One of the most common concerns voiced by litigants is how they can recover their costs of the litigation. In Ontario, you do not need to bring a separate claim against the opposing party to recover your legal fees. Rather, at the end of the litigation (or at the end of a particular step of the litigation), the judge hearing the matter will make a decision about costs. In Kurt v Kurt and Sullivan, 2024 ONSC 589, Justice Valente set out a clear overview of the process and factors taken into consideration when determining costs in an estates proceeding.
Modern Approach to Cost Awards in Estate Litigation
Historically, the costs of all parties involved in estate litigation were paid out of the estate. In 2005, the Court of Appeal for Ontario set aside the traditional approach to costs in McDougald Estate v Gooderham, 2005 CanLLII 21091. In its place, the Court of Appeal held that the normal cost rules would apply to estate litigation unless a public policy consideration was found at play. Two common public policy considerations which would justify deviating from standard cost rules include:
(1) Where the litigation was reasonably necessary to ensure the proper administration of the estate. For example, where there are reasonable grounds on which to question the execution of a will or the testator’s capacity to make a will.
(2) Where the litigation arose as a result of the testator’s actions or those with an interest in the residue of the estate.
Following McDougald Estate v Gooderham, the first question a judge will ask at the end of a proceeding (or step in the proceed) is: Does one or more public policy considerations apply?
If the answer is yes, then the parties’ reasonable costs will be paid out of the estate.
Factors in Determining Costs
Section 131 of the Courts of Justice Act give the judge hearing the matter the discretion to determine by whom and to what extent costs should be paid.
Sub-rule 57(1) of the Rules of Civil Procedure set out a non-exhaustive list of factors the court should take into consideration when exercising its discretion. Some of those factors include:
(i) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(ii) the amount claimed and the amount recovered in the proceeding;
(iii) the complexity of the proceeding;
(iv) the importance of the issues; and
(v) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding.
Policy Reasons for Awarding Costs in Civil Litigation
(1) to indemnify successful litigants for the costs of litigation, although not necessarily completely;
(2) to facilitate access to justice, including access for impecunious litigants;
(3) to discourage frivolous claims and defences;
(4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and
(5) to encourage settlements.
It follows that, in most cases, the unsuccessful party will pay a portion of the successful party’s legal fees. A judge will only depart from the usual rule and award a losing party a portion of their costs payable by the winning party in exceptional circumstances.
Having reviewed the process and policy reasons for awarding costs, Justice Valente summarized his role in determining costs as follows:
It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in [the] circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is “fair and reasonable” having regard to what the losing party could have expected the costs to be.
What does this mean for litigants? Whether you are considering starting litigation or you have been served with a proceeding and must respond, it is important to understand that the all litigation is an investment: not only of time and energy, but money as well. It is rare that the winning party will recover 100% of their legal fees. For this reason, it helps to weigh the costs of litigating against the amount in dispute and the likelihood of success. Doing so will help you choose the right strategy for your circumstances.