The Development of the Law of Costs in Ontario in Estate, Trust, and Related Litigation
An award of Costs is the amount of money that the Court awards to one Party against another in respect of legal fees incurred in the litigation process.
In estate litigation, historically, costs were usually awarded to be paid out of the estate. Recently, however, Courts have demonstrated an increased willingness to award costs against the unsuccessful party. Where such costs are awarded, they are usually in the form of what is called 'party and party' costs amounting to about 20% of actual legal fees incurred.
In very exceptional circumstances, the Court will even award what is called 'full indemnity' costs, and amounts to a greater percentage of total legal fees incurred, against the unsuccessful litigant.
Costs are at the discretion of the Court.
Section 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43, (the "CJA") provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid."
In the estate context, litigation may arise out of a number of different circumstances.
Executors and trustees may require direction from the Court in the carrying out of their duties. Where costs are reasonably incurred, executors and trustees are usually entitled to be compensation out of the estate from the costs they have incurred in seeking such direction;
Beneficiaries or potential beneficiaries may begin litigation because of ambiguities in the Will or other testamentary dispositions made by the deceased. Here too, if there is ambiguity, Courts will generally order costs to be paid out of the Estate;
In other cases, beneficiaries or potential beneficiaries may question the legitimacy of testamentary dispositions on the basis of lack of testamentary capacity, undue influence, or fraud.
In arriving at a conclusion as to costs, the Courts try to balance the competing interests. On the one hand, there is the interest in punishing frivolous or vindictive litigation by imposing costs on the unsuccessful litigant. This interest, however, must be balanced against the concern that legitimate court actions, particularly those brought by executors or trustees, are not discouraged.
Under Rule 56 of the Rules of Civil Procedure R.R.O. 1990, Reg. 194 (the "Rules"), the Court may make an order for security of costs. The criteria for making such an order are as follows: (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.
The general criteria that the court is to consider in making an award for costs under s. 131 of the CJA for are set out in Rule 57 of the Rules. The value of the award in light of the value of the estate is a consideration, as is what would be fair and reasonable under the circumstances. The conduct of the parties is a factor for consideration, as is whether any step taken in the proceeding was "improper, vexatious or unnecessary" or "taken through negligence, mistake, or excessive caution".
Rule 58 governs the assessment of costs where a rule or order provides that a party is entitled to the costs of all or part of a proceeding and the costs have not been fixed by the court. Under such circumstances, an assessment officer will make the costs determination.
Modern Approach to Costs Decisions
In Blue Estate (Re), (2007), 156 A.C.W.S. (3d) 770, the court ordered costs on a partial indemnity basis payable by the beneficiaries to each other as a sanction in response to the parties' inability to co-operate with one another.
In Susin v. Susin, (2007), 34 E.T.R. (3d) 294, a beneficiary applied to the court to remove his brother as Estate Trustee of their father's estate. The applicant beneficiary was ordered to pay the Estate Trustee's costs on a partial indemnity basis. The court determined that the Estate Trustee had acted properly and reasonably in administering the estate.
In Assaf Estate (Re), (2007) 34 E.T.R. (3d) 182, costs were awarded against the unsuccessful moving party on a partial indemnity basis. The moving party had requested emergency medical funds to be paid out of the estate and had brought a similar motion six months earlier. The earlier motion had been dismissed on the basis that the moving party had failed to supply the court with an accounting of medical funds previously advances. The court did find, however, that the costs sought by the successful party were excessive under the circumstances given the simplicity of the motion.
In Gubo Estate v. Cotroneo, (2007), 33 E.T.R. (3d) 57, 157 A.C.W.S. (3d) 329 (Ont. S.C.J.), the Estate Trustee sued the surviving common-law husband of the deceased, alleging that the $65,000 by the deceased to him before her death was a loan. The common-law spouse argued that the sum given to him was not a loan but rather a gift. The court found that there had been an unjust enrichment and that the spouse owed a debt to the estate. Ultimately the parties were ordered to bear their own costs since each had failed to establish its case in the eyes of the court.
In a brief costs decision by Justice Perell of the Superior Court, Harding Estate v. Beverly, 2007 CanLII 28742 (ON S.C.), it was decided that costs should not be paid out of the estate but rather by the unsuccessful litigant. On the basis that the respondent's position was 'quite weak', Justice Perell found that it would not be appropriate to make the estate responsible for the costs associated with the litigation. Accordingly, Justice Perell held that costs should follow as in the normal case of unsuccessful litigation, and the respondent was held responsible for the costs.
Where the conduct of a party is deemed by the court to be reprehensible, costs may be ordered payable on a substantial indemnity basis. For example, Willmot Estate v. Willmot, (2007), 34 E.T.R. (3d) 276, involved a Will challenge. The party challenging the Will alleged wrong-doing on the part of the propounder of the Will and her lawyer. A complaint was also filed with the law society against the sister's lawyer. The court found no wrong-doing on the part of the propounder or the lawyer. As a sanction against such unfounded allegations, the court ordered costs to be paid by the unsuccessful party.
For recent developments regarding costs decisions please read our paper: Costs: Discretion, Proportionality, Access to Justice, and other Considerations, presented to the OBA Institute, February 3, 2011; and our blog post: Smith Estate v. Rotstein revisited: After Court of Appeal Ruling, Superior Court Upholds Earlier Costs Decision.
Clients should never expect that all litigants' costs or indeed any, will be paid out of the assets of the estate. Rather than the rule, this state of affairs is now more likely the exception. Especially where a matter is drawn out or the Court perceives a party to have been unreasonable, costs will not likely be ordered payable out of the estate.
With an increasing value placed on efficiency in resolving disputes, the Courts are eager to create incentives for speedy resolutions.
This overview is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This information is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive. Whaley Estate Litigation.