Hermiston et al v. The Estate of Marek Janus Krol et al., 2023 ONSC 6049

Court File and Parties

COURT FILE NO.: CV-18-4769-00 DATE: 2023 10 26

SUPERIOR COURT OF JUSTICE – ONTARIO 7755 Hurontario Street, Brampton ON L6W 4T6

RE: HERMISTON Joel and HERMISTON, J. in his capacity as Litigation Guardian of HERMISTON, Agnieszka Eva - Applicants AND: THE ESTATE OF MAREK JANUSZ KROL and LUKASZ GAJEK Litigation administrator for the ESTATE OF HANNA GAJEK, and KROL, Katarzyna - Respondents

BEFORE: Justice Emery

COUNSEL: UTHAYAKUMAR, P., for the applicants HERMISTON Joel and HERMISTON, J. in his capacity as Litigation Administrator of the ESTATE OF AGNES HERMISTON pratheeb@orcuslaw.com BICKHRAM, R. and AMBRUS, A., Estate Trustee During Litigation for the respondent THE ESTATE OF MAREK JANUSZ KROL rick@askyourlawyer.ca / alicia@askyourlawyer.ca JAGIELSKI, R. for respondent ESTATE OF HANNA GAJEK Jagielski@bellnet.ca PEACOCK, L., for the respondent KROL, Katarzyna lpeacock@donovankochman.com

HEARD: In writing, and by video conference on September 29, 2023

Reasons for Decision

1This motion is brought by Mr. Rajendra (Rick) Bickhram as Estate Trustee During Litigation (the “ETDL”) in respect of the Estate of Marek Janusz Krol (the “Krol estate”). He brings this motion to vary a specific term of an Order made by Coroza J. on February 6, 2020 (the “Coroza Order”) in litigation over the Krol estate.

2The motion is brought in writing with the consent of all parties. The motion materials and submissions made in writing were augmented by brief submissions of the parties at a Case Conference on September 29, 2023.

3After first introducing the parties, I propose to refer to each of them by their first names for conciseness, with no disrespect or overly familiar tone intended.

4The one asset of greatest value in the Krol estate is the house and property at 1045 Cawthra Road (the “Cawthra property”). Joel Hermiston and his late wife, Agnieszka (Agnes) Ewa Hermiston commenced this application to claim that Marek had gifted the Cawthra property to Agnes or to both Agnes and Joel during his lifetime. Agnes was one of Marek’s two daughters.

5Even though Marek held title to the Cawthra property, the Hermistons have taken the position that they have been the beneficial owners since at least 2010. The question of whether the Cawthra property is an asset of the Krol estate or not is a central issue in this application.

6In the alternative, Joel and Agnes claimed remedies in their application that the Krol estate has been unjustly enriched at their expense, including restitution.

7Marek Krol died on September 18, 2017. No will made by the late Marek Krol has ever been found. There is no will to nominate an estate trustee or to direct how his estate is to distribute property held in his name on death.

8Mr. Bickhram was appointed the ETDL of the Krol estate under the Coroza Order. Paragraph 11 of the Order made by Coroza J. provided that:

a. Mr. Bickhram as the ETDL would not take any steps to sell the Cawthra property, but would maintain the status quo in the application brought by Joel Hermiston and Agnieszki Hermiston in CV-18-4769;

b. The Hermistons were granted leave to enjoy quiet possession and enjoyment of the Cawthra property as against the ETDL and the respondents Hanna Gajek and Katarzyna Krol until further order or the written agreement of the parties; and

c. The Hermistons (as the applicants in CV-18-4769) shall continue to keep the Cawthra property insured and those carrying costs, which are permitted to be paid, paid and up to date.

9The Cawthra property was encumbered by a mortgage of approximately $250,000 granted to TD Bank at the time of Marek’s death. Coroza J. specified that nothing in his Order is intended to or that affects any rights the TD Bank may have pursuant to the mortgage registered on title.

10The ETDL brings this motion to vary paragraph 11 of the Coroza Order to allow him to sell the Cawthra property. The ETDL arranged for a private mortgage in the approximate amount to $250,000 to replace the mortgage held by TD Bank when it declined to renew that mortgage in 2021. The private mortgage matured on October 1, 2023. The mortgagee is now in a position to enforce its security unless it is renewed or paid out. The ETDL takes the position that it would be in the best interests of the estate to sell the Cawthra property as it cannot afford to subsidize the carrying costs of a new mortgage at current rates. But for the Coroza Order, the ETDL would have authority to sell the Cawthra property under s. 28 of the Estates Act.

11The litigation over the Krol estate has expanded beyond the original framework of the Hermiston application. Hanna Gajek commenced an application on October 19, 2020 for her preferential share of the estate as she was Marek’s spouse at the time of his death. Katarzyna (Kathy) Krol is Marek’s other daughter. Katarzyna commenced an application on July 30, 2021 to make a dependant’s relief claim. Both of these other claims are brought under the Succession Law Reform Act (the “SLRA”) as Marek died intestate.

12Hanna died on August 11, 2021. Her application claiming a preferential share of the estate is continued by her son and litigation administrator, Lukasz Gajek.

13Both Katarzyna and Hanna’s estate support the motion of the ETDL to vary the Coroza Order to have the Cawthra property sold.

Other Background Facts

14The history of this family and Marek’s accumulation of assets is well known to the parties. A summary of the events and assets relevant to the litigation were set out in Justice Coroza’s reasons for the Order made on February 6, 2020, and in my reasons on a disclosure motion dated October 4, 2021.

15Agnes died in March 2023. Her interest in the Hermiston application and in the Cawthra property is continued by Joel as her estate trustee and litigation administrator. Joel obtained a Certificate of Appointment without a Will in the estate of Agnes Hermiston on September 12, 2023. Joel also claims a beneficial interest in the Cawthra property in his own right.

16Joel states in his affidavit that Marek gave the Cawthra property and the right of possession to Agnes and himself in 2010. He states that Marek gave them the property under an agreement that the Cawthra property would be theirs for as long as they paid the mortgage and property taxes, along with providing any maintenance and renovations required. Joel states that the Cawthra property was their matrimonial home, and that he and Agnes have used their own funds to carry and maintain the property.

Analysis

17The ETDL brings this motion on two grounds. Under the first ground, he brings the motion under Rule 59.06 to set aside or to vary an Order provided there is a basis to do so. Rule 59.06(2)(a) is available to a party who seeks to have an order set aside or varied where there are facts arising or discovered after it was made.

18The facts the ETDL relies upon are set out in the affidavit of Alicia Ambrus sworn on June 16, 2023. Ms. Ambrus is a lawyer employed in Mr. Bickhram’s office. Ms. Ambrus gives evidence in her affidavit that the mortgage with the private lender has expired. She further deposes that the ETDL takes the position that the estate cannot afford to subsidize the carrying costs for the Cawthra property by renewing the mortgage or obtaining a replacement mortgage at a higher interest rate.

19In the alternative, the ETDL relies on paragraph 17 of the Coroza Order as the second ground for the motion. Paragraph 17 provides that any party shall be entitled to return to the court to seek such directions as are necessary and advisable in relation to an Order, and in relation to the other relief claimed in the collateral proceedings. The ETDL refers to the duties of an ETDL set out in the authorities and refers specifically to the decision of Gilmore J. in Brass v. Berkley Estate et al., 2020 ONSC 6615 to seek orders for the protection of assets in an estate.

20Under either ground, the ETDL seeks an order from this court to set aside or vary paragraph 11 of the Krol estate so that he can then exercise his authority under s. 28 of the Estates Act to sell the Cawthra property as an estate asset. Section 28 reads as follows:

Pending an action touching the validity of the will of a deceased person, or for obtaining, recalling or revoking any probate or grant of administration, the Superior Court of Justice has jurisdiction to grant administration in the case of intestacy and may appoint an administrator of the property of the deceased person, and the administrator so appointed has all the rights and powers of a general administrator, other than the right of distributing the residue of the property, and every such administrator is subject to the immediate control and direction of the court, and the court may direct that such administrator shall receive out of the property of the deceased such reasonable remuneration as the court considers proper. R.S.O. 1990, c. E.21, s. 28 ; 2006, c. 19 , Sched. C, s. 1 (1).

21In Brass v. Berkley Estate, the ETDL brought a similar motion to sell the residence in the estate because the expenses for the property were not being met. The ETDL in Brass v. Berkley Estate considered this step necessary to preserve the estate’s only asset. Gilmore J. held in that case that:

[26] The ETDL has a court ordered mandate to gather in, account for and protect the Estate’s assets. I find that the ETDL cannot do so while Sandy remains living at Brockington given that Brockington is the only significant asset of the Estate. While Sandy protests that he is doing his best and should be allowed to remain there with Maya pending trial, the Court has concerns about that position which may be summarized as follows:

a. While there was proof that the house insurance is current, Sandy did not provide proof that utilities or realty taxes are current. b. Sandy admits that he has not paid court ordered costs or other amounts he was ordered to pay back to the Estate. He says he is trying his best to do so but provided no explanation as to why the line of credit secured by Brockington is at its limit. c. Sandy is working but freely admits he doesn’t earn much income. There is a concern he simply cannot afford the carrying costs of the home and now the line of credit payments. d. There is outstanding court-ordered documentary disclosure which has still not been provided. e. Sandy tends to provide items only when a court date looms. He provided the court ordered video of the interior of Brockington last evening.

22Gilmore J. then stated:

[28] While the court is sympathetic to Sandy not being able to replace his family home if Brockington is sold, he will have funds to buy a new home if he is successful at trial.

23The ETDL in the instant case submits that the Brass decision is persuasive to guide this court in exercising the discretion to vary the order of Coroza J. to enable the sale. Ms. Ambrus states in her affidavit that the Cawthra property was worth $940,000 as of 2022. The ETDL has been servicing this mortgage for over three years to preserve the Cawthra property until the parties resolved the various claims or took one or more of the proceedings to trial. She states that the ETDL takes the position that it is now necessary to sell this asset.

First and Successor Mortgages Since 2010

24Ms. Ambrus describes the history of the first mortgages registered against the Cawthra property before and after Marek’s death. The first mortgage to TD Bank was granted in 2010. It is not clear from the evidence filed throughout this proceeding, let alone sufficiently enough to make any finding of fact, why that mortgage was arranged or who received the proceeds when it was first taken out.

25When the first mortgage matured in March 2020, the TD Bank demanded full payment in the amount of $241,050.36. When the ETDL inquired about renewing the mortgage, the TD Bank wrote to him in May 2020 to confirm that it was prepared to renew the mortgage for six months. However, the TD Bank also requested payment of arrears in the amount of $47,597.76 at that time.

26The TD Bank wrote to the ETDL again on June 4, 2020 to agree that the mortgage be held in abeyance until March 1, 2021. During the forbearance period, the ETDL was required to make bi-weekly payments in the amount of $597.

27In 2020, Joel and Agnes were contributing approximately $1,194 a month in rent. This amount was sufficient to cover the monthly mortgage payments. This arrangement came to an end on or about July 2021 when the TD Bank made demands the estate could not meet to renew the mortgage. This required the ETDL to explore other financing alternatives.

28The ETDL finally secured a private mortgage in the amount of $250,000 in October 2021 from or through Duncan Boardman (the “Boardman mortgage”). On refinancing, the mortgage held by TD Bank was paid off from the proceeds of the Boardman mortgage. The interest rate under the Boardman mortgage was 8% for a one year term.

29The Boardman mortgage commenced on November 1, 2021 and matured on October 1, 2022. The monthly payments under this mortgage were $1,666.67.

30Throughout this time, Joel and Agnes contributed approximately $1,264 each month. According to the ETDL, there was a capital depletion of estate assets each month in the amount of approximately $402.67 to make up the shortfall in mortgage payments.

31The litigation over the Krol estate continued throughout 2021 and into 2022. As a result, the ETDL was forced to renew the Boardman mortgage on the Cawthra property on October 1, 2022 to avoid a default. Because of the volatility in the economy, the interest rate for this mortgage was increased by the lender to 11% a year. The higher interest rate increased the monthly payment to $2,291.67 to service the mortgage as a result. Joel and Agnes continued to contribute only $1,264 a month. This resulted in a further capital depletion of estate assets in the amount of approximately $1,027.67 each month.

32The Boardman mortgage on the Cawthra property expired on October 1, 2023. The ETDL states that the estate does not have the cash flow to continue making payments on a private mortgage because of any increase in the interest rate.

Other Assets and Liabilities in the Krol Estate

33In addition to the Cawthra property, the following properties are assets of the estate:

a) 62 Mississauga Avenue, Elliott Lake, ON b) 41 Poplar Road, Elliott Lake, ON c) 43 Myers Road, Huron Shores, ON d) 40 Main Street, Huron Shores, ON

(Collectively referred to as the “Northern Properties”)

34The ETDL states that the Krol estate has continuously paid bills relating to the Northern Properties, including payment of property taxes and water bills. He states that the estate cannot afford to continue to make these payments indefinitely.

35Ms. Ambrus gives evidence in her affidavit that the estate bank account holds approximately $35,283.57 and the trust account for the estate with Bickhram Litigation P.C. holds approximately $21,526.72.

36The Krol estate has not yet paid capital gains or other taxes owed to Canada Revenue Agency. The estate’s accountant, Mr. Chad Tucker, C.P.A, C.A., L.P.A, estimated the 2022 taxes owing upon the deemed disposition of all five properties on Marek’s death in an email dated March 8, 2023 and attached as an exhibit to the Ambrus affidavit. Mr. Tucker opined that, assuming the Cawthra Property was not designated a principal residence or subject to a spousal rollover, the capital gains tax would be $74,200, plus any penalties and interest of approximately $20,000 on the taxable capital gain of $138,550.

37Ms. Ambrus further deposes that Mr. Tucker has estimated that the 2022 taxes owing if the Cawthra property was properly claimed as a principal residence would be $11,300, plus penalties and interest, on a taxable capital gain of $21,050.

Alternate Financing Proposed

38I released my further endorsement dated September 12, 2023 after learning that Joel had received a certificate of appointment of estate trustee for Agnes’ estate. This endorsement was issued to allow Joel until September 22, 2023 to make submissions in response to the motion on behalf of Agnes’ estate.

39Ms. Ambrus filed a supplementary affidavit immediately after the release of my further endorsement. In her supplementary affidavit, Ms. Ambrus states that on September 13, 2023 the ETDL received an email from Mr. Boardman to advise that he could renew the mortgage for one year on the following terms:

a. an increase in the interest rate from the current 11% to 12.75%. This mirrors the Bank of Canada increase in the prime rate since October 1, 2022 of 1.75%; b. the monthly payments would increase to $2,656.25; c. a renewal fee of $2,500 would be payable; d. legal fees of $395.50 would be payable to prepare the amending agreement.

40Ms. Ambrus repeated the ETDL’s position that the estate does not have the funds to continue paying for the Cawthra property. Ms. Ambrus went on to state that if the private mortgage was renewed on the terms proposed by Mr. Boardman, the monthly payments for that mortgage would increase to $2,656.25 a month. If Joel continued making payments of only $1,264 each month towards the mortgage, the estate would suffer a capital depletion in the amount of $1,392.25 each month.

41Joel has given evidence in his affidavit sworn on September 22, 2023 that he has not refused to pay the excess costs of the mortgage. It is just that he has received no justification why he should pay the full amount when the litigation in this matter has continued. He states that he has been forced to fight for the retention of the Cawthra property which he says Marek gifted to Agnes and himself.

42Joel states that he paid the mortgage and property taxes on the Cawthra property between 2010 and 2020 without causing a shortfall. He states that the shortfall began with the ETDL decided to obtain private financing at extremely high interest rates.

43If the mortgage is to be renewed, Joel states that he has searched for a private lender himself. He states that he has been able to find a potential private lender for the Cawthra property at an interest rate that is significantly lower than what the ETDL has paid during the previous year, or on the terms the current lender is proposing. He has attached a confirmation email dated September 20, 2023 from Glen Garbera, an individual stating that he represents John and Alice Garbera, private lenders. In this email, Mr. Garbera offers to fund a first mortgage in the range of $250,000 on the Cawthra property at the rate of 9% a year.

Discussion

44This motion is not a motion for summary judgment where the moving party must show there is no genuine issue requiring a trial, or where that is shown, for the responding party to show there is a triable issue. The parties have framed the ownership, or the delay by Joel and Agnes’ estate in asserting their claim for ownership of the Cawthra property as the primary issue on the motion. I will deal with the evidence relating to the ownership issue given on the motion before returning to the real issue before the court.

45The ETDL states that the purpose of preserving the Cawthra property through refinancing the first mortgage has been to provide time for the estate to deal with the claims all beneficiaries are making. The ETDL submits that Joel has produced no evidence in all that time to support the position that Marek gifted the Cawthra property to Agnes or to himself and Agnes, or to support any other claims they have made.

46The essential elements to prove a gift of property by one person to another were restated by the Court of Appeal in McNamee v. McNamee, 2011 ONCA 533 at para. 24 to be:

a. There must be an intention to make a gift on the part of the donor, without consideration or the expectation of renumeration; b. An acceptance of the gift by the donee; and c. a sufficient act of delivery or transfer of property to complete the transaction.

47Joel and Agnes’s estate have only Joel’s evidence in his affidavits sworn on July 11, July 23 and September 22, 2023 to show evidence of Marek’s intention that they were the true owners of the property. I do not consider this evidence to provide conclusive proof one way or another.

48In his affidavit dated September 22, 2023, Joel attaches interview notes written by Constable Harcourt from 2016 when investigating an incident where Joel was later charged with assault and uttering threats. The handwritten notes are separated by horizontal lines. Between two of those lines appear the words “the home (or “house”) 1045 Cawthra is also owned by the victim-gave it to their daughter”. This is the only document Joel relies upon to show that Marek had gifted or intended to gift the Cawthra property to Agnes as the daughter.

49The handwritten note of Constable Harcourt is not admissible evidence on this motion. It is hearsay evidence as Joel is relying on it for the truth of its contents. It has not been introduced through Constable Harcourt as the maker of the note and does not show who made the statement or in what context it was made. There is no evidence in Joel’s affidavit about how the evidence could be admissible on the principled approach to admitting hearsay evidence under R. v. Khelawon, 2006 SCC 57. The exceptional admission of hearsay evidence by using this approach requires evidence from the maker of the affidavit that the second party evidence is both reliable, in that the evidence is trustworthy and not dependant on cross-examination, and necessary that it be given in the manner it is offered. Neither criteria are satisfied here.

50Joel also attaches an email from a friend of Agnes, Nicoleta Atanasoaie, dated September 22, 2023 as an exhibit. The email reads, in part, “Prior to her dad passing away it was always the plain for Agnes to have the Cawthra property in her name.” The date of the email is suspicious as it is the same date Joel made his affidavit. That suggests to me that the email was requested for the purpose of attaching it to the affidavit. I rule this email to be inadmissible for the same reason as my ruling that the police officer’s notes are not admissible as evidence.

51There is little objective evidence on this motion to show that Marek intended to gift the Cawthra property to Agnes or to both Agnes and Joel without consideration or the expectation of renumeration, or that he made a sufficient act of delivery or the transfer of property. It is beyond controversy that title to the Cawthra property remained in Marek’s name. It is also beyond dispute that Joel and Agnes had agreed to pay the carrying costs for the property since 2010.

52In the alternative to his position that he and Agnes have improved the Cawthra property believing it to be their own, Joel makes a claim in unjust enrichment against the Krol estate. He has quantified this claim for unjust enrichment in the amount of $219,338.92. Joel has set out those payments in para. 25 of his affidavit dated July 11, 2023.

53Joel asserts in his last affidavit that the ETDL has not administered the Krol estate professionally and with proper diligence. He submits that the Northern Properties could have and should have been sold to pay out the Boardman mortgage. Joel further submits that the ETDL should be removed and that he be required to provide a full accounting of his activities as ETDL to date.

54I do not give any weight to these submissions. The ETDL has a duty to all beneficiaries in this estate, not just to Agnes. Except for his appointment as the estate trustee for Agnes’ estate, Joel’s personal claims appear to be based either on the alleged gift of the Cawthra property to Agnes and himself, or for restitution on the unjust enrichment claim. Joel personally has no basis to quarrel with how the ETDL has executed his duties for the estate, or for the time it has taken to obtain disclosure on the application. As an applicant himself and now as the estate trustee for Agnes’ estate, Joel bears a significant amount of the responsibility for the delay in moving this case forward.

55Joel’s submissions that the ETDL could have sold some or all the Northern Properties to pay out the first mortgage also fails to consider that the ETDL owes a duty to all beneficiaries. It is difficult to reconcile his argument that an estate trustee should sell one or more assets in an estate to satisfy the debt against another asset that is being claimed in specie by one of those beneficiaries with that duty. An estate trustee cannot favour one beneficiary at the expense of others. This position is also inconsistent with Joel’s submission that the Northern Properties be sold to apply their proceeds to the mortgage. That would be asking the estate to apply estate funds to an asset that Joel claims is outside the estate.

56Joel has not brought a cross-motion for an accounting or for any substantial relief against the ETDL of the Krol estate. There is no evidence that Mr. Bickhram has acted in any manner contrary to the authority and powers given to him as the ETDL under s.28 of the Estate Act. Nor has Joel has not brought a motion under s.5(1) of the Trustee Act to have this court make an order appointing a new trustee in substitution of, or in addition to Mr. Bickhram as the ETDL. Therefore, I consider these issues to be beyond the scope of this motion.

57As I have remarked above, this is not a motion for summary judgment. In any event, this proceeding currently remains in the form of an application and that application has not been brought forward for adjudication to access the powers under Rule 38.10(1).

58The real issue on the motion under Rule 59.06(2)(a) is whether the evidence shows that facts have arisen or have been discovered that make it necessary or in the interests of justice to vary paragraph 11 of the Coroza Order. Similarly, the motion under paragraph 17 of the Coroza Order requires evidence that a change to the Order is either necessary or advisable.

59On considering the evidentiary record and the nature of the motion, I conclude that the ETDL has not shown that facts have arisen or been discovered since the Coroza Order to give effect to either Rule 59.06 (2) or para. 17 of the Order. The threshold requirement to show facts that have arisen or been discovered beyond the requirement that the ETDL has renewed or replaced the mortgage on title to the Cawthra property as of February 6, 2020 has been met. There is evidence before the court from Ms. Ambrus that Mr. Boardman has offered to renew the Boardman mortgage. There is also evidence from Joel that he may have sourced alternate financing at an interest rate he is prepared to pay.

60I want to make it clear that I am making no findings on this motion that Marek did not gift the Cawthra property to Joel or to Agnes to have it fall into the estate. I do not make any finding in this regard because that was not the question before the court. The Cawthra property shall be preserved for the time being, in keeping with para. 11 of the Coroza Order that the ETDL shall not take any steps to sell the Cawthra property but will maintain the status quo in the application CV-18-4769. This will give Joel limited time to diligently prosecute the application for himself on behalf of Agnes’ estate provided he pays all carrying costs for any mortgage. If he does not, the ETDL may bring this motion again.

61For now, the first mortgage must be dealt with as the ETDL was required to deal with the TD Bank mortgage in 2020 and 2021, and with the Boardman mortgage in 2022.

Conclusion

62The motion of the ETDL is dismissed. However, I make the following procedural Orders as the designated judge to hear all motions in these proceedings under Rule 37.15 (1.2). These Orders are made to facilitate paragraph 11 of the Coroza Order:

a. The ETDL shall renew the Boardman mortgage or refinance the Cawthra property by granting a new first mortgage to a new mortgagee forthwith, but only for the amount required to discharge the Boardman mortgage and to pay the municipal taxes on the Cawthra property up to date (if required); b. Joel Hermiston shall pay all carrying costs of the Cawthra property, including the mortgage payments, municipal taxes and insurance premiums as required by the Order of Coroza J., effective immediately; c. Subject to any Order made at trial, Joel Hermiston and the Estate of Agnes Hermiston shall be at liberty to claim any amount in excess of fair market rent from the Krol estate for paying these carrying costs if either he or the Estate of Agnes Hermiston are not successful on their claim for ownership of the Cawthra property; and d. The above Orders are made without prejudice to the ability of the ETDL to bring another motion, on notice to all parties, for the same relief if there is evidence that the Boardman mortgage cannot be renewed of refinanced, or that Joel Hermiston is not paying or cannot pay the carrying costs as ordered, or that the Cawthra property cannot otherwise be preserved or protected by the ETDL.

63Costs may be spoken to at the next Case Conference if the parties cannot agree on a fair resolution.

Emery J.