COURT FILE NO.: 05-136/17 and CV-20-00654059-00ES
DATE: 20210401
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: In the Matter of Estate of Robert William Campbell, deceased
Jean Campbell, Executor and Trustee of the Estate of Robert William Campbell, Applicant
AND:
Owen Campbell, Respondent
BEFORE: C. Gilmore, J.
COUNSEL: Howard Black and Sheila Morris, Counsel for the Applicants Allan Socken, Counsel, for the Respondent Susan Stamm for the OCL re any unborn issue Daniel Dochylo and Yehia Ziad on behalf of LawPro for Suzanne I.R. Hanson
HEARD: In Writing
ruling on costs
overview
[1] After several case conferences this matter was resolved by way of consent judgment dated February 12, 2021. Unfortunately, the issue of costs could not be resolved, and I requested that counsel provide written submissions on costs to ensure the matter was dealt with efficiently and with minimal cost to the Estate. A term of the consent judgment required that $40,000 be earmarked from the Respondent’s share of the Estate for costs and held in the trust account of Mr. Socken pending my costs decision. The written submissions have now been received.
[2] LawPro and Ms. Stamm did not provide written submissions nor take any position on the issue of costs.
BACKGROUND
[3] Robert William Campbell died on July 5, 2015. The deceased had two sons, Owen Campbell (“Owen”) and Kevin Campbell. The deceased was married to Jean Margaret Campbell (“the Estate Trustee”) on the date of his death. The deceased’s sons are from a previous marriage. The Estate Trustee also had children from a previous marriage.
[4] A Certificate of Appointment of Estate Trustee was issued to the Estate Trustee on January 28, 2016. The deceased’s will directed that Owen be paid two bequests. A cash bequest of $250,000 and that the Estate Trustee purchase a $500,000 single premium life annuity on Owen’s life. The deceased’s other son received the same gift under the will which was paid out and the annuity arranged in 2016. The deceased made various other bequests under his will including to the Estate Trustee’s children and to his daughter. The Estate Trustee received the residue of the Estate.
[5] Owen is in receipt of Ontario Disability Support Program (“ODSP”) benefits and sought to have his share of the Estate paid out to him in a manner that did not disentitle him from those benefits. Owen suffers from a rare genetic condition and has had three kidney transplants. None were successful and Owen now has no kidneys. He requires dialysis three times per week and also suffers from clinical depression, scoliosis, hearing loss and eye abnormalities. Owen’s father was aware of his son’s medical conditions.
[6] The actual cost of Owen’s required medications for his various conditions is $24,000 per year. Most of the medications are covered by his ODSP benefits. It was very important to Owen that he not lose his ODSP benefits and the accompanying drug coverage. Without such coverage, Owen’s inheritance would be dissipated very quickly just paying for his medications. Owen worked part time until 2017. He has not worked since then as his health has declined. He has never realistically been in a position to support himself financially.
[7] Once appointed, the Estate Trustee proceeded to administer the Estate including the distribution to all beneficiaries other than Owen. Owen signed an Acknowledgment of Receipt and Release and Indemnity in favour of the Estate on March 16, 2017 but wanted to structure the receipt of his proceeds in a way that would preserve his ODSP. The Release was to be held in escrow pending Owen’s receipt of information as to how best to do this.
[8] The Estate Trustee received legal advice that she should commence an Application for Directions in relation to Owen’s request to structure the payment of his inheritance in a way different from that set out in the will. That Application was issued in August 2017. Owen delivered responding materials in October 2017. Owen sought adjournments of the Application in order to receive a response to a proposal his counsel had made to ODSP.
[9] Owen was opposed to the Estate Trustee commencing this Application. He did not believe it was necessary as he was not attempting to challenge or vary his father’s will. He simply wanted to ensure his ODSP eligibility was preserved. The Estate Trustee had a different view of the issues and took the position that Owen was in fact challenging the will.
[10] Thus, the disputes between the parties began and continued over several years. In December 2020, Owen brought an Application to vary his father’s will. His position is that he did not do so to increase costs but to force the Estate Trustee to respond to his simple request to have his share of the Estate paid out to him.
[11] Owen and the Estate Trustee each allege that the other has been intransigent, caused delays and were unwilling to accept unreasonable settlement Offers. Not surprisingly, they have been unable to agree on the issue of costs each alleging that the other has caused unnecessary costs.
THE POSITION OF THE ESTATE TRUSTEE
[12] The Estate Trustee submits that Owen’s actions in delaying his response to her Application for Directions and then delaying his own Application to vary have created unnecessary costs. The Estate Trustee therefore seeks substantial indemnity costs of $35,574. Alternatively, she seeks partial indemnity costs of $23,800. The Estate Trustee has attempted to be reasonable by not including the costs of her previous counsel which totalled $40,632.
[13] Owen first offered to settle all matters on May 15, 2020. He offered to distribute the Estate in accordance with a structure recommended by Goddard Gamage LLP (as per their advice with respect to ODSP eligibility) and that costs would be dealt with in writing. According to the Estate Trustee, the problem with Owen’s Offer was that its effect was to amend certain paragraphs of the will. There was no request to amend the will before the Court at that time. Further, his Offer to settle the issue of costs in writing was not clear because it did not specify which judge or Court or whether it was to be done by way of an assessment. The Offer also did not take into account the $60,000 already distributed to Owen.
[14] The Estate Trustee served an Offer to Settle on September 24, 2020. She offered to settle the outstanding legal issues on the following terms:
- The Estate Trustee would consent to varying certain provisions of the will subject to the Court’s approval;
- The Estate Trustee waived her right to claim any compensation out of Owen’s share of the Estate
- The Estate Trustee would receive her full indemnity costs out of Owen’s share of the Estate;
- Owen would sign a full release in favour of the Estate Trustee and the proceedings would be dismissed.
[15] The Estate Trustee provided a further Offer to Settle on October 6, 2020. In that Offer she offered to pay Owen’s share of the Estate to the Accountant of the Superior Court, less any sums already received by Owen and less $37,500 by way of Estate Trustee compensation.
[16] After the February 12, 2021 Case Conference before me, the Estate Trustee delivered a further Offer to Settle dated February 18, 2021 in which she agreed to waive any payment of compensation to herself and not to seek any legal costs. The Offer expired at 5:00 p.m. on February 19, 2021 without any response from Owen.
[17] The Estate Trustee now finds herself in a position where she must seek her costs of the proceeding on a full indemnity scale. The Estate Trustee submits she has had to incur legal fees through no fault of her own which should be borne by the Estate. The costs were necessary because of the way in which the deceased’s will was drawn and Owen’s request to change the way in which he was to receive his share of the Estate. The matter of costs has nothing to do with the Estate Trustee’s conduct. She distributed the Estate over six years ago. The sole issue remaining was Owen’s distribution and the cost to the Estate of carrying out the terms of the will (or a variation thereof) based on Owen’s requests.
[18] The deceased was estranged from his sons and attempted to reduce the stress on his spouse by directing that any contact between her and his sons regarding his Estate be carried out by the law firm representing the Estate. This requirement also increased the legal fees for the Estate.
[19] Further, it took Owen three years to determine exactly how he wanted his share of the Estate paid out to him such that he would not be disentitled to ODSP benefits. It was therefore not unreasonable for the Estate Trustee to bring an Application for Directions when Owen sought a distribution contrary to the terms of the will and when Owen’s lawyers put the Estate on notice that he was preserving his right to sue the lawyer involved in drafting the deceased’s will. Indeed, Owen has commenced a claim against the drafting solicitor claiming that a Henson Trust should have been created in the will for his benefit.
[20] Owen is not entitled to interest on his inheritance. The will does not fix a date for payment of Owen’s bequests and the Estate Trustee exercised her power to postpone payment, as she is entitled to do, until such time as Owen’s exact requests were determined. Interest should not be paid when the Estate Trustee was waiting to hear from Owen as to how he wanted his share of the Estate paid out.
[21] The Estate Trustee denies Owen’s allegations that she had been deliberately cruel or malicious. She is now out of pocket and potentially liable for Owen’s legal fees simply because she was responsibly discharging her functions as Estate Trustee.
THE POSITION OF OWEN CAMPBELL
[22] Owen’s position is simple. He has never disputed the terms of his father’s will or his gift thereunder. He simply did not want the payment to affect his eligibility for ODSP and he did not want any release that he signed to preclude him from commencing an action against the drafting solicitor.
[23] None of these things should have caused the Estate Trustee to take almost six years to pay Owen his rightful inheritance. Of all of the beneficiaries under his father’s will, Owen was most in need of the funds, yet the Estate Trustee paid herself and the other beneficiaries years ago and was unreasonable when Owen asked for small advances on his inheritance.
[24] Owen seeks the costs of his counsel Goddard Gamage LLP of $18,422.34 regarding advice on the preservation of his ODSP entitlement and the costs of his counsel, Mr. Socken, of $9,435. Those costs should be paid out of the residue of the Estate.
[25] Owen requires ODSP benefits as he has significant medical issues and is unable to be fully employed. His father was well aware of Owen’s personal circumstances and Owen’s position is that counsel who drafted his father’s will was negligent in failing to set up a Henson Trust for his benefit. Owen commenced a claim against his father’s estate counsel on July 31, 2017. He signed an Acknowledgement of Receipt, Release and Indemnity in March 2017. He fully indemnified the Estate Trustee but requested that the Release be amended to preserve his right to pursue an action against the solicitor who drafted his father’s will and/or her firm, Fogler Rubinoff. The amendment did not affect his indemnification of the Estate Trustee. However, at that time, the Estate was represented by Fogler Rubinoff and Owen was concerned that without the amendment to the Release, it would be used as an estoppel defence by that firm. The requested amendment was not agreed to by the Estate Trustee (even though she was fully indemnified) and this caused further delays and disputes which cannot be blamed on Owen. The amendment he requested be made to the Release was entirely reasonable.
[26] Owen sought to have his inheritance paid out to him as quickly as possible but in a way that did not disentitle him to ODSP benefits. He was concerned that without those benefits, his inheritance would be used up by purchasing the expensive medications he required. He offered to move matters forward by having his lawyer assist him in purchasing the annuity. This was refused by the Estate Trustee because the will specified that the annuity had to be purchased by the Estate Trustee.
[27] Owen’s position is that his Offer of May 15, 2020 was entirely reasonable, and the matter should have been resolved then. The Estate Trustee’s insistence on compensation and costs was untenable and the cause for many of the delays. Only after the February 12, 2021 Case Conference did the Estate Trustee give up her misplaced request for compensation and costs. By then, Owen had spent significant legal costs which he needed to recoup. It was not possible for Owen to accept the Estate Trustee’s revised Offer on February 18, 2021 despite her willingness to give up her claim for compensation and costs. Owen sought compensation for his own costs which was not addressed in the Estate Trustee’s Offer.
[28] Owen relies on the equitable “rule of convenience” for his claim for interest on the $660,000 paid to him on March 4, 2021. Based on the case law presented, he seeks interest at the rate of 5% from the first anniversary of his father’s death to March 4, 2021.
ANALYSIS AND ORDERS
[29] This case has been fraught by a series of miscommunications and misunderstandings as follows:
- It is clear that Owen never intended to challenge his father’s will. He did seek to vary it. The Estate Trustee’s position in her initial affidavit was that she was required to commence the Application because of the will challenge was incorrect. The will challenge was already statute barred by that point.
- The Estate Trustee’s failure to adequately respond to Owen’s Offer in May 2020 has led to increased costs. That Offer was very similar to the terms of the February 12, 2021 judgment. The Estate Trustee’s claim that the costs term in the Offer was not clear does not make sense.
- The Estate Trustee was never entitled to compensation for Owen’s share of the Estate.
[30] Owen’s May 2020 Offer should have been accepted with terms to be approved by the Court (to ensure the indemnification of the Estate Trustee), without payment of compensation and with both parties absorbing their own costs or having a Case Conference to obtain directions on dealing with costs in writing. Unfortunately, that did not happen. The Estate Trustee, until 2021, appeared to be under the mistaken impression that she was entitled to compensation for only Owen’s share of the Estate. There also seems to have been an issue with the requested amendment to the Release to ensure that Owen was free to pursue his negligence claim. As the Estate Trustee was initially represented by Fogler, Rubinoff this also created a conflict and delay.
[31] I find that Owen took proper steps to obtain legal advice about how his ODSP eligibility would be impacted by his inheritance. Once he had that advice and had shared it with the Estate Trustee in May 2020 I am at a loss as to why Owen’s share could not have been distributed at that point. The Application for Directions had been outstanding for over three years and if the parties were sui juris with respect to any variation of the trust, the Court could have approved the resulting Order. The impediment appears to have been the Estate Trustee’s insistence on compensation and costs which were only withdrawn in February 2021.
[32] Thus, a rather straightforward matter turned into something unnecessarily complicated. I find that such complications arose because of the Estate Trustee’s unreasonable insistence on costs and compensation. As such, Owen should receive his costs from the Estate.
[33] As for the issue of interest, the case law is clear that it is payable. As per Rivard v. Morris, 2018 ONCA 181, the Ontario Court of Appeal confirmed that the common law “Rule of Convenience” is alive and well. Interest is payable on gifts of personal property such as the personal property in this case. Similar to this case, the amounts in question in Rivard were cash legacies of $530,000 payable to each of the deceased’s daughters.
[34] The presumption of course is that such gifts are to be paid out within the Estate Trustee’s year. Where payment is delayed beyond one year and there is no specific provision for delay in the will, interest is payable as “general powers of postponement are not specific enough to achieve this” (para 50). Further, the payment of interest is not connected to “fault” or even impossibility as set out in Rivard below at para 53:
As explained, the “rule of convenience” is not predicated on the possibility of payment within the executor’s year. The “rule of convenience” applies even where payment within the executor’s year is impossible. It would involve a significant realignment of the rule, in my view, to permit courts to choose whether to pay interest based on how reasonable it is to expect the distribution of property within the executor’s year to occur.
[35] In Rivard, the Court of Appeal overturned the trial judge’s decision to exercise his discretion not to award interest. The judge in Rivard determined that the payment of interest was not intended to reward or penalize either party by the passage of time. The Court of Appeal found that this reasoning was in error. Further, the Court of Appeal did not agree that the sisters were disentitled to interest because their will challenge caused a three-year delay in the litigation. While the sisters were not successful in their will challenge, the Court did not find that the litigation was frivolous.
[36] In summary, I find that the law is clear that barring any specific contrary intention from the testator, interest is payable to Owen and concluding otherwise would be an error in law. The only issue that remains is the rate of interest.
[37] The Court of Appeal acknowledged that the 5% rate of interest applied in “rule of convenience” cases is one which “is not grounded in a uniform or compelling legal basis” and that a “policy case can be made that courts should move away from the 5% rate” (para 86). However, the Court of Appeal declined to weigh in on whether the rate should be changed as they were not asked to do so nor was argument presented on that issue. The Court applied the 5% rate seeing no reason to deviate from it.
[38] In the case at bar, the Estate Trustee did not present any evidence that she had invested Owen’s funds in an interest-bearing account. Had she done so, she could have made the argument that Owen was only entitled to the interest garnered by that investment.
[39] However, notwithstanding any lack of evidence on the rate of interest, I am not inclined to award an interest rate of 5% as suggested by Owen’s counsel given that would work out to $33,000 per year and essentially become a windfall for Owen. This was surely not intended by the testator or by the rule of convenience. Rather, an interest rate which generally falls within the parameters of a Canadian GIC investment is more realistic and frankly, more fair, given that it must be paid from the residue of the estate.
Given all of the above, I make the following Orders:
- The $40,000 from Owen’s share of the Estate and earmarked for costs shall be paid to Owen as directed by his solicitor, Mr. Socken.
- Owen’s costs of $27,800 shall be paid from the residue of the Estate forthwith.
- Owen shall be paid interest on $660,000 at the rate of 1% per annum from the residue of the Estate commencing from the one-year anniversary of the date of death to March 4, 2021 and pursuant to the rule of convenience.
- In the event that the Estate Trustee has not preserved funds from the residue of the Estate for contingencies related to this litigation, she shall pay the costs and interest personally.
C. Gilmore, J.
Date: April 1, 2021