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Significant Costs Award Against Party Pursing Claim Against Estate as if He “Was Playing With The House’s Money”

Just over a month ago, Justice Dunphy released a decision dismissing the application of a husband as against his wife’s estate and estate executors (his late wife’s children from a prior marriage).  Costs were awarded to the respondent executors, and the parties were to address the scale and amount of those costs in written submissions.  This follow-up decision Sabetti v. Jimenez, 2018 ONSC 4727 http://canlii.ca/t/htc46  addresses the outstanding issues pertaining to costs.

Background:

The applicant husband challenged the interpretation of his wife’s Will arguing that a partial intestacy resulted. He also argued that the respondent executors had failed in their duties and should be removed.

Justice Dunphy dismissed the application finding that the husband’s arguments lacked merit both with respect to the interpretation of the Will and with regard to the conduct of the executors.  The decision was also critical of the manner in which the application was pursued.

Costs Submissions:

The respondent executors put forth a costs outline reflecting partial indemnity costs of $132,712.91, substantial indemnity costs of $181,465.35 and full indemnity fees of $210,716.81.  They sought a “higher scale” than partial indemnity subject to the Court’s discretion.

Relying on the Ontario Court of Appeal’s decision in McDougald Estate v. Gooderham[1], the executors proposed that the traditional view on costs in estate litigation has been displaced and the modern approach is to follow the costs rules in civil litigation unless one or more public policy considerations apply. They argued that the “loser pay” principle brings needed discipline to the estate litigation process.

In support of their proposal, the executors pointed to:  the husband’s wide-ranging affidavit evidence; the nine court appearances the application generated; the lack of merits of the application; the numerous and baseless allegations of intentional misconduct and dishonesty advanced by the husband; and the various admonitions on the matter of costs made by judges who had dealt with this matter in its lengthy path to a hearing.

The husband, on the other hand, argued that he had pursued the claim with a genuine belief that the Court’s advice and direction were required to administer the Will properly and that public policy in accurately interpreting the Will justified his intervention.  He also submitted that he was an elderly pensioner with limited income without actually claiming that he was impecunious.

The husband denied any “reprehensible” behaviour on his part and argued that costs ought not to be punitive.  In all the circumstances, he claimed that he should not pay costs but should instead receive his costs.

Analysis:

Justice Dunphy began his review by noting that the husband’s partial intestacy claim “was always a strained and technical point that ran contrary to common sense and the clearly expressed intention of the testator.”

The claims against the executors were pursued relentlessly despite being ill-founded from the start.   It could not be said that these claims somehow arose from an ambiguity in the Will.  Rather, this was an issue that came about from the husband’s frustration with receiving so little income from an estate he believed could pay him more.

Apart from the “ill-founded nature” of the primary complaints, the manner in which this application was conducted contributed very heavily to the resulting high legal costs.

Justice Dunphy noted that throughout this litigation, the husband conducted himself as if he was “playing with the house’s money” which is “precisely the sort of approach that the discipline of a loser pay costs regime is intended to discourage.”

A significant portion of the expenses incurred by the respondent executors was due to the inefficient manner in which the claim was pursued, including the adjournments; the failure to prepare; the large number of meritless peripheral issues raised; and, the groundless suggestions of misconduct and wrongdoing on the part of the executors.

The Court also noted that the husband’s submissions suggest a plea of impecuniosity without actually coming forward to say so or providing any evidence to support the suggestion.  As such, no weight was given to this plea.

Ultimately, the husband was ordered to pay the respondent executors’ substantial indemnity costs of $155,000.00 (the amount proposed by the respondents reduced in recognition of a prior order for costs made by Justice Conway which was not on a substantial indemnity basis).

The Court further ordered that the respondent executors were entitled to offset this award of costs against any distributions payable to the husband from the estate.

Takeaways:

The Court has a broad discretion when it comes to dealing with costs.  Pursuing baseless claims “relentlessly” without regard for the expenditure involved may lead to an award of substantial indemnity costs even if such awards are generally rare.

[1] McDougald Estate v. Gooderham, 2005, CarswellOnt 2407, 255 D.L.R. (4th) 435 (C.A.) at para. 80

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