Non-Parties are often brought into estate litigation when litigants seek information in the non-party’s control

By Dickson Appell
Non-Parties are often brought into estate litigation when litigants seek information in the non-party’s control

 

Bayliss v. Burnham, 2024 ONCA 464 (CanLII)

Non-Parties such as financial institutions, corporations, or medical care providers are often brought into estate litigation when litigants seek information in the non-party’s control, such as corporate, financial or medical records. In Bayliss v Burnham, 2024 ONCA 464 (CanLII), the court considered a motion for the disclosure of corporate financial information under Rule 30.10, Production from Non-Parties With Leave.

When Kenneth “Kenny” Hill died in January 2021, the largest asset in his very substantial Estate was shares in Grand River Enterprises Six Nations Ltd. (“GRE”), an Indigenous-owned company that exports tobacco products. Kenny was a co-founder and 12.5% shareholder. The parties seeking the corporate disclosure were some of Kenny’s adult and minor children (through their representatives) and his former partners.

This Estate litigation involves, among other claims, dependent support claims and a will challenge, which are scheduled to be heard in September 2024. Kenny was survived by nine children, some adults and some minor, and a former spouse. Kenny’s one-page Will gave the GRE shares to his son and estate trustee Ryan, with half of the income they produced going to Ryan and half to another son, Joshua. Kenny left cash gifts to other children and appears to have disinherited one adult child. Estate Trustees During Litigation were appointed.

The parties seeking disclosure argued that the corporate records were necessary both to value the shares and assess whether the Will makes “testamentary sense” given the size and nature of Kenny’s Estate.

GRE contested the production. Included in its assertions were that production would be detrimental and prejudicial to its commercial and competitive interests, that its financial information was not publicly disclosed or distributed to shareholders, and that a Pricewaterhouse Cooper (“PwC”) report purporting to value the shares was sufficient. The uniqueness of GRE and its shares is a significant part of this decision. The company operates differently both from other Canadian Indigenous tobacco producers in terms of its legal and regulatory compliance, and from non-Indigenous corporations in terms of its use of traditional Haudenosaunee governance principles and its method of distributing profits by way of non-taxable income rather than dividends. Its shares are not transferrable without approval of a majority of the shareholders or directors so there is no readily available market-based share value.

In December 2023 (2023 ONSC 7161 (CanLII)), the motions judge reviewed the requirements for Rule 30.10 production relating to privilege, relevance, and fairness of proceeding to trial without the production. Additional factors under Rule 30.10 motions include the importance of the document to the litigation, the stage of production relative to the trial, whether discovery of individuals can be a substitute, the non-party’s position, availability of the information elsewhere, and the relationship between the non-party and the litigants. There was evidence that similar disclosure had been made by GRE in prior litigation. The Estate was also considered a shareholder with statutory rights to corporate information.

The motions judge granted the disclosure requested, and further documents the valuator might identify as necessary. This disclosure was relevant to understand the complexity of the Estate, to assess the will challenge, to assess dependency claims, and to the conduct of the litigation on behalf of the minor children. There was no other source of the information, and awaiting disclosure at trial would likely lead to an adjournment. The motions judge sided against GRE with respect to the sufficiency of the PwC report, on the basis that it had been prepared with scope limitations, was itself not based on financial statements, and it showed a multi-million dollar gap between the high and low range of the shares’ values.

There was a subsequent, contested hearing over a confidentiality protocol that would govern the disclosure. Disclosed information was restricted to the parties, the estate trustees, their counsel and the valuator and the valuator’s additional requests for information had to be reasonable and not a “fishing expedition.” The motions judge was the case management judge, so would be able to hear from the parties with respect to adherence to the disclosure order.

The motions judge also granted a request for the examination of two individuals with purported knowledge of Kenny’s will, with limitations on the length, timing,  which counsel could ask questions, costs and use of the examinations.

GRE unsuccessfully appealed the disclosure order (2024 ONCA 464 (CanLII)). The Court of Appeal deferred to the motions judge’s discretion, and agreed that the documents were relevant and should be produced before trial. It also endorsed the confidentiality protocol as dealing sufficiently with GRE’s concerns related to the disclosure.

As noted by the motions judge, caselaw indicates this type of production should be viewed as “exceptional…extraordinary and intrusive” on non-party rights. This case provides insight into the considerations that will affect corporate disclosure relevant to an estate asset, both from the standpoint of the parties seeking it, and the corporate non-party with legitimate interests in how its information will be used and how it can be protected if disclosed.

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