November 18, 2011

As noted by one jurist[1], to the extent that it was not clear prior, the Ontario Court of Appeal made it abundantly clear in McDougald Estate v. Gooderham[2] that the modern approach to fixing costs in estate litigation is to carefully scrutinize the litigation and, unless the court finds that some public policy consideration applies, to follow the costs rules that normally apply in civil litigation.

Succinctly put, the goal of awarding costs is to restrict unwarranted litigation and protect estates from being depleted by litigation.  Payment of costs from the estate is only justified in limited circumstances where the litigation arose as a result of the actions or omissions of the testator or where the litigation was reasonably necessary to ensure the proper administration of the estate.

Justice Brown perhaps put it best in Bilek v. Salter[3] when he stated in the frank terms that he is now rightly famous (or infamous) for:

Consequently, the general costs rules for civil litigation apply equally to estates litigation – the loser pays, subject to a court’s consideration of all relevant factors under Rule 57, and subject to the limited exceptions described in McDougald Estate.  Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation. The “loser pays” principle brings needed discipline to civil litigation by requiring parties to assess their personal exposure to costs before launching down the road of a lawsuit or a motion.  There is no reason why such discipline should be absent from estate litigation. Quite the contrary. 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.[4] [emphasis added]

It is now safe to say that over the last two to three years the general principles governing estate litigation have become abundantly clear to the estate bar.  For better or worse, those principles have been forcefully articulated by a variety of judges in a variety of settings.  The phrase, “buyer beware”, loosely construed, can easily be applied to the average estate litigant.

However, it is also safe to say that awarding costs is never straight-forward and the “emotional dynamics” of most pieces of estate litigation makes the situation even more tentative and unpredictable.  In fact, it has become nearly impossible to accurately predict how costs will be decided in any particular estate or guardianship proceeding.

Section 131 of the Courts of Justice Act[5] (“CJA”) leaves an award of costs in the discretion of the court and the court may determine by whom and to what extent the costs shall be paid.  Moreover, Section 131 of the CJA is expressly made subject to the Rules of Civil Procedure and Rule 57 lists numerous factors the court may take into account in awarding costs.  But Section 131 of the CJA and Rule 57 apply with equal measure to all civil litigation matters.

What then makes estate and guardianship litigation different from other civil litigation such that costs become near impossible to predict?  One obvious example is where one or more of the parties adopts a “scorched-earth” policy in respect of the litigation and/or behaves in a “reprehensible” manner.  Allegations of fraud and impropriety are often common place, with parties pumped up on emotional adrenaline.  Such tactics do result in elevated costs awards, including costs payable personally on a substantial indemnity or full indemnity basis.[6]  While most judges readily condemn such tactics, some judges are more inclined to empathize with the litigant’s emotions and temper their cost awards accordingly.

Human nature also comes into play when awarding costs.  It is axiomatic that different judges will respond differently to similar situations, especially when it comes to “sorting out” family dynamics.  One judge may order costs payable out of the estate while another will order the losing party to pay costs personally.  Partial indemnity may be the norm, but quantum can also vary widely, as what is reasonable to one judge may be completely unreasonable to another.  Simply put, cost decisions are often contradictory and can be hard to reconcile (though this is literally true in civil litigation matters generally).  What we are seeing is that cost awards in estate and guardianship litigation increasingly follow the “loser-pays” principle.  The application of that principle, coupled with the traditional discretion that rests with a judge in deciding costs and the ability to sanction “reprehensible” behaviour in estate and guardianship litigation with an elevated cost award, has resulted in costs which are difficult, if not impossible, to predict.


[1] Justice R.D. Gordon in Viau v. Kozicki, [2010] O.J. No. 1146 (S.C.J.)

[2](2005), 255 D.L.R. (4th) 435 (Ont. C.A.), paragraphs 78 to 80

[3] [2009] 50 E.T.R. (3d) 227 (Ont. S.C.J.)

[4] Ibid., at paragraph 5 and 6

[5] R.S.O. 1990, c. C.43, as amended

[6] Rule 57.01(4)(d)

Read the full paper here: Understanding Costs in Estate and Trust Litigation – A Witch’s Brew (2011)