COURT FILE NO.: CV-20-82699
DATE: 2020/12/23
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF The Estate of Bote Johannes Viertelhausen
RE: Teresa Viertelhausen, Applicant
AND
William Viertelhausen in his personal capacity and in his capacity as the Estate Trustee of the Estate of Bote Johannes Viertelhausen, Respondent
BEFORE: Justice R. Ryan Bell
COUNSEL: Dorota Turlejski, for the Applicant
Ken Dunham, for the Respondent
HEARD: In writing
costs ENDORSEMENT
Overview
[1] Teresa Viertelhausen (“Teresa”) applied to remove William Viertelhausen (“Bill”) as estate trustee of the estate of Bote Viertelhausen (“Bote”). For reasons set out in my September 29, 2020 endorsement (Viertelhausen v. Viertelhausen, 2020 ONSC 6744), I dismissed Teresa’s application and ordered the immediate return to Bill of the certificate of appointment of estate trustee without a will. Given the attacks levelled against Bill by Teresa, I also ordered Bill to commence an application to pass his accounts as estate trustee within three months.
[2] I invited the parties to make written submissions in the event they were unable to agree on costs. I have received submissions from both parties.
[3] The parties’ submissions raise the following issues:
(i) Should costs to date be deferred to the judge hearing the application to pass the estate trustee’s accounts? This is Teresa’s primary position.
(ii) Who was the successful party on the application? Teresa claims partial success because I ordered a passing of accounts.
(iii) Should any costs payable be attributed to the estate?
(iv) What is the appropriate scale of costs? Bill seeks his costs on a “full indemnity” basis.
(v) What is the appropriate quantum of costs?
[4] Bill was the successful party on the application. For the following reasons, I order that Bill’s substantial indemnity costs in the amount of $48,975.94 be paid by Teresa from her share of the estate.
Litigation History
[5] A review of the history of this litigation explains, in part, the considerable costs incurred by both parties.
[6] In December 2018, Bill was appointed Bote’s guardian for property and personal care. In January 2019, Teresa informed Bill’s lawyers that she had just learned that Bote granted her powers of attorney for property and personal care in May 2017. Teresa was told that Bill had been appointed Bote’s guardian.
[7] In May 2019, Teresa moved to challenge Bill’s appointment as Bote’s guardian on the basis that she had not been given notice of Bill’s application, notwithstanding that she herself was not aware of her alleged powers of attorney. Teresa’s motion did not proceed in September 2019 on the date scheduled because Teresa did not provide her motion materials on time. On September 20, 2019, four days after Teresa served her motion record, Bote died, rendering Teresa’s motion moot.
[8] In October 2019, Bill served his notice of application to be appointed estate trustee on all beneficiaries, including Teresa. Bill was appointed estate trustee on December 4, 2019.
[9] Teresa initiated this application in January 2020. The parties agreed on a procedural timetable, with the application scheduled to proceed to a hearing in June.
[10] On February 14, 2020, without notice to Bill, Teresa obtained an order that required Bill to return his certificate of appointment of estate trustee without a will to the registrar.
[11] Bill wrote to the court requesting an urgent motion date to set aside the February order. On February 25, 2020, MacEachern J. directed that Bill should bring a motion for directions under Rule 75.06 of the Rules of Civil Procedure. Bill did not do so; instead, at the end of April, Bill served his responding application record and a related notice of motion. The parties proceeded to cross-examinations in May. On Teresa’s cross-examination, numerous questions were refused in relation to Teresa’s February 10, 2020 affidavit. After her cross-examination, Teresa served a “reply” affidavit.
[12] On June 3, 2020, the parties proceeded to a case conference before Master Kaufman. Master Kaufman ordered: (i) Teresa’s cross-examination be continued for a further half day; (ii) on consent, two of the affidavits served by Teresa in support of her application be withdrawn; and (iii) “[c]osts of the continued cross-examination of Teresa Ling and of the application to remove William Viertelhausen as guardian (which has become moot) are deferred to the applications judge.” Based on his order and the fact that only Teresa’s cross-examination continued, it is clear that Master Kaufman intended to refer to the costs of Teresa’s continued cross-examination. The June hearing date was vacated and a further case conference was scheduled for July 29, 2020.
[13] At the July 29, 2020 case conference, Master Kaufman ordered that the application be heard on September 29, 2020. At the hearing, I granted Bill’s motion to strike portions of one of Teresa’s affidavits. Teresa opposed the admission in evidence of a reply affidavit on the basis that no notice of motion was served. I ruled that no notice of motion was required because the affidavit was specifically contemplated in the July case conference endorsement. I granted leave given the affidavit’s contents. Teresa did not serve her reply factum in accordance with the timetable order made at the July case conference.
Overview of Teresa’s Allegations
[14] Teresa’s wide-ranging and serious allegations against Bill also account for the substantial costs incurred by the parties.
[15] Originally, Teresa alleged that Bill had committed a fraud upon the court in obtaining his original certificate of appointment and claimed that she had not been served with his notice of application. I found this statement to be untrue. Teresa maintained this position during her cross-examination. Then, in her reply affidavit, Teresa claimed that she did not file an objection due to inadvertence. I found this to be nothing more than a bald allegation.
[16] Teresa claimed that her objection to Bill’s appointment as estate trustee was somehow implied in her motion challenging his guardianship and her requests for fiduciary accounts for Bill’s period of guardianship. Teresa claimed that Bote appointed her power of attorney in May 2017. These allegations necessitated consideration of the circumstances surrounding the creation and discovery of the powers of attorney upon which Teresa relied.
[17] Teresa alleged that Bill was in a conflict of interest because of prior litigation against Bote – an allegation I found to be without merit. The factual context of this prior litigation had to be examined.
[18] Teresa alleged that Bill had acted improperly in the administration of his mother’s estate, another allegation I found to be without foundation. Bill was required to respond to this allegation.
[19] Teresa alleged an animus arising from Bill’s care of Bote. I found that there was nothing in the record to support this suggestion. Bill, however, had to respond to this claim.
Costs Should Not be Deferred
[20] Teresa’s primary position is that “costs to date” should be deferred to the judge hearing the application to pass the accounts of the estate trustee. Teresa provides no rationale for her submission.
[21] The costs of a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid: Courts of Justice Act. R.S.O. 1990, c. C.43, s. 131(1). The court shall devise and adopt the simplest, least expensive, and most expeditious process for fixing the costs of the proceeding: Rule 57.01(7) of the Rules of Civil Procedure. The simplest, least expensive, and most expeditious process is for the application judge to determine and fix the costs of the application following the disposition of the proceeding.
Bill was the Successful Party on the Application
[22] Teresa claims that success on the application was divided because I ordered Bill to pass the accounts for the estate within three months.
[23] I dismissed Teresa’s application to remove Bill as estate trustee and I ordered that his certificate of appointment be returned to him immediately. I ordered a formal passing of accounts because Teresa had made serious and unfounded attacks on Bill. That does not render Teresa partially successful on the application. As I stated in my endorsement, Bill was the successful party.
Teresa is Required to Pay Bill’s Costs
[24] I agree with Bill that Teresa, not the estate, should be liable for his costs.
[25] As the Court of Appeal for Ontario made clear in McDougald Estate v. Gooderham, 2005 21091 (ON CA), [2005] O.J. No. 2432, at para. 80, estates litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime, except in a limited number of circumstances where public policy considerations permit the costs of all parties to be paid out of the estate. The “loser pays” principle brings needed discipline to civil litigation by requiring parties to assess their personal exposure to costs before commencing a lawsuit or initiating a motion. Given the charged emotional dynamics often present in estates litigation, an even greater need exists to impose the discipline of the general “loser pays” principle: Salter v. Salter Estate, 2009 28403 (ON SC), 2009 CarswellOnt 3175 (Ont. S.C.J.); Fiacco v. Lomardi, [2009] O.J. No. 3670 (Ont. S.C.J.), at para. 32.
[26] In Sawdon Estate v. Sawdon, 2014 ONCA 101, the Court of Appeal recognized that the availability of a blended costs order in estates litigation gives the court the ability to both respect the public policy considerations involved and maintain the discipline imposed by the “loser pays” principle: Sawdon Estate, at para. 97. The public policy considerations are primarily: (i) the need to give effect to valid wills that reflect the intention of competent testators; and (ii) the need to ensure that estates are properly administered: Sawdon Estate, at paras. 84-85. Neither public policy consideration is engaged in this case.
[27] Unlike Marley v. Salga, 2019 ONSC 3527, aff’d 2020 ONCA 104, this application was not made necessary by the actions of the deceased; rather, the litigation was brought forward because of Teresa’s wide-ranging and unmeritorious allegations against Bill. The most serious among Teresa’s allegations included her claim that Bill had committed a fraud on the court, an allegation that Teresa persisted in maintaining up to and including her cross-examination in July. To award any costs payable out of Bote’s estate would penalize Bill and the other beneficiaries.
Bill is Entitled to His Costs on a Substantial Indemnity Basis
[28] Bill asks for his costs of the proceeding on a full indemnity basis.
[29] An award of costs on an elevated scale is intended to be rare and is justified in only very narrow circumstances – where the unsuccessful party has engaged in behaviour worthy of sanction or where an offer to settle is engaged: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, at para. 8; Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), at para. 28. Substantial indemnity costs is the elevated scale of costs normally invoked when the court wishes to express its disapproval of the conduct of a party to the litigation; conduct worthy of sanction must be “especially egregious” to justify the highest scale of full indemnity costs: Net Connect, at para. 8.
[30] I have no hesitation in finding that Teresa engaged in behaviour worthy of sanction – her litigation conduct was “reprehensible, scandalous [and] outrageous”: Young v. Young, [1993] 4 S.C.R. 3, 1993 34 (SCC), at para. 250. The only serious issue is whether Teresa’s conduct was sufficiently egregious to justify an award of costs on the full indemnity scale rather than on the substantial indemnity scale.
[31] As a result of Teresa’s without notice motion in February, Teresa obtained the order that required Bill to return his certificate of appointment to the registrar. As a result, the administration of the estate came to a halt. The basis for Teresa’s motion was her statement that she was not served with Bill’s notice of application, a statement that was demonstrably untrue. Teresa was served with Bill’s notice of application in October 2019: she signed for the registered mail envelope, contacted her lawyer, and received a copy of the materials in early November 2019. Nevertheless, Teresa maintained her position throughout her cross-examination, confirming that Bill had committed a fraud upon the court in obtaining the original certificate. She compounded her reprehensible behaviour further by refusing to answer questions concerning the affidavit containing the false statement. Finally, she filed another affidavit, after her cross-examination, in an effort to explain her false statement. It was at that point that Teresa advanced the notion that she did not file an objection to Bill’s appointment due to inadvertence, a claim I found to be nothing more than a bald allegation, without any evidentiary support.
[32] Teresa also put forward the “service issue” as a source of animus, justifying Bill’s removal as estate trustee. In my view, Teresa’s continued reliance on her false statement after she had reverted to a claim of inadvertence, is behaviour that can only be described as reprehensible.
[33] Unfounded allegations of misconduct and personal attacks on the propriety of an estate trustee can attract an elevated costs award: Morassut v. Jaczynski, 2015 ONSC 502 (Div. Ct.), at paras. 61-62; Cardinal v. Perreault, 2020 ONSC 4825, at para. 38. I found Teresa’s veiled allegation that Bill acted improperly in the administration of his mother’s estate to be “utterly without foundation”, particularly given that Teresa, together with the other beneficiaries, had signed a comprehensive release. In my view, advancing this allegation constituted reprehensible conduct, worthy of the court’s sanction.
[34] The Court of Appeal has cautioned that a case must be both “rare and exceptional” to justify a costs award on the full indemnity scale: Net Connect, at para. 9. In Net Connect, the behaviour of the appellants included both the movement of funds out of the country in an effort to place them out of the respondents’ reach and instances of fabricated evidence. While Teresa’s behaviour was, without doubt, egregious, I cannot say that it was so “especially egregious” that full indemnity costs are warranted.
[35] Bill is entitled to his costs on a substantial indemnity scale.
Quantum of Costs
[36] Bill’s actual costs are fees (inclusive of HST) in the amount of $52,273.80[^1] and disbursements (inclusive of HST) in the amount of $3,975.94. The fees include an appearance fee of $1,750 for the full day hearing.
[37] Counsel’s hourly rates are reasonable having regard to his level of experience. The hourly rates of the articling students and the law clerk involved in the file are also reasonable. With one exception, I would not make any adjustments to the number of hours charged for the various categories of work itemized on Bill’s costs outline. In relation to “Drafting Responding Record”, counsel spent 44.6 hours, a law clerk spent 3.1 hours, and an articling student spent an additional 32.8 hours, for a total of more than 80 hours. Even allowing for factual complexity, this amount of time seems to me to be excessive and likely entails overlap between the efforts of the articling student and counsel. I would reduce the number of hours of the articling student by approximately one-half, yielding actual fees (inclusive of HST) of $50,000.
[38] The fixing of costs does not, however, begin and end with a calculation of hours times rates. As the Court of Appeal stated in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 26, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay rather than an amount fixed by the actual costs incurred by the successful litigant.
[39] In assessing Teresa’s reasonable expectations, I have considered the costs incurred by Teresa as set out in her costs outline: Teresa’s fees on a partial indemnity scale are $49,775.10, and on a full indemnity scale, they are $82,958.49. These fees include counsel’s time in relation to Teresa’s challenge to Bill’s appointment as Bote’s guardian. Deducting for this time yields fees of approximately $33,000 (partial indemnity) and $57,000 (full indemnity). On either scale, Teresa’s fees exceed those of Bill.
[40] Teresa was also kept apprised of Bill’s mounting costs as the litigation progressed. For example, in April 2020, Bill proposed to resolve matters based on a discontinuance and Teresa’s payment of $15,000 in costs to Bill. Bill’s counsel cautioned that “significant expenses” beyond this amount would be incurred if the parties proceeded with the next steps in the litigation, including cross-examinations.
[41] The administration of Bote’s estate is clearly an important issue, not only to the parties, but also to the other beneficiaries.
[42] In addition to the factual complexity in this case, I have placed significant weight on the factors in Rules 57.01(1)(e), (f), and (g). These factors consider, respectively, conduct that may have affected the duration of the proceeding, whether any steps in the proceeding were improper, unnecessary, or taken through negligence, mistake, or excessive caution, and whether a party denied or refused to admit anything that should have been admitted. In this case, such conduct included the following:
• Teresa’s motion to require Bill to return his certificate of appointment to the Registrar, based on her untrue statement that she was not served with Bill’s original appointment materials. As a result of the February order that she secured, the administration of Bote’s estate was frozen.
• Teresa’s initial refusal to answer questions on her first affidavit, necessitating a case conference and a second day of cross-examination.
• Teresa’s “reply” affidavit, served after the completion of the cross-examinations.
• Teresa’s inclusion of hearsay in her March 2020 affidavit, necessitating Bill’s motion to strike. I note, in particular, Teresa’s efforts to recount, through hearsay, her sister Susan’s purported objections to Bill’s appointment as estate trustee. Susan did not file an objection and did not file an affidavit in these proceedings.
• Teresa’s opposition to the admissibility of Ms. Den Haan’s reply affidavit on the basis that no notice of motion was served.
• Teresa’s late service of her reply factum.
• Teresa’s consent to the order permitting Bill to file the estate’s tax return being given only the day after the hearing.
[43] Counsel’s acknowledgment at the hearing that her client engaged in speculation confirmed Teresa’s approach to this litigation: she succeeded in obtaining an order that Bill return his certificate based on an untrue statement and levelled personal and baseless attacks against Bill in an effort to have him removed as estate trustee. Teresa’s conduct was reprehensible and weighs heavily in my assessment of the costs that would be fair and reasonable for her to pay.
[44] Bill’s claimed disbursements, inclusive of HST, total $3,975.94. I make no adjustments to this amount.
Disposition
[45] Bill is entitled to his costs, payable by Teresa, on a substantial indemnity basis. I have concluded that, in all the circumstances, the fair and reasonable amount for Teresa to pay is $45,000 (90 per cent of adjusted actual fees of $50,000) plus disbursements of $3,975.94, for a total of $48,975.94. This amount is inclusive of HST.
[46] The amount of $48,975.94 is to be paid by Teresa from her share of the estate.
[47] Bill also requested an order that Teresa be required to pay any expenses, penalties, and interest incurred by him or the estate because of the return of the certificate of appointment. Bill proposed that these costs be assessed through a reference once the related documentation is available. Without further information, I am not prepared to make such an order or direct a reference at this stage. The parties may seek an appointment before me to address this issue once the expenses, if any, become known.
Justice R. Ryan Bell
Date: December 23, 2020
COURT FILE NO.: CV-20-82699
DATE: 2020/12/23
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF The Estate of Bote Johannes Viertelhausen
RE: Teresa Viertelhausen, Applicant
AND
William Viertelhausen in his personal capacity and in his capacity as the Estate Trustee of the Estate of Bote Johannes Viertelhausen, Respondent
BEFORE: Justice R. Ryan Bell
COUNSEL: Dorota Turlejski, for the Applicant
Ken Dunham, for the Respondent
costs ENDORSEMENT
Ryan Bell J.
Released: December 23, 2020
[^1]: Calculated by multiplying the number of hours for each category of work by the actual rate charged, and then totalling these amounts.