COURT FILE NO.: 05-158/16

DATE: 20201208

ONTARIO

SUPERIOR COURT OF JUSTICE

In the Matter of the Estate of Fania Klaczkowski, deceased

BETWEEN:

HARRY KLACZKOWSKI, in his capacity as Estate Trustee for the Estate of Fania Klaczkowski and in his personal capacity Applicant

– and –

MAX KLACZKOWSKI, in his capacity as Estate Trustee for the Estate of Fania Klaczkowski and in his personal capacity Respondent

Archie Rabinowitz and Patrick Harris for the Applicant

Richard K. Watson, for the Respondent

HEARD: November 2-5 and 18, 2020

REASONS FOR DECISION

LEIPER J.

I INTRODUCTION AND OVERVIEW

[1] Harry Klaczkowski (or “Harry”) applied for an accounting relative to a property at 128 Richmond Street East in Toronto and a TD Canada Trust Trading Account (the “TD Trading Account”) from his brother, Max Klaczkowski (or “Max”) in his capacity as co-estate trustee over the estate of their late mother, Fania Klaczkowski. Harry seeks a declaration of trust over amounts which Max withdrew from the TD Trading Account, or alternatively a disgorgement of those sums to be held in trust pending the final passing of accounts of the estate.

[2] Harry Klaczkowski also seeks an order releasing the funds held in trust from the sale of Fania Klaczkowski’s house. Max and Harry are the sole beneficiaries under Fania Klaczkowski’s will, with each entitled to a 50% share in the residue of their late mother’s estate.

[3] During the hearing, the parties called evidence and sought an order of assistance from the court concerning certain disputed sums/payments of money and whether these sums/payments form part of the estate.

[4] After calling evidence and during final submissions, Harry Klaczkowski raised a new issue. He sought leave to amend his application to seek an order removing himself and Max Klaczkowski as estate trustees. Max Klaczkowski requested additional time to consider calling further evidence and making submissions on this issue. Both requests were granted.

[5] The balance of the application was heard on November 16, 2020. Harry and Max gave further evidence. At the conclusion of that evidence, Harry Klaczkowski modified his position and asked the court to make an order appointing an estate trustee during litigation (“ETDL”). Max Klaczkowski opposed this order: he submitted that he and his brother should continue to act as estate trustees.

[6] For the reasons that follow, I conclude that an ETDL should be appointed, and Max Klaczkowski must provide an accounting for the TD Trading Account and the Estate’s interest in 128 Richmond Street East. At the parties’ request, I have also made findings in relation to certain sums in dispute as between Harry and Max Klaczkowski as described below.

II THE ISSUES TO BE DECIDED IN THIS APPLICATION

[7] The parties identified the following issues to be determined in this application:

i) Should Max Klaczkowski be required to account for:

a. The estate’s interest in 128 Richmond Street East, Toronto, and in particular, revenue from parking and billboard rentals?

b. The estate’s interest in the TD Trading Account?

ii) Should the court appoint an EDTL?

iii) If the court exercises its jurisdiction, how should an EDTL be selected?

iv) Should an order be made for the distribution of the proceeds from the sale of Fania Klaczkowski’s house to the beneficiaries?

v) What directions should be made concerning the following disputed sums/payments?

a. A loan of $170,000 to Harry Klaczkowski;

b. A payment of $54,000 from Max Klaczkowski to Harry Klaczkowski and an offer of reimbursement of this amount made by Fania Klaczkowski to Max Klaczkowski;

c. The equal division of $32,000 in paper bills by Harry and Max Klaczkowski after the date of their mother’s death.

III BACKGROUND FACTS

[8] Fania Klaczkowski died on May 23, 2015. Her will named her adult children, Harry and Max as estate trustees and equal beneficiaries of the residue of the estate.

[9] According to an agreed statement of facts and chronology filed by the parties, attached to these reasons as Appendix 1, at the time of her death the residue of Fania Klaczkowski’s estate consisted mainly of:

i. The TD trading account;

ii. A 1/3 interest in a commercial property at 128 Richmond Street East, Toronto; (the “Richmond Street property”)

iii. A home at 65 Barksdale Avenue, Toronto (“Barksdale”).

[10] After Fania’s death, Harry and Max sold Barksdale. Some of the proceeds were used to pay estate taxes. The balance of these proceeds is being held in trust pending agreement of the estate trustees or court order.

[11] Harry began asking Max questions about Max’s withdrawals of funds from the TD trading account in June of 2015 and February 2016. Harry seeks an accounting of these funds. Max resists this accounting: he says that his mother gifted the contents of the trading account to him and he withdrew the funds to pay for the estate’s share of taxes on the Richmond Street property.

[12] After their mother’s death, Harry and Max attended at a bank safety deposit box containing jewelry belonging to Fania Klaczkowski and $32,000 in $1,000 bills. They divided the cash equally. Max now says that the contents of the safety deposit box, including the cash, belongs to him and was not the property of the estate. He seeks repayment from Harry of the $16,000.

[13] The Richmond Street property is contiguous to another commercial property on Queen Street East (the “Queen Street property”) owned by Max Klaczkowski. Max carries out a tire business on the Queen Street property. By virtue of a family trust, Harry has a 10% interest in the Queen Street property. Before and after Fania Klaczkowski’s death, the property on 128 Richmond Street earned income from commercial tenants, billboard rentals and parking revenues. Both Harry and Max Klaczkowski believe that the Richmond Street property and the Queen Street property have potential redevelopment value. Each has spent money on various redevelopment efforts for the Richmond Street property.

[14] On September 19, 2016, Harry Klaczkowski commenced this application for an accounting of the TD Trading Account, parking and billboard revenues at the Richmond Street property, a declaration of trust over the sums withdrawn from the Trading account and an order releasing the balance of the proceeds from the sale of Barksdale to the beneficiaries.

[15] During these proceedings, Max Klaczkowski and/or his former accountant, Stephen Biback produced various records to Harry, including tax bills for the Richmond Street property, development costs, account statements for the TD Trading Account and a former brokerage account, billboard lease information and tax returns for Fania Klaczkowski. These were tendered and form part of the record.

[16] Prior to the further evidence tendered on November 23, 2020, Max produced more records related to the development activities he has been undertaking and which he had not previously shared with Harry.

IV DISCUSSION OF THE ISSUES

Should Max Klaczkowski be required to account for the estate’s interest in 128 Richmond Street East, Toronto, and including revenue from parking and billboard rentals?

[17] Rule 74.17 of the Rules of Civil Procedure, RRO 1990, Reg 194, requires estate trustees to keep accurate records of estate assets. On the passing of accounts, all disbursements, and payments from and to the estate are to be accounted for properly.

[18] Max produced records relative to the costs for development activities at the Richmond Street property during the hearing. On prior dates, he produced partial records for the TD trading account and other records. He gave evidence that he managed the revenues, expenses and development activities for both his and the estate’s interest in the Richmond Street property. His position is that these were not provided due to any legal requirements, but he said this was done voluntarily in response to Harry’s requests. He submits that no order for accounting under Rule 74 is available because the property was held by himself and his mother as tenants in common which displaces his obligations as estate trustee. He submits that the only request for an accounting available is pursuant to the Courts of Justice Act.

[19] The property was purchased in April of 1986 and the family shared as follows: 1/3 each owned by Harry and Max and 1/3 in the name of the parents, Fania and Israel Klaczkowski. In February of 1987, the Applicant transferred his interest to Max. He received consideration for that transfer. Prior to Fania’s death and following the death of her husband Israel in 2002, Fania and her son Max, Max, shared the property on a 2/3 to 1/3 basis. Max’s share was 2/3 and Fania’s 1/3. As such, the estate holds Fania’s 1/3 share of the Richmond Street property.

[20] At the time of Fania’s death, the Richmond Street property generated income, variously from car rental companies, paid parking and at least one billboard. An adjoining property at 128 Queen Street East is owned by the Klaczkowski Family Trust, of which Harry has a 10% ownership. That property is used by Max for his tire business. He stores tires in the office at the Richmond Street property. The property tax records reveal that the cost of taxes has been steadily increasing over the years. Max testified that this is a source of financial stress.

[21] Max testified that since his mother’s death, he has continued to make decisions relative to the property, as he did when Fania was alive. He continued collecting rental income from tenants, from billboard rentals and parking revenues. In the middle of this hearing, Max produced records for expense related to his development activities in recent years. Max also testified that for a period since Fania’s death, he had a cannabis store tenant, and received rental income from that tenant. He has not provided an accounting to the estate for these rent revenues. Harry testified he learned about these revenues for the first time during the hearing of this Application.

[22] Max argues that the billboard and parking revenue have nothing to do with the estate. He shared the tax losses with Fania when she was alive, and her share of the rental income. He testified that he did not account to Fania for billboard or parking revenues. As such, he submits that he is not obliged to produce an accounting to the estate for these revenues. He submits that he has voluntarily provided tax records, his mother’s tax returns and additional records to the Applicant for development costs.

[23] I disagree. There is no agreement or other material to displace Max’s obligation to hold his mother’s share of the Richmond Street property in trust for her benefit. His evidence amounts to a recognition that she received some benefit while she was alive, but that his practice was not to account or share in all the revenues with her. This arrangement has not been corroborated by other evidence or in any agreement between Max and Fania Klaczkowski.

[24] There is no dispute that the 1/3 interest in Richmond Street property forms part of the estate. The evidence reveals that there has been ongoing economic activity at the Richmond Street property since the time of Fania Klaczkowski’s death. Partial records have been produced. Max has testified that some of the rental revenue generated by the Richmond Street property has been deposited into a business account solely controlled by Max.

[25] In Valard Construction Ltd v. Bird Construction Co., 2018 SCC 8 at paras. 16-18, the Supreme Court of Canada discussed the principles and expectations for estate trustees, including their obligations to act honestly and with a level of skill and prudence to be expected of a reasonable person of business administration his or her own affairs. A trustee is not to profit personally from its dealings with the trust. A beneficiary under a trust, may hold a trustee to account for the carrying out of these responsibilities. Above all, the hallmark of the trustee-beneficiary relationship is of a fiduciary relationship.

[26] Max has produced no authority to establish that as a fiduciary, he is exempt from accounting for all revenues and expenses for a property in which the estate has an interest. Harry has provided authority for the proposition that an estate administrator who is also a tenant in common will be required to pass accounts: Fray v. Evans, 2013 ONCA 776 at para. 39.

[27] I order that Max shall provide an accounting for all expenses and revenues including, but not limited to parking and billboard revenue from the Richmond Street property since the date of Fania’s death.

Should Max Klaczkowski be required to account for the estate’s interest in the TD Trading Account?

[28] At the hearing, Max Klaczkowski disputed the estate’s entitlement to the contents of the TD Trading account: he testified that either the funds in the account had been gifted to him by his late mother and do not form part of the estate, or the funds in the account were owed to him for expenses related to his late mother’s 1/3 interest in the Richmond Street property.

[29] The Applicant has tendered evidence that in June 2016, the month after Fania Klaczkowski’s death, Max withdrew $189,000 from the Trading Account. In February of 2016, Max withdrew cash and shares worth $59,880.16 from the Trading Account. The Trading Account was a joint account in the names of Fania and Max Klaczkowski.

[30] According to Max, he traded on his mother’s account for her benefit, following difficulties with an earlier account and another broker. He testified that he had put some of his own funds into the Trading Account at times but was not able to identify the amounts or dates on which he deposited his own funds.

[31] Max testified that his mother told him that he could keep the contents of the TD Trading Account. On that basis, he denies any legal obligation to produce an accounting to the estate or to share any remaining proceeds. He also testified that he withdrew funds from the Trading Account after his mother’s death to pay for taxes on the Richmond Street property and other expenses. He has voluntarily supplied some statements for the Trading Account. He also testified that he directed Harry to speak with their former accountant, Stephen Biback for any additional records relative to the TD Trading Account.

[32] Harry relies on the presumption in Pecore. Equity presumes bargains, not gifts. When a parent gratuitously transfers property to an adult child, the law presumes that the child holds the property on a resulting trust for the parent: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 36.

[33] Max submits he has no duty to account further than he has to his brother Harry. He says that he provided Harry with all the information necessary to substantiate his withdrawal of $189,000 on June 15, 2015.

[34] The principle in Pecore applies. Presumptively, the contents of the TD Trading Account were for Fania’s benefit. To rebut the presumption, Max must provide evidence corroborating his assertion that his mother intended to gift him the contents of the TD Trading Account.

[35] In Pecore, the Supreme Court noted that in the case of joint bank accounts, the court may look to a range of evidence to determine whether the deceased intended to gift the remainder in the account to the survivor: A court may look at the bank documents, the control and use of the funds, any power of attorney, tax treatment and evidence after the transfer if it is relevant to the transferor’s intention: Pecore, paras. 55, 59‑62, 69.

[36] Max has not produced the TD Trading Account opening records. He has not quantified any amounts which he deposited. There is nothing in writing to corroborate Fania’s intention to gift the contents of the Trading Account to Max. Fania had substantial investments which were moved from a broker-traded account into the TD Trading Account that was placed in her name and Max’s name. Max testified that he made trades for his mother, sometimes day trading, in an effort to earn money for her. According to the evidence from Stephen Biback, Fania’s accountant, the capital losses for these investments were included on Fania’s terminal tax return. The tax treatment of the losses is consistent with my finding that the trading activity in the TD Trading Account was done for Fania’s benefit.

[37] I find that the uncorroborated, undocumented assertion by Max that his mother gifted the contents of the Trading Account to him has not rebutted the presumption that these funds were for her benefit and form part of her estate.

[38] The evidence produced on this Application favours a finding that the Trading Account forms part of the estate. According to the principles in Pecore, the contents of the account were impressed with a trust in favour of Fania, now in favour of her estate. Max removed $189,000 from the Trading Account following her death and a further amount $59,880.16 in cash and shares, in 2016. As an estate trustee, he will be required to account for the activities in the Trading Account in accordance with the duties owed by trustees to beneficiaries of an estate.

[39] I find that that Max Klaczkowski must provide a full accounting in respect of the TD Trading Account as of the date of death of Fania Klaczkowski. The proceeds of that account that remain and have been withdrawn since the date of Fania’s death are held by Max Klaczkowski pursuant to a constructive trust.

Should the court appoint an EDTL?

[40] I have applied the following principles to the question of whether an EDTL should be appointed, rather than removing Harry and Max as estate trustees at this time:

• Ordering the removal of an estate trustee is a decision not to be taken lightly and only where there it is clearly necessary: Re Weil, 1961 157 (ON CA), [1961] O.R. 888 at 889 (C.A.)

• Friction between co-estate trustees may be a basis for a removal of both estate trustees where it impacts the decision-making process: Radford v. Wilkins (2008), 43 ETR (3d) 74, 2008 45548 (S.C.J.) at paras 111-113;

• A failure to properly keep records resulting in the need to make corrective disclosure is an aggravating factor in considering whether a trustee ought to be removed. Similarly, failure to consult with co-trustees is significant. Graham v. Benton, 2020 ONSC 6985 at paras. 156-157;

• A testator’s choice of estate trustee should not be lightly interfered with, but the appointment of an ETDL is a “much less intrusive” remedy that exists where “parties’ duties as fiduciaries can be inconsistent with their ongoing litigation interests.” A court should consider the balance of convenience and, since the appointment of an ETDL is not an extraordinary remedy, “the court will favour appointment in the vast majority of cases unless the administration of the estate involved is particularly straightforward or simple”: Mayer v. Rubin, 2017 ONSC 3498 at paras. 24-36.

[41] Max Klaczkowski opposes any appointment of an ETDL. He testified that although there have been strains in the relationship, he is willing to continue working with his brother and their interests in maximizing the value of the property are aligned. He also testified that this would work if Harry “knows his place” and “accepts that he has no authority” concerning the Richmond Street property. Max submits that there have been strains in their relationship over the years, but there have also been times of generosity and sharing of resources.

[42] There has been delay and cost to the estate by virtue of the breakdown in the family relationship between Harry and Max. Since Fania’s death in 2015, there has been a stalemate concerning the distribution of the proceeds of the sale of her house. Harry has been excluded from the discussions about development of the Richmond Street property. Max has been bearing the burden of increasing property taxes, an unreliable tenant, and the costs of development of both properties. The trustees have been engaged in this litigation since September 2016. In that context, Max has provided partial but not full records, often grudgingly or late in the process. He has expressed a sense of grievance over the proceedings, and the failure of Harry to “know his place.” He has described a sense of being overwhelmed and busy with other matters. There is no clear path to reconciliation, nor is there evidence that suggests that the welfare of the beneficiaries is best served by maintaining the status quo during this litigation. Given that there are two estate trustees, the lack of any dispute resolution mechanism is a concern. A prior effort by Harry to engage Max in mediation at an earlier stage of the conflict over their mother’s estate was not taken up.

[43] I have concluded that there are three factors which strongly support an appointment of an ETDL pending the accounting. These are the state of the relationship between the trustees, the conflicts of interest and the nature of the decisions required for future administration of the estate. I will discuss each factor in turn.

The Current Trustee Relationship

[44] Both Harry and Max testified to the friction between them over the estate. Max Klaczkowski testified that he wants his brother “out of his life.” Harry Klaczkowski testified that although he sought a “seat at the table’ for discussions with consultants about future development of the Richmond Street property, Max had excluded him from these conversations since this application began. Both agreed that their history of tension goes back many years, including before Fania’s death.

[45] Emails filed at the hearing also reveal tension between Harry and Max. Prior divisions of property which were agreed upon have been resurrected in these proceedings. Each brother has accused the other of taking funds from various accounts without the permission of the other. The proceeds from the sale of Fania Klaczkowski’s house sit in a lawyer’s trust account because Harry and Max could not agree on distribution. Max testified about the stress of the situation and his fears for the impact on his health. Max had not read his mother’s will until the hearing of this Application began. This speaks to his reluctance to engage with the document that created his responsibilities as estate trustee.

[46] The relationship has broken down. Litigation has exacerbated the tensions between these brothers. Once trust is lost in a relationship it is hard to regain. There is no sign there is an effective plan to overcome these tensions pending the outcome of the accounting, which was resisted by Max Klaczkowski.

Conflicts of Interest

[47] The second factor I have considered are the acknowledged conflicts of interest which both brothers have in relation to their various roles. Max Klaczkowski has a majority interest in the Richmond Street property. He denied any obligation to account to Harry on the theory that his status as a tenant in common with the estate at the Richmond Street property entirely displaces his fiduciary duties. I have concluded that is not the case.

[48] Max Klaczkowski has testified that his business at the Queen Street property also uses the 128 Richmond Street property. He has paid sums for development of both properties. He has made all the decisions about the use, leasing and revenue collecting at both properties. His business and personal interests are potentially in conflict with his responsibilities as estate trustee for the benefit of himself and his brother, Harry. Finally, Max has a conflict as between his role as beneficiary and estate trustee.

[49] Harry Klaczkowski brings the application to appoint. He also acknowledges that he also has a conflict of interest as between his role as estate trustee and beneficiary of the estate.

[50] Counsel for Max Klaczkowski pointed out that there is nothing wrong per se with having a conflict of interest: the important thing is how such conflicts will be effectively managed. This is true. In this case, the conflicts have not been managed well. They have led to delayed administration of the estate and have contributed to a frayed filial relationship between Max and Harry.

The Nature of the Future Decisions Required for the Estate

[51] Fania Klaczkowski’s will reads in part that her trustees are to “sell, call in and convert into money the residue of my estate on such terms as my trustees in their absolute discretion decide.” There has been no agreement as to the approach by the estate trustees as to how to carry out this wish in relation to the Richmond Street property. Max’s evidence on this point discussed the possibility of engaging a long-term tenant, development, or sale of the property. He testified in essence, that he did not value input from his brother Harry. He was disparaging about some of the professionals consulted by Harry. Max wishes to provide information to Harry only as he deems appropriate. As he put it, Harry should “know his place [as a minority interest.]”

[52] The parties acknowledge that the 1/3 interest in 128 Richmond Street East is part of the residue of the estate. The decisions about selling or developing this interest for the benefit of the beneficiaries are complicated by nature of the decisions that will have to be made about the development of the property, the interests of Max and Harry in the Queen Street property and Max’s tire business on the Queen Street property.

[53] Although the residue of the estate is to be shared equally, the nature of the existing interests in the Richmond Street and Queen Street propoerties leads to an unequal proportion of ownership. Max Klaczkowski has been making all the decisions relating to the use and development of the property since the litigation began. If this unequal role in decision-making continues, this could have consequences for the future development, leasing and/or sale of the property and the interests of the estate.

[54] The intertwined and uneven interests of Harry and Max in relation to the Richmond Street property, the current state of the property, the issues relating to the business on the Queen Street side and the desirability of making sound business decisions for the benefit of both beneficiaries, all support an appointment of an EDTL.

[55] I conclude that the interests of the estate favour a removal of Harry and Max Klaczkowski as estate trustees. Having made that determination, I turn next to the question of the process to replace the estate trustees.

[56] If the court exercises its jurisdiction, what process should be in place to appoint an EDTL?

[57] Counsel for Harry Klaczkowski has corresponded with an accounting firm and at least one trust company offering estate trustee services. This information has been shared with Max Klaczkowski. I would prefer to provide the two brothers the opportunity to agree amongst themselves as to the best choice for them and the interests of the estate.

[58] I will provide a period of time in the order to permit the parties to explore the choice of EDTL, failing which they may return before me to make submissions in aid of having the court decide.

Should an Order be Made Ordering the Distribution of the Proceeds from the Sale Barksdale to the Beneficiaries?

[59] Harry seeks the release of the sale proceeds from the sale of Barksdale. The brothers signed an agreement of purchase and sale for this property on January 13, 2016 for $840,000.00. On February 3, 3016, the house sold. The estate’s solicitor, Ms. Reiter-Nemetz, received the net proceeds of $793,346.57.

[60] On April 27, 2016, the brothers authorized Ms. Reiter-Nemetz to pay $214,931 from the net sale proceeds to the Canada Revenue Agency. To date, Max has not consented to the release of the remainder of the sale proceeds to Harry and himself as the beneficiaries.

[61] Harry and Max have exchanged information about expenses they have incurred relative to the sale of the house. Max has testified he spent $5,300 to help ready the house for sale. There are no receipts to support this. Max also acknowledges that he cashed a cheque from the real estate agent made out to both brothers for a finder’s fee, and that he owes Harry his share of the real estate agent’s finders’ fee.

[62] Harry also claims expense for the house sale in the amount of $4,000.00.

[63] Given my findings appointing an ETDL, the estate may require funds to pay for those services. Pending a full accounting as ordered in this Application, I defer the question of distribution of the house proceeds. The ETDL may seek payment from the funds held in trust by Marilyn Reiter-Nemetz for reasonable expenses relative to those services to this estate.

What Orders Should be Made Concerning the Following Disputed Sums/Payments?

[64] The parties called evidence and sought findings of fact on three sums/payments as between Harry and Max Klaczkowski. None of these decisions rely upon a passing of the accounts. They concern two transactions that took place prior to the death of Fania Klaczkowski and the equal division of cash between the beneficiaries from a safety deposit box after Fania’s death.

[65] I will deal with each of these items in turn.

The payment of $54,000 from Max Klaczkowski to Harry Klaczkowski and an offer of reimbursement from Fania Klaczkowski

[66] Prior to Fania’s death Max’s son lived with Harry. During that period, Harry and his wife paid for private school tuition and other costs related to their nephew. Harry later sought payment from Max to be reimbursed for these costs. Ultimately, Max reimburse Harry for these costs. Max paid Harry $54,000.

[67] There was friction between the brothers over the Harry’s demand for payment. Max resented that decisions were made about where his son was at school. At one stage, to try and establish peace between Max and Harry, Fania offered to repay Harry on Max’s behalf. Harry refused: he believed that his mother should not pay on behalf of Max because it was his responsibility, and he had the means to reimburse Harry.

[68] Max and Miriam both testified that there were several offers from Fania to repay Max, after he repaid Harry. These offers appear to have been motivated by Fania’s desire to have her sons cease fighting with one another.

[69] Max submits that the offer to repay from Fania amounts to a contract in his favour and that the estate owes him $54,000 as one of its debts to be repaid before the residue is divided between the brothers.

[70] Both Max and his daughter Miriam testified at the Application about Fania’s offer to reimburse Max for the payment to Harry for Max’s son’s educational expenses. Essentially, Fania wanted there to be peace between her two sons. She offered Max $54,000 after he expressed his resentment at being required to reimburse Harry. It is clear from both Max and Miriam, that Fania’s offer was made without any express expectation of repayment. Max chose not to accept the offer. I find that Fania offered her son a gift during her lifetime. He declined. Thus, although there was evidence of Fania’s intention to donate, there was no acceptance or delivery of the gift: McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 24.

[71] There was no evidence of a contract or obligation established by Fania’s offer to Max. She was motivated by trying to achieve peace between her sons. She offered a gift. Max did not accept. I find that the $54,000 is not a debt owed by the estate to Max.

The equal division of $32,000 in paper bills to Harry and Max Klaczkowski after the date of death.

[72] Shortly after Fania’s death in 2015, Harry and Max took the key to the safety deposit box which had been kept in her home to the bank. They divided $32,000 in $1,000 bills held in the box evenly between them. There was no discussion of the cash belonging to Max only.

[73] In his evidence Max said that he had remembered after the fact that this money was his, the safety deposit box was his and that he had left the key with Fania. He acknowledged that he had his own safety deposit box at another bank, but said he was too busy to move his cash from one safety deposit box to another. He also did not explain why jewelry belonging to Fania was in the same box with his cash.

[74] I do not accept Max’s evidence about the provenance of the cash or the ownership of the safety deposit box. It is not credible that had he owned all of the cash inside it (but not his mother’s jewelry), yet said nothing to Harry, with whom he had had financial disputes in the past, when they divided up the $1,000 bills inside the safety deposit box after Fania’s death. To “recall” that this money belonged to him four years later, during litigation that he resents, suggests that his memory has been affected by his feelings about this litigation and his brother. I find that this amount was divided in accordance with Fania’s directions in her will, as part of her estate, evenly between her sons.

The loan of $170,000 to Harry Klaczkowski

[75] In 1997, Harry Klaczkowski borrowed $170,000 from a friend of his parents, Annie Goldsmith. He used these funds to pay for a share in Richmond Street property. He paid interest only on the loan until 1999, when his mother Fania told him that he would not have to worry about the debt anymore. He took that to mean that his parents, Fania and Israel had repaid the loan to Annie Goldsmith. There was nothing in writing about how this payment was to be treated. Any funds paid to Annie Goldsmith were paid directly to her, and not given to Harry.

[76] Max Klaczkowski submits that the presumption of a bargains, not gifts from Pecore means that the payment to Annie Goldsmith created a resulting trust in favour of Harry. Fania and Israel repaid Annie Goldsmith to Harry’s benefit.

[77] Harry testified that he was not told by his mother that she was loaning him money. He already had arranged a loan from Annie Goldsmith. His mother made no demands for payment. There was no loan documentation. It is unclear precisely how or when his debt to Ms. Goldsmith was extinguished. Fania Klaczkowski’s will is silent as to the $170,000 payment. The repayment took place over fifteen years prior to Fania’s death and while both parents were still alive.

[78] Harry submits that the loan repayment was a gift. I agree. The payment made in Harry’s favour took place when both of his parents were alive. It was made directly to Ms. Annie Goldsmith and not to Harry. The nature of the loan and the circumstances of its repayment were informal. There was no discussion, demand, or other request for reimbursement by either parent.

[79] There was no indication that these funds were to be treated as a loan. The evidence of members of Fania’s family, including Max, Harry and her granddaughter Miriam was that she was generous and preferred to spend money on her family members than on herself. She gifted cars to her granddaughter during her lifetime, she was willing to pay money claimed by Harry from Max for the tuition paid for Max’s son. The length of time since repayment and the absence of any demand for repayment or mention of this in writing are pieces of circumstantial evidence that support a finding that this was an inter vivos gift.

[80] I conclude that the amount of $170,000 paid by Fania and Israel Klaczkowski to Annie Goldsmith to retire Harry’s debt to Ms. Goldsmith does not form part of the estate.

V CONCLUSION

[81] For these reasons I make the following order:

i) An Estate Trustee During Litigation will be appointed for the estate of Fania Klaczkowski;

ii) If the parties are unable to agree to the naming of the Estate Trustee During Litigation by February 1, 2021, they are to appear before me, if available, before March 1, 2021 to make submissions on an appropriate Estate Trustee During Litigation;

iii) Max Klaczkowski is ordered to provide an accounting in accordance with Rule 74.17 within six months of the date of this order for:

a) The TD Trading Account held in the name of Fania Klaczkowski and Max Klaczkowski from the date of death to the date of the appointment of the Estate Trustee During Litigation;

b) The Estate’s interest in 128 Richmond Street East, from the date of death of Fania Klaczkowski to the date of the appointment of the Estate Trustee During Litigation with such accounting to include all revenues and disbursements from any and all sources including, but not limited to, billboard and parking revenues;

iv) The amounts withdrawn by Max Klaczkowski from the TD Trading Account are declared to be subject to a trust in the amount of $ 248,880.16.

v) Declarations are made with respect to the following amounts:

a) The sum of $32,000 in paper bills that were retrieved by Harry and Max Klaczkowski and equally divided between them were properly divided in accordance with the terms of the will;

b) The loan of $170,000 to Harry Klaczkowski from Annie Goldsmith does not represent a debt to the estate by Harry Klaczkowski;

c) The $54,000 paid by Max Klaczkowski to Harry Klaczkowski does not represent a debt of the estate to Max Klaczkowski.

VI COSTS

[82] If the parties are unable to agree as to costs, they may make brief written submissions (maximum 4 pages exclusive of attachments), on or before December 18, 2020.

Leiper J.

Released: December 8, 2020

COURT FILE NO.: 05-158/16

DATE: 20201208

ONTARIO

SUPERIOR COURT OF JUSTICE

In the Matter of the Estate of Fania Klaczkowski, deceased

BETWEEN:

HARRY KLACZKOWSKI, in his capacity as Estate Trustee for the Estate of Fania Klaczkowski and in his personal capacity Applicant

– and –

MAX KLACZKOWSKI, in his capacity as Estate Trustee for the Estate of Fania Klaczkowski and in his personal capacity Respondent

REASONS FOR decision

Leiper J.

Released: December 8, 2020