Brown, Dale and Shackleton v. Rigsby and Shackleton, 2015 ONSC 1777
Why litigants’ conduct matters-costs are always at issue!
Introduction:
A successful litigant who has conducted litigation in an unreasonable way may be disentitled to an award of costs notwithstanding their success. This is one of the major lessons from Brown, Dale and Shackleton v. Rigsby and Shackleton, a recent decision of the Honourable Mr. Justice Leitch.
Facts:
The facts of this matter are stated concisely by Leitch J., as follows:
[1] This motion relates solely to the issue of costs in relation to estate litigation.
[2] The applicants and the respondents are five of the six children of the [Testator].
[3] The respondents held the power of attorney for their mother and were also appointed as the estate trustees of her estate.
[4] In August 2008, the applicants brought an application seeking orders compelling the respondents to pass their accounts as attorneys; removing the respondents as executors and replacing them with the applicants or an independent third-party; requiring the respondents to pass their accounts as estate trustees; and requiring the respondents to repay any amounts found to have been improperly received by them and/or pay damages for breach of their fiduciary duties in the amount of $1,000,000.00.
[…]
[7] The matter was scheduled to proceed to trial on September 29, 2014.
[8] The matter was settled September 18, 2014.
[…]
[12] The parties were not able to resolve the issue of costs and the matter proceeded to today’s date for that issue to be determined. As I commented at the hearing of this motion, early in this action – that is, late in 2008, it was agreed between counsel for the applicants and the then counsel for the respondents that a formal passing of accounts would not be pursued because of the expense. It is ironic that over six years later the applicants and the respondents have collectively incurred legal expenses of almost $150,000 which has led to this highly contentious motion and, the differing positions on who should be responsible for paying these legal expenses.
As most readers will anticipate, the Respondents sought their costs of defending the Application on a substantial indemnity basis against the Applicants. The Respondents contended, as parties in estate litigation often do, that the Applicants’ Application was motivated by personal interest.
For their part, the Applicants sought their costs payable by the Respondents in their personal capacity on a substantial indemnity basis. The Applicants contended that they acted reasonably in bringing the Application, inter alia, because “red flags” existed in relation to the Respondents’ conduct warranting investigation. In the same vein, the Applicants submitted that the Application was reasonable because the Respondents refused to readily provide the financial disclosure sought by the Applicants—their conduct, according to the Applicants, was obstructive.
Leitch J., considered the relevant jurisprudence, noting the circumstances in which full indemnity costs might be appropriately awarded:
[27] I note that an award of costs on a full indemnity basis is awarded in only “rare and exceptional cases to mark the court’s disapproval of the conduct of the party in the litigation” […] or where the conduct of a party has been “egregious” and there have been “flagrant breaches” occurring in the administration of an estate […].
[28] The respondents refer to the decision of D. M. Brown, J. as he then was, in Re: Estate v. Brett Salter, in which he stated that the “general costs principle of “loser pays” applies equally to estate litigation”.
[29] MacKenzie, J. applied the principles in McDougald Estate and Salter Estate in Cordiero v. Sebasiao, […] and concluded that the beneficiaries’ conduct unnecessarily lengthened and aggravated the pace of the proceedings and he was in default and was therefore obliged to reimburse the estate for the costs awarded against him.
[30] The respondents also refer to Re: Prong Estate (2011) ONSC 632 (SCJ), where D. J. Gordon, J. found the position of the moving parties, who challenged the validity of a will based on the testator’s capacity, relied solely on a suspicion or belief that was not supported by evidence. He denied the moving parties their costs payable by the estate, and ordered the moving parties to reimburse the estate trustees for full indemnity costs.[citations omitted]
Ultimately, Leitch J., found that the parties should bear their own costs, notwithstanding that, similar to the cases reviewed by Justice Leitch, the Applicants based their Application on suspicion and belief and corroborative evidence did not exist.
Discussion
Many readers may be wondering, at this point, why the Respondent was not awarded costs when the Application brought by the Applicants was ultimately settled and the basis for the Application was not grounded in evidence but was, it appears, merely speculative. The answer may be apparent from the following passages where Justice Leitch stated:
[34] I have concluded that the commencement of the application was reasonable. I have also concluded that the respondents did not adequately address the reasonable questions of the applicant early in the application.
[35] I note that one of the respondents, […] in her affidavit sworn in response to the application on November 6, 2008, deposed at para. 6 that they “never used the power of attorney to manage [the Testator’s] affairs, and only started to control her property after she died”. That statement is not correct in that the two discharges of mortgage which were significant “red flags” for the applicants were signed by the respondents pursuant to the power of attorney.
[…]
[39] Overall, the applicants’ questions remain unanswered for a considerable period of time. Undertakings given on cross-examination by the respondents were not fulfilled. The applicants were obliged to bring a motion to compel the satisfaction of undertakings given by the respondents. This motion was resolved on consent; however, a subsequent motion was brought to have the respondent found in contempt because the undertakings remained unfulfilled. This motion was ultimately withdrawn. Thereafter, correspondence and communication with respect to the issue of outstanding undertakings continued.
It appears, therefore, that at least in part, the Court based its decision regarding the appropriate award of costs on the Respondents’ unreasonable conduct in failing to promptly provide information requested by the Applicants, and in failing to answer undertakings resulting in a motion for contempt.
Justice Leitch also noted that the parties’ success could be considered to be divided with no clear “winner” could be said to exist so as to warrant an award of cost against the “loser”.
Notably however, is the fact that the Respondents were, in a sense, entirely successful at defending the Application brought by the Applicants. This Application took place over 6 and one half years, and cost approximately $150,000 for the parties collectively. Ordinarily, notwithstanding the “divided success” referred to, it is not an unreasonable expectation that a Respondent against whom an Application is brought which is later, after many years of litigation, dropped, to receive an award of costs referable to the trouble through which they have been put by the Applicant.
Though many factors did influence the Court’s decision not to award costs against the Applicants, this case leads inexorably to the conclusion that the Respondents’ conduct of the litigation likely mitigated in favor of the parties bearing their own costs, disentitling the Respondents to a costs award.
As the adage goes, “it’s not whether you win or lose, but how you play the game.” In estate litigation, it seems, this sentiment is truer than ever.
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Written by: WEL Partners
Posted on: June 16, 2015
Categories: Commentary
Brown, Dale and Shackleton v. Rigsby and Shackleton, 2015 ONSC 1777
Why litigants’ conduct matters-costs are always at issue!
Introduction:
A successful litigant who has conducted litigation in an unreasonable way may be disentitled to an award of costs notwithstanding their success. This is one of the major lessons from Brown, Dale and Shackleton v. Rigsby and Shackleton, a recent decision of the Honourable Mr. Justice Leitch.
Facts:
The facts of this matter are stated concisely by Leitch J., as follows:
[1] This motion relates solely to the issue of costs in relation to estate litigation.
[2] The applicants and the respondents are five of the six children of the [Testator].
[3] The respondents held the power of attorney for their mother and were also appointed as the estate trustees of her estate.
[4] In August 2008, the applicants brought an application seeking orders compelling the respondents to pass their accounts as attorneys; removing the respondents as executors and replacing them with the applicants or an independent third-party; requiring the respondents to pass their accounts as estate trustees; and requiring the respondents to repay any amounts found to have been improperly received by them and/or pay damages for breach of their fiduciary duties in the amount of $1,000,000.00.
[…]
[7] The matter was scheduled to proceed to trial on September 29, 2014.
[8] The matter was settled September 18, 2014.
[…]
[12] The parties were not able to resolve the issue of costs and the matter proceeded to today’s date for that issue to be determined. As I commented at the hearing of this motion, early in this action – that is, late in 2008, it was agreed between counsel for the applicants and the then counsel for the respondents that a formal passing of accounts would not be pursued because of the expense. It is ironic that over six years later the applicants and the respondents have collectively incurred legal expenses of almost $150,000 which has led to this highly contentious motion and, the differing positions on who should be responsible for paying these legal expenses.
As most readers will anticipate, the Respondents sought their costs of defending the Application on a substantial indemnity basis against the Applicants. The Respondents contended, as parties in estate litigation often do, that the Applicants’ Application was motivated by personal interest.
For their part, the Applicants sought their costs payable by the Respondents in their personal capacity on a substantial indemnity basis. The Applicants contended that they acted reasonably in bringing the Application, inter alia, because “red flags” existed in relation to the Respondents’ conduct warranting investigation. In the same vein, the Applicants submitted that the Application was reasonable because the Respondents refused to readily provide the financial disclosure sought by the Applicants—their conduct, according to the Applicants, was obstructive.
Leitch J., considered the relevant jurisprudence, noting the circumstances in which full indemnity costs might be appropriately awarded:
[27] I note that an award of costs on a full indemnity basis is awarded in only “rare and exceptional cases to mark the court’s disapproval of the conduct of the party in the litigation” […] or where the conduct of a party has been “egregious” and there have been “flagrant breaches” occurring in the administration of an estate […].
[28] The respondents refer to the decision of D. M. Brown, J. as he then was, in Re: Estate v. Brett Salter, in which he stated that the “general costs principle of “loser pays” applies equally to estate litigation”.
[29] MacKenzie, J. applied the principles in McDougald Estate and Salter Estate in Cordiero v. Sebasiao, […] and concluded that the beneficiaries’ conduct unnecessarily lengthened and aggravated the pace of the proceedings and he was in default and was therefore obliged to reimburse the estate for the costs awarded against him.
[30] The respondents also refer to Re: Prong Estate (2011) ONSC 632 (SCJ), where D. J. Gordon, J. found the position of the moving parties, who challenged the validity of a will based on the testator’s capacity, relied solely on a suspicion or belief that was not supported by evidence. He denied the moving parties their costs payable by the estate, and ordered the moving parties to reimburse the estate trustees for full indemnity costs.[citations omitted]
Ultimately, Leitch J., found that the parties should bear their own costs, notwithstanding that, similar to the cases reviewed by Justice Leitch, the Applicants based their Application on suspicion and belief and corroborative evidence did not exist.
Discussion
Many readers may be wondering, at this point, why the Respondent was not awarded costs when the Application brought by the Applicants was ultimately settled and the basis for the Application was not grounded in evidence but was, it appears, merely speculative. The answer may be apparent from the following passages where Justice Leitch stated:
[34] I have concluded that the commencement of the application was reasonable. I have also concluded that the respondents did not adequately address the reasonable questions of the applicant early in the application.
[35] I note that one of the respondents, […] in her affidavit sworn in response to the application on November 6, 2008, deposed at para. 6 that they “never used the power of attorney to manage [the Testator’s] affairs, and only started to control her property after she died”. That statement is not correct in that the two discharges of mortgage which were significant “red flags” for the applicants were signed by the respondents pursuant to the power of attorney.
[…]
[39] Overall, the applicants’ questions remain unanswered for a considerable period of time. Undertakings given on cross-examination by the respondents were not fulfilled. The applicants were obliged to bring a motion to compel the satisfaction of undertakings given by the respondents. This motion was resolved on consent; however, a subsequent motion was brought to have the respondent found in contempt because the undertakings remained unfulfilled. This motion was ultimately withdrawn. Thereafter, correspondence and communication with respect to the issue of outstanding undertakings continued.
It appears, therefore, that at least in part, the Court based its decision regarding the appropriate award of costs on the Respondents’ unreasonable conduct in failing to promptly provide information requested by the Applicants, and in failing to answer undertakings resulting in a motion for contempt.
Justice Leitch also noted that the parties’ success could be considered to be divided with no clear “winner” could be said to exist so as to warrant an award of cost against the “loser”.
Notably however, is the fact that the Respondents were, in a sense, entirely successful at defending the Application brought by the Applicants. This Application took place over 6 and one half years, and cost approximately $150,000 for the parties collectively. Ordinarily, notwithstanding the “divided success” referred to, it is not an unreasonable expectation that a Respondent against whom an Application is brought which is later, after many years of litigation, dropped, to receive an award of costs referable to the trouble through which they have been put by the Applicant.
Though many factors did influence the Court’s decision not to award costs against the Applicants, this case leads inexorably to the conclusion that the Respondents’ conduct of the litigation likely mitigated in favor of the parties bearing their own costs, disentitling the Respondents to a costs award.
As the adage goes, “it’s not whether you win or lose, but how you play the game.” In estate litigation, it seems, this sentiment is truer than ever.
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