Trustee’s files revealed in $100m valuation dispute

An Ontario court has ordered a bankruptcy trustee to release expert communications that created a $100 million gap in real estate valuations. The ruling may change how contested claims proceed in insolvency cases.

Years of litigation over a profit-share claim

The case involves a former employee’s profit-share claim against the companies behind a large real estate development. She originally demanded $1 million for wrongful dismissal and $18 million for breaking an oral agreement that promised 20% of the project’s profits.

The Proposal Trustee approved the wrongful dismissal claim at $880,000.39 in March 2023 but dismissed the profit-share claim five months later. The employee challenged the decision, and in March 2024, the Ontario Superior Court of Justice ruled the claim was valid and needed valuation. That decision stood after the Ontario Court of Appeal reviewed it in 2025, and the Supreme Court of Canada refused to hear the case last month.

The claim had risen to $25 million by then. When the Trustee evaluated it again under the Bankruptcy and Insolvency Act, the claim was valued at zero. Two experts hired by the Trustee used a Direct Comparison Approach and set the project’s value at $275 million. The employee’s experts, using a Land Residual Approach, calculated $375 million. The $100 million difference eliminated her claim.

Court rejects privilege claim, orders disclosure

Before an October 21 appeal, the employee asked for correspondence between the Trustee’s experts and their discussions with the Trustee or its lawyers. She said the material might show how the experts reached conclusions that erased her claim.

The Trustee opposed the request, calling it a “fishing expedition” and citing section 26 of the BIA, which protects a trustee’s working files from disclosure. Justice Kimmel disagreed. In an August 7 decision, she ruled section 26 did not apply because the request focused on the experts’ files, not the Trustee’s internal records.

She ordered the Trustee to collect and hand over the experts’ unanswered cross-examination responses, allowing redactions only for references to the Trustee’s strategy toward the debtor companies. Kimmel noted the Trustee’s dual role as both investigator and decision-maker on the claim.

The decision has wider effects. It shows that working-file privilege has boundaries once an appeal starts, and claimants do not need to prove bad faith to see the communications behind a disputed valuation. For trustees and creditors, the final number in an expert report may no longer end the discussion—it could open a closer examination of how that number was determined.

If the employee wins the appeal, the zero valuation might be reversed, requiring a new calculation of her claim. The court will decide on the motion’s costs during the October hearing.

Trustees managing BIA claims based on expert opinions may now face more questions about the methods and discussions behind their valuations. The ruling does not grant access to every internal document, but it makes clear that privilege is not unlimited when a claimant’s financial recovery is involved.

A bank cleared of damages in a recent loan dispute shows how courts weigh evidence in financial cases.