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Case Comment: Indemnity Costs in Smith Estate v. Rotstein

Smith Estate v. Rotstein, 2011 ONCA 491 (CanLII): Court of Appeal Upholds Full Indemnity Costs Award but Requires Review of Costs Claimed

This appeal, heard by the Court of Appeal of a ruling by Justice Brown in a motion for summary judgment. The Deceased, Ruth Dorothea Smith, passed away on November 7, 2007. Shortly after Mrs. Smith’s death, her daughter (the “objector”) filed a Notice of Objection to the certificate of appointment of estate trustee respecting her mother’s 1987 Will and four codicils on the grounds of lack of testamentary capacity, lack of knowledge or approval of the contents of the will, undue influence, and suspicious circumstances.

Lawrence Smith, the named executor and the objector’s brother, brought a motion for summary judgment in respect of the Notice of Objection. While Mr. Smith initially sought summary judgment in respect of the Will and all four codicils, he later withdrew his summary judgment motion in respect of the last two codicils, to reduce the scope of the motion.

On April 15, 2010, Justice Brown of the Superior Court of Justice granted the motion and ordered that partial probate issue to Lawrence Smith in respect of the Deceased’s 1987 Will and two codicils.

On July 30, 2010, Justice Brown ruled on costs. Mr. Smith sought full indemnity costs against the objector personally and submitted a bill of costs reflecting costs in excess of $700,000.00. Justice Brown had directed the objector to provide a bill of costs, so as to allow a review of the objector’s expectations. The objector did not provide a bill of costs, but instead submitted a detailed critique of Mr. Smith’s costs, arguing that just over $230,000.00 calculated on a partial indemnity scale should be awarded.

In his costs ruling, Justice Brown found that the objector’s conduct was “reprehensible” in that she “engaged in baseless, hugely expensive, scorched earth litigation over the validity of a will” such that full indemnity costs were warranted.

On the quantum of costs, Justice Brown gave little weight to the critique by the objector’s counsel and relied on the objector’s failure to submit a bill of costs to find that Mr. Smith’s costs submissions accurately reflected the costs incurred. The objector was ordered to pay Mr. Smith’s costs in the amount of $707,173.00.

The objector appealed Justice Brown’s ruling on the motion for summary judgment and on costs.

Armstrong J.A., writing for the Court, dismissed the appeal on the summary judgment and allowed the appeal on costs.

In considering the costs issue, Armstrong J.A. noted that an appellate court requires substantial grounds in order to overturn a costs order. Armstrong J.A. cited Arbour J. who wrote in Hamilton v. Open Window Bakery Ltd.1:

“A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong.” [emphasis added]

Reviewing the decision of Justice Brown, Armstrong J.A. held that the objector’s failure to file a bill of costs should not have been determinative and that she was entitled to challenge Mr. Smith’s costs even without filing her own bill of costs. Armstrong J.A. concluded that the decision to disregard the objector’s detailed critique of Mr. Smith’s bill of costs on the basis that the objector had not filed her own bill of costs was a reversible error. Armstrong J.A. ordered a reassessment of Mr. Smith’s costs, to be conducted by Justice Brown.

The ruling upheld the costs award on a full indemnity scale but required the motion judge to reassess the quantum of fees.

This ruling maintains the principle in Davies v. Clarington (Municipality)2 that reprehensible conduct on the part of a party can invite elevated costs. The Court of Appeal upheld the full indemnity award. No reasons were provided by Armstrong J.A. but presumably he agreed with Justice Brown’s findings that the objector’s conduct was “reprehensible”. Separately, Armstrong J.A. noted that the objector was the “author or her own misfortune.” Still, the objector’s egregious conduct did not disentitle her from challenging the reasonableness of the successful party’s costs.

The objector is still left with a full indemnity costs award but the quantum of those costs is reviewable on the grounds of reasonableness. It will be interesting to see the outcome of that review.

1. [2004] 1 S.C.R. 303 at para. 27
2. (2009), 100 O.R. (3d) 66 (C.A.)

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.


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