One of the first questions clients often raise at the outset of a retainer is how much the litigation is going to cost them. While many know that going to court is an expense endeavour, the parties’ conduct in a proceeding can have a great impact upon the ultimate costs ordered to be paid.
By way of background, Rule 1.04(1.1) of the Ontario Rules of Civil Procedure provides that the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. In other words, the parties must deal with a case in a manner that is proportionate and counsel, as well as the parties, are required to act reasonably and civilly. If they are unable to do so, the courts may intervene (and impose cost consequences) to ensure that litigation is conducted properly. The factors to be considered when fixing costs are set out in Rule 57 of the Ontario Rules of Civil Procedure and include, in part and in addition to success, the unreasonable conduct of any party which unduly lengthened the proceeding.
The recent case of Toller James Montague Cranston (Estate of) (“Toller”) is a stark reminder to both lawyers and litigants on the cost consequences of a party’s conduct.
In Toller, the trustee was compelled by two beneficiaries to bring an application to pass her accounts. The beneficiaries raised over 300 objections to varies expenses paid by the trustee to administer the estate and were ultimately unsuccessful on all but 5 of those objections. The beneficiaries also withdrew many of their objections when questioning was about to begin at the hearing (after counsel for the trustee had spent a large amount of time preparing to respond to the objections). In addition, the beneficiaries claimed that the trustee had committed fraud and stolen several hundred thousand dollars from the estate, which allegations were unsupported by any facts or evidence.
The court ultimately held that the beneficiaries acted unreasonably by raising over 300 objections and forcing the trustee to incur substantial legal expenses to prepare and respond to each one, only to abandon approximately half of them at the hearing. While the ultimate abandonment of their unreasonable objections at the hearing was appropriate, the court held that it should have been done much earlier. The judge noted that the beneficiaries’ conduct turned what should have been a summary proceeding into a complicated hearing, and the unfounded allegations of fraud constituted reprehensible conduct.
In the result, the trustee was awarded $325,000.00 in costs on a substantial indemnity basis as a reflection of the court’s disapproval of the beneficiaries’ conduct and to deter others from engaging in similar behaviour.
While it remains to be seen whether the decision will be appealed, Toller provides a valuable lesson for those travelling the long and expensive road to litigation to act reasonably and proportionally.