Court File and Parties

Court File Numbers: CV-24-00712697-00ES CV-24-00713798-00ES

Date: 2024-07-31 Superior Court of Justice - Ontario

Re: IN THE MATTER OF THE ESTATE OF HELEN JEHN, ALSO KNOWN AS HELEN KLONOWSKI, deceased

Between: JOHN KLONOWSKI, Plaintiff (Defendant by Counterclaim)

And: THE ESTATE OF HELEN JEHN (a.k.a. HELEN KLONOWSKI), deceased, and MIREILLE JEHN, Defendants (Plaintiffs by Counterclaim)

And:

Between: JOHN KLONOWSKI, Plaintiff (Defendant by Counterclaim)

And: THE ESTATE OF HELEN JEHN (a.k.a. HELEN KLONOWSKI), deceased, and MIREILLE JEHN, Defendants (Plaintiffs by Counterclaim)

Before: M. D. Faieta J.

Counsel: Kathleen Judd, for the Plaintiff (Defendant by Counterclaim) John Klonowski Ayaz Mehdi, for the Plaintiff (Defendant by Counterclaim) Fred Klonowski Anne E. Posno, for the Defendants (Plaintiffs by Counterclaim), The Estate of Helen Jehn (a.k.a. Helen Klonowski) and Mireille Jehn

Heard: July 29, 2024

Endorsement

[1] The defendant Mireille Jehn brings this motion for an order for directions restraining the plaintiffs in both actions from registering a caution or a certificate of pending litigation or otherwise seeks leave to provide 22 days’ notice of the intention to refinance rather than 30 days as ordered by this Court.

[2] In response the plaintiffs bring a cross-motion to (a) restrain the defendant (in both actions) from registering a further encumbrance on title to the properties located at 24 and 26 Wynn Road, Toronto; (b) restrain the defendant (in both actions) from refinancing sought by the moving party, which is proposed to be secured against title to 24 and 26 Wynn; (c) Compliance with the Court Order of May 11, 2022 requiring 30 days’ notice of the intention to refinance any Estate Property, including 24 and 26 Wynn. (d) In the alternative, a Certificate of Pending Litigation ("CPL") to be placed on the Estate properties.

Background

[3] Helen Jehn (“Helen” or the “deceased”) was a widow at the time of her death in June 2021 at the age of 92. She was survived by four adult children. Three sons from her first marriage, namely, John Klonowski (“John”), Fred Klonowski (“Fred”) and George Klonowski (“George”). George is not a party to these proceedings. As well, Helen was survived by her only children from her second marriage, namely, Mireille Jehn (“Mira”).

[4] Helen’s Last Will and Testament is dated November 7, 2013. Mira is named as Helen’s Executrix and Trustee. The Will directs that the residue of the Estate is to be divided equally between Helen’s four children. At the time of her death, Helen’s Estate was quite modest and was comprised of a car, with an estimated value of $1,000.00, a bank account that holds about $13,000.00 that was used to pay for Helen’s funeral, and various personal belongings such as an accordion and two gold rings.

[5] At the time of Helen’s death, Mira owned three properties that Helen had either bought for Mira or transferred to Mira starting in 1994:

(1) Sunny Isles Beach Condo. Helen and her second husband purchased this property in 1988. In 1994, they transferred it to Mira. This property has an estimated fair market value of $235,000 USD.

(2) 24 Wynn Road, Toronto. In 1995, Helen purchased this property in Mira’s name. Mira moved into 24 Wynn Road in 2015. This property has an estimated fair market value of $1,500,000.00.

(3) 26 Wynn Road, Toronto. In 1972, Helen purchased this property. In 2007, Helen transferred ownership of this property to Mira. This property has an estimated fair market value of $1,500,000.00.

[6] In addition, Helen transferred ownership of a Miami Gardens Rental Condo to Mira in 2007. Mira sold this property in 2019 for $56,427 USD.

[7] Finally, Mira purchased a cottage in Wasaga Beach, Ontario in 1995. She has always owned this cottage. This property has an estimated fair market value of $400,000.00.

[8] A resulting trust arises when title to property is in one party's name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner: Pecore v. Pecore, 2007 SCC 17, at para. 20. In Andrade v. Andrade, 2016 ONCA 368, K. van Rensburg J.A. stated at para. 61:

A presumption is of greatest value in cases where evidence concerning the transferor's intention may be lacking (for example where the transferor is deceased). "[T]he focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer ... "[T]he presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities". …

[9] Without making any findings regarding whether Helen intended to gift any of the above properties to Mira, I note that the Will states:

I confirm my gift to Mireille Jehn of the property known as 24 Wynn.

[10] It is evidence of the drafting solicitor that the confirmation of the gift of 24 Wynn should have stated 26 Wynn instead.

[11] No such similar statement is stated in the Will, made in November 2013, in respect of the Sunny Isles Beach Condo, 26 Wynn, or the Miami Gardens Rental Condo.

[12] In November 2021, John and Fred commenced an application, which was converted into two actions by Order dated November 29, 2023. Both plaintiffs alleged that 24 Wynn, 26 Wynn, the Sunny Isles Beach Condo and the Miami Gardens Rental Condo is held in a resulting trust for the Estate. Fred’s claim also alleges that the Wasaga Beach property is also held in a resulting trust for the Estate.

[13] On May 11, 2022, Conway J. granted an Order, on consent, for the preservation of assets amongst other things. Paragraph 2 of the Order (the “Conway Order”) states:

THIS COURT ORDERS that the parties shall be restrained from dissipating, selling, transferring, disposing of any and all assets and property of Helen Jehn aka Helen Klonowski (the "Deceased"), including all gifts made by the Deceased, pending the determination of this litigation, order of the Court, or the written agreement of the parties. In the event any party seeks to encumber any such asset, property or gift, in any amount exceeding $30,000 per annum, then 30-days written notice of the proposed sale, transfer, disposition, or encumbrance shall be provided to the other parties. [Emphasis added]

[14] At the time of Helen’s death, there was a blanket mortgage with a face value of $1,150,000.00 on 24 Wynn and 26 Wynn however the indebtedness on that mortgage was only $290,000.00. The Sunny Isles Beach Condo and the Wasaga Beach Cottage were unencumbered at the time of Helen’s death and remain unencumbered.

[15] On May 31, 2023, counsel for Mira advised the other parties of her intention to change lenders but maintain the same $1,150,000 mortgage on both 24 Wynn and 26 Wynn. The drawdown on the mortgage at that time was $290,000.00. The email states:

Further to the order of Conway J dated May 11, 2022, this email provides notice of the intention to replace the current MCAP charge registered on title of 24 Wynn Rd in the amount of $1,150,000. The refinancing will be for an equivalent charge registered against 24 Wynn Rd. with a new lender Vault Capital Inc. The last appraised value of 24 Wynn Rd as of winter 2023 was $1.7m. The current drawdown on the MCAP loan is $290,000. Further drawdowns will be made on the replacement loan for ordinary living expenses, property maintenance and repairs, and legal fees. I have requested a copy of the appraisal, and will forward the loan and mortgage records once executed. [Emphasis added]

[16] John and Fred did not object to this new financing.

[17] The existing mortgage is due on July 31, 2024. However, Mira did not give John and Fred 30 days notice of her intention to refinance the property as required by the Conway Order.

[18] Instead, on July 9, 2024, Ms. Judd notified Ms. Posno that her client had learned that Mira was intending to further encumber the property and opposed any such further encumbrance. On July 9, 2024, Ms. Posno responded as follows:

… In relation to the renewal of this financing, these discussions only just commenced. While there are no details yet, please treat this email as formal notice of the intention to renew the financing on 24 Wynn (and 26 Wynn). Mira is in discussion with the broker in relation to an increase in the amount which I will pass along on receipt.

Mira requires these funds for ordinary living expenses, property maintenance and repairs of the 4 properties in dispute (including insurance and taxes) – which Mira is carrying alone, and legal fees.

In light of the Conway order, the value in the properties and the existing financing, it is not proper for John to register a caution on title or to interfere with the re-financing, which Mira requires for bona fide expenses. If John wants to pursue a CPL, or to seek an order precluding the refinancing, he should bring the necessary motion. This is the reason for the 30-days’ notice in the Conway order. …

[19] On July 18, 2024, Mira received a mortgage commitment letter from her mortgage broker dated July 17, 2024 which states:

We are pleased to advise that your existing Lender has approved the following mortgage loan for Renewal. The Lender confirms that the terms and conditions contained in the original Mortgage Loan Commitment remain unchanged, unmodified and in full force and effect, except as modified by this Renewal.

Renewal Details

Loan Number: xxxx Total Loan Amount: $875,000.00 Total Advanced Amount: $800,000.00 Draw Amount: $75,000.00 Increase Amount: $425,000.00 New Loan Amount: $1,300,000.00 Mortgage Administrator: Latitude Mortgage Services Inc. Borrower(s): Mireille Jehn Property: 24 Wynn Road, North York, ON M2R 1S7, 26 Wynn Road, North York, ON M2R 1S7 Interest Rate: The higher of 8.49% or RBC Prime Commercial Lending rate plus 1.54%. Interest is calculated on 365/actual number of days basis and payable in arrears Monthly Payment: Interest-only payments debited on the 1st of each month. Term: 12 months Prepayment Terms: The Loan will be open for prepayment during the Term of the Loan. Borrower to provide written notice 30 days prior to repaying the loan, failing which an additional payment equivalent to 30 days interest will be payable by the Borrower. Renewal Date: August 1, 2024 New Maturity Date: August 1, 2025 Renewal Fee: $29,250.00 to be paid by the Borrower(s) and deducted from the loan advance.(The Lender may pay a referral fee from the Renewal Fee collected for the Loan to the referring entity.) Legal Fee: The approximate cost is $2,500.00 (plus HST and disbursements), to be paid by the Borrower(s) and deducted from the loan advance. Loan Increase Processing Fee: The cost is $2,500.00 to be paid by the Borrower(s) and deducted from the loan advance Other: If a renewal agreement is sent to you to renew this Loan, but we do not receive, by the applicable maturity date, either (i) a duly executed copy of the renewal agreement or (ii) repayment, in full, of the outstanding principal balance, accrued interest and any fees and costs owing under the Loan, we may, in our sole and absolute discretion, elect to extend the Loan for an additional Term of Three (3) months to Six (6) months as determined by us in our sole discretion (the "Extended Term"). …

[20] The mortgage commitment letter shows that the amount drawn down on the mortgage has increased from $290,000 to $800,000.00 over about 14 months. Mira states that this $510,000 difference was used to pay carrying costs, personal expenses and legal fees. There is no evidence regarding how much of the $510,000 was allocated to each of these areas of expense over the last year.

[21] From May 2023 to Mira states that if the refinancing is not renewed on July 31, she will be unable to repay the mortgage and the lender will then be in a position to enforce on its security. Mira intends to drawdown additional funds of approximately $300,000 (from the current mortgage amount), in order to continue to pay the costs to maintain four Properties, to support my reasonable living expenses and to pay my legal fees to defend the litigation.

Analysis

[22] Rule 45.01(1) of the Rules of Civil Procedure authorizes the court to grant an interim order for the preservation of property. It states:

The court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorize entry on or into any property in the possession of a party or of a person not a party.

[23] In Morden and Perell, The Law of Civil Procedure in Ontario, 5th ed. (Toronto: LexisNexis Canada, 2024), at section 3.144, the test for an interim preservation of property is described as follows:

… the moving party must establish that:

(a) The assets sought to be preserved constitute the subject matter of the dispute or a right to a specific fund or are relevant to an issue in the proceeding;

(b) There is a serious issue to be tried regarding the plaintiffs’ claim; and

(c) The balance of convenience favours granting the relief sought by the moving party.

Also see BMW Canada Inc. v. Autoport Limited, 2021 ONCA 42, para. 42.

[24] The first two requirements are easily satisfied. The properties at 24 Wynn and 26 Wynn are the subject of the resulting trust claims. Having reviewed the evidence, I find that the plaintiffs’ claims raise a serious issue.

[25] The balance of convenience requires a consideration of whether the moving party would suffer greater harm from the refusal of the interlocutory injunction pending a decision on the merits than the responding party would from the issuance of an interlocutory injunction and thus the balance of convenience favours the issuance of the preservation order: R. v. Canadian Broadcasting Corp., 2018 SCC 5, para. 1.

[26] Mira submits that she has paid the carrying costs of the properties that are the subject of the resulting trust claims for many years. From the figures that she has provided, it appears that Mira has spent an average, since 2021 of about $80,000 per year in carrying costs on these properties. Such costs include property maintenance, repairs, taxes and utilities. Mira states that she retired about two or three years ago and that she cannot afford to pay these carrying costs from her pension income.

[27] Mira submits that if the plaintiffs will not be financially prejudiced if their resulting trust claim is successful and if she drawn down the entire $1,300,000.00 mortgage as she will be able to repay that amount from the ¼ share that she will be entitled to in the properties and by receiving credit for part of the carrying costs that she has paid. Such as a result is not so clear as it is based on the future values of the properties which has dropped since the mortgage was first registered in 2022. Mira states that she anticipates drawing an additional $300,000 in equity on the new financing to cover the carrying costs of the properties as well as her ordinary living expenses and legal costs. Further, it is my view, as Estate Trustee, Mira places herself in a conflict of interest by seeking to use the assets of the Estate to fund her costs of this litigation.

[28] I find that it is just to permit the refinancing of the mortgage on 24 Wynn and 26 Wynn to proceed on July 31, 2024 however Mira shall be restrained from drawing down any funds from the mortgage for any purpose other than to pay for the costs of the refinancing and, up to $80,000.00 for the carrying costs of the properties that are the subject-matter of the plaintiffs’ claims, unless this court otherwise orders. There was no explanation regarding why Mira waited until July 2024 to seek refinancing of soon to expire mortgage. This “urgent” motion was self-induced, and I reluctantly grant leave for Mira to provide 22 days notice, rather than the 30 days notice required by the Order of Conway J., as I find that the refinancing is needed to fund the carrying costs of the properties that are the subject-matter of this case. I order that 30-day notice period in the Conway Order shall be extended to 60 days for all future refinancings.

[29] This not an appropriate case for placing a caution under s. 128 of the Land Titles Act, R.S.O. 1990, c. L.5, nor for the issuance of a CPL under Rule 42.01 of the Rules of Civil Procedure on title to 24 Wynn or 26 Wynn. The plaintiffs, as beneficiaries, do not allege that they have an “interest in land” in the disputed properties. The plaintiffs’ resulting trust claim is a claim that enures to the benefit of the Estate, not them personally as residual beneficiaries of the Estate.

[30] The parties may deliver their costs submissions within 7 days, and their reply costs submissions within 14 days. Each submission shall be no longer than three pages, exclusive of an outline of costs and any offers to settle.

[31] There has been little progress in moving this matter towards either resolution or a hearing on its merits. The plaintiffs place the blame on Mira for failing to meaningfully comply with court orders requiring disclosure. Mira blames the delay on each plaintiff changing lawyers several times and their failure to attend examinations for discovery as ordered. A case conference is scheduled for early October 2024 and counsel for the parties should come to that conference with a draft Order that outlines next steps and a timetable on how to move this case more quickly towards a final determination.

Released: July 31, 2024 M. D. Faieta J.