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Estate Trustees and Costs of Litigation: Try not to take it personally?

Posted by Steve Frye Posted on 29 Aug 2018

In the work I do, I am asked to provide expert testimony to support litigation. In some cases, I am often quite surprised to what extent parties will continue to litigate matters that appear to be “no-wins” or for small dollar amounts. Depending on the circumstances, parties have taken the personal brunt of litigation costs that may far exceed the amount in question, due primarily to their own intransigence.

A recent decision of the Ontario Superior Court illustrates that estate trustees are not personally immune to the vagaries of costly litigation, particularly when it appears to involve imprudent behavior.

Three siblings (Joan, Brian, and John) were trustees of their father’s estate. As estate trustees, Joan and Brian brought an action against their brother John over one asset Joan and Brian alleged was an asset of the estate. The asset in question was a painting by a noted French landscape artist (the “painting”) which was stated to be worth “approximately $30,000”.

In Newlands Estate, 2017 ONSC 7111, the Court ruled in favor of John, determining that the painting was not an asset of the estate and declaring that Joan and Brian were obliged to convey ownership of the painting to John personally upon receipt of $30,000 from John. Notwithstanding the foregoing, in a subsequent application for costs, Newlands Estate, 2018ONSC 2952 Joan and Brian sought a declaration that the painting fell into the residue of the estate, sought damages against John related to his alleged breach of fiduciary duty to the beneficiaries of the estate and negligence and costs of the application from John on a substantial indemnity basis.

In its analysis, the Court noted that almost half a million dollars had been spent on a painting worth, at most, $30,000; the applicants, in their capacities as co-Estate Trustees, and John had spent about 50/50 of the total. At issue on this application was the matter of costs and “on whose dime”.   Further it noted that, before the application was commenced, John, acting on his father’s wishes, had offered to pay the agreed upon value of the painting ($30,000) to the Estate. He also offered to resolve some other issues regarding the administration of the Estate. The applicants did not provide a formal response to this offer.

Reflecting on the foregoing and other facts of the case, the Court concluded that the application was being used by Joan and Brian as a means of expressing some form of vexatious behaviour toward John, for some reason(s) beyond the issue of the painting’s ownership.

Though orders for substantial litigation costs to be paid personally by an Estate Trustee are not common, the Court concluded that John was entitled to costs on a substantial indemnity basis (which meant payment by Joan and Brian personally).

Happy Reading

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