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The “Loser Pays” Cost Construct Remains Alive and Well in Estates Disputes

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The “Loser Pays” Cost Construct Remains Alive and Well in Estates Disputes

By:

Posted April 6, 2021

By way of a recent decision by Justice Sheard of the Ontario Superior Court, litigants in estates disputes are reminded again that the “loser pays” system remains applicable to estates disputes, and the court retains its broad discretion to sanction improper conduct by the parties.

The parties in Dewaele v. Roobroeck, 2021 ONSC 1604, were the beneficiaries and co-estate trustees of the estates of their parents. The applicant had successfully applied to have the respondents removed as co-executors and trustees of the estates, leaving the applicant as the sole estate trustee.

On the issue of costs, Justice Sheard provided a useful review of the law of costs as it relates to estates disputes. After noting that s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that costs are in the discretion of the court, Justice Sheard noted the following:

  • The overriding objective in a cost award is that it be fair and reasonable. What is reasonable is determined by the expectations of the parties, and, in particular, the reasonable expectations of the losing party.
  • The general rule is that estate trustees are entitled to be indemnified for costs reasonably incurred in the administration of the estate.
  • The “loser pays” costs regime applies to estate matters and the court has the discretion to make a blended cost award in which a portion of the costs is paid by the litigants and a portion is paid from the estate.

With these principles in mind, Justice Sheard applied the factors set out in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, in seeking a fair and reasonable cost award.

Justice Sheard noted that substantial indemnity costs are authorized under r. 57.01(4)(c) where the losing party has engaged in behaviour worthy of sanction (citing Davies v. Clarington (Municipality), 2009 ONCA 722) and should only be awarded where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties (citing Young v. Young, 1993 CanLII 34 (SCC)).

Justice Sheard ultimately found that the respondents’ conduct was worthy of sanction and awarded costs on a full-indemnity basis, with the majority of the costs payable by the respondents. In the end, $60,821.50 of the $78,802.63 total costs were ordered paid by the respondents, with only the remaining $17,981.13 to be paid by the estate.

In supporting the decision, Justice Sheard noted that the respondents, to the detriment of the beneficiaries of the estate, had:

  • not fulfilled their obligations as co-estate trustees;
  • preferred their own self-interest;
  • failed to comply with court orders, even orders made on consent;
  • refused to take any meaningful steps to facilitate the realization of the estate;
  • by their conduct, brought the administration of the estate to a standstill; and
  • Deliberately interfered with the applicant’s ability to complete the administration of the estates.

Justice Sheard found the respondents’ conduct to be reprehensible and outrageous.

This decision is an important reminder that the “loser pays” system remains applicable to estate disputes, and that the court maintains its broad discretion and authority to award costs against parties personally, where appropriate.

This blog post was written by Chris McLeod, head of the Commercial Litigation team and a member of the Estate Litigation team.  He can be reached at 613-367-0372 or at christopher.mcleod@mannlawyers.com.

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