“Costs Follow the Result”: The “Loser Pays” Principle
The issue of the payment of costs in an estate litigation matter has seen somewhat of a reshaping recently. Historically, courts generally took the position that the costs incurred by all parties in an estate litigation matter ought to be paid out of the assets of the estate at issue, regardless of the outcome. Whether or not a party was successful in the litigation, that party would not likely be responsible for its own legal costs. More recently, the courts have adopted a modified approach with a view to disincentivizing frivolous claims and to bring the costs principles in estate matters more in line with those in other civil litigation matters. In particular, the principle that the “loser pays”, as opposed to the estate, gained traction.
The recent decision of the Court of Appeal for Ontario in Birtzu v McCron, 2019 ONCA 777, reaffirmed the court’s approach to the “loser pays” principle consistent with other civil matters. The parties to this appeal had endured a 21-day trial in 2016, following which the defendant McCron was held to be entirely successful. However, contrary to the “loser pays” principle, Justice Bloom, in his decision on costs released in 2017, decided instead that the parties would each bear their own costs.
Justice Bloom’s reasons were based on two findings in particular:
- Notwithstanding that the plaintiffs were entirely unsuccessful at trial, they had “reasonable grounds” on which to commence the action; and
- That McCron had lacked credibility with respect to one issue resolved at trial.
McCron successfully appealed the decision, and the Court of Appeal for Ontario awarded her costs of the trial on a partial indemnity basis, consistent in part with the “loser pays” principle.
At the outset, the Court of Appeal noted that costs awards are discretionary. Rarely will litigants be granted leave to appeal except in cases where the lower court is found to have made a “legal error” or, more generally, where the costs award is “plainly wrong.”
The Court of Appeal acknowledged, in respect of the second criteria above, that a litigant’s conduct at trial and her credibility are relevant factors with respect to the issue of costs. However, unless that litigant’s conduct bears on the length or the substance of the trial, it is not appropriate for a court to punish that litigant by denying them their costs. The issue of McCron’s credibility was, in effect, moot given that she was successful “on all fronts” and, in any event, it did not impact the judge’s findings.
The Court held that McCron’s costs “should have followed the result”, but they did not. The costs decision of the trial judge was held to be “plainly wrong” and accordingly overturned.
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