Court File and Parties
COURT FILE NO.: CV-19-005249-00ES DATE: 20230630 SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF THE ESTATE OF ESTHER SHAFMAN, deceased
BETWEEN:
HERBEY SHAFMAN Applicant
AND:
ALLAN PAUL SHAFMAN and JERRY SOLOMON SHAFMAN, in their capacities as THE ESTATE TRUSTEES OF THE ESTATE OF ESTHER SHAFMAN, deceased Respondents
BEFORE: Justice A.A. Sanfilippo
COUNSEL: Arie Gaertner and Jonathan Pellow, for the Applicant John J. Adair and Morgan McKenna, for the Respondents
HEARD: In writing
Endorsement on Costs
1In my Reasons for Judgment issued March 1, 2023, I provided that if the parties were unable to agree on the issue of costs, they could deliver written submissions in costs in accordance with the timetable that was established. [1] The parties were not able to agree, and delivered written submissions on costs, which I have considered. [2]
2The Respondent Estate Trustees of the Estate of Esther Shafman, Allan Paul Shafman and Jerry Solomon Shafman (collectively, the “Estate Trustees” or the “Respondents”), do not contest that since the Applicant, Herbey Shafman, was successful in his claim for dependant’s support under Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26 (the “SLRA”), he is entitled to an award of costs. The dispute between the parties is the scale of costs, and their quantification. Herbey [3] seeks costs on a full indemnity basis in the amount of $274,141.87, all inclusive of fees, disbursements, and applicable taxes, for this 4-day trial. The Respondents submit that Herbey should receive a reasonable cost award, on a partial indemnity basis, which they quantify in the amount of $94,123.28, all-inclusive.
I. Applicable Principles
3Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides the court with discretion in the determination of costs. Section 75 of the SLRA provides that the Court may direct that the costs of a dependant’s support Application brought under Part V of the SLRA be paid out of the Estate, “or otherwise as it thinks proper”. [4]
4The Applicant relies heavily on the statement by the Court of Appeal in Cummings v. Cummings, that “[i]n practice, where the court has concluded that the deceased’s distribution be reviewed in favour of a dependant, the costs of all parties are generally ordered to be paid out of the estate on a substantial indemnity basis.” [5] Interestingly, although Cummings was cited for this principle, the Court of Appeal upheld the Application Judge’s exercise of discretion to order that the parties to the dependant’s support application bear their own costs. The Court of Appeal held that there was no error in the Application Judge’s exercise of discretion to award neither party costs on consideration of the following relevant factors: (a) the measure of success achieved by the Applicant; (b) which party made the more favourable offer to settle; (c) conduct on the part of any party that had protracted the proceeding; (d) the difficulties of the case; (e) the size of the estate and the resultant impact of a cost award on the Respondents; and (f) Application Judge’s assessment of the bills of costs filed by the parties. [6]
5The Court of Appeal’s later decision in McDougald Estate v. Gooderham displaced the traditional approach of Canadian trial courts of ordering costs of all parties in estates litigation on a “virtually automatic” basis, all payable out of the estate. [7] The Court of Appeal stated that the modern approach to fixing costs in estates litigation is for the judge to “carefully scrutinize the litigation and, unless the court finds that one or more of the public policy considerations … applies, to follow the cost rules that apply in civil litigation.” [8] The recognized public policy considerations are “[w]here the difficulties or ambiguities that give rise to the litigation are caused, in whole or in part, by the testator” and “[i]f there are reasonable grounds upon which to question the execution of the will or the testator’s capacity in making the will”. [9]
6The Court of Appeal’s formulation of the modern approach to costs in estate litigation does not foreclose an award of costs against an estate in an appropriate case, such as “where the testator bears significant responsibility for failing to arrange his affairs properly”, as would later be recognized by the Divisional Court in Quinn v. Carrigan. [10] The Court of Appeal instructed, and later reiterated in Sawdon Estate v. Sawdon, [11] that the modern approach recognized the “need to restrict unwarranted litigation and protect estates from being depleted by litigation”. [12] The Court of Appeal provided a firm caution: “Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive that there is nothing to be lost in pursuing estate litigation.” [13]
7Consistent with this caution, Justice D.M. Brown, as he then was, admonished, in Salter v. Salter Estate, that parties to estate litigation cannot “treat the assets of the estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation.” [14] The Court of Appeal endorsed this comment in Johnson v. Johnson, explaining that “[i]t is well established that estate litigation, like all civil litigation, is subject to the general civil litigation costs regime in accordance with s. 131 of the Courts of Justice Act … and r. 57 of the Rules of Civil Procedure,” and that “[e]xceptionally, costs are ordered to be paid out of the estate where policy considerations permit it.” [15] In Neuberger Estate v. York, the Court of Appeal explained that the public policy considerations in estate litigation are “primarily of two sorts: (1) where the difficulties or ambiguities that give rise to the litigation are caused, in whole or in part, by the testator; and (2) the need to ensure that estates are properly administered.” [16]
8In Quinn, the Divisional Court accepted that the dependant’s support claim was a direct result of the testator’s failure to settle his legal and financial affairs properly and lawfully, and so his estate should bear the costs of the litigation required to provide the dependant with support. But, after consideration of the conduct of the parties, the settlement opportunities, and positions raised that caused the litigation to be unnecessarily protracted, the Court awarded the parties their partial indemnity costs throughout, payable from the estate, in proportion to the parties’ proportionate share of the estate. [17]
9In contrast, in Morassut v. Jaczynski, the Divisional Court upheld a trial judge’s award of costs on a full indemnity scale, payable by the estate to a successful applicant in a dependant’s support claim. [18] The Divisional Court applied the same principles as in Quinn, traced to McDougald Estate and Cummings, that “when a court has concluded that a dependant is entitled to have the circumstances reviewed, costs of all parties are commonly ordered to be paid out of the estate on a solicitor and client basis.” [19] The difference between the two decisions is that in Quinn, the relevant costs factors did not support an award of costs on an escalated basis, but in Morasutt they did, on the finding that the opposing parties’ position was worthy of sanction.
10Recently, in Gefen v. Gefen¸ a successful applicant on a dependant’s support application was awarded costs on a substantial indemnity basis, in application of “the normal course award of substantial indemnity costs to the successful party on this dependant’s support application.” [20] The substantial indemnity costs were fixed after consideration of the factors enumerated under Rule 57.01 and having regard to the overarching principles of fairness and reasonableness. In contrast, in Nanchin v. Peller, the Court ordered that an unsuccessful claimant for dependant’s support pay the estate trustees costs on a partial indemnity basis. [21]
II. Analysis
11Here, there was, correctly, no contest on the Applicant’s entitlement to an award of costs. [22] Further, there was no dispute that the costs awarded in favour of the Applicant should be paid from the Estate. I found that Herbey’s deceased mother, Esther Shafman, did not make adequate monetary provision for Herbey’s support in her Last Will and Testament dated July 10, 2008 (the “2008 Will”), and her Codicil dated January 21, 2014. [23] Accordingly, the “fault for this litigation”, as termed by the Divisional Court in Quinn, lies with the Deceased for not making adequate monetary provision for Herbey’s support. [24] This oversight by Esther necessitated the review sought and obtained by Herbey in this Application. [25] The cost award shall thereby be payable by the Estate Trustees from the assets of the Estate.
12I will analyse the parties’ disagreement on the scale of costs and the quantification of costs by consideration of the factors that have been identified by the case law. [26]
(a) The Applicant’s Claim for an Elevated Scale of Costs
13The Applicant submitted that Herbey’s inability to pay his own legal fees, combined with the Estate Trustees’ “intransigence to make any meaningful concessions until the 11th hour”, supports the Court’s exercise of discretion to award costs on a full indemnity basis or, alternatively, on a substantial indemnity basis. I do not accept this submission. I will explain why.
(i) The Respondents’ Conduct
14The Applicant submitted that the Respondents unduly lengthened the proceeding by taking “sharp positions on every element of this proceeding.” This was alleged to consist of blocking admission of expert reports, seeking to bar the testimony of the Applicant’s witnesses and arguing that Herbey was not a dependant.
15The Respondents’ challenge of the expert evidence did not materially add to the length of trial. The Respondents were entitled to argue that Herbey was not a dependant. Further, the Respondents made the following concessions: (a) that the Townsgate Condominium, [27] owned by Allan and Jerry, would form part of the Estate for trial; (b) that the Torbolton Apartment Building, which was transferred inter vivos by Esther to the 2010 Alter Ego Trust after executing the 2008 Will, would form part of the Estate for the purposes of this trial; (c) that the value of the Estate was approximately $3,000,000.00; (d) that the payment of funds to Herbey from the Torbolton Apartment Building would continue for the duration of his life, regardless of the Will or the outcome at trial. These concessions all shortened the length of the trial.
16This is not a case like Morasutt, where the Court found that the Respondent’s strong attitude that the Applicant was “entitled to nothing” constituted reprehensible conduct that supported an elevated cost award. [28] It is well-established that conduct is an important factor in the Court’s exercise of discretion on the issue of costs. [29] Here, the Respondents did not contend that Herbey was entitled to nothing, but rather that the Will provided for him adequately. This case is also different from Gefen, where the award of elevated costs was supported by the Respondent’s “vituperous diatribe demeaning [the Applicant’s] entire life.” [30] I did not see conduct of this nature by the Respondents. Indeed, Allan Shafman readily conceded evidence of Herbey’s challenges. Instead, this claim for costs draws parallels to Quinn, where the Divisional Court awarded costs on a partial indemnity scale after consideration of the conduct of the parties, particularly in forgoing settlement opportunities that could have spared litigation costs.
(ii) Which Party Made the Most Favourable Offer to Settle?
17The Applicant delivered an Offer to Settle dated March 28, 2022 (the “Applicant’s Offer to Settle”). The Applicant offered to settle for $550,000.00 plus costs, plus continuation of the $660.00 payment each month from the Torbolton Property, and without referencing the necessity that Herbey vacate the Townsgate Condominium. I accept that the actual result achieved by the Applicant at trial was well-below the amount of the Applicant’s Offer to Settle.
18The Respondents delivered an Offer to Settle dated September 8, 2022 (the “Respondents’ Offer to Settle”). This Offer to Settle offered to pay Herbey almost precisely what the Applicant achieved at trial, including $1,200.00 each month for life, as opposed to the $1,250.00 awarded at trial; and continuation of the payments from the Torbolton Apartment Building for life. As this Offer to Settle was not made by the Respondents “at least seven days before the commencement of the hearing”, it does not engage consideration of the cost consequences under Rule 49.10(2). However, I have considered the Respondents’ Offer to Settle as an “offer to settle made in writing”, consonant with Rule 49.13, and as “any other matter relevant to the question of costs”, in accordance with Rule 57.01(i).
19The Respondents made the most favourable Offer to Settle, as it came closest (almost precisely) to the result achieved by the Applicant at trial. The Applicant’s failure to accept this Offer to Settle resulted in the Applicant incurring significant trial costs and caused the Estate to be depleted through the legal expense that it incurred. This factor strongly supports denial of an elevated cost award to the Applicant. I reach this conclusion even disregarding the Respondents’ submission that after trial the parties engaged in settlement negotiations wherein the lawyers for both parties agreed to recommend a settlement based on the Estate paying Herbey $1,250.00 each month for life, being the amount awarded at trial, but that the Applicant did not agree. I accept the Applicant’s submission that this was a without prejudice settlement discussion that was not made in writing that I should disregard, as I have. In any event, these discussions occurred near the end of trial and could not salvage the costs of trial that had by then been incurred.
(iii) The Applicant’s Measure of Success
20While successful at trial in achieving an increase in the monthly support payable by the Estate, the Applicant fell well-short of the amounts claimed. The Applicant asserted that the standard of the Court’s review of Esther’s provision of support for Herbey was to determine what the Court would have done in Esther’s stead, and that this would result in a redistribution of the Estate in more equal shares to Esther’s children. [31] I found that these submissions were unfounded in law.
(iv) Conclusion – Costs on a Partial Indemnity Scale
21After consideration of all relevant factors, I have concluded that the Applicant has not established a basis for an award of costs on an elevated basis. I find, in the exercise of my discretion, that it is fair and just, on the basis of applicable principles, to fix the Applicant’s costs on a partial indemnity scale.
(b) Quantification of Costs
22The quantification of costs of this Application begins by giving effect to an existing cost order. On November 19, 2021, Justice Cavanagh granted the Applicant’s motion for an extension of time to deliver the expert report of Dr. Nestor Ariel Zielinsky, a certified specialist in psychiatry, and the expert report of Wynnifred Harvey, a professional financial planner (the “November 2021 Motion”). In his disposition on costs, Justice Cavanagh ordered that the Applicant pay the Respondents their “costs of this motion on a full indemnity basis in an amount to be agreed upon or fixed by the Court” (the “November 2021 Cost Order”). [32]
23The Applicant submitted that he deducted the costs of the November 2021 Motion from his Bill of Costs. My review of the Applicant’s Bills of Costs confirms that an amount of legal costs was deducted in consideration of the November 2021 Cost Order.
24The Applicant initially submitted two Bills of Costs: (a) a Bill of Costs by Shael Eisen Professional Corporation consisting of full indemnity fees in the amount of $153,256.25 and disbursements of $93,808.84 for a total of $247,065.09, inclusive of HST (the “Eisen Bill of Costs”); and (b) a Bill of Costs by Gaertner Baron Professional Corporation (the “Gaertner Law Firm”) consisting of full indemnity fees of $98,928.51 and disbursements of $1,298.52 for a total of $100,227.03, all inclusive of HST (the “Gaertner Bill of Costs”). The Eisen Bill of Costs included a disbursement of $40,000.00, which was said to constitute an “Agency Fee” payable to the Gaertner Law Firm. These Bills of Costs total $252,184.76 in fees and disbursements of $95,107.36 for a total of $347,292.12, inclusive of HST.
25The Respondents objected to the Agency Fee disbursement on the submission that this constituted legal fees and was not properly characterized as a disbursement. As part of their Reply submissions, the Applicant agreed that the Agency Fee disbursement be deducted from the Eisen Bill of Costs, but without deduction of fees in a corresponding amount in the Gaertner Bill of Costs.
26In their Reply, the Applicant re-cast the amount of the combined fees of both law firms as $286,633.53, inclusive of HST. The Applicant deducted $33,150.25, inclusive of HST, attributable to the Applicant’s costs on the November 2021 Motion, and deducted a matching $33,150.25, inclusive of HST, attributable to the costs owed to the Respondents, and thereby claimed fees of $220,333.03, inclusive of HST. [33] The Applicant reduced his claim for disbursements to $53,808.84, [34] producing a restated cost demand, on a full indemnity basis, of $274,141.87, all inclusive. [35]
27The Applicant’s Reply costs submissions did not conduct a similar computation using partial indemnity fee values, but rather the Applicant only stated fees on a full indemnity basis. As I have found that costs will be awarded on a partial indemnity scale, I have re-calculated the Applicant’s fees as 65% of the full indemnity values, resulting in $143,216.46 in fees, inclusive of HST, and disbursements of $53,808.84 for a total cost demand, on a partial indemnity basis, of $197,025.30, all inclusive. [36] The deductions for the November 2021 Cost Order remained at full indemnity values because that Order was for payment of costs of the November 2021 Motion on a full indemnity basis.
28The Applicant submitted that this claim in costs was reasonable when compared with the Respondents’ Bill of Costs, but this was not borne out. The Respondents’ Bill of Costs set out the Respondents’ legal fees, on a partial indemnity basis net of the November 2021 Motion, in the amount of $94,794.00, which is about two-thirds of the partial indemnity fees claimed by the Applicant.
29The Applicant’s Bill of Costs shows that 11 timekeepers billed time for provision of services for the Applicant, including 8 lawyers. The claim for the cost of this staffing is, in my view, excessive and unreasonable for a dependant support claim involving a 4-day trial. This action was not complex and did not justify staffing by 8 lawyers. Further, this number of lawyers was disproportionate to the reasonable amounts in issue. This over-staffing accounts for the difference between the Applicant’s claimed legal fees, on a partial indemnity basis, of $143,216.46, and the Respondents’ legal fees on a partial indemnity basis of $94,794.00.
30Further, the legal fees sought by the Applicant are beyond the amount of costs that an unsuccessful party could reasonably expect to pay, a factor set out in Rule 57.01(1)(0.b). In my view, the Respondents could reasonably expect to pay a partial indemnity cost award for fees closer to $94,794.00, being the amount billed by their lawyers.
31In submitting that the total amount of costs payable to the Applicant should be $94,123.28, all inclusive, the Respondents submitted that the total amount of fees should be discounted to $65,000.00, and HST of $8,450.00, and the total disbursements should be discounted to $20,673.28, which requires disallowing any value to the expert reports. I am not persuaded that these submissions should be accepted. I already considered the grounds asserted by the Respondents to discount the partial indemnity fees in my analysis of the scale of costs. The Respondents did not cite any authority for deducting, in their entirety, the cost of expert reports that were obtained for the purpose of trial, served, filed, and relied on at trial.
32Last, I have taken into consideration the size of the Estate. The parties agreed that the Estate has a value of approximately $3,000,000.00. The Estate has sufficient assets, even when considering the claims of others, to respond to a cost award in favour of the Applicant.
33In my view, the Applicant’s Bills of Costs, when considered with all factors regarding the quantification of costs, support a claim for partial indemnity costs in the amount of $148,602.84, consisting of $94,794.00 for fees, inclusive of HST, and disbursements of $53,808.84.
(c) Conclusion – Quantification of Costs
34The overarching objective is to determine a cost quantification that is objectively fair and reasonable, and not simply an arithmetic or mechanical measure of the actual costs incurred by a successful litigant. [37] The Court of Appeal has instructed that after consideration of the relevant factors to be applied to the costs claimed, the Court should then “step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable.” [38]
35Having considered all applicable principles set out by the case law and under Rule 57.01, and in the exercise of my discretion, as set out in s. 131 of the Courts of Justice Act, I have concluded that it is reasonable, fair, just and proportionate to award the Applicant costs of this Application on a partial indemnity basis, fixed in the amount of $160,000.00, all-inclusive, payable by the Respondent Estate Trustees from the assets of the Estate.
III. Disposition
36On the basis of the reasons set out herein, I order:
(a) The Respondents, Allan Paul Shafman and Jerry Solomon Shafman, in their capacity as Estate Trustees of the Estate of Esther Shafman, deceased, shall, from the assets of the Estate, forthwith pay the Applicant, Herbey Shafman, costs of this Application, fixed in the amount of $160,000.00, all inclusive of legal fees, disbursements and applicable taxes.
37The lawyers for the parties may deliver to my judicial assistant a form of draft Judgment, after agreeing on its form and content and filing on CaseLines, comprising the disposition set out in this Endorsement and in the Reasons for Judgment. In the event of disagreement, any party may request the scheduling of a Case Conference to settle the form of Judgment.
Justice A.A. Sanfilippo Date: June 30, 2023
Footnotes
[1] Shafman v. Shafman, 2023 ONSC 1391, at para. 136 (“Reasons for Judgment”). [2] Costs Submissions of the Applicant dated March 21, 2023; Respondents’ Costs Submissions, dated April 12, 2023; Reply Cost Submissions of the Applicant, dated April 21, 2023. [3] For brevity and clarity, particularly as the testator and all parties share a common surname, I will refer to them in this Endorsement on Costs by their first names, respectfully. [4] SLRA, s. 75: “The court may direct that the costs of the application be paid out of the estate or otherwise as it thinks proper and may fix the amount of the costs payable by any party, exclusive of necessary disbursements, at a lump sum having regard to the value of the estate and the amount of any support applied for or directed by its order.” [5] , 69 O.R. (3d) 398 (C.A.), at para. 62. [6] Ibid, at para. 63. [7] , 255 D.L.R. (4th) 435 (Ont. C.A.), at para. 79. [8] Ibid, at para. 80. [9] Ibid, at para. 78. [10] 2014 ONSC 5682 (Div. Ct.), 377 D.L.R. (4th) 101, at para. 164. [11] 2014 ONCA 101, 119 O.R. (3d) 81, at paras. 82-84: “The historical approach to costs in estate litigation created the danger that estates would be unreasonably depleted because of unwarranted or needlessly protracted litigation.” [12] McDougald Estate, at para. 85. [13] Ibid. [14] , at para. 6. [15] 2022 ONCA 682, at para. 21. [16] Neuberger Estate v. York, 2016 ONCA 303, 131 O.R. (3d) 143 (C.A.), at para. 24, citing Sawdon Estate, at para. 85. [17] Quinn, at para. 183, and more generally, 164-183. [18] 2015 ONSC 502 (Div. Ct.), at paras. 57-63. [19] Ibid, at para. 60. [20] 2019 ONSC 6020, at para. 12. [21] 2022 ONSC 2846. [22] Salter, at para. 6: “…estates litigation is a sub-set of civil litigation. Consequently, the general costs rules for civil litigation apply equally to estates litigation – the loser pays, subject to a court’s consideration of all relevant factors under Rule 57, and subject to the limited exceptions set out in McDougald Estate.” [23] Reasons for Judgment, at paras. 101-108. [24] Quinn, at para. 166. [25] Cummings, at para. 62. See also McDougald Estate, at para. 78, and Sawdon, at para. 86: “In any event, where the problems giving rise to the litigation were caused by the testator, it is appropriate that the testator, through his or her estate, bear the cost of their resolution.” [26] Cummings, at para. 63; Quinn, at paras. 168 and 182; Gefen, at paras. 13-17; Morassut, at paras. 59-62; McDougald Estate, at paras. 80-86; Sawdon, at para. 84. [27] The defined terms used in this Endorsement are taken from the Reasons for Judgment. [28] Morasutt, at para. 61. [29] Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310, at para. 89. [30] Gefen, at para. 16. [31] Reasons for Judgment, at paras. 101 and 110. [32] Endorsement of Justice Cavanagh dated November 19, 2021, at para. 26. [33] $286,633.53 (fees and HST) - $33,150.25 - $33,150.25 = $220,333.03. [34] $93,808.84 - $40,000 (Agency Fee) = $53,808.84. [35] $220,333.03 + $53,808.84 = $274,141.87. [36] $220,333.03 x 65% = $143,216.46 + $53,808.84 = $197,025.30. [37] Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, at para. 61; Barbour v. Bailey, 2016 ONCA 334, at para. 9; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at paras. 26 and 38; Zesta Engineering Ltd. v. Cloutier, at para. 4. [38] Apotex Inc., at para. 60, applying Restoule v. Canada (Attorney General), 2021 ONCA 779, 466 D.L.R. (4th) 2, at para. 356.