Ontario Superior Court of Justice

Court File No.: CV-22-00692275-00ES and CV-22-00692287-00ES
Date: 2025-02-21

Re: In the Estate of Joan R. McAteer (also known as Joan Rita McAteer), deceased.
In the Estate of John J. McAteer (also known as John Joseph McAteer), deceased.

Before: Frederick L. Myers

Counsel:
Gregory M. Sidlofsky, for the Applicant John J. McAteer
Eddy Battiston, for the Respondents Susan Bird, Linda McAteer and Richard McAteer, in their personal capacity; Susan Bird and Bonnie Hunt, as co-Estate Trustees of the Estate of David McAteer; Susan Bird and Linda McAteer, in their capacities as co-attorneys for property for Joan R. McAteer, and co-Estate Trustees of the Estate of Joan R. McAteer

Heard: 2025-02-20

Endorsement

Introduction

[1] John McAteer has objected to applications by the respondents to pass their accounts as estate trustees for the estates of their late father and mother. Although the respondents formally held various roles individually, for the purposes of this proceeding, both counsel dealt with them as a collective group. I do so for convenience below.

[2] After the parties’ father died, the respondents acted as attorneys for property under powers of attorney for their incapacitated mother until she passed away. The applicant seeks to have the respondents account for the period in which they acted as attorneys for property for their mother while she was alive.

[3] The respondents also seek directions concerning a proposed interim distribution. Both sides also seek directions on the terms or scope of mediation.

Production of Corporate Documents by Attorneys for Property for the Mother

[4] The parties disagree about whether the applicant ought to be entitled to production of documents concerning the period for which he seeks an accounting. The respondents particularly object to production of documents concerning the affairs of corporations in which the mother held interests and about various transactions that were conducted by those corporations under the respondents’ charge before the mother passed away.

[5] I am very concerned about proportionality and the risk that accounting inquiries can amount to expensive fishing expeditions. The applicant does not yet have leave to require the respondents to pass their accounts for the time when they acted under powers of attorney. Leave is required under s. 42(4)6 of the Substitute Decisions Act, 1992, SO 1992, c 30.

[6] I am also sympathetic to the possibility that the respondents might have complete answers to the request for leave.

[7] The overarching principle, however, is that people who act as personal representatives, as fiduciaries, are accountable to the penny. The only way to hold them to account and to protect the vulnerable people under their charge is through transparency. To paraphrase Justice Brandeis, “Sunlight disinfects.” [1]

[8] Mr. Battiston makes several submissions that are impactful. The applicant may be barred from this claim by a release that he signed. This application may be an after-thought. The applicant seemingly did not complain when he was paid millions of dollars and signed on to the transactions that he now questions. The application may be an abuse of process if it was brought too late or if it overlaps with the applicant’s separate oppression remedy claim involving the management and affairs of the most significant corporation in which the parents had interests.

[9] But the respondents have not moved to dismiss the application on any of these grounds. Rather, these points, and others, are really responses to the applicant’s request for leave to proceed or defences to an accounting if ordered. If I thought there was a narrow issue of law that could end the application without spending a lot of time and effort on production and discovery or without being drawn into an analysis of the merits, I might have considered scheduling a quick motion. But none of the grounds raised by Mr. Battiston really stand on their own apart from an assessment of the merits. A motion would then become just another expensive battleground with the same production and discovery issues as are raised before me now.

[10] Not every case can be resolved summarily. Accountings are notoriously fact heavy. I accept that they are expensive if opposed. I do not agree with Mr. Battiston however when he submits that there should be an initial evidentiary threshold to be met by the applicant before he can call on the other beneficiaries to bear the cost of the production exercise. First, this would reverse the burden on the fiduciaries to account transparently. In addition, the leave requirement in the statute already functions as a screening device. An additional screen is not needed. Furthermore, the court can always consider the proportionality of a production request without an initial assessment on the merits.

[11] I do not agree with Mr. Sidlofsky that an accounting by the attorneys for property is necessarily required to complete the accounting of the two estates. Each estate received assets and liabilities and dealt with what they received. Here, the issues raised deal with the interregnum during which the estate trustees functioned as attorneys for property before their mother’s death. The accounting for the father’s estate will end before the issues with the attorneys for property begin. The issue for the attorneys for property is what did they do with the assets they received from the father’s estate. That does not help with the accounting for their prior duties on behalf of the father’s estate. There is a stronger argument that it would be instructive or helpful to the judge to see the full continuum to understand the opening position of the mother’s estate. I am not sure that this is needed to account for the mother’s estate. But I can see where at least some information about what happened before the mother passed away would be helpful. That may just require some information. It does not compel an accounting by the attorneys for property for the mother.

[12] It may be that at the end of the day, the court completely agrees with respondents and finds that the entire process or elements of it were unnecessary or even abusive. The fact that another beneficiary has already passed away before receiving the funds his parents wanted him to have is a sad reflection of the ongoing dispute. If it turns out that there is no substance to the applicant’s allegations, I would expect the respondents to ask the court to penalize him in costs to keep others affected by this litigation as close to whole as possible.

[13] But indemnity for legal costs will not heal lost time or injured feelings. It is up to the respondents to assess whether the non-monetary costs of the proceeding are a greater detriment to them than the monetary costs of settling. A judge cannot know or fix the emotional impact of a family dispute. Only the parties can assess whether it is better to pay some money to end the case rather than suffering the non-monetary costs and harm of continuing to litigate. Parties can criticize the legal system for being slow and expensive. But if they are unwilling to pay or take what the other side offers to settle, then they are deciding that the non-monetary costs and harm does not outweigh the priority they put on the money. This is not a criticism of anyone’s position. It is a simple recognition of the cost-benefit analysis that every civil litigant undergoes. Every case can settle. If you don’t want to pay or take what is offered by the other side, that is a choice to prefer incurring the systemic cost, delay, and non-monetary harms of the ongoing proceeding.

[14] Looking at the refusals chart prepared by the parties, I find that all of the documents sought are relevant and must be provided with the exception of item No. 2. Counsel has represented in writing that the unsigned copy of the form sought in No. 2 is identical to the filed version. I take counsel at their word unless there is very good reason not to do so. All counsel understand how serious it would be if they were later found to have made a misrepresentation to the other side or to the court.

[15] The documents sought are all part and parcel of a proper accounting by legal representatives who control corporations as fiduciaries for their principals. I agree with Mr. Sidlofsky that fiduciaries who manage corporations on behalf of a principal are always acting in that capacity and cannot rely upon the corporate personality of the corporation to avoid accountability.

[16] The fact that the documents may overlap with production sought in the applicant’s oppression remedy proceeding could actually reduce the cost and inconvenience of finding and producing them. That is, were the respondents already producing in the oppression application the documents sought in this case, the documents would be sitting available to them in files (or e-files) without much cost or effort to locate them.

[17] But, as I understand the state of play in the oppression proceeding, the scope of production is not yet finalized. So, there is not much duplication of effort now.

[18] In any event, under Rule 31.1 of the Rules of Civil Procedure, RRO 1990, Reg 194 and the common law “implied undertaking of confidentiality” documents produced in one legal proceeding cannot be used in another legal proceeding. The promise of confidentiality protects the privacy of litigants who are compelled by law to produce their confidential documents in the litigation. Mr. Battiston did not respond to Mr. Sidlofsky’s invitation to waive the confidentiality obligation that prevents Mr. Sidlofsky from using in this proceeding documents that the respondents may produce in the oppression proceeding. The applicant therefore has no practical choice but to seek the same documents in both proceedings if they are relevant to the issues in both.

[19] Mr. Battiston criticizes the applicant’s requests for production by “corporations” because the applicant does not specifically identify which corporation’s records are sought. The information about what the respondents did as attorneys for property is in their hands. The corporations involved are all corporations in which the father’s estate or the mother had an interest. Any transactions that were conducted affected the mother’s financial interests (whether her assets, liabilities, revenue or expenses, past, current or future, whether opportunities or existing). Everything they touched as attorneys for property for their mother is relevant to the accounting sought.

[20] Accountability is the price of undertaking a fiduciary position. Attorneys for property must be prepared to account for their activities to show that they acted solely in the best interest of their principal and that they engaged in no self-dealing or conflicts of interest in violation of their fiduciary duties. This may sound onerous; but it is necessary. Moreover, it is not so onerous. In the ordinary course attorneys for property are indemnified for any professional assistance that they require to help them account. They can also seek compensation for the time they spend on their duties in most cases. The law protects them and values their willingness to devote their selfless efforts to protect a vulnerable person. But it also insists on strict performance including transparent accountability.

[21] I do not accept as a matter of law or fact that documents are not available just because a corporation has been sold. Parties are required to produce everything in their possession, power, or control. While parties may have no visibility into a corporation after it has been sold, that does not say anything about what records they already have in their files, on their computers, or with their accountants or other professionals. It is common, for example, for former directors to keep copies of financial statements and tax returns to protect themselves from liability in case the buyer or the taxman comes knocking in future. Case law is clear that production obligations trump contractual confidentiality clauses barring extreme cases like trade secrets. So, even if, in selling corporations, the respondents agreed to keep historical corporate information confidential, that obligation is subject to production obligations required by law.

[22] I would want to see evidence of due diligence and very best efforts to search for documents before accepting as a fact that a party has no documents for a business he, she, or it sold.

[23] Similarly, I do not accept that the applicant is limited to receiving only audited financial statements for corporations where they exist. Passing accounts involves an assessment of receipts and disbursements, relating both to capital and revenue transactions. Audited financial statements do not necessarily (or usually) include that level of detail. Barring precedents to the contrary, of which I am unaware, I agree with Mr. Sidlofsky that the same documents as are routinely required to be produced by an estate trustee to provide a full accounting for an estate of a deceased person (including bank statements and transaction details) ought to be required where a corporation is being managed by a fiduciary who may be required to account.

[24] Had there been evidence to suggest that the applicant’s concerns might have been satisfied by the review of a less significant swath of documents, I might have tried to stage or limit production to try to save time and money. But I do not have that type of evidence here and I do not think it is available. Rather, what is sought is not yet too granular and is sensible and normal for a passing of accounts.

Directions for an Interim Distribution and Mediation

[25] The respondents also ask the court to approve an interim distribution of $1 million to each beneficiary. They propose to set off against this interim distribution amounts claimed by the estate from each beneficiary. That will wipe out the proposed distribution to the applicant.

[26] The applicant concedes that he owes $350,000 claimed by the respondents (without the $25,000 in additional unparticularized interest) and a further $34,000 in relation to a car loan. But he denies that he owes a further $500,000 (approximately) claimed by the estate trustees related to a loan from the deceased father to the applicant.

[27] The applicant says that his father forgave the loan before he died. He points to the fact that the mortgage given to secure the loan was discharged long ago. In addition, he says that the loan was not shown as an asset of the father’s estate in its original listing. This suggests that the loan was not shown in the father’s books and records as being an outstanding claim at the time of his death.

[28] The respondents counter that the father was meticulous in recording loans to his children to ensure that each child’s accounts would be equalized on his death. There is no record of this loan being forgiven.

[29] As there is at least a contested issue about the loan, the respondents ask to hold the $500,000 in trust pending the outcome of their claim on the loan.

[30] The applicant submits that the respondents are seeking execution before judgement. They have not brought a claim on the loan on behalf of the father’s estate. The applicant says a lawsuit is statute barred. In any event, there is no evidence that the loan, if it is due, cannot conveniently be withheld from a later distribution by the estate. It is too convenient that the respondents chose a quantum for an interim distribution that almost exactly matches what they claim from him.

[31] I am not prepared to rule summarily in the absence of evidence and argument about whether the estate trustees ought to be entitled to withhold the amount claimed in a proposed multi-million-dollar distribution. Instead, they can find a way to agree with the applicant in the mutual interest of all of them; or they can exercise their business judgement as they see fit and run the risk of doing so; or they can incur the cost and delay of coming to the court on proper material to allow a decision to be made on the merits in a fair process. I have no evidence on the facts in dispute. I have no law on which limitation period is applicable. As the loan was apparently secured by a mortgage, might the 10-year real property limitation period apply? I have no law on whether a debt that is statute-barred can still be enforced by estate trustees through the self-help remedy of setoff. I have no way to assess the strength of the claim to the debt; or the financial ability of the estate to pay now and set off against later distributions; or the financial ability of the applicant to repay such a significant sum if he receives it and it is found later that he does owe the debt.

[32] Similarly, I am not going to order these parties into mediation when they disagree about the scope of what is to be covered in the process. Moreover, I agree with Mr. Sidlofsky that a mediation before he has production to which his client is entitled is not optimal for success (unless the respondents are willing to pay to avoid disclosure and I see no indication of that.)

[33] These parties do not appear to be in settlement mode yet. When both sides are ready to talk, they can do so without anyone’s intervention. If they want a judge engaged, they can always convene a case conference under Rule 50.13.

Outcome

[34] The parties are to agree on an order that gives the respondents no more than 45 days to collect and produce the relevant documents as ordered and then sets a schedule for the remaining proceedings. All the passings of accounts (including the request for leave) should be heard together or one after the other with common processes leading to the hearing. Oral examinations (either for discovery or cross-examinations) are needed. Then will there be a hearing on the record or a trial? Usually, it is sensible to try to have the matter heard on the record leaving open the possibility that the judge orders a trial of one or more issues under Rule 38.10 if necessary. But oral evidence is also very normal for a passing of accounts. Perhaps a hybrid trial with affidavits standing as evidence in chief will work.

[35] I direct counsel to meet by phone, videoconference, or, preferably, in person, to try to work through procedural issues to schedule these applications for the earliest resolution that is fair to all. The parties are reminded that in Ontario, their lawyers are required to cooperate on procedural and scheduling matters to try to ensure a fair hearing for everyone. Sending emails loaded with tone and copied to clients is not a useful way to cooperate. Clients have minimal input on scheduling matters. Scheduling issues are generally dealt with cooperatively between and among the lawyers and the court.

[36] If the parties cannot agree on a schedule by March 7, 2025 either can arrange an early case conference with me through my Judicial Assistant. In that case, the order should simply compel the production of documents as sought (except #2 on the chart) within 45 days of today and dismiss without prejudice the requests for approval of an interim distribution and orders concerning mediation.

Frederick L. Myers
Date: 2025-02-21

Footnotes

[1] "Brandeis and the History of Transparency," Sunlight Foundation:
“If the broad light of day could be let in upon men’s actions, it would purify them as the sun disinfects.”