COURT OF APPEAL FOR ONTARIO

CITATION: Feinstein v. Freedman, 2014 ONCA 446

DATE: 20140605

DOCKET: C56955 and C56958

Laskin, van Rensburg and Hourigan JJ.A.

BETWEEN

Abraham Feinstein

Applicant (Respondent)

and

Jacob Freedman, Jonathan Freedman, Rose-Anne Freedman-Prizant, Josh Freedman, Michael Freedman, Shira Leah Ben-Choreen Schneck, Rachel Freedman, Joshua Freedman, Eli Freedman, Tal-Or Ben-Choreen, Elishua Ben-Choreen, Joshua Prizant, Sarah Idit Prizant, Samuel Prizant, Joshua Freedman, Adam Freedman, Liat Ben-Choreen and Riva Freedman Rotenberg

Respondents (Respondents)

Application under ss. 3, 5, 16 and 37 of the Trustee Act, R.S.O., 1990, c. T-23 and Rules 10.01, 14.05(3)(a), (b), (c), (d) and (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194;

AND BETWEEN

The Children’s Lawyer, as litigation guardian for Joshua Freedman, Adam Freedman, Samuel Prizant, Asher Freedman, Netta Grace Schneck, Nili Sarit Schneck and Ora Tmemah Aviner

Applicant (Appellant)

and

Jacob Freedman, Rose-Anne Freedman-Prizant, Josh Freedman, Jonathan Freedman, Michael Freedman, Shira Leah Ben-Choreen Schneck, Rachel Freedman Aviner, Joshua Freedman, Eli Freedman, Joshua Prizant, Sarah Idit Prizant, Liat Ben-Choreen, Tal-Or Ben-Choreen, Elishua Ben-Choreen, Riva Freedman Rotenberg and Abraham Feinstein

Respondents (Respondents)

Application under s. 5 of the Trustee Act, R.S.O., 1990, c. T-23 and Rules 14.05, 16 and 17.02(c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

Joseph Y. Obaji, for the appellants Liat Ben-Choreen, Tal-Or Ben-Choreen and Elishua Ben-Choreen

Claire E. Burns and Bianca V. La Neve, for the appellant the Office of the Children’s Lawyer as litigation guardian for Joshua Freedman, Adam Freedman, Samuel Prizant, Asher Freedman, Netta Grace Schneck, Nili Sarit Schneck and Ora Tmemah Aviner

Catherine Francis and Mark Freake, for the respondents Jacob Freedman, Rose-Anne Freedman-Prizant and Josh Freedman

Gregory M. Sidlofsky, for the respondents Michael Freedman, Shira Schneck, Rachel Freedman, Joshua Freedman, Eli Freedman, Joshua Prizant and Sarah Prizant

Peter G. Hagen, for the respondent Abraham Feinstein

Kenneth Radnoff, Q.C., for the respondent Riva Freedman Rotenberg

Jaye Hooper, for the respondent Jonathan Freedman

Heard: January 14, 2014

Released: March 12, 2014

On appeal from the orders of Justice Julianne A. Parfett of the Superior Court of Justice, dated March 18, 2013 and June 2, 2013, with reasons reported at 2013 ONSC 1616 and 2013 ONSC 4420, respectively.

COSTS ENDORSEMENT

A. Introduction

[1] This appeal arises in the context of litigation regarding the proper administration of the Riva Freedman Trust (“RFT”), an inter vivos spousal income trust established by Jarvis Freedman. The trustee of the RFT, Abraham Feinstein, brought an application for directions regarding the appointment of his successor upon his resignation. The Office of the Children’s Lawyer (the “OCL”), supported by Jonathan Freedman and his adult children (being Tal-or Ben-Choreen, Elishua Ben-Choreen, and Liat Ben-Choreen – collectively, the “Ben-Choreen Appellants”), brought a cross-application for the appointment of a sole independent trustee for the RFT.

[2] Justice Parfett dismissed the OCL’s cross-application and ruled that, upon Mr. Feinstein’s resignation, the four children of Jarvis Freedman could appoint replacement trustees, including themselves. With respect to costs, the application judge found that Mr. Feinstein’s application and the cross-application were necessary for the proper administration of the RFT and the Jarvis Freedman Insurance Trust (collectively the “Estate”). Consequently, she ruled that the costs of all parties should be paid out of the Estate.

[3] The OCL and the Ben-Choreen Appellants appealed the order of the application judge. The successful parties on the application and the OCL sought leave to appeal the costs award made by the application judge.

[4] In reasons dated March 12, 2014, the two appeals and the motions for leave to appeal the costs awards were dismissed. The parties were unable to agree on the issue of the costs of the appeals and the motions for leave to appeal, and have filed extensive written submissions.

B. POSITIONS OF THE PARTIES

[5] Jacob Freedman, Rose-Anne Freedman-Prizant, and Josh Freedman (the “Three Siblings”) seek costs on a full or substantial indemnity basis against the appellants and Jonathan Freedman. These respondents submit that costs on a higher scale are warranted given the serious and unfounded allegations of wrongdoing made against them by the appellants and Jonathan Freedman. They have filed a bill of costs claiming total costs of $129,813 on a full indemnity basis and $77,129 on a partial indemnity basis.

[6] Michael Freedman, Shira Schneck, Rachel Freedman, Joshua Freedman, Eli Freedman, Joshua Prizant and Sarah Prizant (the “Freedman/Prizant Grandchildren”) seek costs on a partial indemnity basis, fixed at $25,000, inclusive of disbursements and HST, and payable jointly and severally by the appellants. The amount requested has been reduced by $4,715 to reflect the lack of success of these parties on their cross-appeal.

[7] Riva Freedman Rotenberg seeks costs on a substantial indemnity basis, payable jointly and severally by the appellants and Jonathan Freedman. She has filed a bill of costs claiming total costs of $49,112 on a substantial indemnity basis and $34,576 on a partial indemnity basis.

[8] Mr. Feinstein seeks costs on a substantial indemnity basis payable jointly and severally by the appellants. He has filed a bill of costs claiming total costs of $31,148 on a full indemnity basis, $28,248 on a substantial indemnity basis, and $19,547 on a partial indemnity basis.

[9] Jonathan Freedman submits that the court should order that the costs of Mr. Feinstein be paid by the Estate on a partial indemnity basis and that all other parties should bear their own costs. In the alternative, he submits that if the court awards costs among the parties, he should be awarded his costs of the motions for leave to appeal on a partial indemnity basis, payable by the Three Siblings jointly and severally. He has filed a bill of costs claiming total costs of $20,522 on a full indemnity basis and $12,957 on a partial indemnity basis.

[10] The OCL submits that there was divided success on the appeals, that it was reasonable for it to appeal, and that the Three Siblings and the Freedman/Prizant Grandchildren made unfounded allegations against the OCL and its counsel and, consequently, they should not be awarded any costs. The OCL also submits that Mr. Feinstein and Ms. Freedman Rotenberg did not need to retain counsel because the Three Siblings defended their interests.

[11] The Ben-Choreen Appellants submit that there was divided success and that all parties should bear their own costs, with the exception of Mr. Feinstein, whose costs should be paid by the Estate.

C. Analysis

i. Entitlement to Costs

[12] The first issue is the entitlement to costs. The first consideration as part of this analysis is whether the loser-pays regime should apply or whether costs should be paid out of the Estate.

[13] The loser-pays regime generally applies to estate litigation, such that successful parties are entitled to have their reasonable costs paid by the unsuccessful parties and that costs are usually only payable from an estate where the litigation arose out of the actions of the testator or was reasonably necessary to ensure the proper administration of the estate: McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA), [2005] O.J. No. 2432 (C.A.), at paras. 78, 80, 85, 91; and Vance Estate v. Vance Estate, 2010 ONSC 4944, at para. 4. We found no error in the application judge’s finding that the litigation enured to the benefit of the Estate and in her consequential ruling that costs should be paid from the Estate.

[14] The circumstances extant at the time of the application and cross-application were much different from the circumstances at the time of the commencement of the appeals. At the time of the application and cross-application, there was genuine uncertainty about how a new trustee(s) would be appointed. At the time of the appeals, the uncertainty was gone. The application judge determined the issue and, in so doing, made findings regarding the interpretation of the relevant documentation and the conduct of the parties.

[15] The application judge gave clear direction as to how the appointment process should work. The appellants were entitled to challenge the application judge’s findings and conclusions, but they did so at their own risk. This was no longer an exceptional circumstance where the proceeding was reasonably necessary to ensure the proper administration of the estate. The normal loser-pays regime applies to the appeals and the motions for leave to appeal.

[16] We reject the argument advanced by the OCL that the Three Siblings and the Freedman/Prizant Grandchildren have no entitlement to costs by reason of the allegations made against the OCL and its counsel. We have carefully reviewed the submissions of the parties on the appeal. This was high stakes litigation. Allegations and counter-allegations were levelled. There is obvious distrust among the parties. In this context, the Three Siblings and the Freedman/Prizant Grandchildren in their submissions used unfortunate and somewhat intemperate language. However, those submissions do not cross the line to the point that they disentitle the Three Siblings and the Freedman/Prizant Grandchildren from being awarded their costs as successful litigants.

[17] We also reject the submission of the OCL that Mr. Feinstein and Ms. Freedman Rotenberg did not need to retain counsel because the Three Siblings defended their interests. These parties had interests that were distinct from those of the Three Siblings. They were entitled to have counsel. Mr. Feinstein, in particular, is a well-respected member of the Ottawa legal community. At the very least his competence as trustee was challenged in the appeals. He had a right to defend himself. It should come as no surprise to the OCL that all of the parties affected by the appeals would incur significant legal fees.

[18] The next consideration is whether there was divided success such that no party should be entitled to its costs. While we recognize that there was some measure of divided success, given that both the appeals and motions for leave to appeal were dismissed, the vast majority of the time and effort on the hearing and the written submissions was dedicated to the appeals brought by the OCL and the Freedman/Prizant Grandchildren. Thus, while we are prepared to reduce the amount of costs awarded to the successful parties on the appeals, we are not prepared to order that the parties should bear their own costs.

[19] Jonathan Freedman is in a unique position. He did not appeal the decision of the application judge. He was a respondent on the appeal but supported the position taken by the appellants. His position was akin to that of an intervener. In these circumstances, we find that the appropriate order is for there to be no costs payable by or to Jonathan Freedman.

[20] In summary, we find that the normal loser-pays regime should apply and that the successful parties, being the Three Siblings, the Freedman/Prizant Grandchildren, Mr. Feinstein and Ms. Freedman Rotenberg, are entitled to their costs.

ii. Scale of Costs Payable

[21] The next issue is the scale of costs payable. The presumptive rule is that costs are payable on a partial indemnity basis. That rule is, of course, subject to exceptions that may result in an award of costs on a higher scale.

[22] We reject the argument made by the Three Siblings that costs on a higher scale are warranted because of the allegations of wrongdoing made against them by the appellants and Jonathan Freedman. Again, we do not find that the nature of the allegations crosses the line such that a costs award on a higher scale is warranted.

[23] There is no basis for an award of costs on a substantial indemnity scale to Ms. Freedman Rotenberg.

[24] Mr. Feinstein is in a different position. His involvement in this case results from the execution of his duties as trustee. No doubt he will have a claim against the RFT for any costs not recovered as a result of this costs award. However, it would be inequitable for all of the beneficiaries of the RFT to be forced to pay for a sizable portion of his costs. We conclude, therefore, that costs on a full indemnity basis are warranted for Mr. Feinstein.

[25] The final issue is the quantum of costs to be awarded. The overriding principle in assessing costs is that the award must be fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 24.

[26] In exercising our discretion regarding costs, the general principles enumerated in rule 57.01 are instructive. The most relevant factors here are that the issues raised on the appeal were of tremendous importance to the parties and that the factual and legal issues were complex. None of the parties could have reasonably expected that, if unsuccessful on the appeals, they would not be required to pay significant costs. We note that the full indemnity costs of the OCL were $97,581.

[27] We find that a reduction of the costs awarded to the successful parties should be made to reflect the fact that they were not successful in obtaining leave to appeal the costs award made by the application judge.

[28] The Three Siblings were primarily responsible for responding to the appeals. It is not surprising, therefore, that their costs are the highest claimed. In our view, the costs sought are somewhat excessive in all of the circumstances. We fix their costs at $70,000.

[29] The costs claimed by the Freedman/Prizant Grandchildren of $25,000 are entirely reasonable and shall be so ordered.

[30] We also find the full indemnity costs claimed by Mr. Feinstein in the amount of $31,148 are reasonable and an order will go for their payment.

[31] The costs claimed by Ms. Freedman Rotenberg are excessive. She played a relatively minor role on the appeals and should not be awarded more costs than the Freedman/Prizant Grandchildren. We fix her costs at $20,000.

[32] All amounts awarded are inclusive of fees, disbursements and HST, and shall be payable jointly and severally by the OCL and the Ben-Choreen Appellants.

D. DISPOSITION

[33] We award costs, inclusive of fees, disbursements and HST, payable jointly and severally by the OCL and the Ben-Choreen Appellants, to:

(a) the Three Siblings - $70,000;

(b) the Freedman/Prizant Grandchildren - $25,000;

(c) Riva Freedman Rotenberg - $20,000; and

(d) Abraham Feinstein - $31,148.

“John Laskin J.A.”

“K. van Rensburg J.A.”

“C.W. Hourigan J.A.”