In the case of Shanthakumar v. RBC et al. 2023 ONSC 2209, the Court discussed two important issues, among others, that counsel regularly confront in their estate litigation practice.

The convoluted history of this near-decade long case is not essential in understanding the legal concepts distilled by the Court.

Suffice to say, however, the action was commenced by the Plaintiff after she had been criminally charged by the RCMP following RBC’s suspicions that there had been fraudulent conduct involved on the part of the Plaintiff in seeking financing. Between the time that the Plaintiff had passed away and the hearing of a motion brought by the Defendants to remove the Plaintiff’s litigation guardian, costs awards were made and the Plaintiff’s estate became responsible for them. Writs associated with those costs awards were obtained with respect to property that was transferred from the Plaintiff’s estate to the Plaintiff’s husband. RBC accordingly brought a motion to compel an accounting of the estate and disclosure of the lawyer’s file pertaining to the transfer of that property.

Fairness Demands Disclosure

Justice LeMay began his analysis by identifying two key considerations in motions to compel disclosure of a lawyer’s file:

1. Solicitor-client privilege is one of the cornerstones of our legal system and should be protected unless the protection is waived.
2. The burden of proving a waiver of solicitor-client privilege in this case rests on the Defendants.

Waiver of privilege can be done either expressly or implicitly and while there was no express waiver of privilege in the immediate case, the Plaintiff implicitly waived privilege through his affidavit and testimony on the Examination in Aid of Execution:

“In this case, Mr. Mylabathula claims that he was acting in accordance with the advice of counsel and was relying on the lawyer to make sure that the transaction was properly done. It is not open to Mr. Mylabathula to then claim privilege over the lawyer’s file [emphasis added]. This would be partial disclosure that could have the effect of misleading the Defendants. As a result, I conclude that the privilege over the lawyer’s file on the real estate transactions has been waived”.

Justice LeMay accepted the proposition in Spicer v. Spicer 2015 ONSC 4175 that mere receipt of and reliance upon legal advice is insufficient to give rise to a waiver of privilege, but that “the issue is whether the Respondent has opened an inquiry into whether the legal advice effected his state of mind, thereby waiving privilege in that legal advice” [emphasis added].

In following that line of reasoning, Justice LeMay continued to quote with approval from the Spicer Court:

“The reasoning behind waiver by implication and rejection of partial disclosure is that a party cannot be allowed to disclose only that portion of communication that could advance their position but mislead the other party. As such, full disclosure will be ordered in circumstances where fairness requires it [emphasis added]”.

Banks with “Crystallized” Financial Interest Can Compel Accounting

Rule 74.15(1)(h) of the Rules of Civil Procedure (the “Rules”) permits any person who appears to have a financial interest in an estate to move for an order requiring an estate trustee to pass accounts. But as readers of this blog are no doubt aware from a previous post by Suzana Popovic-Montag, the law is anything but settled on this deceptively simple issue.

Counsel for the Plaintiff in Shanthakumar sought to argue that precedent indicated a narrow construction of what constitutes a financial interest and that forcing a trustee to pass accounts could add unnecessary complexity into estate procedures.

In rejecting that argument, Justice LeMay noted that the cases cited by the Plaintiff’s counsel concerned a “derivative interest”. In other words, in so far as a judgment creditor’s having a mere financial interest in the beneficial interest of a beneficiary of an estate, such creditors could not fall within the meaning of the Rules.

However, section 50 of the Estates Act clearly contemplates “a creditor with an interest in the estate itself that has crystallized may seek a passing of accounts” [emphasis added]. Any unnecessary complexity could be resolved by a crystallized financial interest as, in those circumstances “the creditors may have a financial interest in the estate”.

Thanks for reading.

Aaron Chan