ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 10-21122
DATE: 20140707
IN THE ESTATE OF LAWTON GEORGE LOWE, DECEASED
BETWEEN:
GARRY LORNE LOWE, ESTATE TRUSTEE WITH A WILL IN THE ESTATE OF LAWTON GEORGE LOWE, DECEASED
Applicant
– and –
RICK W. LOWE
Respondent
Michael C. Bruder, for the Applicant
Richard P. Startek and K. Morimoto, for the Respondent
HEARD: January 30, 2014, with subsequent written costs submissions
The Honourable Mr. justice Robert B Reid
Costs endorsement
[1] This application concerned the contents of a joint bank account in the names of Lawton Lowe, (now deceased), and his nephew, Rick Lowe. The dispute was about whether the money became estate funds under the control of Lawton Lowe’s personal representative on the date of death, or alternatively was available for distribution by Rick Lowe according to the instructions of the deceased.
[2] In my decision of April 16, 2014, I found that the contents of the bank account did not pass to the estate on the death of Lawton Lowe but that in effect, Lawton Lowe had set up a trust with Rick Lowe as the trustee when he added Rick Lowe as legal title holder to the joint bank account. Lawton Lowe’s granddaughter, his alma mater, and his son Garry were the beneficiaries. As a result, the application was dismissed.
[3] Since the parties were not able to agree on the issue of costs, written submissions were received.
[4] The parties agreed that the respondent should receive an order as to costs flowing from his success in the litigation. Based on the submissions received, there are several other issues to be determined:
a. Should the costs be on a substantial or partial indemnity basis? Was a relevant Rule 49 offer made by the respondent? On a related issue, since Rick Lowe was a trustee who derived no benefit from the administration of the trust, and since he was the successful respondent in the application, should he receive full indemnification for his costs?
b. What is the appropriate quantum of costs? Answering this question includes consideration of proportionality and expectations of the parties and includes a review of applicable hourly rates, time spent and disbursements.
c. From what source or sources should the costs order be paid? Given the insolvency of the estate, should the trust funds otherwise destined for Garry Lowe in his personal capacity be available for the payment of costs?
Scale of Costs:
[5] The parties exchanged various offers during the course of the litigation. The respondent served an offer to settle on January 10, 2014. In it, the applicant was to consent to a dismissal and the parties were to exchange full and final releases as to the application and the operation of the joint bank account. A that point, the granddaughter and school had received funds from the joint bank account but the residue was undistributed. That offer did not provide that any of the monies in the joint bank account would be paid to Garry Lowe. Since my decision identified Garry Lowe as the residual beneficiary of the trust, the offer does not engage the substantial indemnity cost consequences mandated by Rule 49[^1].
[6] Although Rick Lowe derived no financial benefit from his position as joint owner of the bank account with the deceased or from his role as trustee, the law requires that in a situation where one person gratuitously adds another’s name as owner of a bank account with right of survivorship, the transferee must rebut the presumption of resulting trust by proving that it was not the transferor’s intention that the funds from the joint account flow to the estate on the transferor’s date of death[^2].
[7] Obviously Rick Lowe incurred costs in complying with his legal obligation to rebut the presumption of resulting trust.
[8] Our system of civil litigation incorporates a “cost shifting” component pursuant to which a successful party can reasonably expect a contribution to his costs from the unsuccessful party. However, full or even substantial indemnification is not the norm and therefore is not a reasonable expectation. The respondent in this case had the same options available to any other litigant to engage in strategic settlement negotiations and serve Rule 49 offers in an effort to minimize the potential cost consequences of the litigation.
[9] Since I have determined that there is no offer to settle to attract the substantial indemnity scale contemplated by Rule 49, and since there are no other circumstances to justify imposition of the otherwise punitive order of substantial indemnity costs, there will be an order that the applicant pay the respondent’s costs on a partial indemnity scale.
Quantum of Costs:
[10] The respondent has incurred costs in the full indemnity amount of $31,368.80 plus $900.48 disbursements. Based on the applicant’s submission that partial indemnity costs represent about 65% of full indemnity, the costs claim amounts to $20,389.20 plus $900.48 disbursements.
[11] The factors set in Rule 57.01(1) guide my discretion in awarding costs. The applicant emphasizes the issue of proportionality. Related to this factor is the amount of costs that an unsuccessful party could reasonably be expected to pay.
[12] The bank account in question contained about $64,500. Although in my decision of April 16, I questioned whether the amount at stake was enough to justify the time and expense of the litigation, I am not critical of the respondent for having incurred a reasonable amount of costs to defend the application. The respondent’s costs on a partial indemnity basis amount to about a third of the amount claimed. That is not a disproportionate amount.
[13] There is no indication of the amount billed by the applicant’s counsel to the applicant and therefore no reason to conclude that the applicant’s expectations as to the cost consequences of the litigation were different from the partial indemnity amount indicated above.
[14] The applicant submits that the respondent’s bill of costs showed an amount significantly greater than was indicated in the July 31, 2013 draft bill of costs filed in support of the respondent’s motion for security for costs. That observation is correct. However, there is no submission that the hours spent by counsel, particularly junior counsel, since the July 31, 2013 draft was prepared were excessive. The draft bill of costs was prepared for the specific purpose of securing an order for security for costs and the estimate of future costs in itself should not be held against the respondent in reviewing the final bill. In fact, underestimating the cost of litigation may well have worked to the respondent’s disadvantage as to the amount of security ordered.
[15] The applicant has also challenged the full indemnity hourly rate of junior counsel at $250 per hour. I do not find that rate to be excessive. I note that the rate charged by senior counsel at $350 per hour appears very modest in relation to his experience. Similarly, the partial indemnity counsel fee at the hearing of $1,625[^3] did not disclose excessive fees arising from the presence of senior and junior counsel.
[16] The applicant has challenged a $500 file administration disbursement. In response, the respondent has broken down the administrative disbursement into its component parts. I agree with the applicant that it is not appropriate to charge a general disbursement for administration in a significant amount. That is not an appropriate entry on a bill of costs. However, I accept the breakdown provided by counsel for the respondent in reply submissions and find the disbursements charged to be reasonable.
[17] Based on the foregoing, there will be a costs award payable by the applicant to the respondent in the amount of $20,389.20 plus $900.48 disbursements for a total of $21,289.68 inclusive of HST.
Payment of Costs Awarded:
[18] The respondent is entitled to receive the $10,000 paid into court by the applicant as security for costs towards satisfaction of this costs award. The balance payable by the applicant is therefore $11,289.68
[19] An order for a set off of costs incurred by the respondent as trustee against the residue of the trust is appropriate, and was not contested. That residue is $12,414.82 which was to be paid to Garry Lowe. A set off is particularly appropriate in the particular circumstances of this case where the applicant has litigated against the respondent on behalf of what has been said to be an insolvent estate, and where the applicant in his person capacity is the residual beneficiary of the trust.
[20] Although the applicant submitted that the set off should be against the amount of the costs award, I consider it more appropriate to be applied first against the full indemnity costs charged by counsel to the respondent. That conclusion is based on the premise that a trust should indemnify its trustee for costs incurred appropriately in relation to the trust.
[21] The respondent’s full indemnity costs based on the bill of costs filed is $32,269.28. The difference between that total and this partial indemnity costs award is $10,979.60. The set off of $12,414.82 exceeds the difference between full and partial indemnity costs by $1,434.92. That amount will be a credit to the applicant toward the $11,289.68 balance of this award leaving the sum of $9,854.76 owing by the applicant to the respondent.
Summary:
[22] In summary, there will be an order that the applicant pay partial indemnity costs to the respondent fixed in the amount of $21,289.68 inclusive of disbursements and HST. The $10,000 deposit as security for costs is to be paid out of court to the respondent. There will be a set off in the amount of $1,434.92 against the residue of trust funds held by the respondent resulting in a balance owing by the applicant to the respondent of $9,854.76. The respondent is entitled to retain the balance of the trust funds towards his account for legal fees incurred in the defense of the application.
Reid, J.
Released: July 7, 2014
COURT FILE NO.: 10-21122
DATE: 20140707
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GARRY LORNE LOWE, ESTATE TRUSTEE WITH A WILL IN THE ESTATE OF LAWTON GEORGE LOWE, DECEASED
Applicant
– and –
RICK W. LOWE
Respondent
COSTS ENDORSEMENT
Reid, J.
Released: July 7, 2014
[^1]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194
[^2]: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795 at paras. 23 and 24
[^3]: $2,500 x 65%