Court Orders Brother to Pay $88,400 in Rent and Removes Him as Co-Trustee in Bitter Estate Dispute

Court Orders Brother to Pay $88,400 in Rent and Removes Him as Co-Trustee in Bitter Estate Dispute

Case: Raddalgoda v. Raddalgoda, 2025 ONSC 1869 (CanLII)

This case involves a dispute between two brothers, Sidath Raddalgoda (Applicant) and Malsiri Raddalgoda (Respondent), concerning the administration of their deceased mother Prema Raddalgoda’s estate.

Prema died in 2017, leaving a Will appointing her sons as co-Estate Trustees and directing her estate, primarily consisting of her home at 24 Kalbrook Street, Ottawa, to be divided one-third each to her sons and one-sixth each to her granddaughters, Sienna and Ceyla Ebbinghaus.

Sidath applied to the Ontario Superior Court of Justice on March 12, 2025, seeking directions to resolve disputes and remove Malsiri as co-Estate Trustee due to alleged misconduct. The court, presided by Justice Somji, addressed four main issues:

1. Occupation Rent: Malsiri lived in the property from 2014 until February 2022 without paying rent after Prema’s death, despite not being entitled to reside there per the Will. The court ordered Malsiri to pay $88,400 to the estate for occupation rent (52 months at $1,700/month), citing his fiduciary duty breach as co-Estate Trustee by not generating rental income for the estate.
2. Legal Fees from BNS Action: In 2020, Bank of Nova Scotia (BNS) sued the estate over matured loans ($181,000) secured by the property, which couldn’t be paid due to Malsiri’s refusal to vacate or buy it timely. The property was sold to Malsiri for $570,000 in 2022 to settle the loans. The court ordered Malsiri to reimburse the estate $7,500 and Sidath $18,484.48 for legal fees, attributing the costs to Malsiri’s delay.
3. Renovation Expenses: Malsiri claimed $48,161 for property upkeep and renovations but provided no receipts. The court denied reimbursement unless Malsiri submits photos and receipts within 14 days proving renovations were completed before appraisals and increased the property’s value.
4. Removal as Co-Trustee: The court removed Malsiri as co-Estate Trustee, citing his delays in selling the property, self-interested actions (e.g., seeking a discounted purchase), failure to account for expenses, and discord with Sidath, which endangered estate administration. Sidath was appointed sole Estate Trustee without security.

Costs: Sidath sought $21,928.69 in legal costs. The court awarded $17,500, finding it fair given Malsiri’s misconduct, breach of fiduciary duty, and procedural failures, to be paid forthwith or set off against Malsiri’s estate share.

The decision, dated March 28, 2025, ensures the estate’s administration proceeds efficiently, protecting the beneficiaries’ interests as per Prema’s Will.

Here are some key lessons learned from the Ontario Superior Court of Justice case involving the estate of Prema Raddalgoda:

1. Fiduciary Duty Must Be Upheld: As an estate trustee, one has a legal obligation to act in the best interests of the estate and its beneficiaries, not for personal gain. Malsiri’s actions—living in the property rent-free, delaying its sale, and attempting to buy it at a discount—breached this duty, leading to financial penalties and his removal as co-trustee.
2. Timely Estate Administration is Critical: Delays in administering an estate, such as failing to sell or manage key assets promptly, can lead to legal disputes, financial losses (e.g., the BNS action), and depletion of estate funds. The eight-year delay in this case harmed the beneficiaries and necessitated court intervention.
3. Documentation is Essential: Claims for reimbursement (e.g., Malsiri’s renovation expenses) require proper evidence like receipts and photos. Without substantiation, such claims are likely to be denied, emphasizing the importance of maintaining clear records.
4. Cooperation Between Co-Trustees is Vital: Discord and lack of cooperation between co-trustees, as seen between Sidath and Malsiri, can paralyze estate administration. Courts may remove a trustee if their conduct obstructs progress, as happened here.
5. Personal Liability for Misconduct: Trustees who misuse their position or cause losses to the estate can be held personally liable for costs, such as occupation rent ($88,400) and legal fees ($25,984.48), and may face reduced inheritance shares to offset these amounts.
6. Court Respects Testator’s Intent but Not at All Costs: While courts hesitate to override a testator’s choice of trustees, they will intervene when clear evidence shows a trustee’s actions endanger the estate or beneficiaries, as demonstrated by Malsiri’s removal despite Prema’s appointment.
7. Costs Follow Civil Litigation Rules: In estate disputes, the “loser pays” principle applies unless public policy dictates otherwise. Malsiri’s misconduct led to a $17,500 cost award against him, underscoring the financial risk of unsuccessful litigation.

In essence, this case teaches that estate trustees must act diligently, transparently, and in good faith—or risk legal and financial consequences.

Call our Toronto estate litigation lawyers at 416-847-1859 to discuss your matter.