COURT FILE NO.: 18-76912 DATE: 2019/01/11 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: DARYL EARL SELKIRK as Co-Executor of the Estate of Sheila Selkirk Applicant
AND
JAMES LORIS SELKIRK in his personal capacity and his capacity as Co-Executor of the Estate of Sheila Selkirk, SHARON SELKIRK, CAROLYN ROUTLEDGE, LYNWEN PLAMONDON and KELLY LINTON-SELKIRK Respondents
BEFORE: Justice P.E. Roger
COUNSEL: Miriam Vale Peters, Counsel for the Applicant Caitlin Cardill, Counsel for the Respondents
HEARD: Application heard on September 21, 2018, and submissions on costs received by October 12, 2018
COSTS ENDORSEMENT
Introduction
[1] The issue to be decided now is how to deal with the costs of this application.
[2] The applicant brought this application to be appointed the sole estate trustee for the estate of the parties’ mother, who died on November 2, 2017. By her last will, the mother had appointed the applicant and his brother, the respondent James, jointly as estate trustees.
[3] The applicant was the successful party. I ordered James removed as estate trustee, confirmed the appointment of the applicant as estate trustee, and ordered James to provide an accounting of his expenditures of the mother’s funds. Although I was clear that considering the state of the evidence I was not making any definitive findings, and that my decision should not be viewed as a victory or a loss but as an opportunity for this family to finally administer the modest estate of their mother, I generally did not believe James’ explanations, and specifically found that the estate could not be properly executed with James as a trustee because he would then be in a position of conflict of interest regarding the yet unaccounted funds. I also found that the applicant had accounted for his management, demonstrated a plan to properly administer the estate, and that unusual circumstances resulted from the facts; particularly from the ongoing conflict between the trustees resulting from the yet unaccounted funds spent by James, and from the conflict of interest this created.
[4] On the issue of costs, the applicant seeks payment of his costs (1) from the respondent James for the portion representing the applicant’s partial indemnity costs (to be paid out of James’ share of the estate or personally if there are insufficient funds), and (2) from the estate for the balance of the applicant’s costs (for the portion from partial indemnity to complete indemnity).
[5] The respondent James seeks that the costs of each party be paid by the estate. He argues that although he responded unsuccessfully to this application, he acted in the interests of the estate and exercised proper conduct.
[6] The traditional approach to estate litigation, that generally saw costs charged to the estate, was displaced in favour of an approach that sees, as a starting point, the Court treating estate litigation like civil litigation. This means that “the court is to carefully scrutinize the litigation and, unless it finds that one or more of the relevant public policy considerations apply, it shall follow the costs rules that apply in civil litigation.” The public policy considerations are primarily of two sorts: (1) where the difficulties or ambiguities that gave rise to the litigation were caused, in whole or in part, by the testator, and (2) where the litigation was reasonably necessary to ensure the proper administration of the estate. The litigation will not be to ensure the proper administration of the estate if an estate trustee acted unreasonably or in substance for his or her own benefit rather than for the benefit of the estate. As well, as indicated by Brown J. in Salter v. Salter Estate, “the general costs rules for civil litigation apply equally to estate litigation – the loser pays, subject to a court’s consideration of all relevant factors under Rule 57, and subject to the limited exception described in McDougald Estate.” (See Salter v. Salter Estate (2009), 2009 ONSC 28403, 50 E.T.R. (3d) 227, at paras. 5 and 6 by Brown J.; Sawdon Estate v. Sawdon, 2014 ONCA 101, 370 D.L.R. (4th) 686, at para. 84; Brown v. Rigsby, 2016 ONCA 521, 350 O.A.C. 236, at paras. 11-14; Greaves v. Nigro Estate, 2016 ONSC 44; Neuberger Estate v. York, 2016 ONCA 303, 131 O.R. (3d) 143; Woolnough v. Dare, 2016 ONSC 5051, 22 E.T.R. (4th) 168; McDougald Estate v. Gooderham (2005), 2005 ONCA 21091, 255 D.L.R. (4th) 435 (Ont. C.A.)).
[7] Similarly, subject to the discretion of the Court, estate trustees are generally entitled to be fully indemnified by the estate for their reasonably incurred legal costs to the extent that these costs are not recovered from any other person. However, if an estate trustee acted unreasonably or in his or her own self-interest, then he or she is not entitled to indemnification from the estate. Moreover, if an estate trustee recovered a portion of his or her costs from another party, the estate trustee may be entitled to indemnification from the estate for the remaining reasonably incurred costs. (See Brown v. Rigsby, at paras. 11-14).
[8] When considering whether a party acted reasonably, or in his or her own self-interest, I am mindful of the wise comments of Brown J., in Salter, at para. 6 whereby parties “cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation. The ‘loser pays’ principle brings needed discipline… by requiring parties to assess their personal exposure to costs before launching down the road of a lawsuit or a motion.”
[9] When considering the circumstances of this case and the applicable law, I conclude that the following is fair and reasonable:
a) The respondent James pays to the applicant the applicant’s reduced partial indemnity costs in the all-inclusive amount of $8,561.67 out of James’ share of the estate or personally if there are insufficient funds. b) The estate pays the balance of the applicant’s reduced full indemnity costs in the all-inclusive amount of $9,492. c) The estate pays a portion of the respondent James’ costs representing those costs reasonably necessary to ensure the proper administration of the estate in the all-inclusive amount of $9,026.84.
[10] I arrive at the above because:
- the applicant was the successful party, and should be entitled to his costs; and
- public policy considerations dictate that a portion of the costs be paid out of the estate.
[11] The applicant’s full indemnity costs total $20,517.07 ($17,180 in fees, $2,233.40 for HST, and $1,103.67 for disbursements). The respondent James’ full-indemnity costs total $28,407.22 ($27,848.85 in fees, and $558.37 for disbursements).
[12] This application was not complex. The materials are not significant. It was important, but the facts, issues, and the law are simple. The applicant was entirely successful. Offers are not relevant. The costs outline prepared by the respondent confirms that the respondent should have understood that costs could be important. However, this is a relatively modest estate considering that the assets total about $400,000, and that it is to be divided equally between the children.
[13] Consequently, proportionality, fairness, and reasonableness dictate that the applicant’s full indemnity fees be reduced to $15,000. Fees in that amount should have been more than sufficient to review all relevant documents, provide advice to the client, prepare required court documents, and attend on this application. Plus HST and disbursements, the costs of the applicant therefore total $18,053.67.
[14] Considering the circumstances of this case, I find that it was reasonable for the respondent James, a co-trustee, to seek legal advice and counsel about how to respond to his brother’s demands. However, at some point the respondent James should have understood that he needed to respond clearly to his brother’s demands, and provide accounts to support his expenditures. He did not, and did not seek an adjournment of this application to provide clear accounts. Also, I find that the amounts sought for costs by the respondent James are out of proportion and exceed what might be fair and reasonable. I therefore find that the respondent James acted reasonably (and for the benefit of the estate) for amounts representing half of the total indemnity costs of the applicant: $9,026.84 (half of $18,053.67). Thereafter, the respondent James acted in substance for his own benefit relating to the unaccounted funds and his resulting conflict of interest. Consequently, the respondent James may recover from the estate, for his costs, the amount of $9,026.84.
[15] Similarly, for purposes of calculating the amount of costs payable by the respondent James, a portion of the fees incurred by the applicant would have been incurred even if after some reasonable time to seek and obtain legal advice James had decided either to consent or not to oppose this application. In reviewing the applicant’s costs outline, I find that at least $4,000 would have been spent by the applicant regardless. Subtracting that amount from the amount of fees found to be fair and reasonable of $15,000, I arrive at $11,000 in fees incurred by the applicant for the unreasonable conduct of the respondent James. On a partial indemnity basis, the amount of $11,000 is reduced to $6,600. Adding to that amount HST and disbursements, I arrive at partial indemnity costs payable to the applicant by the respondent James in the amount of $8,561.67.
[16] Having found that the applicant acted reasonably to ensure that the estate was properly administered, it follows that he should be indemnified by the estate for the difference between the partial indemnity costs payable by the respondent ($8,561.67), and the applicant’s full indemnity costs as found by this Court ($18,053.67): $9,492.
[17] The above ensures that amounts paid by the estate are fair and reasonable, and related to the proper administration of the estate. It also protects the respondent James by allowing him not to pay directly for costs related to James acting reasonably and not in his own self-interest. It also appropriately focuses on the principle of indemnity. Finally, it provides much needed discipline “to inject some modicum of reasonableness into decisions about whether to litigate estate-related disputes.” (See Salter at para. 6).