Reasons for Decision on Application for Directions

Court File No.: CV-23-92602-ES
Date: 2025/03/25
Ontario Superior Court of Justice
In the Estate of Prema Raddalgoda, Deceased

Between:
Sidath Raddalgoda, in his capacity as Estate Trustee of the Estate of Prema Raddalgoda (Applicant)
– and –
Malsiri Raddalgoda, Sienna Ebbinghaus, and Ceyla Ebbinghaus (Respondents)

Appearances:
Alexander Bissonnette, for the Applicant
Malsiri Raddalgoda, Self-Represented

Heard: March 12, 2025

Before: Justice Shalini Somji

Introduction

[1] The Applicant, Sidath Raddalgoda, applies for directions to resolve disputes between himself and his brother, Respondent Malsiri Raddalgoda, concerning the estate of their mother, Prema Raddalgoda, and for an order removing his brother as co-Estate trustee.

[2] Prema Raddalgoda died in 2017. She died testate, leaving a Last Will and Testament dated August 9, 2017 (“Will”). In her Will, the deceased appointed her two sons to administer her Estate. Following their mother’s death, the parties were granted a Certificate of Appointment of Estate and act as co-Estate trustees.

[3] The deceased directed in her Will that her Estate be distributed to four beneficiaries. Each of her sons are to receive a one-third share of the Estate and the remaining one-third share is to be divided equally between her two granddaughters, Sienna and Ceyla, whose father was the deceased’s third son who previously passed away. It is not disputed that the primary asset of the Estate is the deceased’s home at 24 Kalbrook Street, Ottawa (“Property”).

[4] The Applicant alleges that he has been unable to advance the administration of the Estate because of the Defendant’s conduct, which includes refusal to: vacate the deceased’s home or purchase it in a timely manner; pay occupation rent while residing in the deceased’s home; pay legal fees owing to the Estate from an action brought by Bank of Nova Scotia (“BNS Action”); provide a proper accounting of expenses related to the home; provide answers and comply with undertakings; and allow for the proceeds of sale of the home to be distributed in accordance with their mother’s instructions in the Will.

[5] The Applicant seeks directions regarding the administration of the Estate under Rule 75.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. More specifically, the Applicant seeks an order for directions regarding funds owed to or incurred by the Estate and an order to remove the Defendant as co-Trustee: Squillace v Sampogna, 2016 ONSC 2559 at para 69. The issues to be decided are:

a. Should the Defendant compensate the Estate for occupation rent in the amount of $88,400 for the period he resided at the deceased’s home following her death?
b. Should the Defendant compensate the Estate and the Plaintiff for the legal fees and costs of $7,500 and $18,484.48 following the BNS action?
c. Should the Estate reimburse the Defendant for any renovation expenses the Defendant incurred on the Property prior to its sale in the absence of proper receipts?
d. Should the Defendant be removed as co-Trustee of the Estate?

[6] The Applicant’s position is supported by two sworn affidavits and supporting exhibits. In response to the Application, the Defendant provided a one-page unsigned affidavit and made oral submissions at the hearing.

[7] While the granddaughters are not party to this action, they have provided consents in support of the relief sought in the Application.

Issue 1: Should the Defendant Compensate the Estate for Occupation Rent?

[8] In October 2014, the Defendant moved into the Property to care for his mother and resided there until her death in November 2017. Following her death, the Defendant expressed an intention to purchase the Property. It is not disputed that at that time, the fair market value was $300,000. However, the Defendant did not have the funds to purchase the Property at the time. According to the Plaintiff, the Defendant attempted to bargain and negotiate with the Applicant to purchase the Property at a discounted price below the fair market value but the Applicant, as co-Estate Trustee, refused.

[9] The Defendant continued to reside at the Property until February 2022 and failed to pay any occupation rent. There is no language in the Will that entitled the Defendant to reside at the Property. The Applicant did not provide the Defendant permission to live there, and even if he had, it would have conflicted with his responsibilities as a co-Estate Trustee. In 2020, after unsuccessful attempts to get the Defendant to purchase the Property, vacate it for sale, and/or pay occupation rent, the Applicant retained counsel to advance the matter.

[10] Occupation rent has been awarded in estate litigation against persons who occupy property when not entitled to: Calmusky v Calmusky, 2020 ONSC 1506 at para 73; Bermann v McMahon, 2010 ONSC 993 at para 37; Korsch v Hildebrandt, 2023 ONSC 2513 at paras 23-28.

[11] As co-Estate Trustee, the Defendant had a fiduciary duty to protect the value of all Estate assets until the completion of the administration of the Estate. The Defendant’s wish to purchase the Property did not justify the continued occupation of the Property without proper compensation to the Estate. Rental income could easily have been generated from the Property for the benefit of the Estate. The Defendant’s continued occupation of the Property to the detriment of the beneficiaries is irreconcilable with his duties of fidelity as co-Estate Trustee. Lima v Ventura (Estate of), 2020 ONSC 3278 at paras 49-57; Broos v Broos at paras 5, 14-15.

[12] Based on an assessment by the same Realtor that appraised the Property for sale, the median market value of monthly rent for the Property between November 2017 to February 2022 would be approximately $1,700/month. The Defendant has not challenged that value. When multiplied by 52 months, the Defendant owes the Estate $88,400 for occupation rent.

[13] I would add that had the Applicant provided occupation rent, those funds could have been invested and earned compound interest to the benefit of the Estate. However, the Applicant has not sought pre-judgment interest and so I will not order it. However, there will be an order for post-judgment interest as calculated under the Court of Justice Act, R.S.O. 1990, c. C.43, as amended.

[14] There will be an order that the Defendant shall pay the Estate $88,400 within 14 days, failing which the principal amount of $88,400 plus post-judgment interest will be set off against the Defendant’s distributive share of the Estate after the Estate’s payment of all debts and bequests.

Issue 2: Should the Defendant Compensate the Estate and the Plaintiff for the Legal Fees Paid for the Action Brought by the Bank of Nova Scotia?

[15] In 2020, loans in the amount of approximately $181,000 secured against the Property matured. The Estate did not have sufficient funds to pay off the loans as the Defendant had not paid occupation rent, vacated the Property for sale, or agreed to purchase it at fair market value. Consequently, BNS brought an action for summary judgment for breach of contract and for leave to issue a writ of possession to take over the Property.

[16] To avoid additional costs arising from foreclosure and sale of the Property by the BNS, including interest and legal fees, the Applicant and the Defendant agreed as co-Estate trustees to allow for the Defendant to purchase the Property at fair market value. At this time, house prices had gone up because of the COVID-19 pandemic. The Defendant agreed to purchase the Property for $570,000 pursuant to new real estate appraisals. On January 11, 2022, the parties to the BNS action agreed to a judgment on consent to allow for the co-Estate Trustee to pay BNS the outstanding loan amounts following the sale of the Property to the Defendant. The proceeds of sale that remain after payments to BNS are presently held in trust.

[17] The Applicant seeks an order that the Defendant pay the legal fees incurred in defending the BNS action to the Estate in the amount of $7,500 and to the Applicant personally in the amount of $18,484.48. The Applicant argues that the Defendant’s failure to act in accordance with his fiduciary obligations to the Estate and beneficiaries resulted in the BNS action. I agree.

[18] Had the Defendant allowed for the sale of the Property in a timely manner on the open market at fair market value in 2017, the funds from the sale would have been more than sufficient to pay for the outstanding loans secured against the Property. The Defendant’s failure to vacate and sell the home, purchase it at fair market value, or either pay or renew the terms of the loan forced BNS to bring its action. The consequent legal costs should not be borne by the Estate or the beneficiaries, but the Defendant himself.

[19] The Defendant suggests that he incurred legal fees to defend the BNS action and administer the Estate. However, he has not filed any supporting evidence. During the motion hearing he was unable to even identify the name of the counsel with whom he dealt. In the absence of evidence, his claim for reimbursement of funds is denied.

[20] There will be an order that the Defendant will reimburse the Estate $7,500 and the Applicant personally $18,484.48 within 14 days, failing which these amounts plus post-judgment interest will be set off against the Defendant’s distributive share of the Estate.

Issue 3: Should the Estate Reimburse the Defendant for Any Renovation Expenses the Defendant Incurred on the Property in the Absence of Proper Receipts?

[21] While the Defendant did not pay occupation rent, he claims he incurred expenses in the upkeep and renovation of the Property for which he seeks reimbursement.

[22] The Applicant attests in his affidavit of November 2023 that the Defendant seeks to be reimbursed in the amount of $48,161.

[23] The Applicant is agreeable in principle as co-Estate Trustee to reimburse the Defendant expenses for maintaining the Property but argues that the renovation expenses should not be reimbursed in this case for two reasons: one, the Applicant did not agree to such expenses as co-Estate Trustee; and two, the Defendant has not produced receipts.

[24] The Applicant argues that most of the renovations were cosmetic and undertaken in the front and backyard of the Property for the benefit of the Defendant who intended to live there. He understands from Facebook photos posted by the Defendant that front yard renovations occurred in January 2022. Some photos were later removed on Facebook by the Defendant.

[25] The Defendant conceded at discovery that at the time the appraisal was done, the backyard remained overgrown, and the rotting deck had not been replaced. Hence, the cost of backyard renovations did not increase the fair market value of the Property. The photos attached to the Appraisal Report dated April 1, 2021, corroborate this fact. That appraisal valued the Property at $560,000. The Applicant obtained in September 2021 a Comparative Market Analysis which lists a suggested sale price of $570,000 for the Property. The Defendant purchased the Property for $570,000 in February 2022.

[26] The Defendant submits that he did many of the renovations himself and paid cash for others. He argues the renovations did increase the value of the home, and he does have both photos and receipts to indicate they were completed prior to the appraisal and sale of the Property. If that is the case, then I find that upon obtaining receipts, the Estate should reimburse the Defendant because the renovations would have increased the value of the Property.

[27] There will be an order that the Defendant shall provide within 14 days photos demonstrating that the renovations were completed prior to the appraisals and receipts, or financial statements of the amounts spent and with specification as to whether the receipts are for the front or backyard renovation and the supplier or vendor (for material) used.

[28] There will be a further order that should the Defendant provide said documentation, the Estate shall reimburse the Defendant the expenses in the amount supported by the receipts or financial statements.

Issue 4: Should the Defendant Be Removed as Co-Trustee of the Estate?

[29] A court may remove an Estate Trustee: s. 37(1) of the Trustee Act, RSO 1990, c. T.23.

[30] In Johnson v Lanka, 2010 ONSCS 4124 at para. 15, the court set out some guiding principles for determining removal of an Estate Trustee, namely that a court must:

a. not lightly interfere with a testator’s choice of Estate Trustee;
b. have clear evidence of necessity;
c. consider the welfare of the beneficiaries; and
d. be satisfied that the Estate Trustee’s acts or omissions are of such nature to endanger the administration of the Estate.

[31] Grounds for removal can include a conflict of interest with the Estate, past misconduct that is likely to continue and interfere with the administration of the Estate, or discord and breakdown between co-Estate Trustees: Squillace v Sampogna, 2016 ONSC 2559 at paras 63-64; Taetz v Mikolajewski, 2023 ONSC 4635 at para 12; Kasanda v Sartarelli, 2023 ONSC 4400 at paras 8-9.

[32] I find the grounds for removal of the Defendant as co-Estate Trustee are met.

[33] First, the Defendant’s conduct delayed the administration of the Estate. The Defendant’s refusal to vacate the Property or purchase it at fair market value left the Estate unable to dispose of its primary asset and wind down the Estate. Furthermore, even after the Defendant purchased the Property at fair market value, he obstructed the administration of the Estate by insisting that any proceeds of sale above $300,000 (which was the original fair market value in 2017) accrue to him. There is no basis for such a claim. His mother did not specify in her Will that the Defendant was entitled to have the home sold to him nor did the Applicant authorize such a sale as co-Estate Trustee. It has now been eight years since the deceased passed away, and the Estate has yet to be administered so that all beneficiaries, including the deceased’s two granddaughters, receive their distributive share.

[34] Second, the Defendant did not exercise his powers as co-Estate trustee for the benefit of the Estate and other beneficiaries, but for his own self-interest. In this regard, the Defendant breached his fiduciary obligations as a co-Estate Trustee. This misconduct includes:

a) delaying the sale of the Property;
b) occupying the Property without paying rent to the financial detriment of the Property;
c) leveraging his position as a co-Estate Trustee to persuade the Applicant to sell him the Property at a discounted price thereby undermining the value of the primary Estate asset contrary to the detriment of the other beneficiaries;
d) failing to address the loan renewals in a timely manner resulting in the BNS action and unnecessary legal costs to the Estate;
e) refusing to provide a proper accounting of expenses related to the Property;
f) failing to comply with undertakings following cross-examination; and
g) obstructing the winding down of the Estate by insisting that any proceeds accruing over $300,000 be given to him.

[35] Third, there is considerable discord between the co-Estate Trustees. The Applicant has made multiple attempts to advance the administration of the Estate but has been unable to do so because of the Defendant's lack of cooperation. The Applicant retained a lawyer in 2020 and continues to take legal steps to advance what should have been a straightforward Estate administration process given there is just a single asset to dispose of. Given the Defendant’s misconduct and the continued failure to comply with undertakings to produce the documentation necessary to advance the administration of the Estate, the Applicant has little confidence the Defendant will cooperate in the future. I would agree.

[36] For all these reasons, I am not satisfied that the Defendant can act honestly and diligently in his role as co-Estate Trustee, and I find that his continued role in such a position would hamper the administration of the Estate. Kasanda at para 77; Radford v Wilkins, 43 E.T.R. (3d) 74 at paras 97-121.

[37] There will be an order that Malsiri Raddalgoda be removed as co-Estate Trustee.

[38] The granddaughters consent to the Applicant becoming the sole Estate Trustee and for the administration of the Estate to be finalized. There will be an order that a Certificate of Appointment of Estate Trustee with Will shall be issued to Sidath Raddalgoda without the requirement to post security.

Costs

[39] The modern approach to fixing costs in estate litigation is to carefully examine the litigation and, unless the court finds there are public policy considerations at play, to follow the costs rules that apply in civil litigation. This approach, which replaces the traditional approach of having costs paid by the estate, protects estates from being depleted by litigation: McDougald Estate v Gooderham at paras 80, 85.

[40] Entitlement and quantum of costs is in the discretion of the judge: Courts of Justice Act, s. 131(1).

[41] In exercising their discretion, judges may consider the factors set out in Rule 57.01(1) and governing jurisprudence. These factors include: the experience of counsel and rates charged, the amount an unsuccessful party could reasonably expect to pay, amounts claimed, amount recovered, apportionment of liability, importance of issues, complexity of the proceedings, and the conduct of the parties.

[42] In Zimmerman v McMichael Estate, 2010 ONSC 3855 at para 4, the court summarized the applicable principles to assessing costs in estate litigation as follows:

(a) the costs of a proceeding are in the discretion of the court and the court may determine by whom and to what extent costs should be paid: Courts of Justice Act, R.S.O. 1990, c. C43, s. 131(1);
(b) estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime: McDougald Estate v Gooderham;
(c) as a general proposition, the principle that the “loser pays” applies to estate litigation: Bilek v Salter Estate;
(d) in the determination of costs, the court must have regard to the factors set out in Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, but, at the end of the day, the court’s responsibility is to make an award that is fair and reasonable, having regard to all the circumstances, including the reasonable expectations of the parties;
(e) the court’s discretion to award costs on a full-indemnity basis is preserved by rule 57.01(4)(d);
(f) full-indemnity costs are reserved for those exceptional circumstances where justice can only be done by complete indemnity: Mark M. Orkin, The Law of Costs, Vol. 1, 2nd ed., looseleaf, (Aurora, Ontario: Canada Law Book, 2010).

[43] The Applicant incurred costs in the amount of $21,110 for this Application to advance the administration of the Estate since 2023. In addition, the Applicant incurred costs of $818.69 for attendance at a case conference. Having previously consulted a lawyer, the Defendant would have known that as the unsuccessful party in this litigation, he would be expected to pay costs: r. 57.01(1)(0.b).

[44] The request for costs is supported by a bill of costs. Lead counsel has 7 years experience and billed at a rate of $315/hour. Work was performed meeting with the client, preparing pleadings and factums, preparing for and attendance at cross-examination of the Defendant, and attending the case conference and Application hearing. I find the rates charged and the billings commensurate with the work performed: r. 57.01(1)(0.a).

[45] The Defendant’s failure to abide by Justice Roger’s Order resulted in a further hearing before His Honour thereby increasing the Applicant’s costs. In addition, the Defendant failed to follow the procedural rules in respect of his unsworn affidavit, failed to respond to undertakings, and failed to file proper accounts of his expenses that caused delays and increased costs. This improper conduct warrants an elevated costs award: r. 57.01(1)(f).

[46] The matter was not complex, but the issues were important to the Applicant as co-Estate Trustee and beneficiaries given the Estate’s depletion of funds from the Defendant’s misconduct and the delay in winding up the Estate so that the beneficiaries could receive their entitlements: 57.01(c) and (d).

[47] The Defendant acknowledged in cross-examination that the backyard renovation photos illustrate that his renovations were not completed at the time of the appraisal. However, the Defendant failed to admit this at the hearing or alternatively, provide documentation to facilitate a determination of whether these expenses were reasonable and reimbursable: r. 57.01(1)(g).

[48] The courts may consider full recovery costs where there has been a finding of a breach of fiduciary duty, but the final cost award can be reduced should the amount be unreasonable: Baca v Tiberi, 2018 ONSC 7282 at paras 128-134; Volchuk Estate v Kotsis, 2007 CarswellOnt 8027 at paras 7-9, 12ff; Daley v Daley, 2017 ONSC 2365 at para 13. In this case, the Defendant’s misconduct resulted in a breach of his fiduciary duties.

[49] Having considered all these factors as well as the principle of proportionality, I find that a cost award in the fixed amount of $17,500 is fair and reasonable in this case.

[50] There will be an order that the Defendant pay fixed costs to the Applicant in the amount of $17,500 forthwith. Any amount not paid shall be set off against the Defendant’s distributive share of the Estate after the Estate’s payment of all debts and bequests.

Released: March 25, 2025

Justice Shalini Somji