Executive Summary: Key Legal and Evidentiary Issues

• Scope of the lawyers’ duty of care in advising on the need for expert evidence in a professional negligence summary judgment motion arising from tax and trust planning.
• Causation questions about whether proper advice on expert evidence and party joinder would likely have changed the outcome of the earlier Cadesky-Seltzer action.
• Alleged negligence in failing to identify and sue all potentially responsible professionals (Jones and Finkelstein) involved in the tax and trust structure.
• Use and limits of prior findings in the Cadesky-Seltzer litigation, including res judicata, issue estoppel and abuse of process arguments to prevent re-litigation of issues already decided.
• Admissibility and scope of affidavit and hearsay evidence on summary judgment, including striking argumentative, hearsay and relitigation material from both sides’ records.
• Procedural suitability of resolving standard of care, causation and damages issues (in whole or in part) by way of a narrowed summary judgment motion rather than a full trial.

Background to the tax planning and trust structure

The dispute originates from the late 1990s sale of a computer software research and development company co-owned by Barry McPeake and two associates. In preparation for that sale, they implemented a tax-planning structure using family trusts, including the McPeake Family Trust (MFT), to minimize capital gains tax on the sale of their company shares. The sale to Microsoft closed in 1999, and the sale proceeds were paid into the MFT and then distributed to its beneficiaries, who reported the capital gains on their own tax returns. Several years later, in 2004, the Canada Revenue Agency (CRA) audited Mr. McPeake and, relying on section 75(2) of the Income Tax Act, reassessed him on the basis that all of the trust’s gains should be attributed solely to him. This resulted in substantial additional tax, interest and penalties. He retained tax counsel, Andre Rachert, who pursued rectification of the MFT deed and negotiated with CRA. Ultimately, after the Federal Court of Appeal in Canada v. Sommerer held that CRA’s interpretation of section 75(2) was incorrect, Mr. McPeake’s tax liability was significantly reduced through agreement with CRA.

The first professional negligence case: the Cadesky-Seltzer action

Following the audit, in 2006 Mr. McPeake brought a professional negligence action against an accounting firm, Cadesky & Associates, and a lawyer, Barry Seltzer. He alleged they had been negligent in structuring and implementing the MFT and claimed damages for his tax liability, legal fees incurred for rectification and CRA negotiations, loss of business opportunities, and other special damages. Cadesky cross-claimed against Seltzer, and both issued third-party claims against another lawyer, George Jones, who had also done work for the plaintiff. In 2017, the Cadesky-Seltzer action was disposed of on a summary judgment motion before Justice Ryan Bell. She was asked to determine whether there was a genuine issue for trial concerning, among other things, whether Seltzer and Cadesky had actually been retained for the formation of the MFT and drafting of the trust deed, whether they were negligent, whether Jones’ retainer was limited, the legal effect of backdating the trust deed, and limitation issues on the third-party claims. Justice Ryan Bell found that Seltzer had not been retained for the formation of the MFT or preparation of the trust deed and that the evidentiary record did not support a negligence claim against him. With that conclusion, she did not need to address expert evidence on Seltzer’s standard of care. She further found that while there was a live issue about whether Cadesky had been retained at the trust-formation stage, the court could resolve that issue using the fact-finding tools under Rule 20.04(2.1) and (2.2) of the Rules of Civil Procedure. She concluded on the record that Cadesky was not retained to advise on the formation of the MFT or on drafting the trust deed and had only been retained after the trust was already established.

The limits of the first action and the role of expert evidence

Mr. McPeake also argued in the Cadesky-Seltzer action that the accountants had an ongoing retainer to provide accounting and tax advice after the trust was formed and were negligent in failing to identify and correct deficiencies in the trust structure. Justice Ryan Bell found that, absent expert evidence of the applicable standard of care, it was not obvious that Cadesky’s conduct prior to the Sommerer decision breached any professional standard in the circumstances. Because the plaintiff had not served expert evidence to establish the standard of care and a breach of that standard, he failed to meet his burden, and the claim against Cadesky was also dismissed. Given those conclusions regarding Seltzer and Cadesky, she did not need to decide issues about backdating the MFT deed or the extent of Jones’ alleged negligence. The Ontario Court of Appeal later upheld this outcome, affirming that there was no genuine issue for trial and confirming that the plaintiff had not proved a viable professional negligence claim.

The second professional negligence case: the Barber-Houston action

After losing the appeal in the Cadesky-Seltzer action, Mr. McPeake commenced a new action in 2019 against his former litigation counsel, Thomas Barber (now deceased, represented by his estate), Robert Houston, and their law firms, Burke-Robertson LLP and, in relation to later events, Gowling WLG (Canada) LLP. In this second action (the Barber-Houston action), he alleges negligence, breach of contract and unjust enrichment arising from how Barber and Houston conducted the Cadesky-Seltzer case. Barber and Houston had represented him at Burke-Robertson LLP and, following Barber’s death in 2016, Houston continued to act. Houston later moved to Gowling, raising vicarious liability issues for that firm. The pleaded negligence focuses on three main alleged failures by the lawyers: not advising him of the need to file expert evidence on the summary judgment motion to establish the standard of care owed by Seltzer and Cadesky; not advising him of a potential claim against George Jones; and not advising him of a potential claim against the company’s former accountant, Kenneth Finkelstein. In the Barber-Houston action, he seeks to recover his legal fees, disbursements, adverse cost awards and personal expenses from the Cadesky-Seltzer litigation and its appeal, the loss of use of funds spent on that litigation, costs of rectification and the CRA dispute, and the alleged loss of the opportunity to pursue or settle claims against all potentially liable professionals.

Defining the issues in the lawyer-negligence claim

Justice Cullin’s decision in McPeake v. Houston is a “Decision on Motions” that clarifies what issues will be determined on the upcoming summary judgment motion in the Barber-Houston action and what evidence is properly before the court. Reviewing the pleadings and Justice Ryan Bell’s reasons, Justice Cullin notes that the new action targets two aspects of the legal services: the conduct of the summary judgment motion itself and the lawyers’ advice regarding which parties should have been named in the original professional negligence claim. On summary judgment, therefore, the court will have to determine the standard of care Barber and Houston owed in advising the plaintiff about the need for expert evidence regarding Cadesky’s post-1997 services to the plaintiff and the MFT, whether they breached that standard by not advising on expert evidence, and whether any breach caused compensable loss. This involves asking whether, had proper advice been given, the plaintiff would likely have acted on it and whether an expert-supported record would probably have changed the result of the Cadesky-Seltzer action. The court must also examine the standard of care in advising on “necessary parties” to the original action: whether competent counsel ought to have advised that Jones and/or Finkelstein be included as defendants, whether any such omission breached the standard of care, and whether the plaintiff would have acted on such advice if it had been given. In addition, the summary judgment will address whether Burke-Robertson LLP and Gowling WLG (Canada) LLP are vicariously liable for Barber and Houston’s acts and whether principles like res judicata, issue estoppel and abuse of process bar some or all of the plaintiff’s claims because key factual issues were already decided in the Cadesky-Seltzer litigation and its appeal.

Suitability of the case for summary judgment

The plaintiff sought to have the defendants’ summary judgment motion struck entirely, arguing that resolving the lawyer-negligence claim via summary judgment would not be the just, most expeditious and least expensive method of determining the case on the merits. Justice Cullin applied the case-management principles articulated in George Weston Ltd. v. Domtar Inc., focusing on whether a summary judgment motion would assist in an efficient resolution and whether the issues were suitable for determination without a full trial. In her analysis, the standard of care and damages issues, as framed by the defendants, were not particularly complex and are potentially resolvable on a paper record with expert evidence under Rule 20.04. The most challenging aspect is factual causation, especially because the court is being asked to assess what would likely have happened in the earlier professional negligence action if different litigation decisions had been made. For the expert-evidence issue, causation will centre on the impact of adding an expert opinion on Cadesky’s standard of care to the existing record that was before Justice Ryan Bell, a type of “paper review” similar to appellate analysis. For the failure-to-add-parties issue, however, causation could require a “trial within a trial” to determine whether Jones or Finkelstein would actually have been found liable or whether the plaintiff could have recovered additional damages from them, a process ill-suited to summary judgment. Justice Cullin therefore splits the causation inquiry: on summary judgment, the court will address whether the plaintiff would have acted on advice to add Jones or Finkelstein if it had been given, but not attempt to fully try their underlying liability at this stage.

Evidentiary disputes and the scope of the record

Both sides brought extensive motions to strike parts of each other’s affidavits and supporting materials from the summary judgment record. The defendants relied on a single affidavit from Robert Houston with numerous exhibits; the plaintiff filed multiple affidavits (including his own and one from his tax lawyer, Mr. Rachert), as well as “Will Say” statements for several witnesses and voluminous documentary schedules. Justice Cullin emphasized that the moving party on summary judgment must present admissible, relevant evidence and that affidavits should offer a coherent, organized set of facts. She also applied Rule 25.11, which allows striking affidavits or other documents that may prejudice or delay a fair trial, are scandalous, frivolous or vexatious, or constitute an abuse of process. The court adopted a practical approach: only evidence that is “clearly inappropriate” and would impose unreasonable effort or cost or require voluminous responses would be struck in advance, leaving other admissibility and hearsay issues to be dealt with at the summary judgment hearing itself. Justice Cullin held that hearsay not compliant with Rule 39.01(4) (for example, statements made on information and belief without a basis for reliability) and documents without proper foundation would not be admitted for the truth of their contents. Such material can, however, remain in the record for the limited purpose of showing what information and documents were allegedly within the knowledge or possession of the parties during the retainer—relevant to standard-of-care analysis—without being treated as proof of the underlying facts. Third-party hearsay, even if transcribed, will not be accepted as true. The court left to the eventual hearing the task of deciding whether any exceptions to the hearsay rule apply and whether adverse inferences should be drawn under Rule 20.02(1) when parties rely heavily on information-and-belief evidence.

Specific rulings on the affidavits and other materials

On the plaintiff’s motion to strike the Houston affidavit, Justice Cullin declined to remove it wholesale. She found it generally contained relevant, admissible evidence on the issues to be tried. However, she did strike certain discrete portions: paragraphs that merely recited or interpreted prior judicial decisions (deemed argument, not evidence) and a paragraph attaching an affidavit from Finkelstein filed in another proceeding as proof of Finkelstein’s retirement date. Because Justice Ryan Bell had already found as a fact that Finkelstein was retired at the relevant time, the court invited the plaintiff to admit that fact within 30 days; if he refused, the defendants would be allowed to file admissible evidence on the point. The remainder of the contested Houston paragraphs and exhibits—mainly factual descriptions of the lawyers’ activities, the client’s dealings, settlement of CRA reassessments, and foundational documents such as the Bahl statement of claim and a prior affidavit sworn by the plaintiff—were allowed to stand. On the defendants’ motion against the plaintiff’s materials, the court struck all of the “Will Say” statements and schedules, finding they were not admissible evidence on summary judgment, although she acknowledged they could demonstrate the complexity of what a full trial might involve. She also ordered the redaction of the plaintiff’s handwritten notes that had been inadvertently included in some exhibits. Large portions of Mr. McPeake’s own affidavit were struck where they consisted of argument, conclusory commentary, personal opinion, or attempts to re-litigate the role of Cadesky and Seltzer in the original trust formation contrary to Justice Ryan Bell’s findings. Sentences that tried to characterize evidence as “admissions,” summarize appellate holdings, or assert opinions on standard of care were removed. Exhibits relating solely to re-arguing the accounting firm’s and Seltzer’s role in drafting the trust were excluded as irrelevant to the current case. Similarly, substantial parts of Mr. Rachert’s affidavit were struck where they constituted bare advocacy, improper expert opinion, or argument about the meaning of previous judgments and CRA interpretations. Nonetheless, some opinion material was allowed to remain because it reflected information that had allegedly been provided to Barber and Houston and could be relevant to what competent counsel acting on that information should have done. Affidavit evidence from the late Mr. Jones was also permitted to remain, as he is deceased and the plaintiff has no other way to tender his version of events.

Procedural directions and next steps

Justice Cullin ultimately dismissed the plaintiff’s attempt to strike the summary judgment motion in its entirety, holding that summary judgment—properly narrowed—offers a just, expeditious and cost-effective means to determine many of the central issues. She then formally defined the questions that will be addressed on summary judgment: the standard of care and any breach in relation to advising on expert evidence and on necessary parties; whether, on a balance of probabilities, the plaintiff would have followed such advice; whether doing so would likely have altered the outcome of the earlier Cadesky-Seltzer case; whether the damages claimed were actually incurred and are not too remote; whether Gowling bears any vicarious liability for Houston’s conduct; and whether doctrines such as res judicata, issue estoppel and abuse of process bar parts of the claim. The court also ordered that, aside from expert reports, the plaintiff must obtain leave before filing further evidence on the summary judgment motion, reflecting concern about the already voluminous and problematic record. A case management conference was scheduled for the week of March 30, 2026 (or another convenient date) to organize the next procedural steps. Costs of the various motions were expressly reserved to the hearing of the summary judgment motion, so no party was ordered to pay costs at this stage.

Outcome, successful party and monetary amounts

This decision functions as a procedural and evidentiary roadmap rather than a final ruling on liability or damages in the Barber-Houston action. On the key motion to strike the defendants’ summary judgment motion, the defendants were the successful party because their motion will proceed, albeit on a narrowed list of issues. Each side achieved partial success on the evidentiary motions, with limited portions of their affidavits being struck and clear parameters set on the use of hearsay and argumentative material. There is, however, no final determination that the defendants were negligent, no dismissal of the action, and no damages or quantified costs ordered in anyone’s favour. As a result, while the defendants can be regarded as having a procedural advantage from this ruling, there is no total monetary award, no assessed damages, and no costs figure yet granted or ordered in favour of any party, and the precise amount (if any) that may ultimately be ordered cannot be determined from this decision.