ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Judy Brown, Brenda Dale and Bruce Shackleton
Lou-Anne F. Farrell, for the applicants
Applicants
- and -
Janet Rigsby and Paul Shackleton
Ondrej Sabo, for the respondents
Respondents
HEARD: March 6, 2015
1This motion relates solely to the issue of costs in relation to estate litigation.
Background Facts
2The applicants and the respondents are five of the six children of the late Blanche Shackleton. Mrs. Shackleton’s sixth child, Mr. Norm Shackleton, is not a party to the litigation.
3The respondents held the power of attorney for their mother and were also appointed as the estate trustees of her estate.
4In August 2008, the applicants brought an application seeking orders compelling the respondents to pass their accounts as attorneys; removing the respondents as executors and replacing them with the applicants or an independent third-party; requiring the respondents to pass their accounts as estate trustees; and requiring the respondents to repay any amounts found to have been improperly received by them and/or pay damages for breach of their fiduciary duties in the amount of $1,000,000.
5The grounds for the application were stated to include the following:
(a) the respondents managed the affairs of Blanche Shackleton using the Power of Attorney until her death. For several years prior to her death, Blanche Shackleton was incapable of managing her affairs;
(b) the applicants have a number of concerns about the handling of their mother’s affairs, including:
(i) Mrs. Shackleton’s assets appear to have been depleted from approximately one million dollars at the time she made her will in 1992 to virtually nothing as at the date of her death;
(ii) a mortgage owing to Mrs. Shackleton on the home of Paul Shackleton appears to have been forgiven by the attorneys for no consideration approximately one week before Mrs. Shackleton’s death;
(iii) another family mortgage, to Mrs. Shackleton’s son Norm for the benefit of his son Tom, was also forgiven by the attorneys;
(iv) the attorneys removed Mrs. Shackleton from her home to the home of the respondent Janet Rigsby. They rented out Mrs. Shackleton’s home and farm but have not accounted for the rent. The applicants also believe that Mrs. Shackleton was charged rent by the respondent Janet Rigsby, which amounted to an improper personal benefit to an attorney.
(v) the contents of Mrs. Shackleton’s home have disappeared and have not been accounted for.
(vi) Assets were placed into jointly held GICs or other securities in the name of the attorneys either by the attorneys in breach of their fiduciary duty, or by Mrs. Shackleton under the influence of the attorneys and when she lacked the capacity to manage her affairs.
6On January 17, 2012, pursuant to the order of Rady J., the issues in the application were to proceed to trial and the proceeding was to be treated as an action.
7The matter was scheduled to proceed to trial on September 29, 2014.
8The matter was settled September 18, 2014.
The Terms of the Settlement
9The applicants made the first offer to settle dated September 5, 2014. It required the respondents to repay to the estate the $10,000 removed for “funeral expenses” and the $10,000 removed for “legal expenses”; and to acknowledge Judith Brown as the sole legal and beneficial owner of the Florida property. This offer also provided that the executor and executrix would be paid their proper executor fees out of the estate. With respect to costs, the offer stated that each party would pay his or her own costs and the application would be abandoned on a without costs basis.
10The respondents did not accept the applicants’ offer and instead made an offer, dated September 12, 2014. They proposed that they receive their executors’ fees; the $10,000 set aside for “funeral expenses” and the $10,000 set aside for “legal expenses” would constitute part of the estate; and they would acknowledge that Judith Brown was the sole legal and beneficial owner of the Florida property. Therefore the respondents agreed with the applicants’ settlement proposal on the substantive issues. However, with respect to costs, the respondents wanted to have their costs paid out of the estate with the applicants being responsible for their own costs.
11The applicants made a further offer to settle on September 15, 2014 with all the same terms and conditions on the substantive issues. With respect to costs, the applicants’ second offer provided that the entitlement of the parties to costs would be determined by the court. This last offer was the basis on which the action was settled.
The Issue on this Motion
12The parties were not able to resolve the issue of costs and the matter proceeded to today’s date for that issue to be determined. As I commented at the hearing of this motion, early in this action – that is, late in 2008, it was agreed between counsel for the applicants and the then counsel for the respondents that a formal passing of accounts would not be pursued because of the expense. It is ironic that over six years later the applicants and the respondents have collectively incurred legal expenses of almost $150,000 which has led to this highly contentious motion and, the differing positions on who should be responsible for paying these legal expenses.
The Respondents’ Position
13The respondents seek an order requiring the applicants to pay their costs on a substantial indemnity basis. Their bill of costs is $74,299.37 prepared on that basis plus HST.
14The respondents’ position is succinctly stated in paragraph 6 of their factum as follows:
It is the respondents’ position that this application, which was issued on August 15, 2008, was a misguided and personally motivated waste of time and money. The applicants should not be permitted to recoup their costs out of the assets of the Estate. The respondents seek their costs from the applicants on a solicitor client basis.
15Mr. Sabo, on behalf of the respondents, vigorously asserted the respondents’ entitlement to costs submitting that the “meat and bones” of the application related to the capacity of Blanche Shackleton and the alleged undue influence of the respondents; there was no serious issue of incapacity, which should have been clear to the applicants early in the action; the applicants’ continued to pursue their claim; there was no basis for the allegations of mismanagement; the claims of impropriety were bogus; the applicants should not be excused from their liability to pay costs because they chose to ignore evidence contrary to their assertions; and the application should have been promptly abandoned (although the respondent’s primary view was that it should never have been made).
16Mr. Sabo was also critical of the applicants seeking records from CCAC in 2014.
17The respondents note that Blanche Shackleton’s sixth child, Norm Shackleton, supports their request for costs as does Ms. Donkers, a friend of Blanche Shackleton.
18The respondents filed the affidavit of Norm Shackleton in which he expressed his full support of the respondents and took the position that the applicants were motivated by “personal reasons. He included his view that the application “had no merit to begin with”. As he further deposed, he is opposed to legal costs being paid out of the estate and effectively out of his share of the estate.
19Ms. Donkers also swore an affidavit in support of the respondents’ position on all issues even though her evidence had been obtained on video at an earlier date in preparation for trial. As previously set out, she expressed her personal views of her friend’s competence, her personal views of the various issues raised on the application and the validity of the applicants’ assertions.
The Applicants’ Position
20The applicants take the position that they are entitled to their costs from the respondents personally on a substantial indemnity basis. Their bill of costs is $80,380.63 prepared on that basis plus HST.
21The applicants’ position is set out in para. 5 of their factum as follows:
(a) there were a number of “red flags” which justified the bringing of this Application;
(b) the respondents’ intransigence with respect to the conduct of this proceeding led to unnecessary delay and costs. The respondents did not agree to a formal passing of accounts, but agreed to provide informal accounting and disclosure. However, the process has been very difficult, with limited and inconsistent information being provided. Rather than making full answer to the applicants’ concerns, information has been produced incrementally, and the applicants have had to continually ask for additional information. For example, they had to bring a motion to get an order to compel the respondent Janet Rigsby to answer her undertakings, and then a contempt motion to enforce that order;
(c) although the amount to be repaid to the estate is modest, the abandonment of the estate’s claim to the Florida property was significant. Overall, the applicants had a real measure of success on the application;
(d) the respondents were fiduciaries who had a duty to account and failed to do so until forced by the applicants through this proceeding. The breach of fiduciary duty justifies an award of costs on a substantial indemnity basis.
22Ms. Farrell, on behalf of the applicants, asserted that it was reasonable to bring the application. In retrospect she acknowledges that the applicants should have insisted on a formal passing of accounts. She emphasized that the respondents are fiduciaries; they have a duty to account; and thus bore the onus of satisfying the applicants that they had fulfilled their fiduciary duties. The applicants, as the beneficiaries, are not obliged to undertake investigations and are entitled to require the respondents to account. She noted that the most serious “red flag” was the discharge of the mortgage one week prior to Blanche Shackleton’s death from a brain tumour, signed by the mortgagor, pursuant to the power of attorney.
23Ms. Farrell stated the applicants believe very strongly that Blanche Shackleton was incapable at the relevant times and as a result the applicants requested the records of CCAC late in 2014. However, as Ms. Farrell acknowledged, the applicants had to accept that the medical records did not corroborate their beliefs of incapacity. As a result this was a significant factor in resolving the action.
24The lack of corroboration of the applicants’ beliefs is readily acknowledged in paragraph 33 of the affidavit of Mr. MacLean sworn in support of the applicants’ position on this motion:
The respondents are correct that there was little if any corroboration of our clients’ evidence re their mother’s capacity in the medical records. However, our position remained that our clients had put forward significant anecdotal evidence of incapacity, and that the absence of references to Mrs. Shackleton’s mental status in her medical records did not necessarily mean she was capable, and could easily have been explained by the fact that Mrs. Shackleton was in extremis and the medical providers were concerned with keeping her alive as opposed to assessing the niceties of her level of cognitive function.
25In addition to submitting that the application was reasonable, Ms. Farrell noted that the respondents had not promptly provided the accounting and disclosure they were obliged to produce as set out in para. 35 of Mr. MacLean’s affidavit:
Once the application was brought, the conduct of the respondents, particularly during the tenure of their first counsel. [In November 2011, the respondents changed lawyers to the counsel who they are now represented by] was obstructive.
Although the respondents superficially acknowledged their duty to account and indicated a willingness to do so, their accounting was woefully inadequate, with limited and inconsistent information being provided. Rather than making full answer to the applicants’ concerns, information has been produced incrementally over a period of 6 years, and only after the applicants had to incur significant legal costs to bring motions and conduct examination.
Relevant Jurisprudence
26The leading decision on costs in estate litigation is the 2005 decision of the Ontario Court of Appeal in McDougald Estate v. Gooderham, 2005 21091 (ON CA), 2005 O.J. No. 2432 (CA), where Gillese, J.A. helpfully set out the following principles at paras. 78 to 85:
The practice of the English courts, in estate litigation, is to order the costs of all parties to be paid out of the estate where the ligation arose a result of the actions of the testator, or those with an interest in the residue of the estate, or where the litigation was reasonably necessary to ensure the proper administration of the estate. …
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 if 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 will’s validity, such cost awards became virtually automatic.
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 that one or more of the public policy considerations set out above applies, to follow the costs rules that apply in civil litigation. …
27I note that an award of costs on a full indemnity basis is awarded in only “rare and exceptional cases to mark the court’s disapproval of the conduct of the party in the litigation” (See Buccilli v. Pillitteri (2012), 2012 CarswellOnt 15064, 2012 ONSC 6624 (Ont. S. C. J.), at para. 2 quoting Orkin, The Law of Costs, 2nd ed. (Aurora: Canada Law Book, 1993)) or where the conduct of a party has been “egregious” and there have been “flagrant breaches” occurring in the administration of an estate (See para. 12. of Gelcer v. Tamari, [2011] O.J. No. 3131).
28The respondents refer to the decision of D. M. Brown, J. as he then was, in Re: Estate v. Brett Salter, in which he stated that the “general costs principle of “loser pays” applies equally to estate litigation”.
29MacKenzie, J. applied the principles in McDougald Estate and Salter Estate in Cordiero v. Sebasiao, (2012) ONSC 2291 (SCJ) and concluded that the beneficiaries’ conduct unnecessarily lengthened and aggravated the pace of the proceedings and he was in default and was therefore obliged to reimburse the estate for the costs awarded against him.
30The respondents also refer to Re: Prong Estate (2011) ONSC 632 (SCJ), where D. J. Gordon, J. found the position of the moving parties, who challenged the validity of a will based on the testator’s capacity, relied solely on a suspicion or belief that was not supported by evidence. He denied the moving parties their costs payable by the estate, and ordered the moving parties to reimburse the estate trustees for full indemnity costs.
Disposition
31It is unfortunate, and it seems to me in hindsight that it has been unnecessary, that significant legal costs were incurred over the past six and one-half years. However, the quantum of costs was not argued on this motion given that each of the claims for substantial indemnity costs were relatively the same. The entire focus of the dispute on this motion was the question of who should pay the costs.
32It is important to bear in mind that this application, ultimately converted to an action, did not relate to a challenge to a will. It began with the request that the attorneys pass their accounts and answer the questions raised by the applicants.
33Section 42 of the Substitute Decisions Act, S.O. 1992 c. 30, provides that a court may order that all or a specified part of the accounts of an attorney of property be passed.
34I have concluded that the commencement of the application was reasonable. I have also concluded that the respondents did not adequately address the reasonable questions of the applicant early in the application.
35I note that one of the respondents, Janet Rigsby, in her affidavit sworn in response to the application on November 6, 2008, deposed at para. 6 that they “never used the power of attorney to manage her [Blanche Shackleton’s] affairs, and only started to control her property after she died”. That statement is not correct in that the two discharges of mortgage which were significant “red flags” for the applicants were signed by the respondents pursuant to the power of attorney.
36I note also that Ms. Rigsby supported her assertion of her mother’s capacity by attaching to her affidavit a letter from Dr. Wahby, who was asked to comment on the capacity of Blanche Shackleton. Dr. Wahby stated in the attached correspondence dated September 28, 2008 that he could “honestly say that during this entire period [1992 until her death in 2007] except maybe the last two months, she was lucent (sic) enough to comprehend what she was doing and what was being done on her behalf”. His last visit with her was March 15, 2007. He noted that there was one reference from the cancer clinic that her memory was faulty in May 2007, but prior to that there was no reference to any significant loss of mental capacity.
37This early disclosure was not particularly helpful because the attorneys signed the two discharges of mortgage in June 2007, a number of months after Dr. Wahby had seen Blanche Shackleton and a number of months after Dr. Wahby was confident about Blanche Shackleton’s capacity.
38I note also that in paragraph 15 of the same affidavit in relation to the questions respecting the discharge of the two mortgages she deposed that it was her mother’s direction to her lawyer Ms. Brown to have the mortgage in favour of Paul discharged. Ms. Rigby stated that: “She [Blanche Shackleton] specifically requested that the mortgage be discharged. Paul was not with her when she made that initial request”. Unfortunately although requested as a “priority” by Ms. Farrell on behalf of the applicants, the notes of Debra Brown were still outstanding in June 2009.
39Overall, the applicants’ questions remain unanswered for a considerable period of time. Undertakings given on cross-examination by the respondents were not fulfilled. The applicants were obliged to bring a motion to compel the satisfaction of undertakings given by the respondents. This motion was resolved on consent; however, a subsequent motion was brought to have the respondent found in contempt because the undertakings remained unfulfilled. This motion was ultimately withdrawn. Thereafter, correspondence and communication with respect to the issue of outstanding undertakings continued.
40Indeed, as Ms. Farrell noted in correspondence to the respondents’ counsel dated December 12, 2012, as of that date the answers to undertakings had not been fully responsive. In particular, she noted the following:
Probably the most significant item that I believe remains outstanding is the request for an accounting of the expenditures listed at Tab F of Janet Rigsby’s affidavit. We have now been trying to get an explanation of these items since the summer of 2008 when that affidavit was delivered. Your clients are fiduciaries and have a duty to account. If we press the point, we would be entitled to a formal accounting in court format. I am trying to be practical and avoid that expense, but we do need more than a stack of bank statements and cheques with no explanation as to the relationship between those documents and the list at Tab F, and without a meaningful explanation for many of the cheques. The expenses in Tab F need to be broken down into the individual expenditures that were made from the larger withdrawals, with that list referenced to the back up documents.
41Ultimately, Ms. Farrell prepared a chart as of October 16, 2013 which outlined 10 categories of outstanding issues and the rationale for her position. She indicated that the issues that were outstanding as of October 16, 2013, were never resolved. However, the applicants chose to settle the litigation and are not pursuing any further inquiries relating to, or challenges of, how the attorneys dealt with Blanche Shackleton’s property.
42In addition to the contentious issues respecting the respondents’ actions as attorneys, there was a contentious issue raised by the respondents regarding property in Florida. Around the time the applicants raised their questions, one of the applicants was alerted to the fact that the estate trustees wished to sell what they considered was Blanche Shackleton’s Florida property and had travelled to Florida and entered the property.
43The respondents asserted that the estate was entitled to ownership of the Florida property, which had been in the names of Blanche Shackleton and Judith Brown. However, the applicants had obtained an opinion from Florida counsel that confirmed that the property had been registered with joint ownership with right of survivorship. As a result, after the death of Blanche Shackleton, Judith Brown was the sole owner of that property.
44As set out in the affidavit filed on behalf of the applicants on this motion, it wasn’t until around the time of the pretrial that there was an indication from the respondents that they might not pursue the claim to the Florida property and the first formal concession on that point was their offer to settle dated September 11, 2014.
45Having reached the conclusion that the commencement, and continuing pursuit of, the application was reasonable I turn next to a consideration of the result of the application and the issue of the entitlement to costs. The applicants chose to resolve the issues on the application pursuant to the terms of their first offer to settle, which ultimately was the basis for the resolution of all the substantive issues. In my view, the resolution of the substantive issues reflects divided success – that is the applicants abandoned their claims in relation to the respondent’s activities as attorneys and estate trustees on the condition that $20,000 would be considered an asset of the estate and the respondents agreed not to pursue a claim on behalf of the estate to the Florida property.
46After considering all of the issues raised on the application, the affidavit evidence filed by the applicants and respondents and the offers to settle, I cannot conclude that one party has been more successful than the other. To use the vernacular, as has been used in some of the cases reviewed above, these are not circumstances where a “loser” should pay.
47In these circumstances I am satisfied that the appropriate order as to costs is an order requiring that each party is responsible for their own costs.
Justice L. C. Leitch
Released: March 30, 2015
CITATION: Brown, Dale and Shackleton v. Rigsby and Shackleton, 2015 ONSC 1777
COURT FILE NO.: 59235
DATE: 2015/03/26
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Judy Brown, Brenda Dale and Bruce Shackleton
- and -
Janet Rigsby and Paul Shackleton
REASONS FOR JUDGMENT
Justice L. C. Leitch
Released: March 26, 2015