuletic Defendants  
contributed to the project. After reviewing his working  
papers he has clarified the source of these figures. The  
$1,064,832.73 represents figure amounts to the loans  
Embleton/185 made to Anthony Vuletic.  
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[400] When confronted with this answer, Anthony initially asserted that this was  
yet another error which Mr. Hinchcliffe and the Defendants’ former lawyers had  
made as the $1.06 million figure reflected funds put into the Project. Anthony was  
then confronted by his answer to undertaking in response to the Plaintiffs’ request  
for the Defendants’ position on whether they accepted that Mr. Hinchcliffe’s  
correction was accurate. The written answer sent in March 2021 by the  
Defendants through their former lawyers was that “Mr. Vuletic [Anthony] agrees  
that these were amounts of money flowing out of the company, not into the  
company.” In response, Anthony testified:  
a) that he was resiling from his answer  
b) that Mr. Hinchcliffe was mistaken  
c) that $600,000.00 had been put into Embleton and 185 Corp. and that  
Mr. Hinchcliffe’s $1 million figure was some form of “matching” of  
monies into company accounts against management fees taken out  
of company accounts under a scheme that was vague and unclear.  
He then distanced himself from his effort to explain the discrepancy, claimed that  
the accuracy of his written answer depended “on what time I was asked that  
question because I was never clear on it”, and ultimately agreed that the $1 million  
was an outflow (and not an inflow) of funds “at this particular time.”  
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[401] Ms. Grounds testified that she thought the total $10.9 million “Expenditure”  
figure in the 2002-2016 Accounting Report represented total Project expenses  
through to the end of 2016. Anthony agreed that a reader could certainly think  
that. He also testified that Project expenses were $3.5 million and claimed to not  
know how Mr. Hinchcliffe arrived at the $10.9 million figure. However, despite his  
answer, Anthony refused to concede that the $10.9 million figure was wrong and  
explained that he had sought to have Mr. Hinchcliffe correct the 2002-2016  
Accounting Report prior to the commencement of the action but did not carry  
through with this based on legal advice he received “not to do anything on that  
front for a while.”  
[402] Based on the foregoing, I find that the spiraling figures for the respective  
Expenditure” and “A. Vuletic Advancesline items in Mr. Hinchcliffe’s accounting  
reports are likely inaccurate and unreliable.  
aa. Details Regarding the Sale of the Property  
[403] On May 26, 2016, 185 Corp. and 2248648 Ontario Inc. (subsequently  
Brampton G&A to which ownership of the land was transferred) entered into an  
Agreement of Purchase and Sale for the property at 78 Cliffside Drive in Brampton  
(the “May 2016 APS”), as mentioned earlier. The May 2016 APS states:  
Purchaser, 224 8648 Ontario Inc. offers to buy from the  
Vendor [185 Corp.], through no agent, the property  
being Part of Lot 5 concession 5 W.H.S. in the City of  
Brampton, In the Region of Peel municipally known as  
78 Cliffside Drive, Brampton, Ontario and as more  
particularly described in Schedule “A” annexed hereto  
 
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and forming part hereof, at the Purchase Price of  
Fifteen Million Three Hundred and Eighty Six  
Thousand Dollars ($15,386, 000).  
Pursuant to the May 2016 APS, the entire Property (all 12.58 acres) was  
purchased.  
[404] As part of the purchase transaction, 185 Corp. received a vendor take-back  
mortgage that resulted in total interest payments of $1,352,958.00 by September  
2020.  
[405] Schedule “C” to the May 2016 APS contains terms relating to Lots 49, 50,  
60, 75 and 76 for the Property. Among other things, Schedule “C” states that,  
[t]he Vendor [185 Corp.] shall have the right to have Lots 49, 50, 60, 75 and 76  
re-conveyed to it following the registration of the plan of subdivision upon the lands  
given by the Purchaser to the Vendor including those lands acquired by the  
Purchaser under the assumed agreements.” [Emphasis added]  
[406] Section 2 of Schedule “D” to the May 2016 APS states: “[o]n closing the  
Vendor [185 Corp.] shall assign to the Purchaser all its right title and interest in the  
agreements with Teramoto and Ufkes, copies of which have been provided to the  
Purchaser and the Purchaser shall assume all obligations thereunder.”  
[407] Section 5 of the May 2016 APS states that: “[t]he Vendor [185 Corp.]  
represents and warrants that it is not aware of any agreements dealing with the  
development of the lands including development agreements, cost sharing  
agreements and any other agreements dealing with governmental authorities sae  
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those that have been disclosed to the purchaser and as set out in Schedule “D”.  
It is noteworthy that none of the Kostelac APS, the Savona APS, the Caroti APS,  
the Grounds APS, the Pelchat-Morris APS or the Nizalek APS are disclosed in  
Schedule “D” to 185 Corp.’s May 2016 APS, and Carlo Sistilli, the Chief Financial  
Officer of Arista Homes and vice-President of Brampton G&A, testified that  
Brampton G&A had:  
a) were unaware of the investors prior to its purchase of the Property  
b) the Vuletics never disclosed the investors  
c) the Vuletics never mentioned Embleton, which Mr. Sistilli had not  
heard of before and  
d) the Vuletics had not disclosed the existence of the APSs for the  
subscription of future lots on the Property.  
[408] The May 2016 APS was amended by the Amendment to Agreement of  
Purchase and Sale between 185 Corp. as vendor and 2248618 Ontario Inc. as  
purchaser, which was signed on July 28, 2016 (the “July 2016 Amended APS”).  
[409] Section 2.5 of the July 2016 Amended APS states:  
The Vendor [185 Corp.] and Purchaser agree that a  
Paragraph 33 shall be added to the Purchase  
Agreement as follows: “The Vendor covenants and  
agrees to deliver to the Purchaser on the closing of this  
transaction a certified cheque in the amount of  
$206,000.00 as a cost recovery to the Purchaser, or to  
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allow the Purchaser an adjustment for such amount on  
closing.  
[410] Section 2.1 of the July 2016 Amended APS states:  
The Vendor and the Purchaser agree that all  
references in Schedule “C” referred to in the Purchase  
Agreement to Lots 75 and 76 shall be deleted and that  
Lots 75 and 76 shall be included in the purchase price,  
by virtue of the assignment of the agreement with  
Teramoto.  
Under the agreement, Brampton G&A did not value each part lot but purchased  
the Property as one piece. In cross-examination, Mr. Sistilli did not remember the  
exact reason why these lots were deleted from Schedule “C” as part of the  
amending agreement, but acknowledged that there were some cost issues related  
to the development that may have resulted in this.  
[411] Although the May 2016 APS and the July 2016 Amended APS were  
attached to Anthony’s affidavit and filed with the court in response to Mr. Bilich’s  
motion, Anthony did not provide a copy of the agreements to Ms. Kostelac until  
May 2017 purportedly over confidentiality concerns. Other investors did not see  
the agreements until this litigation.  
[412] Under the sale agreement, the remaining Lots 49, 50 and 60 mentioned in  
Schedule “C” are to be reconveyed to 185 Corp. subject to an option held by  
Brampton G&A in respect of Lot 60. According to Mr. Sistilli, the reconveyance of  
these lots are further compensation in addition to the purchase price for the  
Property. The sale agreement includes a term for homes to be built on Lots 49  
and 50 for only $150.00 per square foot (i.e., that reflected Brampton G&A’s  
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estimated actual cost in 2016 to build the homes) which 185 Corp. was to pay  
along with a management fee and other soft costs such as overhead. Moreover,  
within 90 days of the registration of the plan of subdivision, which has not yet  
occurred, Brampton G&A may exercise its option to purchase Lot 60 (instead of  
reconveying it) at a price of $4,440.00 per setback frontage foot (n.b., this option  
does not apply to Lots 49 or 50). During the trial, Brampton G&A advised through  
its counsel that it is prepared to exercise its option to purchase Lot 60 at $4,440.00  
per setback frontage foot.  
[413] Neither the May 2016 APS nor the July 2016 Amended APS allocate any  
part of the $15,386,00000 total purchase price of the Property to the lands that are  
the subject of the Teramoto and Ufkes agreements set out in Schedule “D”. Mr.  
Sistilli testified that Brampton G&A did not pay 185 Corp. anything separate and  
apart from the overall purchase price to acquire 185 Corp.’s interest in the 2014  
agreements with Mr. Ufkes and the Teramotos. Instead, Brampton G&A assumed  
all of 185 Corp.’s rights under the Ufkes and Teramoto agreements. Brampton  
G&A did not attribute a portion of the purchase price to either of these land transfer  
agreements referenced in Schedule “D”, and no side agreement for this purpose  
was ever made. Mr. Sistilli testified that the sale included only the Property (12.58  
acres) without the Ufkes and Teramoto lands (i.e., which otherwise would have  
encompassed a total of 14.5 acres), and did not allocate separate portions of the  
purchase price to the Ufkes and Teramoto lands. In addition, Mr. Sistilli testified  
that Brampton G&A purchased all of the Teramoto property for about $3.75 million  
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and all of the Ufkes property for $1.05 million, and that each of the Teramoto and  
Ufkes lands were purchased under separate agreements of purchase and sale.  
[414] As it turned out, no property was ever transferred to 185 Corp. under either  
of the Ufkes or Teramoto land exchange agreements. The land transfers  
contemplated by both agreements were to take effect only when:  
a) in the case of the Teramoto agreement, an application was made to  
sever the lands (which had not yet occurred) and  
b) in the case of the Ufkes agreement, the plan of subdivision had been  
registered.  
Accordingly, as the Teramoto and Ufkes lands could not be purchased with the  
Property, 185 Corp. assigned its land exchange agreements with Mr. Ufkes and  
the Teramotos to Brampton G&A. In any event, 185 Corp. was to receive any  
lands that would have been received under these land exchange agreements.  
bb. Proceeds from the Sale of the Property  
[415] The sale of the Property yielded $2,166,763,82 in proceeds which were  
deposited in 185 Corp.’s TD and CIBC bank accounts between September 19,  
2016 and June 13, 2019. According to Anthony, this $2.1 million constituted “profit”  
that his family had taken from the sale. None of the $2.1 million was paid to  
investors, except for:  
 
- 207 -  
a) a $32,000.00 payment to Mr. Savona in January 2018 and  
b) a $20,000.00 payment to an investor, F. Samardzic, in September  
2016 days after the deal closed.  
[416] From the $2.1 million in sale proceeds, 185 Corp. transferred $1,474,247.26  
in total from its company bank accounts to personal bank accounts belonging to  
Anthony, which Mira recorded, as follows:  
a) $278,000.00 was transferred to an account  
belonging to Anthony on November 1, 2017 “pending  
resolution with CRA”;  
b) $1,004,296.26 was transferred to an account  
belonging to Anthony on January 2, 2019 “pending  
CRA resolution”;  
c) $159,351.00 was transferred to an account  
belonging to Anthony on June 20, 2019 “pending CRA  
resolution; and  
d) $30,000.00 was transferred to an account belonging  
to Anthony on December 9, 2019 “pending resolution  
with CRA.”  
[417] Anthony conceded that the $1 million and $159,000.00 transfers to his  
personal bank accounts in 2019 were done to shield the funds from CRA while 185  
Corp.’s tax assessment was in dispute. From these funds, Anthony spent the  
$159,000.00 on legal fees, and used more than $780,000.00 from the $1 million  
transfer to purchase a home in 2019 on a one-acre property in Brampton and make  
mortgage payments on the property through to at least January 2021.  
[418] When questioned about 185 Corp.’s outstanding tax liabilities and amounts  
paid to CRA, Mira testified that $265,000.00 of the $2.1 million taken by the  
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Vuletics as “profit” from the sale of the Property was transferred to her personal  
bank account in two tranches, namely $235,000.00 in December 2017 and  
$40,000.00 in May 2019. According to Mira, the majority of these funds,  
$251,143.95 in total, were paid to CRA in three separate instalments of $83,714.65  
in December 2018, April 2019 and July 2019, respectively. She also testified that  
185 Corp. has paid CRA a total of $317,836.02 in respect of its corporate taxes, of  
which about $62,000.00 was paid through a transfer of GST refunds payable to  
185 Corp. for the period 2018-2020. As of July 17, 2020, 185 Corp. owed CRA a  
total of $1,728,879.16 for outstanding corporate tax liabilities. Anthony testified  
that 185 Corp. still has an active dispute with CRA after filing a notice of objection  
for the tax year ending December 31, 2016 over CRA’s assessment of its tax filing.  
[419] Pursuant to the Order made by Justice LeMay dated September 9, 2019, as  
amended on November 25, 2019, Brampton G&A paid into court all vendor take-  
back interest and principal payments between December 2019 and September  
2020 pending a decision of this action and the claims advanced by Robert Sokic  
and Anna Bilich. As of August 16, 2021, the amount paid into court was  
$10,685,228.99. Justice LeMay’s Order also restrains the Defendants from  
dealing with their interests in Lots 49, 50 and 60 of the approved draft plan of  
subdivision for the Property pending a determination of this action.  
[420] On Mr. Soriano’s analysis in the KSV Report, the Defendants received  
$2,462,272.00 in sale proceeds between September 2016 and September 2019,  
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and the Vuletics withdraw or otherwise took the benefit of $1,827,311.00 from 185  
Corp.’s bank accounts between the sale and December 31, 2019.  
Plaintiffs’ Expert Evidence  
a. Errol Soriano  
[421] Mr. Soriano delivered the KSV Report dated March 5, 2021 and a reply  
report dated May 25, 2021, and testified at trial. He was qualified as an expert in  
the quantification of financial loss and the valuation of business interests to opine  
on two (2) matters:  
a) to quantify the proceeds that would be available for distribution to  
the Plaintiffs but-for the alleged misappropriation of funds and  
mismanagement of the Project by the Defendants to the financial  
detriment of the Plaintiffs resulting in an alleged reduction of the  
Plaintiffs’ share of the proceeds from the sale of the Property (the  
“But-For Proceeds”); and  
b) to quantify the economic benefit realized by the Vuletic Defendants  
from using investor funds and assets associated with the Project.  
[422] To answer the first question, Mr. Soriano took the But-For Proceeds  
available for distribution to all investors and multiplied the Plaintiffs’ pro-rata  
interest in the Project based on their relative capital contribution to the total capital  
invested in the Project.  
[423] For the second question, Mr. Soriano opined that the economic benefit  
derived by the Vuletic Defendants from the Project amounted to $9,218,000.00.  
   
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b. Michael Parsons  
[424] Mr. Parsons delivered the Duff & Phelps appraisal report dated March 17,  
2021 (the “D&P Appraisal Report”) and an Appraisal Review and Responding  
Report dated May 25, 2021, and testified at trial. He was qualified as an expert in  
real property appraisals, including rent appraisals.  
[425] Based on the assumptions and conditions set out in the D&P Report, Mr.  
Parsons was asked to opine on:  
a) the current market value, as a the effective date of March 1, 2021, of  
a standard 50 x 140 foot lot as if subdivided and serviced  
b) the respective market rent for the house on the Property over the  
period from August 2002 to March 1, 2021, under two scenarios  
c) the current market value, as of March 1, 2021, of Lots 49, 50 and 60  
as if subdivided and serviced  
d) the current market value, as of March 1, 2021, of a single detached  
dwelling as if constructed on Lots 49 and 50 and  
e) the current embedded value, as of March 1, 2021, accrued to 185  
Corp. as the vendor, in connection with the contractual construction  
terms for Lots 49 and 50 in the sale agreements between 185 Corp.  
and Brampton G&A.  
 
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[426] With respect to the first question, Mr. Parsons gave an opinion that the  
market value of a standard lot, as if subdivided and serviced, is $725,000.00 as of  
March 1, 2021. He also opined on the “indexed” value of a standard divided and  
serviced lot as of September 1, 2021.  
[427] On the second question, Mr. Parsons opined that the cumulative total market  
rent for the house on the Property from August 2002 to March 1, 2021 is  
$362,338.00. For the second scenario in which market rent was reset in 2016 to  
coincide with the sale agreement between 185 Corp. and Brampton G&A, Mr.  
Parsons opined that the cumulative total market rent for the same period was  
$374,451.00. He also testified to an “indexed” rent value to September 1, 2021.  
[428] In respect of the third, fourth and fifth questions, Mr. Parsons arrived at an  
agreement with Yvonne White of KPMG, who delivered an appraisal report and a  
review of the D&P Appraisal Report but ultimately was not called as a witness at  
trial by the Defendants. The relevant portions of the agreement are summarized  
as follows:  
1. The market value of Lot 60 as of March 1, 2021 is $675,000.00;  
2. The market value of Lot 49 inclusive of embedded value as of  
March 1, 2021 is $1,637,500.00, which reflects the average  
between the Defendants’ expert value and the Plaintiff’s expert  
value;  
3. The market value of Lot 50, inclusive of embedded value as of  
March 1, 2021 is $1,520,000.00;  
4. The aggregate market values of Lots 49, 50 and 60 inclusive  
of embedded values as of March 1, 2021 is $3,832,500.00;  
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5. The market value of Lot 49 as if complete is $2,475,000.00 as  
of March 1, 2021; and  
6. The market value of Lot 50 as if complete is $2,360,000.00 as  
of March 1, 2021.  
Mr. Parsons also testified to an “indexed” market value for Lots 49 and 50.  
c. John Galluzzo  
[429] Mr. Galluzzo delivered the Altus Group Report dated March 18, 2021 and  
testified at trial. He was qualified as an expert in real estate valuations.  
[430] In his evidence, Mr. Galluzzo opined on the estimated current market value  
of the Property as at March 1, 2021, as well as its retrospective market value as at  
September 1, 2016, based on value estimates applicable to a hypothetically fully-  
serviced 50 foot x 110 foot residential detached lot on the Property drawn from his  
analysis of comparable neighbouring properties in the vicinity.  
[431] Mr. Galluzzo opined that the estimated market value of a subdivided and  
serviced detached 50 x 110 foot lot as of March 1, 2021 is $800,000.00, inclusive  
of development charges. He also gave an opinion of the value of the same lot as  
of September 1, 2016.  
d. No Defence Expert Evidence  
[432] Although the Defendants delivered reports to challenge the KSV Report and  
the D&P Appraisal Report, none of the authors of the Defendants’ reports were  
called to testify at trial after the Defendants chose not to call them as witnesses.  
Accordingly, none of the Defence reports are admissible in evidence: Sit v. Trillium  
   
- 213 -  
Health Centre, 2020 ONSC 2458 at para 17. As a result, the court is left with no  
contrasting expert evidence to the Plaintiffs’ expert valuation reports.  
Analysis  
a. Credibility  
[433] The parties have very different accounts of what took place over the course  
of the Project. As a result, significant portions of this case will turn on credibility  
given the polarized evidence given by the parties about important events and their  
implications.  
[434] In assessing credibility, the court must consider a number of relevant factors.  
In the leading case of Faryna v. Chorny, [1951] 2 DLR 354 (BCCA) at 357, the  
B.C. Court of Appeal held that an assessment of credibility is a test of probabilities  
and offered the following guidance:  
[435] The credibility of interested witnesses, particularly in cases of conflict of  
evidence, cannot be gauged solely by the test of whether the personal demeanour  
of the particular witness carried conviction of the truth. The test must reasonably  
subject his story to an examination of its consistency with the probabilities that  
surround the currently existing conditions. In short, the real test of the truth of the  
story of a witness in such a case must be its harmony with the preponderance of  
the probabilities which a practical and informed person would readily recognize as  
reasonable in that place and in those conditions.  
   
- 214 -  
[436] There are many factors to consider in assessing credibility, such as:  
a) whether the witness’ evidence makes sense by being internally  
consistent, logical or plausible: Borrelli v. Chan, 2018 ONSC 1429 at  
para 187, affirmed 2019 ONCA 525, leave to appeal denied 2020  
224 (SCC); Faryna at 357;  
b) whether there are inconsistencies or weaknesses in a witness’  
evidence such as internal inconsistencies, prior inconsistent  
statements, or inconsistencies with the evidence of other witnesses:  
R. v. Williams, 2018 ONCA 138 at para 33;  
c) whether there is independent evidence to confirm or contradict the  
witness’ evidence, or whether there is a lack of any such evidence:  
Christakos v. De Caires, 2016 ONSC 702 at para 10;  
d) a witness’ demeanour, including their sincerity and use of language,  
although this must be done with caution: R. v. Mah, 2002 NSCA 99 at  
paras 70-75; and  
e) whether a witness, particularly a party to a case, may have a motive  
to fabricate evidence: R. v. J.H., 2005 253 (ONCA) at paras  
51-56.  
[437] The court is not required to believe or disbelieve a witness’ testimony in its  
entirety, and may believe none, part or all of a witness’ evidence or attach different  
- 215 -  
weight to different parts of a witness’ evidence: R. v. R.(D.), [1996] 2 SCR 291 at  
para 93.  
[438] Having regard to these considerations, I have made the following  
determinations.  
[439] The Plaintiffs all have obvious interests in the litigation. Nevertheless, I am  
satisfied that they all gave clear and straightforward evidence that was consistent  
with the contemporaneous documents in the record. Each testified in a thoughtful  
manner, acknowledged the limits of their memories or recollections due to the  
passage of time, conceded evidence that would support the defence, and took  
care to not misstate or overstate their evidence. I shall say more about the  
evidence from Ms. Bilich and Mr. Pichelli, respectively, later in these reasons.  
[440] Mr. Kegalj testified in a clear and forthright manner. Throughout his  
testimony, he gave thoughtful evidence that was supported by documents in the  
record. He candidly acknowledged his dealings and involvement in the Project,  
including aspects that he now concedes were improper or problematic, and he  
gave fulsome and complete answers without seeking to minimize or deflect his role  
or activities despite having some recollection issues due to the passage of time. I  
am satisfied that Mr. Kegalj had no reason to be untruthful, and I accept that his  
evidence was credible.  
- 216 -  
[441] Ms. Ceifets gave careful evidence based on her voluminous  
contemporaneous file notes that she made of her various conversations with and  
instructions from John and Anthony. Despite having a limited independent  
recollection of events, Ms. Ceifets gave informative and reliable evidence by  
relying heavily on her detailed file notes that thoroughly documented her  
involvement with the Project in 2002 in a diligent and meticulous fashion. Ms.  
Ceifets readily conceded the limits of her recollection and notes and was careful  
to not stray beyond them in giving her evidence. I am satisfied that Ms. Ceifets  
was a credible and reliable witness.  
[442] Mr. Sistilli is a land development professional who gave his evidence in a  
direct and straightforward manner. In my view, he had little if any interest in the  
outcome of this litigation and no incentive to misstate his evidence. I accept that  
his evidence was credible and reliable.  
[443] Mr. Soriano, Mr. Parsons and Mr. Galluzzo gave their expert valuation  
evidence in a clear and straightforward manner.  
[444] Anthony was the Defendants’ main witness. In my view, his evidence must  
be approached with caution and, in general, should be given little weight. Through  
his testimony, he made it clear that he would say whatever he needed to benefit  
or bolster his case. He was frequently impeached by prior inconsistent evidence  
given on discovery or in affidavits, and his efforts to reconcile his previous  
contradictory statements were strained and implausible. He argued relentlessly  
- 217 -  
about the plain meaning of works in emails and documents, including those he  
authored, denied his own words in sworn testimony, and resiled on many  
occasions from formal admissions and even his pleadings. When caught by  
discrepancies in his evidence, such as when he claimed to have attended a BWLG  
meeting when he actually was in Europe at the time, he simply brushed off the  
inconsistencies with overly generalized statements (i.e., such as how he usually  
attended meetings) to the point where his comments lacked any real meaning. To  
explain problematic documents, Anthony would simply change his evidence in  
response to new facts or problems as they emerged which left his evidence as a  
patched-up reconstruction of events. Based on this, I find that Anthony’s evidence  
was contrived.  
[445] Anthony was quite aware of what issues were contentious, grew defensive  
or evasive when confronted with discrepancies in his evidence on these issues,  
and tried to avoid having to answer difficult questions by quibbling over  
inconsequential points, by blaming others such as his lawyer or accountant, by  
rambling about other matters of little consequence, and by offering implausible  
explanations that were uncorroborated by any records. Much of his evidence was  
argumentative and lacked a ring of truth. Overall, his evidence was not credible  
or reliable.  
[446] John’s evidence was vague, imprecise and unresponsive. For most of his  
testimony, he minimized his role in the Project and deflected responsibility by  
- 218 -  
repeatedly stating that it was his son, Anthony, who looked after all of the  
paperwork and finances for the Project, even when saying this was not responsive  
to the question put to him. Among other things, John:  
a) declined to consider or answer questions about documents by  
claiming that Anthony had been charged to deal with documents  
b) disavowed almost all of his interactions in 2002 with Ms. Ceifets that  
she had recorded in her notes  
c) deferred questions about Project funding to Anthony by claiming “my  
son was dealing with the documents, I didn’t deal with the documents”  
d) claimed to not know or recall how the Vuletics took Project funds for  
their personal use because Anthony handled all of the finances and  
e) deflected corporate governance and Project management questions  
as they involved documents that Anthony purportedly “followed” and  
solely looked after.  
All of this casts serious doubt on the credibility and reliability of John’s evidence.  
[447] Mira was the most candid of the Vuletics. She clearly knew of the scheme  
that she and her family used to take Project funds to pay for their personal  
expenses, and was aware that they could not afford their lifestyle without this  
money, but she chose to downplay her role in the scheme. She lived rent-free,  
- 219 -  
bought groceries and household goods, travelled to Europe, and purchase other  
personal items with Project funds, all while having close contact with the books,  
ledgers and bank statements that she maintained for the Project.  
[448] Mr. Adair testified and gave credible evidence. Among other things, Mr.  
Adair candidly contradicted the Defendants in several key respects including with  
respect to the Vuletics’ alleged breaches of their obligations under the Project.  
b. Limitations Defence  
[449] As set out below, I find that this action is not statute-barred.  
[450] Following about five (5) years of litigation, the Defendants amended their  
pleading just shortly before trial to assert a limitations defence. They were slow to  
raise the defence, and did not argue the defence in their factum or their closing  
submissions at trial.  
[451] The Plaintiffs all seek a share in the Property through a constructive trust  
based on unjust enrichment. On this basis, their claims constitute actions to  
recover land under s. 4 of the Real Property Limitations Act, RSO 1990, c. L.15  
(“RPLA) by claiming a share in property.  
[452] Section 4 of the RPLA provides:  
Limitation where the subject interested  
4 No person shall make an entry or distress, or bring  
an action to recover any land or rent, but within ten  
years next after the time at which the right to make such  
 
- 220 -  
entry or distress, or to bring such action, first accrued  
to some person through whom the person making or  
bringing it claims, or if the right did not accrue to any  
person through whom that person claims, then within  
ten years next after the time at which the right to make  
such entry or distress, or to bring such action, first  
accrued to the person making or bringing it. [Emphasis  
added]  
It follows that an action to recover land is subject to a ten-year limitation period  
under s. 4 of the RPLA. The term “land” is defined under s. 1 of the RPLA as  
follows:  
“land”  
includes  
messuages  
and  
all  
other  
hereditaments, whether corporeal or incorporeal,  
chattels and other personal property transmissible to  
heirs, money to be laid out in the purchase of land, and  
any share of the same hereditaments and properties or  
any of them, any estate of inheritance, or estate for any  
life or lives, or other estate transmissible to heirs, any  
possibility, right or title of entry or action, and any other  
interest capable of being inherited, whether the same  
estates, possibilities, rights, titles and interest or any of  
them, are in possession, reversion, remainder or  
contingency. [Emphasis added]  
[453] In McConnell v. Hustable, 2014 ONCA 86 at paras 14-52, the Court of  
Appeal considered whether a claim for unjust enrichment in which the claimant  
seeks a constructive trust in respect of the respondent's real property is an action  
to recover any land under the RPLA. After discussing the law and facts in that  
case, Rosenberg J.A. held (at para 38) that a constructive trust claim, based in  
unjust enrichment, was an action to recover land under s.4 of the RPLA because  
it was a claim for a share in property:  
- 221 -  
With that background, I return to the interpretive issue  
and specifically to the question of whether an  
application for the equitable remedy of a constructive  
trust in real property is an application for recovery of  
any land. In my view, the [claimant] is making a claim  
for recovery of land in the sense that she seeks to  
obtain land by judgment of the court. That the court  
might provide her with the alternative remedy of a  
monetary award does not take away from the fact that  
her claim is for a share of the property. [Emphasis  
added]  
[454] It follows that an action for unjust enrichment in respect of an ownership  
interest in real property constitutes an action to recover land under s. 4 of the RPLA  
which is subject to a 10-year limitation period: see also Harvey v. Talon  
International Inc., 2017 ONCA 267 at paras 45 and 55. As remedies for unjust  
enrichment are restitutionary, the court may award either a constructive trust over  
proprietary interests or monetary damages for unjust enrichment: Kerr v. Baranow,  
2010 SCC 10 at para 50; McConnell at para 36. The ability of the court to award a  
monetary damages does not detract from the claim for a constructive trust over a  
proprietary share of real property for unjust enrichment: McConnell at para 38. In  
addition, an alternative claim for damages that accompanies a principal claim for  
a constructive trust will be sheltered under s.4 of the RPLA: McConnell at para 40.  
[455] As set out earlier, the Defendants failed to provide quarterly accounting  
reports as required by the Kegalj settlement dated July 11, 2011. Justice Lederer  
endorsed on October 20, 2016 that, [t]he idea was that, with these reports in  
hand, the investors would understand how the money they contributed to the  
project had been used and, if dissatisfied, take whatever action each of them  
- 222 -  
thought advisable.” However, as Justice Lederer noted, it was not until August 24,  
2016 that an up-to-date accounting of the income and expenditures associated  
with the development project was delivered, and the quarterly accounting was not  
received until October 2016 and in 2017. Some investors, including Ms. Nizalek  
and Mr. McDowell never received a quarterly accounting. The Plaintiffs then  
commenced their actions in 2017.  
[456] As discussed below in further detail, Ms. Bilich inquired with Anthony about  
alternative ways to pay her fourth cash call in 2008. Both then met in December  
2008 or January 2009 and ended up discussing terms for Embleton to buy out Ms.  
Bilich’s lot interest. On April 28, 2013, Ms. Bilich sent Anthony’s lawyer, Mr. Adair,  
an email in which she claimed that Embleton had agreed to buy her lot and  
demanded full payment by no later than May 13, 2013. After receiving no  
response, Ms. Bilich believed that the deal had fallen through. At the time, she  
was unaware that Embleton was a dissolved corporation without capacity to  
contract and did not hold title to the Property which Mr. Kegalj had conveyed to  
185 Corp in February 2012. Only after receiving the quarterly accounting in  
October 2016 would Ms. Bilich discover her claim.  
[457] Based on the foregoing, I find that the earliest the limitation period began to  
run was from October 2016 when the Defendants gave investors the quarterly  
accounting and the Plaintiffs would have discovered their claims. Alternatively, the  
earliest that Ms. Bilich would conceivably had discovered her claim was May 13,  
- 223 -  
2013 when her deadline for receiving payment on her lot expired. The Plaintiffs  
had ten years from discovering their claims to bring an action and actually  
commenced their actions in 2017. Taking this all into account, I am satisfied that  
their actions are not statute-barred under s. 4 of the RPLA.  
[458] Pursuant to ss. 2(1)(a) of the Limitations Act, 2002, SO 2002, c. 24, Sch. B  
(“Limitations Act”) that statute does not apply to a proceeding for which the RPLA  
applies. It follows that the Plaintiffs’ claims are subject to the operative 10-year  
limitation period found under the RPLA and not the basic 2-year limitation period  
under s. 4 of the Limitations Act, which otherwise provides:  
Basic limitation period  
4 Unless this Act provides otherwise, a proceeding shall not be  
commenced in respect of a claim after the second anniversary of the  
day on which the claim was discovered.  
Discovery  
5 (1) A claim is discovered on the earlier of,  
(a) the day on which the person with the claim first knew,  
(i) that the injury, loss or damage had occurred,  
(ii) that the injury, loss or damage was caused by or  
contributed to by an act or omission,  
(iii) that the act or omission was that of the person  
against whom the claim is made, and  
(iv) that, having regard to the nature of the injury, loss  
or damage, a proceeding would be an appropriate  
means to seek to remedy it; and  
(b) the day on which a reasonable person with the abilities and  
in the circumstances of the person with the claim first ought to  
have known of the matters referred to in clause (a).  
- 224 -  
Presumption  
(2) A person with a claim shall be presumed to have known of the  
matters referred to in clause (1) (a) on the day the act or omission on  
which the claim is based took place, unless the contrary is proven.  
[459] Accordingly, I am satisfied that the actions are not statute-barred. In any  
event, given that the Plaintiffs would have discovered their claims in October 2016  
when the Defendants provided the quarterly accounting to them, I further note that  
the Plaintiffs’ claims in these proceedings would not have been statute-barred  
under the basic 2-year limitation period under the Limitations Act as their actions  
were commenced in 2017.  
c. Investment Relationship under the APS  
[460] As set out below, I find that the Plaintiffs were investors under the APS.  
[461] The Plaintiffs contend that they are investors as the nature of their interest  
under the APS is properly characterized as an investment in the Project that was  
meant to yield a future asset. For their part, the Defendants submit that the  
Plaintiffs are merely “lot purchasers” albeit purchasers who never received what  
they ostensibly bought by signing the APS in 2002.  
[462] Having regard to the plain language of the APS, and reading the agreement  
as a whole by giving its words their ordinary and grammatical meaning, I am  
satisfied that the Plaintiffs were investors under the APS. Without question, the  
APS created an investment relationship by which the Plaintiffs initially paid money  
to Embleton by way of the “Purchase Price” in 2002 (i.e., which gave Embleton  
 
- 225 -  
funds to acquire the Property), and subsequently paid Embleton (and later 185  
Corp) up to five (5) cash calls or “Servicing Costs” between 2003 and 2013, all in  
consideration of receiving a right to title for a future lot to be created on the Property  
and later conveyed to the Plaintiffs once it was legally possible after the Property  
was subdivided. On this point, I note that ss. 52(1) of the Planning Act, expressly  
prohibits the sale of land not yet subdivided until draft approval for a plan of  
subdivision is given:  
No person shall subdivide and offer for sale, agree to  
sell or sell land by a description in accordance with an  
unregistered plan of subdivision, but this subsection  
does not prohibit any person from offering for sale or  
agreeing to sell land by a description in accordance  
with a plan of subdivision in respect of which draft  
approval has been given under section 51.  
In turn, s. 2(a) of Schedule A to the APS specifically provides that “[t]he completion  
of this Agreement is conditional upon compliance by the Vendor with the provisions  
of Section 50 of the Planning Act, 1990 (Ontario) and amendments thereto on or  
before the Closing Date.”  
[463] Section 1 of the APS provides that the “Purchase Price” consists of:  
a) a $5,000.00 “Initial Deposit” due on signing the APS and  
b) a “Second Deposit”, namely the balance of the agreed purchase price  
amount, due no later than 30 days from the date of acceptance of the  
agreement.  
- 226 -  
Despite some minor variances between the Plaintiffs as some paid the “Initial  
Deposit” separately from the “Second Deposit” while others paid the entire  
“Purchase Price” by way of the so-called “Second Deposit”, it is common ground  
that the Plaintiffs paid about $35,000.00 to subscribe for a lot interest in the Project.  
Using most of the proceeds from the lot subscriptions, Mr. Kegalj acquired the  
Property from Ms. Taylor in July 2002.  
[464] The third paragraph to s. 4 of Schedule A to the APS provides for Purchasers  
to be invoiced by the Vendor (i.e., Embleton and later 185 Corp.) for “Servicing  
Costs” or so-called “cash calls”:  
Prior to the Closing Date, the Vendor shall invoice the  
Purchaser from time to time, for the Purchaser’s share  
of the Servicing Costs and the amount of such invoice  
will be payable by the Purchaser to the Vendor within  
thirty (30) days from the date of such invoice. Any  
failure by the Purchaser in making payment to the  
Vendor for Servicing Costs shall be deemed to be a  
monetary default hereunder and the provisions of  
paragraph 6 shall apply. The Purchaser further  
acknowledges that Servicing Costs may be incurred  
after the Closing Date and the Purchaser covenants  
and agrees to pay such Servicing Costs within thirty  
(30) days of being invoiced by the Vendor. The Vendor  
reserves a vendor’s lien on the Lots until the Servicing  
Costs have been fully paid.  
[465] The following chart shows the capital contributions which the Plaintiff  
investors paid to the Project based on their initial contributions and subsequent  
cash call contributions:  
- 227 -  
Investor  
Initial  
Cash  
Contributions  
$18,273.00  
Call Total  
Capital  
Contribution  
$35,500.00  
$35,500.00  
$71,000.00  
$71,000.00  
Contributions  
J. Caroti (1 lot)  
$53,773.00  
$59,368.00  
$118,738.00  
$118,736.00  
I. & M. Grounds (1 lot)  
N. Kostelac (2 lots)  
R. Morris & M. Pelchat-  
Morris (2 lots)  
$23,868.00  
$47,738.00  
$47,736.00  
B. Nizalek & B. McDowell (1  
lot)  
$37,000.00  
$3,200.00  
$40,200.00  
W. Jesus & M. Savona (4  
lots)  
$142,000.00  
$85,472.00  
$227,472.00  
A. Bilich (1 lot)  
$35,500.00  
$8,274.00  
$43,774.00  
P. Pichelli (5 lots)  
$175,000.00  
$68,207.00  
$243,207.00  
I shall return to the matter of the cash calls later in these reasons  
[466] It is evident from the APS that the point when Embleton or 185 Corp. would  
deliver the lots which the Plaintiffs had subscribed for would be some future date  
that was uncertain given the need to develop the Property before lots could be  
conveyed. Several provisions of the APS make it clear that the Plaintiffs had  
transacted for future lots that did not yet exist, might never come to exist, and could  
not be transferred to them unless and until a plan of subdivision was registered.  
These provisions include the following:  
Section 1 of the APS:  
The undersigned ___________ (the “Purchaser”)  
hereby agreed to and with Embleton Properties Corp.  
(the “Vendor”) to purchase ____ Standard Lots  
intended to be developed on the Land (the “Lots”) …  
- 228 -  
Section 1(b) of Schedule A to the APS:  
The Vendor intends to take all necessary proceedings  
required in order to have the Land Zoned to permit  
single family residential dwellings including, the  
servicing of the Land and the registration of a plan of  
subdivision to create residential building lots.  
Section 1(e) of Schedule A to the APS:  
The Vendor is offering purchasers the right to purchase  
one or more Standard Lots on the terms and conditions  
set out in this Agreement.  
Fourth Paragraph to Section 3 of Schedule A to the  
APS:  
On the Closing Date the Vendor shall deliver a  
Transfer/Deed of Land (“Transfer”) to the Purchaser  
(which shall be registered by the Purchaser at the  
Purchaser’s expense) and the Purchaser shall deliver  
to the Vendor a certified cheque or bank draft for the  
Servicing Costs or other amounts payable hereunder  
Fifth Paragraph to Section 3 of Schedule A to the APS:  
After the Closing Date, and when not in breach of any  
provisions of this Agreement, the Purchaser shall have  
the right to possession of the Lots that have been  
transferred to the Purchaser.  
Section 7 of Schedule A to the APS:  
The Purchaser acknowledges and agrees that  
Purchaser is not purchasing a lot in a specific location  
on the Land or on the Initial Concept or the plan of  
subdivision to be registered. The location of the Lots  
being purchased herein will be designated by the  
Vendor in its sole and absolute discretion once the plan  
of subdivision has been approved and/or registered  
and the Purchaser will have no choice whatsoever as  
to the location of the lots. …  
Section 9(a) of Schedule A to the APS:  
The Purchaser shall not be permitted to enter onto the  
Land or the Lots prior to the Closing Date unless  
accompanied by a representative of the Vendor.  
- 229 -  
and  
Section 9(c) of Schedule A to the APS:  
Prior to the Closing Date, the Purchaser shall not  
advertise or list or enter into an agreement to sell the  
Lots without the Vendor’s prior written approval which  
may be give nor withheld in the Vendor’s sole and  
absolute discretion. [Emphasis added]  
[467] Having regard to the nature of the subscriptions to acquire a future lot to be  
developed and realized at some future undetermined point, if ever, I find that the  
relationship that each Plaintiff entered into under the APS is fairly and appropriately  
characterized as an investment relationship. In effect, each investor committed  
capital to a development project aimed at creating a future asset in the form of a  
serviced “Standard Lot” that, as it turned out, never actually came into existence.  
The Defendants claim that the Plaintiffs were merely “lot purchasers” and  
analogized the purchase of a lot subscription under the APS to buying an apple at  
a grocery store. I am not persuaded by this analogy which entirely discounts the  
temporal questions related to how long the Plaintiffs’ capital resided with Embleton  
and 185 Corp., and when the Plaintiffs were to receive the lots which they had  
subscribed for in exchange for their capital payments. The Plaintiffs effectively  
paid for future lots in the Project which is entirely characteristic with an investment  
relationship. The fact that the lots never actually materialized lends, in my view,  
further support to this characterization.  
[468] The above-mentioned terms of the APS fully support this finding of an  
investment relationship. I add that s. 17(g) of Schedule A to the APS provides:  
- 230 -  
The Purchase acknowledges and agrees that the Purchaser is not and shall  
not in any way be construed as or deemed to be a partner, associate, joint  
venturer or any other participant with the Vendor with respect to the Land  
and/or the development thereof and that the Purchaser’s only interest is as a  
purchaser of the Lots as provided for herein and that the Vendor owes no  
fiduciary obligation to the Purchaser. [Emphasis added]  
[469] Regardless of the terms under s. 17(g), the Plaintiffs do not claim to be  
partners, associates or joint venturers of Embleton or 185 Corp. and no such  
characterizations or declarations are being sought, although the Plaintiffs are  
asserting fiduciary obligations are explained below. In addition, the Plaintiffs do  
not assert that they were co-participants with Embleton or 185 Corp. in seeking to  
develop the Property and have a registered subdivision for single family residential  
dwellings to create the standard and premium lots as initially contemplated by the  
Project. As well, s. 17(g) states that the Purchaser’s only interest under the APS is  
as a purchaser of the Lots as provided for herein” which supports the Defendants’  
“lot purchaser” characterization when read in isolation. However, s. 17(g) must be  
read in the context of the APS as a whole. To this end, s. 9(d) to Schedule A of  
the APS provides:  
The Purchaser covenants and agrees to not register  
this Agreement or notice of this Agreement or a  
caution, certificate of pending litigation, Purchaser’s  
Lien, or any other document providing evidence of this  
Agreement against title to the Land or the Lots and  
further agrees not to give, register, or permit to be  
registered any encumbrance against the Land or the  
Lots, it being expressly agreed to and understood by  
the parties that in no event shall the Purchaser be  
deemed or construed to have any interest whatsoever  
in the Land or the Lots prior to closing and that the  
Purchaser’s only remedy against the Vendor for breach  
of this Agreement shall be recission and a claim for the  
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return of the Deposit and not a claim for specific  
performance or damages. …  
[Emphasis added]  
[470] In plain and ordinary language, s. 9(d) denies a Purchaser’s only interest  
under the APS as a lot purchaser by expressly provided as part of a larger  
covenant to Embleton that the Purchaser shall not have any interest whatsoever  
in the Land or Lots before closing. Reading both s. 17(g) and s. 9(d) in tandem,  
the resulting proposition is that a purchaser’s only interest under the APS is that of  
a lot purchaser who, nevertheless, has no interest whatsoever in the lots said to  
be purchased until the APS closing date arrive, if ever.  
[471] The intention of the parties to a contract is decided by reading the contract  
as a whole and giving the words used their ordinary and grammatical meaning in  
a manner that is consistent with the surrounding circumstances known to the  
parties at the time when the contract was formed: Sattva at para 47. Having regard  
to the above-mentioned provisions in the APS as well as the circumstances by  
which the parties entered into the contract, I find that the Plaintiffs made any  
investment for the delivery of a future asset that might never have come into  
existence. Ms. Ceifets testified that the Vuletics wanted to ensure that a purchaser  
under the APS had no interest in the Property until a subdivision was registered,  
and wished to make it clear in the APS that the purchaser was not buying an  
interest in land and thereby presented a material risk to their investment. In turn,  
s. 9(d) was deliberately included in the APS to reflect this risk, which reinforces the  
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characterization of the Plaintiffs as investors under the APS. The evidence of  
objective surrounding circumstances leading up to the preparation of the APS by  
Ms. Ceifets reveals some of the complexities in the drafting exercise as she saw  
them given the structure the Vuletics wanted for the Project, which Ms. Ceifets  
testified was unusual or uncommon. Clearly, the APS was not a simple lot  
purchase agreement. Taking this all into account, I find that s. 17(g) does not  
detract from properly characterizing the Plaintiffs’ interests under the APS as an  
investment for something in the future.  
[472] When read as a whole, I am satisfied that the APS granted the Plaintiffs an  
investment in a future asset.  
d. Anna Bilich’s Interest  
[473] As explained below, I am satisfied that Ms. Bilich retained her rights under  
the APS to an interest in the Project and did not enter into a new contract with  
Embleton that terminated or altered her rights under the APS.  
[474] The Defendants’ central defence to Ms. Bilich’s claim is that she stopped  
being an investor after she entered into an oral agreement in December 2008 or  
early 2009 with Anthony acting for Embleton. I am not persuaded by this defence  
for several reasons.  
[475] On January 21, 2008, Embleton was dissolved by order of the Ministry of  
Government Services pursuant to s. 241 of the Business Corporations Act, RSO  
 
- 233 -  
1990, c. B.16 for being in default of complying with the Corporations Tax Act.  
Thereafter, Embleton was never revived. Before its was dissolved, Ms. Bilich paid  
Embleton three (3) cash calls. Embleton then made a fourth cash call demand in  
September 2008 that came to Ms. Bilich’s attention in December 2008. Following  
an exchange of emails, Ms. Bilich met with Anthony (i.e., as Embleton’s  
representative) in December 2008 or January 2009 to discuss the cash call  
payment and how or when she would make the payment. During this meeting, the  
Defendants claim that Ms. Bilich entered into an oral agreement with Anthony for  
Embleton to buy her lot interest in the Property. However, by this time, Embleton  
was a dissolved company and no longer in existence: 2015673 Ontario Inc. v.  
Chorny, 2008 7740 at para 8.  
[476] Given that Embleton was no longer a legal and subsisting entity by late 2008  
or early 2009 when Anthony and Ms. Bilich met, Embleton clearly did not have  
capacity to enter into the oral contract allegedly made during the meeting.  
Moreover, as 185 Corp. was not incorporated until August 24, 2011 (i.e., well after  
the meeting had taken place), it follows that 185 Corp. was not privy to any contract  
made at the meeting and, therefore, cannot enforce any such contract. Apart from  
185 Corp., no other party had been identified as having stepped into Embleton’s  
shoes.  
[477] In October 2011, Ms. Sulzenko emailed Ms. Bilich to confirm the alleged oral  
contract. In her email message to Ms. Bilich, Ms. Sulzenko identified herself as  
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counsel for Embleton and the Vuletics without disclosing that Embleton had been  
dissolved and, therefore, had no capacity to enter into the alleged oral contract.  
Given the absence of an identifiable legal and subsisting party to the alleged oral  
agreement with Ms. Bilich, I am satisfied that the Defendants cannot rely on this  
alleged contract that Anthony purportedly made for Embleton with Ms. Bilich to  
extinguish her lot interest in the Property under the APS.  
[478] In any event, I accept that Ms. Bilich and Embleton never actually reached  
an agreement on the essential terms of the alleged oral contract. According to the  
Defendants, Embleton was to purchase Ms. Bilich’s lot interest for double her  
contribution to the Project less her outstanding cash call payment. Although Ms.  
Bilich acknowledges that she discussed receiving double the value of her  
contributions, she claims that Anthony proposed having her lot interest identified  
and transferred upon a draft plan of subdivision being approved in the late summer  
of 2009 (i.e., roughly 8 months from her discussion with Anthony) with the proposal  
to be put in writing and sent to her for review. She also claims that no actual price  
was agreed upon, and that the proposed sale transaction was conditional on her  
approval of its written terms. Ms. Bilich’s evidence that Anthony was to send her  
the proposed terms in writing was not contradicted by the Defendants. Ultimately,  
Ms. Bilich never got a written proposal for her lot interest from Anthony or  
Embleton, and a draft plan of subdivision was not approved in 2009 (i.e., as draft  
subdivision approval came only in December 2013, roughly four years later). It  
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follows that Embleton’s purported deal to purchase Ms. Bilich’s lot interest never  
closed.  
[479] Embleton and Ms. Bilich never agreed on a purchase price. Doubling Ms.  
Bilich’s total capital contributions to the Project less her unpaid cash call payment  
amounted to $81,953.00 (i.e., $47,334.00 x 2 - $5,595.00), but neither Anthony nor  
Embleton ever agreed to pay her this amount. Instead, Anthony’s position on the  
purchase price for Ms. Bilich’s lot interest changed over time. In a January 2, 2012  
email, Anthony asserted that the purchase price was $75,000.00, but in her  
January 5, 2012 correspondence Ms. Sulzenko asserted a lower price of just  
$71,000.00 based on a doubling of Ms. Bilich’s initial investment (i.e., $35,500.00  
x 2) without any credit for service costs or any reduction of the purchase price by  
offsetting the amount of her unpaid fourth cash call. Later on, in his affidavit sworn  
February 29, 2016, Anthony claimed that the purchase price was only $66,000.00  
based on $71,000.00 less a partial $5,000.00 offset for Ms. Bilich’s fourth cash call  
payment. Although Anthony apparently understood that Ms. Bilich would not  
actually get double her contributions for the Project to date, Ms. Bilich denies that  
she agreed to sell her lot interest for anything less than double the amount of her  
cumulative total financial contributions to the Project. There is no document to  
show that Ms. Bilich agreed to a specified price for her lot interest, or that she  
otherwise agreed to wait indefinitely after 2009 for a registered plan of subdivision  
to sell her lot interest. Instead, the record shows that Ms. Bilich sought to negotiate  
or conclude a purchase price with Ms. Sulzenko from the Fall of 2011 onwards  
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without any written acknowledgment that a purchase price previously had been  
reached. Taking this all into account, I am satisfied that the parties never agreed  
to a specific purchase price as they clearly were not ad idem about what Ms.  
Bilich’s contributions to the Project were or what, if anything, was to be deducted  
from her contributions. Despite the settlement overtures made in March 2012 and  
later in 2013 between Ms. Bilich and Mr. Adair, none of their exchanges resulted  
in any accepted offers. For example, Ms. Bilich’s letter to Mr. Adair dated April 28,  
2013 to propose a sale of her interest in the Property by May 13, 2013 for double  
her cumulative monetary contributions to the Project was ignored and went  
unanswered.  
[480] Quite apart from the fact that Ms. Bilich never received anything in writing to  
confirm the terms of alleged oral agreement to sell her lot interest in the Property,  
nothing in Embleton’s books serve to record the alleged deal, a transfer of her lot  
interest to Embleton, or any payments made in respect of the purported oral  
agreement.  
[481] Importantly, the alleged oral contract for Embleton to acquire Ms. Bilich’s lot  
interest was, according to Anthony’s own evidence, conditional upon a lot for her  
being identified after a registered plan of subdivision was obtained so her lot  
interest could be transferred. To this end, Anthony’s affidavit of February 2016  
states the following:  
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11. Anna Bilich and I then met approximately a week  
or two later at her house and came to an agreement  
whereby I would purchase her interest in the Lot  
Purchase Agreement for $71,000.00 (being double  
what she had paid) less $5,000.00 representing most if  
not all of the cash call then due which she had not paid.  
The monies owing under this agreement were to be  
paid to Anna Bilich if as and when my father and I  
through Embleton Properties was able to register a  
sale of individual lots which can only be done once  
servicing has been completed. That has not yet  
happened.  
However, the Property was never serviced and a registered sale of individual  
Project lots never occurred. Instead, 185 Corp. sold the Property in its un-serviced  
state before a registered plan of subdivision was obtained. Accordingly, I am  
satisfied that the alleged oral contract must fail.  
[482] The Defendants allege that Ms. Bilich was in default of the APS terms.  
However, none of the Defendants ever followed up with Ms. Bilich to demand  
payment of the cash call or to assert that she was in default of the APS terms.  
Furthermore, as detailed below, I find that the Defendants improperly administered  
the terms for collecting management fees under the APS and never sought to  
amend the APS to properly align its terms with how cash calls actually were being  
collected or administered.  
Notably, the APS expressly states that any  
amendments to its terms may only be done in writing. Taking this all into account,  
I am satisfied that Ms. Bilich was not in default by having not paid a cash call that  
was improperly demanded from Project investors by the Defendants in  
contravention of the express provisions under the APS for collecting management  
fees.  
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e. The Pichelli APS  
[483] There is a major dispute as to which APS version the Vuletics and Mr.  
Pichelli signed on behalf of the so-called Pichelli Group during a meeting on July  
3, 2002, and what actual form and content the APS should contain. From all of the  
testimony, I find that the conflicting evidence on this point cannot be resolved.  
Accordingly, for the reasons that follow, I conclude that there was no meeting of  
the minds in respect of the APS signed that day. Nevertheless, I am satisfied that  
the Plaintiffs in the Pichelli Group should receive a share of the sale proceeds of  
the Property on equitable grounds under a constructive trust or a purchase money  
resulting trust analysis, as discussed later in these reasons.  
[484] In May 2002, Mr. Pichelli, Mr. Toth and John conducted a site visit of the  
Property. Mr. Pichelli and Mr. Toth claim that Anthony joined them on the site visit,  
but Anthony denied being there. Following the site visit, Mr. Pichelli and others in  
his group expressed interest in acquiring lots in the Project. Thereafter, Mr. Pichelli  
claims that John gave him a draft APS which was later revised to deal with  
concerns that Mr. Pichelli had with its terms, principally:  
a) the interest rate that Embleton would pay on funds that it returned to  
investors were it to decide by a fixed date not to develop the Property  
and reimburse investors for their contributions to the Project  
b) the potential for an investor to forfeit a lot interest if one or more  
servicing payments were unpaid and  
 
- 239 -  
c) mortgages on the Property to develop the lands as development costs  
were to be covered by obtaining servicing payments from investors.  
[485] During a meeting on July 3, 2002 between john, Anthony and Mr. Pichelli,  
an APS for three (3) lot interests in the Project was initially signed before the APS  
was changed at the meeting by handwritten revisions to increase the subscription  
to five (5) lot interests. This is not disputed. Both sides agree that Mr. Pichelli  
initially had one lot subscription before he took a second shortly thereafter, while  
three other lot interests were acquired by Mr. Toth, Mr. Leslie and Mr. Campli,  
respectively. But the parties strongly disagree on the actual APS terms that were  
agreed upon that day. Members of the Pichelli Group produced an APS with a 13-  
section Schedule “A” which they claim was signed at the July 3, 2002 meeting. For  
their part, the Defendants produced a different version of the APS featuring a 16-  
section Schedule “A” which they claim is the real version from that day. Both sides  
also gave conflicting accounts in changing narratives to explain how the APS was  
signed, all of which was strongly contested at trial.  
[486] According to Mr. Pichelli, John gave him a draft APS sometime in May 2002  
before the July 3, 2002 meeting. When cross-examined in 2018 for a summary  
judgment motion brought by the Defendants, Mr. Pichelli testified that he accepted  
the terms of the draft APS and chose to not seek any changes to the draft after his  
late cousin, John Pichelli, who was a lawyer, reviewed the draft and advised that  
it was acceptable. However, at trial, Mr. Pichelli testified that he had been  
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concerned by certain terms in the draft APS including one which provided for the  
forfeiture of a lot to Embleton if servicing payments went unpaid. Mr. Pichelli  
testified that he shared his concern with Mr. Leslie and faxed a revised APS to Mr.  
Leslie for his review on June 28, 2002. Mr. Leslie produced the revised APS which  
captured Mr. Pichelli’s intention at the time to buy only three lots on behalf of the  
Pichelli Group members, as set out in the signing page and in Schedule “A” to the  
revised APS. As Mr. Leslie acknowledged, the 13-section Schedule “A” of the  
revised APS did not have a forfeiture provision and had an added term that  
required Embleton to return investor contributions with interest at 10% per annum  
if the company decided to not proceed to develop the Property within a 3-year  
period. As for the consequence of any missed servicing or cash call payments,  
Mr. Leslie understood that Embleton could place a lien on the lot that he had  
subscribed and prevent him from obtaining title until outstanding payments that he  
owed were paid. The APS that Mr. Pichelli faxed to Mr. Leslie on June 28, 2002  
did not provide for lot interests to be forfeited to Embleton for the non-payment of  
servicing or cash call payments. Based on these terms, Mr. Leslie chose to invest  
in the Project as a member of the Pichelli Group and made an initial $35,000.00  
payment followed by four cash call payments.  
[487] Similarly, Mr. Toth confirmed that Mr. Pichelli sent him the revised APS  
before the July 3, 2002 meeting. He generally shared Mr. Leslie’s understanding  
of the investment terms, and went on to make an initial $35,000.00 payment and  
two cash calls for his lot interest in the Project.  
- 241 -  
[488] It was not until August 2017 (i.e., in responding to a motion by the Pichelli  
Group for a Mareva injunction) that the Defendants first claimed no “meeting of the  
minds” in respect of the APS from the July 3, 2002 meeting. In para 15 of the  
Amended Amended Statement of Defence and Counterclaim, the Defendants  
assert that Anthony and Mr. Pichelli negotiated terms in June and July 2002 for  
Mr. Pichelli to buy five (5) lot interests in the Project. But at trial, no evidence was  
led of any negotiations between Anthony and Mr. Pichelli. Instead, Mr. Pichelli  
testified that he received a draft APS from John sometime prior to the July 3, 2002  
meeting and later sent a revised APS to Mr. Leslie and Mr. Toth in June 2002. In  
response to the Defendants’ summary judgment motion in 2018, Mr. Pichelli  
testified that John sent him a draft APS in late May 2002, which John  
acknowledged doing around that time. Mr. Pichelli also claims that he obtained  
legal advice from his late cousin, John Pichelli, who died in May 2013, which led  
to a revised APS with a 13-section Schedule “A” under cover of the APS signing  
page. According to Mr. Pichelli, he obtained a revised copy of the agreement from  
John sometime in mid to late June 2002 that bore, among other things, a  
2002/04/29 revised” date mark in the header on the first page of Schedule “A” to  
the alleged revised APS that Ms. Ceifets, Embleton’s real estate solicitor, had  
made when she drafted the template APS form with a 17-section Schedule “A”.  
But as the signing page to the alleged revised APS lists John Pichelli as the  
Purchaser’s solicitor with his contact information, which was not on the earlier  
version that John had sent, it seem that either John Pichelli or Peter Pichelli added  
- 242 -  
this to the APS which the Vuletics likely would not have seen or been aware of.  
The forfeiture term that favoured Embleton (i.e., in the event of unpaid cash call  
payments) did not appear in Schedule “A” to the alleged revised APS, however the  
10% interest provision that favoured the Pichelli Group was included in the  
agreement along with other changes.  
[489] During the July 3, 2002 meeting, the Vuletics and Mr. Pichelli signed multiple  
original versions of the APS. Anthony and John claim to have each signed one  
original APS on behalf of Embleton which Mr. Pichelli signed for his group. Having  
regard to the documentary evidence at trial, including Embleton’s own ledgers, it  
is clear that five (5) lot interests were allocated to the Pichelli Group in July 2002  
as follows:  
a) one interest to Mr. Toth  
b) one interest to Mr. Leslie  
c) one interest to 958041 Ontario Limited ( “958 Corp.”) being Mr.  
Pichelli’s company)  
d) one interest to Sam Veneri and Frank Campli and  
e) one interest to Campli Metals Inc., respectively.  
- 243 -  
Subsequently, Mr. Pichelli through 958 Corp. took over in 2006 the lot interest held  
by Mr. Veneri and Mr. Campli, and acquired in 2021 the lot interest held by Campli  
Metals Inc..  
[490] John and Anthony met with Mr. Pichelli at his office to sign the APS on July  
3, 2002. No one else attended the meeting. During the meeting, the Vuletics  
agreed to have Mr. Pichelli acquire five (5) rather than three (3) lot interests in the  
Project, which led to handwritten revisions to the APS contracts signed that day to  
reflect the acquisition of two more lots. Corresponding handwritten revisions were  
made to reflect the increase in the buyer’s initial capital contribution from  
$105,000.00 (i.e., for 3 lot interests at $35,000.00 per lot) to $175,000.00 (i.e., for  
5 lot interests) in the APS. But apart from these changes, the Defendants assert  
that all of the other changes to Schedule “A” of the APS were made by Mr. Pichelli  
without their knowledge or agreement. According to the Defendants, John and  
Anthony each signed an APS without reading its contents because they trusted  
Mr. Pichelli to not change the terms in the earlier version of the draft APS template  
that John had provided without first obtaining their consent or agreement.  
[491] Prior to trial, Mr. Pichelli claimed that the Vuletics had made all of the  
changes to the APS template, although this seems unlikely as John and Anthony  
apparently only had paper copies of the APS template and never received an  
electronic version from Ms. Ceifets after the template was drafted. The Vuletics  
claim that they did not bring any APSs to the July 3, 2002 meeting as John had  
- 244 -  
given the APS to Mr. Pichelli in May 2002. They also claim that Mr. Pichelli had  
paper APSs which they signed at the meeting believing them to simply be copies  
of the APS that John gave to Mr. Pichelli in May 2002. As Mr. Pichelli was the  
family accountant, John and Anthony apparently trusted him and simply signed the  
APS that he produced for their signature without bothering to read or check the  
APSs or any of the terms or schedules either before or after they signed them as  
none of the provisions were raised or discussed at the meeting. On Mr. Pichelli’s  
own evidence, many of the changes to the APSs that departed from what Ms.  
Ceifets had initially drafted were never discussed by the parties. Importantly, after  
denying that he had made any changes to the APSs, Mr. Pichelli testified under  
cross-examination at trial that typed changes to the signing page of the APS (i.e.,  
that added his name and the purchase price for the transaction) actually had been  
made by his own office staff acting on his instructions. To do this, his office staff  
would have prepared an electronic version of the APS.  
[492] Although much of the Schedule “A” content to the APS from July 3, 2002  
likely originated from the standard form APS template that Ms. Ceifets would have  
prepared for the Vuletics by April 29, 2002, the APS signed by the Vuletics and Mr.  
Pichelli on July 3, 2002 had significant changes that included, among other things,  
the complete removal of the management fee term in favour of Embleton. Mr.  
Pichelli claims that the Vuletics voluntarily removed this term from the APS that  
John gave him in May 2002 even though Mr. Pichelli admittedly never raised  
concerns over the management fee provision with the Vuletics. I do not accept  
- 245 -  
Mr. Pichelli’s evidence on this point as it lacks a compelling commercial  
explanation for why the Vuletics would unilaterally alter the standard APS template  
solely to their own detriment by waiving or removing Embleton’s right to charge  
management fees for work performed to develop the Project. While Mr. Pichelli  
may have claimed that the Vuletics were desperate to obtain the Pichelli Group’s  
funds to buy the Property and, therefore, waived Embleton’s right to management  
fees to close the deal, this was not borne by the evidence. Instead, without  
discussing Embleton’s right to management fees for the Project, Mr. Pichelli claims  
that the Vuletics unilaterally removed the management fee term under the APS  
that John earlier provided and later signed at the July 3, 2002 meeting. His account  
makes little sense and does not reasonably explain what likely occurred.  
[493] On balance, I am satisfied that Mr. Pichelli chose to unilaterally amend the  
draft APS terms without disclosing any of the changes to the Vuletics. His version  
of the APS effectively removed all of the terms that were favourable to Embleton  
and the other Defendants. Although Mr. Pichelli denied making these changes to  
the APS, I find that he likely did so by unilaterally revising the electronic copy of  
the APS that his office staff prepared for him. I also find that John and Anthony  
signed the paper copies of the APS that Mr. Pichelli provided them on July 3, 2002  
without reading the terms or content of the APS as they trusted him, as their  
family’s accountant, to have the APS ready for their signature that day based on  
the draft APS that John had given to him in May 2002 (i.e., based on the APS  
template that Ms. Ceifets had prepared). In turn, I find that John and Anthony  
- 246 -  
assumed that the APS they signed on July 3, 2002 was identical to the May 2002  
version of the APS.  
[494] For a contract to be valid and enforceable, there must be a meeting of the  
minds or consensus ad idem: Lee v. 1435375 Ontario Ltd., 2013 ONCA 516 at  
para 37. In determining whether a binding agreement exists, courts apply an  
objective test of whether a reasonable person in the particular circumstances  
would have believed and understood that the other party was consenting to the  
identical terms: Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003  
ABCA 221 at paras 9-10. To this end, in Jedfro Investments (USA) Ltd. v. Jacyk,  
2007 SCC 55 at para 17, the Supreme Court adopted the following passage by  
Lord Diplock in Paal Wilson & Co. A/S v. Partenreederei Hannah Blumenthal,  
[1983] 1 All ER 34 (HL) at pp. 48-49 regarding notion of consensus ad idem:  
To create a contract by exchange of promises between  
two parties where the promise of each party constitutes  
the consideration for the promise of the other what is  
necessary is that the intention of each as it has been  
communicated to and understood by the other (even  
though that which has been communicated does not  
represent the actual state of mind of the communicator)  
should coincide. That is what English lawyers mean  
when they resort to the latin phrase consensus ad idem  
and the words that I have italicised are essential to the  
concept of consensus ad idem, the lack of which  
prevents the formation of a binding contract in English  
law. [Emphasis added]  
[495] The principle that parties must be ad idem on the essential terms of a  
contract reflects the law’s attempt to protect reasonable expectations: S.M.  
Waddams, The Law of Contract, 6th Ed. (Toronto: Canada Law Book Inc., 2010)  
- 247 -  
at para 145. Where one party knew or ought to have known of the other’s mistake  
or misapprehension, the agreement should not be enforced.  
[496] In my view, the unilateral changes made by Mr. Pichelli to his version of the  
APS were significant and material. Among other things, Mr. Pichelli effectively  
removed Embleton’s ability under the APS to charge management fees for its work  
to develop the Property. As Embleton’s management fees were a critical  
compensation mechanism for the corporation, and also for the Vuletics, I accept  
that the management fee provision was an essential term under the APS and that  
its removal was a significant omission that neither the Vuletics nor the other  
Defendants intended. Similarly, I am satisfied that Mr. Pichelli’s removal of the  
APS’ default terms was significant and material as it removed Embleton’s  
contractual right to terminate the contract in the event of a failure by an investor to  
complete any monetary payment under the APS, which was an important if not  
essential term for the company. He also removed Embleton’s contractual ability  
to mortgage the Property to finance the servicing and development of the Project,  
which I accept would have been a significant and material limitation on Embleton’s  
ability to manage and develop the land. In addition, Mr. Pichelli removed other  
APS provisions that gave Embleton the ability to allocate specific lot locations  
within the Property, alter the number or frontage of lots for the Project, control  
access to the Property, limit an investor’s interests and remedies, exercise  
architectural control over dwellings to be constructed on the lots, and develop the  
Property together with owners of adjoining or adjacent properties, all of which I  
- 248 -  
accept would have imposed significant and material limitations on Embleton’s  
ability to manage and develop the Project. Collectively, all of the changes to Mr.  
Pichelli’s version of the APS were skewed entirely against Embleton to its sole  
detriment (i.e., by significantly hampering its ability to manage the Project) without  
conferring any advantages to Embleton by virtue of its revised terms. Given the  
collective nature and effect of the many APS changes that I find Mr. Pichelli  
unilaterally and surreptitiously made, I am satisfied that Mr. Pichelli would not have  
believed nor understood that the Vuletics acting on behalf of Embleton would have  
consented to his amended terms for the APS: Lee at para 37; Ron Ghitter at paras  
9-10; Jedfro at para 17.  
[497] In light of the foregoing, I am satisfied that there was no meeting of the minds  
in respect of the APS that Mr. Pichelli and the Vuletics signed on July 3, 2002. In  
my view, the parties were not ad idem on its essential terms, many of which Mr.  
Pichelli had removed without notifying the Vuletics or Embleton who remained  
unaware that the APS had been altered. In addition, I accept that Mr. Pichelli knew  
or ought to have known that the Vuletics had acted under a serious  
misapprehension by signing the APS with him without realizing that he had  
amended the contract without their knowledge or agreement. Having regard to all  
of the circumstances, I am satisfied that the APS executed by Mr. Pichelli and  
Embleton should not be enforced.  
- 249 -  
[498] Nevertheless, despite my finding that the APS is invalid and unenforceable,  
I find that the Pichelli Plaintiffs should receive a share of the sale proceeds of the  
Property on equitable grounds. I shall return to this point in my constructive trust  
and purchase money resulting trust analysis later in these reasons.  
f. The APSs were Not Forfeited for a Failure to Pay Cash Calls  
[499] In pleading their defence, the Defendants assert that Mr. Leslie, Mr. Toth,  
958 Corp. and Ms. Nizalek, Mr. McDowell and Ms. Bilich defaulted on at least one  
cash call and, therefore, forfeited their respective rights to a lot interest in the  
Property under the APS. They also assert that Mr. Pichelli acknowledged the  
defaults by the Pichelli Group members and took over 958 Corp.’s interests in one  
of the two lots that it had purchased. Respectfully, I am not persuaded by this  
position.  
[500] There is simply no provision under the APS that obliged any of the Plaintiffs  
to make any “cash call” payments to Embleton. The APS makes no mention of  
any cash calls, nor anything akin to cash calls, that investors had to pay under the  
agreement. As Anthony admitted, a cash call was a demand for an investor to pay  
funds in anticipation of services costs to be incurred or provided in the future, and  
was not an invoice for costs or services already incurred or provided.  
[501] The APS defines the term “servicing costs” at s. 4 of Schedule “A” to the  
agreement which is reproduced again for convenience as follows:  
 
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“Servicing Costs” shall mean and include all costs  
incurred by the Vendor in developing the land and  
registering a plan of subdivision (including without  
limitation the cost of all tests, inspections, certifications,  
plans, surveys, consultants, engineers, surveyors and  
other experts), and all costs incurred by the Vendor in  
providing the Services, as well as all levies,  
developmental charges, education development  
charges or any impost or other charges imposed by  
any Governmental Authorities or public or private utility  
corporation or required to be paid pursuant to any  
subdivision or other municipal agreement. In addition,  
the Servicing Costs for the Lots shall include such  
reasonable charges of the Vendor or any associated  
company or entity, for services provided in connection  
with the development of the land and the registration of  
the plan of subdivision including, without limitation the  
management and administration of the installation and  
completion of the Services (the “Administration Fee”).  
The Servicing Costs shall be allocated equally among  
all lots which form part of the plan of subdivision.  
Prior to the Closing Date, the Vendor shall invoice the Purchaser from time to  
time, for the Purchaser’s share of the Servicing Costs and the amount of such  
invoice will be payable by the Purchaser to the Vendor within thirty (30) days  
from the date of such invoice. Any failure by the Purchaser in making  
payment to the Vendor for Servicing Costs shall be deemed to be a monetary  
default hereunder and the provisions of paragraph 6 shall apply. The  
Purchaser further acknowledges that Servicing costs may be incurred after  
the closing Date and the Purchaser covenants and agrees to pay such  
Servicing Costs within thirty (30) days of being invoiced by the Vendor. The  
Vendor reserves a vendor’s lien on the Lots until the Servicing Costs have  
been fully paid. [Emphasis added]  
[502] Accordingly, to be a “servicing cost” that could trigger a monetary default  
and cause an investor to forfeit their interest under the APS, Embleton first was  
required to invoice the investor for their share of the servicing costs and then wait  
thirty days for payment. As none of Embleton’s cash call requests invoiced  
investors for their respective share of servicing costs that had been incurred, as  
Anthony conceded in his evidence, I am satisfied that none of the cash call  
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requests could lead to a monetary default upon an investor’s non-payment that  
could trigger a forfeiture of their interest under the APS.  
[503] In any event, even if the cash calls constituted a form of servicing cost  
charge contemplated under the above-mentioned terms, the APS is clear that  
servicing cost charges were to be “allocated equally among all lots that form part  
of the plan of subdivision.” Applying a reasonable and fair interpretation of this  
requirement, I am satisfied that the allocation term clearly required everyone  
asserting a lot interest in the Project to equally share any servicing costs in  
proportion to their interests in the development, which included the unallocated lot  
interests or lands for which the Defendants claimed to hold an interest. However,  
as set out earlier, neither the Vuletics nor their corporations paid a proportionate  
share of the expenses that were incurred to develop the Project. Instead, these  
expenses were borne by as few as 25 investors to cover expenses incurred for up  
to 108 lots. In addition, investors paid to subsidize the cost to develop the Ufkes  
and Teramoto lands without the Defendants ever disclosing these additional costs  
to the investors. Moreover, the cash calls paid by investors to the Defendants were  
never structured as funds earmarked or held in trust to pay for incurred Project  
expenses, but rather were comingled with operating funds which the Vuletics took  
and used for personal expenses or non-Project purposes as the Defendants have  
conceded. Accordingly, I do not find that any of the Plaintiffs’ interests under the  
APS were forfeited due to a non-payment of cash call demands.  
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[504] Under the above-mentioned APS terms, the only remedy open for Embleton  
in the event of a cash call default was to assert a lien on an investor’s lot which the  
investor would have to pay before the closing date to obtain title to a serviced lot.  
As Embleton never delivered serviced lots to investors, the matter of discharging  
a lien asserted against a subdivided and serviced lot for a cash call default never  
arose.  
[505] With respect to the Defendants’ defence that Mr. Pichelli himself  
acknowledged the alleged defaults and then assumed 958 Corp.’s interests, I am  
satisfied that Mr. Pichelli never assumed the interests of any lots owned by 985  
Corp. which he properly used as his holding company. As for the five lot interests  
acquired by members of the Pichelli Group under their APSs, I find on the record  
that:  
a) 958 Corp. acquired one lot interest  
b) Sam Veneri and Frank Campli acquired one lot interest which they  
later assigned to 958 Corp. in June 2006  
c) Campli Mentals Inc. acquired one lot interest which was then assigned  
to 958 Corp. in April 2021  
d) Mr. Toth acquired a lot interest and  
e) Mr. Leslie acquired one lot interest.  
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Accordingly, by the time of the trial in late 2021, Mr. Pichelli through 958 Corp. held  
three (3) lot interests while Mr. Toth and Mr. Leslie each held one lot interest. At  
no time did Embleton bring a legal proceeding for a declaration that any of these  
investors were in default for not paying cash calls. Although Anthony claimed that  
he sent registered letters to members of the Pichelli Group to advise them of  
Embleton’s apparent position that their lot interests were forfeited, the Defendants  
produced no records to corroborate that any letters were ever sent, let alone  
drafted. Anthony later changed his narrative to assert that he had spoken to Mr.  
Toth and Mr. Leslie by phone about their purported defaults, although none of this  
was corroborated by any records or other evidence. For their part, Mr. Toth claims  
that he never had any dealings with Anthony while Mr. Leslie claims that he never  
had any phone calls or meetings with the Vuletics.  
g. Breach of Contract  
[506] For the reasons that follow, I am satisfied that the Defendants breached their  
APS with the Plaintiff investors other than the Pichelli Plaintiffs. In light of my  
finding that the parties to the APS for the Pichelli Group had no consensus ad idem  
and, therefore, no valid APS was formed, my findings on breach of contract do not  
apply to that APS.  
[507] The goal when interpreting a contract is to determine the intention of the  
parties to the contract at the time that it was made: Jesuit Fathers of Upper Canada  
v. Guardian Insurance Co. of Canada, 2006 SCC 21 at para 27. The intention of  
 
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the parties is determined by reading the contract “as a whole, giving the words  
used their ordinary and grammatical meaning, consistent with the surrounding  
circumstances known to the parties at the time of formation of the contract: Sattva  
Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para 47.  
[508] The interpretation of a contract must always be grounded in its text and read  
in light of the entire contract: Sattva at para 57. The surrounding circumstances  
cannot be used to deviate from the text to effectively create a new agreement: Ibid.  
Evidence of the surrounding circumstances of a contract is only an interpretive aid  
for use in deciding the meaning of the written words chosen by the parties, and  
should not change or overrule the meaning of those words. But such evidence may  
allow the court to decide between the possible meanings of a contract and avoid  
an interpretation that would lead to an unrealistic result in favour of reaching a  
commercially sensible result: Consolidated-Bathurst Export Ltd. v. Mutual Boiler  
and Machinery Insurance Co., [1980] 1 SCR 888 at 901.  
[509] Evidence of “surrounding circumstances” or the “factual matrix” should  
consist only of objective evidence of background facts that were or reasonably  
ought to have been within the knowledge of the parties when the contract was  
executed: Sattva at para 58. Such knowledge includes anything that would have  
affected the way in which the language of the document would have been  
understood by a reasonable [person]”: Investors Compensation Scheme Ltd v.  
- 255 -  
West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912. To this end,  
relevant background facts include:  
a) the genesis, purpose or aim of the contract  
b) the nature of the relationship created by the contract and  
c) the nature of custom of the market or industry in which the contract  
was executed: IFP Technologies (Canada) Inc. v EnCana Midstream  
and Marketing, 2017 ABCA 157 at para 83; Sattva at paras 47-48.  
[510] Although a proper understanding of the factual matrix is crucial to the  
interpretation of many contracts, evidence of surrounding circumstances generally  
plays less of an interpretive role in cases involving standard form contracts as  
parties do not negotiate terms and the contract is put to the receiving party as a  
take-it or leave-it proposition”: Ledcor Construction Ltd. v. Northbridge Indemnity  
Insurance Co., 2016 SCC 37 at paras 28 and 32. Nevertheless, other evidence of  
the surrounding circumstances to a standard form contract, such as the purpose  
of the contract, the nature of the relationship it creates, and the market or industry  
in which it operates, will play a role in the interpretive process: Ledcor at para 30.  
[511] In this case, the subject APSs are clearly standard form contracts. The APS  
terms which the Plaintiff investors signed came from templates, were not  
negotiated in any meaningful way, are virtually identical, and the few modest  
differences between each version relate to matters that are not in dispute (i.e., the  
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APS signed by Ms. Nizalek and Mr. McDowell has a minor variation in the purchase  
price and variations to the closing date terms in s. 3 of Schedule A) or matters of  
simple nomenclature (i.e., variations between the terms “management fee” and  
“administration fee” in s. 4 of Schedule “A). Each of the modest differences  
resulted from changes made by the Vuletics to the operative standard form APS  
at points between March and October 2002. None resulted from requests made  
or concessions obtained by investors through negotiations. At one point, Ms.  
Grounds’ lawyer, Stanley Joffe, asked to negotiate changes to the APS but Ms.  
Ceifets, the lawyer for Embleton and the Vuletics, declined to negotiate. Apart from  
the situation involving the Pichelli Group, which has been discussed separately,  
none of the Plaintiff investors negotiated the terms of the APS which they signed.  
That said, the testimony from Ms. Ceifets, which was strongly bolstered by her  
work records and file notes, gave objective evidence of the surrounding  
circumstances related to the purpose of the APS and the relationships it embodied  
at the time the agreements were created.  
[512] In my view, there are a number of grounds for finding that the Defendants  
breached the terms of the APS with investors.  
[513] The Defendants did not provide services to the Property or distribute lots to  
investors after approval of its draft plan of subdivision had been obtained. Instead,  
believing that the costs to service the Property would be prohibitively expensive  
and unmanageable, the Defendants opted to discontinue their efforts to develop  
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the Project and sell the Property to a major developer at a profit. Clearly, by not  
discharging their obligations to provide the servicing infrastructure or deliver the  
lots required under the APS terms, the Defendants breached the contract on this  
basis alone. In addition, there are other grounds for finding that the Defendants  
were in breach of the APS.  
[514] The Defendants took substantial management fees for themselves without  
complying with the requirements under the second and third paragraphs of s.4 to  
Schedule A of the APS which provides a specific mechanism for invoicing and  
collecting management fees from investors:  
“Servicing Costs” shall mean and include all costs  
incurred by the Vendor in developing the Land and  
registering a plan of subdivision (including without  
limitation the costs of all tests, inspections,  
certifications, plans, surveys, consultants, engineers,  
surveyors and other expert(s), and all costs incurred by  
the Vendor in providing the Services, as well as all  
levies, development charges, education development  
charges or any impost or other charges imposed by  
any Governmental Authorities or public or private utility  
corporation or required to be paid pursuant to any  
subdivision or other municipal agreement. In addition,  
the Servicing Costs for the Lots shall include such  
reasonable charges of the Vendor or any associated  
company or entity for services provided in connection  
with the development of the Land and the registration  
of the plan of subdivision including without limitation the  
management and administration of the installation and  
completion of the Services (the “Management Fee”).  
The Servicing Costs shall be allocated equally among  
all lots which form part of the plan of subdivision.  
Prior to the Closing Date, the Vendor shall invoice the  
Purchaser from time to time, for the Purchaser’s chare  
of the Servicing Costs and the amount of such invoice  
will be payable by the Purchaser to the Vendor within  
thirty (30) days from the date of such invoice. …  
[Emphasis added]  
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[515] Although John and Anthony later had the APS revised to refer to an  
“Administration Fee” instead of a “Management Fee”, the operative language  
remained unchanged. In principle, the management fee comprises an aspect of  
Servicing Costs that may only encompass “reasonable charges” associated with  
developing and servicing the Project that must be invoiced and communicated to  
investors to give them oversight of these costs.  
[516] The requirement under the APS for management fees to be invoiced and  
communicated to investors reflected Ms. Ceifet’s instructions from John and  
Anthony and was intentionally included to provide a mechanism for Vuletics to  
“charge” or “bill” their work in carrying the Project. However, over the life of the  
Project, the Defendants never followed the process required by the APS for  
charging management fees. Not only were invoices for management fees never  
sent to investors, but the Defendants ended up taking Project funds directly from  
Embleton and 185 Corp. bank accounts ostensibly as management fees but  
without ever informing investors that they were doing this or otherwise asserting  
any entitlement to take any management fees. None of this is disputed by the  
Defendants, who have conceded that the APS was the only source of their right to  
management fees for the Project. Rather, John and Anthony clearly admit that  
management fees were improperly taken from Project funds without any disclosure  
to the Plaintiffs or other investors for many years.  
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[517] John and Anthony tried to explain their practice of taking undisclosed  
management fees by claiming to have an unlimited or unbridled discretion to deal  
with funds belonging to Embleton and 185 Corp., ostensibly due to the closely-  
held nature of these companies and their apparent decision to mirror private-equity  
compensation practices. However, none of this excuses their breach of the terms  
of their own standard form APS by unilaterally ignoring the invoicing mechanism  
under s. 4 of Schedule A in favour of their own approach which lacked  
transparency. The language in s. 4 for Embleton to charge management fees  
could not be clearer and clearly did not give the Defendants any discretion to  
unilaterally take Project funds as management fees without any transparency for  
investors. By their actions, the Defendants showed their complete indifference to  
being held accountable for taking Project funds. Their breach of the APS on this  
basis is plain, obvious and beyond any doubt.  
[518] I am satisfied that the Defendants were motivated by self-interest in  
deliberately ignoring the process under the APS for charging management fees.  
By avoiding the process that embodied a threshold of reasonableness between  
the amount billed and the work performed, the Defendants reserved to themselves  
an unchecked ability to unilaterally set their own fees with impunity. This gave  
them the ability to maintain a significant cash flow over time which they did not  
bargain for, and which they likely would not have achieved through other business  
activities. Their intentional disregard for the management fee process deprived  
the investors from bringing any oversight to the reasonableness or value of the  
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management fees being taken from Project funds, which is precisely the oversight  
that the APS gave investors which they lost through the breach.  
[519] Over the lifespan of the Project from July 2002 through September 2016,  
the Defendants unilaterally took $866,436.00 in Project funds as management  
fees, according to the KSV Report, which far exceeded the direct Project-related  
costs over that period.  
[520] The Defendants’ claim that investors somehow learned how management  
fees were being taken and allegedly waived strict compliance with the terms under  
s. 4 terms by consenting to this. But their evidence on this point is quite vague  
and only starts in 2010 after they had been taking undisclosed management fees  
since 2002. In April 2010 and November 2011, Anthony claimed to have informed  
Ms. Kostelac that he had been taking mortgage proceeds to pay his personal  
expenses, but he later admitted that he does not recall ever having discussed his  
management fees (i.e., as opposed to his personal spending of mortgage funds)  
with Ms. Kostelac. For her part, Ms. Kostelac testified that April 2010 meeting had  
included a discussion with the Vuletics about a $100,000.00 loan to Anthony  
carved from the $600,000 MCAP mortgage, but that neither John nor Anthony had  
suggested that this would impact cash calls to investors or be claimed as  
management fees. Mr. Adair testified that Ms. Kostelac knew about the use of  
proceeds for personal expenses, but gave no particulars to support this. In any  
event, I do not accept the proposition that Mr. Kostelac, even if fully informed,  
- 261 -  
would or could relieve the Defendants of their transparency obligations to investors  
under s.4 and leave them able to continue taking undisclosed management fees  
without oversight.  
[521] The Defendants also breached s. 4 of Schedule A to the APS by not  
allocating Servicing Costs equally amongst all lots. As set out in the last sentence  
of the second paragraph to s. 4:  
The Servicing Costs shall be allocated equally among  
all lots which form part of the plan of subdivision.  
[Emphasis added]  
[522] The directive under this provision of s. 4 is clear, unambiguous and  
mandatory. Servicing Costs were to be calculated and billed on an equal per lot  
basis across the Project.  
[523] The “Initial Concept” set out in s. 1(c) of the APS was to achieve a registered  
plan of subdivision with 51 lots comprising 47 “Standard Lots” and 4 “Premium  
Lots”. Although the Initial Concept was subject to modification and the number of  
lots in the plan of subdivision as ultimately registered could have been other than  
51 lots, the calculation and billing of Servicing Costs along the way to a registered  
plan of subdivision could only be based on the anticipated 51 lots. Giving the  
words “shall be allocated equally among all lots which form part of the plan of  
subdivision” their ordinary and grammatical meaning, and then reading these  
words together with the “Initial Concept” in s. 1(c) allows for no other reasonable  
interpretation.  
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[524] As set out earlier, there were five (5) cash calls. However, Embleton and  
185 Corp. did not calculate the cash calls based on the 51 lots comprising the Initial  
Concept for the Project. Instead, the Defendants calculated the cash calls based  
on the number of lot subscriptions from investors. Importantly, the Defendants  
unilaterally chose to exclude themselves from the field of investors that had  
subscribed for a lot and, on this basis, paid no cash calls for any of their four  
Premium Lots or any of the unsold “residual” Standard Lots (i.e., that comprised  
about 65% of the total number) which the Defendants took as their own  
“compensation”. The Defendants chose to not pay for any of these “residual” lots  
and not disclose their claimed interest in them to investors.  
[525] In effect, the Defendants unilaterally chose to exempt themselves from  
making any cash call payments for the Premium and Standard Lots they  
appropriated, which reduced the number of payors and correspondingly increased  
the cash call amounts that the investors ended up paying. Moreover, at certain  
times, Anthony decided unilaterally to waive cash calls for certain investors,  
including Mr. Kegalj, Mr. Sokic and Mr. Granic, without disclosing this to investors  
who were unaware that cash calls were not being paid equally. The Defendants  
were not entitled to proceed in this way. Section 4 to Schedule A of the APS clearly  
required servicing payments to be spread equally across all lots to the Project.  
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[526] As the Defendants directly took mortgage proceeds from Project funds to  
pay personal and non-Project expense, the Plaintiffs further submit that the  
Defendants breached s. 9(f) of Schedule A to the APS, which provides:  
The Purchaser agrees that the Vendor is permitted to  
mortgage the Land for purposes of completing the  
Services and the Development of the Lands and further  
agrees that this Agreement is subordinate to and  
postponed to any mortgages arranged by the Vendor  
and any advances thereunder from time to time, and to  
any easements, licenses or other agreements  
concerning the Lands and/or the Logs. [Emphasis  
added]  
“Services” is defined under the first paragraph to s. 4 of Schedule A to the APS as  
follows:  
“Services” shall mean and include any services to be  
installed within the Land or within any registered plan  
of subdivision in which the Land shall be situate, by the  
Vendor or any other person or entity (including any  
Governmental Authorities) including, without limiting  
the generality of the foregoing, survey stakes,  
landscaping, curbs, curb cuts, streets, temporary or  
permanent roads and all components thereof,  
sidewalks, walkways, street signs, street lighting,  
sanitary and storm sewers (including connections),  
water mains (including connections) and all  
appurtenances relating to any of the foregoing  
services, any underground hydro services, gas service,  
telephone, internet and cable transmission lines or any  
other installations effected for the purpose of public  
utilities.  
[527] Based on their reading of s. 9(f), the Plaintiffs submit that the Defendants  
were restricted under the APS from receiving management fees directly from  
mortgage proceeds. Although this strict interpretation may arguably apply in  
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respect of the ability to mortgage the Property for purposes of competing the  
Servicesunder the APS definition set out above, s. 9(f) also permits the use of  
mortgage proceeds to complete “the Development of the Lands” which is captured  
under the “Servicing Costs” definition under s. 4 of Schedule A, reproduced above.  
Given this language, I am not persuaded that the Defendants were necessarily  
precluded by s. 9(f) from recouping legitimate management fees from Project  
mortgage proceeds given their ability under the second paragraph to s.4 of  
Schedule A of the APS to collect management fees incurred in developing the  
Property so long as the invoicing requirements under the third paragraphs of s. 4  
to Schedule A of the APS was satisfied. However, as the Defendants issued no  
invoices, I accept that they acted in breach of s.4 by unilaterally taking Project  
funds as management fees without giving investors, including the Plaintiffs, any  
invoices to provide transparency for these management fees.  
[528] By ignoring the APS’ specific management fee mechanism in favour of  
taking Project funds as unilateral and undisclosed management fees, I find that the  
Defendants breached their duty of honest performance to investors. The good  
faith performance of contractual obligations is a general organizing principle of  
contract law:  
This organizing principle is simply that parties generally  
must perform their contractual duties honestly and  
reasonably and not capriciously or arbitrarily.  
- 265 -  
The organizing principle of good faith exemplifies the  
notion that, in carrying out his or her own performance  
of the contract, a contracting party should have  
appropriate regard to the legitimate contractual  
interests of the contracting partner.  
Bhasin v. Hrynew, 2014 SCC 71 at paras 63 and 65  
[529] The duty of honest performance is a specific good faith doctrine that comes  
under the ambit of the general organizing principle:  
[T]here is a general duty of honesty in contractual  
performance. This means simply that the parties must  
not lie or otherwise knowingly mislead each other about  
matters directly linked to the performance of the  
contract. This does not impose a duty of loyalty or  
disclosure … it is a simple requirement not to lie or  
mislead the other party about one’s contractual  
performance. … The requirement to act honestly is one  
of the most widely recognized aspects of the organizing  
principle of good faith.  
Bhasin at para 73.  
[530] More recently, the duty of honest performance has been described in these  
terms:  
[The] requirements of honesty in performance can, and  
often do, go further than prohibiting outright lies.  
Indeed, the concept of “misleading” one’s counterparty  
… will in some circumstances capture forms of silence  
or omissions. One can mislead through action, for  
example, by saying something directly to its  
counterparty, or through inaction, by failing to correct a  
misapprehension caused by one’s own misleading  
conduct. To me these are close cousins in the  
catalogue of deceptive contractual practices.  
At the end of the day, whether or not a party has  
“knowingly misled” its counterparty is a highly fact-  
specific determination, and can include lies, half-truths,  
omissions, and even silence, depending on the  
circumstances. I stress that this list is not closed; it  
merely exemplifies that dishonesty or misleading  
- 266 -  
conduct is not confined to direct lies. [Citations  
omitted; emphasis added]  
C.M. Callow Inc. v. Zollinger, 2020 SCC 45 at paras 90-  
91.  
[531] In my view, the Defendants breached the duty of honest performance by  
ignoring the specific management fee mechanism under s.4 of Schedule A to the  
APS in favour of taking fees on a unilateral and undisclosed basis, and by not  
disclosing to investors that Servicing Costs were not being allocated equally across  
all lots to the “Initial Concept” of the Project. By their omissions, silence and non-  
disclosures, I am satisfied that the Defendants knowingly misled investors out of  
clear self-interest to pay themselves unchecked management fees while not  
paying their share of servicing costs under the terms of the APS which they had  
drafted. Through deliberate non-disclosure for personal gain, the Defendants  
improperly took management fees and evaded cash calls over the better part of  
14 years. Given the overwhelming evidence of their deceptive conduct by their  
omissions, silence and non-disclosures, I find that none of their actions can  
reasonably be attributed to honest mistakes.  
[532] In addition to breaching their duty of honest performance, I am satisfied that  
the Defendants failed to exercise their discretionary powers under the APS in good  
faith by living rent-free on the Property and by using Project funds to develop the  
adjacent Ufkes and Teramoto lands without providing investors with any disclosure  
of this.  
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[533] Beyond the requirement of honest performance, a party is required to  
perform discretionary power under a contract in good faith. Where a party’s  
exercise of a contractual discretion is unconnected to the purpose for which the  
contract granted the discretion, the contractual power is not exercised in good faith:  
Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District,  
2021 SCC 7 at para 69. This principle is elaborated as follows:  
[70]  
The touchstone for measuring whether a party  
has exercised a discretionary power in good faith is the  
purpose for which the discretion was created. Where  
discretion is exercised in a manner consonant with the  
purpose, that exercise may be characterized as  
reasonable according to the bargain the parties had  
chosen to put in place. Perforce, the exercise of power  
consonant with purpose may be thought of as  
undertaken fairly and in good faith on the parties’ own  
terms. As such, barring issues such as  
unconscionability not raised in this appeal, that  
exercise is best understood, as a general matter, to be  
insulated from judicial review as a matter of fairness.  
[71]  
But where the exercise stands outside of the  
compass set by contractual purpose, the exercise is  
unreasonable in light of the agreement for which the  
parties bargained and, as such, it may be thought of as  
unfair and contrary to the requirements of good faith.  
Scholars commenting on trends in common law  
jurisdictions have observed that “courts have  
repeatedly held that discretionary contractual powers  
should not be exercised for an ‘improper’ or  
‘extraneous’ purpose” (J. M. Paterson, “Implied Fetters  
on the Exercise of Discretionary Contractual Powers”  
(2009), 35 Mon. L. R. 45, at p. 54). As Professor  
Collins has written, “[t]he good faith standard . . .  
enables a court to control discretionary decisions that  
are perceived to be based on improper purposes, that  
is where the power is used for a purpose not originally  
expected by the subject of the power” (H. Collins,  
“Discretionary Powers in Contracts”, in D. Campbell,  
H. Collins and J. Wightman, eds., Implicit Dimensions  
of Contract: Discrete, Relational and Network  
Contracts (2003), 219, at p. 223). It is this principle that  
constrains contractual discretion and, accordingly,  
- 268 -  
fixes the proper limits for judicial review of the exercise  
of the power. Importantly, it is not what a court sees as  
fair according to its view of what is the proper exercise  
of the discretion. Instead, drawing on the purpose set  
by the parties, the measure of fairness is what is  
reasonable according to the parties’ own bargain.  
Where the exercise of the discretionary power falls  
outside of the range of choices connected to its  
underlying purpose outside the purpose for which  
the agreement the parties themselves crafted provides  
discretion it is thus contrary to the requirements of  
good faith. Courts can then intervene, for example,  
where the exercise of the power is arbitrary or  
capricious in light of its purpose as set by the parties.  
[Emphasis added]  
Wastech at paras 70-71.  
[534] Relying on its discretion under s. 2 of Schedule A to the APS, the Defendants  
made a unilateral and undisclosed decision to live in the house on the Property on  
a fully rent-free basis between August 2002 and September 2016 by purportedly  
invoking s. 2 of Schedule A that states:  
The Purchaser acknowledges and agrees that at any time up until the Closing  
Date as set out below, the Vendor may permit the Land to be used for any  
purpose, and on such terms and conditions as the Vendor may determine in  
its sole and absolute discretion. The Vendor covenants to proceed diligently  
with its plans to develop the Land as provided for herein. [Emphasis added]  
[535] When the APS was being prepared, Ms. Ceifets clearly cautioned John and  
Anthony that not disclosing their intention to live in the home on the Property in the  
APS may be seen by some investors “as not being entirely forthrightover  
concerns that the Vuletics were using their money to acquire a place to live rent  
and mortgage free while the Property was being developed. John and Anthony  
agreed to think about this, but several days later they expressly instructed Ms.  
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Ceifets to remove all mention of the home on the Property and its use(s) stating,  
[w]e feel this is not necessary [to] mention to any parties.” In effect, the Vuletics  
deliberately chose the path of non-disclosure. For his part, Anthony testified that  
he preferred the revised version of s. 2 to Schedule A of the APS that was silent  
about the house on the Property relative to an earlier clause which had disclosed  
the Vuletics’ intention to live there.  
[536] The Defendants’ opportunistic decision to confer a personal benefit on the  
Vuletics by allowing them to live in the house rent-free for an infinite period fell well  
outside any legitimate range of choices connected to the underlying purpose of the  
discretionary grant under s. 2 of Schedule A to further the Project. The decision  
to give the Vuletics a personal benefit was simply unrelated to any legitimate or  
reasonable Project-related interest. As Embleton’s compensation for legitimate  
work on the Project was specifically provided for through the management fee  
mechanism, I find that it was not open for compensation to be enhanced through  
an opportunistic and self-interested exercise of a discretionary power under a  
different part of the APS to confer this undisclosed benefit to the Vuletics. In my  
view, this is precisely the kind of arbitrary or capricious exercise of discretion that  
warrants judicial intervention: Wastech at para 71.  
[537] In similar fashion, the Defendants relied on s. 9(q) of Schedule A to the APS  
to support their contention that investors have no entitlement to share in the portion  
of the Property sale proceeds, said to approach $2.2 million, which they attribute  
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to roughly two acres that were the subject of land exchange agreements between  
185 Corp. and Mr. Ukfes and the Teramotos in 2014. Section 9(q) provides:  
The Purchaser acknowledges and agrees that the  
Vendor may develop the Lands together with owners  
of adjoining or adjacent properties and that any  
Municipal Agreements and/or other governmental or  
other requirements or title matter may affect the Land  
and other lands. [Emphasis added]  
[538] In his evidence, Anthony claimed that the proceeds he says are attributable  
to these two acres are his personal compensation for assisting Mr. Ufkes and the  
Teramotos in bringing their respective properties into the draft plan of subdivision  
and thus fall beyond the reach of the Plaintiffs. But Anthony used Project funds to  
pay for the development costs associated with Ufkes and Teramoto lands, which  
came at the expense of Project investors.  
[539] In my view, the purpose of s. 9(q) was to grant Embleton the discretion to  
identify and make reasonable arrangements with owners of adjoining or adjacent  
lands, like Mr. Ufkes and the Teramotos, that would be appropriately beneficial for  
the Project, recognizing that there might be efficiencies or advantages that accrue  
to the Project, and therefore investors, from jointly pursuing development work with  
neighbouring landowners. However, for the same reasons discussed in respect of  
the discretionary power in s. 2 of Schedule A, I find that the s. 9(q) discretion cannot  
be exercised in a way that purports to transfer any realized benefits solely to  
Anthony as his personal compensation at the expense of those who have invested  
in the Project. Such an opportunistic and self-interested exercise of discretion falls  
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entirely outside of the purpose of the s. 9(q) discretionary power, which is meant  
to benefit the Project. The opportunistic nature of Anthony’s position is all the more  
egregious given the use of Project funds at investor expense to develop the Ufkes  
and Teramoto lands for which he now claims any proceeds as his personal and  
exclusive compensation.  
h. Fraud, Deceit and Fraudulent Misrepresentation  
[540] For the reasons that follow, I am satisfied that the Defendants perpetrated a  
fraud against the Plaintiffs by making misrepresentations that induced them to  
invest and remain in the Project.  
[541] The tort of civil fraud is comprised of the following four (4) elements:  
a) a false representation made by the defendant;  
b) some level of knowledge of the falsehood of the representation on the  
part of the defendant (whether through knowledge or recklessness);  
c) the false representation cause the plaintiff to act; and  
d) the plaintiff’s actions resulted in a loss.  
Bruno Appliance and Furniture Inc. v Hryniak, 2014  
SCC 8 at para 21.  
[542] Under the analysis for civil fraud, a false representation may involve an overt  
statement of fact and also certain kinds of silence, namely half-truths or  
representations that are practically false from what is left unsaid or where the  
circumstances raise a duty on the representor to state certain matters, if they exist,  
whereby the representee may infer their non-existence from the representor's  
 
- 272 -  
silence: Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320 at para  
163, leave to appeal denied 2017 86178 (SCC). A party in pre-contractual  
discussions must ensure that its representations are accurate to avoid a  
misrepresentation and may have a duty to speak when its silence effectively  
makes a representation inaccurate: Xerex Exploration v. Petro-Canada, 2005  
ABCA 224 at paras 56-58; C.M. Callow at paras 89-91 and 132. A statement of  
intention of future conduct that is not intended to be fulfilled gives rise to a  
misrepresentation: Edgington v. Fitzmaurice, [1885] EWCA Civ 1 at para 3; Ma v.  
Nutriview Systems Inc., 2014 BCSC 725 at paras 192-194, affirmed 2016 BCCA  
4, leave to appeal denied 2016 33998 (SCC).  
[543] Under the second arm of the test for civil fraud, the false representation must  
have been made either with knowledge of its falsity or without an honest belief in  
its truth, or recklessly as to whether it is true or false: Parna v. G&S Properties Ltd.,  
[1971] SCR 306 at 316-317. It is unnecessary for the plaintiff to show that the  
defendant intended to cause the plaintiff’s loss and a defendant’s motive is  
irrelevant: Fiorillo v. Krispy Kreme Doughnuts Inc., 2009 29902 (ONSC) at  
paras 75-77. Representations made through negligence, carelessness or wishful  
thinking are not enough to establish fraud in the absence of moral recklessness or  
a callous disregard as to whether the statement is true or false: McLaughlin v.  
Colvin, [1941] 4 DLR 568 (ONCA) at 583, affirmed [1942] 3 DLR 292 (SCC).  
- 273 -  
[544] The third arm of the analysis for civil fraud requires the misrepresentation to  
be acted upon. The plaintiff is not required to show that the false representation  
was the sole inducement but only that it was a material influence. If the  
defendant’s misrepresentation was calculated to induce reliance or had the natural  
effect of inducing reliance, the Court can infer that the plaintiff relied on the  
misrepresentation from all the circumstances. If a misrepresentation is obviously  
material, it is a natural inference that the plaintiff relied on it: Borrelli (SCJ) at para  
918.  
[545] Finally, to establish the tort of civil fraud, the plaintiff must show that they  
suffered damage by acting on the misrepresentation without having to show that  
the defendant profited or personally benefitted from the misrepresentation: Borrelli  
(SCJ) at para 921.  
[546] Courts apply the same test for civil fraud as they do for the torts of deceit  
and fraudulent misrepresentation: Paulus v. Fleury, 2018 ONCA 1072 at paras 8-  
10, leave to appeal denied 2019 53418 (SCC). Historically, a fifth element  
of the tort of fraudulent misrepresentation as been applied, which requires an  
intention on the part of the defendant that the false representation be acted on by  
the plaintiff: Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320 at para  
162, citing Amertek Inc. v. Canadian Commercial Corp. (2005), 76 OR (3d) 241  
(CA) at para. 63, leave to appeal denied [2005] SCCA No 439. There is some  
uncertainty as to whether an intention that the false representation be acted on is  
- 274 -  
a necessary element of a fraudulent misrepresentation claim: Trump v. Singh,  
2016 ONCA 747 at para 141, leave to appeal denied 2017 12224 (SCC).  
Should it constitute a necessary element for such a claim, an intention may be  
proven directly with evidence or inferred from the lack of evidence of a credible  
explanation for the actor’s concealment or false representation: Precision Drilling  
Canada Limited Partnership v Yangarra Resources Ltd, 2017 ABCA 378 at para  
32.  
[547] As set out in the following discussion, I am satisfied that John and Anthony  
knowingly and intentionally made a number of false representations to investors.  
[548] Both falsely assured investors that John was an experienced real estate  
developer even though the Project was his first development undertaking of this  
sort. They also told investors that Anthony was a lawyer to falsely bolster his  
professional status and instill investor confidence. They did not inform investors  
that Anthony would take on a significant decision-making role and largely run the  
Project despite having no land development experience. I have no doubt that John  
and Anthony clearly knew that the misrepresentations were false and deliberately  
made them to solicit investors and obtain their investment funds.  
[549] During the Restaurant Meeting in 2001, John falsely informed attendees that  
he would be contributing money to the Project to fund the development activities.  
He later made similar false representations to Ms. Nizalek and Mr. McDowell that  
he had bought the Property and lots in it. None of this was true. Neither John nor  
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Anthony, who also was at the Restaurant Meeting, had any of their own funds to  
contribute to the Project, as they both clearly knew. John was a declared bankrupt  
who had been discharged only a few years before the Restaurant Meeting in 2001,  
which neither he nor Anthony disclosed to investors. According to his 2002 tax  
returns, John’s income that year was only $17,997.00 which clearly left him without  
any means to purchase the Property. For his part, Anthony had student loans and  
lacked credit worthiness to make the sort of financial contributions to the Project  
that John and himself had represented to investors. Although John initially posted  
$60,000.00 to the Project by borrowing these funds, this relatively modest amount  
(i.e., in comparison to what investors paid to Embleton), was immediately  
reimbursed to him with Project funds and, therefore, did not comprise a net capital  
contribution to the Project at its outset. Similarly, Anthony initially posted  
$19,400.00 to the Project but was immediately reimbursed with Project funds  
which also left him without any up-front net capital contribution to the Project either.  
Given their limited financial means, I am quite satisfied that John and Anthony  
clearly knew that neither would make an initial net capital contribution and that any  
such misrepresentations were intended to reassure investors into joining the  
Project by falsely suggesting that their interests were aligned given their own  
personal investments in the development of the Property. Neither John nor  
Anthony sought to later correct any of these misrepresentations to investors.  
[550] John and Anthony falsely represented at the Restaurant Meeting that all lot  
interest holders would proportionately share the Project costs, which later formed  
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a term of the APS with investors. They later continued to share this  
misrepresentation with investors over the course of the Project by telling investors  
that the costs to service the Property would be paid in proportion to the lot interests  
held in the Project. However, the Vuletics paid no cash calls and chose to relieve  
some investors from having to pay their proportionate cash calls by entering into  
special arrangements. They also negotiated contracts that did not require some  
investors to pay their proportionate share of servicing costs. In addition, the  
Vuletics allowed for investors to quit the investment without paying servicing costs  
as set out in Anthony’s communications with Mr. Kegalj which set this out. Taking  
this all into account, I am satisfied that John and Anthony were quite aware that  
the representation about the proportional sharing of Project costs was false and  
was made with the intention of satisfying certain investors that costs would be  
equitably shared while also reassuring other investors who could not afford the  
servicing costs that they could leave the investment without incurring these costs,  
all in an effort to preserve their investor base and best maintain their funding in the  
Project.  
[551] During the Restaurant Meeting in 2001, and during their meeting with Mr.  
Soriano, John and Anthony represented that the Property would have 51 lots with  
each lot having a 50 foot frontage and a 140 foot depth. Later, in the prospectus,  
brochure and other promotional material for the Project, they guaranteed that  
investors would receive delivery of their subscribed lots in accordance with these  
lot dimensions. During a pre-contract meeting at the Workplace Group office,  
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Anthony told Ms. Kostelac of the intention to develop 50 x 140 foot lots on the  
Property. In addition, John and Anthony made the same representations with  
respect to the number of lots, the size of lots, and the delivery of lots to Mr. Savona  
and Ms. Nizalek, respectively. However, as the Project advanced, John and  
Anthony clearly knew that these representations were false after embarking on  
multiple development applications with the City of Brampton over the course of the  
Project for subdivision approval at a much higher density with a greater number of  
lots and correspondingly smaller lot sizes for the Property. In the circumstances,  
I find that John and Anthony knowingly made false representations to the Plaintiffs  
about the size of their lot interests to falsely suggest that the Project was advancing  
as planned to avoid any hesitation by the Plaintiffs in remaining with the Project by  
not disclosing Embleton’s efforts to obtain a higher lot density for the Project to  
achieve higher returns.  
[552] John and Anthony advised investors that Embleton would hold title to the  
Property. However, even before the Restaurant Meeting occurred, both clearly  
knew that this representation would be false as they had arranged for Mr. Kegalj  
to take a mortgage on the Property that required him to personally hold title which  
he did for many years. Neither John nor Anthony disclosed any of this to investors,  
or otherwise take steps to correct their misrepresentation.  
[553] To promote the Project to investors, the Defendants circulated a prospectus,  
a brochure and other marketing materials which falsely advised that the Property  
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was zoned for executive housing. This representation was clearly incorrect as the  
land had a Village Residential zoning designation (i.e., that only permitted 12 lots  
on the Property) which John and Anthony were keenly aware of.  
[554] At intervals, Anthony and John falsely told the Plaintiffs that the Project was  
facing significant costs to advance the development of the Property. Their  
misrepresentations grossly exaggerated the actual Project development costs in  
an effort to falsely justify demands for cash call contributions from the Plaintiffs to  
purportedly cover these costs. In reality, the actual Project costs were  
comparatively modest yet many went unpaid to preserve the Vuletics’ ability to use  
Project funds for their personal expenses that were unrelated to developing the  
Property. From the evidence, I am satisfied that the false representations  
regarding development costs were intended to mislead investors into believing that  
the Project’s progress was on track while not disclosing that various subdivision  
applications to the City of Brampton had been rejected as being premature (i.e.,  
as City first required macro block plan issues to be addressed before specific  
subdivision plans would be considered). In turn, the Property continued to have  
a Village Residential zoning designation that simply could not accommodate its  
contemplated development under the Project. None of these true facts or risks  
were disclosed to investors.  
[555] The Vuletics represented to investors that cash calls were being used to pay  
for legitimate development expenses to advance the Project. This representation  
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was largely false as cash calls, were comingled with other Project funds and mainly  
used to pay for personal expenses that did not have a legitimate Project purpose.  
Among other things, the Vuletics spent Project funds on furniture, food, jewellery,  
international travel, an adult film venture, and an unrelated development project in  
Oakville.  
[556] The Defendants falsely represented in the APS and other Project materials  
to investors that proceeds from mortgages on the Property would be used to  
develop the Project. However, the Vuletics always took mortgage proceeds to pay  
for personal and non-Project expenses and, in effect, treated the proceeds as their  
own funds for the taking. Mira, the bookkeeper, was a knowing participant in this  
scheme as she maintained records of the Project funds which the Vuletics took for  
their personal use. The Vuletics also used Project funds to develop the  
neighbouring Ufkes and Teramoto lands with a view to generating a personal profit  
from this effort without sharing any profits with Project investors who unknowingly  
paid to develop these adjacent lands.  
[557] Under the APS, Embleton was entitled to take an administrative or  
management fee by invoicing for work performed on the Project. However, despite  
representing that management fees would be drawn by this process, the Vuletics  
simply helped themselves to Project funds for their personal and non-Project  
expenses by taking substantial Project funds which they characterized as  
- 280 -  
management fees without issuing any invoices or providing any transparency to  
investors.  
[558] When asked how the Property would be used pending its development, the  
Vuletics represented that it would be used to further the Project. This  
representation was clearly false. As Ms. Ceifets’ file showed, the Vuletics always  
had an intention to live rent-free on the Property and deliberately chose to not  
disclose this to investors.  
[559] In marketing materials, the Vuletics falsely represented to investors that  
Project lots were sold out (i.e., that further lots were not available). However, it is  
apparent from Ms. Ceifets’ file that they knew in 2002 that there would be unsold  
lots which they planned to claim for themselves without disclosing this to others.  
Her file also reveals that the Vuletics believed in 2002 that they had to purchase  
the unsold lots which they were planning to do using surplus funds from investors.  
But they never paid for any unsold lots which they chose not to sell to maintain  
their purported share of the Project. In the end, the Vuletics covertly reserved  
about 65% of the lots for themselves without paying anything or making any cash  
calls attributable to these lots.  
[560] During the course of the Project, the Defendants repeatedly gave  
assurances to investors of their commitment to complete the Project with the  
registration of a plan of subdivision after which lots would be transferred to  
investors. In turn, investors were asked to make cash call payments to advance  
- 281 -  
the development of the Property. However, it is quite apparent from the Statement  
of Intention that the Defendants had decided in 2009 to not develop the Project but  
instead sell the Property as they did in 2016. Among other things, the Statement  
of Intention confirmed Anthony’s belief that John was incapable of developing the  
Project due to his age and poor health which made their decision to sell the  
Property in its undeveloped state even more apparent. In my view, the Statement  
of Intention revealed their true intentions and showed that any assurances given  
after 2009 that the Property would be developed were clearly untrue and intended  
to mislead investors into paying cash calls to make Project funds available for the  
Vuletics’ personal use.  
[561] Anthony and the other Defendants falsely represented that investors would  
receive a proper accounting at the end of the Project. In addition, Anthony and  
John further agreed to give investors an accounting in the minutes of settlement  
which they entered into with Mr. Kegalj in July 2011. However, in the end, they  
never gave investors a proper accounting with accurate or meaningful information.  
The accounting that Mr. Hinchliffe prepared for investors only gave aggregated  
figures that lacked meaningful detail and contained material omissions which made  
the accounting inaccurate and unreliable as Anthony himself conceded. Despite  
Mira’s ledger and bookkeeping records that detailed the fund appropriated by the  
Vuletics for themselves, Mr. Hinchcliffe’s accounting revealed none of this despite  
representations by the Defendants that his accounting reflected statements and  
receipts which they had provided to him. In the circumstances, I am satisfied that  
- 282 -  
the Defendants knowingly made false representations about the accounting, which  
never materialized, to reassure investors about the Project so they would stay with  
the investment and their funds would remain available for the Vuletics use.  
[562] Ultimately, for the reasons described earlier, I conclude that the Defendants  
were aware of the falsity of the representations to the Plaintiffs and lacked an  
honest belief in their truth. Their motives or intentions are immaterial: Bruno at  
para 18.  
[563] I am satisfied that the Defendants intended for the Plaintiffs to rely or act on  
their false representations, which may be inferred in all of the circumstances. At  
the outset, they canvassed investors to solicit funds to purchase the Property.  
Later on, the Defendants continued to make representations to reassure investors  
that development work was progressing and to justify further demands for cash  
call payments. In addition, I find that the Defendants’ misrepresentations were  
calculated to induce the Plaintiffs into relying on them, and that this effect was  
actually realized as I accept that the Plaintiffs were materially influenced by the  
misrepresentations into investing in the Property and continuing their respective  
investments over the course of the Project. Among other things, I accept that the  
Plaintiffs were induced by the misrepresentations into believing that the Vuletics  
could be trusted to responsibly develop the Project.  
[564] Relying on what they were told, investors acted on the Defendants’ false  
representations by giving their money to the Defendants at the outset of the Project  
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and later on during its course. From the evidence, I am satisfied that the Plaintiffs  
would not have invested in the Project were it not for the Defendants’ false  
representations that induced investors to enter into the APSs and fund the Project.  
For instance, Mr. Savona and his daughters, Ms. Jesus and Ms. Savona, would  
not have invested in the Project had they known that the Vuletics would take  
Project funds for personal use. Ms. Kostelac, Ms. Pelchat-Morris, Ms. Grounds  
and Mr. Grounds, and Ms. Caroti would have not invested in the Project had they  
known that the Vuletics would use Project funds for their personal expenses or live  
rent-free on the Property. Ms. Kostelac would not have invested in the Project had  
she known that the Vuletics would not service the land. Ms. Pelchat-Morris and  
Ms. Caroti would not have invested in the Project had they known that John was a  
bankrupt. Mr. McDowell testified that he invested because John had represented  
that the Project would take only two years in which he and Ms. Nizalek would  
double their investment. Mr. McDowell also testified that he would not have  
invested in the Project had he known that the Vuletics would not be investing their  
own money into the Project. In addition, Ms. Nizalek and Mr. McDowell would not  
have invested had they known that the Vuletics would use Project funds for their  
personal expenses. Having regard to all of the evidence, I am satisfied that none  
of the Plaintiffs would have given their money to the Defendants had they been  
honest and transparent about their intentions for the Project funds, or how they  
intended to pursue their self-interests. In my view, this explains precisely why the  
Defendants made false representations to them.  
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[565] The misrepresentations by the Vuletics allowed Embleton to raise more than  
$1.48 million for the Project and led the Plaintiffs to entrust the Defendants to  
develop the Property using their money. The Vuletics’ misrepresentations were  
material and it is clear from the evidence that the Plaintiffs all relied on them. I am  
satisfied that the Plaintiffs would not have entrusted the Vuletics or their companies  
with their investment funds without the fraudulent misrepresentations.  
[566] As explained further below in my discussion on damages, I am satisfied that  
the Plaintiffs suffered losses as a result of giving the Defendants their money  
between 2002 and 2013. Apart from Mr. Savona who received a $32,000.00  
payment from Anthony in 2018 for reasons that are unclear and based on him not  
disclosing the payment, none of the Plaintiffs were ever compensated while some,  
like Ms. Nizalek and Mr. McDowell, were refused even the return of their money.  
[567] Accordingly, I am satisfied that the Plaintiffs have satisfied the test for civil  
fraud.  
i. Breach of Fiduciary Duty  
[568] As set out below, I am satisfied that John and Anthony breached the ad hoc  
fiduciary duty they owed to the Plaintiffs.  
[569] Relationships in which a fiduciary obligation has been imposed have three  
general hallmarks or characteristics:  
a) the fiduciary has scope for the exercise of some discretion or power  
 
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b) the fiduciary can unilaterally exercise that power or discretion to affect  
the beneficiary’s legal or practical interests and  
c) the beneficiary is peculiarly vulnerable to or at the mercy of the  
fiduciary holding the discretion or power: Elder Advocates of Alberta  
Society v. Alberta, 2011 SCC 24 at para 27, citing Frame v. Smith,  
[1987] 2 SCR 99 at 136.  
[570] It is the nature of the relationship, not the specific category of actor involved,  
that gives rise to the fiduciary duty: Lac Minerals Ltd. v. International Corona  
Resources Ltd., [1989] 2 SCR 574 at para 30, citing Guerin v. R., [1984] 2 SCR  
335 at 384. While certain status relationships, such as solicitor-client or doctor-  
patient, for example, give rise to a per se fiduciary relationship, other  
circumstances may implicate an ad hoc fiduciary duty where, in addition to the  
vulnerability arising from the relationship described in Frame, a claimant shows  
that:  
a) the alleged fiduciary gave an undertaking of responsibility to act in the  
best interests of a beneficiary;  
b) a defined person or class of persons is vulnerable to the alleged  
fiduciary’s exercise of discretionary power over them; and  
c) the alleged fiduciary’s power may affect the beneficiary’s legal or  
substantive practical interests.  
Elder at paras 30-34 and 36; Extreme Venture Partners  
Fund LLP v. Varma, 2021 ONCA 853 at para 102,  
citing Galambos v. Perez, 2009 SCC 48 at paras 66  
and 83.  
- 286 -  
[571] The first arm of the ad hoc fiduciary duty test may be satisfied by an express  
or implied undertaking by the fiduciary to act in the best interests of the beneficiary,  
without necessarily requiring a mutual understanding: Perez at para 66. The  
question to ask is whether, given all the surrounding circumstances, one party  
could reasonably have expected the other to act in the former’s best interests with  
discretion, influence, vulnerability and trust being non-exhaustive considerations  
in making this determination: Hodgkinson v. Simms, [1994] 3 SCR 377 at para 32.  
The presence of elements such as trust, confidentiality, and the complexity or  
importance of the subject matter may make it reasonable for a party to expect the  
other to exercise special skills in the former’s best interests or, in some instances,  
in their joint interests, unless the contrary is disclosed: Hodgkinson at paras 28  
and 33.  
[572] The second arm of the ad hoc fiduciary test requires that the duty must be  
owed to a defined person or class of persons who must be vulnerable to the  
fiduciary in the sense that the fiduciary has a discretionary power over them: Elder  
at para 33. Vulnerability alone is insufficient to support a fiduciary claim: Elder at  
para 28. However, vulnerability is common to many relationships in which the law  
will intervene to protect a party: Hodgkinson at para 25.  
[573] Under the third prong of the ad hoc fiduciary duty test, a claimant must show  
that the alleged fiduciary’s power may affect an identifiable legal or substantial  
practical interest of the beneficiary, with the most obvious example being an  
- 287 -  
interest in property: Elder at para 35; Buccilli v. Pillitteri, 2012 ONSC 6624 at para  
183.  
[574] In this case, there is ample evidence to implicate an ad hoc fiduciary  
relationship based on the kind of vulnerability described in Frame arising from the  
relationship between the Vuletics and the Plaintiff investors. To this end, I am  
satisfied that:  
a. John and Anthony designed a structure for the Project to  
empower themselves to fully exercise the discretion or  
power to create and run the Project;  
b. as the directing minds for the Project, John and Anthony  
fully exercised complete discretion and authority to make  
decisions on running and advancing the Project;  
c. as fairly unsophisticated and novice investors in real estate  
development matters, the Plaintiffs were all particularly  
vulnerable to the Vuletics who effectively held all of the  
discretion and power to receive their investments and  
manage the Project; and  
d. as the Defendants have conceded, the Plaintiffs all trusted  
the Vuletics who won their trust as John claimed to be a  
capable and experienced land developer and Anthony held  
himself out as a lawyer or legal professional. Both John  
and Anthony informed Ms. Ceifets that Project investors  
trusted them, and Anthony testified that he saw no reason  
for investors not to trust him. Some, including Ms. Nizalek  
and Mr. McDowell, trusted John as a good friend.  
[575] I am satisfied that John and Anthony gave the Plaintiffs an undertaking of  
responsibility to act in their best interests. From the outset, John and Anthony  
assured the Plaintiffs that decisions would be made in the best interests of the  
Project and, by logical extension, the Plaintiffs as well. Among other things, pre-  
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contractual representations were made to Ms. Kostelac that the Property would be  
used to advance the Project’s best interests. To this end, John falsely represented  
to investors that he was investing money in the Project to assure them of his  
interest in successfully developing the Project, despite not having funds to invest.  
Over the course of the Project, Anthony gave investors further assurances that the  
development of the Property would progress diligently to achieve the best outcome  
for the Project. Later, while trying to sell the Property, Anthony told investors that  
he was trying to negotiate a fair deal with a buyer and hoped to get an offer that  
was good for all of us.” He also gave express undertakings to investors on behalf  
of himself and John to act in the Plaintiff’s best interests while knowing of their duty  
to be honest with them. In turn, the Plaintiffs believed that John and Anthony would  
loyally make decisions in their best interests.  
[576] The Plaintiffs were highly vulnerable to the Defendants. As unsophisticated  
investors, and believing they were in safe hands, the Plaintiffs placed unqualified  
trust in John and Anthony to make decisions and develop the Property. This left  
the Plaintiffs highly vulnerable to the various non-disclosures and false or  
misleading representations by the Defendants who had all of the pertinent  
information. The vulnerability of the Plaintiffs was further magnified by the fact that  
neither John nor Anthony had funds to invest in the Project themselves which  
subjected investors to heightened risks as the Vuletics chose to help themselves  
to Project funds to pay for international trips, luxury items, other business activities  
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(i.e., including a wholly-unrelated development project in Oakville, and an adult film  
venture that Anthony pursued), and other non-Project related costs.  
[577] All of the Plaintiffs had a legal and financial interest in the Project. They all  
signed APS contracts and gave the Defendants funds to acquire lot interests.  
Clearly, their interests stood to be adversely affected by the discretion or control  
exercised by John and Anthony who, from the outset, chose to not disclose their  
underlying plan to claim residual lots without paying for them, falsely represented  
that Embleton would hold title to the Property, ignored the APS terms for the limited  
use of mortgage proceeds and how to collect management fees, and deliberately  
misled the Plaintiffs with false and inaccurate Project updates to justify demands  
for cash call payments. The Vuletics also failed to advise investors of Embleton’s  
dissolution and ignored their obligation under the Kegalj settlement to give  
quarterly accountings of Project funds. As set out earlier, a large body of evidence  
establishes the deliberate nondisclosures by the Vuletics who relentlessly pursued  
their self interest at the expense of the Plaintiffs who were unsuspecting and relied  
entirely on the Vuletics to give information about the Project and its progress, to  
manage Project funds prudently, to properly run the Project (e.g., by paying fees,  
taxes and other legitimate Project-related expenses), and to advance the Project  
in a diligent manner. Regrettably, their trust in the Vuletics was misplaced. Indeed,  
the Plaintiffs became increasingly vulnerable as the Vuletics engaged in conduct  
that grew more deceptive and self-interested over time.  
- 290 -  
[578] As set out below, I am satisfied that fiduciary duty owed by the Vuletics to  
the Plaintiffs is not abrogated by the terms of the APS. A contract is merely one  
factor to consider in deciding the true nature of a relationship between parties, and  
the existence of a contract does not necessarily preclude the existence of fiduciary  
duties: Hodgkinson at para 28. To this end, s. 17(g) of Schedule “A” to the APS  
provides in part that, “the Vendor owes no fiduciary obligation to the Purchaser.”  
However, as the APS was executed by Embleton, I find that the s. 17(g)  
exculpatory language does not extend to remove any fiduciary duty by the Vuletics.  
Moreover, as Embleton was dissolved in 2008, it seems improper to apply this term  
to relieve the Vuletics from an ad hoc fiduciary duty to the Plaintiffs given the nature  
of their relationship. In any event, as the Vuletics persistently ignored the terms of  
the APS and having regard to their many misrepresentations, non-disclosures,  
misappropriations, and other instances of misconduct, as described earlier, I find  
that it would be unconscionable and grossly unfair to allow the Vuletics to rely on  
the limitation of liability clause under s. 17(g) to escape their fiduciary duties to the  
vulnerable and unsophisticated Plaintiffs: Singh v. Trump, 2016 ONCA 747 at  
paras 114-122. As a result, I find that s. 17(g) should be rendered unenforceable  
for unconscionability: Singh at para 114, citing ABB Inc. v. Domtar Inc., 2007 SCC  
50 at para 82.  
j. Conspiracy  
 
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[579] For the reasons that follow, I am satisfied that the Defendants engaged in  
the tort of civil conspiracy against the Plaintiffs by perpetrating an unlawful conduct  
conspiracy.  
[580] The tort of civil conspiracy may be committed in two (2) ways:  
a) whether the means used by the defendants are lawful or unlawful, the  
predominant purpose of the defendants’ conduct is to cause injury to  
the plaintiff; or  
b) where the conduct of the defendants is unlawful, the conduct is  
directed towards the plaintiff (along or together with others), and the  
defendants should know in the circumstances that injury to the plaintiff  
is likely to and does result.  
Canada Cement LaFarge Ltd. v. British Columbia  
Lightweight Aggregate Ltd., [1983] 1 SCR 452 at 471-  
472.  
[581] In this case, the Plaintiffs rely on the second category of conspiracy, namely  
the tort of unlawful conduct conspiracy.  
[582] For defendants to be liable for the tort of unlawful conduct conspiracy, the  
following elements must be established:  
a) The defendants acted in combination, that is, in concert, by agreement  
or common design;  
b) The defendants committed unlawful acts;  
c) The defendants’ conduct was directed towards the plaintiff;  
d) The defendants knew or should have known that injury to the plaintiffs  
was likely to occur; and  
e) The defendants’ unlawful conduct caused injury to the plaintiff.  
- 292 -  
Agribrands Purina Canada Inc. v. Kasamekas, 2011  
ONCA 460 at para 26.  
[583] To prove unlawful conduct conspiracy, it is not necessary to show that the  
pre-dominant purpose of the defendants’ conduct is to injure the plaintiff. But in  
the prevailing circumstances, the defendants should have known that injury to the  
plaintiff would ensue, and the plaintiff must have suffered actual damage: LaFarge  
at p. 472; Agribrands at para 24. For the tort of unlawful conduct conspiracy, the  
“unlawful conduct” part of the test may be satisfied by a breach of contract, an  
actionable tort, or a breach of fiduciary duty: Extreme Venture Partners Fund I LP  
v. Varma, 2019 ONSC 2907 at para 247; affirmed 2021 ONCA 853 at para 39.  
[584] Conspiracy claims are often built on inference given the difficulty proving  
them by direct evidence: Canadian Community Reading Plan Inc. v. Quality  
Service Programs Inc. (2001), 141 OAC 289 (CA) at para 27; Paradis v. R., [1934]  
SCR 165 at 168; Extreme (SCJ) at para 242.  
[585] The remedy for unlawful conduct conspiracy is damages, which may be  
awarded if the damages are causally related to the defendants’ actions pursuant  
to the agreement among them: Helmy v. Helmy, [2000] OJ No 4456 (SCJ) at paras  
90-91.  
[586] In the case at bar, there is overwhelming evidence of a common scheme to  
which all of the Defendants at trial were complicit. John and Anthony made every  
decision related to the Project on behalf of Embleton and 185 Corp., and Mira  
- 293 -  
maintained all of the bookkeeping ledgers which clearly show that she knew of all  
the funds going into and out of the Project. Each clearly lived beyond their means  
by misappropriating Project funds from mortgage proceeds and investor cash calls  
for personal and non-Project related uses. I am satisfied that John, Anthony and  
Mira acted in a common scheme to enrich themselves at the Plaintiffs’ expense by  
taking funds that otherwise would have benefitted the Project and its investors. By  
misappropriating funds, the Defendants engaged in unlawful conduct that  
constituted beach of contract, fraud, breach of fiduciary duty and unjust  
enrichment. The Defendants perpetrated their malfeasance knowing that the  
Plaintiffs had invested in the Project and would likely suffer losses from their  
scheme to misappropriate funds. Without question, the Plaintiffs suffered losses  
by being deprived of funds that were improperly taken by the Defendants who  
acted in concert and concealed their scheme for years.  
[587] Based on the foregoing, I am satisfied that the necessary elements of the  
tort of civil conspiracy have been proven against each of the Defendants.  
Accordingly, I find that all of the Defendants are liable in civil conspiracy for the  
damages suffered by the Plaintiffs.  
k. The Remedy of a Constructive Trust  
[588] In my view, this is an appropriate case for awarding a constructive trust to  
achieve a just result in this case.  
 
- 294 -  
[589] In general, a constructive trust is a flexible remedy which may be imposed  
when required by good conscience: Soulos v. Korkontzilas, [1997] 2 SCR 217 at  
para 34:  
It thus emerges that a constructive trust may be  
imposed where good conscience so requires. The  
inquiry into good conscience is informed by the  
situations where constructive trusts have been  
recognized in the past. It is also informed by the dual  
reasons for which constructive trusts have traditionally  
been imposed: to do justice between the parties and to  
maintain the integrity of institutions dependent on trust-  
like relationships. Finally, it is informed by the absence  
of an indication that a constructive trust would have an  
unfair or unjust effect on the defendant or third parties,  
matters which equity has always taken into  
account. Equitable remedies are flexible; their award  
is based on what is just in all the circumstances of the  
case. [Emphasis added]  
[590] There are two (2) general categories in which the court may consider  
whether good conscience requires a constructive trust to be imposed: Soulos at  
para 36. The first category involves property obtained by a defendant’s wrongful  
act, notably the breach of a fiduciary obligation or a duty of loyalty. The second  
arises where the defendant has not acted wrongfully but would be unjustly  
enriched to a plaintiff’s detriment by keeping property that was obtained.  
[591] A constructive trust may remedy wrongful acts or unjust enrichment:  
[U]nder the broad umbrella of good conscience, constructive trusts are  
recognized both for wrongful acts like fraud and breach of duty of loyalty, as  
well as to remedy unjust enrichment and corresponding deprivation. While  
cases often involve both a wrongful act and unjust enrichment, constructive  
trusts may be imposed on either ground: where there is a wrongful act but no  
unjust enrichment and corresponding deprivation; or where there is an  
unconscionable unjust enrichment in the absence of a wrongful act, as  
in Pettkus v. Becker, supra. Within these two broad categories, there is room  
- 295 -  
for the law of constructive trust to develop and for greater precision to be  
attained, as time and experience may dictate. [Emphasis added]  
Soulos at para 43.  
[592] To have a constructive trust, a plaintiff must show a wrongful act in respect  
of the property, such as a fraud or breach of loyalty, or otherwise establish a  
restitutionary basis for the relief: Soulos at para 45. Frequently, a restitution order  
for unjust enrichment will be made upon proof of three (3) well-established  
elements:  
a) whether the defendant has been enriched  
b) whether the plaintiff has suffered a corresponding  
deprivation; and  
c) whether the benefit and corresponding detriment  
occurred without a juristic reason  
Garland v. Consumers’ Gas Co., 2004 SCC 25 at para  
30; Kerr v. Baranow, 2011 SCC 10 at paras 36-40.  
[593] In this case, I am satisfied that the Defendants were enriched. There is  
ample evidence that 185 Corp. was enriched by having received the benefit of title  
to the Property from Mr. Kegalj for nominal consideration. The Vuletics were  
enriched by taking over $2.5 million in Project funds for personal and other non-  
Project expenses that benefitted all three of them. To the extent that the Vuletics  
took these funds as loans from Embleton, the transfer of the Property to 185 Corp.  
after Embleton was dissolved effectively relieved them from ever having to repay  
them. Although it was open for Embleton to charge the Project administrative or  
management fees under the APS, 185 Corp. was not privy to the APS and could  
- 296 -  
not charge management fees to the Project. The Vuletics claimed an entitlement  
to the unallocated lots in the Property without paying for these lot interests or any  
share of the costs to develop them. John and Anthony also used Project funds to  
develop the neighbouring Ufkes and Teramoto lands to generate profits which they  
intended to keep for themselves without sharing any profits with investors who  
provided these funds. Upon 185 Corp. selling the Property to Brampton G&A, they  
negotiated a contractual right to three (3) residual lots under a reconveyance  
arrangement, and they redirected significant sale proceeds to their own accounts  
for their personal use. In addition, under the terms for the sale of the Property  
From 185 Corp. to Brampton G&A, the Vuletics obtained a contractual right to  
continue living rent-free on the Property pending its development and highly  
preferential terms to have homes built on the residual lots.  
[594] In contrast, the Plaintiffs suffered a corresponding deprivation in respect of  
their financial contributions to the Project as the Vuletics took the above-mentioned  
funds and interests for their personal benefit leaving less to benefit the Project and  
its investors. A corresponding deprivation arises where a benefit has been  
acquired by a defendant in circumstances where it would otherwise would have  
accrued to a plaintiff: Moore v. Sweet, 2018 SCC 52 at paras 44-45. In this case,  
the benefits taken by the Defendants would otherwise have accrued to the  
Plaintiffs by reducing the financial burdens on the Project and by raising allocations  
to investors when the Property was sold.  
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[595] The Defendants had no juristic reason for their enrichment. The Plaintiffs  
did not gift these benefits to the Defendants. Although 185 Corp. claims that it was  
Embleton’s successor, there was no merger, amalgamation or any other type of  
legal succession to vest 185 Corp. with the rights that Embleton previously held.  
Moreover, once Embleton was dissolved in January 2008, it no longer had capacity  
to effect any transfer in August 2011 when 185 Corp. was incorporated. To receive  
a transfer of the Property from Mr. Kegalj in January 2012, 185 Corp. gave only  
nominal consideration that was neither fair nor adequate. The Defendants did not  
disclose the impending transfer to the Plaintiffs who did not consent to the transfer,  
and Mr. Adair’s firm did not notify investors that Embleton was dissolved, that the  
Property would be transferred to 185 Corp., or that 185 Corp. had stepped into  
Embleton’s shoes. Even Mr. Hinchcliffe, the purported independent accountant,  
referred to the accounting prepared and gave to investors in 2016 as having been  
prepared on behalf of “Embleton Properties Corp.” despite its dissolution in 2008  
that blurred the true relationship between 185 Corp. and Embleton. Having regard  
to all of this, I am not persuaded that any juristic reason can justify the enrichment  
of the Defendants, respectively. I also find that the Defendants have shown  
another reason to deny recovery: Garland at paras 45-46. Given the injustice to  
the Plaintiffs that arose in this case, I am satisfied that this case is an appropriate  
one for granting a constructive trust to give the Plaintiffs an equitable remedy. It  
is precisely where an injustice arises without a legal remedy that equity finds a  
role: Kerr at para 45. In light of the reasonable expectations of the parties and the  
- 298 -  
relevant circumstances that arose in this particular case, it would be neither just  
nor fair to allow the Defendants to retain the benefit without compensating those  
who provided it: Montor Business Corp. (Trustee of) v. Goldfinger, 2016 ONCA  
406 at paras 109-114; Simonin v. Simonin, 2010 ONCA 900 at para 24.  
[596] In my view, the equitable remedy should be awarded with a value survived  
approach that offers a fair and reasonable way to determine an individual’s  
proportionate share to the value of an asset. Under the value survived approach,  
a party’s proportionate contribution to the value of an asset will entitle the party to  
a comparative share in its value: Wilson v. Fotsch, 2010 BCCA 226 at paras 60-  
64. Its calculation methodology involves a two (2) step approach. The first step  
considers the asset’s value at the beginning and end of the parties’ relationship,  
with the increase in value during the relationship being the value available for  
apportionment. The second considers the parties’ respective contributions to  
determine the share to which a claimant is entitled. As the principle of unjust  
enrichment is inherently flexible, the process of calculating a monetary award for  
a successful unjust enrichment claim is equally flexible so that successful  
claimants may be awarded whatever form of relief is most appropriate in the  
circumstances: Kerr at para 79.  
l. Purchase Money Resulting Trust  
[597] In the alternative to a constructive trust, I would award a remedy based on  
a purchase money resulting trust that arose in this case.  
 
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[598] A resulting trust arises when legal or equitable title to property is in one  
party’s name, but that party, because he is a fiduciary or gave no value for the  
property, is under an obligation to return the property to the original owner or to the  
person who did give value for it: Sampath v. Deopersad, 2017 ONSC 7055 at paras  
23-24.  
[599] The concept of a purchase money resulting trust has been described as  
follows:  
A purchase money resulting trust arises when a person advances funds to  
contribute to the purchase price of property, but does not take legal title to  
that property. Where the person advancing the funds is unrelated to the  
person taking title, the law presumes that the parties intended for the person  
who advanced the funds to hold a beneficial interest in the property in  
proportion to that person’s contribution. This is called the presumption of  
resulting trust.  
The presumption can be rebutted by evidence that at the time of the  
contribution, the person making the contribution intended to make a gift to the  
person taking title. While rebutting the presumption requires evidence of the  
intention of the person who advanced the funds at the time of the advance,  
after the fact evidence can be admitted so long as the trier of fact is careful to  
consider the possibility of self-serving changes in intention over time.  
[Emphasis added]  
Nishi v. Rascal Ltd., 2013 SCC 33 at paras 1 and 2.  
[600] The purchase money resulting trust is a type of gratuitous transfer resulting  
trust where a person advances a contribution to the purchase price of property  
without taking legal title: Nishi at para 21. By relying on a clear rule for determining  
who holds the beneficial interest in the property, the purchase money resulting  
trust provides certainty and predictability: Nishi at para 28.  
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[601] A presumption of resulting trust can be rebutted by evidence that, at the time  
of the contribution, the person making the contribution intended to make a gift to  
the person taking title. In effect, the test for rebutting the presumption is based on  
the absence of intention to create a beneficial interest for the transferor: Nishi at  
paras 30 and 34.  
[602] Once a plaintiff shows that they made a contribution to the purchase price  
of a property, the presumption of resulting trust applies: Singh v. Kaler, 2017 ABCA  
275 at para 26. The plaintiff is not required to show that they were themselves the  
purchasers. The burden for rebutting a presumption of resulting trust is on the  
defendant: Pecore v. Pecore, 2007 SCC 17 at para 25.  
[603] The fact that some contributions may have been made after the actual sale  
or acquisition of the subject property, and after the defendant has taken legal title  
to the property, does not alter the presumption that the parties intended for the  
plaintiff to hold a beneficial interest in the property: Warraich v. Choudhry, 2019  
ONSC 2656 at paras 61-62. Similarly, an understanding that property is to be held  
in someone else’s name does not preclude a purchase money resulting trust from  
being recognized: Chechui v. Neiman, 2017 ONCA 669 at paras 53-56 and 59-66.  
[604] There is no dispute that the Plaintiffs provided funds to the Defendants that  
were used to purchase and acquire the Property. By doing so, I am satisfied that  
the Plaintiffs intended to create a beneficial interest for themselves in the Property.  
Although Ms. Nizalek and Mr. McDowell contributed their money after the  
- 301 -  
acquisition of the Property closed, I am satisfied that this does not alter the  
presumption that they were expected to have a beneficial interest in the Property.  
In the circumstances, I accept that a resulting trust should be presumed. In turn, I  
am satisfied that the Defendants are presumed to hold the Property, and therefore  
its proceeds, in trust for the Plaintiffs in proportion to the contributions which they  
made to the Project.  
[605] In my view, the presumption of a resulting trust is not rebutted. In this case,  
it is clear that the Plaintiffs intended to acquire a beneficial interest in the Property  
by making their financial contributions to the Project for the purpose of acquiring  
the Project and obtaining an interest in the land. This is corroborated by the terms  
of the APS which show that funds provided by the Plaintiffs were used to acquire  
and develop the Property in exchange for future lot interests in the Property.  
Despite all of this, the Defendants never delivered the promised lots to the  
Plaintiffs. Instead, the Defendants sold the Property to a third party which made it  
impossible to deliver the lots for which the Plaintiffs had subscribed. The APS  
contemplated none of this. To address this outcome, the Defendants seek to limit  
the Plaintiffs’ recovery to a share of the sale proceeds by proposing a distribution  
formula which they devised based on the frontage of notional “lots” on a proposed  
unregistered plan of subdivision for which they claim roughly 65% of these so-  
called “lots” and associated frontages without having paid any lot subscriptions or  
cash calls in respect of them, as previously discussed. However, the Vuletics did  
use their own funds to pay for certain legitimate Project-related costs, as further  
- 302 -  
discussed below. Ultimately, the Defendants seek to unilaterally impose a new  
contract on the Plaintiffs despite the APS stating that any amendment must be  
made in writing. Taking this all into consideration, I am not persuaded that the  
presumption of a resulting trust is somehow rebutted by the Defendants’ proposed  
distribution formula.  
[606] A purchase money resulting trust affords a just and fair alternative basis for  
granting the Plaintiffs an equitable remedy in this case. To this end, I accept that  
the Plaintiffs are beneficiaries of a purchase money resulting trust in respect of the  
proceeds of sale from the Property and should be entitled to receive a pro-rata  
share of the sale proceeds under the “But-For” valuation analysis in the KSV  
report, as set out below.  
m. The “But-For” Analysis  
i. Overview of KSV’s Methodology  
[607] The Plaintiffs retained an expert valuator, Errol Soriano at KSV Soriano Inc.  
(“KSV”), to quantify what the available proceeds for distribution would have been  
from the sale of the Property in 2016 but-for the Defendants’ misappropriation of  
funds and financial mismanagement of the Project. The KSV report calculated the  
so-called “But-For Proceedsusing this framework:  
   
- 303 -  
As set out below, I find that the approach in the KSV report dated March 5, 2021  
should be applied, with some modifications, to quantify the remedy in this case.  
[608] To determine the “But-For” proceeds, KSV applied the following steps:  
At step #1, KSV determined the actual proceeds  
available for distribution from the sale of the Property  
by analyzing the cash inflows into and outflows from  
four corporate bank accounts that Embleton and 185  
Corp. maintained during the relevant period;  
At step #2, it determined the Project’s But-For cash  
flows by excluding cash flows that were not necessary  
to acquire, manage or develop the Property and sell it  
in 2016. In effect, this analysis sought to exclude the  
Vuletics’ personal and non-Project expenditures and  
excess mortgage financing costs, and to reflect a  
notional benefit which the Vuletics received from living  
rent-free at the house on the Property;  
At step #3, it calculated the Project’s But-For Proceeds  
(i.e., the proceeds available for distribution to all  
investors in the Project) by deducting the But-For cash  
flows and the actual sale transaction costs from the  
actual purchase price, and by adding the March 2021  
market value of Lots 49, 50 and 60 (i.e., to be conveyed  
back to 185 Corp. under the terms of sale to Brampton  
G&A) and the Project’s post-sale cash flows; and  
At step #4, KSV calculated the But-For Proceeds  
available for distribution by multiplying the Plaintiffs’  
relative capital contribution to the total capital invested  
in the Project.  
- 304 -  
ii. Use of Relative Capital Contributions to Calculate the But-For  
Proceeds  
[609] In its March 5, 2021 report, KSV confirmed its instruction from Plaintiffs’  
counsel to calculate the But-For Proceeds available for distribution to the Plaintiffs  
based on their relative capital investments to the Project. Mr. Soriano testified that  
a relative investment approach was a reasonable way to allocate the But-For  
Proceeds given that the original intent of the Project never materialized (i.e., as the  
Property was never subdivided and the lots promised under the APSs were never  
provided to investors). Ultimately, the Project outcome involved a sale of the  
undeveloped Property which was never contemplated by the APS or by the  
investors who entered into them. While acknowledging the Defendants’ pleaded  
position that the sale proceeds should be allocated to the Plaintiffs on a per linear  
foot basis, Mr. Soriano testified that he was unaware of any expert evidence that  
would support that methodology.  
[610] In my view, KSV’s use of the relative capital contributions by the Plaintiffs is  
appropriate and supported by the language of the APS which, as discussed earlier,  
established an investment relationship by which the Plaintiffs paid Embleton, and  
later 185 Corp., in consideration for a future lot that did not exist and ultimately  
never materialized through the development process. Given the inherent risks  
associated with the Project which the Plaintiffs assumed by entering into the APS  
contracts with Embleton, I am satisfied that taking an investment-like methodology  
 
- 305 -  
(i.e., by using relative capital contributions) to calculate the Plaintiff’s entitlements  
is a fair and reasonable approach to follow in this case.  
aa. But-For Cash Inflows  
[611] Turning to the But-For cash inflows, KSV imputed a notional level of  
mortgage financing based on the Project’s financing needs. This was done to  
adjust for the Defendants’ personal and non-Project use of Project funds which  
resulted in actual borrowing activity for the Project that exceeded its actual  
financing needs or requirements. Accordingly, the actual net mortgage proceeds  
inflow was adjusted from $1,429,790.00 to a But-For net mortgage proceeds inflow  
of $683,114.00. Having regard to the Defendants’ use of Project funds for matters  
unrelated to the Project, I accept that this approach was warranted to fairly account  
for over-financing costs.  
[612] KSV then added a notional rent figure of $1,350.00 per month to cash flow  
to account for the fair market rent which the Vuletics should have paid to the Project  
for residing in the house on the Property. The notional figure in KSV’s analysis  
reflected the actual market rent that tenants were paying in August 2002 just before  
the Vuletics moved in, with escalations to reflect provincial rent increase  
guidelines. Based on this, KSV added rental income of $267,012.00 as a But-For  
inflow for the period from August 2002 to September 2016. Michael Parsons, a  
real property appraiser with Duff & Phelps Canada Limited (“Duff & Phelps”),  
supported the market rent figures that KSV applied for the house over this period.  
 
- 306 -  
[613] The APS did not permit the Vuletics to live rent-free on the Property.  
Embleton had the sole discretion under s. 2 of the APS to permit the land to be  
used for any purpose. However, in my view, John and Anthony exercised  
Embleton’s discretion to improperly confer on themselves, without any disclosure  
to investors, the benefit of living rent-free on the Property through a clear misuse  
of its discretion that fell beyond any legitimate Project-related choice connected to  
the underlying exercise of the discretion. Although the Defendants claim that the  
rent benefit was coupled to their management compensation, I am not persuaded  
by this as Ms. Ceifets testified that Anthony expressly told her to remove any  
mention of the home on the Property from the APS which runs counter to any  
notion that the Vuletics wanted to account for their rent-free use of the home as  
part of their management fees for the Project.  
[614] In its report, KSV stated the total But-For cash inflows to be $611,237.00  
less the actual cash inflows reported in the corporate accounting records which I  
accept this as an appropriate figure. I also accept from KSV’s analysis that a lesser  
requirement for Project mortgage financing should be properly assumed given the  
non-Project related use of Project funds.  
bb. But-For Cash Outflows  
[615] In dealing with the But-For cash outflows, KSV’s analysis credits the Vuletic  
Defendants for certain Project-related payments drawn from their personal bank  
accounts. Between August 2012 and October 2013, the Vuletic Defendants paid  
 
- 307 -  
a total of $100,000.00 in personal funds to BWLG in three instalments (i.e., being  
$50,000.00, $10,000.00 and $40,000.00, respectively). They also used their  
personal funds to pay $70,000.00 to Ms. Leveriza and Ms. Gushue (Whyte) to buy  
out their lots subscriptions in December 2012 and refund their interest, which I  
accept as having been proper Project-related expenses. In addition, Anthony used  
$14,000.00 in personal funds to pay Project-related property taxes in December  
2011 as noted in the KSV report based on a review of Embleton’s records. Their  
payments total $184,000.00, which I shall return to shortly.  
[616] The KSV report also deducted an imputed management fee of $35,000.00  
per annum for the period from the closing of the acquisition of the property in July  
2002 through to its sale in September 2016, for a total of $495,833.00 from the  
Project’s But-For cash flows to credit the Defendants for the services they  
contributed to the Project. Mr. Soriano testified that he was comfortable applying  
the $35,000.00 per annum figure as it was the same figure that Anthony and John  
expressly agreed to in minutes of settlement dated July 11, 2011 to resolve the  
Kegalj action, which they entered with the benefit of Mr. Adair’s representation and  
advice. The reasonableness of the $35,000.00 annual management fee figure is  
further supported by the comparatively lower $25,480.00 annual management fee  
that Anthony swore to and put before Justice LeMay, also with the assistance and  
advice of counsel, through his August 30, 2017 affidavit. In the circumstances, I  
find that his effort to resile from the $35,000.00 annual figure and seek an  
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increased management fee of $95,000.00 per year without any supporting  
evidence is simply not credible.  
[617] Under cross-examination, Mr. Soriano disagreed with the proposition that it  
would have been impossible to hire someone to perform the work done by John  
and Anthony on the Project for only $35,000.00. Over time, the $35,000.00 annual  
management fee came to almost half a million dollars for work on a development  
project for land initially bought for $1.225 million. In addition, the Project was never  
actually completed. There was also compelling evidence at trial that Anthony and  
John spent a considerable amount of time and effort making development  
applications for the Property which the City regarded as premature and refused to  
entertain before the area block plan was addressed. Despite the lack of expert  
planning evidence, I accept that the evidentiary record raises a number of serious  
concerns about how and when the Vuletics chose to advance the Project and the  
efficiency or effectiveness of their approach. Although Anthony was emphatic  
about the need to persistently confront municipal planning officials and other  
developers to achieve his own development goals, various documents from  
Embleton’s own development file show that much of the work he oversaw for  
seeking approval to change the Property’s zoning designation before Block Plan  
40-3 was approved was premature and unlikely to prevail. Moreover, the various  
development applications for the Property that Embleton filed with the City of  
Brampton make it clear that Anthony and John essentially came to ignore their  
APS obligations to deliver 50 foot x 140 foot lots to investors as all of their  
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applications called for denser lot configurations for the Project that clearly would  
have left them unable to deliver a sufficient number of 50 foot x 140 foot lots to  
fulfill their contractual APS obligations to investors.  
[618] Given the foregoing, I struggle with the notion that Anthony and John would  
draw Project management fees while showing no apparent regard for their  
obligation to develop the Property in a way that would allow them to deliver what  
investors had bargained for. All of this raises real concerns with the work that the  
Vuletics performed to manage the Project, and underscores the importance for  
their work to have been invoiced, as required by s. 4 of the APS, to give investors  
the necessary transparency for them to ensure that management fees related to  
work that had been reasonably performed to advance the Project in appropriate  
fashion. Ultimately, however, I am persuaded that KSV’s imputed management  
fee of $35,000.00 per year is not unreasonable in the circumstances of this case,  
particularly as this figure received an earlier judicial endorsement.  
[619] The KSV analysis considered the Defendants’ wide use of Project funds on  
personal and non-Project items (i.e., including cash withdrawals, Vuletic cheques,  
discretionary expenditures, an unrelated development project in Oakville, among  
other items) and added them back to the But-For cash flow on a net basis, where  
applicable. In addition, the KSV report analyzed the Project’s outstanding  
$630,105.00 mortgage obligation as of September 12, 2016 and contrasted that  
figure with the actual outstanding mortgage obligation of $3,389,861.00 on that  
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date (i.e., consisting of the 2012 TD mortgage, the Rathcliffe second mortgage and  
the Adair lien) in concluding that the Project’s But-For net cash position, net of  
outstanding mortgage debt, was improved by about $2.74 million principally due  
to the But-For cash flow analysis which assumed a reduction in required mortgage  
financing of about $2.76 million. Taking this all into account, including the impact  
of the Defendants’ personal use of Project funds on the requirements for financing  
the Project, I am satisfied that the KSV analysis on this point is sound and should  
be adopted.  
[620] In my view, Mr. Adair’s legal fees for defending the Kegalj action on the  
Defendants’ behalf, which largely comprised the basis of the Adair lien on the  
Property, was not a Project-related expense. The Defendants assert that Mr.  
Adair’s legal fees were incurred to the benefit of the Project as it achieved the July  
2011 settlement which:  
a) defeated Mr. Kegalj’s effort to obtain a court order permitting him to  
sell the Property for $2 million, and  
b) preserved the Plaintiffs’ ability to share in the larger amount of sale  
proceeds from its September 2016 sale.  
Mr. Soriano disagreed with the Defendants’ position and felt that the legal fees,  
which approached $800,000.00, were disproportional to the value of the Property  
that initially was bought for about $1.2 million. He also felt that comparing these  
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values to the ultimate sale proceeds many years later in 2016 was unfair as no  
one would have known at the time of the Kegalj action in 2011 what the future  
value of the Project would be worth.  
[621] Quite apart from Mr. Soriano’s opinion, which I accept as being sound and  
reasonable, I am troubled by the nature and outcome of the Kegalj litigation. In  
that case, Mr. Kegalj sued the Vuletics by alleging that he was a partner in the  
Project in which the Vuletics took Project funds for their personal use. Before  
commencing his claim in 2010, Mr. Kegalj met with some of the Workplace Group  
members and asked them to join his action. However, as his lawyer refused to  
reveal any records to them that would have corroborated his allegations against  
the Vuletics until they joined his action, they chose not to join the Kegalj action.  
Later on, to reassure these investors, the Vuletics described Mr. Kegalj to them as  
a liar and predicted that he was going to lose his case badly. They later informed  
investors that he did lose badly and was forced to settle. Although the Vuletics  
told investors that Mr. Kegalj’s claim lacked any merit and that the settlement  
vindicated them of any wrongdoing, his allegations against them were never  
adjudicated and the settlement clearly did not absolve them of misconduct. In  
response to Mr. Kegalj’s allegations of financial improprieties, the Vuletics told Ms.  
Kostelac that Anthony had made personal use of $100,000.00 in mortgage funds  
through a repayable personal loan to the Project, but this claim was clearly false.  
In the end, the Kegalj settlement resulted in Justice Lederer’s endorsement dated  
July 11, 2011 that ordered the appointment of an independent accountant to give  
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a full accounting of all Project funds to investors with lot interests in the Project.  
But instead of complying with this order, which was obviously intended to address  
the financial mismanagement concerns that Mr. Kegalj had raised in the litigation,  
the Defendants simply ignored the order until at least 2013 which led Justice  
Lederer to admonish them in 2016 when Mr. Bilich moved to enforce the order for  
an accounting of Project funds to be provided to investors. From the evidence, I  
am satisfied that the accounting would have shed light on the mismanagement of  
Project funds, as Mr. Kegalj was alleging, and in all likelihood explains why prompt  
steps were not taken to prepare and share the accounting with Project investors  
to avoid scrutiny of how Project funds were being managed and used. In light of  
this, and the Defendants’ initial decision to disregard the order to account for  
Project funds, it is difficult for met to accept the Defendants’ position that the  
defence of the Kegalj action constituted a legitimate Project expense.  
[622] The Defendants and Mr. Adair sought to characterize his legal fees as  
legitimate Project expenses by asserting that Embleton and later 185 Corp.  
“owned” more than half the lots on the Property which had to be preserved.  
However, none of the Defendants ever disclosed to investors that Embleton  
claimed ownership of the unallocated lots despite having paid nothing to acquire  
the lot interests and having not paid any proportional service or cash calls as  
required by the APS. Nothing in the APS allowed Embleton or anyone else to  
acquire the unallocated lots in this fashion, and both John and Anthony actively  
concealed their intention to have Embleton acquire these unallocated lots by  
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instructing Ms. Ceifets in February 2002 to not mention its ownership of the lots in  
the APS. When pressed, Mr. Adair himself acknowledged that investors might  
argue that the discharge of his lien for legal fees did not constitute a legitimate  
Project expense.  
[623] Under paragraph 4 of the minutes of settlement dated July 11, 2011 in the  
Kegalj action, the Defendants agreed to enter into a $785,000.00 second mortgage  
in favour of Mr. Kegalj (i.e., the Leamount mortgage) that was discharged in April  
2014. Upon discharging this second mortgage, paragraph 5 of the minutes of  
settlement required “the Vuletics to pay Mr. Kegalj as a condition of discharge an  
amount equal to the value of 1 premium and 3 standard lots as determined by an  
agreed upon / or court appointed appraiser on an “as serviced” basis less the total  
of $215,00000 and $785,000.00.” According to Mr. Kegalj, these terms captured  
the four lot interests in the Property that he had receive by July 2011. On this  
basis, the Defendants asserted that Mr. Kegalj’s situation was exactly analogous  
to the 2002 buyout of the lot that Mr. Santo had initially subscribed for, and the  
2012 buyouts of the lots that Ms. Leveriza and Ms. Gushe (Whyte) had subscribed  
for, each of which KSV had categorized as Project-related expenses. However,  
Mr. Soriano disagreed with this proposition given the need to understand:  
a) the basis on which Mr. Kegalj had come to possess an interest in the  
four lots (i.e., and what value, if any, that he added in exchange for  
that interest) when the Project bookkeeping showed that his total  
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capital investment amounted to only $47,000.00 in respect of one lot  
and  
b) whether the $785,000.00 mortgage, as one of an array of terms in the  
settlement with Mr. Kegalj was exclusively for the purpose of paying  
for the four lots or whether other settlement considerations were  
embedded in that figure.  
Were the Court to find that any portion of the $785,000.00 Leamount mortgage  
was for the purpose of buying out Mr. Kegalj’s interest, even for just one lot, Mr.  
Soriano conceded that any such portion would be a Project-related cost so long as  
the payment was for the fair market value of that lot and nothing else, including  
considerations such as the litigation. In my view, these qualifications for identifying  
an appropriate project-related lot interest buyout expense are fair and sensible by  
seeking to exclude any factors that may influence the buyout decision beyond  
legitimate Project-based considerations. That said, I find that it is not possible to  
determine on the limited record before me whether any portion of the Leamount  
mortgage was solely intended to buy out Mr. Kegalj’s lot interests in the Project  
without factoring other considerations, including the litigation risks from his action.  
There is also no reliable evidence of the fair market value for these interests in the  
Property. Accordingly, I am satisfied that no adjustment should be made to KSV’s  
notional But-For analysis on this point.  
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[624] Mr. Soriano also testified that the KSV analysis excluded $190,000.00 in real  
estate commissions purportedly incurred by 185 Corp. on the sale of the Property  
because neither the trust ledger statement prepared for the sale nor 185 Corp.’s  
bank statements reflected any such amount having been paid. In cross-  
examination, he agreed that if the real estate commission had ben paid, then it  
would be a proper Project expense. When shown a default judgment dated March  
13, 2017 for $190,120.77 obtained by the realtor against 185 Corp. and Anthony  
personally, Mr. Soriano agreed that an actual payment on the judgment would be  
a valid Project expense although he did not accept that the default judgment itself  
as an unpaid debt would be sufficient to constitute a proper Project expense. I  
agree with Mr. Soriano’s evidence and accept that the real estate commission is  
not a proper Project expense absent proof that the amount was actually paid.  
[625] Step #3 of KSV’s analysis calculates the Project’s total But-For sale  
proceeds that ought to have been available for distribution to all Project investors.  
[626] The actual total proceeds of sale of the Property in 2016 came to  
$16,535,561.00, which includes:  
a) the initial deposits paid by the purchaser  
b) the cash paid on the September 12, 2016 closing  
c) the total principal paid off in full under the vendor take-back mortgage  
by September 12, 2020 and  
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d) the total interest paid off in full under the vendor take-back mortgage  
by September 12, 2020.  
[627] KSV’s analysis assumed that the entirety of the total sale proceeds figure  
was available for distribution amongst the investors. In turn, KSV did not make  
any “carve out” from the total sale proceeds to reflect the Defendants’ position that  
the neighbouring lands that 185 Corp. acquired from Mr. Ufkes and the Teramotos  
pursuant to land exchange agreements signed in 2014 belong exclusively to the  
Defendants which leaves that portion of the sale proceeds attributed to these lands  
(i.e., purportedly about $2.2 million) as theirs alone and not for distribution to the  
Plaintiffs or other investors. Having reviewed the land exchange agreements, Mr.  
Soriano testified that he was comfortable making this assumption as Project funds  
had been used to pay for certain development costs (e.g., fees paid to planners)  
that Embleton and 185 Corp. had incurred to develop the Ufkes and Teramoto  
lands, which the Defendants admitted. In addition, he noted the absence of any  
terms in 185 Corp.’s May 2016 agreement or July 2016 amended agreement for  
the sale of the Property to Brampton G&A that allocated any part of the total  
purchase price to the Ufkes or Teramoto lands, as the Defendants have conceded.  
Absent any allocation of the purchase price between the parcels that were sold,  
Mr. Soriano treated the original acreage to the Property plus the additional acreage  
as one parcel.  
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[628] I am satisfied that the proceeds attributed to the adjacent Ufkes and  
Teramoto lands should not be exclusively reserved to Anthony or the other  
Defendants from the total sale proceeds. First, Project funds were used to develop  
the Ufkes and Teramoto lands, as the Defendants acknowledge. In addition, there  
is no provision or language in the agreement and amended agreement by which  
185 Corp. sold the Property to Brampton G&A that purports to allocate any portion  
of the $15,186,000.00 purchase price to the Ufkes or Teramoto lands to be  
transferred under the 2014 land exchange agreements. Furthermore, as the  
Defendants concede, nothing in the land exchange agreements with Mr. Ufkes and  
the Teramotos or the minutes of settlement concluding the 2014 litigation with the  
Teramotos, indicates that the lands to be transferred constitute personal  
compensation for Anthony or John. In my view, the only way for Anthony to deny  
a portion of the sale proceeds from the Plaintiffs and other investors would be for  
him to misuse the discretion conferred on Embleton (n.b., which had been  
dissolved by the time of the Ufkes and Teramoto agreements) under s. 9(q) of the  
APS to develop the Property along with owners of adjoining or adjacent properties  
by claiming that he earned personal compensation from MR .Ufkes and the  
Teramotos. However, given its obligation to exercise its contractual discretionary  
powers in good faith, it was not open for Embleton (i.e., even had it not been  
dissolved) or its principals to arrange to develop the adjacent Ufkes and Teramoto  
lands using Project funds only to later reserve any compensation for just  
themselves and not the Project when profits materialized. The Defendants cannot  
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take exclusive benefits from the Project while ignoring the burdens which the  
Project and its investors incurred to achieve those benefits as doing so would  
cause an obvious injustice. Taking this all into account, I am not satisfied that  
Anthony’s uncorroborated assertions of the land exchange agreements being his  
compensationconstitute a legitimate basis for apportioning the sale proceeds  
from the Ufkes and Teramoto lands exclusively to him or the other Defendants.  
Accordingly, I am not prepared to reduce the $16,535,601.00 total sale proceeds  
figure by the $2.2 million amount as the Defendants have proposed.  
[629] In its analysis, KSV made two deductions against the $16,535,601.00 total  
sale proceeds figure. First, $630,105.00 was deducted as an amount that would  
have to be repaid from the sale proceeds as a But-For notional mortgage deduction  
to exclude cash flows that were unnecessary to develop the Property. In addition,  
the KSV report deducted $109,042.00 in actual transaction costs and  
disbursements incurred for the sale of the Property.  
[630] KSV then added the assumed market value of Lots 49, 50 and 60 (i.e., as  
of March 2021) that were to be reconveyed to 185 Corp. under its agreement and  
amended agreement with Brampton G&A as non-cash consideration that went to  
the Vuletic Defendants as a personal benefit on the sale. The KSV report used a  
current market value of $3,580,000 for the three lots, but prior to trial the parties  
later agreed through their experts that the aggregate market values for the three  
lots, inclusive of embedded values, came to $3, 832,500.00 as of March 1, 2021.  
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As Mr. Soriano explained, substituting this slightly higher agreed market value  
figure would increase his But-For proceeds by $252,500.00 (i.e., the difference  
between both market value figures).  
[631] Despite agreeing on the market value of the lots, the Defendants asked Mr.  
Soriano whether the correct market valuation date of the three lots would have  
been in 2016 (i.e., the date of breach, being the September 12, 2016 closing date)  
and not March 1, 2021. Mr. Soriano responded that the March 1, 2021 valuation  
date was appropriate to use in quantifying the lots as they are still owned by the  
Vuletics and, therefore, should be valued at current values in lieu of older values.  
[632] Depending on the circumstances, the date if breach may be used as the  
valuation date for real property disputes: Semelhago v. Paramadeven, [1996] 2  
SCR 415 at para 12. However, it is open for the court to fix a different valuation  
date in order to do justice between the parties in a particular situation: Semelhato  
at paras 12 and 16-18. In my view, the “date of breach” approach in traditional  
cases is not appropriate to apply in this case as the goal is to value a benefit  
accruing to the Defendants in the future. Lots 49, 50 and 60 as shown on a draft  
plan of subdivision remain unregistered. In the circumstances, I am satisfied that  
the valuation date is more appropriately set in 2021 instead of 2016. Moreover,  
the Plaintiffs cannot be faulted for the delay in crystallizing the valuation date. By  
Order dated September 9, 2019, Justice LeMay required the Defendants to not  
convey, encumber their claimed interests in the three lots pending the  
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determination of this action on its merits. The impending distribution of sale  
proceeds will only occur at some future point after this action is determined. As a  
result, it would be peculiar to use a 2016 date to value assets which the purchaser  
agreed to, but has not yet, reconvey(ed) the Defendants where the assets properly  
belong to the Project. Taking this all into account, I am satisfied that 2021 is the  
more appropriate valuation date to apply in this case.  
[633] Pursuant to Schedule C of the May 26, 2016 agreement of purchase and  
sale between 185 Corp. and Brampton G&A Holdings Inc., the purchaser was  
given the option of retaining Lot 60 (i.e., instead of reconveying it to 185 Corp.) by  
purchasing it within 90 days of plan registration at $4,440.00 per setback frontage  
foot (i.e., $,440.00 x 50 feet = $222,000.00). In turn, by email dated October 31,  
2021, Brampton G&A’s lawyer, Mr. Hiutin wrote to counsel for the Plaintiffs, and  
the Defendants to state the following on behalf of Brampton G&A:  
Pursuant to the attached agreements which you have  
all seen, my client has the option to purchase Lot 60  
within 90 days of plan registration at $4,440 per  
setback frontage foot. My client would like to know if  
there’s any interest in selling this Lot to my client now  
as opposed to within 90 days of plan registration.  
In addition, pursuant to the attached agreements, our  
client was to build a single family detached dwelling on  
Lots 49 and 50 for the Vuletics at their cost. This was  
to be built as early as the development would allow. My  
client wants to know if there’s any interests in selling  
these two lots to my client on the same terms as Lot  
60.  
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[634] Based on the foregoing, it is clear that Brampton G&A is prepared to pay  
$4,440.00 per setback front foot to acquire Lots 49 and 50 rather than reconvey  
the lots and continue to bear the contractual obligation to build homes on the lots  
at below market construction costs. At $4,440.00 per setback foot, two 60 foot lots  
gives a total proposed purchase price of $532,800.00. In turn, the Defendants  
asserted at trial that $4,440.00 per setback foot is a reliable indicator of the 2016  
fair market value for all three lots (i.e., Lots 49, 50 and 60).  
[635] Unlike the case with Lot 60, however, the May 2016 agreement of purchase  
and sale does not give Brampton G&A an option to retain Lots 49 and 50 at an  
agreed 2016 contractual price. Accordingly, to acquire Lots 49 and 50, Brampton  
G&A would need 185 Corp., through John and Anthony, to agree on its terms for  
buying the lots. In addition, Brampton G&A would require the Plaintiffs to consent  
to the purchase of the lots given the terms of Justice LeMay’s November 2019  
preservation order. It follows that Brampton G&A’s offer to purchase the lots from  
185 Corp. based on a frontage price negotiated in 2016 is just one part of the  
potential negotiations that may unfold. In turn, I am satisfied that Brampton G&A’s  
proposed $4,440.00 per setback foot figure does not necessarily represent the fair  
market value of Lots 49 or 50 in 2016 or 2021. Not only did the Defendants not  
agree to sell the lots in 2016 on such terms, but there is no evidence to suggest  
that they would have accepted $532,800.00 as the sale price for both lots in 2021.  
Moreover, as the aggregate market value for Lots 49, 50 and 60 was  
$3,832,500.00 in 2021, as set out earlier, it seems improbable that the Defendants  
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would agree to sell Lots 49 and 50 for such a low and economically  
disadvantageous price that seems well-below market value.  
[636] That said, I accept that Mr. Hiutin’s email is tantamount to Brampton G&A  
exercising its clear contractual right to acquire Lot 60 for a $222,000.00 purchase  
price and not reconvey the lot to 185 Corp. after plan registration. In the  
circumstances, I find that it is appropriate for Lot 60 to be valued as of March 1,  
2021 by using the $222,000.00 figure instead of the $675,000.00 amount as the  
parties otherwise had agreed upon. After adjusting for the $453,000.00 difference,  
the market value for Lots 49, 50 and 60 (i.e., inclusive of embedded construction  
profits for Lots 49 and 50) under the KSV But-For analysis is $3,379,500.00 (i.e.,  
the agreed upon $3,832,500.00 value less the $453,000.00 adjustment). That  
said, I am satisfied that the market value for Lots 49 and 50 as of March 1, 2021  
should not be adjusted for the reasons set out earlier.  
[637] In cross-examination, Mr. Soriano was asked about a scenario in which the  
Defendants and Mr. Granic intended when the Property was sold in 2016 that Mr.  
Granic would get Lot 60 after it was reconveyed to 185 Corp. by Brampton G&A.  
In this scenario, Mr. Soriano agreed that Mr. Granic’s contribution would be  
removed from the total investor contributions and the value of the Property would  
be reduced by the value of Lot 60 if the lot represented everything that Mr. Granic  
was owed. Mr. Soriano also explained that an acquisition by the Defendants of  
Mr. Granic’s interest in Lot 60 would not lead to a reduction of Mr. Granic’s capital  
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contribution to the Project or the $222,000.00 value of Lot 60 being removed from  
the But-For proceeds for distribution. Regardless, neither Mr. Granic nor 185 Corp.  
ever (re)acquired Lot 60 as Brampton G&A, through Mr. Hiutin, effectively  
exercised its option to retain Lot 60, as set out earlier. As a result, there is no basis  
to further reduce the value of Lot 60 under the But-For analysis.  
[638] Notably, Mr. Granic sued the Defendants in this action which led to a  
counterclaim for a declaration against Mr. Granic and his spouse that the  
Defendants are entitled to Lot 60. Later on, by minutes of settlement signed on  
July 23, 2020, both sides settled their claims by the Defendants agreeing to pay  
$250,000.00 to Mr. Granic. According to Anthony, the Defendants intend to pay  
this outstanding amount to Mr. Granic by using the sale proceeds that were paid  
into Court. None of this suggests that Mr. Granic holds an interest in Lot 60 to  
warrant adjusting the KSV analysis.  
[639] The last part of step #3 to the KSV analysis was the addition of $67,036.00  
in post-closing (2017-2019) Project cash flows. This reflected added cash flows  
including, among other things, $89,704.00 of imputed rental income to the Project  
(i.e., related to the Vuletics having lived on the Property from September 13, 2016  
through September 30, 2020). The KSV analysis also removed $516,667.00 in  
legal fees that 185 Corp. had paid between 2017 and 2019 to Mr. Adair, Mr. Pape  
and a mediator, Steven Morrison, which KSV regarded as non-Project related  
costs. That said, $71,428.00 in legal fees paid to Mr. Adair in 2017 in connection  
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with the Teramoto litigation were accepted as Project-related costs that were not  
removed in KSV’s analysis.  
[640] Under the KSV analysis, the $16,535,601.00 in actual sale proceeds, less  
$630,105.00 to discharge the But-For notional mortgage and less $109,042.00 in  
sale-related transaction fees and disbursements, plus $67,036.00 in post-sale  
Project cash flows resulted in But-For sale proceeds of $19,242,990.00 available  
for distribution to investors. To this figure, the KSV analysis added $3,580,000.00  
to account for the fair market value of Lots 49, 50 and 60, to which Mr. Soriano  
indicated that a further $252,500.00 should be added to reflect the parties’  
agreement prior to trial of the assumed market value for all three lots. By indexing  
the market values of Lots 49 and 50 forward to the start of trial, Mr. Parsons  
reached a market value of $1,780,000.00 for Lot 49 and a value of $1,655,000.00  
for Lot 50 as of September 1, 2021. These figures reflected increases to the  
parties’ agreed market values for both lots as of March 1, 2021, namely a  
$142,500.00 increase to the value of Lot 49 and a $135,000.00 increase to the  
value of Lot 50, that combined for an aggregate $277,500.00 increase for both lots.  
[641] Based on the foregoing, I am satisfied that the total But-For sale proceeds  
available for distribution to Project investors comes to $19,520,490.00.  
[642] Through the expert evidence of Michael Parsons and John Galluzzo, the  
Plaintiffs proposed an alternative methodology for valuating their respective shares  
in the Project based on the value of their respective lot subscriptions under the  
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APS. To this end, Mr. Parsons and Mr. Galluzzo gave expert evidence for the  
value of fully-serviced lots based on their analyses of comparable properties in the  
neighbouring areas to the Property. However, their evidence did not address the  
costs for bringing servicing infrastructure to the Property. When asked at trial  
about the likely cost to service the Property, Anthony gave impressionistic figures  
that were vague and uncorroborated. Despite my reservations with the quality of  
this evidence, I accept that the costs related to bringing servicing infrastructure to  
the Property would likely not be insignificant and could be substantial.  
[643] Aside from the cost to service the Property, the Plaintiffs led no evidence to  
show when the Property would likely have service infrastructure. For their part, the  
Defendants offered several predictions for when the Property would be serviced,  
but it is clear that their estimates were overly optimistic as the Property remained  
without servicing infrastructure by the start of trial in the Fall of 2021. Without  
knowing the cost or likely timeframe for bringing servicing infrastructure to the  
Property, I am not persuaded that the valuations proposed by Mr. Parsons and Mr.  
Galluzzo would offer a sufficiently reliable method for determining the Property’s  
fair market value and the corresponding entitlements of the parties in this case. In  
the circumstances, I am not persuaded that the valuation approach proposed by  
Mr. Parsons and Mr. Galluzzo should be adopted.  
[644] Under step #4 of the KSV analysis, the But-For proceeds available for  
distribution to each Plaintiff was calculated according to each Plaintiff’s relative  
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interest in the Project (i.e., based on their contributions to the total capital invested  
in the Project). In principle, I accept that this pro-rata methodology is an  
appropriate and fully supportable approach for quantifying the Plaintiffs’  
entitlements in this case.  
[645] The Defendants submit that the capital investment approach under the KSV  
analysis is flawed because if fails to fully reflect the capital contributions of all  
investors and skews the results in favour of the Plaintiffs. Respectfully, I am not  
persuaded by this submission. As set out in the KSV report, and as Mr. Soriano  
confirmed in his evidence, the pro-rata analysis considered the Plaintiffs’ pro-rata  
interest based on their relative total capital contribution to the total capital invested  
in the Project. Although certain non-Plaintiff investors settled their claims with the  
Defendants, the KSV analysis accounted for their pro-rata capital interests in the  
Project (i.e., based on their lot interests and cash call contributions) irrespective of  
any settlements. In turn, the KSV analysis arrived at the Plaintiffs’ relative interests  
based on the total capital invested in the Project by all investors which is a fair and  
appropriate method to adopt in the circumstances of this case.  
[646] Importantly, the KSV analysis did not recognize any capital contributions  
made by the Defendants to the Project. As discussed earlier, Embleton  
immediately reimbursed the Vuleticsfor their early contributions so the Property  
could be acquired from Ms. Taylor in 2002 leaving them with nil net capital  
contributions to the Project. Nevertheless, according to the KSV report, the Vuletic  
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Defendants made a $14,000.00 tax payment for the Property on December 15,  
2011, and also paid a total of $170,000.00 from their personal accounts for other  
Project costs on four (4) occasions between August 16, 2012 and October 8, 2013,  
as set out earlier. In light of this, I accept that the Vuletic Defendants paid a total  
of $184,000.00 in legitimate Project expenses, as Mr. Soriano acknowledged in  
his evidence. But instead of recognizing these payments by the Vuletics as capital  
contributions to the Project on the same basis as those made by the Plaintiffs, the  
KSV analysis treated these contributions as credits against the benefits received  
from the Project by the Vuletics that would have to be repaid. This part of the KSV  
analysis is inconsistent with the Plaintiffs’ underlying position in this litigation that  
any contributions to the total capital invested in the Project should be factored by  
distributing the available proceeds on a pro-rata basis.  
[647] Taking this all into consideration, I am satisfied that the Vuletic Defendants  
should have a pro-rata share of the available proceeds based on their $184,000.00  
capital contribution that paid legitimate Project-related costs and expenses. By  
making these payments, I find that the Vuletics contributed capital to the Project  
that, in fairness, should properly be recognized and accounted for in distributing  
proceeds to investors in order to achieve a fair and equitable distribution under the  
methodology proposed by the KSV analysis. In arriving at this finding, I  
acknowledge that the Vuletics engaged in very serious misconduct by misleading  
investors over the course of the Project to pursue blatantly self-interested  
outcomes at their expense. Moreover, in fashioning an equitable remedy with a  
- 328 -  
constructive trust, I am acutely aware that parties coming to equity must do so  
with clean hands: Ernst & Young Inc. v. Aquino, 2022 ONCA 202 at para 89. Here,  
the Vuletics hands are not clean. Nevertheless, to do justice in this case, I find  
that their capital contributions to the Project should be factored in distributing its  
proceeds. To do otherwise would, in my view, cause serious unfairness that would  
not be just or equitable in all of the circumstances.  
[648] As stated in the KSV report, investors contributed $1,480,207.00 in total net  
capital to the Project. In my view, a further $184,000.00 should be added to this  
figure to properly account for the Vuletics’ capital contributions to the Project, which  
brings the actual total to $1,664,207.00.  
[649] Accordingly, by applying each party’s total net capital investment under the  
KSV pro-rata methodology to the $19,520,490.00 in total sale proceeds available  
for distribution, I find that the parties should receive the following entitlements:  
Plaintiff  
Investment Pro-rata  
Interest  
Entitlement  
Nancy Kostelac  
$118,738.00 7.13%  
$118,738.00 7.13%  
$59,368.00 3.57%  
$1,391,810.90  
$1,391,810.90  
$696,881.49  
$630,511.82  
Marielle Pelchat-Morris  
Moraig and Ian Grounds  
Jacinta and Aleardo Caroti $53,773.00 3.23%  
- 329 -  
Biljana Nizalek and Brian $40,200.00 2.42%  
McDowell  
$472,395.85  
Monica Savona and Wilma $227,472.00 13.67%  
Jesus  
$2,668,450.90  
Anna Bilich  
Peter Pichelli  
Todd Leslie  
Frank Toth  
$43,774.00 2.63%  
$117,736.00 7.07%  
$513,388.88  
$1,380,098.60  
$573,902.40  
$464,587.66  
$433,354.87  
$48,868.00 2.94%  
$39,624.00 2.38%  
Frank  
Campli  
(Peter $36,975.00 2.22%  
Pichelli)  
Anthony and John Vuletic $184,000.00 11.06%  
$2,158,966.10  
Total Distribution to the  
Parties  
$12,776,159.00  
Punitive Damages  
[650] In Borrelli (SCJ) at para 1048, Justice Penny concisely summarized the legal  
principles to consider in awarding punitive damages:  
Punitive damages are available where there is high-  
handed, malicious, arbitrary or highly reprehensible  
misconduct that departs to a marked degree from  
ordinary standards of decent behaviour. Such  
damages are used to deter the defendant and others  
from similar misconduct in the future, and to mark the  
community’s collective condemnation of what has  
happened. In situations of fraud and breach of  
fiduciary duty, punitive damages are appropriate  
“[w]here the actions of the fiduciary are purposefully  
 
- 330 -  
repugnant to the beneficiary’s best interests” and “the  
impugned activity is motivated by the fiduciary’s self-  
interest”: Mark Ellis, Fiduciary Duties in Canada,  
(Scarborough, ON: Carswell, 1993), at 20-35 20-36,  
1980 ed. quoted by McLachlin J. (as she then was)  
in Norberg v. Wynrib, 1992 65 (SCC),  
[1992] 2 S.C.R. 226, at para. 112  
See also Hill v. Church of Scientology of Toronto, [1995] 2 SCR 1130 at para 196;  
Whiten v. Pilot Insurance Co., 2002 SCC 18 at para 36.  
[651] Courts have awarded punitive damages to deter fraudulent and egregious  
conduct: Boughner v. Grewhawk Equity Partners Limited Partnership (Millenium),  
2013 ONSC 163 at para 41, affirmed 2013 ONCA 26. Punitive damages may be  
awarded to relieve a wrongdoer of its profit where compensatory damages would  
amount to nothing more than a license fee to earn greater profits through  
outrageous disregard of the legal or equitable rights of others: Whiten at para 72.  
The governing rule in awarding punitive damages is proportionality as the overall  
award of compensatory and punitive damages plus any other sanction should be  
rationally related to the objectives for which the punitive damages are awarded,  
such as retribution, deterrence or denunciation: Whiten at paras 74 and 112.  
[652] In my view, an award of punitive damages is completely appropriate in this  
case. The Defendants acting through Embleton and 185 Corp. wilfully engaged in  
a deliberate pattern of secretive and self-serving misconduct to perpetrate a large  
and complex fraud over a number of years by taking advantage of the Plaintiffs’  
lack of sophistication and vulnerability as novice land development investors. The  
- 331 -  
Defendants’ conduct was reprehensible and a marked departure from the  
standards of common decency. Their conduct should clearly be deterred.  
[653] Taking all of the foregoing into consideration, and having regard to the  
amounts involved and my disposition of the Plaintiffs’ damages claim, I award  
punitive damages of $150,000.00.  
Outcome  
[654] Accordingly, judgment shall issue in accordance with these reasons.  
[655] A case conference shall be convened following the release of these reasons  
to establish a timetable for the disposition of issues relating to the funds preserved  
in Court and the lots addressed in the Order of Justice LeMay dated September 9,  
2019, as amended on November 25, 2019, which shall be continued until the  
disposition of these issues at the case conference or such later date as may be  
directed.  
[656] I would ask counsel to confer and provide my assistant with dates mutually  
convenient to them and counsel for other affected parties for the return of the case  
conference. Prior to the case conference, I also ask that counsel confer on how  
to best address costs so that this matter may be spoken to at the case conference.  
[657] I wish to express my thanks to all counsel for the high quality of their  
submissions.  
 
- 332 -  
Doi J.  
Date: August 15, 2022  
CITATION: Caroti v. Vuletic, 2022 ONSC 4695  
COURT FILE NO.: CV-17-5302-00  
DATE: 2022 08 15  
SUPERIOR COURT OF JUSTICE -  
ONTARIO  
RE:  
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  
BEFORE: DOI J.  
COUNSEL: Caroline Abela and Michael  
Statham, for the Plaintiffs  
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  
- 2 -  
Estate of Boris Klecina also  
known as Borislav Klecina  
Andrew J. MacDonald, for the  
Defendant to the  
Counterclaim, Anna Bilich  
Douglas M. Cunningham, for  
the Plaintiffs Peter Pichelli,  
Todd Leslie, Frank Toth and  
958041 Ontario Limited  
Ryan Breedon and Jessica  
Mor, for the Defendants  
Anthony Vuletic, John Vuletic,  
Mira Vuletic, Embleton  
Properties Corp. and 1857325  
Ontario Ltd.  
REASONS FOR JUDGMENT  
Doi J.  
DATE: August 15, 2022  
1
By agreement, the Defendant Brampton G&A Holdings Inc. was removed from the actions.  
For clarity, I shall refer to the personal Defendants by their first names in these reasons. No disrespect is  
2
intended by doing so.  


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