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Court Disapproves Actions of Applicant Through a Substantial Indemnity Costs Award – Fanelli v Fanelli-Bruno

Fanelli v Fanelli-Bruno (“Fanelli”),[1] 2023 ONSC 6501, is a recent decision that deals with what the court calls, “scorch of the earth litigation”.[2] This is defined by the court in Young v. Young as “destroy what you cannot have yourself”.[3] Fanelli demonstrates the lengths that a disgruntled family member may take in litigation when unsatisfied with the division of assets, despite its economic irrationality and lack of evidence.

Ms. Fanelli (the “Testator”) had an estate worth approximately $300,000. The testator had a son (the “Respondent”) and a daughter (the “Applicant”). In the Testator’s previous Will she entitled the Applicant and the Respondent 50% each of her estate. One year prior to her death, the Testator created a new Will (the “Will”) gifting her two grandchildren 25% each of the estate. This resulted in a 25% reduction in the Applicant’s share. The Respondent was given 25%, while her two children were also each given 25%. Thus, under the testator’s most recent Will, there were a total of 4 beneficiaries, amounting to a $75,000 gift to each beneficiary.

The Applicant brought a claim that the Testator’s Will was changed under undue influence from the Respondent. The Applicant makes this assertion on two grounds: Firstly, since the Testator was battling a terminal cancer, she had been taking prescribed morphine to counter her pain. The court found that this morphine medication did not alter the Testator’s capacity when she updated her Will, as she was aware of the value of her assets. The court stated:

[26] The applicant gives no evidence indicating that Mrs. Fanelli was not managing her own affairs. She was not in end-stage palliative care or in-and-out of consciousness on high doses of medication. Rather, this was almost a year before Mrs. Fanelli died.[4]

Secondly, the Applicant’s ground for asserting suspicious circumstances regarding the Testator’s will change was the Testator’s use of a new lawyer. The Applicant claimed that this new lawyer may have had familial ties to the husband of the respondent. The Applicant in his affidavit provides an incoherent conversation between the Testator and the Respondent alleging that she was unable to use her previous lawyer because “he was dying”.[5] The Applicant takes away from this conversation that the Respondent manipulated the Testator into changing her will. Unfortunately, for the Applicant, not only did the court label this conversation as lacking sense, but inadmissible hearsay.

The court labelled the actions of the Applicant as a “long, expensive fishing expedition,” creating a massive expenditure. The court addresses the Applicant’s lack of evidence by asserting:

[36] Being disgruntled and therefore prone to believe another person has done you wrong, is not alchemy that transforms speculation into evidence.[6]

The Respondent in this case had decided to agree to the motion for directions. The pressure of wanting to act with transparency took a toll on the Respondent estate trustee.. The court does not fault the Applicant for such action, stating “there is always a risk in litigation that refusing production will be seen as hiding something”.[7] However, the production of the Testator’s documents created a great deal of costs for the Respondent.

In assessing costs to an unsuccessful party in estate litigation, the Applicant brings forward the factors from Babchuk v. Kutz as a guide to determining whether he had a justification for initiating this proceeding.[8]

Babchuk v. Kutz Factors:

  1.    Did the testator cause the litigation?
  2.    Was the challenge reasonable?
  3.    Was the conduct of the parties reasonable?
  4.    Was there an allegation of undue influence?
  5.    Were there different issues or periods of time in which   costs should differ?
  6.      Were there offers to settle?

The court deemed that the Babchuk v Kutz factors did not assist the Applicant. The court did not find that the Applicant had a justification for suing the Respondent. The court deemed that the costs should not fall to the estate trustee, nor should the Respondent be indemnified by the estate. If such indemnification were to happen, “the applicant will have succeeded in imposing on the rest of the family three-quarters of the total amount that he sought despite losing.”[9] The court commented:

[13] The applicant incurred his own legal fees of almost $60,000 to chase a maximum claim of $85,000. He put his sister to an expense of $90,000 to protect the gifts to her children intended by their grandmother.[10]

The court ordered the Applicant to pay the “costs of the respondent on a substantial indemnity basis fixed in the amount of $74,000.”[11] This cost award represents 82% of the Respondent’s costs and reflects the court’s disapproval of such vexatious litigation by the Applicant.

[1] Fanelli v Fanelli-Bruno, 2023 ONSC 6501 (“Fanelli”)

[2] Fanelli at para 15

[3] Fanelli at para 48

[4] Fanelli at para 26

[5] Fanelli at para 30

[6] Fanelli at para 36

[7] Fanelli at para 41

[8] Fanelli at para 18

[9] Fanelli at para 13

[10] Fanelli at para 14

[11] Fanelli at para 52

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