In its costs decision for Campbell v. Evert (previously blogged about here), the Ontario Superior Court of Justice further distilled the rationale and policy reasons informing the “modern approach” to fixing costs in estate litigation.
As frequent readers of this blog may recall, Dr. Ewert (the “Deceased”) passed away in 2011. She left behind two adult children, Monica and Peter.
The Deceased’s estate was to be administered in accordance with the Deceased’s last will and testament executed in 1990. Pursuant to the terms of the Deceased’s will, both Monica and Peter were the residuary beneficiaries, with Monica receiving an additional special bequest of $145,000.00.
Peter challenged Monica’s entitlement to the special bequest. After a three day trial, judgement was ultimately granted in Monica’s favour, with the costs of the action left to be determined on a later date.
As the successful party to the litigation, Monica sought her costs against Peter on either a full or partial indemnity basis. Monica argued that such an award would be consistent with the “modern approach” to fixing costs in estate litigation. Under that approach, the “loser pays” presumption that applies in civil litigation is now equally applicable to estate litigation.
Peter, for his part, sought to have the costs of both parties paid out of his mother’s estate. Peter relied on an unreported decision of the Ontario Court of Appeal in which that court, and without written reasons, dismissed a motion for leave to appeal the unreported costs decision of a trial judge. Peter argued that that decision should be relied upon as “confirming the principle that [in] estate litigation…costs should be paid out of the estate.”
The decision of the Ontario Court of Appeal in McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA) set out the “modern approach” to fixing costs in estate litigation. At paras.79-80 and 85, the Court provides that:
Traditionally, Canadian courts of first instance have followed the approach of the English courts. While the principle was that costs of all parties were ordered payable out of the estate if the dispute arose from an ambiguity or omission in the testator’s will or other conduct of the testator, or there were reasonable grounds upon which to question the will’s validity, such cost awards became virtually automatic.
However, the traditional approach has been – in my view, correctly – displaced. The modern approach to fixing costs in estate litigation is to carefully scrutinize the litigation and, unless the court finds that one or more of the public policy considerations set out above applies, to follow the costs rules that apply in civil litigation.
The modern approach to awarding costs, at first instance, in estate litigation recognises the important role that courts play in ensuring that only valid wills executed by competent testators are propounded. It also recognises the need to restrict unwarranted litigation and protect estates from being depleted by litigation. Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation.
The Court of Appeal affirmed the above approach in Neuberger Estate v. York, 2016 ONCA 303. Moreover, the Court went to lengths in that decision to articulate the public policy considerations at play in estate litigation, providing that they are primarily of two sorts:
- where the difficulties or ambiguities that give rise to the litigation are caused, in whole or in part, by the testator; and
- the need to ensure that estates are properly administered.
After applying the principles set out in McDougald Estate and Neuberger, the Court in the case at hand concluded that, as the successful party, Monica was entitled to her costs on a partial indemnity basis. As the unsuccessful party, or the “loser,” Peter was to pay those costs personally.
In reaching its conclusion, the Court rejected Peter’s argument that an unreported Ontario Court of Appeal decision had somehow overturned McDougald Estate and Neuberger, saying that, clearly, the Court of Appeal would not be expected to overturn one of its previous decisions in the context of a leave to appeal motion without written reasons. Moreover, the Court held that were it to give effect to Peter’s submissions, the result would be manifestly unfair to Monica as the costs resulting from Peter’s challenge would all but consume Monica’s special bequest. In closing, the Court observed that:
The shift from a regime where the estate routinely pays the legal costs of the unsuccessful challenging party was intended to avoid exactly that type of result, unless the challenging party establishes otherwise in the limited circumstances provided for in the case law. [Peter] has not satisfied the onus of doing so in this case.
This is a good reminder that litigants should keep cost consequences in mind when making decisions about pursuing litigation.