In Herold Estate v. Curve Lake First Nation, the Court of Appeal for Ontario varied a costs award to provide that an estate trustee be personally liable for costs.

In July 2014, the Estate of William Albin Herald (the “Estate”) commenced an application claiming ownership of certain islands in the Trent-Severn Waterway (the “Islands”), on the basis that the Islands were part of Lot 35, which was owned by the Estate. The Estate claimed that title to the Islands was not affected by later Crown resolutions which purported to reserve the lands for the Curve Lake First Nation (the “First Nation”). In February 2020, the application judge released his decision in favour of the Estate.

The First Nation successfully appealed this decision to the Court of Appeal for Ontario, and in August 2021, the Estate was ordered to pay costs totalling over $190,000 to the First Nation. The Estate then unsuccessfully applied for leave to appeal to the Supreme Court of Canada, and was ordered to pay the First Nation’s costs of the leave application.

The First Nation was unable to recover their costs from the Estate, as the Estate was without means to pay. The First Nation then moved to vary the costs award to provide that Jeffrey S. Herold, the estate trustee of the Estate, be jointly and severally liable to pay the costs awarded against the Estate.

The First Nation asserted that they discovered, after the costs orders were made, that on May 5, 2015 (after the Application was commenced), Mr. Herold, in his capacity as estate trustee of the Estate, had transferred Lot 35 to himself personally (Mr. Herold was also the sole beneficiary of the Estate).  During the litigation, which continued for another four years, the Estate never disclosed to the First Nation or the court that Lot 35 had been transferred to Mr. Herold and was no longer owned by the Estate.

Rule 59.06(2)(a) of the Rules of Civil Procedure authorize the court to vary an order “on the grounds of fraud or of facts arising after [the order] was made.” To obtain relief under rule, the moving party must show that the circumstances warrant a deviation from the basic principle that orders, unless appealed, are final.

The Court of Appeal declined to vary the costs order of the Supreme Court of Canada for lack of jurisdiction, but varied its own costs award. The Estate had a duty to disclose the Lot 35 transfer, as the Estate’s continuing and current ownership of Lot 35 was the basis for its claim to current ownership of the Islands. Following the transfer, the application ought to have been continued not by the Estate, but by Mr. Herold personally, which would have made him responsible for costs. Mr. Herold could not avoid personal exposure to costs because he pursued the litigation in the name of the Estate, which he was able to do as the estate trustee. In any case, the court had jurisdiction to order a non-party to pay costs, because Mr. Herold had status and was required to continue the application in his own name once Lot 35 was transferred to him; the Estate was no longer the true litigant; and the effect of continuing the application and responding to the appeal on behalf of the estate, which lacked ability to pay costs, insulated Mr. Herold, the true litigant, from costs. It would therefore be unjust for Mr. Herold to be free of cost consequences.

Take Away

While the estate trustee maintained that the transfer of Lot 35 was undertaken for insurance purposes, and at the time of the transfer, there were still assets in the Estate, this did not relieve Mr. Herold of personal liability for costs for improperly litigating on behalf of the Estate after the transfer. A estate trustee cannot litigate his personal interest through the Estate and expect to be shielded from exposure to costs.