In September, my colleagues Ian Hull and Noah Weisberg discussed the judgment of Justice Kristjanson in Tarantino v. Galvano, 2017 ONSC 3535 (S.C.J.). More recently, costs were decided by the Court; 2017 ONSC 6635 (S.C.J.).

Here two of three Estate Trustees brought an application against the third trustee in respect of her administration as Deceased’s property while she was alive under a Continuing Power of Attorney for Property. They were successful and obtained orders setting aside a self-dealing transaction, compelling an accounting, and limiting compensation. The third trustee brought an action against the Estate for provision of care services and was successful. Hence, each side was partially successful.

Tarantino v. Galvano provides a useful review of the costs principles applicable to estate litigation and the importance of the proportionality principle and the conduct of the parties during the litigation. As is not unusual, the litigation was an emotional affair with allegations of improper conduct made by each side against the other. Justice Kristjanson held:

[18]           The Amount Claimed and Recovered/Proportionality:  This was a ten day trial, with legal fees, disbursements and HST (on a substantial indemnity basis) collectively amounting to approximately $621,660.  The main asset of the Estate was 80.398% of a house valued at $680,000 in 2012.  While the house was returned to the Estate, Nellie is entitled to 59.81% of the house, with the two granddaughters entitled to share as beneficiaries in the remaining 40.19% share.  I found that Nellie was under a duty to account for Rosa’s income of $141,990.00, and did so.  It is also clear that she subsidized Rosa’s care out of her own resources; in the absence of receipts, for example, no costs were allocated for food or clothing to Rosa for the period. While there are some other minor Estate assets, it is clear that the fees of this litigation will deplete the Estate. The only beneficiaries of the Estate are the three participants in this lawsuit. They collectively decided, by the way they chose to advance this litigation, to incur fees that deplete the Estate. This cannot be proportionate to the amounts and issues raised in the proceeding.

…

[20]           Other factors:  A significant issue relating to costs is the unfounded allegation by the granddaughters that Nellie improperly diverted funds from RBC Account 7459, an allegation in the nature of fraud/dishonesty.  Unfounded allegations of dishonesty in the nature of fraud often give rise to claims for substantial indemnity costs, in this case, in Nellie’s favour. In making this serious allegation, I note that the granddaughters were the only parties on the signature card to the account.  They did not call any bank representative to explain how a non-signatory, not entitled to the account, could have accessed the account.

…

[23]           The granddaughters commenced the application in their capacity as Estate Trustees, but they are also the sole beneficiaries, along with Nellie, of the Estate. Nellie as Estate Trustee was successful in preventing her removal as executrix and Estate Trustee. Estate trustees are generally entitled to indemnification from the estate, unless motivated by self-interest or unreasonable.  I find the position of the granddaughters to have a large element of self-interest, and their positions on the improper diversion of funds, care for Rosa, occupation rent, and many elements of the accounting as set out in my decision, to be unreasonable and motivated by self-interest.  At the same time, Nellie breached her fiduciary duties and her duties under the Substitute Decisions Act, although I found that if required, Nellie should be relieved of liability under s. 33(2) of the Substitute Decisions Act for committing a breach of duty, as she acted honestly, reasonably and diligently.  She upheld her end of the bargain, although as a matter of law, the bargain was set aside.  This, too, is relevant to costs.

[24]           I have considered all of the above factors. The mixed success, the lack of proportionality, the fact that the three Estate Trustees are the sole beneficiaries, unreasonableness, and self-interest are important elements of my decision. The disbursement costs of the Mak Report in the amount of $53,000.00, plus HST, are awarded to the granddaughters to be paid from the Estate. Although there were issues with respect to the assumptions and classifications in that report, it was used by all parties and benefitted the Court’s understanding of the contested issues.  In the circumstances, no other costs are awarded.  None of the three Estate Trustees are entitled to indemnification, given their conduct in the litigation.

[Emphasis added.]

It is vitally important in estate litigation to be mindful of the scope of the litigation, the litigation strategy employed, and the level of expenditure. Here the cost of the litigation was almost the value of the Estate itself, which the Court considered unreasonable based on the issues and conduct of the litigants. The refusal of costs in a situation like this is a devastating one for the litigants as a practical matter and serves as a reminder of the consequences of allowing the litigation to become larger and more expensive than necessary.

Have a nice day,

David