Costs follow the event. This can be translated as the “loser pays” principle which has applied in estate litigation for many years now (since at least the seminal decision in Salter v. Salter Estate, 2009 CanLII 28403 (ON SC), decided by Justice D.M. Brown, as he then was). But in estate litigation there is often a fiduciary who is involved because they must be, in order to carry out their fiduciary duties. For example, an estate trustee who is required to bring a court application or respond to one, on behalf of the beneficiaries of the estate.
When an estate trustee is successful she will most likely make a costs argument that the losing party should pay a portion of her legal costs. But payment of only some of her costs means there will be a balance owing to the estate trustee’s lawyers. The estate trustee can ask the Court for a “blended” costs award which would result in the estate indemnifying the estate trustee for the balance of her legal costs not paid by the losing party or parties. Recovery of legal costs are routinely (and should always be) included in the originating pleading which commences the litigation (often a notice of application). Submissions on the exact request for costs are provided to the Court at the conclusion of the hearing or trial.
In assessing a request by an estate trustee in the indemnification of her costs, the Court will consider the decision of Sawdon Estate v. Sawdon, 2014 ONCA 101 (CanLII) (“Sawdon”). In Sawdon, the Court held that the “modern approach” to fixing costs in estate litigation (i.e. the loser pays principle) will apply unless the Court finds that one or more of the public policy considerations applies. The two policy considerations are “(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.” Moreover, the Court in Sawdon held that blended costs awards can achieve the discipline needed in estate litigation while recognizing that public policy considerations may exist. If the estate trustee’s involvement in the litigation fits into one or both of the policy considerations then indemnification by the estate may be awarded by the Court.
In the recent case of Dixon v. Spencer, 2023 ONSC 202 (CanLII) (“Dixon”), the Court was asked to order a blended costs award in favour of an estate trustee. A beneficiary alleged that an asset was not gifted by the deceased prior to her death but instead was an estate asset to be distributed in accordance with the will. The Court disagreed with the applicant and agreed with the estate trustee. The Court awarded the estate trustee partial indemnity costs from the applicant personally with the balance of the estate trustee’s costs payable by the estate. In doing so, the Court noted the following: (i) there was a public policy basis to respond to the application: the proper administration of the estate (a legal determination of what was and was not an estate asset was required); (ii) the estate trustee had relevant evidence relating to the gift of the asset by the deceased before her death: this evidence needed to be adduced by the estate trustee in the proceedings; (iii) the position advanced by the estate trustee proved to be of benefit to the estate: the administration of the estate may now be completed.
Blended costs awards should be considered in cases involving estates and fiduciaries. It may be ordered by the Court to indemnify an estate trustee where she is successful and there is one or more public policy reasons for her involvement in the litigation.