Court File and Parties

COURT FILE NO.: 05-270/19 DATE: 20231117 ONTARIO SUPERIOR COURT OF JUSTICE

IN THE ESTATE OF LINA FANELLI, deceased

BETWEEN:

DAMIANO GABRIELE FANELLI,

Applicant

- and –

SONIA-GINA FANELLI-BRUNO, acting in her personal capacity and in her capacity as the named Estate Trustee of the Estate of Lina Fanelli, CLAUDIA SAMATHA BRUNO, a minor, and JONATHAN GABRIELE BRUNO, a minor

Respondents

BEFORE: FL Myers J

COUNSEL: Eddy J. Battiston, for the applicant Matthew Kersten, for the respondents

HEARD: November 16, 2023

Endorsement

[1] Almost a year before she passed away, Lina Fanelli changed her will. Her old will would have left her assets to be split 50/50 between her two adult children - the applicant and the respondent Sonia-Gina Fanelli-Bruno.

[2] In her new will, Mrs. Fanelli left 25% of her estate to each of the applicant, the respondent Sonia-Gina Fanelli-Bruno, and her two minor children. Mrs. Fanelli named her daughter Sonia-Gina Fanelli-Bruno as the estate trustee.

[3] The parties anticipate that there will be about $320,000 to distribute from the entire estate. When Lina Fanelli changed her will to decrease the applicant’s share of her estate from 50% to 25%, the applicant’s inheritance decreased by about $85,000 from about $160,000 to about $75,000.

[4] This entire litigation therefore only ever stood to be worth about $85,000 to the applicant if he won completely. Nevertheless, the applicant sued to set aside his mother’s new will on the bases that she lacked capacity and that his sister exercised undue influence over their mother.

[5] The parties have now settled the litigation other than costs. Once the applicant obtained some 9,000 pages of medical records and an affidavit (with back-up notes and correspondence) from the mother’s lawyer, the applicant accepted the terms of the new will.

[6] The applicant capitulated. He sought to change the regime governing the estate and he ultimately accepted the regime as it stood on the day he launched his lawsuit.

[7] The estate trustee seeks payment of her costs on a substantial indemnity basis of about $75,000. The estate’s funds are frozen. So the estate trustee has had to fund her own costs. She does not want to be indemnified by the estate because she and her children would effectively bear 75% of that amount.

[8] The applicant does not seek costs. But he submits that the respondents’ costs should be paid by the estate. He also challenges the quantum of those costs.

[9] Like most estates applications under Rule 75 of the Rules of Civil Procedure, this case commenced with a consensual order providing for production of the deceased’s medical, financial, and legal records to the parties.

[10] This case is an example of the very harm inherent in the “motion for directions” process predicted by the Court of Appeal in Johnson v. Johnson, 2022 ONCA 682. In that case, the Court of Appeal discussed the need to impose a minimum evidentiary threshold on parties before unleashing them to engage in a massive documentary review in estates cases brought by disgruntled relatives.

[11] In Johnson, the court rejected a request by a disgruntled beneficiary for an order for the production of documents on a motion for directions like the one agreed upon in this case. The court held:

[16] We reject Nancy’s submission that her application should not have been dismissed without production of the medical, financial, and legal documents that she had requested or the calling of further evidence from Mrs. Johnson’s advisors. Her argument defeats the very practical purpose of the minimal evidentiary threshold prescribed by this court in Neuberger, at para 88: to avoid putting an estate to the needless expense and delay of a fishing expedition brought by “a disgruntled relative”. It also undermines the policy concerns articulated in Neuberger that a claimant ought not be permitted to deplete an estate and delay its administration by seeking documentary discovery or other directions without meeting the minimal evidentiary threshold of “some evidence” that would call into question the validity of a will and that is not successfully answered by the responding party. These concerns were also addressed by Myers J. in Seepa where he advocates “a culture shift” from the routine standard form orders for directions that “consign parties to lengthy, intrusive, expensive documentary collection and investigation proceedings”: at paras. 2-4.

[12] The feared outcome is exactly what happened here. The applicant was disgruntled and brought a claim with no real evidence to support his position. Now, the parties are here years later, with a huge swath of documents sought, obtained, organized, analyzed, and produced, in which no real evidence supporting the claim is found.

[13] The applicant incurred his own legal fees of almost $60,000 to chase a maximum claim of $85,000. He put his sister to an expense of $90,000 to protect the gifts to her children intended by their grandmother.

[14] If the respondents are indemnified by the estate, the applicant will have succeeded in imposing on the rest of the family three-quarters of the total amount that he sought despite losing. Plus, the applicant’s own costs will deprive him of all but about $15,000 from his net $75,000 inheritance.

[15] This litigation is an example of scorched earth litigation. The estate has been tied up in this litigation for four years unable to make distributions. The applicant imposes his economic outcome on the other beneficiaries with no out-of-pocket cost to himself. But he effectively spent his inheritance to do so.

[16] It’s a lose-lose all around unless the applicant pays the respondents’ costs.

[17] The applicant submits that he advanced bona fide causes of action that were neither frivolous nor vexatious. As long as he had “some justification” for his claims, he submits that he should not be penalized in costs even though by settling he effectively discontinued or abandoned his claim. Gianopoulos v. Olga Management Ltd..

[18] Turning to the rules applicable to estates cases in particular, the applicant adopts or analogizes to the tests applicable to an unsuccessful beneficiary who claims his or her costs from the estate. In Babchuk v. Kutz, 2007 ABQB 88 the court held:

[7] It is not automatic in probate litigation that the estate must pay costs: McCullogh Estate v. Ayer, 1998 ABCA 38, [1998] A.J. No. 111 (C.A.). Rather, the modern approach to fixing costs in estate litigation is to scrutinize the litigation carefully to restrict unwarranted litigation and protect estates from being depleted by such litigation: McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 (Ont. C.A.).

[8] There are a number of factors that must be considered when determining whether the court should award costs to an unsuccessful party in estate litigation: a. Did the testator cause the litigation? b. Was the challenge reasonable? c. Was the conduct of the parties reasonable? d. Was there an allegation of undue influence? e. Were there different issues or periods of time in which costs should differ? f. Were there offers to settle?

[19] Although the applicant does not seek his costs from the estate here, he uses these factors as guides to help determine whether he has established a justification for bringing this proceeding.

[20] The applicant submits that his mother caused the litigation. Her lawyer warned her that if she cut the applicant’s share in favour of his nephew and niece, he would likely be disgruntled. The lawyer advised Mrs. Fanelli to discuss her new will with both of her children.

[21] Mrs. Fanelli apparently did not want to have that difficult conversation with her son. But the applicant does give evidence that he had a discussion with his mother at an earlier time in which she discussed leaving gifts for the grandchildren. At the time those gifts would have replaced the respondent’s 50% share rather than coming at the expense of both the respondent and the applicant.

[22] The applicant then submits that his challenge was reasonable. It was neither frivolous nor vexatious. I do not agree. Looking just at the applicant’s evidence, without even considering whether the respondent’s evidence answered his claims, in my view, the applicant’s claims would not likely have surmounted even the minimum evidentiary threshold from Neuberger discussed above in Johnson.

[23] On the issue of his mother’s capacity, the applicant’s evidence was that his mother suffered from advanced cancer. She was ill for several years. She had chemotherapy, underwent surgeries, and took morphine for pain.

[24] Mrs. Fanelli signed her new will on March 19, 2018. Here is the applicant’s evidence about her capacity at around that time:

15. Sometime in January 2018, she suffered from wound infection as a result of intravenous medical administration ("POST") and was an in-patient at the Humber River Hospital for approximately 2 weeks.
16. From February until approximately May 2018, my mother was at home in her apartment being cared for by me and the PSW.
17. On March 18, 2018, we celebrated my mother's birthday. Various family members attended at my mother's apartment to celebrate, including her niece Linda Bellini and Linda's brother, Georgio DiGennaro. During the course of that visit, my mother complained that the post infection injury was still very painful. She took several morphine pills to dull the pain.

[25] The only evidence that the deceased lacked capacity adduced by the applicant is that the day before she signed her new will, she took morphine pills to dull pain. That is not any evidence at all that she did not know her assets, could not appreciate the likely recipients of her largesse, or that she could not appreciate property decisions.

[26] The applicant gives no evidence indicating that Mrs. Fanelli was not managing her own affairs. She was not in end-stage palliative care or in-and-out of consciousness on high doses of medication. Rather, this was almost a year before Mrs. Fanelli died.

[27] The applicant adduced no relevant evidence - evidence that made it more or less likely - that Mrs. Fanelli lacked capacity on the day she signed her will. All we are told is that she suffered from serious cancer and took morphine for pain when needed. We aren’t even told whether, at the dosages she ingested, the morphine affected her cognition. The applicant is not a medical or pharmacological expert of course. But he did not even give layman’s observations of his mother being confused or lacking understanding, etc.

[28] The applicant provides no evidence at all about his mother’s actual mental state. There is not a hint of evidence to rebut the presumption that Mrs. Fanelli had capacity.

[29] We now know from the medical files and lawyer’s evidence, that Mrs. Fanelli’s capacity was just fine until the day she died. If the applicant lived with his mother as he says, then he knew it too.

[30] As to undue influence, the applicant swears that the lawyer who attended on his mother to prepare her new will is a cousin of the respondent’s husband. She did not use her old lawyer John Cirillo. Then his affidavit says:

42. In early February 2019, my uncle, Mario DiGennaro (brother of Lina Fanelli), called Sonia to express his concern that I was upset about what Sonia had told me regarding my mother's Will. Mario asked Sonia what caused me to get me upset about the Will. Sonia told Mario that my mother had changed the Will "because it wasn't fair; " that " Damiano wasn't on the Will so she changed it to make it fair. " Mario told Sonia that couldn't be right because when he visited Lina on April 7, 2018, he and Lina spoke about her illness. Lina told Mario " io sto piu di la que di qua" meaning that she was not well and did not expect to live much longer. Lina told Mario that her paperwork was in order and everything was 50/50. Sonia replied " that's not true, that's not what my mother wanted. " Mario then said " how is that fair if you get three quarters (3/4) and he gets one-quarter(1/4)?") Mario asked Sonia why Lina did not go back to the lawyer John Cirillo if there was a problem with the Will. Sonia replied that her mother " didn't want to go to him because he was dying ."
43. I believe that my sister Sonia manipulated my mother into executing the Will on March 19, 2018.
44. I believe that my sister Sonia exerted undue influence on my mother.

[31] Paragraphs 43 and 44 do not follow from paragraph 42 in my view. They are just bald assertions.

[32] It is hard to make sense of the alleged conversation between the applicant’s uncle and the respondent estate trustee. It is all inadmissible hearsay. The lack of an affidavit from the uncle prevents the applicant from relying on the respondent’s statements as admissions. Regardless, the conversation as conveyed makes no sense. It starts from an assertion that the applicant was not in the will at all. It ends with the uncle questioning the fairness of the sister and her children receiving 75% of the estate.

[33] Mr. Battiston submits that the mother’s change of her will to reduce the applicant’s share using a lawyer who is a relative of the respondent’s husband raised suspicious circumstances. I do not agree. And that is before all of these points are answered in the respondent’s material and the lawyer’s affidavit.

[34] Mrs. Fanelli did not exclude the applicant. She reduced the shares of both of her children to give the grandchildren gifts. The applicant has no children. Mrs. Fanelli changed her will almost a year before she died. It was not on the sudden. There is no indication that she was in extremis or at all fragile or vulnerable to her daughter when she did so. The respondent estate trustee lives in San Jose, California. She did not live with her mother. The applicant did. There is no evidence that she did anything except inferentially help find a lawyer for her mother. I am not aware of any rule or presumption that if a deceased person leaves less than an equal amount among her children, that is suspicious in itself.

[35] Nothing in the applicant’s affidavit is relevant evidence that makes an inference of undue influence or the factors underlying undue influence more or less likely. Uncle and the respondent sister had a conversation in which the respondent says that her mother did not want her estate divided 50/50. That accords with the will. But it says nothing about the sister having done anything at all to influence the mother’s estate planning let alone having done so unduly.

[36] The fact that the applicant brought an undue influence claim is itself a relevant factor. It is a fact-heavy, serious allegation of wrongdoing that is tantamount to fraud. The applicant knew that he was claiming that his sister had wrongfully overwhelmed her mother’s will to effectively force her or trick her into changing her will to reflect an estate plan that the mother did not truly intend. He had no evidence to make any such assertion. Being disgruntled and therefore prone to believe another person has done you wrong, is not alchemy that transforms speculation into evidence.

[37] Lacking objective evidence, the applicant embarked on a long, expensive fishing expedition into his mother’s most private information. In the applicant’s favour, at least he agreed to walk away once his fishhook came back empty.

[38] I agree with Mr. Kersten that this is not a case like Di Nunzio v. Di Nunzio, 2022 ONCA 889. The applicant was not suspiciously excluded from his mother’s will. His share was reduced, as was the respondent’s share, so Mrs. Fanelli could make gifts to her grandchildren as she desired. This is also not a case like Silano v. Silano, 2019 ONSC 2776, in which the deceased excluded those whom she had previously included which led Dietrich J. to conclude that her own acts had called out for a legal resolution.

[39] The only thing that can be pointed at Mrs. Fanelli is perhaps her failure to tell the applicant that she had changed her will. If she had done so (with a witness or in writing) then perhaps this litigation might have been avoided. But given that the applicant scorched the earth without any actual evidence, I am not prepared to find that Mrs. Fanelli could have prevented the applicant’s acting on his feelings of being slighted. The applicant has chosen to invest his entire inheritance to obtain a roughly equal amount. He was not acting from a place of economic rationality.

[40] I find that the applicant has not established on balance that he had “some justification” for suing as he did. The Babchuk factors do not assist him. His evidence would not likely have met the Neuberger threshold.

[41] I thought about whether the respondents should bear some costs because they agreed to such a broad order for directions on such a thin claim. But consent orders are needed in this field as discussed elsewhere. Moreover, there is always a risk in litigation that refusing production will be seen as hiding something. I do not think that an estate trustee should be faulted for being cooperative.

[42] I also note that neither party submitted that I should refrain from considering costs on the basis of the principals set out in cases like Muskala v Sitarski, 2017 ONSC 2842. In light of the specific policies involved in this type of case as discussed in Johnson and since I was able to consider the issues by looking at the prima facie evidence of the applicant, I am satisfied that this is an exception to the general policy against deciding costs independently when a case is settled.

[43] The applicant says that the estate trustee could have made production consensually and discussed the issues with him without incurring all the costs. But it was the applicant who sued and chose to allege undue influence. I see no evidence of him taking any step to seek a more consensual process or discussion before launching the parties to DEFCON 1.

[44] Under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, the court has a discretion to award costs. The normative approach is that costs follow the event. Here the parties settled. There is no event per se. But the finding that the lawsuit did not have justification leads to the same outcome.

[45] I have serious concerns with the amount spent on both sides. But that cannot lie at the estate trustee’s feet. First, as estate trustee she was duty-bound to respond and to try to protect the wishes of the deceased subject to the limits of her fiduciary duties and economic rationality. She also bore an asymmetrical burden as she had to collect and produce the documents obtained from the various third parties under the order for directions. She had to collect evidence to respond to the applicant’s subjective beliefs and speculation.

[46] I would expect the costs of the estate trustee’s lawyers to exceed those of the applicant in this case.

[47] I do not agree that there are costs of administration mixed into the estate trustee’s bill of costs. The allegations of duplication made by the applicant are trivial and de minimis.

[48] This is a case for substantial indemnity costs in my view. Bringing a case like this, making allegations of undue influence with no relevant evidence of either incapacity or undue influence, forcing a massive expenditure on an estate in an effort to scorch the earth, i.e. destroy what you cannot have yourself, is reprehensible litigation behaviour in my view. Young v. Young.

[49] This is especially the case here, where every dollar of legal fees left for the estate (i.e. the difference between full indemnity and either partial or substantial indemnity) is borne only 25% by the applicant. That is not fair or reasonable.

[50] The fees are disproportionate compared to the amount in issue. But the applicant cannot be heard to complain when he brought a fact-laden case with very nasty allegations and himself spent two-thirds of his best-case outcome. A reasonable litigant considering the case would have recognized that the respondents would have little choice but to spend the same or more in light of the asymmetric documentary and evidentiary burden.

[51] I have reviewed the respondents’ bill of costs. The rates are within market norms. The hours billed are reasonable for the work performed.

[52] In all, in my view it is fair and reasonable for the applicant to pay the respondent her costs on a substantial indemnity basis fixed in the amount of $74,000 all inclusive.

[53] The parties should be able to agree on the costs of this hearing given the findings above. If they cannot agree, the respondents may deliver costs submissions by November 24, 2023. The applicant may then deliver his costs submissions by December 1, 2023. If a party delivers costs submissions, they shall also deliver a Costs Outline at the same time. Submissions shall be no longer than two pages, double spaced, with normal margins, and written in at least a 12-point font. The parties may also submit any offers to settle on which they rely for costs purposes. Submissions should be filed through the online portal, uploaded to Caselines, and sent to me by an email to my Judicial Assistant.

FL Myers J Date: November 17, 2023