Laski v Gallo, 2017 ONSC 89
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE ESTATE OF EUGENIUSZ KOLODZIEJ, deceased
BETWEEN: Monika Laski and Martin Laski, Applicants
-and-
Dorothy Gallo, Estate Trustee With a Will of the Estate of Eugeniusz Kolodziej, deceased; and Dorothy Gallo, personally, and Renata Kasprzak, Respondents
BEFORE: F.L. Myers J.
COUNSEL: Michael W. Czuma, for the Applicants, Dorothy Gallo, in person
HEARD: January 4, 2017
ENDORSEMENT
1The applicants seek an order removing Dorothy Gallo as estate trustee of their father’s estate and appointing the applicant Monika Laski as estate trustee in her stead.
2Mr. Kolodziej died on July 16, 2010. He was survived by his three adult children, the applicant Monika Gallo, the respondent Dorothy Gallo, and the respondent Renata Kasprzak. Ms. Kasprzak has renounced any interest that she may have in her father’s estate. Martin Laski is Monika Laski’s son. He is a beneficiary under a Polish will apparently left by Mr. Kolodziej dealing with property in Poland. Ms. Gallo advises that there may be issues with the propriety of the Polish will. However, the parties were content that matters proceed here independent of whatever may be occurring in Poland.
3Under Mr. Kolodziej’s Canadian will, Ms. Gallo is the named executrix or estate trustee. The assets of the estate were to be divided and distributed in three equal shares; one to each of Mr. Kolodziej’s children.
4Mr. Kolodziej’s estate is of modest size. His principal asset was his house which was sold by Ms. Gallo in 2010. She received net proceed of sale of approximately $134,000 for the house. She has made no distributions to her siblings at all.
5This application was originally returnable on July 18, 2016. At that time, Conway J. agreed to adjourn the hearing to October 28, 2016 to allow Ms. Gallo to retain counsel. On October 28, 2016, the parties appeared before Penny J. Ms. Gallo had not yet retained counsel. In light of evidence that the amount of cash then remaining in the estate’s bank account had shrunk to approximately $70,000, Penny J. imposed terms on Ms. Gallo as a condition of granting her a further adjournment until today. First, he restrained Ms. Gallo from dealing in any way with the assets of the estate pending the hearing. He also ordered Ms. Gallo to provide by December 30, 2016, an accounting of the finances of the estate from the date of Mr. Kolodziej’s death to the present. Finally, he ordered Ms. Gallo to file any evidence on which she relies by November 25, 2016.
6On freezing the estate’s bank account, the applicants learned that only approximately $71,000 in cash remains in the account. Over $60,000 is unaccounted for.
7Ms. Gallo filed an affidavit on November 25, 2016. However she did not serve it first on the applicants. She says that she does not know their address. However counsel’s address is duly disclosed on all pleadings.
8Ms. Gallo’s affidavit contains a substantial amount of history about how the family came to Canada. She discusses her close relationship with her father and how she took care of him and the whole family. She also discusses in her evidence and in her oral submissions that in 2004 to 2005 she conducted several transactions with Monika Laski’s husband who is a lawyer. As a result of those transactions, she says she lost everything and had to move back in with her father.
9During the oral hearing, Ms. Gallo was very clear that she wants to sit down with Ms. Laski’s husband and come to an agreement as to what happened in 2004 – 2005. She conditions her siblings’ entitlement to receive any distributions under their father’s will on a settlement being reached with Ms. Laski and/or her husband. She also submitted that the bulk of the estate belongs to her despite the language of the will dividing the beneficial titled into equal thirds. She explains this view based on a combination of her having cared for her father and the family for several years, the need for a settlement with Ms. Laski and her husband, and alleged oral statements made by her father in the hospital before his death.
10Finally, Ms. Gallo advises that she finds herself in extreme conditions at the current time. She has had to move five times in the past year because she is being stalked in breach of her rights under the Charter of Rights. She advises that she has failed to perform the accounting ordered by Penny J. because she does not have sufficient funds to retain an accountant or to even print documents that she has on her computer. She also has many boxes of records relating either to the estate or to her prior business transactions, or both. She provided some form of accounting she says in 2014 and all she wants now is to get the family back together to resolve her issues. She advises that her life is in a shambles. She wants to live life in a quiet and peaceful manner rather than fighting with her family.
11Under questioning from the court, Ms. Gallo was not able to explain where the missing $60,000 has gone. That was the purpose of the accounting that Penny J. ordered her to provide. Ms. Gallo refers to bills from an estates lawyer and bills dealing with complex transactions. She also retained a lawyer to deal with her personal employment issues. She has spent estate money to pay for her many recent moves ostensibly because she had to move her boxes of records with her. She says that she had no other funds available to pay her expenses.
12It is apparent to the court that Ms. Gallo has a number of significant issues in her life right now that need her full time and attention. She finds herself in very difficult circumstances which prevent her from recognizing or performing her responsibilities as estate trustee. Ms. Gallo has intermingled her business affairs with her understanding of the administration of her father’s estate. Her views as to her entitlement to withhold estate funds pending settlement of ten year old complaints with her brother-in-law and as to her apparent inability to implement the terms of the will in light of her own sense of entitlement to a greater share of her father’s estate than he left to her makes it clear that she lacks the proper capacity to execute the duties of her fiduciary position. St Joseph's Health Centre v. Dzwiekowski, 2007 51347 (ON SC) at para. 25. Moreover, her inability to account for expenditures of the estate’s funds renders it inappropriate for her to continue as estate trustee.
13Ms. Gallo needs to spend her time on her other pressing matters. Financial administration of estate funds for others is an onerous responsibility. It is in the best interests of all of the beneficiaries to lift this burden from Ms. Gallo’s shoulders. The due administration of the estate has already waited more than six years. I am satisfied that continued administration with due regard to the interests of the beneficiaries has become impossible by virtue of the situation in which Ms. Gallo finds herself. See St Joseph's Health Centre at para. 30 citing Re Consiglio Trusts (No. 1) (11973), 3 O.R. (3d) 326 (C.A.).
14Therefore, under s. 5 of the Trustee Act, R.S.O. 1990, c. T.23, I have signed an order replacing Ms. Gallo with Ms. Laski as estate trustee. The order also requires Ms. Gallo to deliver up to Ms. Laski all documents concerning the administration of the estate. This does not include her personal records concerning her business transactions. Ms. Gallo shall deliver all property belonging to the estate and all documents that evidence how the estate has been administered since its inception including, without limitation, all bank records, all invoices paid by or on behalf of the estate, all communications concerning estate matters, and the like.
15This is an appropriate case for costs to be awarded on a substantial indemnity basis. I have reviewed the Costs Outline of the applicants. The hours and rates charged by counsel for this application are quite reasonable. Substantial indemnity costs are appropriate when a party’s behaviour is reprehensible and deserving of censure. While I have not found deliberate misconduct (and was not required to do so under s. 5 of the statute) it cannot be ignored that Ms. Gallo has wholly misconceived the fiduciary nature of her duties. Whether in good faith or otherwise, she has acted in a conflict of interest to pursue her personal issues ahead of and at the expense of her obligations to the beneficiaries. Ms. Gallo is ordered to pay costs of $10,614.30 to the applicants forthwith. In the event that the estate ever owes money to Ms. Gallo after a proper accounting, the costs may be garnished by Ms. Laski from her sister’s share. However, nothing in this order limits the applicants to that relief. They are free to enforce the costs order in the ordinary course.
16Counsel for the applicants may arrange with my Assistant to pick up the signed order from Judges’ Administration at 361 University Avenue.
F.L. Myers J.
Date: January 4, 2017