In a recent Ontario decision, two brothers were ordered to pay costs in the amount of $60,000 to their sister after failing to agree on the distribution of their parents’ estate, with the court calling their behaviour “reprehensible and outrageous’.
Sister Seeks Costs Against Brothers
In the underlying court decision, the sister had applied to court for directions and other relief respecting the administration of her parents’ estates. The application arose from the inability of the three children to agree on how their parents’ estates should be administered. The estates were worth an estimated $2.8 million.
The sister was successful on her application and the court removed the brothers as co-executors and trustees of the parents’ estates, leaving the sister as the sole estate trustee. Specifically, the court found that the two brothers were unable to exercise their duties in an impartial and objective manner and that the due administration of the estate would have been compromised if they were not removed.
In its underlying decision, the court found that the brothers, to the detriment of the beneficiaries of the estate, had engaged in the following behaviours:
- They had not fulfilled their obligations as co-estate trustees;
- They had preferred their own self-interest;
- They had failed to comply with court orders, even orders made on consent;
- They had refused to take any meaningful steps to facilitate the realization of the estate; and,
- By their conduct, they had brought the administration of the estate to a standstill.
For those and other reasons, the brothers were removed as estate trustees.
The sister subsequently applied to court seeking full recovery of the costs she incurred in her application. The court also had to determined which costs should be paid by the brothers and which costs should be charged to the estate itself.
The sister claimed that she had incurred legal fees in the amount of $93,865 and sought an order that her substantial indemnity costs be paid by the brothers and that the balance of her full indemnity costs be paid by the estates. Specifically, the sister asked that the costs awarded against the brothers be fixed at $71,000.
Court Orders Cost Award Against Brothers
At the outset, the court explained that pursuant to s. 131 of the Courts of Justice Act costs are in the discretion of the court and the overriding objective in a cost award is that it be fair and reasonable.
With respect to estate cases, the court further explained that, as a general rule, estate trustees are entitled to be indemnified for costs reasonably incurred in the administration of the estate and that the “loser pays” costs regime applies to estate matters. Additionally, a blended cost award – in which a portion of the costs is paid by the litigants and a portion from the estate – is within the court’s discretion.
In exercising its discretion, a court must consider the factors set out in Rule 57.01 of the Rules of Civil Procedure. The court explained that the rule’s overall objectiveis to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs.
In this case, the sister asked for substantial indemnity costs from the brothers, which may be authorized under r. 57.01(4)(c) “where the losing party has engaged in behaviour worthy of sanction”.
After reviewing the findings against the brothers in its underlying decision, the court stated:
“The [brothers] both failed in their obligations as estate trustees and… they deliberately interfered with the [sister]’s ability to complete the administration of the estates. But for the conduct of the [brothers], no litigation would have been necessary. Moreover, the [brothers] should have complied with previous court orders made, especially those made on consent. They did not.
In my view, the [brothers’] conduct is worthy of sanction and can be characterized as reprehensible and outrageous. For that reason, I conclude that it is proper for me to exercise my discretion to award costs against the [brothers] on an elevated scale.”
In the result, the court ordered the brothers to personally pay costs to the sister in the total amount of $60,821. It further ordered that the balance of the sister’s costs in the amount of $17,981 be paid from the assets of the parents’ estate.
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