16 May Costs of Estate Litigation: Who Pays?
In estate litigation as in other litigation, the general rule is that costs follow the event.
The general rule in litigation is “loser pays.” A losing party must bear the costs award. In estate litigation, however, if a losing party can establish “exceptional circumstances,” the losing party may be entitled to partial or full reimbursement of costs from the estate.
The general rule that “costs follow the event” should apply in estate litigation.
Moreover, the general rule envisages costs on a party-and-party basis (partial indemnification).
Of course, the general rule is subject to an exceptional category which mirrors and builds upon the policy reasons cited in the jurisprudence.
Throughout history, English courts awarded the costs of all parties to be paid out of the estate where the litigation arose from either these public policy grounds:
(1) an ambiguity or omission in the testator’s will or other conduct of the testator; or
(2) there were reasonable grounds upon which to question the will’s validity.
In the past, it had become “virtually automatic” for Canadian courts of first instance to apply this historical approach in estate litigation.
The Modern Approach
In McDougald Estate v. Gooderham, the court wrote that
“Traditionally, Canadian courts of first instance have followed the approach of the English courts.
While the principle was that costs of all parties were ordered payable out of the estate if the dispute arose from an ambiguity or omission in the testator’s will or other conduct of the testator, or there were reasonable grounds upon which to question the will’s validity, such cost awards became virtually automatic. However, the traditional approach has been displaced. The modern approach to fixing costs in estate litigation is to carefully scrutinize the litigation and, unless the court finds that one or more of the public policy considerations set out above applies, to follow the costs rules that apply in civil litigation.”
As D. M. Brown J. noted in Salter v. Salter Estate (2009), 50 E.T.R. (3d) 227 (Ont. S.C.), at para. 6:
Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation. The “loser pays” principle brings needed discipline to civil litigation by requiring parties to assess their personal exposure to costs before launching down the road of a lawsuit or a motion. There is no reason why such discipline should be absent from estate litigation. Quite the contrary. Given the charged emotional dynamics of most pieces of estates litigation, an even greater need exists to impose the discipline of the general costs principle of “loser pays” in order to inject some modicum of reasonableness into decisions about whether to litigate estate-related disputes
The court must scrutinize the estate litigation. It must find that the one or more of the relevant public policy considerations exists as outlined above. If it reaches that conclusion that public policy grounds listed above in 1 and 2 do not apply, it must follow the costs rules that apply in civil litigation.
The public policy considerations at play in estate litigation are primarily of two sorts: (1) the need to give effect to valid wills that reflect the intention of competent testators; and (2) the need to ensure that estates are properly administered.
In exceptional cases, the probate court may exercise its discretion to depart from the general rule and award costs to an unsuccessful litigant (partial or full). Of course, the exercise of discretion must be effected on a principled basis and, hence, in accordance with the case law.If you wish to discuss your estate litigation matter with our Ontario and Toronto estates lawyer, please contact us at 416 847 1859.