Those who practice in the world of estates know that emotions can run high. Estate planning and estate litigation involve relationships and, often, family. And relationships and family are complicated. It can sometimes be hard to be reasonable in the face of difficult emotions. But reasonableness should be a guiding principle for estate trustees and beneficiaries alike. If that warning is not heeded then parties to estate litigation must know that they are potentially vulnerable to a personal costs award. In case anyone needs a reminder of just how significant a personal costs award can be, they can review the recent decision of Toller James Montague Cranston (Estate of), 2021 ONSC 3704 (CanLII) (“Cranston Estate”).
The Cranston Estate was not a simple estate. The deceased died in Mexico without a will. The deceased had significant property in Mexico, including 400 very valuable paintings, over 18,000 “non Toller” art and decorative items and two houses on the same lot. The deceased also had a staff of 6 people. As part of the estate trustee’s duties, the court found that the estate trustee was “required to personally pay the ongoing expenses incurred by Toller’s estate in Mexico, many of which were made in cash, to value and conduct a sale of the 18,000 non Toller items in Mexico, to take the required steps to maintain, sever and sell the two real estate properties in Mexico, to identify, value and divide the 400 original Toller paintings and to package and ship them to Canada.”
The estate trustee was compelled to pass her accounts by two beneficiaries: Guy Cranston and Goldie Cranston (“Guy” and “Goldie” respectively). When the estate trustee did so, Guy and Goldie filed more than 300 objections which they maintained and pursued until the hearing of the passing of accounts. At the hearing, Guy and Goldie dropped more than one-half of their objections. (But waiting until the eleventh hour to narrow the issues did not prevent the estate trustee from responding to the 300 objections and preparing to address all objections at the hearing). In addition to this, Guy and Goldie made serious personal allegations against the estate trustee, alleging that she committed fraud and stole hundreds of thousands of dollars from the estate. The court found that there was no evidence to support those allegations.
In the end, only 5 objections were found to be valid. These 5 objections amounted to approximately $60,000 of improperly paid expenses (of which $50,000 was one accounting error). This was in contrast to the approximately $800,000 which the beneficiaries alleged was improperly paid and/or stolen.
As the successful party, the estate trustee sought $390,602.98 in substantial indemnity costs against Guy and Goldie personally. Guy and Goldie accepted the scale of the costs award (elevated to substantial indemnity given that their allegations of fraud and theft were unsubstantiated). However, they argued that the quantum was not reasonable or proportionate and that they should pay no more than $100,000.
The court disagreed and referred to the summary of the costs principles in estate litigation set out in the decision of Estate of Francoise Poitras v. Canadian Cancer Society, 2021 ONSC 406 (CanLII). One of the costs principles reviewed by the court in the Cranston Estate was the reasonable expectations of the parties. The court noted that the beneficiaries knew their lawyer had spent more than 352 hours on the passing of accounts and that the estate trustee “would be expected to have spent more time to respond to over 300 expense objections”. In fact, the estate trustee’s lawyers spent a bit less: 344 hours. The court also found that the “team approach” of the estate trustee’s lawyers was “an efficient way to divide up the work performed”. That included one lawyer, with civil litigation experience, who acted as lead counsel at the hearing and another lawyer who was present for his extensive estate expertise and experience. Although the court deducted some costs of a law clerk present at the hearing, for the most part the costs claimed by the estate trustee were awarded by the court. In the end, the beneficiaries were ordered to personally pay $325,000 in substantial indemnity costs with the estate bearing the balance of the estate trustee’s costs award.
In estate litigation, all parties should know of the potential risk of a personal costs award and make certain decisions with this knowledge in mind. Otherwise, the court will impose the “loser pays” principle which, in the well-known words of Justice D.M. Brown (in Salter v. Salter Estate, 2009 CanLII 28403 (ON SC)), is necessary to “inject some modicum of reasonableness into decisions about whether to litigate estate-related disputes.”