An estate trustee was successful in litigation in upholding the will. However, due to her conduct before and during the litigation the court nevertheless ordered that she personally bear half of her costs in Bayford v. Boese, 2019 ONSC 6919.
The estate trustee (a friend of the deceased) sought to uphold the deceased’s will but was challenged by the deceased’s brother (the defendant noted that there were two different versions of the will and the estate trustee had only produced one version). Ultimately, the estate trustee was successful at trial. She sought her full indemnity costs from the defendant brother in the amount of approximately $42,000 (all figures in this blog are approximate for ease of reference). In the alternative, she sought a blended costs award where the defendant paid her substantial indemnity costs with the balance paid by the estate.
The court found that there were no grounds to depart from the normal rules principles of litigation and attribute costs to the defendant on an elevated scale. As such, the court ordered that the defendant pay the estate’s trustee’s “litigation and administration costs” on a partial indemnity basis (it is unclear why any administration costs would be attributed to the defendant).
The parties disagreed on the appropriate quantum of the estate trustee’s partial indemnity fees: the defendant argued $26,000, the estate trustee argued that they should be $28,000. The court found that it did not need to engage in a “line-by-line” analysis of the costs as the parties were only $2,000 apart with respect to the quantum of costs. As such, the court fixed partial indemnity costs in the amount of $26,000.
However, the court found that the amount of these costs payable by the defendant should be reduced as the estate trustee did not exercise proper diligence regarding the discovery process. The estate trustee gave different evidence at trial than what she had given on examination but had not corrected her answers on examination pursuant to subrule 39.01(1). Had the estate trustee exercised proper diligence, the court concluded, “the action could have proceeded with greater efficiency and the expenses incurred by the parties would have been less than those actually incurred.” As such, the court reduced the amount of partial indemnity costs the brother had to pay by 50% to a total amount of $13,000.
The court then determined what extent the estate trustee could indemnify herself from the estate for the remainder of the fees. The court set out the relevant test from the Court of Appeal’s decision in Brown v. Rigsby, 2016 ONCA 521:
- An estate trustee is entitled to indemnification from the estate for all reasonably incurred legal costs;
- An estate trustee who acts unreasonably or in his or her own self-interest, is not entitled to indemnification from the estate; and
- An estate trustee who recovers a portion of his or her costs from another party is entitled to indemnification from the estate for the balance of the reasonably incurred costs.
The court noted that the estate trustee had an obligation to manage relevant documents responsibly and it was “entirely of her own doing” that she was unable to produce one of the versions of the will. Had she fulfilled her obligations as estate trustee, the estate administration costs would be less. As such, the estate trustee would have to bear some of her costs personally. As noted, the court had previously fixed partial indemnity costs at $26,000.00 (even though the defendant only had to pay 50% of those costs). The court held that the estate trustee could indemnify herself from the estate for half of the different between that figure and her full indemnity costs. The difference between these figures is $16,000 and, as such, the estate trustee could indemnify herself out of the estate for $8,000 of her costs. In total therefore, of the $42,000 in costs the estate trustee incurred: $13,000 would come from the defendant, $8,000 would come from the estate and the estate trustee would be personally responsible for the remaining $21,000 (i.e. half of her total costs).
This decision is another demonstration of the principle that the ability of estate trustees to indemnify themselves for their legal fees out of the estate is not absolute. Even though the estate trustee had been ultimately successful, her behaviour caused her to personally have to bear half of her costs. Had the estate trustee promptly corrected her answers on examination pursuant to subrule 39.01(1), it is possible that the court would not have imposed as strict a penalty upon her.