) ) PETER KALINS, Estate Trustee of the Estate of Andris Kalins, Applicant – v. –, 2013 ONSC 6166

CITATION : Estate of Andris Kalins, 2013 ONSC 6166 COURT FILE NO.: 01-1550/03 DATE: 20131002 ONTARIO SUPERIOR COURT OF JUSTICE ESTATES LIST IN THE ESTATE OF ANDRIS KALINS, deceased BETWEEN: ) ) PETER KALINS, Estate Trustee of the Estate of Andris Kalins, Applicant – and – VALDA M. KALINS, Respondent ) ) ) ) ) ) ) ) )) ) ) Jan Goddard , Counsel for the Applicant Dean Adema , Counsel for the Respondent ) ) HEARD: SEPTEMBER 12, 2013 endorsement: gREER J. : [ 1 ] On May 28, 2013, the parties appeared before Mr. Justice McEwen in this matter. The Application was adjourned. He ordered that the Application proceed in accordance with a

Schedule he set up for the parties to follow. The Application was directed to be heard on September 12, 2013 for two hours. The Respondent was ordered to file her responding materials no later than July 15, 2013. The Applicant was to file his reply no later than August 9, 2013 and his Factum in accordance with the timelines set out in the Rules of Civil Procedure . [ 2 ] When I reviewed the file the evening before the Application was to be heard, there were no materials filed by the Respondent and no Confirmation Slip filed by her Counsel.

On the morning of the Application, the Counsel for the Respondent appeared and asked for a further adjournment. The Applicant opposed the adjournment, noting that despite all his Counsel’s best efforts to communicate with Counsel for the Respondent, no response had been forthcoming. [ 3 ] When the July 15th deadline passed, Counsel for the Respondent was telephoned by the office of the Applicant’s Counsel to point out that his client’s materials had not been filed. He did not respond. A letter was then sent to him, to which he also did not respond.

He was served in mid-August with the Applicant’s Factum and Brief of Authorities and he, again, did not respond. A week before the Application was to be heard, he was called by a Law Clerk in the firm acting for the Applicant, to remind him of the date of the hearing. He again did not respond. He was served with the Confirmation Sheet about what materials were going to be referred to on the date of the Application. [ 4 ] At 7:00 p.m., the night before the Application was to be heard, Counsel for the Applicant received a copy of a 5 page

Affidavit of the Respondent, sworn by her on July 23, 2013. By this time, the deadline of July15th had already passed. The Affidavit had remained in the Respondent’s Counsel’s file until that date. The Applicant’s Counsel says that she read the Affidavit and in her view, it does not relate to the issue before the Court, as set out in the Application. [ 5 ] The Respondent’s counsel first requested another adjournment, and then asked if he could file the Affidavit with the Court.

Since there had already been one adjournment of the matter, and since the deadline for filing responding materials had passed nearly two months previously, I refused to allow it to be filed. I then refused to grant another adjournment and heard the Application.

The Application [ 6 ] The issue before the Court is whether the Applicant, Peter Kalins, (“Peter”), as Estate Trustee of the Estate of his late father, Andris Kalins, (“the deceased”) is entitled to a declaration that the Respondent, Valda Kalins (“Valda”), is in breach of a Settlement Agreement made between the Estate and Valda, and whether there should be an order for damages with respect to any such breach, and if so, the quantum of those damages. [ 7 ] The deceased died on January 23, 2003. Peter was appointed the Estate Trustee under the deceased’s Will dated May 2, 2000.

The Will was made in contemplation of his marriage to Valda, which was to take place on May 6, 2000. The deceased made provision for Valda in para. 4 of his Will. He directed that any real property he owned and was using as a matrimonial home at his death, was to be held in trust for Valda, subject to certain conditions regarding house expenses and repairs. [ 8 ] Prior to his death, the deceased and Valda, in May 2002, purchased two adjoining properties , one with a residence on it at 1 Larwood Boulevard and the other being adjacent land , both overlooking the Scarborough Bluffs.

The ownership interest in this new property was 75% owned by the deceased and 25% owned by Valda as tenants-in-common. The couple had contemplated making extensive renovations to this property. They never moved into the property before the deceased died. The Settlement Agreement [ 9 ] Peter acknowledges that the parties reached an agreement on how the properties would be renovated, with Valda undertaking the task, subject to Peter’s approval. Valda was to deposit $326,312.94 from the joint account into a new joint account with Peter as Estate Trustee, which funds would be solely used to renovate the property.

Valda was to be responsible to pay all on-going expenses inclusive the property taxes, insurance, utilities, repairs and maintenance. They entered into a “Letter Agreement” in July 23 about this. [ 10 ] Disputes arose between the two about such renovations and the application of such funds. This led to the Settlement Agreement signed on December 16, 2003. As the years passed certain renovations took place. [ 11 ] Peter and Valda therefore entered into a “Settlement Agreement” dated December 16, 2003, almost a year after the deceased’s death.

The Agreement was put into place because it was unclear whether the new property was a matrimonial home, since they had not taken up residence in it at the date of death. Before his death, Andris had sold the house he owned and paid off the mortgage on that home. After that sale and before his death, the deceased put the balance of the proceeds from the sale of the home into a joint investment account with Valda. [ 12 ] The Settlement Agreement set out Valda’s obligations regarding her occupation of the matrimonial home. Valda received independent legal advice with respect to signing the Settlement Agreement.

It was entered into because disputes arose between the Estate and Valda regarding the right to renovate, live in and occupy the property of which the deceased and Valda were tenants-in- common (”the property”). The Agreement was also entered into by the Estate of Alma Kalins (the deceased’s first wife) and the three Kalins adult children.

The issue before me arises only out of Valda’s right to live in and occupy the property and her agreement to keep it repaired and to pay certain expenses. [ 13 ] Under the Settlement Agreement, Valda was to undertake certain renovations, as defined in the Agreement, maintain certain insurance coverage on the property, with the costs of the renovations to be solely the responsibility of Valda. There were obligations on her to provide invoices regarding renovations. The issue, which has arisen is what was required of Valda while she remained occupying the property, pursuant to para. 10 of the Agreement.

It reads as follows:

Valda shall maintain 1 Larwood in good condition by performing all repairs (whether or not such repairs are significant or if the items needing repair must be replaced or rebuilt, and whether or not covered by the Property Insurance) and all general upkeep and maintenance, in each case to a standard or level that is at least equal to comparable residential homes and properties in the area (collectively, the “Maintenance and Repair Work”).

Valda shall provide copies to Peter, on a timely basis, of any report or other information provided by any home inspector, architect or other contractor or tradesperson engaged by Valda, regarding the condition of the property. In addition, para. 12 says that if a Home Inspector provides a report that recommends or indicates that Maintenance and Repair Work is necessary, Peter is to give a copy to Valda, and if demanded, Valda “shall perform such Maintenance and Repair Work within 60 days.” [ 14 ] Under para. 15, a Contingency Fund in the amount of $50,000 was set up from funds held in the joint account.

Those funds could be used to make repairs costing no more than $3,000 per year, which could accumulate and be added to the next year’s payment, if not used in any such year. A description of how it was to operate is set out in paras. 16, 17 and 18. [ 15 ] Valda continued living in the home and doing renovations from 1993 until 2012, when she was found by the Court to be in breach of the Settlement Agreement. She then vacated the property. The Two Reports [ 16 ] After Valda left the property, Carson Dunlop was retained to provide a “home inspection” of the property for Peter. It is dated November 28, 2012.

It sets out, in minute detail, all aspects of the interior of the interior of the home which may require repair and/or replacement. The report is said to be “not technically exhaustive.” It does cover “roof covering” and certain exterior defects as well as problems with the interior of the home. Extensive photos are included in the report. [ 17 ] The Dunlop report notes various problems that do not relate to renovations which were done to the home under Valda’s agreement.

It shows various problems with the basement, including leakage, problems with the fireplace or wood stove in the basement, which created smoke damage. The family room shows water leakage from the roof and water damage in the second floor bathroom. The shower stall in the main bathroom requires caulking. The second floor bathroom is missing the tub and faucets. These are only some of the interior problems. [ 18 ] The second report is entitled “Landscapes by Lucin”. It is dated December 4, 2012. The report is said to be done to generally estimate work to be done on the gardens and land surrounding the home.

It points out that various clearances and permits may be needed to be obtained from the City to satisfy the Toronto Ravine Authority and the Conservation Authority, as the house sits on escarpment land. Extensive photos are included in the report. [ 19 ] The Lucin report says that the front entrance patio requires extension repairs costing about $1,600-$2,200. The south side concrete stairs leading down from the south facing patio need to be replaced at a cost of $15,000, as do the creosote stairs to the south at a cost of $25,000. Retaining walls are crumbling, for an added $8,000.

Concrete steps on the south side going down a steep slope are “hazardous” and will cost $13,000 to $15,000 to repair. The rear patio is “shifting and moving slowly down the south slope, primarily due to the retaining walls ‘inability to hold back the load surcharge.” To repair it and replace flagstones, could cost between $21,000 to over $40,000. The same type of expense would also be incurred if the south patio retaining wall was also repaired.

The Lucin report has a total for all repairs, being a low of $169,075 and a high of $250,000 as estimates. [ 20 ] On November 2, 2012, Madam Justice Klowak found that Valda was in breach of paras. 18(

a) and (

c) of the Settlement Agreement. Valda was ordered to provide Peter with vacant possession of the property within 14 days of being served with the Judgment. Neither Valda nor her counsel appeared on that Application when it was hear. [ 21 ] The Court found that Valda had failed to keep the property taxes up-to-date on the property and there was approximately $75,934.93 owing to the City. In addition, Valda had allowed a construction lien of $70,000 and government liens of $26,303, to be registered against the property. She was also ordered to pay Costs of $21,889.33.

The sale of the property [ 22 ] Peter was given vacant possession of the property. He was then in a position to have the two reports done. The property was eventually sold on February 8, 2013. The Statement of Adjustments sent to Peter on the closing shows the sale price as $1,400,000. After the property taxes were paid, there was a net amount of $1,376,642.65 remaining in the lawyer’s trust account. [ 23 ] Peter e-mailed Valda on March 5, 2013 about the closing and sent her documents respecting what had been deducted from the net amount.

Since all taxes and liens had to be paid, the City of Toronto was paid $77,422.49 plus $1,628.01. The Receiver General for Canada was paid $228,019.79 on account of taxes owed by Valda, the legal bills were deducted and certain amounts were paid to the deceased’s Estate for his 75% interest in the sale. Valda’s 25% would have been approximately $344,160.65 if there had been no taxes and liens owing by her.

After all these deductions were made, there was a letter over $8,600 left in the lawyer’s trust account. [ 24 ] It is Peter’s position that Valda let the property go into such a state of disrepair that the fair market value of the property, for purposes of sale, was far less than it would have been had Valda spent some money on repairs and general upkeep. It appears that she spent a lot on renovations, which were not completed by the time of the sale.

The only evidence there is that Valda spent anything on repairs is that $32,000 of the $50,000 remained in the Contingency Fund when she vacated the property. [ 25 ] Ken Digalakis of RE/MAX sent a letter to Peter dated February 25, 2013. It says that had the property been kept in a good state of repair, the market value of the property on a sale would have been $300,000 to $500,000 more for that what was received on the sale. [ 26 ] It is Valda’s position that the house, before the sale, was simply showing its age.

Some of the damages, she says, are caused by the fact that the property sits on the edge of the Scarborough Bluffs and that shifting had occurred to damage the patio structures. Her counsel also points to the fact that the renovations done by Valda may have increased the value of the house. He says that the roof repairs are not urgent and should not be considered. He says the damages, which Peter asks the Court to consider, are not realistic, given that it was an old house in need of repair when it was purchased.

He says, that despite the fact that Valda lived there for 9 years, many of the repairs suggested in the Dunlop report would have made that area of the house “new” and not just repaired. [ 27 ] Valda’s counsel says that $32,000 of the monies remaining in the Contingency Fund should be paid to her. He says she did make repairs but provided no invoices to show what was spent on repairs rather than on renovations. [ 28 ] Peter says that the way the Contingency Fund operates, is that the repairs have to have been made before the $3,000 is paid out in any one year.

Valda provided renovation bills, which did not fall within the scope of the Fund. Valda seems to have ignored repairs, just like she ignored the overdue property taxes and the taxes she owed to CRA. Analysis [ 29 ] On the basis of the two reports, I am satisfied that Valda is in breach of paras. 3 and 10 of the Settlement Agreement. Peter says that he is entitled to damages from Valda given the loss in the value of the property when it was sold. In addition, Peter asks the Court for the following relief: (

a) An Order determining the quantum of damages arising from the breached owed by Valda to the Estate or directing him to determines how the damages are to be determined in another way; (

b) An Order that the balance in the Contingency Fund shall be paid to the Estate in partial satisfaction of the damages arising from the breaches owed by Valda to the Estate; (

c) An Order that Peter be authorized to continue to instruct the real estate lawyer, Nicholas T. Tyacke, to hold Valda’s remaining allocation of the net proceeds from the sale of the property until further Order of this Court in this proceeding, being obtainable by the Peter upon further motion to the Court, or any proceeding brought by the purchaser of the property or upon written agreement signed by the parties to this proceeding;

(

d) An Order that Valda pay Peter’s Costs of this Application on a substantial indemnity basis plus HST, and, if necessary, that the costs be paid from Valda’s share of the net proceeds of the sale of the property. [ 30 ] Since I have found Valda in breach of the Settlement Agreement, the difficult question is what damages the Estate is entitled to for such a breach.

The house is the subject of the agreement between the parties and there is evidence that the value of the house for sale purposes was diminished due to the lack of repair made to the house in the years that Valda occupied it. [ 31 ] It is trite law to say that every breach of contract entitles the injured party to damages. Such damages are awarded to the injured party to compensate for any loss suffered. See: Hadley v. Baxendale ,1854 WI. 7208.

There the court also said that for damages to be recoverable for a breach of contract, such damages should be fairly and reasonably considered as arising from the breach of contract. [ 32 ] In Portable Packaging Systems Inc. v. Anthony Brackin , 2011 ONSC 4440 , the issue as to whether the Court, on hearing an Application, as opposed to having an action before it, has the jurisdiction to deal with damages where the claim is of a liquidated nature. There the Court, in para. 18, held that if it can readily be found on a contractual

interpretation of the contract in question and on a review of the documentary evidence, the Judge hearing the Application may, if there is a finding of a breach of contract, determine the damages. [ 33 ] Here, the Court has the assistance of two reports, which set out what repairs are needed and what was the condition of the property at the time of sale. It also has the RE/MAX letter setting out the estimated loss to the value of the property on sale because the repairs were not done.

It is given when damages are awarded for breach of contract, in so far as they can be monetarily calculated, the party suffering the loss should be placed in the same position as he or she would have been if the contract had been performed. See: Remedies: The Law of Damages, 2nd ed, Jamie Cassels, pp.16 and 17. [ 34 ] The difficulty I have is in determining what the actual quantum of damages should be in the circumstances of this case. In my view, it is not sufficient, based on one realtor’s letter that I fix the damages at somewhere between $300,000 and $500,000.

I could find no evidence as to what was paid for property when it was originally bought by the deceased. There were no pictures of what the building and the retaining walls and stairs in the garden looked like on the date of purchase. I therefore reject the idea that Valda would have made all those repairs, which would have increased the value of the property to that extent. [ 35 ] The evidence is clear that Valda has taken no

part in any of the three appearances before Madam Justice Klowak, Mr. Justice McEwen and me. Although Valda’s counsel appeared before me, he was in breach of the Order of Mr. Justice McEwen and had not prepared for the Application. What is clear, however, is that the Lucin report has quantified the crumbling status of the garden, its pathways and retaining walls and patios. The cost to repair those structures varies from $169,075 and $250,000.

It is also clear that the Carson report shows that there was considerable water damage in the interior of the home caused by a leaking roof, with many other problems long neglected in the lower level of the home. [ 36 ] It seems to me that it would be futile and hugely expensive to have the trial of the issue of loss in value at this point in the litigation. I am able to determine what, in the case at bar, would reasonably be an amount lost by the Estate on the sale of the home if even some of the repairs had been effected by Valda under the terms of the Settlement Agreement.

There is $32,000 left in the Contingency Fund, which could have expended and was not. If even 50% of the Lucin estimated repairs had been done to the outer property, it is safe to say that the property value would easily have been increased by $85,000 on the sale. [ 37 ] In addition, if the roof and flashing had been repaired at a cost of $15,500 as per the Carson report, the aesthetics of the property would have been greatly enhanced.

If some repairs had been made and the stairs in the garden were walkable, if the patios that attracted the viewer and the retaining walls that did not look like they were about to collapse, and if the roof that did not leak, the sale price would have been greater. In my view, these repairs would have enhanced the value by $100,500. This, I believe, is a realistic number, not knowing what the detailed status of the property was when it was bought. [ 38 ] I fix the damages at $100,500. The value of the property would have been enhanced by this amount to the benefit of both the Estate and Valda.

Since the Estate had a 75% interest in the property, I order Valda to pay to the Estate the sum of $75,375 as damages for her breach of the Settlement Agreement. With respect to this amount, I order that the balance of the Contingency Fund in the amount of $32,000 plus any interest accrued on that amount, be paid to Peter, in his capacity as the Estate Trustee, to be applied against such

damages. In addition, the balance owed to Valda still remaining in the lawyer’s trust account, shall be paid to Peter as the Estate Trustee to offset the damages award owed by Valda. [ 39 ] There shall be post-judgment interest at the Courts of Justice Act rate payable on the balance of such damages by Valda until it is paid in full. [ 40 ] Peter is entitled to his Costs payable by Valda. He asks for those to be fixed on a substantial indemnity rate, given Valda’s behaviour in flagrantly ignoring her obligations under the Settlement Agreement and her breach of Court Orders.

Counsel presented me with a Bill of Costs at the end of the hearing of the Application. Those Costs are $15,410.86 inclusive of disbursements and HST. The time spent by senior counsel was at $500 per hour but junior counsel greatly assisted at lesser rates to keep the costs down. I am satisfied that under the circumstances of this Application that the Costs are fair and reasonable, given the detailed work which had to be done and the examination of the law in these circumstances, to try to effect a just result in a very difficult situation.

An Order shall go fixing the Costs at $15,410.86 payable by Valda within 30 days of this Order. [ 41 ] Counsel for Peter prepared a Draft Judgment and handed it to the Court, to be reviewed once a determination had been made on the merits of the Application. I have labelled it a “Draft” and amended in accordance with the reasons set out herein. It shall be mailed to Peter’s Counsel for re-typing and sent to me for signature.

Valda’s consent to the Judgment is therefore not required. [ 42 ] While Valda’s Counsel will receive a copy of this Endorsement and the Judgment, I order Peter’s Counsel to also send her a copy of both documents so that there is evidence she received them. Greer J. Released: October 2, 2013 CITATION : Estate of Andris Kalins, 2013 ONSC 6166 COURT FILE NO.: 01-1550/03 DATE: 20131002 ONTARIO SUPERIOR COURT OF JUSTICE ESTATES LIST IN THE ESTATE OF ANDRIS KALINS, deceased BETWEEN:

PETER KALINS, Estate Trustee of the Estate of Andris Kalins, Applicant – and – VALDA M. KALINS, Respondent ENDORSEMENT Greer J. Released: October 2, 2013