Court File and Parties

COURT FILE NO.: 259/14 DATE: 20181119 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SANDRA KOSTER, KENNETH KOSTER, JAMES LOLAS, KATHLEEN MORTSAKIS and PATRICIA VASSILAKES, Plaintiffs AND: ELIZABETH ANNA KOSTER, Defendant

BEFORE: The Honourable Mr. Justice Robert B. Reid

COUNSEL: D. N. Delagran, Counsel, for the Plaintiffs P. Quinlan, Counsel, for the Defendant

HEARD: October 1, 2018

Judgment as to Costs

Background

[1] George Koster died in June 2014 at the age of 94. He married the defendant, Elizabeth Koster, in 2011. His last will and testament was dated October 4, 2012. Under that will, he made his wife the executor and trustee.

[2] The plaintiffs are nieces and nephews of George Koster. They objected to the appointment of Elizabeth Koster as trustee, alleging that at the time he made his will, George Koster lacked capacity and was subject to undue influence by his wife.

[3] Elizabeth Koster was unsuccessful in a motion for summary judgment in which she requested the dismissal of the application. The summary judgment motion was dealt with by R. J. Nightingale J. on April 27, 2018, reported at 2018 ONSC 2321. A detailed review of the facts and issues in the litigation is contained therein and need not be repeated here. Nightingale J. awarded costs payable by Elizabeth Koster to the plaintiffs in the amount of $20,500 plus HST plus $1,521.35 disbursements.

[4] The parties engaged in mediation and eventually settled the case. The settlement contained the following elements:

• the wills of George Koster dated October 4, 2012, were agreed to be valid;
• the costs award from the summary judgment motion would be paid to counsel for the plaintiffs out of the estate’s capital;
• Elizabeth Koster would resign as trustee of the Varon trust and administration of that trust would be turned over to a person or persons designated by the plaintiffs, and Elizabeth Koster would be released from any claims regarding that trust;
• monies held in trust by Elizabeth Koster for the children of Kenneth and Sandra Koster would be turned over to Kenneth and Sandra Koster or whomever they might designate to hold the monies and pay them out as they see fit, and Elizabeth Koster would be indemnified and released from any claims regarding that trust by Kenneth and Sandra Koster;
• the parties’ entitlement to and quantum of costs of the proceedings is to be determined by a justice of the Superior Court of Justice;
• upon disposition of the costs issue, court actions number 405/15 and 259/14 are to be dismissed; and
• the plaintiffs are to sign a full and final release in favour of Elizabeth Koster personally and Elizabeth Koster as estate trustee of George Koster’s estate.

[5] Submissions were made to the court in this motion for judgment as to the parties’ entitlement to and quantum of costs which, by agreement, needed judicial determination.

[6] As a peripheral matter, the plaintiffs sought clarification about whether the costs award in their favour under the summary judgment motion should be payable by Elizabeth Koster personally or from the George Koster estate.

Positions of the Parties

[7] The plaintiffs seek an order that costs are to be payable to them by the estate on a substantial indemnity basis.

[8] On behalf of the plaintiffs, it was submitted that the settlement was designed to resolve the issue about the validity of George Koster’s last will and testament, thereby sparing Elizabeth Koster the ordeal of a trial. In exchange, there was to be a transfer of trusteeship of the Varon trust, which was established for the benefit of George Koster’s disabled nephew, and the transfer of trusteeship over funds held in trust for the three children of the plaintiffs Kenneth Koster and Sandra Koster.

[9] The defendant seeks a costs award on a substantial indemnity basis payable by the plaintiffs.

[10] Elizabeth Koster submitted that, although not successful in the summary judgment motion, she nevertheless had a very strong case and that the settlement on the substantive matters amounted to virtual capitulation on the plaintiffs’ part. It was submitted on her behalf that, notwithstanding the existence of genuine issues requiring a trial, the plaintiffs had no realistic prospect of success on the merits. The minor and peripheral issues regarding the Varon trust and the funds held for Kenneth and Sandra Koster’s children were not part of the plaintiffs’ claim. Neither the Varon trust fund nor the children’s trust was part of the Koster estate.

Issues and Law

[11] This court must determine whether one party is entitled to costs from the other, or if the estate should be responsible for costs. As well, if costs are payable, the scale and quantum must be determined.

[12] The jurisdiction of the court to order costs is found in s. 131 of the Courts of Justice Act. Rule 57.01(1) of the Rules of Civil Procedure sets out factors to be considered by the court in exercising its discretion as to costs. There is no rule guiding the court on how costs are to be determined where, as in this case, there has been no adjudication on the merits and the parties have settled all issues except for costs.

[13] The current state of the law is that costs in estate litigation are dealt with in the same manner as in other civil litigation, Estate of Donna-Rae Prong, 2011 ONSC 1446, at para. 8; Sawdon Estate v. Sawdon, 2014 ONCA 101, 119 O.R. (3d) 81, at paras. 82-84, which is a change from the former practice that costs in estate proceedings would typically be paid to all parties out of the estate. Now, only where there are public policy exceptions will the estate bear the costs. Those public policy exceptions are: (a) where the dispute arose from ambiguity or difficulty caused by the testator; or (b) where there are reasonable grounds upon which to question the execution of the will or the testator’s capacity in making the will. Sawdon.

Should there be any cost award?

[14] It is clear from s. 131 of the Courts of Justice Act that costs are in the court’s discretion. Where parties reach a settlement, by definition, that resolution is agreeable to them. Despite the extensive submissions of the parties in this case, it is not possible to review a settlement and decide which party was successful or if one was proportionally more successful than the other. The parties urged the court to, in effect, consider the merits of the plaintiffs’ claim and the defendant’s response and, for the purposes of the costs award, make a finding of success accordingly.

[15] The court considered the matter of a settlement in Dhillon v. Dhillon Estate, 2009 ONSC 58607. As in this case, the parties in Dhillon settled all matters between them on the eve of trial except for costs. They referred to the various factors enumerated in rule 57.01(1) which govern the exercise of the court’s discretion as to costs. In a comment that is appropriate to this case, MacKenzie J. observed, at para. 9, that: “A great many of these assertions and arguments, as set out in their written costs submissions, presuppose that the court is now in a position to make factual findings that either support or detract from their respective submissions.” In this case, the parties have engaged in the same exercise twice: once in the summary judgment motion and once before me as to costs. In dismissing the summary judgment motion, Nightingale J. concluded that the material and conflicting evidence were such that he could not make the required findings of fact. He found there to be genuine issues requiring a trial at which the oral evidence of the parties and witnesses could be presented and made subject to cross-examination.

[16] Returning to Dhillon, MacKenzie J. stated, at para. 10, that:

The discretion of the court under s. 131 of the Courts of Justice Act and the factors in rule 57.01(1) of the Rules of Civil Procedure that form the parameters for the exercise of discretion under s. 131 require factual findings relating to the reasonableness or lack of reasonableness and the conduct of each of the litigants. In the absence of such findings, it is problematic in the extreme for the court to exercise its discretion on a rational basis in making any costs award.

[17] In this case, the defendant points to the withdrawal of the key objections made by the plaintiffs, that is, as to the testamentary capacity of George Koster and undue influence by Elizabeth Koster. Those aspects of the settlement support her position that she was successful. The plaintiffs point to the additional terms of the settlement relating to the Varon trust and the funds held for Kenneth and Sandra Koster’s children as indicative of consideration favouring the plaintiffs in the settlement.

[18] By definition, a settlement is a compromise between the litigants’ positions. Also by definition, it is agreeable to all the parties. It is impossible to say with accuracy why any particular settlement was acceptable to one or other of the parties. Put another way, an award of costs is typically grounded in findings by the court as to the parties’ respective success and the impact of their actions during litigation, which are findings not made in the event of a settlement.

[19] In Waterloo North Condominium Corporation No. 161 v. Redmond, 2017 ONSC 1304, Broad, J. was asked to make a decision where, as in this case, Minutes of Settlement following mediation resolved all outstanding issues except costs. He observed, at para. 33, that:

The parties in the present case each invite the court to examine the evidence in the affidavit material and to embark upon a detailed consideration of the merits of their respective claims, with a view to persuading the court that the outcome, as represented by the Minutes of Settlement, vindicated their position and that they acted reasonably, whereas the opposing party acted unreasonably.

[20] Broad J. declined to exercise his discretion to make any order as to costs and endorsed the approach in Dhillon and similar cases, commenting, at para. 34, that:

Moreover to embark upon a full examination and adjudication of the merits of the parties’ respective substantive claims and defences for the sole purpose of determining the question of costs, when those substantive issues have been settled by the parties, would run counter to the principle in McLellan that costs are incident to a determination of the rights of the parties and are not to be made themselves the subject matter of the litigation.

[21] Plaintiffs’ counsel submitted that this court should not be guided by the outcome in cases like Dhillon and Waterloo North because estate cases are of a different nature than general civil litigation. That position can only be correct if the court was to find that there are public policy exceptions such that the estate should bear the costs. Otherwise, as already noted, there is general agreement that costs in estate litigation are to be dealt with in the same manner as in other civil litigation.

[22] I turn then to the question of whether the dispute arose from an ambiguity or difficulty caused by the testator, or whether there are reasonable grounds upon which to question the execution of the will or the testator’s capacity in making the will.

[23] The problem is that a determination on either of those public policy grounds requires a finding of fact every bit as much as I have already considered and rejected regarding the parties’ relative success. For the reasons previously stated, it is not possible to conclude whether there was any fault or lack of capacity on the part of George Koster in executing his will or Elizabeth Koster in her influence over him at that time.

[24] Therefore, for the reasons set out above, there will be no order as to costs of the litigation.

[25] Finally, I will deal with two issues that the parties have suggested require judicial determination even though the issues are not contentious.

[26] The first is the responsibility of the estate for payment of the costs order made following the summary judgment motion by Nightingale J. The case law is clear that, except in unusual circumstances, an executor should be fully indemnified for good faith actions taken on behalf of the estate. Here, there is no suggestion that the summary judgment motion was inappropriate, even though not successful. Therefore, there will be an order that the costs ordered following the summary judgment motion are to be payable from the George Koster estate.

[27] The second issue is to ensure that, by this decision, no impediments remain to the appointment of Elizabeth Koster as estate trustee. Therefore, on consent, it is ordered that any objections filed are dismissed as are any claims made in court files numbered 405/15 and 259/14.

[28] Based on the foregoing result, it appears to me that there also should be no order as to costs of the motion. By the terms of the settlement, both parties agreed to bring the matter to the court for decision. Neither party achieved success. However, if either or both of the parties wish to make additional written submissions on the issue of costs of this motion, they are to make that request to the court, in writing, directed to the trial coordinator in Brantford by no later than November 30. On receipt of that request, I will provide a timetable for submissions. If no request is received by November 30, I will deem the matter to be concluded.

Reid J. Date: November 19, 2018