Court File and Parties
COURT FILE NO.: 1385-19 & 1681-18 DATE: 20210312 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jacqueline Donovan, Applicant AND: John Kenneth MacKenzie, Kieran MacKenzie, The Public Guardian and Trustee and the Bank of Nova Scotia Trust Company, Respondents
RE: In the Matter of the Estate of John Kenneth MacKenzie
BEFORE: Tranquilli, J.
COUNSEL: Brendan Donovan and Praniet Chopra, for the Applicant, responding party Joseph Dillon, for the Respondent Kieran MacKenzie, moving party
HEARD: December 14 and 15, 2020 via Zoom
Endorsement
[1] Costs are the sole issue on this motion arising from two guardianship applications that were rendered moot before trial by the death of the incapable person. The applications arise from a bitter dispute between the applicant sister and her respondent brother concerning the guardianship of their late father. The parties’ mutual distrust and suspicion of each other’s motivations fuelled this litigation over the course of two and half years.
[2] The parties can at least agree that their legal issues became moot upon their father’s passing in November 2019. However, consistent with their history of dealings with one another in these proceedings, they disagree on the disposition of costs of the moot applications. They require the court’s decision.
[3] This next instalment of their dispute led to a two-day hearing with voluminous materials and extensive written and oral argument as though it was the trial. The court is asked to determine costs in the context of proceedings that were not the subject of any judicial fact finding or a judicial determination of the reasonableness of the parties’ positions or alleged misconduct. It does not promote judicial economy.
Overview
[4] The applicant, Jacqueline Donovan and the respondent Kieran MacKenzie are the son and daughter of the late John Kenneth MacKenzie, who died on November 14, 2019 at the age of 93. The applicant and respondent were the two youngest of Mr. MacKenzie’s four children. The older sons, Kirk MacKenzie and Mark MacKenzie were reportedly estranged from their father.
[5] The respondent Kieran MacKenzie held the powers of attorney for personal care and property for their father. In early 2016, their father was admitted to hospital in deteriorating health, with possible signs of dementia. The respondent arranged to stay in London to oversee his father’s admission into long-term care and began to manage his father’s financial affairs. The applicant Jacqueline Donovan raised concerns about her brother’s decision-making for their father. The siblings were unable to resolve their differences and their disagreements quickly escalated.
[6] In October 2017, Ms. Donovan commenced an application under the Substitute Decisions Act to be appointed as co-guardian of the person along with her brother and to have a trust company appointed as her father’s guardian of property.
[7] The parties agreed to have counsel appointed for their father under s. 3 of the Substitute Decisions Act and that the respondent would provide an informal accounting. The applicant raised objections to the informal accounting and sought an order compelling the respondent to formally pass the accounts. The respondent brought an application to pass accounts in August 2018 and the applicant filed her formal objection. Both matters continued through several motions and procedural court appearances, mediation, cross-examinations on multiple affidavits and two pre-trials. In July 2019, the applications were converted to proceed as a single trial, with an estimated duration of 5 to 10 days. Mr. MacKenzie then died on November 14, 2019, rendering the hard-fought issues moot.
[8] The respondent now seeks substantial indemnity costs of $257,342.75 from the applicant. This sum is comprised of his legal costs, the costs of preparing the accounts, mediator costs and the costs of s. 3 counsel for his father.
[9] The respondent submits he is entitled to his costs as the record demonstrates that he would have been successful in opposing his sister’s application to terminate the powers of attorney against his father’s express wishes. There is no strong or compelling evidence of misconduct or neglect that would warrant changing his father’s powers of attorney. The applicant was unreasonable in her care demands, made scandalous accusations and was not motivated by their father’s best interests. The respondent contends that his sister was instead motivated to run up care costs and legal fees in order to deplete his father’s assets and therefore the respondent’s entitlement as the sole residuary beneficiary of his father’s estate.
[10] The applicant opposes paying any costs to the respondent. The applicant seeks her costs on a partial indemnity basis following her February 2019 offer to settle in the amount of $97,602.50 or alternatively, her partial indemnity costs in responding to this costs motion, in the amount of $66,082.51. As her brother is the sole residual beneficiary of her father’s estate, it makes no difference to the applicant whether her costs are borne by the estate or her brother.
[11] The applicant contends that she was reasonable throughout the litigation and was properly motivated in promoting her father’s best interests, such as by advocating for a level of care consistent with his wishes and in questioning her brother’s investment strategies. She made at least three formal attempts to settle the matter, to no avail and with no counteroffer from her brother. She submits that the respondent’s conduct is explained by a self-interested desire to preserve their father’s estate for himself as the sole residuary beneficiary.
[12] Certain aspects of Ms. Donovan’s conduct are not blameless. It can be said that the parties’ mutual anger and resentment towards one another likely contributed to entrenched positions and increased costs throughout these proceedings.
[13] However, the court accepts that the record supports Ms. Donovan’s position that she was motivated by the best interests of her father. While some aspects of her conduct or positions taken may have been ill-advised, on the whole, I cannot find that Ms. Donovan conducted these applications in an unreasonable manner that led to unnecessary costs. Therefore, there is no basis on which I should impose a cost sanction on Ms. Donovan in respect of Mr. MacKenzie’s legal costs. There is also no basis on which I can find that Ms. Donovan is responsible for the s.3 costs for the late Mr. MacKenzie’s legal representation. These are borne by the incapable person’s estate, as provided for in the Substitute Decisions Act.
[14] As Ms. Donovan was successful in resisting Mr. MacKenzie’s motion that she pays his substantial indemnity costs, she claims her partial indemnity costs either from when she served an offer to settle the applications or in opposing the respondent’s motion for costs. I am not satisfied that her position can be properly characterized as “success”. The reality is that there were competing positions regarding their father’s guardianship, with allegations of improper motive and wrongdoing on both sides. None of her allegations questioning the reasonableness of her brother’s care or financial decisions were proven. The underlying issues in the applications were vigorously contested by both parties. She has produced expert opinion supporting her concerns about the respondent personal care and property decisions. However, those opinions are untested by the trial process. A determination of the issues would have required a full hearing on the merits. In the end, the court does not have the evidentiary basis on which to conclude that the respondent was unreasonable in his position that the powers of attorney should remain in accordance with his father’s expressed wishes.
[15] In these circumstances, I exercise my discretion to decline to order that either Mr. MacKenzie or the estate pay Ms. Donovan’s costs of either the applications or this motion.
Issues
[16] The parties agree that I have the jurisdiction to award costs in these matters in my discretion pursuant to s. 131(1) of the Courts of Justice Act and that costs can be determined in accordance with the principles under rule 57.01 of the Rules of Civil Procedure. However, there were differences between the parties in defining the principles that govern the exercise of discretion in these circumstances. The respondent focused much of his argument on the contention that he would have been successful at trial such that the applicant should be liable to pay substantial indemnity costs. The applicant challenged whether such an analysis was correct and submitted that the appropriate analysis was on the motivations of the party and reasonableness of their conduct.
[17] I am satisfied that “success” is not a tenable approach in this matter for two reasons: 1. The nature of the issues between parties were hard fought, with no judicial fact finding or determination. Therefore, the court approaches the task of costs on the basis that neither party was successful; and 2. The trend in the authorities is that “success” is not a significant factor in these cases; rather, one examines the nature of the dispute and the conduct of the parties. Cost sanctions in these guardianship disputes should not be personally imposed, provided that it can be said the parties were motivated by the best interests of the person under a disability and did not act in an unreasonable manner that led to unnecessary costs: Ziskos v. Miksche at paras. 56, 254.
[18] Although this action was not disposed of on its merits, I am nevertheless required to made certain findings in order to consider the reasonableness of the positions and actions taken by the parties in exercising my discretion in awarding costs: Ziskos, supra at 54.
[19] The determination of liability for costs in these applications therefore turns on the following issues:
- Was the applicant motivated by the best interests of her father in the conduct of these applications?
- Did the applicant act in an unreasonable manner that led to unnecessary costs?
- Is the applicant entitled to her costs from the respondent?
[20] The parties’ brother, Mr. Kirk MacKenzie, personally attended on this motion. He received notice of the initial guardianship application and application to pass accounts; however, did not file a notice of appearance or otherwise participate, such as through affidavits or cross-examinations on an affidavit. Mr. Kirk MacKenzie advised he wished to make a statement to the court. Given the history and nature of the dispute, the court opted to allow Mr. Kirk MacKenzie to make his statement at the outset of the hearing. Although the court appreciates Mr. MacKenzie was motivated by a sincere interest to share his perspective on a fair disposition of this motion, I am satisfied that it would be improper to consider any of his comments. The issues raised in his statement were variously inadmissible opinion, irrelevant, hearsay or conjecture that was not subjected to cross-examination. I have therefore disregarded his comments in the following analysis.
[21] The parties filed evidence of statements made or filed at the two the pre-trials. The parties did not provide any authority that would permit the court to consider such evidence contrary to the general prohibition under rule 50.09 of the Rules of Civil Procedure. I therefore did not review or consider this evidence in the analysis.
Background
[22] The details of the history of the underlying applications and evidence in support of the parties’ opposing positions were set out at considerable length in the materials filed and in the two-day hearing. For the purposes of this analysis, it suffices to summarize the issues that led to the applications and the concerns that arose during the proceedings as follows:
a. In or about 2016, the applicant took the position that there was uncertainty about her father’s mental capacity and there was no reason for her to believe that the powers of attorney appointing her brother were in effect. The applicant accused her brother of abusing his authority under the powers of attorney and his position of influence over their father in keeping him in long-term care and dealing with his assets. She suspected he wished to preserve their father’s estate for those who were beneficially entitled under his will;
b. The applicant attempted to remove their father from long-term care and place him in a retirement home, ostensibly in accordance with their father’s wishes;
c. The applicant implicitly rejected the respondent’s initial proposal that they involve another sibling in making care decisions with the applicant and instead opted to issue her application seeking to be appointed as co-guardian with the respondent for care and appointing a trust company to be guardian of property;
d. The parties disagreed on the level of care their father required, with the applicant advocating for extra care, 12 hours per day, 7 days a week. The applicant eventually paid for private nursing care from her own funds, although the parties continued to clash over the need for and involvement of the private caregivers. At one point the applicant reversed her payments to the private caregivers, resulting in a lawsuit involving both the applicant and respondent. That proceeding was concluded on terms unknown to the respondent;
e. The parties disagreed over the timing and extent of disclosure to which the applicant was entitled regarding their father’s health. The applicant was of the view that the respondent was unreasonably limiting her access to information and was secretive about his decision-making, contrary to his duties under the Substitute Decisions Act. The respondent acknowledged there was a brief period of time where he had limited disclosure, but he later provided all of the necessary authorizations and arrangements for the applicant to see their father and inquire about his health at her discretion;
f. Section 3 counsel advised that her review of the informal accounting produced by the respondent did not raise any obvious concern, such that the expense and effort of a formal passing of accounts may not be necessary. However, the applicant insisted on the respondent formally passing the accounts. Section 3 counsel later cautioned after further review that a court may be critical of some of his investment strategies. In cross-examination, the respondent conceded there were declines in value but claims he had since made gains. For the purposes of this motion, the applicant retained an expert who concluded that the respondent’s investments were inappropriate and resulted in actual losses;
g. The parties initially agreed to arrange for an independent medical assessment of their father. However, this process became protracted and the applicant later opted to proceed with an expert of her own selection;
h. The respondent refused to implement the increased care recommendations made by professionals hired by the applicant. The applicant was also concerned at the respondent’s “bizarre” and “potentially dangerous” care decisions against medical advice, such as using a turkey baster to provide fluids to their father, refusing to provide Ensure supplements and attaching a red light to their father’s head. Mr. MacKenzie’s treating health professionals acknowledged that there were some unusual aspects to the respondent’s care of his father, but did not suggest that he was harming his father or depriving him of care;
i. Each party accused the other of seeking to delay the applications for improper purposes;
j. The respondent became convinced that the applicant’s conduct was motivated by wanting to financially harm him by depleting his father’s assets, for which he was the sole residuary beneficiary under his father’s will. The evidence suggests that the late Mr. MacKenzie wished to make special provision for the respondent in his will as the respondent did not have the same advantages as his siblings. The respondent disputed knowing of this specific provision in their father’s will.
Analysis
1. Was the applicant motivated by the best interests of her father in the conduct of these applications?
[23] The court understands the basis for the respondent’s perception that his sister was not motivated by her father’s best interests, but rather wanted to cause the respondent difficulties and to force him to make expenditures and incur legal costs that would deplete his share in the estate as his father’s sole residual beneficiary. Objectively, she took adversarial positions from the outset of her father’s decline, challenging whether her father was incapable and then questioning her brother’s authority and decision-making and motivations. Her initial communications unfortunately used intemperate language in leveling her accusations. She implicitly rejected the respondent’s initial proposal that another sibling become involved in the decision-making and instead started the application. She apparently disregarded s. 3 counsel’s initial advice and forced her brother to formally pass his accounts. However, while the respondent may genuinely hold the belief that she was motivated by a personal animus to cause him financial harm, there is no evidence to contradict the applicant’s assertion that she did not know of this specific provision in her father’s will at the material times.
[24] On the other hand, there are several facts which support that the applicant was motivated by the best interests of her father. Her concerns may have been misplaced at times, such as initially challenging whether her father was incapable and suggesting he was being held against his will. Her questioning of the quality of care received in the home and her unilateral steps to arrange for private nursing unfortunately complicated the parties’ communications with one another and with the long-term care providers. It would add to the respondent’s impression that the applicant was unreasonably trying to undermine his authority.
[25] However, I accept that overall, the evidence supports that the applicant’s conduct was consistent with a motivation to advance her father’s best interests and not from an improper personal agenda to financially harm her brother. The Substitute Decisions Act contemplates that a guardian has the duty to foster regular personal contact between the incapable person and supportive family and friends and to also consult from time to time with those family and friends.
[26] She personally paid for the private nursing when the respondent would not agree to implement the extra care in the long-term care facility. Health professionals supported the care plans sought by her at the time. While she admittedly retained them to provide these opinions, the court would expect that they were under a professional duty to provide opinions based on their independent assessment and expertise. I make no finding that these would have led to her success on the applications; merely that they are some evidence of a proper motivation that can be considered.
[27] Her application did not seek to entirely remove the respondent as the attorney for personal care. She did not seek to take over the guardianship for property but proposed the appointment of a neutral trust company. Section 3 counsel later confirmed some basis for the applicant’s concerns about her brother’s investment strategies. However, later settlement offers contemplated that the respondent would retain full guardianship, with terms that would allow for timely disclosure of health and financial information, put limits on the investment products the respondent could use, make provision for supplemental private care for their father and allow for the accounts to pass without objection. These factors are all consistent with a motivation to promote their father’s well-being.
2. Did the applicant act in an unreasonable manner that led to unnecessary costs?
[28] The respondent contends that the applicant’s conduct was unreasonable from the outset and led to unnecessary costs to his father’s estate. She would not accept that their father was incapable. She accused the respondent and long-term care facility of civil and criminal misconduct. Had she agreed to his proposal that their brother become involved in the decision-making, the application would not have been necessary.
[29] As previously observed, I accept that the applicant made some unfortunate accusations early in the dispute that likely contributed to setting the tone for the acrimonious litigation that ensued. The same observation can be made of certain aspects of the respondent’s conduct in response to the applicant.
[30] However, evaluated in its entirety, I cannot conclude that the applicant’s conduct led to unnecessary costs. I accept that she was not, in fact, initially aware that her father had been assessed and deemed incapable until her brother included this evidence in his responding materials to her application. She did not pursue the capacity issue after this disclosure. Unfortunately, the parties’ positions were already entrenched.
[31] Her focus thereafter was on the decisions with respect to his care and property. The parties both appeared to agree that their father’s documented wishes required that they maintain an acute level of care, requiring heroic measures, if necessary. Their disagreements arose from what those measures entailed. The respondent did not think the applicant was reasonable in insisting on the expense of additional private care; however, the applicant ultimately funded a substantial amount of, if not all, of this care. The respondent objected to the applicant’s inquiries at the long-term care facility, which apparently disrupted the staff and required various team meetings to manage the disagreements. However, there is also evidence that the applicant was not always getting timely disclosure from the respondent on her father’s health and treatment.
[32] Section 3 counsel initially suggested there were no obvious concerns with the informal accounting that would necessitate the time and expense of a formal passing of accounts. This raises the question of whether the applicant was unreasonable in pursuing a formal passing of accounts. However, s. 3 counsel later noted issues with the respondent’s investment strategy that might invite criticism. Apparently to underline this point, the applicant has now also filed a report for the purpose of this motion which sets out one expert’s conclusions that the respondent’s investment strategy was, in fact, unreasonable and caused financial losses. I make no finding in this regard as the opinion was not tested through a trial of the issue.
[33] Finally, the record establishes that she made four attempts to resolve the matter. Of note was her settlement proposal in January 2019, which had the support of s. 3 counsel as being in accord with their father’s best interests and the views of independent health professionals. The formal offer to settle in February 2019 set out a clear compromise in leaving her brother in place as guardian for the person and property, but with terms for disclosure of financial and health information, guaranteeing a level of supplemental private care, limits on the types of investment products the respondent could use, allow the accounts to pass without objection and dismissing her application without costs. Her offer was not accepted, and the matter proceeded to cross-examinations and further appearances in readiness for trial.
[34] In the context of their father’s declining health and mental incapacity, the court cannot conclude that the applicant’s conduct was unreasonable or caused unnecessary expense. They are all consistent with the statutory scheme under the Substitute Decisions Act to protect adults made vulnerable through incapacity through the involvement of supportive friends and relatives: Ziskos, supra at para. 254.
[35] The court also accepts the applicant’s position that s.3 expenses are routinely ordered paid from the incapable person’s assets, pursuant to the provisions of the Substitute Decisions Act: Howard Johnson v. Howard, 2019 ONSC 4643 at para. 20. The court finds no basis to depart from this practice on the facts of these proceedings, particularly given my findings on the role of s. 3 counsel in the matter. It is evident that counsel’s involvement was for the benefit of the parties’ father, in communicating with the parties, reviewing accounts and promoting settlement.
[36] I conclude that there no basis for the applicant to be liable to the respondent for the estate’s costs in these proceedings. Given this conclusion, I will not analyze the quantum of costs claimed by the respondent. However, I acknowledge the applicant’s position that the costs outline only set out substantial indemnity fees.
3. Is the applicant entitled to her costs?
[37] The applicant seeks her costs on a partial indemnity basis, either from the date of her offer to settle the proceedings served in February 2019, or her costs in responding to the respondent’s subsequent motion for costs. I cannot find a principled basis in these circumstances on which to exercise my discretion to find she is entitled to her costs either from the respondent or their father’s estate, under which the respondent is the sole beneficiary. There is no finding that her brother, in fact, breached his obligations under the Substitute Decisions Act. Although I did not find that her conduct was unreasonable to the extent that she is liable to pay her brother the costs of the guardianship applications, I also noted that she is not entirely blameless for the unfortunate litigation that consumed the final years of her father’s life. The conflicting evidence does not support a conclusion that the respondent was unreasonable in maintaining that the terms of his father’s guardianship should remain in accordance with his father’s expressed wishes.
[38] While she prevailed in her position that she should not personally pay the respondent’s costs, she also submitted that a measure of costs should be awarded in her favour. Both parties therefore committed themselves to arguing the issue of costs on moot applications and litigated issues for which there can be no judicial fact-finding. The applicant undertook additional expenses of obtaining expert medical and financial opinion for the sole purpose of responding to the costs motion. She was at liberty to undertake these expenses; however, I am not satisfied they were necessary for the purposes of this motion and I cannot conclude that it is reasonable for the respondent to be liable for these expenses incurred in the context of an already moot proceeding.
[39] I therefore conclude that neither party is entitled to their costs from one another in these matters.
Justice K. Tranquilli Date: March 12, 2021