Tag: Costs Awards
As in other areas of civil litigation, the general costs principle of “loser pays” applies in estate litigation. The recent costs decision of Toller James Montague Cranston (Estate of), 2021 ONSC 3704, is an interesting example of just how much a loser in estate litigation could have to pay.
In Toller, the Estate Trustee of the estate of Toller Cranston was compelled to bring an application to pass her accounts by the two other beneficiaries of the estate. These beneficiaries (the “Objectors“) raised over 300 objections to various expenses paid by the Estate Trustee personally to administer the estate in Mexico. The Objectors were unsuccessful on all of their objections except for five. They also made allegations of fraud and theft by the Estate Trustee which were ultimately unproven. The Estate Trustee sought costs on a substantial indemnity scale of $390,602.98 inclusive of HST and disbursements, payable by the Objectors personally. The Objectors took the position that the requested amount was not reasonable or proportionate in the circumstances.
In his costs decision, the Honourable Justice Robert Smith relied on the factors set out in Rule 57 of the Rules of Civil Procedure to help determine the appropriate costs award to make. He also relied on the case of Estate of Francoise Poitras v. Canadian Cancer Society, 2021 ONSC 406, for a summary of the legal principles applicable to costs in estate litigation, which include:
- An estate trustee is generally entitled to be indemnified for all reasonably incurred costs in the administration of an estate, including the legal costs of an action reasonably defended, to the extent these costs are not recovered from another person.
- The winning party in estate litigation is usually entitled to reasonable costs from the losing party.
- A court may deny cost recovery by an estate trustee, in whole or in part, if the trustee acted unreasonably or in substance for his or her own benefit, rather than for the benefit of the estate.
- If the estate trustee acted reasonably, the court may require the other party or parties to pay costs or make a blended order requiring the losing party to pay some costs and the estate to pay the balance.
- In fixing costs, the court must determine the fair and reasonable amount that a party should pay in the particular circumstances of the case.
In the case at hand, the Estate Trustee won by a landslide. What is more, given the complexity of the estate and the large number of objections raised, the Estate Trustee was forced to spend a significant amount of time and legal expenses to respond to the 295 meritless objections that had been raised. Justice Smith also found that the Objectors acted unreasonably in refusing to narrow the issues to be decided before the hearing and to then abandon approximately half of their objections at the hearing, after time and expenses had already been incurred on those objections. The Objectors’ unfounded allegations of misconduct by the Estate Trustee also warranted an elevated costs award. For these reasons and more, Justice Smith concluded that the bulk of the Estate Trustee’s legal costs should be paid by the Objectors.
It was ultimately decided that the Objectors would pay costs to the Estate Trustee on a substantial indemnity basis, reduced by an amount to account for the Objectors’ partial success. This resulted in a notably high costs award of $325,000.00, inclusive of disbursements and HST, payable to the Estate Trustee by the Objectors. It was further ordered that the balance of the Estate Trustee’s legal costs be paid to her from the estate.
The Toller decision shows that the court will not shy away from holding a losing party personally liable for significant costs in estate disputes where the court deems such an award to be appropriate in its discretion. To help limit personal liability to costs in the event of a loss, parties should endeavour to act reasonably from the beginning through to the end of the litigation.
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Estate litigation can be expensive. Sometimes a court may award costs to be paid personally by a party in an estates matter. Parties should always try to act reasonably throughout the litigation, as anything less may attract such adverse costs consequences. A recent example of this is the case of Dewaele v. Roobroeck, 2021 ONSC 1604.
The underlying application arose from the inability of three siblings to agree on how the estates of their late parents should be administered. The siblings were the sole beneficiaries and co-estate trustees of their parents’ estates. The daughter of the deceased parents brought an application against her two brothers seeking various relief, including an order removing them as co-estate trustees and appointing her as the sole estate trustee. Her application was successful and she sought costs against her brothers. Specifically, the applicant sought an order that her substantial indemnity costs be paid by her brothers and that the balance of her full indemnity costs be paid by the estates.
The decision on the issue of costs was given by the Honourable Justice Sheard, who held in favour of the applicant. In her written reasons, Justice Sheard provides a concise summary of the law governing the determination of cost awards in estates matters. First, she cites s.131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 as amended, which provides that, subject to the provisions of an Act or rules of court, the court has discretion to determine by whom and to what extent costs should be paid. The factors set out in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 guide the court’s exercise of this discretion. The overriding objective in a cost award is that it be fair and reasonable, which is, in part, determined by the reasonable expectations of the parties concerning the quantum of costs.
Justice Sheard further explains that in estate litigation, the general rule is that estate trustees are entitled to be indemnified for costs reasonably incurred in the administration of the estate. However, the “loser pays” costs regime applies to estate matters, and a blended cost award – in which a portion of the costs is paid by the litigants and a portion from the estate – is within the court’s discretion.
In this case, the applicant asked for substantial indemnity costs from her respondent brothers. Justice Sheard affirms at paragraph 19 of her decision that such an award may be made “where the losing party has engaged in behaviour worthy of sanction”. Moreover, elevated costs should only be awarded where “there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”. Here, the respondents failed in their obligations as estate trustees, deliberately interfered with the applicant’s ability to complete the administration of the estates, and failed to comply with previous court orders made. Justice Sheard found that this conduct was worthy of sanction and can be characterized as reprehensible and outrageous. As such, an elevated costs award was appropriate. Justice Sheard ultimately decided that the applicant was entitled to be fully indemnified for the costs she incurred in respect of the application, with the respondents liable to pay the majority of these costs (and the balance to be paid from the assets of the estates).
This costs decision is an excellent reminder of the importance of acting reasonably in estate litigation. If any party, including an estate trustee, chooses to act unreasonably then they may pay for it in the end.
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Typically, costs awards are not made until the conclusion of litigation. However, in rare circumstances, courts may order that costs are paid to a party at an earlier point during the litigation to assist them with the funding of the litigation itself, even if it is not yet known which of the party or parties will ultimately be successful at trial.
In what circumstances will a court order the payment of legal fees on an interim basis? The Supreme Court of Canada outlined the test for granting an order for interim costs to fund litigation in British Columbia (Minister of Forests) v. Okanagan Indian Band. The Court summarized the test as follows:
- the party seeking the order must be impecunious to the extent that, without such an order, that party would be deprived of the opportunity to proceed with the case;
- the claimant must establish a prima facie case of sufficient merit to warrant pursuit; and
- there must be special circumstances sufficient to satisfy the court that the case is within the narrow class of cases where this extraordinary exercise of its powers is appropriate.
In the Okanagan Indian Band decision, the Supreme Court considered family law disputes as one of the few unique exceptions to the general rule that the costs of an action or application only be awarded at the conclusion of litigation. One factor that the Court refers to as making interim costs awards suitable in family law matters is the presumption that the property in dispute is to be shared by the parties in some way. Ontario courts have acknowledged this presumption to be the basis of allowing interim payments to fund ongoing legal costs in estate litigation, suggesting that the payment of costs to fund the litigation can be accounted for in the final decision. However, a party to family or estate proceedings still needs to satisfy the above test before an interim costs award will normally be made.
In estate litigation, it is not uncommon for the Court to direct the payment of funds for use toward one or more party’s legal fees out of the assets of the estate while litigation is ongoing. Most often, the party to whom interim costs are paid will be entitled to a share of the assets of the estate whether he or she is successful in the litigation or not. The interim costs award can be deducted from the distributions that are ultimately made to that party. While rarely made within contexts other than family and estate litigation, interim costs orders can allow a party that may otherwise be unable to fund litigation to advance or respond to legal proceedings that affect his or her entitlements as the beneficiary of an estate.
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For parties who are thinking about litigating an estate-related dispute in Court, the possibility of an adverse costs award should always be top of mind. A recent costs endorsement from the Ontario Superior Court of Justice serves as a reminder that the legal fees of a successful party may be payable personally by the losing party.
In Ontario, the general rule in civil litigation is that costs – some or all of the successful party’s legal fees – are to be paid by the losing party. Such a costs award can be daunting: in addition to paying his or her own legal fees, the losing party may also be on the hook for some or all of the other party’s legal fees.
With respect to estate litigation matters, Ontario Courts have moved away from the historical rule that costs are to be paid from the assets of the estate. While costs may still be payable from the estate in certain circumstances, the Courts have held that costs are generally to be paid personally by the losing litigant. Rule 57 of the Rules of Civil Procedure sets out the factors the Court may consider in exercising its discretion in awarding costs.
In Tierney (Estate) v Brown, 2015 ONSC 4137, certain beneficiaries of the Estate brought a motion seeking the removal of the estate solicitor in the context of a contested passing of accounts. The beneficiaries alleged that the solicitor was in conflict of interest and would be a witness in the passing of accounts, whereas the responding Estate Trustees argued that the motion was premature. The Honourable Justice Hackland held that the solicitor was in a conflict, and granted the request for an order removing him as solicitor for the Estate.
In a subsequent costs endorsement, Justice Hackland considered the conduct of the parties in the proceedings and noted that there was no misconduct by any of the parties. The Court also noted that the beneficiaries had tried to resolve the issue out of Court. In the result, Justice Hackland held that the costs would be payable on a partial indemnity basis.
After setting the quantum of the costs award, the Court then considered who should pay for the beneficiaries’ costs. Justice Hackland noted that “a more difficult question is whether the costs award herein should be paid by the Estate Trustees personally, as opposed to the estate.”
Justice Hackland went on to hold that the present case did not fit the narrow circumstances in which costs are payable from the assets of the Estate, and that the Estate Trustees should have agreed to the beneficiaries’ request without resort to Court proceedings. The Estate Trustees were ordered to pay the costs of the motion personally, on a joint and several liability basis.
Courts have a broad discretion when it comes to awarding costs, and Justice Hackland’s recent endorsement in Tierney reiterates the importance for litigants to understand the risks with respect to costs if they find themselves on the losing side of a Court proceeding.
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Umair Abdul Qadir
READ THE TRANSCRIBED PODCAST HERE
During Hull on Estates Episode 20, we discussed costs awards and estate litigation. We also analyzed:
- the case of Ali v. Fruci,  O.J. No. 1093 (S.C.J.);  O.J. No. 1425 (S.C.J.); and
- the case of Andersen v. St. Jude Medical, Inc.  O.J. No. 508 (Div. Ct.).