Holgate v. Holgate, 2015 ONSC 1213
COURT FILE NO.: 12-55701
DATE: 20150226
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
STEPHEN CRAVEN HOLGATE AND JOHN EDWARD HOLGATE
Plaintiffs, Defendants by Counterclaim
– and –
THE ESTATE OF MAY SHEEHAN, THE ESTATE OF JOHN HOLGATE, AND JO-ELLEN VICTORIA BUSS
Defendants, Plaintiffs by Counterclaim
Ronald Petersen/Kyle M. Lambert, for the Plaintiffs, Defendants by Counterclaim
Paul Dancause, for the Defendants, Plaintiffs by Counterclaim
HEARD: Written Submissions
COSTS DECISION
Beaudoin j.
Background
[1] The Plaintiffs sued the Defendants’ for $5 million seeking damages on account of monies they allege were improperly paid to the life tenant, May Holgate (also referred to as May Sheehan) by the trustees of the two trusts established by the testator John Holgate as part of his estate planning.
[2] The trial of this matter commenced on November 25, 2014. After three days of evidence, I invited counsel to consider a motion under Rule 21 to determine a specific question of law: namely, whether the testator’s will and codicil precluded May Holgate from accumulating wealth with the monies received from the trust. In my view, the answer to that question, whether affirmative or negative, would have a profound impact on the main claim brought by the Plaintiffs.
[3] After argument on January 5, 2015, I answered that question in the negative. Following the release of my Decision, the Plaintiffs indicated their intention to appeal and it was agreed that the trial, with regard to the balance of the claims, would be adjourned. That trial will not proceed for some time.
The Defendant’s Position
[4] The Defendants claim that they were wholly successful on the motion. As such, they submit that the normal rule would require the Plaintiffs, as unsuccessful parties, to personally pay their costs. They claim their costs on a full indemnity basis in the total amount of $25,290.76 inclusive of fees, disbursements and HST. This claim is limited to costs of the motion only and the Defendants make it clear that this claim is without prejudice to their ability to claim costs of the entire proceeding (net of the award of costs of the motion) following trial.
[5] The Defendants argue that the result of the motion impacted the entirety of the Plaintiffs’ claims and that this involved a very considerable amount of work and research which is reflected in their Bill of Costs. The motion took an entire half day to argue. The hourly rate for Mr. Dancause in 2014 was $325.00, and in 2015 it is $350.00. The law clerk’s hourly rate was $95.00 for the entire period relevant to the motion.
[6] The Defendants submit that the Plaintiffs currently hold personal assets in the residue of the John Holgate Estate as well as in the net proceeds of the sale of a parcel of real estate held by the May Sheehan Estate. They argue that any order for costs should include a term that the Plaintiffs’ interests in either such estate be charged with payment of the costs award determined by the court.
[7] They further ask that any costs order against the Plaintiffs stipulate that the cost be paid or set-off forthwith, as the determination made by the court effectively disposes of their case entirely.
[8] The Defendants rely on the factors set out in rule 57.01 (1) as follows:
The amount claimed in the amount recovered: The Plaintiffs sought damages of $5 million from the Defendants. The Defendants say that the decision on the motion translates to a nil amount to be recovered by the Plaintiff’s in the main action.
The reasonable expectations of the unsuccessful party: The Defendants point out that the Plaintiffs are both retired or semi-retired professionals, an accountant and a lawyer. They had senior litigation counsel from a large national law firm providing them with advice and counsel. The Defendants maintain that the Plaintiffs could have reasonably expected that the full indemnity costs of the motion claimed by them.
The complexity of the motion: Although not overly complex or novel, the Defendants allege that the question posed to the court did require considerable research into the law in British Columbia and Ontario.
The importance of the issues: The question of law determined by the court was fundamental to the claims brought by the Plaintiffs. As such, the Defendants maintain the issues for critically important to both parties.
Any other matter relevant to the question of costs: The Defendants note that the determination of the question posed to the court shortened the trial considerably as it effectively disposed of the Plaintiffs’ case. They maintain however that the trial could have been shortened further even before it commenced. By e-mail correspondence dated May 9, 2013, one year and six months prior to the date of trial, counsel for the Defendants suggested that a rule 21 question, not very dissimilar to the question that was ultimately put to the court midway through the trial, be put before the motions court ahead of the trial. Counsel for the Plaintiffs chose not to respond whatsoever to that suggestion. The Defendants submit that this refusal contributed to the costs of litigation for both parties very significantly.
[9] The Defendants seeks full indemnity costs and rely on case law[^1] that indicates where parties are sued in their capacities as executors and trustees, the courts will be more willing to award costs on a full indemnity basis since few people would be inclined to accept the offices of the executor and/or trustee if they knew they would have to personally pay costs of litigation should they be sued in that capacity.
[10] Finally, the Defendants argue that this is not the case where costs should be borne by the testator’s estate, generally. They cite a recent trend and Ontario courts to no longer subscribe to the notion that estate litigation costs be paid out of the estate regardless of the circumstances.
[11] The Defendants argue that the Plaintiffs claims were misguided from the outset. They maintain that there was nothing inherently perplexing about the wording in the testator’s will and/or codicil. They submit that the far-reaching language of the will precluded the Plaintiffs claims wherein they sought the total disgorgement of their stepmother’s estate, seeking nothing less than every dollar paid by the trust created by their father as part of his estate plan.
[12] The Defendants rely on the fact that the Plaintiffs were entitled to large sums of money from the UK trust and to equal interests in the large amount of capital left in the Holgate residue trust. They note that the Plaintiffs conceded that May Holgate could have spent all of the income of both trusts during her lifetime as well as the capital of the Holgate residue trust.
[13] The Defendants urge the court to send a strong signal to these litigants in awarding costs against them.
The Plaintiffs’ Position
[14] The Plaintiffs submit that no costs should be awarded on this motion. They submit that the motion was heard at the behest of the court without objection from the successful party.
[15] They rely on my original comment that the costs of the motion would be addressed at the conclusion of the trial. They continue to argue that any costs of the motion should be deferred until the remaining issues of the trial can be addressed. They argue that ordering costs at this juncture will greatly increase the risk of double recovery by the Defendants and that any costs obtained in this motion should be deducted from what would otherwise be awarded to the Defendants on the main claim should they be successful at trial.
[16] The Plaintiffs maintain that they acted reasonably and in good faith in pursuing the interpretation of the will and codicil of their father and that there was a genuine question of law to be determined as exemplified by my Decision. They argue that they did not take any steps which resulted in the delay of the action or in the need for the defendants incur unreasonable costs.
[17] The Plaintiffs urge me to follow the traditional rule in estate matters and order that costs be payable from the estate. They also cite and rely on the decision of the Canada Trust Company v. Edward Douglas Gooderham, 2005 21091 (Ont.C.A.) where the Ontario Court of Appeal indicated in paragraph 79:
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 of 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 wills politically, such costs support became virtually automatic.
[18] The Court of Appeal found at paragraph 80, that the traditional approach had been displaced:
However, the traditional approach has been, – in my view, correctly – displaced. The modern approach to fixing costs in estate litigation is to carefully scrutinize the litigation and, unless the court finds one or more of the public policy considerations set out above applies, to follow the cost rules that apply in civil litigation.
[19] The Plaintiffs submit that the policy consideration of properly interpreting the clause in the will, as was a case in this motion, should be applied and that both sides should be entitled to their costs.
[20] They claim that they were reasonable in agreeing to the motion that was suggested by the court. The Plaintiffs argue that they did not seek to prevent May Sheehan from making any use of any part of their father’s estate or to deprive her in any way. They maintain that the motion was solely about what was to happen with unspent funds following May’s death. They argue that this particular issue was not pursued negligently or with malice.
[21] In the alternative, the Plaintiffs argue that the amount sought by the Defendants is excessive. Even in matters not governed by the traditional rules of costs in estate proceedings, a successful litigant is not entitled to costs as of right. They rely on authority[^2] which stipulates that in certain circumstances the good faith of an unsuccessful party may relieve him from the burden of costs, as long as there was cause for complaint.
[22] The Plaintiffs acknowledge that the effect of the ruling substantially reduces most of the amount claimed by them but there is still an issue to be decided, the misappropriation of a small amount of capital by the trustees from the UK trust. In addition, they point out that the counterclaim of the Defendant is still in existence.
[23] For years leading up to this litigation, the Plaintiffs maintain that they were under the firm and honest belief that May Holgate was preserving their father’s estate because she neither needed it nor wanted its proceeds. To their surprise, they discovered, at the time of her death, that she had changed her own will, thereby depriving them of assets which they believed for years were going to be available to them.
[24] The Plaintiffs maintain that they sought to minimize costs wherever possible. They note that the total amount of time spent by the Defendants’ counsel is a full 14 hours more than the combined time of their counsel. Their own costs are $5000 less.
[25] They conclude that both parties should only receive partial indemnity costs fixed at $9000 plus HST.
Conclusion
[26] While I had originally indicated that costs of the motion would be reserved until the end of trial, the circumstances changed significantly once the Plaintiffs indicated their intention to appeal my ruling and the parties agreed to adjourn the trial of the remaining issues. That trial may not take place for some time. It my view, it is appropriate to deal with costs now. The Plaintiffs do not have to be concerned about a possible double recovery by the Defendants. The trial judge will be able to deal with that issue at the end of the day.
[27] There is no doubt that estate trustees should be fully indemnified for their costs where their conduct and actions are reasonable. Where courts have made that finding, they have often ordered those costs to be paid from the estate.
[28] In this case the Defendants do not seek their costs to be paid from the estate; they seek to have the Plaintiffs pay their costs out of their share of the assets being held for them. This requires the careful scrutiny of the public policy considerations discussed in Gooderham.
[29] The motion involved the interpretation in a clause on the late John Holgate’s will and codicil. The testator used very broad language which came as close as possible to giving an outright gift of his entire estate to his widow save and except for the capital of the UK trust which he preserved for the Plaintiffs.
[30] While the Plaintiffs did have an argument based on a narrow interpretation of some case law, it would have been far more reasonable for them to have responded to the Defendants’ invitation to consider a Rule 21 motion before the litigation reached the state that it did. They ignored that invitation.
[31] I reject the Plaintiffs’ argument that they did not seek to prevent May Sheehan from making any use of any part of their father’s estate nor to deprive her in any way and that their claim solely about what was to happen with unspent funds following May’s death.
[32] Rather than commencing their claim by way of an Application under rule 14.05 (3)(a) or (d), the Plaintiffs commenced these proceedings by way of Statement of Claim seeking $5 Million dollars in damages. Had they sought a Passing of Accounts and had moved for Directions under rule 75.06, the trustees would have become the Plaintiffs.
[33] By reversing this scenario, the Holgate Plaintiffs assumed the burden of proof and this put them in the position of claiming every dollar of trust funds paid out to May Holgate during the approximate 20 years that she survived her husband; unless, the remaining trustee, Jo-Ellen Victoria Buss, could somehow demonstrate their mother had “needed the money.” The Plaintiffs had to prove their case through cross-examination. In the end, they had to concede that May Holgate could spend all of the income and even the capital of the John Holgate Trust; she just couldn’t save any money in her own name. I rejected that argument.
[34] The language of the will and codicil strongly favoured the interpretation adopted by the Defendants and accepted by me. The Plaintiffs should have sought an interpretation of the subject clauses from the very outset and had they done so their position on costs might have been accepted. I find their conduct in delaying that question to be unreasonable. For that reason, costs should follow the normal costs rules that apply in civil litigation.
[35] The Defendants were prepared to debate a Rule 21 motion at the outset and some of their costs would have been incurred in any event. This is not a case for full-indemnity costs, but rather costs on partial indemnity basis which I fix in the all-inclusive amount of $15,000. This amount is to be charged against the assets currently being held for the Plaintiffs in the residue of the John Holgate estate as well as in the May Sheehan estate.
Mr. Justice Robert N. Beaudoin
Released: February 26, 2015
COURT FILE NO.: 12-55701
DATE: 20150226
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
STEPHEN CRAVEN HOLGATE AND JOHN EDWARD HOLGATE
Plaintiffs, Defendants by Counterclaim
-and-
THE ESTATE OF MAY SHEEHAN, THE ESTATE OF JOHN HOLGATE, AND JO-ELLEN VICTORIA BUSS
Defendants, Plaintiffs by Counterclaim
COSTS DECISION
Beaudoin J.
Released: February 26, 2015
[^1]: Furtney v. Furtney, 2014 ONSC 3774, 242 A.C.W.S. (3d) 245; Thompson et al v. Lamport et al, 1945 2 (SCC), [1945] S.C.R. 343; Gerren v. Goodman Estate, 1991 69 (SCC), [1991] 2 S.C.R. 353 and Indemnity of Estate Trustees as applied in Recent Cases, Advocates Quarterly, Vol. 41 2013 at p. 123
[^2]: Orkin, The Law of Costs, 2nd ed. (2012) at pp.2-92 to 2-94