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Unpacking Costs in Estate Litigation

In Shannon v Hrabovsky,  2018 ONSC 6593 Justice H.J. Wilton-Siegel provided a judgment on the question of a limitation period in a will challenge, testamentary capacity, and undue influence. A proceeding for costs was brought in 2019, Shannon v. Hrabovsky, 2019 ONSC 3128 provides further understanding as to the courts’ modern approach to costs in estate litigation.

Background

In 2016 a beneficiary brought an application to set aside a Last Will and Testament on the grounds of lack of requisite testamentary capacity. The applicant is the daughter of the Testator who made a series of three wills.  The first two wills were markedly similar, the son and daughter were appointed executors and their families would effectively benefit equally. In the third will, the son and brother of the deceased were appointed executors and the son was the primary beneficiary. In 2018 the applicant’s claim to set aside the will was successful. After careful examination of medical and lay evidence Justice Wilton-Siegel found that the Testator did not have the capacity to execute the third iteration of the will. The claim included an allegation of undue influence against the applicant’s brother, yet it was unsuccessful in the result.

In 2019, the applicant sought costs of $41,519.65 on a full indemnity basis while the respondent sought costs on a substantial indemnity bases for the amount of $118,077.55.[1] The court found that no costs were incurred by brother of the deceased that were not related to the son’s response to the application for costs. Justice Wilton-Siegel’s analysis proceeded on the basis that the brother’s costs in fact, represented the respondents’ costs.

The applicant argued that an order requiring the Estate to pay the respondents’ fees would be unjust to her, and the other beneficiaries considering:

1) the quantum of the costs; and

2) the belief that costs were inflated as result of various actions taken by the respondent.

The respondent submitted that costs should be paid by the testator’s estate, arguing that resistance to the application was simply a prudent discharge of fiduciary obligation as an estate trustee in efforts to administer the last will of the Testator.

Analysis

In the historical approach to costs in estate litigation, the estate would more usually bear the costs of both parties. In his analysis, the Honorable Justice Wilton-Siegel looked to the 2005 decision of McDougald Estate v. Gooderham[2] which reinforced his continued modern approach to estate litigation costs orders. Absent any policy concerns, civil litigation cost principles should be applied. Justice Wilton-Siegel balances this approach with reference to Penney Estate v. Resetar,[3] and the idea that parties should not bear the cost of resolution when the problems that resulted in litigation were caused by the testator. In these circumstances, costs should be paid from the assets of the estate.

In consideration of the facts, the court highlighted three primary points deserving of reflection:

  1. Both the applicant and the respondent increased time spent on litigation “actively pursuing a claim that had little chance of success” as a result of a “longstanding acrimonious relationship,”[4]
  2. Considering the finding that the Testator lacked testamentary capacity, the respondent’s argument that they were simply carrying out their obligations as the estate trustee is overly reductionist; and,
  3. The court re-iterated that no evidence had been found to support the applicant’s claim of undue influence.

Justice Wilton-Siegel concluded that the parties should only receive the portion of fees that directly corresponds to the issue on which they were successful.  As such, 2/3 of the fees related to issues concerning testamentary capacity with the rest related to the issue of undue influence were ordered and His Honor stated as follows:

“Accordingly, as the successful party, the applicant should be entitled to approximately two-thirds of her fees reasonably attributable to the issue of the Testator’s testamentary capacity and the respondents should be entitled to approximately one-third of their reasonable fees attributable to the issue of undue influence.”[5]

Justice Wilton-Siegel went on to explain that the applicant had to bring the application to determine the testator’s testamentary capacity.  As such, she should be entitled to reasonable fees on a substantial indemnity basis from the Estate. Justice Wilton-Siegel found that, in light of the evidence, the respondent’s opposition to the motion transcended the role of estate trustee as he “effectively opposed the application in his personal capacity,”[6] preventing him from reimbursement from the estate.

With respect to the issue of undue influence, the court found that the applicant was not entitled to costs since the claim was rejected. Unlike the opposition to the determination of testamentary capacity, the respondent was entitled to resist the claim of undue influence on behalf of the Estate.[7] Justice Wilton-Siegel concluded that the respondent should be awarded reasonable fees on a substantial indemnity basis from the Estate.

The court found fair and reasonable costs on an all-inclusive basis to be $30,000, made payable to the applicant with respect to the claim of testamentary capacity, and $34,750 payable to the respondent for the claim of undue influence. In both instances costs were to made payable from the estate.

Takeaways

Justice Wilton-Siegel’s reasoning can help to nuance an understanding of the continued modern approach to costs in estate litigation. This case is in keeping with the general approach set out in McDougald Estate v. Gooderham,[8] which found that costs in estate litigation should follow the applicable rules in civil litigation unless the court finds public policy considerations for a different approach. The primary public policy considerations at play are typically:

(1) the need to give effect to valid wills that reflect the intention of competent testators; and

(2) the need to ensure that estates are properly administered.”[9]

The court’s finding in this case underscores the public policy arguments that those questioning the validity of a will based on (reasonably grounded) issues of testamentary capacity should not be expected to bear the costs of resolution.

By awarding fees only on a substantial indemnity basis, the court reinforced the careful circumscription of full indemnity costs outlined in Zimmerman v McMichael Estate[10]. Justice Wilton-Siegel was notably aware of excluding costs in circumstances where he deemed that the parties had created unnecessary delays. The court decisions on costs demonstrate the need for litigant’s to be ever wary of “the danger that estates would be unreasonably depleted because of unwarranted or needlessly protracted litigation”.[11]

Few things in law are certain, but this case reinforces the primacy of judicial discretion,[12] particularly, when it comes to costs in estate litigation.

[1] Shannon v Hrabovsky, 2018 ONSC 6593 at 2.

[2] McDougald Estate v. Gooderham, [2005] O.J. No. 2432

[3] Penney Estate v. Resetar, [2011] O.J. No. 490, 2011 ONSC 575, 64 E.T.R. (3d) 316

[4] Shannon v Hrabovsky, 2018 ONSC 6593 at 10.

[5] Ibid at 13.

[6] Ibid at 14.

[7] Ibid at 15.

[8] McDougald Estate v. Gooderham, [2005] O.J. No. 2432

[9] Shannon v Hrabovsky, 2018 ONSC 6593 at 3.

[10] Zimmerman v McMichael Estate, 2010 ONSC 3855

[11] Shannon v Hrabovsky, 2018 ONSC 6593 at 3.

[12] Courts of Justice Act, R.S.O. 1990, c. C.43, s.131 (1).  Rules of Civil Procedure, R.R.O. 1990, R. 194, at rule 57.01

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