In August, my colleague, Geoffrey Sculthorpe, wrote a blog on Sheffield (Estate) v. Sheffield, 2024 ONSC 3627, which addressed how an estate trustee is legally allowed to manage and sell an estate property.

To briefly summarize the outcome, the Court found in favour of Katherine (the Deceased’s daughter/the Estate Trustee and the Applicant), and in turn, against Bradley (the Deceased’s son and the Respondent). With respect to costs, Justice Mew concluded that Bradley should bear his own costs personally and Katherine’s costs should be payable from the Estate.

This blog summarizes Justice Mew’s endorsement on costs.

Katherine’s Position

Katherine sought her costs on a full indemnity basis, pursuant to section 23.1 of the Trustee Act, R.S.O. 1990, c. T.23, which stipulates:

Expenses of trustees

23.1 (1) A trustee who is of the opinion that an expense would be properly incurred in carrying out the trust may,

(a)  pay the expense directly from the trust property; or

(b)  pay the expense personally and recover a corresponding amount from the trust property.  2001, c. 9, Sched. B, s. 13 (1).

Later disallowance by court

(2) The Superior Court of Justice may afterwards disallow the payment or recovery if it is of the opinion that the expense was not properly incurred in carrying out the trust.

In Santos v. Coghlan, 2023 ONSC 4862, at paragraphs 23 to 27, the Court concluded that this indemnity for costs reasonably incurred to administer an estate encompasses litigation costs. 

In the alternative, Katherine sought her costs on a substantial indemnity basis, due to Bradley engaging in “reprehensible, scandalous or outrageous conduct in acting to disrupt the timely administration of the estate” and removing valuables from the Estate property.

Bradley’s Position

Despite Justice Mew already concluding that Katherine’s costs should be payable from the Estate, Bradley submitted that no costs should be ordered. Bradley did not, however, challenge the costs summary that Katherine submitted.

Bradley’s position was grounded on the argument that the dispute was really between Katherine, personally, and himself, rather than between the Estate and himself.

Justice Mew’s Decision

Ultimately, Justice Mew concluded that the costs claimed by Katherine were reasonable and ordered that her costs on a full indemnity basis (totaling $10,814.50) be payable from the Estate.

In coming to this conclusion, Justice Mew wrote:

[8]               I observe that the right of indemnity provided by the Trustee Act can be extended even when the estate trustee is also a beneficiary, who has pursued personal interests alongside those of the trust: Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353.

…

[10]           The application was ultimately necessary because of the impasse that had been reached between the parties.  The application advanced the administration of the Estate.  This may have resulted in the preferred outcome for [Katherine] personally.  However, that should not, in the circumstances, disentitle her to indemnification by the Estate for legal expenses reasonably incurred.

Justice Mew also noted that there were apparently settlement discussions between the parties, although no offers in compliance with the Rules of Civil Procedure, and that it was regrettable that Katherine and Bradley had to resort to judicial determination of their dispute.

Takeaway

This costs decision acts as a helpful reminder of two things:

1. Just because litigation that advances the administration of an estate results in a favourable outcome to an estate trustee, in their personal capacity, does not act as an automatic disentitlement to the estate trustee’s indemnification of reasonably incurred legal fees.

2. The Court definitely prefers parties resolving their costs disputes amongst themselves.

Thank you for reading!

Megan Zanette