As anyone who has ever been a party to litigation (and every litigation lawyer) knows, the costs of any court proceeding is a looming threat that surrounds the entire process. The sanction of costs is meant to discourage frivolous and vexatious litigation that has no chance of success. It is also meant to temper the zeal of the litigating parties (even where there are very real issues to be tried) by making them think hard about the necessary steps and how they conduct themselves in the litigation.
The court has broad discretion to award costs under section 131 of the Courts of Justice Act. The factors the court considers in exercising that discretion are found in Rule 57.01 of the Rules of Civil Procedureand include the result in the proceeding, any offer to settle made in writing, the principle of indemnity, the amount of costs that an unsuccessful party could reasonably expect to pay, the amount claimed and the amount recovered in the proceeding, the apportionment of liability, the complexity of the proceeding and the importance of the issues.
Notably, the court will also consider, the conduct of any party that tended to shorten or to unnecessarily lengthen the proceeding, whether any step was improper, vexatious, unnecessary, taken through negligence, mistake or excessive caution, and a party's denial of or refusal to admit anything that should have been admitted.
Costs sanctions are just one of the many mechanisms built into the litigation process designed to encourage settlement. For example, matters commenced in the Toronto Estates Court are subject to mandatory mediation, which means that the parties must attend with counsel to enter into in good faith settlement negotiations assisted by a professional and neutral third party.
If mediation fails, a pre-trial provides the opportunity for court-assisted settlement whereby a judge will assist and encourage the parties to settle.
Certainly, it is always better to be a part of the resolution, which provides a measure of control over costs and other factors. A much more attractive option than the risk involved with having no control over the outcome.
In the last of my series this week on recent trust cases of interest, today’s blog looks at the case of Nolan v. Kerry(Canada) Inc., 2009 SCC 39, [2009] 2 S.C.R. 678. This case provides guidance as to when costs, arising from litigation regarding a pension trust fund, are payable out of the pension trust fund. Though Nolan v. Kerry(Canada) Inc. is a pension case, the analysis might apply to a context where there is a proceeding involving a legitimate uncertainty as to how to properly administer a trust, and/or where there is a trust dispute (whether or not the proceeding is brought by trustees or by beneficiaries).
The issues in Nolan v. Kerry were related to the obligations of an employer under a pension plan for its employees.
The Supreme Court of Canada dismissed the appeal and affirmed the decision of the Ontario Court of Appeal in favour of the respondents, the employer and the Superintendent of Financial Services. The Court of Appeal had declined to award costs to the Employees Pension Committee (the “Committee”) from the trust fund as the unsuccessful party in the litigation.
The Supreme Court of Canada held: “In the end, of course, costs awards are quintessentially discretionary.” The key question on that point was, however, whether the litigation was adversarial or whether it was aimed at the due administration of the pension trust fund. The Supreme Court of Canada found that the rules in both Buckton v. Buckton[1907] 2 Ch.406.and Sutherland v. Hudson’s Bay Co. (2006) would allow a court to award costs out of the fund where there is a legitimate uncertainty as to how to properly administer the trust and where the dispute is not adversarial. Adversarial claims in the context of the Nolan case did not qualify for a costs award from the trust fund. Here, the litigation was adversarial in nature because it was ultimately about the propriety of the employer’s actions and because the Committee sought to have funds paid into the trust fund to the benefit of its members.
In Nolan v. Kerry(Canada) Inc., 2009 SCC 39 the Supreme Court of Canada considered, inter alia, when costs can be awarded out of a trust fund in the context of a pension plan dispute regarding the employer’s obligations. The pension plan contained defined benefit (“DB”) and defined contribution (“DC”) components. The CA Employees Pension Committee (the “Committee”) sought to have funds paid into the pension fund to the benefit of the DB members only.
In considering when costs are payable out of a trust, the Court noted that there were three categories of cases in the wills and estate context: 1) Where trustees apply to a court to construe the terms of the trust deed so that they may determine the proper administration of the trust; 2) similar cases where beneficiaries of the trust apply rather than the trustees; and 3) where a beneficiary makes a claim which is adverse to other beneficiaries of the trust. In the first two cases costs may rightfully be paid from the trust fund. However, costs will not be paid from the fund in cases that fall under the third category.
The key question was whether the litigation was adversarial or whether it was aimed at the due administration of the trust. Adversarial claims did not qualify for a costs award from the trust fund. In Nolan v. Kerry the litigation was adversarial in nature because it was ultimately about the propriety of the employer’s actions and because the Committee sought to have funds paid into the pension fund to the benefit of the DB members only. The employer was successful and there was no reason to penalize it by diminishing the pension fund surplus, thereby reducing its opportunity for contribution holidays.
The Supreme Court of Canada affirmed the decision of the Ontario Court of Appeal in favour of the employer. The Committee was not entitled to its costs out of the pension fund and costs were ordered against it as the unsuccessful party.
In a prior blog by Paul Trudelle, a partner at Hull & Hull LLP, he explained the decision of Rooney Estate v. Stewart Estate (2007). In Rooney Estate v. Stewart Estate, the court highlighted some of the roles the Estate Trustee and the estate solicitor and held responsible for including, among other things, arranging for the funeral and disposition of remains.
Arranging for the funeral and disposition of remains can be burdensome, especially if the estate trustee was related to the Deceased. This task becomes even more daunting when they are dealing with the expenses of a funeral in which case, fewer are in the mood to bargain. Regrettably, this leads many spending more then they have to.
I recently came across an interesting article, How to Cut Funeral Costs, which was published in The Wall Street Journal. Under this article, the author provides us with a few tips on how to keep costs reasonable when arranging a funeral service:
1.Learn your Rights: Funeral homes are prohibited from charging certain fees, and there may be a requirement that compels funeral homes to provide a written fee list upon request
2.Pre-plan: “Have a conversation with your family about what you want and what’s going to be meaningful to them.”
3.Consider pre-owned plots: Purchasing a pre-owned plot has always been a common practice; but the purchaser has moved out of the area where his plot is purchased.
4.Compare Funeral Home Prices: it’s worthwhile to shop around. Prices vary from one home to another
The court had dismissed the application by the charity for a declaration that it was the successor charity, or that it was entitled to the bequest upon the application of the cy-pres doctrine.
The charity requested solicitor and client costs from the estate. The successful residual beneficiaries suggested that the charity should receive no costs at all, or at best, party and party costs. The residual beneficiaries noted that any award of costs would come from their entitlement under the estate, and thus, in effect, the successful parties would be paying the unsuccessful party’s costs.
The court awarded solicitor and client costs to the charity. The court noted that the “dispute” was created less by the parties, and more by the wording used by the testator, which wording “fuelled” the issues. Although the arguments of the charity failed, they were “justified” arguments, and arguments “based on reason”.
In Ontario, the court has made similar costs rulings in circumstances where it can be said that the parties have acted reasonably in bringing the matter before the court. However, a different outcome might result if the court was of the view that one of the parties acted unreasonably.
As noted in past blogs and podcasts, the modern rule that “costs follow the event” also now generally applies to estate litigation. However, as demonstrated by a recent case out of Alberta, there are still instances where an unsuccessful party will not be held responsible for the costs of the successful party and will also recover their own costs from an estate.
In Re Foote Estate, the Deceased’s widow and children had commenced an application for the advice and direction of the Court as to the Deceased’s domicile (i.e. where, legally, the Deceased lived) as well as the validity of a “poison pill” clause in the Deceased’s Will (i.e. a provision disinheriting a beneficiary who challenged the Will). The widow and children wanted to commence support claims against the estate, and were concerned about the poison pill provision. They also realized that the Deceased’s domicile at his death would determine the applicable law with respect to their support claims. The Deceased had been born, raised and ultimately died in Alberta, but he had obtained permanent residency status on Norfolk Island during his life. He also had a significant connection to British Columbia. The widow and children argued that the Deceased had been domiciled in Alberta or British Columbia at the time of his death. The executor and the two residuary beneficiaries (both charities) argued in favour of Norfolk Island. A three-week trial was held and Justice Graesser ruled that the Deceased was domiciled on Norfolk Island, an Australian territory, at the time of his death.
The respondents, as the successful parties, subsequently sought their costs against the applicants, Deceased’s widow and children. The latter, although unsuccessful in their application, sought their costs from the estate, valued at over $100 million.
After a thorough review of the law concerning costs in estate litigation and its application to the case at hand, Justice Graesser ultimately held in his costs decision that the matter clearly fell within the exceptions to the modern rule. Accordingly, the executor and the residuary beneficiaries were not entitled to recover any of their costs from the applicants, the widow and children. As for the applicants, Justice Graesser ruled that this was an appropriate case for them to recover their costs from the estate, as, among other factors, the Deceased’s conduct caused the litigation, the applicants prosecuted the litigation in a diligent and efficient manner and there was no basis to criticize their conduct.
There has been a lot of attention in Ontario lately about the intentions of litigants quarrelling over inheritance. As mentioned in a recent blog this can even happen in advance, in the form of capacity litigation. In recent cases the Court has made it clear that it is incumbent upon not only the parties but on counsel as well to cooperate sufficiently to move the litigation along. At threat of costs payable by the parties or even their solicitors, all concerned are generally expected to work together to come up with a timely litigation management plan to efficiently dispose of the matter.
Recent Ontario decisions illustrate that greed and rivalry amongst family members will not be tolerated in our courts. However, this is by no means exclusive to Ontario. In the B.C. case of Calbick v. Warne we see the same familiar scenario. The testator in this case, the parties’ mother, knew her children would quarrel after her passing but still couldn’t do anything to prevent it.
What more could she have done? In such cases, it might be appropriate to have a family conference to mediate the squabbles prior to death, especially if the testator feels that he or she can have a moderating influence on the family and can explain the reasons behind his or her decisions with the assistance of a professional and neutral mediator. If intentions are understood by the entire family, and if everyone agrees to abide by them in advance of your passing, then they might stay on the same page after your death and there is a reasonable chance of avoiding the fight. Who knows – maybe the rivalry can even be solved once and for all in such an environment. A nice bonus.
Earlier this week I blogged about proportionality, which is now a codified requirement in the Ontario Rules of Civil Procedure. It is a common sense consideration, but unfortunately one that is not all that common in estates litigation where emotions run high and hurt feelings have been building for a lifetime. Be that as it may, litigants be warned, gone are the days when estate litigation was “free” with the expectation that the estate would pay costs for everyone.
As noted in one of my earlier blogs, gone are the days where estate litigants almost automatically were awarded their costs out of the estate. The trend in recent years has adopted elements of the loser- pays philosophy, which has long been applied to other types of litigation.
Moreover, parties in estate matters who conduct themselves in such a manner that serves to protract and unnecessarily increase the costs of litigation can more and more often find themselves penalized with a cost award.
This trend is no more clearly seen than in Teffer v. Schaefers, a recent decision of the Ontario Superior Court of Justice, where an estate trustee was Ordered to personally pay more than half of the legal costs awarded to the various other parties due to his conduct in the litigation.
That said, less than 25% of the aggregate legal costs sought were actually awarded (although I understand further submissions are being made). This result is indicative of another noteworthy trend that we are seeing in estate matters. That is, judges are increasingly exercising their discretion to ensure cost awards are subject to the overriding principle of fairness and reasonableness in light of all the circumstances of each particular case, as well as proportionate to the amount at issue (in addition to being reflective of the factors set out in Rule 57.01(1) of the Rules of Civil Procedure).
This decision should serve as a caution to anyone involved in estate litigation – costs (even to the victor) are not guaranteed!
This week on Hull on Estate and Succession Planning, Ian and Suzana get into specifics regarding costs.
They discuss specific illustrations where motions can arise; both strategic motions and those that can be predicted and look into why costs may be so high.
If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.
This week on Hull on Estate and Succession Planning, Ian and Suzana continue their discussion on the question of costs. Specifically, they discuss the estimated costs when engaging a lawyer.
If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.
The Question of Costs - Part 2 - Hull on Estate and Succession Planning #165
Welcome to Hull on Estates and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag.The podcast you’re listening to will provide information and insights into estate planning in Canada.From the offices of Hull & Hull in Toronto, here are Ian and Suzana.
Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to episode 165 of our podcast on Tuesday, May 19, 2009.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian.How are you today?
Ian Hull: Terrific, thanks.
Suzana Popovic-Montag: That’s good.
Ian Hull: Alright, we’re where the buck stops here in that series of our podcasts in the sense that what’s it really going to cost you financially.We spend a lot of time talking about some of the emotional strains that come from litigation.And we have on Hull Estate Mediation web page we have a brochure that sort of sets out what we call the estimated costs so we’re going to spend some more time talking about the estimated costs.
We started our last podcast talking about this wide discretion the Court has and we finished it with talking about what kind of ranges are we looking at.So we’ve had the first meeting.We’ve decided to do a little bit of exploration.We’re going to do what we call an Order for Directions which is a motion and that’s like our Statement of Claim.And that first stage involves meeting with the client, reading documents and typically preparing for and attending at Court, which again, hourly rates can vary but you’re looking at anywhere between sort of 15 hours of lawyer’s time minimum, minimum to, you know, 30 - 40 hours of lawyer’s time, depending how contentious it gets.
Suzana Popovic-Montag: That’s right.
Ian Hull: So we’ll have got to the point, and let’s just sort of break this down.Phase 1 or stage 1 is client comes to see you to Court Order.And that is the first preliminary Order for Directions.And as we’ve talked about in the past, there’s really actually nothing that’s directly accomplished here except for information gathering.
Suzana Popovic-Montag: Right.
Ian Hull: And we’re only information gathering as far as we can legally.
Suzana Popovic-Montag: Yes.
Ian Hull: Because the Order for Directions opens the door to get the next stage. And let’s talk about then what’s our next stage?So stage 1 is get us from the first meeting to Order for Directions and we estimate, in our booklet we estimate anywhere between, you know, well I’ve talked about the hours but you know you’re probably looking at anywhere between $5,000 - $20,000 of lawyer’s time, and it’s flexible depending on where you are.
Suzana Popovic-Montag: And you know one of the things that I say to my clients is that, you know, when you talk about costs, the only thing I can guarantee is my side of the equation.And if you’ve got a very contentious, difficult counsel on the other side, a matter that should only cost $5,000 can cost $15,000. Not because of anything that you’ve done improperly but because of the fact that you’ve got to respond to the individual whose making it difficult for you.And that’s one of the things that’s the hardest to predict.The costs are hard enough to predict from our end but when you’re dealing with that unknown in terms of how you’ll have to respond to the other side, makes it very difficult to anticipate it.
Ian Hull: It’s so true.You cannot control the other side’s behaviour.And if the other side behaves in a way that costs you money, it costs you money.And unless you want to throw in the towel at that preliminary stage 1, you have to belly up to the bar, as they say.
Suzana Popovic-Montag: And then the next stage, Ian, after we’ve done a preliminary Court attendance and received the authorization and the ability to collect additional documentation outside of the legal parameters that you talked about initially that we would have, we’re looking at getting perhaps the medical records, getting the financial records, getting the solicitor’s notes and so further evidence gathering essentially.
Ian Hull: And really you’ve described this as this is the intense investigation.We are going to get these third party sources of information to support, and we kept coming back to our initial sort of scenario, and that is a Will challenge, where the brother is tired of getting nothing out of the estate, got nothing from parents when they were alive and feels, you know, misdealt a card in terms of the estate because he got written out of the Will.So he’s challenging the Will.The first stage allows him to just be able to get the preliminary story on the table, and then the second stage, which is this stage, is a big part of the intense, third party documentary investigation.And that can take again, I mean you’re looking at, depending on lawyer’s time, clerk’s time and so forth, you’re looking at many, many hours of effort.And from that standpoint, you’re booklet describes it as somewhere between, you know, even guess-timating $5,000 - $60,000.It seems like a strange spread, but like you say, it depends on behaviour, it depends on what documentation you’re going to have to chase and so forth.So you’re looking at big dollars, even at stage 2.
Suzana Popovic-Montag: For sure.And then once you finish that stage, you move on to possibly considering the attendance at a mediation or possibly proceeding to discoveries.And certain jurisdictions will do that in different order.Certain practitioners will choose to do one as opposed to the other at stage 3.But I know we would typically move to mediation if we can, if it’s the right time in the lawsuit and if it seems to be something that is facilitated and amenable to the other side.Now some jurisdictions actually have mandatory mediation and others don’t. But I think in any event, it’s something that people would be well suited to consider after they’ve done that intensive investigation and built their case, or learned their case as best as they can.
Ian Hull: And so again, we’re looking at many hours of time and effort by lawyers and clerks and so forth.And you’re looking at the cost of the mediator himself or herself.So again, you’re book says estimate $10,000 - $50,000.And, you know, estimates - again, wide ranges but will depend on the complexity of the case, the behaviour of the individuals and so forth.
Suzana Popovic-Montag: That’s right.
Ian Hull: Alright, so now the cash register is ringing off the hook…
Suzana Popovic-Montag: That’s for sure.
Ian Hull: and you can see that we haven’t really got that far along in the lawsuit and we’re into the tens of thousands of dollars, depending on the case.There’s obviously lots of war stories or horror stories that we could tell where even this kind of money was way too low.But there’s also cases where we move pretty quickly and efficiently to get to mediation, get the information accessible on a non-contentious and also on a modest cost basis.But good to have the ranges and good to know that we could have spent by now, just on our rough estimates, we could have already spent over $100,000.
Suzana Popovic-Montag: For sure.
Ian Hull: Alright.And that’s just on your side, our side…
Suzana Popovic-Montag: Exactly.
Ian Hull: in that sense.Okay, so the next stage, you said that you could choose to go to mediation or discoveries.And we’ve talked about discoveries and we may talk a bit more about that process.But that’s really the time where you’re on the record with a transcription of everything you say.You get to explain your case away and vice versa, with lawyers around and all of that stuff.Tell me about that kind of cost estimates there.
Suzana Popovic-Montag: Well those costs, Ian, they could range anywhere from $15,000 up to maybe $50,000 - $60,000, depending on how many people are involved, how many lawyers are involved as well.I mean, there could be several lawyers or there could be one lawyer representing a group of individuals.
Ian Hull: Right.
Suzana Popovic-Montag: There’s so many unknowns in that whole process and how it could unfold.But it’s kind of hard to peg it but discoveries tend to be much more expensive than people would expect them to be because of the nature of the process.
Ian Hull: It’s days of preparation, days of organizing documents and days of sitting in a room asking questions.
Suzana Popovic-Montag: Yes.
Ian Hull: And it can be, quite frankly, overwhelming in terms of the cost.
Suzana Popovic-Montag: And there’s also, of course, the motions that can arise as a result of the discoveries, refusals to answer questions or to provide undertakings and that again, you can’t really predict which case that will arise in, but it is a possibility that just adds to the costs.
Ian Hull: For sure.What about interim motions and, first of all, what do I mean by saying that?And second of all, what kind of costs could we be looking at for that?
Suzana Popovic-Montag: Well just the clearest example is a motion for undertakings or a motion to compel answers to refusals.I think that’s one of the motions that can arise at this stage.It may be that at this point in time, depending on the nature of the evidence that’s been provided or the way the conduct of the parties, there might be some relief that you would seek a judge to provide to you in order to be able to continue to build with your case.
Ian Hull: And one of the things you struggle with again on that, and we’ll just wind up our thoughts about that at this point, is the whole question of motions.And so why don’t we do our next podcast coming into that issue of the different kinds of motions that could occur and illustrate the kinds of exploding costs you can get into when it looked like a perfectly normal, simple case at the start.
Suzana Popovic-Montag: Great Ian.I look forward to that podcast.
Ian Hull: That’s a lot.Me too.
Suzana Popovic-Montag: Thank you.
You have been listening to Hull on Estates and Succession Planning by Ian Hull and Suzana Popovic-Montag.The podcast that you have been listening to has been provided as an information service.It is a summary of current issues in estates and estate planning.It is not legal advice and you are reminded to always speak with a legal professional regarding your specific circumstance.
To listen to other Hull & Hull podcasts, or leave any questions or comments, please visit our website at hullestatemediation.com.
There, the Applicant was successful in resisting a motion to dismiss her claim for dependant support. Costs were awarded to the Applicant, payable out of the estate.
After the motion, the Applicant and her lawyer had a falling out, and an issue arose as to who the costs award was payable to: the Applicant or her lawyer.
Henderson J. found that as a general principal, the costs of a proceeding are payable to the litigant, not the lawyer. Entitlement to costs is based on the principle of indemnity, and costs are awarded to a litigant to indemnify the litigant for monies that she may owe to her lawyer or a third party (although the law of costs has been expanded to allow for costs to unrepresented litigants).
Henderson J. held that any dispute between a litigant and her lawyer should not be dealt with in the main proceeding, but should be dealt with in another manner, such as an assessment.
Having said that the costs belong, prima facie, to the litigant, Henderson J. went on to consider whether the Applicant had contracted out of the general principle. The Applicant had signed an irrevocable direction in favour of the lawyer. However, Henderson J. reviewed the direction and found that it was not sufficiently broad to as to apply to the fact situation. Henderson J. held that if the parties wished to contract out of the general principle that the costs of a proceeding belong to the litigant, they must do so by way of a clear, precise written agreement.
Offers to settle and more specifically, Rule 49.10 of the Rules of Civil Procedure, are intended to force the parties in a legal proceeding to consider the settlement of a matter prior to trial failing which, costs consequences will result if an offer is more favourable than the result obtained at the trial.
In the general litigation context, the Ontario Court of Appeal has held that the Court should depart from the prima facie costs consequences in Rule 49.10 only where, after giving proper weight to the policy of the rule and the importance of a reasonable predictability and the even applicability of the rule, the interests of justice require departure.
The applicability of offers to settle and Rule 49 in a Will challenge context has been considered by Judges with different results. In the often quoted case of Olenchuk Estate, Re. the Court found, amongst other things, that it would seem somewhat incompatible with the nature of these proceedings to apply rules designed to encourage settlement of adversarial, contentious, proceedings and when there appears to be a reasonable question whether the deceased was mentally capable of making the Will that is propounded; it imposes an obligation on the Court to be satisfied that the Will was the product of a capable testator before putting on it the imprimatur of the Court. In Olenchuk, the Court further held that Rules designed to encourage settlement of contentious litigation can be applied in estate matters, but the difference between certain kinds of estate litigation and other forms of litigation can make it difficult to apply Rules of Civil Procedure to estate proceedings.
The Ontario Court of Appeal discussed the traditional approach and modern approach to awards of costs in estate litigation in its 2005 decision of McDougald Estate v. Gooderham. The Court found that 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 in its decision applies, to follow the costs rules that apply in civil litigation.
The Court of Appeal noted that “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.”
In a Will challenge, offers to settle, whether informal or formal can be an important tool in regard to the disposition of costs; perhaps more so in light of the approach for costs set out in McDougald v. Gooderham.
In determining whether to litigate, or how far to go with a claim, a paramount consideration must be the costs involved, and the prospect of their recovery or payment.
Recently, I came across a case that highlights the issue. There, a wrongful dismissal matter, the court awarded the employee 2 ½ months’ notice, or $9,166. However, in the costs ruling, the judge noted that the employee’s own costs, according to the employee’s bill of costs, were $14,246. (Actual costs incurred by a client are often in excess of the costs claimed in a bill of costs.) The judge, for various reasons, did not award any costs to any party.
There are a myriad of other examples.
There is also the old joke about the man who said he only went bankrupt twice: once when he lost a lawsuit, and once when he won.
Parties often state that it is the “principle” of the matter that warrants the fight. However, “principles” come with a cost, and this reality must always be kept in mind.
Parties to a piece of litigation must be aware of these costs, and these costs should inform, to a considerable extent, the actions of the parties. Hopefully, all parties will take reasonable approaches in light of the costs of proceeding to court.
This, however, is easier said than done, particularly in the context of estate litigation. Here, emotions are usually close to the surface, and often interfere with reasonable judgment. One of the functions of the litigation lawyer is to attempt to calm these emotions, and to bring a reasoned, objective vision to the table.
"Access to Justice" tends to be a topical issue in the newspapers. The general feeling seems to be that legal costs are spiraling ever upwards to the detriment of the public. Take this article from CanWest News Services.
Few would dispute that litigation costs can sometimes grow rapidly, particularly where the issues are complex or a litigant acts unreasonably. However, it seems to me that for many other legal services, there has actually been a reduction over the years. I am often surprised to find out the legal costs for the average client to: make a Will, buy or sell a house purchase, buy or sell a small business, set up a company or other routine solicitor's work.
I suspect many lawyers, especially sole practitioners, might agree that many of these expenses have actually been reduced for clients over the years. They may even say that the standard of care tends to rise over time, so what was simple forty years ago is more complex today.
I suppose at the end of the day sympathy for lawyers doesn't make for a great news story...
It is often impossible to predict how costs will be decided by the presiding judge at a motion, application, or trial. The Rules of Civil Procedure encourage a judge to fix the costs of the proceeding before him or her. A judge has wide discretion to award costs - discretion that an appeal court will be reluctant to interfere when faced with the issue. With the demise of the infamous cost grid, costs have tended to come down and the court is now largely motivated by deciding what is reasonable in the circumstances and fair to all parties with an eye to the factors listed in Rule 57.01(1).
An interesting case recently released by the Ontario Superior Court of Justice in Rand Estate v Lenton caught my attention. In a relatively rare decision, the court awarded costs against the solicitors for the respondents.
According to the court, the conduct of the solicitors for the respondents caused costs to be incurred without reasonable cause or wasted by undue delay, negligence or default. The solicitors for the respondents systematically engaged in a pattern of inappropriate conduct, including: (1) inordinate and unnecessary delays; (2) bringing numerous and unnecessary motions; (3) being inadequately prepared; (3) failing to appear; (3) disregarding the professional obligation to be civil and courteous to others; (4) presenting arguments that had no merit; (5) acting for the respondents despite having a clear conflict of interest; (6) failing to do anything to resolve the litigation; (7) disregarding court orders; and (8) continuing to produce documents in contempt of a court order. As a result, the court found it appropriate to award costs against the solicitors for the respondents on a substantial indemnity basis to address the costs thrown away by the applicants.
The case, and the laundry list of improper behaviour, is a good reminder to all counsel to think long and hard about tactics and strategy (no case is really worth sullying your own reputation and credibility). Lawyers also need to keep in mind that they are not just mouth pieces for their clients. Counsel should advise their clients of the minimum standard of behaviour, decorum and professionalism expected by the courts. A good way to control your client is to remind him/her that costs can be awarded against a party who makes frivolous claims, or engages in egregious behaviour. Of course, lawyers are clearly not immune from costs and must govern themselves accordingly. If a client refuses to listen or expects you to take a position that will be frowned upon by the court, it is time to get off the record.
Natalia Angelini: Welcome to Hull on Estates, podcast #77 on Tuesday, September 18th, 2007 with Justin de Vries and Natalia Angelini.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills. Now, here are today’s hosts.
Natalia Angelini: Hi Justin, how are you?
Justin de Vries: Good Natalia, this is our first time that we’re podcasting together. We work closely together on a number of files, so it’s nice that we can actually talk on the air, so to speak, about a case. And today, we’re going to talk about costs, which is always a favourite, I think, in the estate world because it’s a little bit less clear, for lack of a better word, than in the normal or general litigation that one comes across. Today, we’re going to talk about the Ukrainian Catholic Episcopal Corporation of Eastern Canada v. Pidwerbecki which was a recent decision of the Ontario Superior Court of Justice. And it talks about costs in the estate context. So Natalia, why don’t you tell us what was going on there.
Natalia Angelini: Sure. Essentially in this case, the church had commenced an application against estate trustees alleging misconduct, one of whom I believe was a lawyer. They were unsuccessful in the application and the respondents naturally sought their costs. And then the church took the position that no costs should be awarded and that the costs request was excessive in any event.
Justin de Vries: A couple of interesting things coming out of this case. First of all, the Court recognized the general principle that reasonable people could reasonably disagree in the estate context. And where that was the case, and perhaps the most common example of that is a Will interpretation. It’s really going to be the estate that pays the costs of the parties. The parties approach the Court and say, we’re not quite sure how to figure out this testamentary document, we need some guidance. If both parties take reasonable positions and advance reasonable arguments, the Courts are going to really blame the mess on the testator or the testatrix and therefore costs are payable out of the estate.
But, of course, that wasn’t the case here.
Natalia Angelini: Right. In this case, the Court found that there was no dispute arising out of any mistake or lack of clarity or default of the testator. Essentially, the applicant had no basis for commencing its application.
Justin de Vries: So what I found interesting about this case, and I did an earlier blog on it, was the fact that the church took the position, and said well, hold on, we are a not-for-profit organization. We clearly bring other value to the community and as such, you shouldn’t award costs against us because the church was unsuccessful in its application. And the judge simply said no, the fact that you’re not-for-profit is not persuasive to me. You should have known better. In particular, the judge said you should have known after discoveries that your case was weak. And it’s a good reminder to counsel as well that what you should do after discovery is take a good, hard look at the case. Because now you know what allegations are made against you, you now know the evidence to support it, you’ve seen your client examined as well. So you need to write that opinion letter to cover off the risks of any trial going forward.
So the judge said, church - what’s good for the goose, is good for the gander, you have to pay costs as well.
Natalia Angelini: So that’s a good point, Justin. I think that reflects the general trend that when you don’t have a good case, you’re going to be penalized most likely by way of a costs Order against you. And we’ve seen it in various estate matters. For instance, in Will challenges, when unjustified allegations are made against a defendant, the plaintiff may be ordered to pay the defendant’s costs. In dependent support claims, successful claimants may even have to bear their own costs, when the Court considers factors that weigh in favour of that result.
And even in passings of accounts, where executors neglect or refuse to furnish accounts, or fail to keep proper records, they can be ordered to pay the costs of the successful beneficiaries.
Justin de Vries: And let’s look what the Court did here. Once the judge determined that costs were to be paid by the estate, the judge approached it as a judge would in any civil litigation matter. First of all, the judge recognized that there were settlement offers made by the respondents, none made by the applicant, which I think had some bearing on the judge. But in any event, in terms of the respondent’s settlement offers, none of them qualified as a Rule 49 offer. And it’s always important if that’s the case, to follow exactly the parameters or provisions of that Rule. But the Court is nevertheless allowed to look at reasonable settlement offers, which they did here. But the Court said great that you made some settlement offers, but it doesn’t persuade me that you should be awarded higher costs on a higher scale that is. And just by way of reminder, we now have partial indemnity costs which generally are 30% to 60% of the costs of litigation. And substantial indemnity, which now is probably anywhere from about 80% to 100%. And the Rules talk about both of those scales. There’s a Notice to Profession which talks about what the maximum rates should be under partial indemnity costs, though it’s not a hard and fast rule. It’s just something that’s put forward. And then specifically for substantial indemnity costs, the Rules actually define substantial indemnity costs as one and a half times the amount that is awarded on partial indemnity. And here the judge almost did an assessment, which is unusual, because the judge looked at the amount of hours clocked by the respondent lawyers, and in certain instances, brought it down. There were two sets of lawyers for the respondents and the judge said at one point, one of the respondent’s lawyers didn’t do as much prep for the trial, didn’t carry the weight of the trial when it was ongoing, and therefore reduced the time. And also looked at the hourly rates that were put forward. As the Court pointed out, $350 is the maximum amount that can be charged for these respondent lawyers under this Notice to Profession. But brought it down to $250 an hour as the multiplying factor because the complexity of the case wasn’t there. The judge says listen, it was hard fought but there wasn’t particularly difficult issues that were brought before the Court.
So it was interesting from my point of view. Again, the judge really almost made an assessment. And often, Courts won’t do that. Judges are very quick to point out they’re not an assessment officer. They don’t get into the nitty gritty. It’s sort of a touchy feely type of process and they try to get at what they think is fair. And they very much rely on Rule 57 and the factors set out in that Rule.
Natalia Angelini: That’s a great point. When making costs submissions, I would really recommend that everyone review Rule 57 and try to address each of the sub-paragraphs and the factors that the Court will consider because that will most likely help in you getting what you’re asking for.
Justin de Vries: And finally, very difficult to appeal a costs award because it’s discretionary. The Court of Appeal or the Divisional Court would be very reluctant to look into that because discretion means just that. It’s up to the trial judge. The Court of Appeal is not going to really replace its view of what the trial judge did when it comes to costs; wide latitude is given. So bottom-line here is if you’re a charity, same rules apply. You better know what you’re doing, you better think long and hard about the costs consequences and finally, on Examinations for Discovery, make sure that a client is given some sort of opinion about the risks so that they know whether they should fold their tent and move on. And certainly what kind of settlement offer they should make and make it a Rule 49 offer. Thanks Natalia.
Natalia Angelini: Thank you Justin.
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Many litigants are disappointed to learn that costs are no longer automatically paid out of an estate. In fact, it is now widely accepted that estate litigation can attract the usual costs consequence. As such, costs are an issue that should be considered by a party before embarking upon estate litigation. Ukrainian Catholic Episcopal Corp. of Easter Canada v. Pidwerbecki, a recent decision of the Ontario Superior Court of Justice, is instructive in this regard.
The respondents were success at trial and sought their costs. The applicant, the Ukrainian Catholic Episcopal Corp. of Easter Canada (the “Church”), argued that no costs should be awarded and that the costs requested were, in any event, excessive.
The court recognized that in estate matters, issues frequently arose upon which “reasonable persons” could “reasonably disagree”. Ambiguity in a testamentary document was cited as one such example. The court held that where there were reasonable grounds for an application, costs should generally be paid by the estate.
However, in the case at hand, there was no dispute arising out of any mistake or lack of clarity or default of the testator. According to the court, the lack of evidence supporting the Church’s position ought to have been apparent from the beginning and certainly at the end of discoveries (a good reminder to counsel to write to clients at the end of discoveries to address the merits of the case). Given the allegations of misconduct, coupled with the lack of evidence, the court held that costs, on a partial indemnity scale, should follow the cause (loser pays the winner).
The fact that the Church was a not-for-profit organization carried no weight with the court. Moreover, even though there was no adversity of interest between the respondents, the court was satisfied, despite the arguments of the Church, that it was reasonable for the parties to be separately represented. The respondents were awarded their separate costs.
