Tag: Costs in Estate Litigation
In a recent decision out of the Ontario Superior Court of Justice, a “continued and persistent lack of self-awareness” on the part of both parties resulted in cost consequences to each, one, a testamentary trustee, and one an estate trustee.
Cardinal v Perreault, 2020 ONSC 4825, involved the issue of costs in relation to two applications regarding the Estate of Joseph Edmond Beaulieu. The first application, an application for directions, was commenced by Mr. Cardinal, the testamentary trustee. The second, an application to pass accounts, was commenced by Ms. Perreault, the Estate Trustee.
Actions of both parties caused various difficulties and delays throughout the proceedings.
In rendering its decision, the Court provided a helpful summary of costs principles in estate litigation. That summary is highlighted below:
- Rule 57.01(1) of the Rules of Civil Procedure, which sets out that the Court, in exercising its discretion to award costs, the court may consider a number of factors including, among others: the result in the proceeding; any offer to settle; the principle of indemnity; the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; the complexity of the proceeding; and the conduct of any party to shorten or lengthen unnecessarily the duration of the proceeding;
- In Davies v Clarington (Municipality), 2009 ONCA 722 the Court of Appeal held that reasonableness in the circumstances is the overarching principle applied in awarding costs;
- In Andersen v. St. Jude Medical Inc. (2006) the court outlined the elements to consider in its assessment of the reasonableness of the circumstances as, among others: the specific facts and circumstances of each case; a consideration of the experience, rates charged and hours spent that is appropriate, balanced with the overriding principle of reasonableness; the reasonable expectation of the unsuccessful party regarding what is fair and reasonable; inconsistencies should be avoided with comparable awards in other cases; and the indemnity principle should be balanced with the objective of access to justice; and
- In McDougald Estate v Gooderham, the Ontario Court of Appeal provided direction that the approach to fixing costs in the context of estate litigation should follow the modern approach, so as to carefully scrutinize the litigation and follow the costs rules that apply in civil litigation, unless public policy considerations dictate otherwise;
After reviewing the relevant costs principles, the court considered the parties’ behaviour in their respective applications. In Mr. Cardinal’s application for directions, he sought full indemnity costs of approximately $24,000. The court set what it reasoned to be a fair costs award of $18,000 in favour of Mr. Cardinal, and payable by Ms. Perreault.
In Ms. Perreault’s application to pass accounts, the court set a costs award of $48,000 in favour of Ms. Perreault and payable by Mr. Cardinal. All in all, the set-off of costs awards resulted in a net award to Ms. Perreault in the sum of $30,000. The court further held that the costs were to be payable by Mr. Cardinal, personally, rather than as an expense to the Estate. The Court reasoned that Mr. Cardinal’s attempt to impugn Ms. Perreault’s credibility without a credible evidentiary foundation was reprehensible. The court further reasoned that the estate and the remaining beneficiaries should not be burdened by Mr. Cardinal’s decision to pursue allegations that lacked any evidentiary foundation.
Hopefully this case will stand as a reminder to those who find themselves involved in estate litigation (and litigation generally) – your conduct throughout the proceeding is an important factor that will be considered by the court when setting costs awards.
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Motions for security for costs are means of ensuring that there is a sum in place to pay the defendant’s costs, should the defendant be entitled to costs. It is not a motion that is often brought, but it is typically considered when the plaintiff is not a resident of Ontario and there is concern that his or her case may not have merit.
Rules 56 and 61.06 of the Rules of Civil Procedure govern motions for security for costs. The test for obtaining security for costs is two-fold:
- The defendant must show that the plaintiff’s action or application fits into one of the categories specified in subrule 56.01(1) which include the following:
(a) the plaintiff or applicant is ordinarily resident outside Ontario;
(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;
(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or
(f) a statute entitles the defendant or respondent to security for costs.
- If the plaintiff’s action or application does fit into one of the above-noted categories, the plaintiff has the option of attempting to prove that it would be unjust to order security, because they are impecunious, and the claim has merit.
An interesting consideration in the context of estate litigation that needs to be addressed is the fact that the party commencing a proceeding is not always the “plaintiff” or “applicant”, as defined by Rule 56. For example, a party may be propounding a Will in response to a Notice of Objection in which case although the propounder is technically the Applicant, the claim is made by the Objector. This issue has been considered by the Courts:
- In Vout v Hay  2 SCR 876, Justice Sopinka commented on this issue allowing the Court, on a motion for security for costs, to cast the challenger as the real “plaintiff” such that the propounder could indeed move for security for costs.
- In Boutzios Estate, Re (2004), 5 ETR (3d) 51 (Ont SCJ), Justice Greer, exercised her discretion under section 131 of the Courts of Justice Act, to order for security for costs and did not address the question of who had the burden of proof and rebuttable presumptions, as section 131 allows the Court to award the costs of and incidental to a proceeding or a step in a proceeding against any party at any time.
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A frivolous will challenge can be frustrating for any respondent. It is not only time consuming but costly as well. A motion for security for costs is an option a respondent facing a frivolous will challenge can pursue in hopes of putting an end to it. While these motions may not be used as frequently in the estate litigation context as they are used in general civil litigation, they are nonetheless valuable.
An order for security for costs requires an applicant to pay a sum of money into court that will cover the respondent’s legal costs, should they be successful in the action or application. It helps to ensure that a successful respondent is not left with an unenforceable costs order. In doing so, it acts as a deterrent to frivolous proceedings.
Rule 56.01(1) of the Rules of Civil Procedure lists several categories in which a respondent may bring a motion for security for costs. These categories include the applicant not ordinarily residing in Ontario, a frivolous or vexatious action or application or if good reason exists to believe that the applicant has insufficient assets in Ontario.
Once the respondent has shown that the action or application fits into one of the categories listed in rule 56.0(1), the applicant then has the opportunity to prove that ordering security for costs would be unjust because the applicant is impecunious and the claim has merit.
It is imperative that the motion is made without undue delay. However, if the motion involves assessing the action’s merits, Park Street Plaza Ltd. v. Standard Optical Inc. and Shuter v. Toronto Dominion Bank suggests that it should not be made until after examinations for discovery are completed.
In the context of estate litigation, Re Bisyk notes that security for costs will rarely be awarded in a will challenge case where the next of kin have been excluded from the will. This is because the estate trustee has an obligation to propound the will. However, where the next of kin acts on their own and without the support of their family members or against family members, the will challenge may be viewed as “frivolous”, thus providing the possibility for security for costs to be awarded (Boutzios Estate, Re).
Overall, a motion for security for costs is a powerful tool an estate litigator can employ. Forcing an applicant to pay money into court will make them think twice about proceeding with a frivolous will challenge. It may even stop the lawsuit all together, saving both sides costs, time and resources.
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Ian M. Hull and Celine Dookie
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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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