Court File and Parties
Court File No.: 21-661299-00ES Date: 2022-02-16 Superior Court of Justice – Ontario
Re: In the Matter of the Estate of Jeremiah F. Coughlan
Applicants: Paula Cabrera Janice Russell Beverly Godden Mary Mullen
Respondents: Lyn Dunlop Coughlan, in her personal capacity, in her capacity as estate trustee of the estate of Jeremiah F. Coughlan, and in her capacity as attorney for property for Jeremiah F. Coughlan George Vella, in his capacity as estate trustee of the estate of Jeremiah F. Coughlan, and in his capacity as attorney for property for Jeremiah Coughlan Terry Knox, in his personal capacity, in his capacity as estate trustee of the estate of Jeremiah F. Coughlan, and in his capacity as attorney for property for Jeremiah F. Coughlan John Robert Coughlan Thomas Coughlan Dan Gladwin Ajax/Pickering Hospital Foundation Grandview Children's Foundation Lakeridge Health Foundation The Salvation Army - Hope Community Church Variety - The Children's Charity Neil Acton Wayne Millington Ed McGrath Jeremiah F. Coughlan Foundation
Before: Kimmel J.
Counsel: Andrea McEwan/Holly Cunliffe, for the Applicants, Paula Cabrera, Janice Russell, Beverly Godden, and Mary Mullen Ian Hull, for the Respondents, Lyn Dunlop Coughlan, George Vella, and Terry Knox, in their capacities as Estate Trustees for the Estate of Jeremiah Francis Coughlan Kelly Charlebois, for the Respondent, John Coughlan
Heard: February 2, 2022
Endorsement – Motion for Appointment of ETDL
Overview of the Parties and their Positions
[1] The applicants, who were the four daughters of Jeremiah Francis Coughlan, now deceased, were disinherited in their father’s last four sets of wills (signed in 2014, 2017, and two different sets in 2018). The applicants, along with their mother (the deceased’s first wife, also now herself deceased) and their brother, were the named beneficiaries in their father’s preceding August 31, 2010 wills (the “2010 Wills”). The applicants challenge their father’s subsequent wills on various grounds. They recognize that, if their assertion is correct, the last valid will preceding their father’s second marriage to Lyn Dunlop Coughlan (“Lyn”) in 2015 may be revoked by operation of law. As a result, their father’s estate may have to be distributed by intestacy due to his marriage to Lyn if the applicants’ wills challenge is successful.
[2] The applicants hold business interests in Cougs Investments Ltd. through companies that were established for them by their father in 1984 as part of an estate plan. These holdings are not part of their father’s estate or implicated in their wills challenge. The applicants’ falling out with their father has in large part been attributed to disagreements about the Chief Executive Officer they appointed to Cougs, who their father came to disapprove of.
[3] In all of the eight wills in which the applicants were disinherited (beginning in 2014), the deceased provided generously for Lyn, left monies in trust for his son John, but left the majority of his estate to charity. The estate of Jeremiah Francis Coughlan (the “estate”) was conservatively estimated to be worth in excess of $71 million CAD and $1.6 million USD at the time of death in February of 2021, but, according to the estate trustees, the estate (including the value of the Jeremiah F. Coughlan Foundation) was actually estimated to be worth $83 million in November 2018 and would have been worth more at the time of death. No one disputes that the estate has grown and is estimated to be worth approximately $96 million CAD today (this includes the value of the charitable foundation and charitable distributions already made). The value is largely attributed to the real estate and investment business interests of the deceased, much of which are held in the JFC Group of Companies.
[4] The applicants seek the appointment of a neutral professional estate trustee during litigation (“ETDL”) to represent the estate during the pendency of this litigation. This motion was brought in August 2021, a few months after their wills challenge was commenced.
[5] The applicants’ brother, the respondent John Coughlan, was born with cerebral palsy and has both physical and cognitive impairments. He was not disinherited under any of the deceased’s wills, although the bequests and arrangements for him have changed since the 2010 Wills. He is separately represented. His counsel is in the process of determining whether John needs a litigation guardian to be appointed and, as a result, has not received any instructions to take a position on this motion, but John did not object to the motion proceeding.
[6] The respondents Lyn (the deceased’s second wife, whom he began a relationship with in 2005 and married in 2015, and who he also employed in his business(es) during this timeframe), George Vella (a lawyer who was introduced to the deceased by Lyn, and who worked with the deceased for approximately four years), and Terry Knox (a business associate for over 30 years), in their capacities as estate trustees (the “estate trustees”) agree that there should be a formal appointment of an ETDL during the pendency of this litigation. They maintain that this is one of the exceptional situations in which they, the estate trustees, should be appointed as the ETDL. In response to the applicants’ motion, they brought a motion for their appointment as such.
[7] In 2017, Lyn, George, and Terry began attending board meetings with the deceased to learn the business. They began managing the business and affairs of the deceased in November 2018 under a power of attorney for property following a declaration of his incapacity to do so, and they have continued to do so seamlessly since he died in February 2021. They claim to have intimate knowledge of the business and affairs of the deceased and of his charitable intentions and initiatives through the Jeremiah F. Coughlan Foundation. They have begun to wind-down the business of the deceased but maintain that it needs to be done in stages and in an orderly manner, over time. They are concerned that the appointment of a third party as an ETDL would burden the administration of the estate with unnecessary cost and delay, to the detriment of the beneficiaries and the deceased’s wishes.
[8] The estate trustees acknowledge that they had direct dealings with the deceased regarding his testamentary wishes and have (to varying degrees) direct knowledge of his mental and physical capacities and his dealings with his daughters. They also have direct knowledge of the acrimony that developed between the deceased and his daughters in the years prior to his death. They will be witnesses in this will challenge if it proceeds to an adjudication on its merits. The record on both sides suggests that there is no love lost between the estate trustees and the applicants, although the estate trustees maintain that the tensions between them have always and only been perpetuated by the applicants. The applicants disagree.
[9] The estate trustees have reached out to the named charitable residual beneficiaries of the estate (under the wills that are the subject of the wills challenge). Those who responded have said that they do not object to the estate trustees continuing to administer the estate (and acting as ETDL) while this litigation is pending.
Summary of Outcome
[10] The crux of the issue on this motion comes down to whether the estate trustees have unique skills, knowledge, and experience regarding the assets of the estate, and in particular the business interests that will need to be wound-down (divested), so as to justify their appointment as ETDL over a neutral professional. For the reasons that follow, I find that the circumstances of this case and this estate warrant the appointment of a neutral professional ETDL and I accordingly appoint Adam Erlich, a partner of from Fuller Landau LLP, as such.
[11] This is not a negative reflection on the work and efforts undertaken to date by the estate trustees on behalf of Jeremiah Coughlan during his lifetime and/or his estate after his death. However, the appointment of a neutral professional ETDL is justified and appropriate in this case given the acrimony between the parties, the historic acrimony between the applicants and the deceased, the nature of the wills challenges, the inevitability that the estate trustees (or some of them) will have to testify, and the significant value of the estate.
[12] Although it will eventually need to be addressed in the fullness of time, I do not consider it necessary or appropriate to delve into the merits of the applicants’ wills challenge to decide this motion.
The Issues to Be Decided
[13] The primary issue to be decided is whether the court should appoint a neutral professional ETDL or the estate trustees to act as ETDL during the pendency of this litigation. The sub-issues are as follows:
a. Is it necessary and appropriate to appoint an ETDL? b. Is this an appropriate case in which to appoint party litigants (e.g., the estate trustees) as ETDL? c. Are the merits of the applicants’ wills challenge relevant to the determination of who should be appointed ETDL? d. Is the applicants’ proposed neutral professional ETDL suitable and appropriate?
Analysis
Guiding Principles: The Appointment of an ETDL
[14] While the opposing sides appear to agree that an ETDL should be appointed, the court must still be satisfied that the appointment of an ETDL is necessary and appropriate.
[15] The general principles to be considered when deciding whether to appoint an ETDL are not controversial. The authority for the appointment of an ETDL in the context of a will challenge is found in s. 28 of the Estates Act, R.S.O. 1990, c. E.21 and Rule 75.06(3)(f) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[16] The Court will favour the appointment of an ETDL in the vast majority of cases unless the administration of the estate involved is particularly straightforward or simple. This administration is not particularly straightforward or simple, which the parties have recognized through their competing motions for the appointment of an ETDL. The appointment of an ETDL is appropriate in this case.
Should the Estate Trustees be Appointed as ETDL?
[17] In a case such as this where the appointment of an ETDL is considered to be appropriate, the court must exercise its discretion in the determination of who to appoint as ETDL. The court may consider the following factors in exercising this discretion:
a. Whether a trustee may be a witness in the litigation; b. Potential for conflict of interest; c. Conflict between the interests of the trustees and/or beneficiaries; d. Hostility between the trustees and/or beneficiaries; e. Lack of communication between the parties; and f. Evidence of settlement discussions that exclude some of the parties.
See Baran v. Cranston, 2020 ONSC 589, at para. 24.
[18] As Justice Myers held in Mayer v. Rubin, 2017 ONSC 3498, at para. 36:
“... it is in the interests of all beneficiaries that the assets of the estate be immunized from the tactics employed by litigating parties. The court must protect the level playing field. Neither side should be able to use their control over the estate to benefit themselves or to prejudice the other. It is a simple inference that a trustee who is in an adversarial position towards a co-trustee or a beneficiary should not normally be left in charge of trust property. Simple prudence calls for the temporary replacement of a trustee who is in an adversarial position with a co-trustee or a beneficiary. It is not an insult to anyone's integrity to understand that conflicts of interest are insidious. Conflicts of interest play havoc with peoples' judgment of their own capacity to maintain neutrality and a fiduciary stance ...”
[19] The estate trustees acknowledge the well settled law that, except on consent, the court will not generally appoint one of the parties to a proceeding as ETDL. However, they rely upon the recognized exception to the rule. The rule is not absolute, and it can be departed from in a strong case. See Re Bazos.
[20] The applicants point out that the examples of “strong” cases highlighted by the estate trustees, in which the exception to the general rule has prevailed, are factually distinct from this case, in that:
a. In McArthur Estate (Re), the court dismissed the application to appoint an ETDL (and held that the appointed executors could continue to act) because the objector's complaints against the appointed executors had nothing to do with the administration of the estate, and the allegations were far less than what would be required to remove an executor. b. In Hansen v. Hurley, 1994 CarswellOnt 656 (C.J.), at paras. 23 – 25, important distinguishing features included that the estate was modest and there were concerns about the cost of appointing an institutional/professional trustee, there was no other proposed ETDL before the court who had consented to act (aside from the named estate trustees), and there were serious allegations (or murder) against one of the objectors. Re Wood Estate (June 15, 1992), McKenzie J. (Ont. Gen. Div.), is distinguished on similar grounds. c. In Re Griffin, (1925), The Law Times 494 - Vol. 132 (K.B), the wife of the deceased who was the estate trustee was considered to be the desirable choice as administratrix pendente lit because of her involvement in managing the business during the deceased’s period of incapacity prior to death. This was done over the objections of her daughter who was challenging the will, but there was no other alternative appointee named, just the prospect of a process for doing so. This case pre-dates the leading case of Re Bazos and is an earlier example of the recognized exception to the rule against party litigants being appointed, but the very short reasons do not add much to the discussion about what constitutes a “strong case” in which the court might exercise its discretion to appoint a party litigant as ETDL.
[21] In contrast, the applicants have highlighted a number of cases in which the court declined to exercise its discretion to appoint an estate trustee(s) as ETDL that had similar features to this case. Bazos was itself a will challenge, in which the named executors moved for the appointment of themselves as ETDL. The Court of Appeal set aside an order appointing them as such on the grounds that, under normal circumstances, the Court will not, except on consent, appoint one of the litigant parties as an ETDL. A party who is unconnected to the litigation is the most likely and proper person to be appointed.
[22] The applicants point to various other examples of cases in which the court has declined to exercise this discretion and depart from the general rule that a party to the proceeding should not be appointed as ETDL, most often because of concerns about the potential for conflicting interests:
a. In Sherbourne Estate (Re), [2005] O.J. No. 2622 (S.C.), the court ordered the appointment of a neutral trustee over the named estate trustee who was willing to act without remuneration and under the supervision of an independent accountant or solicitor, taking into consideration the acrimony in the family, the serious allegations of undue influence made against the estate trustee and others, and the inevitable conflict of interest that the estate trustee would be in if appointed. b. In Re Baker Estate, [2005] O.J. No. 4892 (S.C.), the estate trustee argued that he was the named choice under both wills, there had been no complaint about his administration to date, there were no allegations of impropriety or undue influence against him, the benefits accruing to him under both wills were relatively small, no member of his family stood to benefit, and appointing a trust company would be an added expense. The court rejected the estate trustee's argument, noting that, among other things, the estate was large, the estate was able to pay for a trust company, the estate trustee was a named beneficiary in both wills, the estate trustee had driven the deceased to her meeting with the lawyer regarding the 2003 will, the estate trustee had evidence about the execution of the 2003 will and would likely be called as a witness, and the estate trustee had made the statement that he believed the 2003 will contained the deceased's last wishes, which opened the estate trustee up to the perception of bias at worst, or lack of impartiality and neutrality at best. c. In Crestohl & BMO Trust Company, 2011 ONSC 2584, the court replaced a named institutional trustee in favour of a corporate estate manager or someone other than the institution. There were no allegations of impropriety or undue influence, but there was the possibility that an employee of the named institutional trustee might be a witness concerning the validity of the will. The objections were based on possible conflict or the appearance of conflict.
[23] The emphasis in the decided cases on the potential for conflicts of interest for the named estate trustees is not surprising as that underlies many of the factors that the court in Baran enumerated for the court to consider in exercising its discretion when appointing an ETDL.
[24] The estate trustees claim to have a good relationship with the named beneficiaries under the impugned wills (which do not include the applicants). They contend that the simple fact that they stand in opposition to the interests of the applicants does not preclude them from exercising the duties of an ETDL with due diligence and integrity.
[25] However, the analysis is not as simple as that. In this case, the applicants’ challenges to the will directly implicate the estate trustees, who were interacting with the deceased at the time of execution of the impugned wills at which his capacity is now being questioned by the applicants (in that same timeframe, the applicants had far less opportunity to interact with the deceased and assess his capacity, as they had become estranged). Further, at least two of the estate trustees (Lyn and George) are alleged to have exerted influence over the deceased in the making of the impugned wills (Lyn for all of them and George for some), and George was directly involved in the instructions that the deceased provided for the drafting of at least some of the impugned wills, while Terry was present at the time of the signing of at least one set of wills. George may also have been involved in giving legal advice to one or the other or both of Lyn and the deceased. Lyn is a beneficiary under the impugned wills, and Terry is a named beneficiary under the more recent ones, although his bequests are much smaller than Lyn’s. George and Terry are entitled to a monetary gift in lieu of compensation for their work as estate trustees. Lyn and George also receive payments from the business, as they are employees/independent contractors.
[26] The applicants have also made accusations against the estate trustees regarding their conduct as fiduciaries when acting under powers of attorney before their father’s death.
[27] Thus, while the estate trustees’ administration of the estate is not being criticized, their conduct and activities prior to the deceased’s death is at issue in this proceeding and they will all likely be witnesses. This raises a conflict of interest or the appearance of a conflict of interest that has led the court to appoint a neutral ETDL in other cases.
[28] As will be discussed in more detail later, there is a neutral professional who has consented to act as ETDL. The estate has significant value so the cost of an independent ETDL, even though it will be more than if the estate trustees are appointed as such, is not a driving consideration when balanced against the objective of ensuring procedural fairness to all interested persons. The court’s primary concern is to ensure fairness to the participants and to protect the parties involved. The court may also consider the balance of convenience in determining the appointment of an ETDL. See Baran, at para. 28 and Mayer, at para. 34.
[29] The main consideration in favour of the appointment of the estate trustees as ETDL in this case is that they claim to possess a deep pool of knowledge and understanding of the deceased’s business, which they have gained over more than three years of working not only on their own but with the deceased before he was determined to be incapable of doing so. They say that they have been working towards a staged wind-down of the deceased’s business interests since 2018 when they stepped in as powers of attorney for his property. They stress that there will be synergies and cost savings to the beneficiaries and the estate in maintaining continuity in the administration of the estate. These cost savings come not only from the efficiency derived from the historic knowledge that the estate trustees have but also from the limits placed on their compensation. They have suggested that any neutral ETDL would be dependent upon them as consultants, leading to duplication of efforts.
[30] These are important considerations that the court acknowledges must be factored into the balance. However overall, I find that fairness to all interested persons (which must include the applicants among others) and the balance of convenience weighs in favour of appointing a neutral professional ETDL, even if there is a trade-off of expense and possible delay. No one has suggested that there is any urgency to the eventual winding-down of the deceased’s business and financial interests (which are vast), and the estate can afford the additional cost. While every business is unique in its own way, there is nothing particularly complex or challenging about it, nor any feature of the deceased’s business that requires particular expertise. Conversely, there are many areas of conflict and potential conflict and too much history between the estate trustees (or at least some of them) and the applicants.
[31] As between the two proposed ETDLs, the estate trustees and Adam Erlich of Fuller Landau LLP, I do not consider the estate trustees to be the preferred choice having considered the Baran factors, the potential for conflicts arising as the litigation progresses, and the likelihood that the estate trustees (or at least some of them) will be witnesses. This is simply not one of the exceptional “strong” cases in which to go against the usual rule and appoint the estate trustees as ETDL.
[32] The words of Myers J. in the Mayer case, at para. 36, are apt here: “It is not an insult to anyone's integrity to understand that conflicts of interest are insidious. Conflicts of interest play havoc with peoples' judgment of their own capacity to maintain neutrality and a fiduciary stance.”
[33] The proposed appointment order contemplates that the estate trustees may continue to be engaged (for compensation) by the ETDL so that the benefit of their experience and knowledge is not lost. The court encourages the ETDL to take advantage of that ability and encourages the estate trustees to provide reasonable assistance when requested.
Are the Merits of the Applicants’ Will Challenge Relevant?
[34] The estate trustees emphasize that the court should remain cognizant that the concerns about conflicts, hostility, and communication in the jurisprudence regarding the suitability of estate trustees to be appointed as ETDL are primarily focused on the beneficiaries. They maintain that the applicants must displace at least three sets of wills for them to even be considered beneficiaries (on an intestacy). This raises the question of whether the strength of the applicants’ wills challenge on its merits has any place in the court’s exercise of discretion regarding the appointment of an ETDL.
[35] The estate trustees placed considerable emphasis on the merits of the applicants’ case (or lack thereof) in their written submissions on this motion. In oral argument, counsel conceded that there is no authority for the proposition that the court should consider the merits of the applicants’ wills challenge, but the estate trustees maintain that it is a factor to be weighed in the balance when determining whether this is one of the exceptional “strong” cases in which the estate trustees should be appointed as ETDL.
[36] I have determined that there is no authority or justification for introducing a minimum merits threshold into the analysis. The facts of this case do not justify an expansion of the ETDL appointment test to include such.
[37] The merits of the wills challenge by the applicants depends in large measure, but not entirely, on the applicants’ father having been without capacity to make a will dating back to 2014 (four years earlier than when he was declared to be incapable and his powers of attorney for property took over the management of his property and business affairs). This would need to be established in the face of a professional capacity assessment that was undertaken in which he was declared to have capacity at that time (which the applicants intend to challenge). Emphasis is also placed on a settlement agreement that the applicants entered into with their father in 2018, a period during which they now assert he was without capacity to do so.
[38] For their part, the applicants contend that their estrangement from their father prevented them from appreciating at the relevant times the duration and extent of his incapacity and susceptibility to undue influence from persons such as Lyn and George, in particular.
[39] There is only one case that either side was able to direct the court to in which the merits of the case of the parties opposing the appointment of estate trustees as ETDL is even discussed. In the unreported endorsement of Newbould J. in Gefen v. Gaertner (January 27, 2015), CV-13-486451, the plaintiff argued that it must be established that the moving parties (who were seeking to appoint a neutral ETDL) have a good arguable case. The court held that even if that were the test (which it did not say was so), there were sufficient grounds to appoint an ETDL. Justice Newbould noted that if the plaintiff felt there was no case at all, a motion for summary judgment could be brought. The motion to appoint an ETDL was not that motion.
[40] No summary judgment motion or motion to strike has been brought by the estate trustees in this case either. Nor have they challenged the standing of the applicants to bring their wills challenge, which only requires them to have a "financial interest" in the estate. See r. 75.06(1) and s. 23 of the Estates Act. Further, although an argument has been made about the applicants’ “laying in the weeds” and delaying their wills challenge, there are no limitations arguments or other challenges that have been advanced by the estate trustees for summary or preliminary determination, as had been done in the cases that the estate trustees have relied upon for this point. See Leibel v. Leibel, 2014 ONSC 4516 and Neuberger v. York et al, 2016 ONCA 191.
[41] The threshold for determining whether an applicant has a financial interest in the deceased's estate is a low one. The applicants may be considered to have a financial interest even when it is contingent upon the court making certain findings in their favour. In the context of a challenge to standing (which this is not), the applicants would need only put forward evidence that is capable of supporting an inference that the claims raise a genuine issue which should be heard by the court. See Moses v. Moses, 2021 ONSC 587, at paras. 21-22, aff'd 2021 ONCA 662, at paras. 7 and 9.
[42] Even if the merits are relevant and should be factored into the balance of convenience and analysis of factors under the test for appointing an ETDL, that threshold would be low. The applicants’ standing to bring the wills challenge has not been itself challenged and they assert a financial interest in the estate and have raised issues of capacity and undue influence, among other things, for the court’s determination. Although they bear a heavy onus over a lengthy evidentiary time frame, I do not consider it to be necessary or appropriate to get into the weeds of the merits of the applicants’ wills challenge to decide this motion, and I decline to do so. [1]
[43] On the record before me, I have found there to be sufficient grounds to warrant the appointment of an ETDL and that a neutral professional ETDL is the most appropriate appointee in the circumstances of this case.
Is the Applicants’ Proposed Neutral Professional ETDL Suitable and Appropriate for that Role?
[44] The applicants originally put forward the accounting firm Fuller Landau LLP as their proposed ETDL. The estate trustees argued that the appointment of the proposed third-party accounting firm as ETDL would be improper. They contend that, subject to specific exceptions for trust companies under s. 305 of the Trust and Loan Companies Act, S.C. 1991, c.45, an ETDL must be an individual who accepts personal responsibility and liability, not a partnership or corporation.
[45] The applicants did not appreciate the nuance of this argument but conceded during oral argument that it was a valid point and that their proposed ETDL, which was the accounting firm of Fuller Landau LLP, could not be appointed. During a break they provided a consent to appointment as ETDL signed by one of the individual partners of that firm, Adam Erlich, who had previously signed the consent to act on behalf of the firm. While this was a last minute change, counsel for the estate trustees was gracious in his acknowledgement that this issue was solved by this substitution of the applicants’ new proposed ETDL.
[46] There has been no suggestion that Mr. Erlich is not up to the task. There is no evidence of any objection by any of the other beneficiaries to the appointment of a neutral professional ETDL (they simply indicated that they did not object to the estate trustees being appointed as such).
Final Disposition and Costs
[47] For the reasons above, I appoint Adam Erlich of Fuller Landau LLP as the ETDL pursuant to the terms of the form of draft order provided by the applicants on February 2, 2022, with revisions to be made to paragraphs 1, 16 and 17 to change the definition to the “Named Estate Trustees.”
[48] The court was advised by correspondence dated February 8, 2022 that the applicants and the estate trustees had agreed that they will each (side) receive costs in the amount of $100,000.00, plus HST and disbursements to be paid out of the estate, regardless of the outcome of the motion. Each side has represented that their actual legal costs exceeded the amounts that they propose be awarded to each of them. The disbursements of the respondent estate trustees are higher than those of the applicants because they include costs of productions that formed part of the extensive record that was put before the court for this motion. The order giving directions dated October 18, 2021 provides for the payment of productions from the Estate.
[49] Given that an award of costs of this amount to be paid by the estate was not part of the express relief sought on either motion (although both sides did seek the costs of their motions), the court asked that the persons who had received notice of these motions be provided with the February 8, 2022 correspondence and the joint request for the costs of these motions to be paid out of the estate and given an opportunity to take a position on this, if so advised.
[50] The court was advised on February 14, 2022 that the requested notice had been provided and that none of the recipients had indicated any objection to the requested costs amounts being paid out of the estate.
[51] It is not a matter of principle or practice that the costs of contentious estate matters will be generally paid from the estate. In Salter v. Salter Estate, at paras. 5-6, Brown J. (as he then was) reviewed the leading decision from the Court of Appeal at the time (McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 (Ont. C.A.)) and reaffirmed that the costs regime in estates litigation is the same as in any other form of civil litigation, which is governed by section 131 of the Courts of Justice Act and Rule 57 of the Rules of Civil Procedure. It was in the Salter Estate case that the oft cited point was made (at para. 6) that:
[p]arties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation…. 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 decisions about whether to litigate estate-related
[52] That said, there are some recognized circumstances where public policy considerations permit the costs of all parties to be ordered paid out of the estate. Those limited circumstances exist where the litigation arose as a result of the actions of the testator or those with an interest in the residue of the estate, or where the litigation was reasonably necessary to ensure the proper administration of the estate: Salter Estate, at para. 5, citing McDougald Estate, paras. 78 to 80. The public policy considerations that create a platform for the parties’ reasonable costs to be paid from the estate have been recently re-affirmed by the Court of Appeal in McGrath v. Joy, 2022 ONCA 119, at para. 94.
[53] These ETDL motions fall into the exceptional category of being reasonably necessary to ensure the proper administration of the estate in this case. The particular circumstances of this case did not make this an obvious or easy choice. The need for the appointment of an ETDL is a function of the litigation and not necessarily a function of any conduct or misconduct by the parties. While this litigation may be emotionally charged, the parties agreed that an ETDL needed to be appointed and the choice between the estate trustees and a neutral professional needed to be objectively considered and determined. This was not a step in the litigation that required the discipline of the loser pays costs rule. The issue was taken seriously and appropriately aired by both sides. The requested costs will not materially impact the value of the estate.
[54] These motions were ultimately for the benefit of the estate and its potential beneficiaries and I find the requested costs to be reasonable and appropriate in the circumstances and they are approved.
[55] Paragraph 21 of the applicants’ draft order should be amended to provide that the applicants and the estate trustees are each awarded their costs of the two ETDL motions in the amount of $100,000.00, plus HST and disbursements, to be paid out of the estate.
[56] The applicants are directed to revise their proposed form of order to reflect the orders and directions contained in this endorsement and provide the draft to counsel for the estate trustees for their approval as to form and content. Once there is an approved form, the parties are asked to send the approved form of order, together with a blackline against the original draft and a clean WORD version of the revised form to my assistant email: linda.bunoza@ontario.ca for the court’s review and consideration.
Kimmel J. Date: February 16, 2022
Footnote
[1] I note that engaging in an analysis of the merits would have entailed further consideration of arguments made on both sides about the credibility of witnesses for the opposing side and the admissibility of hearsay evidence. Such determinations are difficult to make even with the benefit of the additional tools afforded to the court on a summary judgment motion (which this is not). These determinations would not have been appropriate to make in the context of this motion on the written record presented. If and when those determinations are to be made, I would expect that the court will be assisted by viva voce evidence from the persons with direct knowledge of the events at issue and/or based on submissions regarding hearsay exceptions that counsel have fully briefed. Those determinations are best left for another day. As an example, it was conceded during oral argument that the court need not consider hearsay evidence from one of the applicants about what the deceased’s former accountant had said to one of the other applicants for purposes of this motion.