Legal Costs Claimed on a Contested Passing of Accounts May be Reduced

July 22, 2016 David Freedman Executors and Trustees, Litigation, Passing of Accounts 0 Comments

In a judgment released last week, Re Medynski Estate 2016 ONSC 4257 (Ont. S.C.J.), the not unusual circumstance occurred whereby voluminous objections were made against the accounts of a professional trustee. Again, not unusually, the objector and the trustee took offence at each other’s conduct and approached the dispute to make a point of principle. The trustee took the view that the objections amounted to allegations of fiduciary wrongs and it
sought to make clear it acted properly. A contested hearing was held which took three days. Compensation of about $30,000 was ordered, and then the matter exploded on the question of costs.

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The trustee made a costs submission for about $260,000. As Justice J.C. Kent noted, “a costs order of that magnitude would be most detrimental to the estate and all beneficiaries, if ordered payable by the estate. If ordered payable by the objector whose success at the hearing was very limited, it would be a burden far out of proportion to any value that might be placed on the objections made by” the objector. Ultimately costs of about $75,000 were ordered against the objector personally.

This was an unusual case in that the trustee took such umbrage that it “pulled out the stops” and responded in great detail. The judge held that it was justified in responding forcefully but that the litigation costs it sought against the objector were simply beyond the contemplation of an average litigant and would have a chilling effect:

[20] BMO acted reasonably in responding to what it perceived to be an allegation that it was in breach of its fiduciary obligation to the beneficiaries.

[21] A beneficiary who is considering making objections on a passing of accounts would certainly not imagine the possibility of a costs award against herself/himself requiring the payment, if unsuccessful, in excess of $260,000.00. An award of that magnitude becomes an access to justice issue. It would have a chilling effect on most potential objectors.

[22] One must bear in mind that costs in this matter became extremely disproportionate to the potential value of all of the objections. All of the parties, to a greater or lesser extent, share responsibility for that result.

As we all know, sometimes litigation over smaller estates cause the biggest problems.

Have a nice weekend!

David

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