WEL previously blogged  the original decision, “Why litigants’ conduct matters-costs are always at issue! – Brown, Dale and Shackleton v. Rigsby and Shackleton”, Lionel J. Tupman, June 16,2015

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In Brown v. Rigsby[1], the Ontario Court of Appeal describes the general rules governing an estate trustee’s ability to recover legal costs.

Facts

The action was between five of six siblings in a dispute over the estate of their deceased mother. All six children were the residual beneficiaries under the mother’s will. The two appellants (defendants in the action) were the estate trustees and attorneys pursuant to a power of attorney granted to them by their mother.

In August of 2008, the three respondents to the appeal commenced an application, which was subsequently converted to an action, against the appellants in which they sought the appellants’ removal as estate trustees, a passing of accounts and an order that the appellants repay any amounts improperly taken to the estate, or alternatively, pay damages for breach of fiduciary duty. The action was settled shortly before trial but the parties were unable to agree on costs. They agreed instead that the issue of costs should be determined by the court and brought a motion in that regard.

Decision Below

Justice Leitch heard the motion for costs and found that the application was reasonably commenced and that the appellants did not respond to reasonable requests for information or provide answers to undertakings in a timely manner.[2] In the circumstances, however, she determined that the resolution of the substantive issues reflected divided success and that these were not circumstances where a “loser” should pay.[3] As a result, she held that each party was responsible for their own costs. Consequently, the appellants were not entitled to recovery of their costs from the estate as estate trustees. The appellants appealed on the basis that they were entitled to their costs from the estate.

Decision at the Court of Appeal

Justice Pepall, writing for the Court of Appeal, reviewed the relevant case law and applicable principles governing an estate trustee’s ability to recover legal costs. She outlined the general rules, as follows:[4]

• An estate trustee is entitled to indemnification form the estate for all reasonably incurred legal costs;
• If an estate trustee acts unreasonably or in his or her own self-interest, he or she is not entitled to indemnification from the estate; and
• If an estate trustee recovers a portion of his or her costs from another person or party, he or she is entitled to indemnification from the estate for the remaining reasonably incurred costs.

In this case, Justice Pepall found that the dispute between the parties centred, primarily, on the need for the appellants to make disclosure. Their failure to be forthcoming elevated the costs of all parties.[5] As a result, the appellants were not entitled to recover their costs from the estate on the grounds of both unreasonableness and self-interest. She was extremely critical of the conduct of the estate trustees, finding:[6]

“Moreover, the conduct under scrutiny, and the appellants’ failure to exhibit timely candour, related for the most part to conduct that pointed to an aggrandizement of their personal holdings at the expense of the estate and the other residual beneficiaries. In substance, their dilatory conduct served to protect their own interests, not those of the estate.”

This case highlights the requirement for estate trustees to act reasonably and to satisfy their fiduciary obligations. If an estate trustee fails to act in this manner the courts will likely not allow them to recover their costs from the estate.

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[1] 2016 ONCA 521 (“Brown CA”)

[2] Brown, Dale and Shackleton v Rigsby and Shakleton, 2015 ONSC 1777 (CanLii) (“Brown SCJ”)

[3] Brown SCJ at para 46

[4] Brown CA at para 14

[5] Brown CA at para 18

[6] Brown CA at para 19