Offers to Settle in the Context of a Will Challenge – Hull on Estates #137
This week on Hull on Estates, Craig Vander Zee and Bianca La Neve talk about offers to settle in the context of a will challenge. They explain the difference between a will challenge and civil litigation and discuss several examples of will challenge cases.
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Offers to Settle in the Context of a Will Challenge – Hull on Estates Podcast #137
Posted on November 18th, 2008 by Hull & Hull LLP
Bianca La Neve: Hello and welcome to Hull on Estates. You’re listening to episode number 137 on Tuesday, November 18, 2008.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Bianca La Neve: Hi and welcome to another episode of Hull on Estates. I’m Bianca La Neve.
Craig Vander Zee: And I’m Craig Vander Zee. And today I think, Bianca, we were going to talk about Offers to Settle in the context of a Will challenge. But first of all, how are you?
Bianca La Neve: I’m great, how are you?
Craig Vander Zee: Not too bad, did you have a nice weekend?
Bianca La Neve: I did, we celebrated our 5 year anniversary this past weekend.
Craig Vander Zee: Congratulations, but there’s many more to go.
Bianca La Neve: Yes, that’s what everyone keeps telling me.
Craig Vander Zee: What is the fifth anniversary? Is that a paper…?
Bianca La Neve: I don’t know and I know I didn’t get any jewellery so…
Craig Vander Zee: Well I guess that’s the tenth year anniversary, isn’t it?
But back to the Offers to Settle. The starting point for all of this is to recognize that Will challenges, by their nature and the function of the Court with a Will challenge, is different than in civil litigation. In civil litigation, it’s maybe A Co. against, A company that is against B company, there’s a winner, there’s a loser, the Court determines and then you have cost consequences that follow. And in the context of having made Offers to Settle, those cost consequences that may follow an award usually may be affected by the Offers, depending on if the Offers are more favourable than what the result was achieved at trial.
In the Will context, of course, it is the Court that is granting the validity of the Will. And in that case, as the Will, you know, is applicable to the world at large, or in rem as it is, the Court does have a function here. Having said all of that, there is a case in Ulinick that is very often quoted that considered this very issue.
Bianca La Neve: For background purposes, the facts of the case are as follows: the deceased had executed a Will in approximately 1979 and at the time, the deceased had been in and out of hospital and had actually undergone major surgery. One of the deceased’s children ultimately challenged the Will, asserting lack of capacity and undue influence by his sibling, who was the sole beneficiary of the deceased’s estate. There were two competing opinions from medical experts as to the testator’s capacity during the time of the Will, but ultimately Justice Sheard dismissed the Will challenge.
Craig Vander Zee: And in that regard, or perhaps more specifically, Justice Sheard found that with respect to the lack of testamentary capacity, that that allegation had been justified, that is, that it was reasonable to make in the circumstances because there was actually two expert neurologists who gave competing evidence at the trial. And as such, he found on that issue while ultimately he dismissed that issue, he found that it was justifiable to bring it up. And on that issue, he then found with respect to costs that the unsuccessful party shouldn’t have to pay the costs of the successful party. It’s interesting to note, though, that with respect to the assertion of undue influence, that there wasn’t any justification according to Justice Sheard for bringing that allegation. So with respect to that allegation, Justice Sheard found that whatever the cost of the proceedings were that could be reasonably demonstrated to have resulted from that allegation, were going to be on the shoulders of the unsuccessful litigant here. And that is interesting because it wasn’t a case where Justice Sheard found that costs are payable out of the estate regardless of success, and considered even the separate allegations in terms of warding off the requirement to pay costs was going to be dealt with. On the issue of Offers to Settle, though, Justice Sheard found that the offer made on the eve of trial didn’t factor into his consideration on costs. And so in that respect, actually, His Honour found that the Offer to Settle didn’t have effect.
Bianca La Neve: But Craig, other cases in Will Challenges have considered Offers to Settle.
Craig Vander Zee: And that’s right. And perhaps before touching on some of those cases, and we’ll probably just mention them by name given the time today, but I think it is helpful to consider the traditional approach to costs and the modern approach to costs when it comes to awards in Will challenges because it does seem to signify a change in the way at least the Court intends to look at how costs are going to be applied.
Bianca La Neve: For many, many years, in most Will challenge cases, the Courts would order all or most of the costs of the parties to be paid out of the estate. Not only was the Court disinclined to require the unsuccessful party to pay the costs of the successful party, it would also direct that the unsuccessful party be partially or even wholly indemnified by the estate.
Craig Vander Zee: Well, and that meant that the traditional approach to the award of costs in a Will challenge really was a departure from the usual rule in civil litigation, which is to award costs following the event. But while I completely agree with your comment, Bianca, that in many, many cases, for many, many years, it seemed that there was almost an impunity with respect to cost consequences in dealing with Will challenges for the unsuccessful litigant, that that’s not really what the traditional approach stood for. And the traditional approach derived from a case called Mitchell and Garde which is a case from 1863. And not really wanting to go through it, it really boiled down to two principles or policy reasons for an order for costs that would guide how the Courts should look at it. And it was basically this: that the usual rule that costs follow the event will not apply where firstly, the testator or those interested in the estate have been the cause of the litigation; and secondly, where the circumstances reasonably lead to an investigation of the Will itself.
So in the first scenario, it’s where the testator has drafted a Will which would lead one, or has done it in circumstances which would lead one, to challenge it, so where the cause of the litigation is the testator or, again, those interested in the estate. And then the second one is where there is a reasonable basis to have an investigation in respect of the document being propounded. In those scenarios, costs will not follow the event. But that became, over the years, interpreted by at least many judges to mean that there was impunity in bringing Will challenges. In the modern approach, that was more spelled out in a very directed way by the Court of Appeal in its 2005 decision of McDougall Estate and Gooderham.
Bianca La Neve: So in that case, the Court of Appeal found that the traditional approach had been displaced. The modern approach to fixing costs is to carefully scrutinize the litigation, so the Will challenge, and unless the Court finds that one or more of the public policy considerations set out by Craig applies, then a Court should follow the cost rules that apply in regular civil litigation.
Craig Vander Zee: And the Court went on to say, the modern approach to awarding costs at first instance, and again this is in a Will challenge, recognizes the importance of the Courts and the role that they play in ensuring that only valid Wills are executed by competent testators. It also recognizes, though, and this is where it is set out I think expressly now, and clarified, that the need to restrict unwarranted litigation and protect estates from being depleted by litigation, is going to be front and centre. And indeed, the Court of Appeal went on to say gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation. So from that perspective, the Court hasn’t said that in the appropriate circumstances, at least in my view, that an unsuccessful litigant in a Will challenge won’t get their costs or there won’t be the cost consequences that follow the event. But if they find that the public policy reasons that I mentioned before or the basis I mentioned before are not fittingly applied to the situation, then civil litigation rules are going to apply. And what that really is instructive as well is in respect of Offers to Settle because that would also mean that in the case where the public policy reasons are not affecting cost consequences and civil litigation rules apply with respect to costs consequences, that Offers should have that effect. Offers to Settle have been, in a number of cases, considered by Courts in Will challenges. But here it opens the door for a Rule 49 Offer to be more consistently applied because the Courts in the past have differed in their approach to Rule 49 Offers.
Bianca La Neve: So Craig, you mentioned earlier we would go through some of the cases. And in Barone Estate, without going into the facts, in the end the judge found that there was no incompatibility in applying Rule 49 and traditional non-estate cost principles to Will challenge proceedings.
Craig Vander Zee: Well, that’s right and that was a 1997 case. But then in a case the next year, the following year, Justice Haley found in Schwitzer and Pezecki that Rule 49 didn’t apply to estate proceedings. But with respect to the applicability of 49, it really doesn’t end there. And again, Rule 49 is the rule that specifically sets out, Rule 49.10, specifically sets out cost consequences when an Offer is made and is more favourable than the judgment that’s obtained, vis-à-vis the opposing party. In a case called Kerner and Fiorelli which was a case back in 1990, so 8 years before Justice Haley’s decision, the Court found that Rule 49 could not be ignored. So the case law regarding the applicability of Rule 49.10 seemed to have been unsettled. But it seems to me that the decision in Gooderham opens the door for that applicability of Rule 49 in the appropriate circumstances.
Bianca La Neve: So I think that’s a good place to wrap up today, Craig. If any of our listeners want to leave a comment, they may e-mail us at firstname.lastname@example.org or you can visit our blog at www.estatelaw.hullandhull.com. Thanks.
Craig Vander Zee: Thanks very much, Bianca, it’s always a pleasure.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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