COURT FILE NO.: 17-35222ES
DATE: 20210520
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PHILLIPPA MARY BARAN in her capacity as Trustee of the ESTATE OF TOLLER JAMES MONTAGUE CRANSTON
Applicant
– and –
HUGH GOLDIE CRANSTON and GUY FRANCIS CRANSTON
Respondents
Douglas D. Buchmayer and Benoit M. Duchesne, for the Applicant
Miriam Vale Peters, for the Respondents
HEARD: In Writing
REASONS FOR COSTS
R. Smith J.
[1] Philippa Baran (“Phillipa”), the trustee of the estate of Toller Cranston (“Toller”), was compelled to bring an application to pass her accounts for the period from January 23, 2015 to April 31, 2018 by the two other beneficiaries of Toller’s estate, namely Guy and Goldie Cranston (“Guy” and “Goldie”). Guy and Goldie raised over 300 objections to various expenses paid by Philippa personally to administer Toller’s estate in Mexico. She was repaid by the estate when she was named as the Executor in Mexico and after the Estate recovered sufficient funds.
[2] Guy and Goldie were unsuccessful on all of their objections except for five, $1564 for gratifications and gifts to Adrian and Alejandro, a double entry of a legal invoice for $6926 and an accounting error of $50,000 for shipping and insurance on the paintings.
[3] The objectors withdrew over half of their objections at the hearing but forced the Trustee’s counsel to spend a large amount of time preparing to address each of the over 300 objections and withdrew many of the objections when questioning was about to begin at the hearing.
[4] Guy and Goldie also alleged and maintained their allegations that Philippa had committed fraud and stolen several hundred thousand dollars of the estate funds, when there was no evidence to support their allegations.
[5] Philippa seeks costs on a substantial indemnity scale of $390,602.98 inclusive of HST and disbursements, payable by Guy and Goldie personally.
[6] Guy and Goldie submit that they expect that costs will be ordered against them on a substantial indemnity basis, based on their unproven allegations of fraud, but they submit that the costs claimed are not reasonable or proportionate in the circumstances. They suggest an award of $100,000 would be more appropriate and that disbursements be reduced to $3889.55. The respondents also submit that some of the costs claimed were for part of the ongoing litigation which was separate from the passing of accounts.
Factors
[7] The factors to be considered when fixing costs are set out in Rule 57 of the Rules of Civil Procedure include in addition to success, the amount claimed and recovered, the complexity and importance of the matter, unreasonable conduct of any party which unduly lengthened the proceeding, scale of costs and any offer to settle, the hourly rate claimed, the time spent, and the amount that a losing party would reasonably expect to pay. In this case there are the additional factors that Philippa was acting in her capacity as the Trustee of Toller’s estate and the respondents failed to prove very serious allegations of fraud and theft by Philippa.
[8] The law related to costs in estate litigation was summarized by Gomery J. in the Estate of Francoise Poitras v. Canadian Cancer Society, 2021 ONSC 406 at para. 28 to 32:
[28] An estate trustee is generally entitled to be indemnified “for all reasonably incurred costs in the administration of an estate”, including “the legal costs of an action reasonably defended, to the extent these costs are not recovered from another person”; Brown v. Rigsby, 2016 ONCA 521, at para. 11.
[29] The Ontario Court of Appeal has held, however, that estate litigation operates subject to the general costs regime set out in s. 131 of the Courts of Justice Act and rule 57 of the Rules of Civil Procedure; McDougald Estate v. Gooderham (2005), 2005 CanLII 21091 (ON CA), 255 D.LR. (4th) 435 and Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101. Further to this regime, the winning party in estate litigation is usually entitled to reasonable costs from the losing party. As observed in Salter v. Salter Estate (2009), 2009 CanLII 28403 (ON SC), 50 E.T.R. (3d) 227 (Ont.S.C.), at para. 6:
Given the charged emotional dynamics of most pieces of estates litigation, an even greater need exists to impose the discipline of the general costs principle of “loser pays” in order to inject some modicum of reasonableness into decision about whether to litigate estate-related disputes.
[30] As a result, a court may deny cost recovery by an estate trustee, in whole or in part, if the trustee “has acted unreasonably or in substance for his or her own benefit, rather than for the benefit of the estate”: Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), [1991] 2 S.C.R. 353, at 391. An order for an estate trustee to pay legal costs personally is appropriate where it promotes public policy objectives such as the need to give effect to a valid will, and the need to ensure that estates are properly administered; Sawdon Estate, at para. 85.
[31] If, on the other hand, the court concludes that the estate trustee acted reasonably in litigation with beneficiaries and other parties, it may either require the other party or parties to pay costs or, more typically, make a blended order requiring the losing party to pay some costs and the estate to pay the balance; Sawdon Estate, at para. 97.
[32] In fixing costs, I must again determine the fair and reasonable amount that a party should pay in the particular circumstances of the case, rather than an amount fixed by actual costs incurred by the successful litigant; Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.) at para. 26.
Success and Amount Claimed and Recovered
[9] Philippa was completely successful in refuting the respondent’s unsubstantiated allegations of the theft and fraud. Also, the Trustee was successful in refuting almost all of the over 300 objections made to her accounts, with the exception of 5 objections, 3 of which were for $1594, a double entry for a legal invoice of $6926 and an accounting error of $50,000 for insurance and shipping expenses. Guy and Goldie objected to over 300 expenses and were successful on 5 objections, which amounts to success on less than 1.5% of their objections. In addition, the respondents sought an order that Philippa repay the Estate $796,074.69 but were only successful on objections totaling approximately $60,000, or about 13% of the amount sought.
[10] The Trustee was successful on most issues as the respondents sought the repayment of $796,074 but were only successful on a $50,000 objection and several small objections which amounted to 13% in value of the objections. However, the respondents made over 300 objections but were only successful on 5, or 1.5% of them. Stated another way, the Trustee was successful in 295 of the 300 objections and the large number of objections caused the Trustee to incur a large amount of legal expenses to respond to the 295 meritless objections. As a result, the bulk of the legal costs incurred by the Trustee should be paid by Guy and Goldie.
Complexity and Importance
[11] The administration of Toller’s estate was complex because he died in Mexico without a will and he owned approximately $6 million dollars in assets located in Mexico. Toller also employed a staff of approximately 6 persons who helped maintain his properties, cook his meals and drive him as needed. The assets included 400 very valuable paintings, over 18,000 non Toller art and decorative items and two houses located on the same lot in San Miguel de Allende, Mexico.
[12] The Trustee was required to personally pay the ongoing expenses being incurred by Toller’s estate in Mexico, many of which were made in cash, to value and conduct a sale of the 18,000 non Toller items in Mexico, to take the required steps to maintain, sever and sell the two real estate properties in Mexico, to identify, value and divide the 400 original Toller paintings and to package and ship them to Canada.
[13] The respondents raised over 300 objections to almost every expense that was incurred which made the passing of assets very complex and time consuming.
[14] Guy and Goldie’s unsubstantiated allegations of a substantial theft and fraud by the Trustee made defending and clearing her name of the utmost importance to her.
Unreasonable Conduct and the Unsubstantiated Allegations of Fraud
[15] I find that Guy and Goldie acted unreasonably by raising over 300 objections and forcing the Trustee to incur substantial legal expenses to prepare and respond to each one and then to abandon approximately half of them at the hearing. The abandonment of their unreasonable objections at the hearing was appropriate, however it should have been done much earlier before the hearing, and not at the hearing after substantial time and expense had been incurred to each meritless objection.
[16] The respondents also acted unreasonably by bringing an application to have the Trustee pass her accounts only 3 ½ months after she was appointed as the Estate Trustee in Ontario.
[17] The respondents’ insistence on exchanging affidavits of documents, conducting examinations for discovery and spending 3 days cross-examining the Trustee on her affidavits and conducting additional written discoveries, turned what should be a summary proceeding into a complicated hearing.
[18] The respondents refused to narrow the issues to be decided before the hearing as requested by the court, which required each of the over 300 objections to be addressed separately during the hearing.
Unfounded Fraud Allegations
[19] In Viertelhausen v. Viertelhausen, 2020 ONSC 7890 at para. 33 the court held that unfounded allegations of misconduct and personal attacks on the propriety of an Estate Trustee can attract an elevated costs award such as substantial indemnity costs.
[20] The respondents alleged that the Trustee had committed theft and fraud of several hundred thousand dollars. These allegations were maintained even after several warnings from the court, that if fraud was not proven, there was a risk that substantial indemnity costs may be awarded. The respondents state that they expect costs to be assessed on the higher scale based on their failure to prove any theft or fraud by Philippa.
[21] I agree with the statement in Cardinal v. Perreault, 2020 ONSC 4825 at para. 38 stating that:
“Impugning somebody’s integrity in the absence of a credible evidentiary foundation is reprehensible. The estate and the remaining beneficiaries should not be burdened by Mr. Cardinal’s decision to pursue allegations that lacked any evidentiary foundation.”
The Court of Appeal has held that substantial indemnity costs should be considered only when a party has engaged in “reprehensible, scandalous, or outrageous” conduct. The unfounded allegations of substantial fraud, made by Guy and Goldie against Philippa, constitute reprehensible conduct. Their conduct merits an award of substantial indemnity costs to mark the court’s disapproval, and to deter others from engaging in similar reprehensible conduct.
Hourly Rates, Time Spent and Reasonable Expectations
[22] I find that the hourly rates claimed for Mr. Buchmayer are reasonable given his recognized special expertise in the estates area. The rate claimed for Mr. Duchesne is also reasonable based on his years of experience as a civil litigator.
[23] The rates claimed for other lawyers and clerks are also reasonable. I also find that the team approach used by the Trustee’s lawyers was an efficient way to divide up the work performed, including having both Mr. Duchesne and Mr. Buchmayer present at the hearing. It was reasonable to have Mr. Duchesne act as lead counsel at the hearing based on his civil litigation experience and Mr. Buchmayer’s lack of courtroom experience but with his extensive estate expertise and experience.
[24] However, I find that the estate clerk’s presence at the 3 week hearing was not necessary and so I would deduct 82.5 hours of her time at $225/hour, which equals $18,562.00 from the amount that the respondents must pay to Philippa for costs.
[25] The Trustee acknowledged that $18,465.75 was incurred for other litigation between the parties and was included in the bill of costs in error and must be deducted.
[26] I am also satisfied that the time spent by the Trustee’s counsel was reasonable given the numerous objections (over 300) that were raised and the amount of time spent by the respondent’s counsel (excluding the time spent between June 2018 to June 2019) exceeded the amount of time claimed by Mr. Buchmayer (352.9 hours versus 344.9 hours).
Reasonable Expectations
[27] In Boucher v. Public Accountants Council for the Province of Ontario the Court of Appeal stated that in deciding what was a fair and reasonable costs award “the expectation of the parties concerning a costs award is a relevant factor”. The respondents were aware that their lawyer had spent well over 352.9 hours (omitting 1 year’s dockets) and that the Trustee would be expected to have spent more time to respond to over 300 expense objections. When the respondents raised over 300 objections and refused to narrow the issues, they would have or should have been aware that they were causing the Trustee to incur substantial legal expenses to respond to each of their objections. The respondents would have been aware that by taking aggressive actions against Philippa by raising many objections, which they withdrew at the hearing and by maintaining serious unfounded allegation of fraud, the Trustee would be forced to spend a large amount of time to respond to their many serious allegations.
Disbursements
[28] The Trustee seeks to recover disbursements in the amount of $21,105.18. I am satisfied that the disbursements claimed are reasonable, including a disbursement for legal research of $5369.75 given the dispute over the legal standard to be applied to an individual Estate Trustee when passing her accounts and the uniqueness of administering a complicated estate in Mexico involving many valuable assets, where there was no will and without any cash to pay ongoing expenses.
Payment of Costs
[29] In McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA) at para. 80 the Court of Appeal held that where litigation was carried out between the parties for reasons other than the actions of the deceased the court should follow the “loser pays” principle. In this case Guy and Goldie were unsuccessful in 98% of their objections in number and 87% of the amount to which they objected.
[30] As a result, I find that Guy and Goldie are personally responsible to pay costs to Philippa on a substantial indemnity, reduced by the amount of $18,465.75 which was included in the Bill of Costs in error and reduced by $18,562.00 for Ms. Lauzon’s attendance at the hearing, and reduced by an amount to account for their partial success.
Disposition
[31] Considering all of the relevant factors, for the reasons given above, Guy Cranston and Goldie Cranston are ordered to pay costs on a substantial indemnity basis of $325,000.00 inclusive of disbursements and HST to Philippa Cranston. The balance of the legal costs incurred by the Trustee in this passing of accounts are to be paid to her from the estate.
[32] The costs ordered are payable in any event and are not contingent on recovering this amount from the remaining estate assets.
Released: May 20, 2021
COURT FILE NO.: 17-35222ES
DATE: 20210520
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PHILLIPPA MARY BARAN in her capacity as Trustee of the ESTATE OF TOLLER JAMES MONTAGUE CRANSTON
Applicant
– and –
HUGH GOLDIE CRANSTON and GUY FRANCIS CRANSTON
Respondents
REASONS FOR decision
R. Smith J.
Released: May 20, 2021