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Estates - Costs (2). Thiessen v. Thiessen Estate
In Thiessen v. Thiessen Estate (Ont CA, 2026) the Ontario Court of Appeal allowed an appeal, this brought against the dismissal of an R21.01(1) ['Striking Pleadings - No Reasonable Cause of Action or Defence'], here where the issue was competing limitation regimes - RPLA and Trustee Act s.38(2).
Here the court considers the modern approach to assessing costs in estate litigation:[75] In McDougald Estate v. Gooderham (2005), 2005 CanLII 21091 (ON CA), 255 D.L.R. (4th) 435 (Ont. C.A.), at para. 78, Gillese J.A. set out the traditional approach to costs in estates cases:The practice of the English courts, in estate litigation, is to order the costs of all parties to be paid out of the estate where the litigation arose as a result of the actions of the testator, or those with an interest in the residue of the estate, or where the litigation was reasonably necessary to ensure the proper administration of the estate: Mitchell v. Gard (1863), 3 Sw. & Tr. 275, 164 E.R. 1280 (Eng. Prob. Ct.) and Spiers v. English, [1907] P. 122 (Eng. P.D.A.). Public policy considerations underlie this approach: it is important that courts give effect to valid wills that reflect the intention of competent testators. Where the difficulties or ambiguities that give rise to the litigation are caused, in whole or in part, by the testator, it seems appropriate that the testator, through his or her estate, bear the costs of their resolution. If there are reasonable grounds upon which to question the execution of the will or the testator’s capacity in making the will, it is again in the public interest that such questions be resolved without cost to those questioning the will’s validity. [76] Traditionally, Canadian courts of first instance followed this approach. Costs of all parties were payable out of the estate if the dispute arose from an ambiguity or omission in the testator’s will, other ambiguous conduct of the testator, or where there were reasonable grounds upon which to question the validity of the will.
[77] The modern approach to fixing costs in estate litigation, however, now follows the “loser-pays” cost rules in civil litigation, subject to public policy considerations: McDougald Estate, at para. 80. Those traditional public policy considerations do not apply in this case, given that the primary document at issue is not a will, but a marriage contract.
[78] However, even absent such public policy considerations, there are exceptions to the modern approach. In Di Nunzio v. Di Nunzio, 2022 ONCA 889, 164 O.R. (3d) 796, this court recently overturned the application judge’s costs award against the unsuccessful party. The court held, at para. 13, that:[W]hile we are not persuaded that the grounds raised by Lucia rise to the level of public policy considerations that warrant payment of her costs from the estate, the grounds that Lucia raised on the application were not frivolous and did raise triable issues warranting court scrutiny. As the application judge noted, “at first glance, [Mrs. Di Nunzio’s] decision to leave all of her estate to Teresa, excluding both Lucia and Robert, could be considered as a suspicious circumstance”. In the circumstances of this case, we exercise our discretion and set aside the costs order against Lucia. As a result, Lucia will bear her own costs of the application while Teresa’s costs are payable from the estate. [Emphasis added.] . Westover Estate v. Jolicouer
In Westover Estate v. Jolicouer (Ont CA, 2023) the Court of Appeal considered an appeal of an estates cost award:[11] While we allow leave to appeal, we dismiss the costs appeal. Costs awards should only be set aside on appeal where there is an error in principle or the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27; Sawdon Estate v. Sawdon, 2014 ONCA 101, 119 O.R. (3d) 81, at para. 77. For the reasons that follow, although costs against an estate trustee personally are generally rare, we conclude that the trial judge made no error in ordering them in the circumstances of this case.
[12] It is now well-established that estate litigation, like all civil litigation, is subject to the general civil litigation costs regime. The historical approach in estate proceedings that all parties’ costs are paid out of the estate has been displaced by the modern approach to fixing costs in estate litigation that seeks to ensure estates are not depleted through the costs of unnecessary litigation and the assets of an estate are not treated “as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation”: Salter v. Salter Estate (2009), 2009 CanLII 28403 (ON SC), 50 E.T.R. (3d) 227 (Ont. S.C.), at para. 6; Johnson v. Johnson Estate, 2022 ONCA 682, 81 E.T.R. (4th) 7, at para. 21, leave to appeal to S.C.C. refused, 40477 (April 6, 2023); Sawdon, at para. 96; McDougald Estate v. Gooderham (2005), 2005 CanLII 21091 (ON CA), 255 D.L.R. (4th) 435 (Ont. C.A.), at paras. 75-80. The same rules that govern costs in civil litigation at the appeal level apply in estate litigation: McDougald Estate, at para. 91; Sawdon, at para. 101.
[13] Exceptions to the general approach may arise in limited cases where public policy considerations apply and mandate a different result: McDougald, at paras. 75-85; Johnson, at para. 21; Neuberger Estate v. York, 2016 ONCA 303, 131 O.R. (3d) 143, at para. 24, leave to appeal refused, [2016] S.C.C.A. No. 207; White v. Gicas, 2014 ONCA 490, 98 E.T.R. (3d) 197, at para. 70. Public policy considerations include the need to give effect to valid wills that reflect the intention of competent testators as well as the proper administration of estates: Sawdon, at para. 85; Gicas, at paras. 71-72.
[14] Estate trustees are generally “entitled to be indemnified for all reasonably incurred costs in the administration of an estate”: Brown v. Rigsby, 2016 ONCA 521, 350 O.A.C. 236, at para. 11. Saddling estate trustees personally with legal costs where litigation was caused by the testator might well discourage them from initiating reasonably necessary legal proceedings to ensure the due administration of an estate: Sawdon, at para. 86; Gicas, at para. 72. However, this is not an absolute rule. A court may order otherwise if an estate trustee has acted unreasonably or in substance for their own benefit, rather than for the benefit of the estate: Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353, at p. 391; Sawdon, at para. 82. That is the case here.
[15] The trial judge made explicit findings that the appellant unduly influenced her father to make the claims he made in the action. The trial judge also found that the appellant’s continuation of the action was primarily to benefit herself and her father’s other beneficiaries, rather than her father, who died shortly after the litigation was commenced, or his estate. The only basis for the action impugning the property transfers were the clearly unsubstantiated allegations of fraud and conspiracy. As a result, the trial judge found that the appellant’s testimony to further the action and the unsubstantiated allegations of fraud and conspiracy was self-serving.
[16] Further, the appellant’s continuation of the action was not reasonable. While her father commenced the action, he died a little over a year after starting it. It was the appellant who continued it and pursues the claim on appeal, more than five years after her father’s death. Litigation is very expensive. Fraud and conspiracy allegations are notoriously difficult to prove and, if unsubstantiated, can result in a higher level of costs awarded to the successful party, as was the case here: Unisys Canada Inc. v. York Three Associates Inc. (2001), 2001 CanLII 7276 (ON CA), 44 R.P.R. (3d) 138 (Ont. C.A.), at para. 15. The appellant cannot rely on her role as estate trustee as licence to engage unreasonably in estate-funded litigation that was of no real benefit to the estate nor to its proper administration, and had no genuine prospect of success: McDougald, at paras. 81-82. The appellant did not take reasonable steps to ascertain whether the litigation should be continued after her father’s death. The trial judge properly accounted for the portion of the costs attributable to the appellant’s unreasonable decision to continue the litigation: see, e.g. Avdeeva v. Khousehabeh, 2023 ONSC 6402, 90 E.T.R. (4th) 165, at paras. 44-56.
[17] To properly administer her father’s estate, the appellant was obliged to review her father’s bank accounts and documents. A simple review of Mr. Westover’s bank records and real estate documents would have revealed the transfers and their transparent circumstances. Moreover, as evidenced by his lawyer’s notes, the fact that Mr. Westover did not blame Ms. Westover-Morriseau but described the transfers as a “misunderstanding” belied any allegation of fraud and conspiracy. It does not appear that the appellant took any steps to investigate the allegations of fraud and conspiracy. Rather, as also found by the trial judge, the appellant had done little to administer the estate and had enjoyed living rent-free in Mr. Westover’s home for several years. She pursued litigation that chiefly benefitted her because of her free living arrangements and the possibility of enhancing her portion of the estate.
[18] The trial judge’s findings were open to him to make. They supported an award against the appellant personally because she had acted unreasonably and substantially for her own benefit in encouraging her father to start the action and in her continuing the action on the basis of the clearly unsubstantiated allegations of fraud and conspiracy against her siblings. . Cain v Harnett
In Cain v Harnett (Div Court, 2023) the Divisional Court commented on costs reimbursement, including legal cost awards, for estate trustees:[7] In Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101, at para. 82, the Court of Appeal confirmed that estates trustees are entitled to be indemnified for all reasonably incurred costs, including legal costs. The Court of Appeal further held that courts have the authority to make “blended” costs orders, including on appeal. A blended costs order is appropriate if the losing party’s conduct unnecessarily increased the costs of litigation, but some costs were necessarily incurred to ensure that the estate is properly administered. . Di Nunzio v. Di Nunzio
In Di Nunzio v. Di Nunzio (Ont CA, 2022) the Court of Appeal cited a change in the law of costs, as it relates to estate litigation:[9] In McDougald Estate v. Gooderham (2005), 2005 CanLII 21091 (ON CA), 255 D.L.R. (4th) 435 (Ont. C.A.), at paras. 78-80, this court explained that the traditional approach in estate litigation that the costs of all parties are ordered payable out of the estate has been displaced by the modern approach of fixing costs in accordance with civil costs rules, unless the court finds that there are public policy considerations. Public policy considerations include where the dispute arises from an ambiguity or omission in the testator’s will or other conduct of the testator, or there are reasonable grounds upon which to question the will’s validity. The modern approach balances the need of the court’s oversight to ensure that only valid wills executed by competent testators are propounded with the need to restrict unwarranted litigation and protect estates from being depleted by litigation: at para. 85.
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