Superior Court of Justice – Ontario
ESTATES LIST
RE: Annie Mayer, Applicant
AND:
Morris Eric Rubin, in his personal capacity and in his capacity as a Trustee of the Ida Rubin Trust, Sarah Werner, in her personal capacity and in her capacity as a Trustee of the Ida Rubin Trust, Faigy Esther Hammer, in her capacity as a Trustee of the Ida Rubin Trust, by her Litigation Guardian, Joseph Pernica, and the Bank of Nova Scotia Trust Company in its capacity as the Succeeding Estate Trustee of Johann (Jay) Rubin, Respondents
BEFORE: C. Gilmore, J.
COUNSEL: Arieh Bloom and Jessica Karjanmaa, Counsel for the Applicant Sharon Kour, Counsel for the Moving Party, Caitlin Fell, in her capacity as Administrator of the Estate of Ida Rubin and Trustee of the Ida Rubin Trust Henry Juroviesky, Counsel for the Respondent Sarah Werner (via Zoom) John Adair and Rebecca Kennedy, Counsel for the Respondent Faigy Hammer David Lobl, Counsel for the Bank of Nova Scotia Trust Company in its capacity as Succeeding Estate Trustee of the Estate of Johann Rubin Mark Ross and Jacqueline Cole, Counsel for the Respondent Morris Rubin Andrea McEwan, Counsel for Arsandco Investments Limited
HEARD: June 26, 2023
ENDORSEMENT ON MOTION
Introduction
1The court-appointed Administrator (“the Administrator”) of the estate of Ida Rubin (the “Ida Estate”) brings the within motion for appointment of KSV Advisory Inc. as investigator (“the Investigator”) to review the accounts and assets of Ida Rubin (“Ida”), the Ida Estate, and the estate of Ida’s late husband Johann Rubin (“the Johann Estate”, “Johann” and together with the Ida Estate “the Estates”) which assets and the income derived therefrom should have been available to Ida upon Johann’s death.
2Specifically, the Administrator seeks an Order which permits the following:
(a) Appoints KSV as the Investigator under s. 49(10) of the Estates Act, R.S.O. 1990, c. E.21 (the “Estates Act”) and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”);
(b) (b) authorizes the Investigator to investigate and report on, for the period commencing from and after May 20, 2004, being the date Johann passed (the “Review Period”), the following:
(i) the treatment of property that comprised or should have otherwise comprised the Johann Estate and its testamentary trusts;
(ii) any property that flowed out of the Johann Estate after the death of Johann, including to Jay Rubin Holdings Limited;
(iii) the treatment of property in the name of Ida or that should have been distributed to Ida from the Johann Estate (the “Ida Property”); and
(iv) the treatment of the Beneficiaries vis-à-vis each other in respect of amounts received by or on behalf of a Beneficiary from the Ida Property and the Johann Estate;
(c) empowers and authorizes the Investigator to investigate and report on any transactions or other financial matters occurring during the Review Period that directly involve the Johann Estate or the Ida Property, including but not limited to the business carried out by and transactions occurring in respect of the entities listed in Schedule “A” to the proposed Investigation Order, being corporate entities in which the Johann Estate was known to have direct or indirect interests (the “Corporate Entities”);
(d) authorizes the Investigator to request and obtain records from any bank or financial institution for transactions identified by the Investigator as relevant to the investigation in respect of the Johann Estate and the Corporate Entities, and requiring any such bank or financial institution to search for records that it is able to locate, acting reasonably and having regard to the limitations of its retention and storage policies and practices; and
(e) orders that any fees paid out of the Johann Estate by the Bank of Nova Scotia Trust Company (“Scotia Trust”), in its capacity as the trustee of the Johann Estate, to the Investigator and any person engaged by it, shall not be reviewable on a passing of accounts of Scotia Trust.
3While the Appointment Order appointing the Administrator entitles her to engage agents and advisors to assist in the administration of the Ida Estate and to have its fees paid for such assistance, the Administrator seeks Court approval given the disagreement amongst the beneficiaries with respect to the appointment of an Investigator. Specifically, the Administrator seeks Court approval to avoid future disputes with the siblings related to the Investigator’s mandate and the validity of KSV’s appointment.
4The Applicant Annie Mayer (“Annie”), and the Respondents Morris Rubin (“Morris”), Faigy Hammer (“Faigy”) and Sarah Werner (“Sarah”) are the children of Johann and Ida (“the beneficiaries” or “the Respondent siblings” or “the siblings”). They are the beneficiaries of their mother’s estate. Ida was the sole beneficiary of the Johann Estate. The Johann Estate remains under administration by Scotia Trust and the Ida Estate remains under administration by the Administrator.
5Annie supports the Administrator’s motion. Sarah and Morris oppose the motion. Faigy seeks to limit the terms of the appointment as does Scotia Trust. Sarah, Morris, Faigy and Scotia Trust raise many concerns about the appointment, including the cost as well as any associated delays.
6For the reasons set out below, the relief sought is granted in the hybrid form suggested by the Administrator with some terms and conditions.
Background Facts
7As Case Management judge, I am well aware of the rather tortured seven-year litigation history of this matter. However, for the sake of the record, some background is necessary to put this motion in context. The parties have agreed that I may hear this motion notwithstanding my role as Case Management judge.
8Johann died in 2004. Ida died on July 13, 2021 without a Will. Both Estates remain under administration with no significant progress due to what can only be described as prodigious acrimony amongst the Respondent siblings.
9During her lifetime and pursuant to Johann’s Will dated September 28, 1995, Ida was entitled to assets of the Johann Estate including two testamentary trusts created in Johann’s Will. Specifically, the Will created a family trust (“the Family Trust”) and a spousal trust (“the Spousal Trust”). The Family Trust property was to be invested for Ida’s maintenance, education and for the benefit of Ida and the children. The Spousal Trust property was to be invested for Ida’s maintenance, advancement and benefit.
10All four siblings as well as Johann’s brother Joseph (“Joseph”) were appointed as Estate Trustees of Johann’s Will. The Will permitted the Estate Trustees to allocate assets from the Johann Estate to either the Family or the Spousal Trust. In the event that no assets were allocated to the Family Trust within 36 months of the date of death, the Family Trust would hold $1.00 and all of the assets would be allocated to the Spousal Trust.
11The Estate Trustees allocated only nominal assets to the Family Trust. As such, most of the assets were automatically allocated to the Spousal Trust according to the terms of Johann’s Will.
12During her lifetime, Ida settled the Ida Rubin Trust (“the Ida Trust”) and appointed Ida, Morris and Sarah as trustees. The main asset of that trust was the property at 65 Regina Avenue in Toronto (now sold). Upon her death, the balance of the Ida Trust was to be distributed equally amongst the siblings.
13On January 14, 2022, I removed Morris and Sarah as the trustees of the Ida Trust and appointed Caitlin Fell as Estate Trustee without a Will of Ida’s Estate and the Succeeding Trustee of the Ida Rubin Trust (“the Administrator Order”).
14The Respondent siblings have been engaged in litigation since 2016. Annie brought an Application against Morris, Sarah, Faigy and Arsandco Investments Limited (“Arsandco”) alleging that Morris and Sarah breached their fiduciary duties as Estate Trustees and delegated their authority over the assets of the Johann Estate, amongst other relief. That litigation was precipitated by Annie’s inability to obtain an accounting or disclosure from Morris and Sarah regarding her father’s Estate.
15Annie estimates that the value of the Johann Estate is $100M CDN. However, the exact value of the Johann Estate is not known. No party has been able to independently confirm the value of the Johann Estate or the value of its originating assets.
16In her 2016 Application, Annie alleges that assets of the Johann Estate were transferred to third party companies including the Corporate Entities. Further, Annie alleges that companies owned by Johann were amalgamated by resolutions passed by Joseph, Morris and Johann’s brother-in-law Abraham Rappaport (“Abraham”) to the exclusion of the Johann Estate. Both Joseph and Abraham have since died.
17As Annie alleged that Sarah, Morris and Joseph breached their fiduciary duties while acting as Estate Trustees, she sought their removal and an accounting for the Johann Estate during their tenure as Estate Trustees. On June 6, 2017, Morris, Sarah, Ida and Annie were suspended from acting as Estate Trustees of the Johann Estate and the testamentary trusts. Scotia Trust was appointed as ETDL. Morris and Sarah were ordered to pass their accounts for the period of May 20, 2004 to June 6, 2017.
18The application to pass accounts was commenced by Morris in February 2020. Objections and a reply to those objections have been filed. No judgment has been rendered with respect to the 2020 Application, however, Morris has indicated that he is prepared to move ahead with the accounting based on the available record. Morris engaged a lawyer, Ms. Patricia Robinson, to prepare the Estate accounts. In her affidavit sworn March 22, 2023, she commented that the records of the Johann Estate were incomplete and that the value of the original assets is unknown.
19On October 3, 2018, Sarah was ordered to pass her accounts with respect to Ida’s bank accounts and to go as far back as banking records would permit. Sarah has never commenced that application.
20On October 3, 2018, Morris was ordered to provide an informal accounting of Ida’s bank accounts for all transactions over $1,000 for as far back as banking records would permit. Morris was to do so in his capacity as Ida’s Attorney for Property.
21By my order dated January 14, 2022, Morris and Sarah were ordered to pass their accounts in their capacity as trustees of the Ida Trust. No application to pass accounts has been commenced.
22On November 24, 2017, Scotia Trust was appointed as the sole Succeeding Estate Trustee of the Johann Estate and Morris, Sarah and Ida were permanently removed as Estate Trustees. Ida was exempted from passing her accounts.
23In removing Morris and Sarah as Estate Trustees of the Johann Estate by Court Order, the Court found that Morris and Sarah were in a conflict of interest and had breached their fiduciary duty by using their control over their mother’s cheque writing and the Estate’s assets to benefit themselves while punishing Annie for suing them. The Court found that Sarah had engaged in “inappropriate tactics.” The tactics between the parties over seven years of litigation have been commented on repeatedly by this Court and the Court of Appeal. Justice Myers comments in his 2017 decision that Ida was “a wealthy woman being kept minimally content while her trustees bathe in her millions.”
24The Estate Trustees of Joseph’s Estate are Ray Rubin and Anne Rubin (the “Joseph Estate Trustees”). Abraham was Johann’s brother-in-law. Joseph Rappaport, Eric Rappaport and Sharon Slansky are the Estate Trustees of Abraham’s Estate ( the “Abraham Estate Trustees”). The Abraham and Joseph Estate Trustees are only involved in this litigation because it relates in part to assets owned by the Estates of Johann, Joseph and Abraham. Their Estates each hold a beneficial interest in the Extended Family Corporations.
25Ray Rubin and Joseph Rappaport are the directors of Arsandco, Arsco Investments Limited, Duration Investments Limited, Eruv Holdings Inc. and Winter Park Realty Corp. (“the Corporations”) all of which are Extended Family Corporations.
26The Corporations hold cash and investments worth tens of millions of dollars. The most significant investment owned by the Johann Estate is an interest in Arsandco which owns a valuable commercial property on Woodbine Avenue in Toronto. The Woodbine property has over 350 rental units. Arsandco also owns other valuable properties in Toronto. Morris delegated the management of the Johann Estate’s interest in Arsandco and other family corporations to Joseph and Abraham. No accounting has ever been received with respect to that management.
27The Estates’ holdings are complicated. As a result of transfers out of the Johann Estate, it holds either directly or beneficially shares in corporations controlled by extended family members and their affiliates. The value of those holdings is unclear including what dividends or income has been generated by those holdings.
28In 2009, Gerald Taub of Robins Appleby, advised Joseph, Abraham and the Estate Trustees of Johann’s Estate to transfer ownership of properties owned by them from tenants in common to joint tenants to avoid paying probate taxes. He then recommended that the properties be transferred to Arsandco.
29At its core, the dispute is about how the Estate Trustees of Johann’s Estate conducted their administration and how Ida’s Attorney for Property managed her funds.
30Scotia Trust has not passed its accounts, taking the position that it cannot do so until there is a judgment on Sarah and Morris’ passing of accounts. No accounts have been passed in the Ida Estate.
31Scotia Trust has delivered quarterly reports to the beneficiaries since November 10, 2021. Scotia Trust has also compiled a Relativity database containing some 18,000 documents. The database is accessible by all parties.
32Prior to Ida’s death, the siblings received a total of $6,521,787 as dependants of the Johann Estate and $1,469,023 directed to their legal fees. Following Ida’s death, the siblings have received total interim distributions as beneficiaries exceeding $12M. Scotia Trust reports that the liquid assets of the Johann Estate are currently $5,575,379.
The Positions of the Parties
The Administrator
33The Administrator submits there is lack of clarity concerning the assets of the Johann Estate, assets which ought to have benefitted Ida. The Administrator cannot pass her accounts, make distributions or wind down the Ida Estate without an investigation into the Ida Estate to determine what assets should have benefitted Ida. Apart from Ms. Robinson’s accounting (which she admits is not complete), there has never been a fulsome forensic investigation of the assets of the Estates and what their value may be.
34The allegations made by Annie are, to date, unrefuted and unresolved. Those include allegations that assets of the Johann Estate were transferred to the Corporate Entities and to extended family corporations, that monies from Ida’s bank accounts disproportionately benefitted certain beneficiaries, and that loans and distributions made to some beneficiaries were made to the detriment of others. The Administrator cannot address these allegations without a forensic accounting.
35On March 29, 2022, the Court endorsed the appointment of a forensic investigator in order to facilitate settlement and finalize the outstanding passing of accounts. Despite this endorsement, the parties could not agree on the appointment of an Investigator or the form of the Investigation Order. As such, the Administrator has brought the within motion.
36The Administrator submits that the investigation is required to conduct a meaningful analysis of assets in which the Johann Estate should or had an interest, including the corporate and extended family entities. It is expected that the Investigator will need to gather certain documents, but it is conceded that many documents already exist in the Scotia Trust Relativity database, the Regina database or in Ms. Robinson’s possession, thereby avoiding any duplication of work.
37The Administrator submits there are three options for the parties at this point; appoint an Investigator, schedule a trial, or arrive at a hybrid arrangement whereby a trial date is set and the steps leading to trial and the forensic investigation proceed in tandem.
38The Administrator clarified that the appointment of the Investigator is not intended to be strictly a document gathering exercise. Much of that has already been done. If there are missing documents, the Investigator will have the authority to gather documents on its own without having to go through counsel.
39The relief sought is also not intended to be a form of Receivership in circumstances where fraud or oppression are alleged. No such allegations are made by the Administrator in this case. Rather, this investigation is intended to analyze the treatment of property that was in the Johann Estate on the date of death, what flowed out of the Johann Estate and what property in the Ida Estate should have been distributed to Ida from the Johann Estate.
40The Administrator, in her Second Report dated September 14, 2022 has detailed the intended parameters of the investigation as follows:
(a) what assets comprised the Johann Estate at the time of Johann’s death;
(b) why assets were not transferred to the Testamentary Spousal Trust if they were not allocated to the Testamentary Family Trust;
(c) whether assets of Johann Rubin were commingled with third party assets through the amalgamation of various corporate interests, and the implications of such amalgamations and commingling;
(d) what assets were transferred out of the Johann Estate and the current state and value of those assets;
(e) whether proceeds were received for any transfers of assets, where the proceeds were received, and where the proceeds are currently located;
(f) what the value of the Johann Estate is, including the assets held by the Johann Estate through various corporate entities or held by corporate entities on behalf of the Johann Estate;
(g) the historical transactions involving the assets that were or ought to have been legally or beneficially vested in the Johann Estate or to Ida Rubin as a beneficiary of the Testamentary Spousal Trust;
(h) the quantum of funds historically received by each beneficiary or from which each Beneficiary benefitted directly or indirectly;
(i) what equalization, if any, would need to occur in order to ensure that the four Beneficiaries each receive an equal portion in aggregate; and
(j) the appropriateness of payments made to professional advisors in respect of, inter alia the Amalgamation Transactions and other tax advice in light of the allegations raised in the Mayer Application.
41According to the Administrator, none of the abovementioned issues have been adequately addressed nor can they be without a proper investigation and analysis.
42Further, the investigation must apply to both Estates because they are intertwined due to the Testamentary Trusts.
43The Administrator concedes that the Administration Order provides her with the authority to engage third party professionals, such as a forensic accountant. However, given the toxic litigation history of this matter, the Administrator submits that any appointment she might make would be attacked by the parties. Any conclusions made by that accountant would likely also be attacked and as the Administrator submitted, the issues raised by Faigy Hammer would be increased tenfold if the Administrator appointed a private accountant.
44The Administrator seeks a level of protection and describes the parties as “ungovernable.” Under the Estates Act it is the Court that makes the appointment and reviews the report of the Investigator. Ultimately, the Court decides what weight to give the report. There are therefore no cost savings or other advantages in having the Administrator appoint its own expert.
45The Administrator submits that the test under s. 49(2) is met in that the accounts are complex and there are unexplained issues. For example, there are questions about estate funds being allocated to third parties and to charities. Those transfers were initiated by Morris and Sarah but may not have benefitted either Ida or the other beneficiaries. The main issue, however, is that there is no opening balance available for the Johann Estate against which can be measured any increase or decrease in the value of the Estate. As Scotia Trust will not account for any period prior to their appointment, there is no party that will undertake to account for the period between 2004-2017.
46The Administrator submits that the lack of case law in relation to s. 49(2) should not deter the Court from appointing an Investigator in this case.
47In response to the positions taken by Morris, Faigy and Sarah, the Administrator responds that pushing the parties into an adversarial process at this point is futile. The Investigator’s report can either be used as a basis for a global settlement or to narrow the issues for trial. The Administrator does not agree that it is a foregone conclusion that the parties would retain their own experts to dispute the report. As well, the Court may rely on the report to direct a narrowing of issues.
48Finally, the Administrator reminded the Court that it has no vested interest in the outcome of this motion. She is simply pursuing her court-ordered mandate.
Annie Mayer
49Annie submits that despite the extensive database created by Scotia Trust and the documents gathered by Ms. Robinson, Annie’s requests for information over the years have been responded to in a piecemeal fashion. For example, her request for an accounting of the revenue generated by the Woodbine property remains unanswered. Scotia Trust has taken the position that it will not account for rental or business income generated prior to its appointment.
50Counsel for Arsandco and the Estate Trustees of the Estates of Abraham and Joseph have refused to answer document requests from Scotia Trust claiming the documents have already been produced and that it is not their responsibility to fix the disarray in which Scotia Trust finds itself.
51Annie submits that in this case the proceedings are complex and include shares of private companies. The Investigator’s report will assist in narrowing the issues for the Court and shorten any anticipated trial. There is significant distrust amongst the siblings and only a neutral investigation will assist with settlement.
52If Scotia Trust will not involve itself in any accounting which pre-dates their appointment, there is a gap in time which cannot be filled except with the assistance of an Investigator.
53In response to Morris’ complaints that the appointment of an Investigator would be a duplication of work, Annie submits that Ms. Robinson’s work on behalf of Morris was done specifically to assist Morris with the preparation of his accounts for Johann’s Estate. Ms. Robinson is therefore not a neutral party. Further, she has not prepared a comprehensive report, she has simply gathered documents to assist her client. Annie submits that the mere fact that Ms. Robinson had to be hired to complete a limited task speaks to the complexity of the Estates as a whole.
54In response to Scotia Trust’s concern about liquidity issues and payment for the Investigator, Annie submits that Scotia Trust has failed to put any evidence before the Court to support that the Johann Estate could not pay for an expert’s report.
55Annie does not agree that setting these matters down for trial will resolve anything. She points out that the litigation brought by Scotia Trust against Robins Appleby with respect to advice given on transfers of various properties has been tolled. Annie queries whether that litigation will be heard with the other claims. Further, both Sarah and Morris have been ordered to pass accounts in the Ida Estate but there are no pleadings. The parties must know the case they have to meet. Right now, there is no clarity as to what is actually out there in terms of litigation.
56Annie remains concerned about the lack of disclosure in relation to the Johann and Joseph Estate. For example, in a memorandum from Robins Appleby to the Executors of the Johann Estate dated May 12, 2006, there is a statement that Joseph had already distributed $964,000 from the Estate and other funds as well, possibly to Ida’s Trust. These are the types of transactions for which there has not yet been an accounting. It is also unclear as to whether Joseph had renounced as Estate Trustee at that point, or was acting in a fiduciary capacity. Morris concedes in his affidavit sworn in January 2020 that he did not have much involvement with Arsandco or his father’s other assets as he left that management to Joseph and Abraham.
57Annie points to a letter to Scotia Trust from her counsel dated September 2, 2022 outlining repeated requests for information related to Arsandco. Her counsel’s position is that the quarterly reporting from Scotia Trust is insufficient and does not address some key issues such as rental income from the Woodbine property from 2004 to 2017, information about the mismanagement of Woodbine, the cost of remediation of Woodbine, investigations undertaken by Scotia Trust with respect to the various foundations that received thousands of dollars from the Estate, and why the claims against Robins Appleby and Deloitte have not been advanced amongst other enquiries. Scotia Trust takes the position that it will not provide any disclosure or accounting for any period prior to their appointment. They point to the Relativity database which is dense, disorganized and impossible for the beneficiaries to parse through. Annie suggests that the documents provided by Scotia Trust are in a state of disarray. Morris does not disagree. In his affidavit affirmed January 5, 2023, he describes the database as disorganized, duplicative and jumbled.
58According to the Investigator’s Second Report, she expects that one of the Investigator’s first steps would be to inventory the information provided to Scotia Trust. Annie agrees with the Administrator that this is not a document gathering exercise, the Investigator would primarily be involved in an analysis of the available documents.
59Annie reminds the Court that Sarah is in breach of Court Orders requiring her to pass accounts in relation to the Ida Trust and to pass accounts in relation to her bank accounts. Sarah has never commenced the required court applications for the passing of accounts. Annie refers to a portion of Myers’ J. endorsement dated September 24, 2018 which sets out as follows:
The proposed motion was a pretense to try to prevent the litigation guardian and the applicant, Ms. Werner’s sister, from tracing funds that their mother had received while she was incapacitated from the estate of their father. The funds to be accounted for were taken by Mrs. Rubin’s children including Ms. Werner. Ms. Werner’s proposed new motion made hyperbolic claims of violations of Mrs. Rubin’s privacy and Charter rights by the litigation guardian in relation to his efforts to obtain banking records to trace where Mrs. Rubin’s funds were directed (or perhaps misdirected in breach of fiduciary duty or perhaps converted) by some or all of her children.
60Annie also directed the Court to Morris’ examination on October 10, 2017. Morris was shown several cheques totalling over a million dollars. He confirmed that the funds were paid from the Estate to the Jay Rubin Foundation and other foundations which were not beneficiaries of the Estate. His evidence was vague about his involvement and in some instances he could not recall cheques for large amounts being issued. Annie points to this as evidence of the complexity of the Estate as large amounts of money from the Estate were transferred to various foundations over several years, none of whom were beneficiaries. She also points to Morris’ evidence that Sarah unilaterally transferred funds from the Johann Estate to Ida’s bank account so that she could have control over those funds. Sarah must be required to account. Her attempt to characterize a sheaf of redacted bank account statements as an accounting is beyond unacceptable.
61Annie confirms her agreement with the appointment of an Investigator and requests that costs be awarded against any party who does not agree to the appointment.
Morris Rubin and Sarah Werner
62Morris’ position is aligned with that of Sarah. They are opposed to the appointment of an Investigator and submit that this case does not need another group of professionals. What it does require is a peremptory trial date which will force the parties to work backwards and set timelines. Morris and Sarah support Faigy’s counsel’s efforts to canvass each party’s issues for trial and proceed with a Motion for Directions. Following the normal trial process will force the parties to comply with requests for productions with the Court drawing adverse inferences with respect to those who fail to cooperate.
63Morris and Sarah submit that the appointment of an Investigator will inevitably lead to more delay in this case. They estimate it will take KSV at least three months to become familiar with the case, and another 12 months after that to produce a report. If the parties decided to retain their own experts to do responding reports that will add at least another six months to the process. It seems inevitable that the Investigator’s conclusions will be attacked at trial. All of this to say that the appointment of an Investigator will simply lead to more case conferences, more disputes and an increase in challenges in an already unwieldy case.
64If the Administrator is having difficulty with document production that can be dealt with by cooperation or Court Orders. The Investigator’s enquiries will not yield any further documentary information than what is already available.
65Further, pursuant to this Court’s Order made in January 2022, the Administrator already has the authority to hire its own forensic accountant, obtain appraisals and conduct a tracing. Once a tracing exercise has been performed, an Investigator will be in no better position than an accountant hired by the Administrator. That is, the Investigator cannot draw conclusions about whether there was wrongdoing, it can only present an analysis to the Court.
66Morris has done his best, through the retention of Ms. Robinson to prepare an accounting and produce documents. He is not hiding or burying anything and has kept all parties apprised of the limits on available documents. The proper forum for this litigation is by way of a Passing of Morris and Sarah’s accounts at which time the Court may order the accounts to be passed or order a Forensic Accountant to assist. Ms. Robinson has also deposed that the appointment of an Investigator is not necessary. Both Scotia Trust and Ms. Robinson concur that there is no further information left to procure.
67Morris submits that the Administrator has not particularized what more should or could be done and has not reviewed the Arsandco documents produced to Scotia Trust. This should be a starting point for the Administrator. Further, any other documents required from the banks, Robins Appleby or Deloitte can be obtained through the Order made by Myers J. in 2019 as the Estate is the client. The Investigator will be in no better position than any other party to obtain documents given that the retention period only goes back to 2010.
68The Extended Family Corporations and directors have been cooperative. The Scotia Trust Relativity database has over 18,000 documents now available for review by all parties.
69The appointment of an Investigator is an extraordinary remedy which should be approached with caution by the Court. Such an Order should not be made based on mere suspicion, go no further than necessary and not be made if other less drastic means are available to achieve the same result.
70Further, the cost of an Investigator outweighs the potential benefits. The appointment of an Investigator is not needed to break the logjam in this case as there is no evidence that such an appointment will uncover what is already known and available. Finally, there is simply no discernable benefit to hiring an Investigator at this time.
Faigy Hammer
71Faigy does not believe that the appointment of an Investigator will bring this litigation to an end. She does not disagree that this litigation relates to accounting claims and alleged breaches of fiduciary duty nor that the litigation is mired down with ungovernable parties. Her view is that the Court should exercise caution when considering the Administrator’s request. She uses the sale of the Regina Avenue property as an example. Multiple case conferences were required to deal with the cataloguing and distribution of the contents. There is still a Landlord and Tenant Board proceeding outstanding with respect to that property.
72Annie complains that Sarah has frustrated the Court process by her failure to comply with her obligations. It is unlikely that the appointment of an Investigator will change that.
73The appointment of an Investigator will also not narrow the issues in the case because it is unlikely that all parties will accept the Investigator’s findings in any event. What is likely, is that even if an appointment is made, the parties will continue to fight over the Investigator’s mandate, access to information, work product and fees. If the parties were acting rationally, perhaps the Investigator’s report could be used as a platform to narrow issues. However, some of these parties do not have a history of acting rationally. The appointment of an Investigator will simply open up another battleground for skirmishes between the parties.
74Faigy is aligned with Morris in her belief that the appointment of an Investigator will delay this litigation for another six to twelve months and may result in the parties obtaining their own responding expert’s reports which would result in further delay.
75There are already two Court officers appointed in this matter and there has already been significant correspondence and miscommunication between them. Adding another Court Officer would be ineffectual.
76Faigy submits that the Investigator will not assist with the settlement of this matter. That would not be part of KSV’s mandate. After 6.5 years of litigation, the parties are no closer to settlement. An Investigator cannot assist with the significant mistrust which exists between these parties.
77Faigy requests that the motion be dismissed, a peremptory date set for Faigy’s motion for directions and the Court direct the parties to confer on the issues for trial in order to present a timetable at the motion for directions. The trial process will lead to the answers the parties need. For example, Mr. Bloom provides excerpts from Morris’ cross-examination with what could be characterized as unsatisfactory evidence. Morris can be cross-examined at trial on those same issues and the presiding judge can draw his or her own conclusions. The pleadings can be regularized quite easily. All four accounting applications and Sarah’s litigation can be combined into one hearing which deals with the core issues in this case; where the money went, whether it was improperly distributed and where the money is now.
Scotia Trust
78While Scotia Trust does not oppose the appointment of an Investigator, it does not consent to the appointment due to the clear dissension between the beneficiaries. Further, Scotia Trust expresses a concern that the mandate of the Investigator sought by the Administrator makes all of its actions since its appointment in June 2017 reviewable by the Investigator. The investigation should not be permitted to turn into an informal passing of accounts of Scotia Trust as the Estate Trustee. Therefore, Scotia Trust’s position is that if an Investigator is appointed, the investigation should be limited to the period of May 20, 2004 to June 5, 2017.
79Scotia Trust is also concerned that the Johann Estate is being asked to fund the cost of an Investigator. Further, if the purpose of appointing an Investigator is to force Sarah to properly account, there are other means of achieving that objective.
80Scotia Trust submits that if the Investigator finds that Ida was owed another $1M in income, the beneficiaries are the same so that accounting exercise will make no difference to the bottom line.
81Scotia Trust is aware that the beneficiaries intend to seek another interim distribution. They have already each received approximately $3.5M. Scotia Trust requests that there be no further distributions until trial and that the parties be required to pay their own legal fees. Up until now, the beneficiaries have received interim distributions plus a further distribution for legal fees. Scotia Trust submits that this has enabled the parties with respect to their continuing legal conflicts.
The Non-Parties
82The Joseph and Abraham Estate Trustees do not take a position as to whether the Investigator should be appointed. However, in the event that the Court does make such an appointment, they will object to the Investigator looking behind the Extended Family Corporations or into the Joseph and Abraham Estates and specifically into assets owned solely by those Estates.
83The non-parties take the position that the Administrator is effectively seeking pre-action discovery in the form of a Norwich Order, a remedy which must be exercised with caution. The Administrator has not met the necessary test to obtain pre-action discovery.
84The Joseph and Abraham Estate Trustees have fully cooperated with Scotia Trust and produced all documents in their power, possession and control as requested. This has been done at significant expense to the Joseph and Abraham Estates, for which they have not been reimbursed.
85The documents produced to Scotia Trust have been placed in their Relativity database and are accessible to all parties to the litigation. The documents do not reveal any wrongdoing on the part of the Joseph or Abraham Estates or the directors of the Extended Family Corporations. The third parties have complied with all reasonable disclosure requests.
86It appears that there has not been any in depth review of the documents produced by the third parties, in the Relativity database or the database from documents retrieved from the Regina property. The third parties take no position on who should do that review or analysis.
Analysis
87This is a motion brought pursuant to s. 49(2) of the Estates Act, requesting an appointment under s. 49(10) of the Estates Act. Those sections are reproduced below:
Powers of judge on passing accounts
(2) The judge, on passing the accounts of an executor, administrator or trustee under a will of which the trustee is an executor, has jurisdiction to enter into and make full inquiry and accounting of and concerning the whole property that the deceased was possessed of or entitled to, and its administration and disbursement. R.S.O. 1990, c. E.21, s. 49 (2).
(3) The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal. [emphasis added].
Appointment of expert on examination of accounts
(10) Where accounts submitted to the judge of the Superior Court of Justice are of an intricate or complicated character and in the judge’s opinion require expert investigation, the judge may appoint an accountant or other skilled person to investigate and to assist him or her in auditing the accounts. R.S.O. 1990, c. E.21, s. 49 (10); 2006, c. 19, Sched. C, s. 1 (1).
88It is clear from the wording of s. 49(10) that any report produced by the Investigator would be an expert report for the Court’s purposes as opposed to an expert report offered by one of the parties. As such, the Court has the authority to decide what weight the report is to be given and to accept or reject any portion of the report. The objectivity of the Investigator is key in this case given the discord amongst the beneficiaries. The Investigator will provide the Court with a much-needed unbiased analysis.
89The Court also has the power to appoint an Investigator pursuant to s. 161 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. While that provision relates to a request by “a registered holder or a beneficial owner of a security”, the test for the appropriateness of appointing an Investigator is analogous as per Khavari v. Mizrahi, 2016 ONSC 4934, 61 B.L.R. (5th) 313, at para. 41:
[41] The third part of the test, consideration of the appropriateness of appointing an inspector, arises from both the fact that the remedy is discretionary and that it is an extraordinary remedy. In considering the issue of appropriateness, the courts have had regard to a number of factors, including:
a) Whether the applicant needs access to the information;
b) Whether there are better less expensive means to acquire the information;
c) Whether the proposed investigation would give a tactical advantage to the applicant; and
d) The expense of the investigation as compared to the benefits.
90The possibility of appointing an Investigator was raised by the Administrator in early 2022 as a way to break the logjam amongst the parties and provide a proper report and most importantly, an analysis, of the accounting of the Estates. In my endorsement of March 29, 2022, I stated as follows:
Ms. Fell has suggested, and counsel agree, that a forensic accountant should be appointed to do a forensic investigation related to the outstanding Passing of Accounts. It is hoped that the report can be used to further settlement and to assist in finalizing the three outstanding Passing of Accounts. I have invited Ms. Fell to provide me with an Order appointing the forensic accountant.
91Since the date of that endorsement, the parties’ positions have changed. Three of the parties no longer agree to the suggested appointment. Morris, Sarah and Faigy have expressed concern that the appointment of a further Court Officer (there are already two; the Administrator and Scotia Trust as Succeeding Estate Trustee) will not assist with any resolution. Their position is that such an appointment will only lead to more cost and delay.
92Appointing a forensic investigation in a passing of accounts is not unique. In Jones v. Warbick, 2019 ONSC 88, 44 E.T.R. (4th) 243, the Court dealt with a case in which a previous judge refused to approve the accounts and appointed a forensic accountant to review and report to the Court on the Estate accounts (at para. 13). A timetable was set with respect to the preparation of the report and the parties’ responses to it. The accountant was paid from Estate funds at first instance with a final determination as to apportionment of fees left to the judge hearing the application.
93Of interest in that case is that a portion of the report was dedicated to determining amounts paid from and to the Estate by beneficiaries. The “Beneficiary Equity Accounts” tracked amounts paid to beneficiaries and those in dispute were dealt with individually by the Court. The accountant’s evidence was given at the hearing as a court-appointed expert. The Court accepted the form and substance of the expert accounting report. The accounts were passed. In doing so the Court noted at para. 33 that the forensic accountant’s report was “invaluable” to the parties and to the Court in understanding what happened to the Estate assets. I note that in Warbick, the Estate holdings were less complex than in this case, being made up of two pieces of real estate which had already been sold and no corporate holdings.
94In the case at bar, one of the requests which has repeatedly been made by Annie is for an analysis of amounts received by the beneficiaries such that an equalization calculation can be made. Based on the evidence available it appears that funds flowed through the Johann Estate to the Ida Spousal Trust and were deposited in Ida’s bank account. From there, Morris, Sarah and Faigy distributed funds as they saw fit as they had signing authority on the account. In large part it appeared that Sarah was making the decisions about those funds although I do not make a finding in that regard.
95This equalization exercise, similar to the Beneficiary Equity Account calculations done by the accountant in Jones is necessary to put to an end to the ongoing allegations and denials about what happened to Ida’s income entitlements during her lifetime and whether any beneficiary improperly profited from those entitlements or received a disproportionate share of them. It is this Court’s view that an Investigator can efficiently and impartially complete that exercise. I do not agree with Scotia Trust’s submission that it is all a wash because the beneficiaries of the Trust and the Estate are the same. The key here is that some beneficiaries may receive far more/less than others once an equalization accounting has taken place, a request that Annie has been making for years.
96In Estate of Paul Penna, 2010 ONSC 6993, a forensic accountant was appointed. The Estate paid the entire cost of $143,000. The accountant uncovered a massive fraud which led to the removal of all of the Estate Trustees. One of the Estate Trustees was found to have used Estate funds to buy and renovate a large home in Forest Hill. The Court vested title to the home in the ETDL. While fraud is not alleged in the case at bar, there are allegations that large amounts of Estate funds were paid to charitable foundations which were not beneficiaries and without the consent of all beneficiaries.
97The duties of Estate Trustees and Trustees are clear in law. Trustees must act honestly and with a reasonable level of skill and prudence, they must not delegate their office to another and they cannot profit personally from their dealings with trust property or the beneficiaries (see Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, [2018] 1 S.C.R. 224, at para. 17). Breaches of these obligations are what have been alleged by Annie with respect to both the Johann and the Ida Estates and the Ida Trust.
98In Cahill v. Cahill, 2016 ONCA 962, 26 E.T.R. (4th) 207, the Court of Appeal for Ontario dealt with a case in which a Will designated that a trust be set up for one of the deceased’s children ($100,000) and that $500 per month be paid to that child. The trust fund was never set up, a few payments were made and then the payments stopped. One of the Estate Trustees used the balance to fund a mortgage for his business. The funds were lost in an enforcement proceeding. The trial judge found that both Estate Trustees were liable to repay the balance of the fund to their brother. The Estate Trustee who was not involved in the payments to her brother (“Sheila”) appealed the trial judgment claiming that she should not be liable for any losses suffered by her brother.
99The Court of Appeal upheld the trial judgment with several important findings. First, the Court of Appeal found that a trust fund was never established, second the Court upheld Sheila’s liability claiming she had abdicated her responsibilities for setting up and administering the trust fund to her brother and finally the Court found that although Sheila did not act dishonestly, she did not act reasonably in failing to fulfill her duties as an Estate Trustee.
100Many of the allegations in the case at bar go to the issues raised in Cahill including the allegations related to the conduct of Morris and Sarah as Estate Trustees of the Johann Estate and as Trustees of the Ida Trust.
101The Investigator would also have the critical authority to investigate the Corporate Entities including the Extended Family Corporations. This is essential given that the Johann Estate has direct or indirect interests in those holdings which should have formed part of the Ida Property. The Administrator submits, and I accept, that there is no intention that the Investigator interfere with the business or financial affairs of the extended family. The scope of the Investigator in the Administrator’s proposed Order is defined as narrowly as possible. Leaving out the Extended Family Corporations from the investigation would result in an incomplete report.
102There are complaints by Morris and Sarah about the cost of the Investigator. I note that Ms. Robinson has been paid $316,898 to date and Morris has still not passed his accounts. The cost of the Investigator can be paid for from the Estates with a redistribution of costs by the judge hearing the applications. While there is no doubt the cost of the investigation will be high, it is the only way to move forward in this Court’s opinion.
103Given all of the above, I grant the relief sought by the Administrator for the following reasons:
a. This is a complex matter involving the tracing of assets between two Estates. While document production has taken place, there is no analysis of the available documents.
b. It is this Court’s sincere hope that the Investigator’s report will narrow the issues for what will inevitably be a trial of at least 30 days in length.
c. There is dysfunction and mistrust between the beneficiaries. A neutral expert providing a neutral report, supervised by the Court, is the only way forward in terms of making sense of these matters and providing a neutral playing field.
d. Scotia Trust will not seek documents or perform any analysis for the period prior to its appointment in 2017. That gap in essential information must be filled.
e. While the beneficiaries take the position that the majority of them (Faigy, Morris and Sarah) are against the appointment of an Investigator, the Court does not view this matter with the same lens. The very parties who have been subject of allegations of breaches of their fiduciary duty (Morris and Sarah) are the parties most strenuously objecting. Based on previous comments made by this Court (in particular those of Myers J.), the Court is concerned that Morris and Sarah have the least to gain by an in-depth analysis of their past management of Estate assets. Faigy’s protests relate more to wanting the litigation to end. A laudable concern but not one which will accomplish the end goal.
104I also wish to deal with the issue of Sarah’s Passing of Accounts, legal fees and distributions moving forward, taking into account Scotia Trust’s view of that situation. These issues must be dealt to ensure the Investigator can properly do its job and the case does not continue to be mired in never ending conferences.
105Sarah has not passed her account or put them into proper Court form. In the examination of Ms. Fell, Sarah’s counsel suggested that “the formalist aspects of the order [to pass accounts] should be overlooked, and the substance, the meat and potatoes of the accounts should be looked at” (page 28 of the transcript). That suggestion is not accepted by this Court. Sarah has provided hundreds of pages of redacted accounts which, respectfully, speak to nothing. Without being put into proper Court form such that objections can be filed, and sense made of the documents, what she has produced is meaningless. Sarah must, therefore, be required to put her accounts into proper order within a very short time frame so that objections may be filed and responded to for review by the Investigator.
106Further, the endless spats between these parties must have cost consequences that are real. I agree with Scotia Trust that the only way to bring this home to the parties is by way of financial consequence. As such, no further distributions to beneficiaries for legal fees will take place until this matter is either settled or heard. Further, when a Case Conference is requested, there will be costs consequences determined by me at the conclusion of each conference (the Administrator is excepted from this consequence). This will hopefully give the parties pause before they return to Court to squabble over minor issues.
107As Case Management judge, I provide below further specific directions to respond to the concerns of Faigy and Morris with respect to this matter moving forward.
Orders and Costs
108The draft Order of the Administrator is acceptable to the Court but must be amended to reflect this Court’s further directions as set out below.
a. The Investigator’s Report shall be available for review by the Court and the parties by December 31, 2023. If required, the Investigator’s counsel may apply to me as Case Management judge for further directions.
b. Any party who wishes to file a responding expert’s report must give notice of its intention to do so by January 31, 2024.
c. Any responding experts’ report(s) are due by March 31, 2024.
d. With respect to Annie’s 2016 Application, any party who has not filed a responding record must do so by September 30, 2023, failing which they will not be permitted to present any defence evidence to that Application at the ultimate hearing of this matter.
e. The tolling of the claims commenced by Scotia Trust shall end as of July 31, 2023. Defences/Responding Records to those claims are due by September 30, 2023 without exception. A copy of the claims and defences are to be provided to all parties and the Administrator and Investigator.
f. Sarah is required to issue an Application to Pass Accounts pursuant to Chiapetta’s J. Order dated October 3, 2018 by August 31, 2023. The accounts must be in proper Court form. Objections to those accounts must be filed by September 30, 2023 and any reply to those Objections by October 31, 2023. Sarah may not apply for or receive any distribution from either Estate until the abovementioned schedule is complete. All accounting, pleadings and documents must be shared with the Administrator and the Investigator.
g. Morris and Sarah are to commence an Application to Pass Accounts with respect to the Ida Rubin Trust by August 31, 2023. The accounts must be in proper Court form. Objections to those accounts must be filed by September 30, 2023 and any reply to those Objections by October 31, 2023. Neither Sarah nor Morris may apply for or receive any distribution from either Estate until the abovementioned schedule is completed. All accounting, pleadings and documents must be shared with the Administrator and the Investigator.
h. If there are any further steps to be taken in Court File 02-006/20 – the Johann Estate Passing of Accounts (commenced by Morris), those steps are to be taken by July 31, 2023 such that the matter is ready for a hearing (other than examinations if outstanding).
i. Once the Investigator’s Report is available, the parties are to return for a two-hour Case Conference before me in January 2024 to set a litigation timetable. I have directed the Trial Coordinator to set aside four trial weeks commencing September 30, 2024.
Costs
109The Administrator sought costs at the conclusion of the hearing but had not put the parties on notice that it would be doing so. The Administrator sought costs from those parties who opposed the appointment of an Investigator.
110Those parties who opposed the appointment were reasonable in their approach which was more aligned with finding an efficient solution to the current problem than opposition to the relief sought.
111As such, the parties shall be responsible for their own costs other than the Court-appointed officers who shall be indemnified for their costs by the Estates. A review of the Administrator’s Bill of Costs, however, gives the Court pause with respect to the amounts sought. As such, both the Administrator and Scotia Trust may provide written submissions on costs not exceeding three pages and due 10 days following the release of this decision. The costs submissions may be uploaded to Caselines.
C. Gilmore, J.
Date: July 18, 2023