Wednesday, February 5, 2014

Costs in Estate Matters

Sawdon Estate v. Sawdon, 2014 ONCA 101:

[82]       In Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, at pp. 390-391, Wilson J., writing for the court on this issue, reiterated the long-standing principle that estate trustees are entitled to be indemnified for all reasonably incurred costs, including legal costs.  She quoted with approval the following statement from Re Dallaway, [1982] 3 All E.R. 118, at p. 122:

In so far as [an estate trustee] does not recover his costs from any other person, he is entitled to take his costs out of the fund held by him unless the court otherwise orders; and the court can otherwise order only on the ground that he has acted unreasonably, or in substance for his own benefit, rather than for the benefit of the fund.

[83]       However, the practice of ordering costs from the estate did not extend solely to estate trustees.  Historically in estate litigation, the courts would order the estate to bear the costs of all parties. 

[84]       The historical approach to costs in estate litigation created the danger that estates would be unreasonably depleted because of unwarranted or needlessly protracted litigation.  Consequently, it has been displaced by the modern approach set out by this court in McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435, (Ont. C.A.), at paras. 78-80: the court is to carefully scrutinize the litigation and, unless it finds that one or more of the relevant public policy considerations apply, it shall follow the costs rules that apply in civil litigation.  That is, the starting point is that estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime established by section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, except in those limited circumstances where public policy considerations apply.  

[85]       The public policy considerations at play in estate litigation are primarily of two sorts: (1) the need to give effect to valid wills that reflect the intention of competent testators; and (2) the need to ensure that estates are properly administered.  In terms of the latter consideration, because the testator[1] is no longer alive to rectify any difficulties or ambiguities created by his or her actions, it is desirable that the matter be resolved by the courts.  Indeed, resort to the courts may be the only method to ensure that the estate is properly administered.    

[86]       In any event, where the problems giving rise to the litigation were caused by the testator, it is appropriate that the testator, through his or her estate, bear the cost of their resolution.  In such situations, it ought not to fall to the Estate Trustee to pay the costs associated with having the court resolve the problems.  As Kruzick J. observed in Penney Estate v. Resetar, 2011 ONSC 575, 64 E.T.R. (3d) 316, at para. 19, if estate trustees were required to bear their legal costs in such situations, they might decline to accept appointments or be reluctant to bring the necessary legal proceedings to ensure the due administration of the estate.    

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