Jacobelli v. Scanga et al, 2025 ONSC 2248
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Mirella Jacobelli, Plaintiff AND
Andy Scanga, Nino Scanga, and F&A Scanga Holdings Limited, Defendants
BEFORE: C. M. Smith J.
COUNSEL: Dr. Aldo Forgione, Counsel for the Plaintiff Mr. Graeme Oddy, Counsel for the Defendants
HEARD: January 13, 2025
ENDORSEMENT ON PLAINTIFF'S MOTION
NATURE OF THE ACTION
1The plaintiff, Mirella Jacobelli, and the two individual defendants, Andy and Nino Scanga, are siblings. They are the three named beneficiaries of the estate of their late mother, Adelina Scanga, who died in 2010. They are also the three directors of the defendant corporation, F & A Scanga Holdings Limited ("the corporation").
2The plaintiff commenced this action in 2023. She claims the individual defendants have mismanaged and misappropriated the estate's assets, that they have embezzled funds from the corporation, and they have failed to pay dividends, reimbursements and other monies owing to the plaintiff from May 2010. The plaintiff therefore claims the individual defendants have disadvantaged her in her rights as both a residual beneficiary of the estate and as a minority shareholder of the corporation.
3The plaintiff brings a motion for a range of relief including the following:
An order requiring the defendants to produce a further and better Affidavit of Documents which provides full and complete disclosure of all documents, accounts, and instruments related both to the estate of Adelina Scanga and to the corporation.
An order directing the individual defendants, in their capacity as co-executors and trustees of the estate of Adelina Scanga, to forthwith file with the court a statement setting out the nature and value, as of the date of Adelina Scanga's death, of each of the assets of the estate.
An order directing the defendants, in their capacity as co-executors and trustees of the estate, to immediately pass accounts for the estate, including full disclosure of all financial transactions and the administration of the estate's assets.
An order compelling the defendants to provide full financial disclosure regarding the corporation, including but not limited to all financial statements, tax returns, and corporate records for the period between 2010 and the present date.
An order restricting the two individual defendants from taking further monies or assets from the corporation until such time as they have filed a complete accounting of all monies, payments, reimbursements, and other benefits received by them from the corporation between 2010 and the date of the hearing.
FACTUAL BACKGROUND OF THE MATTER
4At the time of her death, Adelina Scanga was the sole shareholder in the corporation. Her holdings consisted of 24,610 preference shares. She also owned the residential property known municipally as 10 McGregor Dr. Ajax, Ontario. She was also the owner of a mutual fund investment account worth approximately $40,000, and of a chequing account with approximately
$56,000 on deposit.
5The three siblings were also the beneficiaries of a last to die life insurance policy held by their mother in the amount of $300,000 which netted each of the siblings $100,084.93.
6Both Andy and Nino Scanga were the trustees named in the will, with Ms Jacobelli being the alternate trustee in the event either of the two brothers did not wish to act. The two brothers applied for and received a Certificate of Appointment of a Estate Trustee With a Will in respect of the estate of their deceased mother. The affidavit material filed by the defendant, Nino Scanga, reveals the assets of the estate, in particular the shares in the corporation and the amounts on deposit in the deceased's mutual fund and chequing accounts, were distributed in three equal shares to the three beneficiaries sometime during 2011. The administration of the estate was finalized in 2012.
7At that time the defendants Nino and Andy Scanga decided they wished to reside in the home on McGregor Drive owned by their deceased mother. They obtained some comparable values from neighborhood houses from which they concluded the sum of $377,400 represented the fair market value of the home in question. In 2011 the plaintiff agreed to sell her ownership interest in that home to her brothers for one third of that amount, being the sum of $125,800.
8At that time the plaintiff appeared to be content with the manner in which the residue of her mother's estate was handled and distributed by her brothers. Indeed, with respect to the contents of the McGregor Drive home the plaintiff was content to leave the furnishings there for
use by her brothers since they were going to reside in that property. There were also some other residual chattels such as jewelry and other personal property of the deceased. The evidence suggests bequests involving the jewelry were in fact made to the deceased's grandchildren. There is no evidence tending to suggest the plaintiff ever asked for or sought any of those other personal chattels of her mother, at least not until the commencement of this action.
9The primary business of the corporation relates to the management of its main asset which is a commercial property located in Ajax. The property is thought to be worth something in the order of $6,000,000. The defendant brothers manage the day-to-day affairs of the corporation for which they receive what appear to be relatively modest salaries.
10The plaintiff was content to leave the day-to-day management of the corporation to her two brothers from the time of the death of her mother until 2021 when it was learned the two brothers were contemplating sale of the main asset of the corporation as they wish to wind down their business activities. During that time the plaintiff received annual income from the corporation based on her share holdings. Those annual payments ranged from a low of $25,900 to a high of $35,500. In total the plaintiff received $385,236.70 during those years.
11The individual defendants met with the plaintiff each year during that time frame and afforded her an opportunity to review the annual company financial statements in the event she wished to do so. The plaintiff also signed the audit exemption form annually during that eleven year period.
ANALYSIS
12I will address each of the orders sought by the plaintiff in the order they are set out above.
1. A further and better affidavit of documents
13The plaintiff contends the affidavit of documents provided by the defendants fails to include a number of documents which she feels are relevant to the issues in this action. In her factum she has provided a list of the documents she seeks. I will deal with each in tum.
(i) Corporate income tax returns of the corporation for the period 2010 through 2022
14The affidavit of documents of the defendants includes the annual financial statements of the corporation for the years 2010 through 2023. While I am unclear about what the tax returns of the corporations will reveal that is not already revealed in the financial statements, Rule 30.03 does require disclosure of such documents.
15I will therefore order the defendants provide copies of the corporate tax returns in their affidavit of documents for the taxation years 2018 through 2024. I am not prepared to order anything prior to that date as documents from that time frame will inevitably have been destroyed.
(ii) Terminal tax returns relating to the estate of Adelina Scanga and all tax returns following her date of death
16The defendants have supplied the terminal Notice of Assessment for the estate. If the defendants are in possession of tax returns related to the estate then they should be included in the affidavit of documents. Given the passage of time I am not prepared to order production of such tax returns as I do not believe they would otherwise be available.
(iii) Clearance certificate from the CRA confirming there are no further taxes owing by the estate of Adelina Scanga
17The defendants assert all taxes owing by the estate have been paid. They further assert that no capital gains taxes were ever paid or owed by Adelina Scanga or by her estate. I have been given no reason to doubt that evidence.
18Counsel for the defendants advises clearance certificates will not be supplied by the CRA unless they have first performed an audit of the return in question. While no evidence was called on the point, I have been given no reason not to accept that advice.
19I have also not been provided with any evidence regarding the policy and procedures of the CRA regarding their retention of tax documents. It is common knowledge that the CRA requires taxpayers to retain documents for the previous seven taxation years. That being the case it seems reasonable to conclude the CRA would hold themselves to the same standard. Thus, the window of time in which the CRA could actually do an audit appears to have closed.
20In such circumstances I am not prepared to make the order requested.
(iv) Statement of assets belonging to the estate of Adelina Scanga at the date of her death
21I will address this issue in detail later in these reasons.
(v) Bank statements in respect of all accounts belonging to Adelina Scanga from January 1, 2010, through to the date(s) that said accounts involving the deceased were closed.
22If the defendants are in possession of such documents then they should be disclosed. However, as the bank in question would have long since destroyed these records I am not prepared to make the order requested.
(vi) Details of withdrawals and payments made from accounts belonging to Adelina Scanga from six months prior to her death through to the date those accounts were closed.
23Again, if the defendants are in possession of these documents they should be disclosed. Otherwise, given the passage of time such bank statements would simply not be available, so I am not prepared to make such an order.
(vii) Production of all lease agreements, rent rolls, property tax bills, insurance policies, and other material documentation relating to the real property owned by the corporation.
24In her affidavit filed in support of this motion the plaintiff describes reviewing the company's financial statements for the years 2011 through 2021. She goes on to say that she prepared a financial summary regarding the revenue and expenses attributed to the corporation over those years.
25Based on that financial summary the Plaintiff has concluded she has grounds to be suspicious the corporation was mismanaged during those years and that the individual defendants misappropriated funds to her financial detriment. In particular, the Plaintiff alleges the individual defendants charged the corporation "for their personal expenses under the guise of vehicle expenses, property management fees, maintenance fees, telecommunication expenses, office expenses, utilities, salaries and wages and meals and entertainment."
26I do not see the relevance of lease agreements, rent rolls, property tax bills, insurance policies, and other such materials to the listed concerns of the Plaintiff. I decline therefore to order production of such documents.
(viii) The general accounting records of the corporation for the fiscal years 2010 through 2023 as prepared by the corporation's accountant.
27Once again, the passage of time means that such records would likely not be available prior to 2018. That aside though, this request seems very much like a fishing expedition, there being no evidentiary foundation placed before me by the Plaintiff to support the notion there has been malfeasance or other impropriety in the day-to-day management of the corporation.
28The Plaintiff has already been supplied with the annual financial statements of the corporation for the years in question. She has also been supplied with audited financial statements for 2021 and 2022 and has been promised same for the 2023 financial year. Such documentation is prepared for the purpose of allaying concerns such as those raised by the Plaintiff.
29The defendants scheduled a special shareholders meeting on June 30, 2023, for the express purpose of allowing the plaintiff and her counsel to review the corporate records. They chose not to avail themselves of that opportunity.
30In sum, the Plaintiff has been supplied with a significant amount of documentation about the financial affairs of the corporation. She was also given the opportunity to inspect the corporate records. Asking for the entirety of general accounting records for the period in question strikes me as oveneaching and out of proportion to the claims asserted. Moreover, the time and expense associated with gathering up and producing those records would be significant and does not appear to be justified in the circumstances of this case per Rule 29.2.02 (a) and (b).
31Given what has already been disclosed, and given the paucity of the evidentiary record before me regarding the allegations of malfeasance, I am not prepared to order the production of the corporation's general accounting records.
2. Statement of assets of the estate
32Rule 74.15 (d) provides that a person who has a financial interest in an estate may move for an order requiring the estate trustee to file a statement of the nature and value, at the date of death, of each of the assets of the estate.
33As noted above, the individual defendants assert the estate in question consisted of the deceased's home, her shareholdings in the corporation, two bank accounts, as well as some jewelry, household furniture, and other assorted personal assets.
34In her affidavit the Plaintiff asserts she "suspected" that not all of the deceased's bank accounts, insurance policies, investments and other assets were disclosed by her brothers in the course of their administration of the estate. She goes on to say she now "firmly believes" her brothers negligently or fraudulently administered the estate and thereby deprived her of her rightful share.
35The difficulty I have with the Plaintiffs assertions is that she has not provided any evidence of any kind to support her suspicion and belief, nor does she explain what caused her to move from mere suspicion to firm belief.
36Whether she was aware of it or not at the time, the Plaintiff received one third of the deceased's preference shares in the corporation. That is established clearly by the shareholder ledger, found at Exhibit B of Nino Scanga's affidavit, which shows 8,203 and one third shares were transferred to Mirrela Iacobelli on February 17, 2011.
37The McGregor Drive house was dealt with as outlined above, with the individual defendants purchasing the plaintiffs share for some $125,000. The individual defendants obtained and provided comparable sales which were used to determine the fair market value of the home for the purpose of that transaction. The Plaintiff now asserts that in fact the fair market value used for that transaction was far below market actual market value. However, at no time between that transaction and 2021 did the Plaintiff ever raise any issue with that process, nor did she ever obtain her own comparables or appraisal of the home. There is only her bald assertion.
38The funds on deposit in the deceased's two bank accounts were confirmed by the bank statement as supplied to the plaintiff by the individual defendants at the time, found at Exhibit E of the affidavit of Nino Scanga. The copies of the various cheques related to the dispersal of those funds are also attached to that affidavit. They show very clearly that those funds were disbursed appropriately.
39As one would expect, there were also a variety of personal chattels involved in this estate which included jewelry, household furnishings, and other personal assets. The Plaintiff asserts the sale documentation associated with the transfer of her interest in the home in question made no mention of those chattels. However, in the course of her cross examination she testified that each of her children received one particularly special piece of jewelry from their grandmother's estate on their subsequent birthdays. She assumed the balance of the jewelry would be distributed to her children on milestone dates however that did not happen.
40Once again, the plaintiff did not assert any interest in any of those items at the material time. In the course of her cross examination she explained that her brothers had asked her if she wished to have some of the furnishings in the home, for example the dining room set and the kitchen table, however she testified she told her brothers to keep them as they were going to be living in the home themselves.
41The Plaintiff testified that she never asked for anything from the estate because in her words " ... the type of person that I am, I don't like to ask for things."
42The Plaintiff also testified that there were numerous items "that I can recall that are still in their possession that they have never offered to divide." She did not provide any details about those items. Once again, other than that bold assertion there is no evidence before me to support the notion that there are any other items in the estate other than those detailed by Nino Scanga in his affidavit.
43Based on the materials filed, I am satisfied the Plaintiff has been provided with sufficient information to satisfy her on the issue of the value of the assets of the estate. The notion there are other, unknown assets is based solely on the Plaintiff's suspicions and belief. As no evidentiary basis has been provided to support that suspicion and belief that notion is best described as wishful thinking and fanciful.
44In such circumstances I see absolutely no utility in ordering a statement of assets, as envisioned by Rule 74.15 (d), be supplied. I therefore decline to make the order requested.
3. Passing of accounts
45Rule 74.15 (l)(h) provides that any person who appears to have a financial interest in an estate may move for an order requiring the estate trustee to pass accounts. The rule does not provide that such an order shall be made, rather such orders are within the discretion of the judge hearing the matter: see Munro v Thomas, 2021 ONSC 3320, and Painter v Painter Estate, 2008 ONCA 203, at paragraphs 2-3.
46Such an order may be required where the applicant raises "a significant concern in respect of the estate trustees management of the estate whether related to misfeasance, wrongdoing or a significant erosion of estate": see Huang v Nie, 2024 ONSC 2398 at paragraph 16.
47In my view, the mere suggestion of malfeasance, without some further evidentiary basis for such a concern, is insufficient grounds upon which to order an estate trustee to pass accounts. That is particularly the case where, as here, some 15 years have passed since the death of the deceased in 2010, and some 13 years have elapsed since the estate was finalized in 2012.
48This issue was considered by this court in Monro v Thomas supra. At paragraph 37 of that decision the court found there are limits on orders under Rule 74.15. The court suggested such orders ought not be made where they would be based solely on the hostility, suspicion, or paranoia of a party.
49In my view the remedy sought by the plaintiff in this regard is excessive having regard for the following factors:
Other than the plaintiffs bald allegations of malfeasance there is no evidentiary foundation upon which to conclude the defendants have engaged in inappropriate behavior of any kind, let alone malfeasance regarding the estate, or embezzlement from the corporation.
No concerns or complaints were raised by the plaintiff during the period of the administration of the estate by the individual defendants between the death of the deceased in 2010 and the completion of the administration of the estate in 2012, or indeed thereafter until 2021 when the issues apparently giving rise to this action first arose.
The plaintiff took no issue with the sale price for her share of the MacGregor Drive property at the time of the transaction or for more than ten years thereafter.
The individual defendants have supplied the plaintiff with significant documentation regarding their administration of the estate which includes the following:
the shareholders ledger of the corporation showing the transfer of the preference shares to the three siblings/beneficiaries.
The two wills of the deceased.
m. A statement from the deceased's bank which shows the balance of the mutual fund and chequing accounts at the time of death.
1v. The list of comparable properties used to determine the fair market value of the McGregor Drive property.
v. Copies of the cheques provided to the Plaintiff for her share of the residue of the estate.
v1. The deceased's terminal Notices of Assessment.
v11. Independently audited financial statements of the company for the 2021 and 2022 financial years.
The defendant Nino Scanga has supplied a lengthy affidavit setting out in great detail all of the actions he took in administering the estate and in the management of the corporation in the years since 2010. That affidavit includes exhibits running from (a) through (x) which include a report from Building Blocks regarding the inadequacy of the salaries being paid by the corporation to the two named Defendants, as well as audits of the corporate financial affairs prepared by an independent accountant. For reasons unknown the plaintiff has chosen not to cross examine Nino Scanga on that affidavit.
The plaintiff raised no issue with the administration of the estate, with the defendants management of the affairs of the corporation, or with the determination of the fair market value of the MacGregor Drive property at any time between 2010 and 2021 when the plaintiff learned the individual defendants were contemplating a sale of the corporation's main asset.
The plaintiff did not seek any accounting or request copies of estate or corporate documentation, or express any concerns about the handling of the corporation or the estate, until 2021.
The individual defendants arranged a special shareholders meeting to allow the plaintiff an opportunity to review the books and records of the corporation. The plaintiff chose not to attend.
The plaintiff asserts she did not know the preference shares in the corporation had been transferred to the three beneficiaries of the estate and not redeemed by the corporation until 2023 and yet she received a total of $385,236.70 in annual payments from the corporation between 2011 and 2023.
50Based on the plaintiff's inaction and her failure to make any complaint between 2010 and 2021, it is hard to avoid the conclusion she acquiesced in the administration of the estate and in the management of the corporation during that period of time.
51Given the plaintiff's acquiescence, and given the absence of any evidentiary foundation for the plaintiff's allegations of malfeasance regarding both the administration of the estate and the management of the corporation, and given some 15 years have now passed since the death of the deceased, I am of the view the plaintiff has failed to meet the "significant concern" benchmark posited by the court in the Huang v Nie case, supra. That being so, I will exercise my discretion and decline to make an order for the passing of accounts.
4. Full financial disclosure by the corporation
52This issue has already been addressed at items 1 (vii) and (viii) above.
5. An order restricting Nino and Andy Scanga from taking further monies or assets out of the cor.P,oration
53In the course of the oral submissions on this matter plaintiff's counsel advised the plaintiff had decided to abandon her original claim for injunctive relief in favor of a claim for an order restricting Nino and Andy Scanga from taking money or assets out of the corporation pending further order of the court. That to me is still injunctive relief.
54Injunctive relief should only be granted where it is necessary in order "to restrain a clear breach of legal obligations:" see 2158124 Ontario Inc. v Fitton, 2017 ONSC 411 at paragraph 23.
55The three part test for granting injunctive relief, set out by the SCC in RJR-Macdonald v Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 SCR 311, is well known.
56The first stage of that test involves a consideration of whether there is a serious question to be tried. Here the plaintiff has provided no evidentiary basis for her claims of malfeasance. Furthermore, her allegation that the individual defendants are taking excessive amounts of compensation out of the corporation flies in the face of the independent consultation report which concluded the two men were being underpaid.
57The second stage of the RJR-Macdonald test involves an assessment of whether the plaintiff would suffer irreparable harm that cannot be cured by a monetary damage award if the injunctive relief is not granted. Here the plaintiff and the two individual defendants each own a one third interest in a corporation that owns and manages an asset estimated to be worth
$6,000,000. There can ne no serious suggestion that any of the three are impecunious or otherwise judgment proof.
58The third stage of the RJR-Macdonald test requires an assessment of which party would suffer greater harm by the decision to grant or refuse the relief. Here the plaintiff will not suffer any harm if the relief is refused as there are sufficient assets available to satisfy her claim. On the other hand, if the relief is granted the individual defendants would be precluded from receiving any compensation for their daily work managing the affairs of the corporation. Thus, the balance of convenience favours the defendants.
59As the plaintiff has failed to meet her onus on any of the three steps in the RJR Macdonald test her claim for the relief sought must fail. I decline to make such an order.
CONCLUSION
60OTG as follows:
The defendants shall prepare, serve, and file an amended Affidavit of Documents which shall include the corporate tax returns for the years between 2018 through 2024 inclusive.
The balance of the plaintiff's motion is dismissed.
COSTS
61If the parties cannot agree on the issue of costs then each are at liberty to make written submissions, no longer than two pages double spaced, together with appropriate attachments which shall include a bill of costs. I will make my decision on costs based on whatever materials are filed as of April 30, 2025.
C. M. Smith J.
Date: April 11, 2025