As is now clear, the traditional approach in estate litigation that “the costs of all parties are ordered payable out of the estate has been displaced by the modern approach of fixing costs in accordance with civil costs rules, unless the court finds that there are public policy considerations” (McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 (Ont. C.A.). Public policy considerations include where the dispute arises from an ambiguity or omission in the testator’s will or other conduct of the testator, or there are reasonable grounds upon which to question the will’s validity.
The modern approach is noteworthy, and the objective stated, “to restrict unwarranted litigation and protect estates from being depleted by litigation”, timely.
Determination of how the costs pendulum will swing is a matter of judicial discretion, the exercise of which is conferred under s. 141 of the Courts of Justice Act.
It has been said that public policy is an unruly horse. The exercise of discretion in the application of public policy considerations is not unfettered, and some level of prediction as to the application of the governing principles is assumed.
This is of particular importance for trustees. Discretion is not arbitrary, but rather something to be done according to the rules of reason and justice…legal and regular… according to law. (Sharpe v. Wakefield et al, [1891] A.C. 173).
That is why we have appellate courts to ensure that the exercise of discretion is on judicial grounds. When they overturn, they exercise their own discretion in the matter. This does not make the art of prediction any easier.
And this takes us to the Estate of Rosalba Di Nunzio (Di Nunzio v. Di Nunzio, 2022 ONCA 889).
Rosalba made a will naming her daughter Teresa as sole trustee and beneficiary and expressly disinherited her other children, Robert and Lucia. She died from cancer at the age of 80, 20 months later. The court issued Teresa, as executrix, a certificate of appointment with will attached.
Lucia brought an application challenging among other things the validity of the will, based on suspicious circumstances, lack of capacity and undue influence. The application judge, as his reasoning clearly demonstrates, had no difficulty dismissing the application. On appeal, the Court of Appeal embraced his reasoning.
Following the modern approach, the application judge ruled that Teresa was entitled to her costs on a partial indemnity basis, payable by Lucia personally, notwithstanding Lucia’s argument that the problems giving rise to the litigation were caused by Rosalba and that her costs should be paid by the estate. The application judge, without identifying his reasoning, held that no policy considerations applied. In so doing, he exercised his discretion.
On Appeal
Lucia appealed both the ruling on her application and costs. It bears noting that the Court of Appeal agreed with the reasons of the application judge and dismissed the appeal concluding that “there was no basis for intervention by this court”.
The Court of Appeal was effusive in its support of the reasons, finding that the application judge: correctly applied the legal principles, thoroughly considered the evidence in relation to each of Lucia’s arguments, gave compelling reasons for accepting Teresa’s evidence and deservedly found Lucia’s relationship with her family and particularly with her mother “had been tumultuous and difficult for a very long time”.
And no wonder it did so.
The application judge had no difficulty finding on the evidence that at all times Rosalba was alert and aware of her surroundings, able to understand what she was signing and not unduly influenced in any way.
There was detailed reasoning on the existence of previous wills and the reasons for the removal of Lucia, a beneficiary in the earlier wills, from the subject will. The application judge did note that, “at first glance” Rosalba’s decision to leave all of her estate to Teresa, excluding both Lucia and Robert, could be considered as a suspicious circumstance. However, he found in the fullness of the evidence that Lucia’s relationship with her family and particularly her mother had been tumultuous and difficult for a very long time, and she had stolen a significant amount of money from Rosalba, which was never resolved. He found that there was no question that their relationship was seriously damaged.
The application judge being satisfied based on the evidence that the will was executed with the requisite formalities and that Rosalba understood its contents, the onus shifted to Lucia to raise suspicious circumstances surrounding the preparation of the will, Rosalba’s capacity or that her free will was overborne by acts of coercion, and she failed to do so.
Costs
As to costs, the Court of Appeal cited McDougald Estate and the enunciation of the modern approach in estate litigation with approval. However, because the application judge gave no reasons for concluding that no public policy considerations were engaged, it held that no deference was owed to that conclusion, and that as a result, leave to appeal the costs order was granted and the court stood in the place of the application judge to consider the question of costs of the application afresh.
Given the application judge’s findings on the issues of testamentary capacity and validity of the will, the Court of Appeal was not persuaded that the public policy considerations outlined in McDougald Estate were engaged. As a result, there was no basis to order that Lucia’s costs be paid from the estate. This was on all fours with the conclusion of the applications judge. To repeat, the Court of Appeal “was not persuaded that the grounds raised by Lucia rise to the level of public policy considerations that warrant payment of her costs from the estate.”
This result, given the evidence throughout as found by the trial judge and supported by the Court of Appeal, was predictable.
However, citing the application judges’ statement “at first glance” that Rosalba’s decision to exclude both Lucia and Rosalba could be considered as a suspicious circumstance”, Lucia’s issues “were not frivolous and did raise triable issues warranting court scrutiny”. In the circumstances of the case, the Court of Appeal exercised its discretion and set aside the costs order against Lucia, the effect being that Lucia bore her own costs of the application while Teresa’s costs were payable from the estate.
I did not see that coming.
This blog post was written by Heather Austin-Skaret, a Partner in the Real Estate, Wills and Estates, and Estate Litigation teams. Heather can be reached at 613-369-0356 or at Heather.Austin-Skaret@mannlawyers.com.
