COURT FILE NO.: 58397/18 & 58548/18
DATE: 2019/10/18
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF LESLIE ANDREW SALGA, also known as Leslie Salga, deceased
BETWEEN:
Karen Marley Applicant
– and –
Suzanne Marcela Salga, Michelle Jessica Salga, The Estate of Leslie Salga, and Helmut Klassen, in his capacity as Estate Trustee of the Estate of Leslie Salga Respondents
Sarah Draper, for the Applicant
Julian Cosentino, for the Respondents Suzanne Marcela Salga and Michelle Jessica Salga
Anne Marie DiSanto, for the Respondent Helmut Klassen
AND BETWEEN:
Suzanne Marcela Salga and Michelle Jessica Salga Applicants
– and –
Helmut Klassen and Karen Marley Respondents
Julian Cosentino, for the Applicants
Anne Marie DiSanto, for the Respondent Helmut Klassen
Sarah Draper, for the Respondent Karen Marley
Costs submissions due: July 22, 2019
R. Reid J.
DECISION ON COSTS OF APPLICATIONS
Introduction:
[1] Karen Marley and the late Leslie Salga held title to real property known as 28 Loretta Drive, in Virgil Ontario as joint tenants. In his will, Mr. Salga purported to give Ms. Marley a life interest in his half of the property. Pursuant to the will, Suzanne Marcela Salga and Michelle Jessica Salga, (the “Salga applicants”) are beneficiaries of the residue of Mr. Salga’s estate including Mr. Salga’s interest in the property.
[2] The Estate consists of minimal assets other than the property.
[3] The parties made two applications that were ordered to be heard together, or one after the other, by the Order of Justice Walters dated October 11, 2018.
[4] The Salga applicants sought an order declaring that they were entitled as residuary beneficiaries in the Estate to an undivided half interest in the property. In addition, they sought an order directing the estate trustee, Helmut Klassen, to sell the property and disperse the proceeds of the Estate.
[5] The application by Ms. Marley sought a declaration that she is the sole legal and beneficial owner of the property as the surviving joint tenant. In the alternative, if the Salga application was successful, Ms. Marley sought an order that she is entitled to a percentage ownership of the property in excess of 50 percent.
[6] The estate trustee, Helmut Klassen, took the position that his only interest was in the proper execution of his responsibilities under the will.
Result of the Applications:
[7] For the reasons given in my decision of June 6, 2019 (2019 ONSC 3527), I concluded that the joint tenancy in the Loretta Drive property had been severed and that therefore title to it was held as tenants in common by the Estate and Karen Marley.
[8] Further, I held that Ms. Marley had a life interest in Mr. Salga’s share of the property under the terms of the will. I dismissed the request of the Salga applicants that the trustee should be ordered to sell the property and disburse the Estate’s share of the proceeds.
[9] I dismissed the request by Ms. Marley that she receive an interest greater than half upon the ultimate disposition of the property based on unjust enrichment.
[10] In the event I found that the Estate to be a tenant-in-common of the property, Ms. Marley claimed that the Estate should be responsible for half the cost of capital improvements made or to be made during her period of residence pursuant to the life interest, despite terms of the will which made her responsible for repairs and maintenance. I observed that Ms. Marley was asking that the terms of the will be rewritten to provide greater fairness, and concluded that it is not the function of the court to determine whether the terms of the life interest set out in the will were fair. I found no juristic reason to change the terms and dismissed that claim.
[11] In my decision, I made what I considered to be an uncontroversial observation that the Estate and Ms. Marley would be responsible for encumbrances against the property in existence on the date of death when it is sold. There was some evidence of subsequent encumbrances of the property and I observed that the responsibility for that debt would be determined by the trustee and Ms. Marley at the appropriate time. No order was made in that regard.
[12] In summary, I made an order:
a. declaring that the estate of Leslie Andrew Salga is entitled to an undivided one half interest in the real property municipally described as 28 Loretta Drive, Virgil Ontario as tenant in common with Karen Marley.
b. dismissing the balance of the Salga application.
c. dismissing the Marley application.
[13] I invited the parties to make written costs submissions if no agreement on costs was reached. They have now filed those submissions.
Positions of the Parties:
The Salga Applicants:
[14] The Salga applicants seek a costs order in their favour payable by Ms. Marley in the all-inclusive amount of $12,555.16 (substantial indemnity basis) or in the alternative $9,183.80 (partial indemnity basis).
[15] They rely on the factors of success, the large volume of materials required, the fact that the costs claimed were proportionate to the amount at stake[^1], and the importance of the matter to them.[^2] The issues were narrowed appropriately at the hearing so that the main focus was on the property as opposed to the distribution of and accounting for relatively small personal items.
[16] Although reference was made to an Offer to Settle dated February 26, 2019, that offer was not filed, nor were the terms of it contained in the Salga applicants’ submissions, so I was unable to attach any significance to it.
[17] In reply submissions, the Salga applicants listed 21 separate reasons why substantial indemnity costs should be awarded in their favour. I will not deal with those points further except to say that they were not proper in reply and, in any event, were largely irrelevant to the issue.
Karen Marley:
[18] Ms. Marley requests an award of costs in her favour payable by the Salga applicants or, alternatively, by the Estate in the partial indemnity, all-inclusive amount of $14,032.86. Any costs of the Salga applicants payable by Ms. Marley or the Estate should be reduced due to partial success.
[19] On the issue of partial success, Ms. Marley submitted that while the joint tenancy was found to be severed so that the Estate was half owner of the property, the claim for immediate sale was dismissed. It was very significant to Ms. Marley that she was not forced to move out of the property which had been her matrimonial home.
[20] According to Ms. Marley, the matter was not complex, and the Salga applicants generated a large amount of material, much of which was found to be irrelevant and/or unhelpful.
[21] A consolidation motion was brought by the Salga applicants and subsequently withdrawn after responses had been prepared. A consolidation order had already been granted, so the motion was entirely unnecessary. Costs were reserved to the motions judge. Ms. Marley claims costs of that motion in the all-inclusive sum of $4,352 calculated on a substantial indemnity basis.
[22] Ms. Marley submitted that the Salga applicants’ Offer to Settle was for an order that they receive an undivided half interest in the property. The decision did not award them any interest in the property. Rather, the severance of the joint tenancy entitled the Estate to an undivided half interest.
[23] If costs are to be payable to the Salga applicants, Ms. Marley submitted that they should be paid from the Estate because the basis of the dispute was created by the imprecise actions of the testator in dealing with the issue of title to the property.
Helmut Klassen as Estate Trustee:
[24] Mr. Klassen submitted that a costs award should be made in his favour in the full indemnity, all-inclusive amount of $6,176.69. Those costs should not be payable by him personally, but by the other parties, or by the Estate. He took no position on either application except to defend his actions and he attempted to minimize costs by responding economically to the substantial amount of paper that was generated by the other parties.
[25] Mr. Klassen states that he was always acting pursuant to his obligations under Mr. Salga’s will. He notes that my decision confirms the will should be administered exactly as it is written, which is what he was undertaking to do before the litigation.
[26] He supports the submission of Ms. Marley that the consolidation motion by the Salga applicants was entirely unnecessary based on the pre-existing consolidation order. He further submits that the opposition by the Salga applicants to the change of venue motion brought successfully by Ms. Marley to move the Salga application from Barrie to St. Catharines was unnecessary and resulted in increased costs.
[27] Because the Estate has virtually no liquid assets, Mr. Klassen proposes that any costs payable by the Estate be deferred to the sale of the property.
Analysis and Conclusion:
[28] Although there were two separate applications, the Marley application was in effect a response to that of the Salga applicants, so I am treating the two as one for the purposes of a costs award.
[29] I have considered the factors found in Rule 57.01 of the Rules of Civil Procedure which guide the exercise of my discretion as to costs. That discretion is derived from s. 131 of the Courts of Justice Act.
[30] The Salga applicants achieved partial success. The main point of the application was to secure an order that title to the property did not flow to Ms. Marley by virtue of survivorship under the joint tenancy. In that they were successful. However, they were not successful in the secondary goal of receiving their portion of the estate proceeds without having to await the conclusion of the life interest.
[31] The matter was financially important to the Salga applicants, who otherwise would have received a minimal inheritance. There was no legal complexity: the law applicable to the issue of severance of joint tenancy by course of dealing is well-established, and the key aspect of the application was the application of facts to the law. As I have noted, there was an excess of factual material filed by the Salga applicants. Some of it was inadmissible hearsay, and some of it was simply not relevant to the legal issue.
[32] Although the Salga applicants sought costs on a substantial indemnity basis, there were no circumstances that justify the imposition of that quasi-punitive scale of costs. Therefore, any costs award to the Salga applicants should be on a partial indemnity basis.
[33] There is no basis for imposing a costs obligation on the Trustee, who simply performed his work under the will as required. The bigger question is whether Ms. Marley should be responsible for costs of the Salga applicants.
[34] Ms. Marley was unsuccessful in her defence of the joint tenancy, but successful in being allowed to continue living in the property in accordance with the life interest contained in Mr. Salga’s will. She was not successful in securing an order for the unequal division of the property on sale, or for an order that the cost of capital improvements to the property be shared between her and the Estate.
[35] Ms. Marley had no alternative but to respond in opposition to the Salga applicants. They did not just want an order awarding them (or the Estate) half the value of the property, but also an order that she leave her home. Clearly the matter was important to her, not just financially but to preserve her residential arrangements. As noted above, she incurred legal fees in the partial indemnity amount of $14,032.86.
[36] In the circumstances of the case, including the divided success as between Ms. Marley and the Salga applicants, no costs award is justified in favour of either one against the other.
[37] The final question as to the costs of the Salga applicants and Ms. Marley is whether costs should be ordered payable from the Estate. Normally, the usual litigation rules apply, and the factors found in rule 57.01 guide the exercise of the court’s discretion as to costs as between the parties. Costs against an estate would only be justified in the context of a particular case after viewing the estate as a litigant. A public policy exception may apply when litigation surrounding the terms of a will occurred as a result of the testator’s actions. In effect, the estate may bear the burden of a costs order where the ambiguity litigated was caused by the testator. In this case, although the will was clear, the testator did not take steps during his lifetime to unambiguously sever the joint tenancy. Had he done so, no litigation would likely have been necessary. If required, the life interest could have been dealt with as a discrete issue.
[38] This is a case where the Estate should be responsible for the costs both of the Salga applicants and Ms. Marley, on a partial indemnity basis. The litigation would likely have been unnecessary if the deceased had acted unambiguously regarding title to the property. I acknowledge that since the Salga applicants are the residuary beneficiaries of the Estate, the award in effect makes them responsible for both their own and Ms. Marley’s costs. Obviously, this result is less desirable to them than an order that they and Ms. Marley bear their own costs. However, it places the responsibility for the litigation squarely on Mr. Salga where it belongs.
[39] There will be a costs order that the Estate pay the costs of the Salga applicants in the amount of $9,183.80 and of Ms. Marley in the amount of $14,032.86.
[40] I turn now to the claim for costs by the Estate Trustee. Mr. Klassen responded as modestly as possible on behalf of the Estate. I agree that he had no choice but to attempt to follow the directions contained in the will. The allegations by the Salga applicants that he had failed to properly administer the estate were not supported by the evidence. He had discretion about whether to consider the life interest terminated and made no inappropriate decision either on that matter or as to the distribution of personal effects, despite the challenges of the Salga applicants.
[41] I conclude that the Estate Trustee should have his costs from the Estate. The Trustee was a proper party to the Salga application. He responded appropriately. There is no basis for personal liability. I see no reason why Ms. Marley or the Salga applicants should be responsible for the Trustee’s costs. Further, and as set out above, the root of the dispute was caused by the testator who failed during his lifetime to resolve the ambiguity between the legal title to the property and the terms of his will.
[42] Costs of the Trustee are fixed in the all-inclusive amount of $6,176.69 calculated on a full indemnity basis payable by the Estate.
[43] The costs of the superfluous and unexplained second consolidation motion brought by the Salga applicants is a different matter. Those costs were incurred by Mr. Marley when there was no reason for them. Taking an unnecessary step in litigation is one of the factors influencing the exercise of my discretion under rule 57.01. The circumstances of this case as to the costs of the motion justify a costs award on a substantial indemnity basis.
[44] Ms. Marley submitted a Bill of Costs on a substantial indemnity basis for $4,352 for the motion. There was no separate allocation of costs from the Trustee as to the motion.
[45] Costs of Ms. Marley for the second consolidation motion will be payable by the Salga applicants in the all-inclusive amount of $4,352.
[46] The Trustee sought a deferral of any payment by the Estate until it receives the proceeds of the sale of the property, which would occur after the conclusion of the life interest. In practical terms, since there are minimal assets in the Estate which could fund the costs payments, an order seems unnecessary. However, for the sake of clarity, there will be an order that the costs payable by the Estate to Ms. Marley and the Salga applicants will be payable from the proceeds of the sale of the property.
[47] In summary, there will be a costs order as follows:
• The Estate will pay costs to the Salga applicants in the amount of $9,183.80.
• The Estate will pay costs to Ms. Marley in the amount of $14,032.86.
• The Trustee will have his costs from the Estate in the amount of $6,176.69.
• The Salga applicants will pay costs of the second consolidation motion to Ms. Marley in the amount of $4,352.
• The costs order by the Estate to the Salga applicants and to Ms. Marley will be paid from the proceeds of sale of the property at 28 Loretta Drive, Virgil, Ontario.
Reid J.
Released: October 18, 2019
COURT FILE NO.: 58397/18 & 58548/18 DATE: 2019/10/18
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Karen Marley Applicant
– and –
Suzanne Marcela Salga, Michelle Jessica Salga, The Estate of Leslie Salga, and Helmut Klassen, in his capacity as Estate Trustee of the Estate of Leslie Salga Respondents
AND BETWEEN:
Suzanne Marcela Salga and Michelle Jessica Salga Applicants
– and –
Helmut Klassen and Karen Marley Respondents
DECISION ON COSTS OF APPLICATIONS
Reid J.
Released: October 18, 2019
[^1]: The disputed half interest in the property was said to be worth about $375,000 at the date of hearing, less encumbrances. [^2]: The Estate’s interest in the property was its main asset.