The recent case of Donovan v. MacKenzie, 2021 ONSC 1865 (CanLII) demonstrates the wide and sometimes unpredictable nature of a judge’s discretion when it comes to costs.

In this guardianship dispute, the applicant sister (“Jacqueline”) and the respondent brother (“Kieran”) were embroiled in litigation relating to their father, John Kenneth MacKenzie (“John”). Litigation was commenced in October 2017 by Jacqueline pursuant to the Substitute Decisions Act to be appointed as co-guardian of the person along with her brother, and to have a trust company appointed as her father’s guardian of property. Jacqueline’s application also sought to terminate powers of attorney granted to her brother, Kieran, by their father, John.

Ultimately, section 3 counsel was appointed for John and Kieran was ordered to provide an informal accounting to his sister relating to his management of John’s assets. Jacqueline was not satisfied with the informal accounting and after a series of (informal) objections, a formal application to pass accounts was brought, followed by mediation and extensive cross-examinations on multiple affidavits. The matter was eventually converted into a trial which was estimated to take place over the course of 5-10 days.

However, on November 14, 2019, John died. As such, costs were the sole issue on the motion arising from the guardianship dispute, that was rendered moot before trial by the death of the incapable person.

Kieran sought substantial indemnity costs of $257,342.75 from his sister, and Jacqueline sought her own costs on a partial indemnity basis (following a previous offer to settle), or alternatively, her partial indemnity costs in responding to the costs motion.

At paragraph 17 of the decision, the judge notes: “I am satisfied that “success” is not a tenable approach in this matter for two reasons: 1. The nature of the issues between parties were hard fought, with no judicial fact finding or determination.  Therefore, the court approaches the task of costs on the basis that neither party was successful; and 2. The trend in the authorities is that “success” is not a significant factor in these cases; rather, one examines the nature of the dispute and the conduct of the parties. Cost sanctions in these guardianship disputes should not be personally imposed, provided that it can be said the parties were motivated by the best interests of the person under a disability and did not act in an unreasonable manner…”

In its analysis, the court stated that Jacqueline was motivated by the best interests of her father in the conduct of the litigation, notwithstanding that some of her concerns may have been misplaced, at times. The court also observed that, overall, Jacqueline did not act in an unreasonable manner that led to unnecessary costs (it was noted, however, that Jacqueline made some unfortunate accusations that likely contributed to setting the tone for the acrimonious litigation that ensued, but that the same observation could have been made of certain aspects of Kieran’s conduct as well).

As such, the judge concluded that Jacqueline was not liable for Kieran’s costs, but also that Jacqueline was not entitled to her costs either. In particular, it was held: “I cannot find a principled basis in these circumstances on which to exercise my discretion to find she is entitled to her costs either from the respondent or their father’s estate, under which the respondent is the sole beneficiary. There is no finding that her brother, in fact, breached his obligations under the Substitute Decisions Act. Although I did not find that her conduct was unreasonable to the extent that she is liable to pay her brother the costs of the guardianship applications, I also noted that she is not entirely blameless for the unfortunate litigation that consumed the final years of her father’s life.  The conflicting evidence does not support a conclusion that the respondent was unreasonable in maintaining that the terms of his father’s guardianship should remain in accordance with his father’s expressed wishes.”

In the court’s view, as both parties committed themselves to arguing the issue of costs on moot applications and litigated issues for which there could be no judicial fact-finding, neither party was entitled to their costs from one another.

This unique decision reminds both lawyers and litigants of the highly discretionary nature of costs awards and that sometimes, in most unfortunate circumstances, no one comes out a “winner”.