Is an estate trustee entitled to damages arising from a “without merit” notice of objection. “No,” said the Divisional Court in McArthur v. McArthur and Harman, 2019 ONSC 7232.

The Deceased died testate in 2013. His will was made four days before his death and named his sisters – but not his elder brother – as estate trustees and beneficiaries. In 2015, the brother filed a notice of objection to his sisters’ appointment as estate trustee.  He followed up by commencing an action against them. The sisters stated that the notice of objection left them unable to liquidate estate assets to pay a tax debt, causing interest and penalties to be incurred. As such, they counterclaimed for damages arising from their inability to administer the estate due to the notice of objection, including paying the tax debt. In the face of the sisters’ commencing a summary judgment motion on their counterclaim, the brother withdrew his notice of objection at the 11^th hour.

In 2017, the motion judge granted summary judgment in favour of the sisters.  In his Honour’s handwritten reasons, he found  the notice of objection to be “without merit” and “fruitless.” Due to the notice of objection preventing the administration of the estate, the court found that the estate had incurred $26,475.44 in damages in penalties and interest to CRA. The court continued that if it was wrong on its disposition of the summary judgment motion, it would still award these damages in costs (noting that the court had wide discretion in ordering costs).

The brother appealed to the Divisional Court.

Justice Corbett, writing for a unanimous panel of the Divisional Court, noted that there was “nothing inappropriate” in brief handwritten reasons. In fact, Justice Corbett noted, a swift handwritten endorsement was often better then lengthy written reasons in order to avoid court business grinding to a halt. Such brief handwritten reasons should be read generously and practically on appeal.

Nonetheless, after reviewing the trial judge’s reasons, the Divisional Court granted the appeal. Justice Corbett noted that the counterclaim did not disclose a cause of action, holding: “Commencing and pursuing litigation is not an actionable wrong.  Commencing and pursuing losing litigation is not an actionable wrong.  Commencing and pursuing vexatious and frivolous litigation or litigation that is an abuse of process is not an actionable wrong.”

Justice Corbett stated that the above had a qualification (the court’s ability to award costs) and two exceptions (if there is a statutory, regulatory or common law principle that allows for damages or where the tort of abuse of civil process was pleaded).  Since none of the exceptions applied in this circumstance, there was nothing that could attribute estate administration costs (other than legal costs and disbursements) to a party that arose from them bringing estate litigation.

The Divisional Court then turned to the motion judge’s costs award. “Costs” in this context, Justice Corbett wrote, refers to litigation costs, not estate administration costs. As such, the Divisional Court found that the motion judge erred in attributing the interest and penalties to the brother as a cost award.

Aside from interest and penalties, the motion judge had ordered $10,000.00 in litigation costs against the brother. The Divisional Court reduced these costs to $8,000.00 to take into account the successful appeal of the counterclaim and further reduced the costs by $2,000.00 for the brother’s cost of the appeal. As such, the brother only owed the estate trustees $6,000.00.

This case shows that while a notice of objection or a will challenge may snarl the administration of an estate, the mere fact of commencing litigation will not entitle a successful estate trustee to damages. The Divisional Court acknowledged that an estate in litigation had obligations, but noted that parties can seek directions and approval from the court to take necessary steps in respect to the estate administration while litigation is outstanding. The estate trustees’ defence contemplated the appointment of an estate trustee during litigation: had one been appointed in the two year period between the notice of objection and the summary judgment motion, the interests and penalties incurred due to the late filing of the estate taxes, could have been avoided.