When new clients embarks on litigation (to challenge a will or to remove an executor, for example), one of the first questions I am asked is whether they can recover their legal fees or costs from the estate or trust (as we all know, litigation can be expensive). The expectation is that the estate or trust will either fund the ongoing litigation or somehow reimburse the clients’ legal fees at the end of the day. Unfortunately, there is no guarantee that an estate or trust will fund the litigation or that the client will be able to recover their legal fees or costs from any other source.
Estate and trust litigation is a subset of civil litigation (i.e. non-criminal matters that go to court). While estate and trust litigation has some unique features, it is not a world entirely unto itself. Estate and trust litigation is bound by the same rules that apply to civil litigation generally.
In our court system, when it comes to civil litigation, the losing party generally pays a portion of the winning party’s costs (often referred to as the “loser pay principle”). Cost awards impose a much needed discipline on the parties – parties won’t litigate recklessly if they know that they could be dinged with substantial costs if they lose (i.e. not only will they have to pay their own lawyer, but they will have to pay a portion of the winning party’s lawyer as well). Moreover, because there will be a cost reckoning at the end of the litigation (after all, there can only be one winner), the parties are more likely to think seriously about making reasonable settlement offers and trying to reach an agreement while the litigation is ongoing.
In our court system, the winning party is generally entitled to be partially indemnified by the losing party for her legal fees or costs; usually in the range of 30-50% of her legal fees. In some instances, the court will award the winning party her substantial indemnity costs; usually in the range of 50 to 75% of her legal fees. Full recovery (100% of legal costs) is almost never awarded.
The court will award substantial indemnity costs where a losing party engaged in reprehensible behaviour during the course of the litigation (e.g. the losing party adopted a “scorched-earth” or “take no prisoners” mindset that the court wants to sanction). Substantial indemnity costs may also be awarded where the winning party made a settlement offer which was not accepted by the losing party, but the losing party would have done better had the offer been accepted. Conversely, if the losing party made a reasonable settlement offer during the course of the litigation that the winning party did not accept (but should have because the winning party would have done better than the end result), the judge may reduce the amount of legal fees awarded to the winning party (i.e. the court will reward the reasonable efforts of the losing party to settle the litigation).
In one particularly apt comment, an Ontario judge famously scolded the parties for treating the assets of an estate “as a kind of ATM bank machine from which withdrawals automatically flow to fund the litigation.” The same judge quoted that the “loser pay principle” brings needed discipline to the parties and that “given the charged emotional dynamics of most pieces of estates litigation, an even greater need exists to impose the discipline of the general costs principle of ‘loser pays’ in order to inject some modicum of reasonableness into decisions about whether to litigate estate-related disputes.”
Nevertheless, there are two specific instances where the court will consider whether the costs of a party should be paid from the estate: (1) where there is some ambiguity in the will which requires the court’s assistance to interpret, or where the conduct of the testator (i.e. the person who signed the will) led directly to the need for litigation; and (2) where there were reasonable grounds upon which to challenge the will’s validity. However, an award of cost is highly discretionary and it is almost impossible to predict how a judge might exercise her discretion in awarding costs. Moreover, cost awards are given a high degree of deference by appeal courts; cost awards are notoriously difficult to overturn unless they are clearly wrong or somehow miss the mark.
Recently, there have been cases where a court has ordered a blended cost award, meaning a portion of the winner’s costs is paid by the losing party and the remainder paid by the estate, thereby allowing the winning party to recover 100% of her costs. Be warned though: blended cost awards resulting in full recovery are not handed out like candy. It is only awarded when doing so is a fair and reasonable result, taking into account all of the circumstances. Even appeal courts have accepted and ordered blended cost awards in the right situations.
When a court will order a blended cost award is even harder to predict than partially or substantial indemnity cost awards. However, if a court thinks that a party had little choice but to start the litigation, and acted fairly and reasonably throughout the course of the litigation, the party may just be able to convince the court that a blended cost award is the right result.
Litigation is expensive because your lawyer has to prepare and know the case inside and out in order to be successful. In order to win the litigation, you have to be prepared to fund the litigation (you get what you pay for). Bottom line: if you want to litigate, you are going to have to fund the litigation out of your own pocket, at least at first instance. If you “win,” you can then look to the losing side to pay a portion of your costs. However, chances are slim that you will recover all of your costs.