Court File and Parties

COURT FILE NO.: CV-23-00705111-00ES DATE: 20240524 ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE ESTATE OF SEVERINO CARINCI, deceased

BETWEEN: NADIA CARINCI Applicant

AND:

DIANA CARINCI-SERRAO and DAVIDE CARINCI Respondents

BEFORE: Justice A.A. Sanfilippo

COUNSEL: Cassandra Martino, for the Applicant, Nadia Carinci Eric M. Katzman, for the Respondent, Diana Carinci-Serrao Michael Krznaric, for the Respondent, Davide Carinci

HEARD: April 22, 2024

Endorsement

[1] The parties settled all issues in this application except the issue of costs. Their claims for costs involved consideration of the principles applicable to costs in settled civil law proceedings.

Background

[2] Severino Carinci died on July 9, 2022 (the “Deceased”), predeceased by his wife, Anna Maria Carinci, who died in 2018. The Deceased and his wife were survived by their three children, the Applicant, Nadia Carinci, and the Respondents Diana Serrao, incorrectly named as Diana Carinci-Serrao, and Davide Carinci.

[3] The Deceased left a last will and testament dated April 20, 1992 (the “Will”). The Will appoints Anna as trustee but, in the event that she should predecease the Deceased, as she did, the Will appoints Diana [1] as the trustee of the Deceased’s estate (the “Estate”). Furthermore, the Will names Anna as the primary beneficiary in the residue of the Estate but considering that she predeceased the Deceased, the Will constitutes Nadia, Diana, and Davide as equal residuary beneficiaries. None of this is in dispute.

This Application

[4] Nadia initiated this application on August 16, 2023, over a year after her father’s death. Nadia sought an order that Diana be removed as estate trustee and that Nadia be appointed as estate trustee in her place or, alternatively, that Diana be replaced by a neutral estate trustee. Nadia also sought ancillary and related relief in a passing of accounts for the period of Diana’s trusteeship and documentary production.

[5] As grounds for this application, Nadia pleaded that Diana did not provide Nadia with a copy of the Will until a year after their father’s death, that Diana changed the locks on the Estate’s primary, if not only, valuable asset, the Deceased’s single family residence (the “Property”), that Diana prevented Nadia from retrieving her personal belongings, and that Diana has squandered the value of the Estate through delay in the sale of the Property. Nadia pleaded, as well, that Diana has been verbally abusive toward Nadia when not ignoring her requests to take some steps in estate administration, and is unable to act impartially as an estate trustee.

[6] Davide agreed with Nadia that Diana has been difficult and unresponsive and has unreasonably delayed in the administration of the Estate, and that Diana’s conduct has caused detriment to all the beneficiaries, including through delay in the sale of the Property. Davide deposed that he was the best person to replace Diana as estate trustee as he resides proximate to the Property and because he attended to the maintenance of the Property after his father’s death.

[7] Diana responded that her delay in the administration of the Estate was caused by inadequate legal advice, not by her current lawyer but by a lawyer that she retained in December 2022 and dismissed in November 2023. Diana’s current lawyer then established a dialogue with the lawyers for Nadia and Davide, and Diana filed, on April 2, 2024, an Application for a Certificate of Appointment of Estate Trustee (“CAET”) in the Newmarket court as estate file number 2024-00476 (the “Probate Application”). The parties then reached a settlement on April 4, 2024, memorialized in Minutes of Settlement executed that day, and Nadia then removed her Notice of Objection to support Diana’s appointment as estate trustee.

[8] Through the Minutes of Settlement, the parties agreed to a process for the sale of the Property, Diana agreed to provide an informal accounting and parties agreed on a plan for the distribution of the residue of the Estate to the three siblings/beneficiaries. Considering the settlement, Diana did not tender evidence in response to Nadia and Davide’s allegations of misconduct and conflict in the family. The parties agreed to the dismissal of this application except for their mutual reservation to seek costs.

The Claims for Costs

[9] Each party sought an award of costs, as follows:

(a) Nadia claimed costs in the amount of $11,074.77, all inclusive, on a partial indemnity basis payable personally by Diana.

(b) Davide claimed costs in the amount of $10,848.00, all inclusive, on a full indemnity basis payable from the assets of the Estate.

(c) Diana claimed costs in the amount of $15,045.06, all inclusive, on a full indemnity basis payable from the assets of the Estate.

[10] I will set out the principles that guide the analysis of these claims for costs.

Principles Applicable to Claims for Costs in Settled Proceedings

[11] The court encourages settlements. [2] There is a public interest in encouraging settlements. [3] The Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provide procedural opportunities for settlement through pre-trial conferences in all civil disputes, [4] and mandatory mediation in certain judicial regions, including Toronto Region, for all civil disputes, [5] including estate litigation. [6] The objective for parties to consider settlement where possible is embodied in Rule 1.04, which calls for “the just, most expeditious and least expensive determination of every civil proceeding on its merits” in a manner that is proportionate to the issues and monetary amounts raised by the proceeding. The Law Society of Ontario’s Rules of Professional Conduct make consideration of settlement a professional imperative: “A lawyer shall advise and encourage the client to compromise or settle a dispute whenever it is possible to do so on a reasonable basis and shall discourage the client from commencing or continuing useless legal proceedings.” [7]

[12] The parties are commended for reaching a resolution of their dispute.

[13] Costs are a by-product of the litigation, not the reason the proceeding was commenced. The Court of Appeal explained that the “purposes of an award of costs are to indemnify the successful party of the legal costs they incurred; to encourage settlement; to deter frivolous actions and defences; and to discourage unnecessary steps that unduly prolong the litigation.” [8] Cost awards must be proportionate. [9] Costs are “in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”. [10]

[14] In the vast majority of cases, the determination of costs follows an adjudication because costs are a consequence of the litigation and an incident of the determination of success. Where parties achieve a settlement of all substantive claims but leave outstanding the issue of costs different considerations emerge because there is no adjudication on which to frame the cost analysis and because the purposes for cost awards do not readily apply to settled proceedings.

[15] Courts have been cautious in exercising their discretion to award costs in settled matters. In Kearney v. Hill, 2017 ONSC 6306, Monahan J., as he then was, noted that “where a proceeding is settled on all issues except for costs, the court is slow to make an award of costs against one of the parties.” [11] This was echoed by Pazaratz J. in Casey v. Casey, 2023 ONSC 2512, who stated that “[w]here parties reach their own settlement, leaving only the issue of costs to be determined by the court, the analysis requires a cautious approach.” [12] This caution is necessary because in settlement - in the absence of an adjudication - no facts have been found and no determination of success has been made. Without adjudication, the elements necessary to inform the court’s exercise of discretion to award costs based on a parties’ success or further to an assessment of the merits of a claim or defence are not available. As Myers J. stated in Muskala v. Sitarski, 2017 ONSC 2842, “costs are an incident of the determination of the rights of the parties.” [13] In Dhillon v. Dhillon Estate (2009), MacKenzie J. held that it was “problematic in the extreme for the court to exercise its discretion on a rational basis in making any cost award” in the absence of factual findings. [14]

[16] Courts have uniformly rejected the invitation to assess the merits of the claims and defences pleaded in the now-settled proceeding as part of hearing cost submissions, referred to by Boswell J. in Woloski v. Woloski, 2022 ONSC 7013 as the “phantom trial”. [15] This would run counter to the very purpose of the parties’ achieving a settlement and would undoubtedly be cost-inefficient and disproportionate when, as routinely occurs, the costs are a fraction of the value of the claims raised in the dispute. I agree with Justice Broad’s holding in Waterloo North Condominium Corporation No. 161 v. Redmond, 2017 ONSC 1304 that such a process would be “inappropriate and would risk being manifestly unfair” because there are many factors for parties to initiate legal proceedings and many reasons to settle. [16] And, it could call for allocation of scarce judicial resources to conduct a moot trial on an untested record to determine a small dollar disagreement between the parties that was left over from their settlement discussions, or, worse, reserved to provide a last outlet for the parties’ unspent acrimony.

[17] There are circumstances where courts have exercised their discretion to award costs in settled proceedings. For example, in Kearney, Justice Monahan awarded costs in the settled proceeding on his finding that the party against whom costs was awarded could have fostered, if not enabled an earlier resolution, thereby “avoiding the need for the costly and bitter litigation that ensued” had she been willing to engage earlier in alternatives to litigation. [17] In JV Mechanical Limited v. Solarc Construction Ltd., [2008] O.J. No. 1977 (S.C.), the court granted costs on a settled motion that had to be brought due to a breach of a court order. [18] These are the types of exceptional cases where a settlement is reached and the facts that are obvious and manifest from the record, including undisputable facts regarding the parties’ conduct, support the granting of a cost award. [19]

Analysis

[18] The principles pertaining to the exercise of discretion to grant costs in settled matters apply to estates cases when costs are to be determined in accordance with the civil litigation costs regime. In Westover Estate v. Jolicouer, 2024 ONCA 81, the Court of Appeal explained that it is now well-established that estate litigation is subject to the civil litigation costs regime except in limited cases where public policy considerations apply and require a different result. [20] The public policy considerations are the need to give effect to valid wills that reflect the testator’s intentions and the need to ensure that estates are properly administered. [21] The latter public policy consideration pertains to any difficulties or ambiguities caused by the Deceased’s testamentary documents or estate planning. [22]

[19] Neither of the policy considerations is applicable here. This application involves a dispute between the sisters and brother in the administration of the estate without dispute about the testator’s intentions or the Will.

[20] In considering Nadia’s claim for costs in accordance with the civil litigation costs regime, Nadia’s claim is not established on the basis of success. Nadia was not vindicated in this application. Indeed, the Minutes of Settlement provide that Diana will remain as estate trustee, contrary to the remedy sought by Nadia to replace Diana. Nadia established, however, that she needed to bring this application to compel Diana to advance the estate administration. This finding is based on the admitted facts that the Deceased died on July 9, 2022 and that Diana had no meaningful substantive communication with the beneficiaries in her capacity as trustee until after Nadia’s initiation of this application on August 16, 2023. Even then, Diana’s Probate Application was not filed until April 2, 2024, in what is essentially a single-asset Estate for which probate is necessary.

[21] One of the purposes of an award of costs is to discourage unnecessary steps that unduly prolong the litigation. This objective applies equally to discourage conduct that renders litigation necessary. Diana submitted that the delay in estate administration was the fault of her previous lawyer, but any dispute between Diana and her former lawyer is of no moment to the beneficiaries, in the circumstances of this case. On the basis that this application would not have been necessary if Diana had engaged in her role as trustee on a timely basis, I will grant costs to Nadia payable by Diana. Considering that the siblings are equal beneficiaries in the residue of the Estate, and since the Estate has value, I order that Nadia shall be paid these costs from Diana’s share in the residue of the Estate.

[22] In fixing the amount of costs payable to Nadia, I have noted the unchallenged evidence that Diana’s new counsel wrote in November 2023 that the continued prosecution of the application was unnecessary because of Diana’s commitment to account, to apply for probate and to advance the sale of the Property in collaboration with the other beneficiaries. These terms were eventually embodied in the Minutes of Settlement. Acting reasonably, no litigation steps were required by Nadia in this application after November 2023 apart from conferring and documenting the terms of the estate administration for the common benefit of all beneficiaries, which the parties would have done independent of the application. Nadia’s recoverable costs from Diana are, my view, limited to the costs associated with bringing this application to cause Diana to take steps in the administration of this estate and not the costs incurred after Diana’s counsel conceded the terms that were later documented in the Minutes of Settlement.

[23] In consideration of the factors listed in Rule 57.01, and in the exercise of my discretion under s. 131 of the Courts of Justice Act, I fix Nadia’s costs in the amount of $5,000.00, all inclusive, payable by Diana to Nadia from Diana’s share in the residue of the Estate. Nadia shall bear the remainder of her own costs of this application.

[24] Davide did not incur costs in bringing the application. Davide incurred costs in the retainer of a lawyer and engaging in the issues raised by the application, which he would have incurred regardless of the formality of an application considering the strained family dynamic. In the exercise of my discretion, I order that Davide shall bear his own costs of this application.

[25] Diana’s claim for costs is not based on civil law cost principles but is predicated on the Supreme Court’s finding in Geffen v. Goodman Estate, [23] that estate trustees are generally entitled to be indemnified for all reasonably incurred costs in the administration of an estate. However, the Court of Appeal instructed in Westover Estate, that “this is not an absolute rule. A court may order otherwise if an estate trustee has acted unreasonably or in substance for their own benefit, rather than for the benefit of the estate.” [24]

[26] On the admitted facts, Diana did not take steps in the administration of this estate for over a year apart from the retainer of her previous counsel whom, she alleges, failed to take steps on her behalf. In the absence of a record and particularly in the absence of any evidence from the previous counsel and the opportunity for that lawyer to respond to Diana’s accusations, I make no findings regarding Diana’s complaints of her previous counsel. There is similarly no record on which to make any finding regarding whether Diana acted reasonably in responding directly to the requests by her brother and sister regarding matters of estate administration. I note, however, that even after Nadia’s initiation of this application on August 16, 2023, Diana did not retain new counsel until some three months later.

[27] I have found that Nadia acted reasonably in bringing this application to cause the administration of this estate to be advanced. The corollary or consequence of this finding is that Diana did not act reasonably in the first year of her estate administration, justifying the initiation of this application. Diana did, however, act reasonably as estate trustee in conferring with the beneficiaries after November 2023, including by committing to account, applying for probate and advancing collaboratively the terms for the sale of the Property.

[28] I thereby decline to grant Diana indemnification for costs from the Estate for her defence of the application. Diana provided the foundation for this application through her unreasonable inactivity and unresponsiveness and shall bear these costs. I grant Diana costs payable by the Estate for the steps that she took in reasonably advancing the administration of the Estate, including preparing and filing the Probate Application, committing to an informal accounting, conferring with the beneficiaries and implementing terms for the sale of the Property. Considering all factors, I fix these costs in the amount of $5,000.00, all inclusive.

[29] In the exercise of my discretion, I order that Diana, in her capacity as trustee, shall be indemnified from the assets of the Estate for legal costs fixed in the amount of $5,000.00, and shall otherwise bear her own costs of this Application.

Disposition

[30] On the basis of these reasons, I order:

(a) The Applicant, Nadia Carinci, shall be awarded costs of $5,000.00, all inclusive, payable by the Respondent, Diana Serrao, improperly named as Diana Carinci-Serrao, from Diana Serrao’s residual share as a beneficiary in the Estate of Severino Carinci and shall otherwise bear her own costs of this application.

(b) The Respondent, Diana Serrao, as estate trustee, shall be indemnified by the Estate of Severino Carinci in the amount of $5,000.00, all inclusive, for costs reasonably incurred in the administration of the Estate, and shall otherwise bear her own costs of this application.

(c) The Respondent, Davide Carinci, shall bear his own costs of this application.

[31] This endorsement and the orders and directions contained in it shall have the immediate effect of a court order without the necessity of the issuance and entry of a formal order. Nonetheless, any party may take out a formal order by filing a draft order on CaseLines, together with the approval as to form and content of all parties, and forwarding a copy, in PDF and Word format, to the Court Registrar and the Estates List Trial Coordinator, to be brought to my attention.

Justice A.A. Sanfilippo

Date: May 24, 2024

Footnotes

[1] For brevity and clarity, I will refer to the parties by their first names, respectfully, in the same manner as they were referred to by their counsel in written and oral submissions.

[2] Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623, at paras. 13 and 19; Landon v. Roberts, 2009 ONCA 383, 249 O.A.C. 72, at para. 34; Middelkamp v. Fraser Valley Real Estate Board (1992), 96 D.L.R. (4th) 227 (B.C.C.A.), at paras. 13 and 44-46.

[3] Sable, at paras 11 and 16; Landon, at para. 35; Middelkamp, at paras. 17-19 and 46.

[4] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rr. 50.01-50.03.

[5] Ibid, r. 24.1.

[6] Ibid, r. 75.1.

[7] Law Society of Ontario, Rules of Professional Conduct (Ontario: Law Society of Ontario, 2000), ch. 3.2-4.

[8] 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O.R. (3d) 757 (C.A.), at para. 26; Fong v. Chan (1999), 46 O.R. (3d) 330 (C.A.), at para. 22.

[9] Beaver v. Hill, 2018 ONCA 840, 143 O.R. (3d) 519, at paras. 19-20; Mattina v. Mattina, 2018 ONCA 867, at para. 10; Bailey v. Barbour, 2016 ONCA 334, at para. 9.

[10] Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131.

[11] 2017 ONSC 6306, 35 E.T.R. (4th) 52, at para. 27.

[12] 2023 ONSC 2512, 93 R.F.L. (8th) 486, at para. 5. Also, Upton v. Harris, 2016 ONSC 2891, at para. 13.

[13] 2017 ONSC 2842, at para. 8.

[14] (2009) , 75 R.F.L. (6th) 284 (Ont. S.C.), at para. 10. Also, Koster v. Koster, 2018 ONSC 6896, 44 E.T.R. (4th) 335, at para. 18: “Put another way, an award of costs is typically grounded in findings by the court as to the parties’ respective success and the impact of their actions during litigation, which are findings not made in the event of a settlement.”

[15] 2022 ONSC 7013, 83 E.T.R. (4th) 150, at para. 37: “The caselaw is consistent in recognizing that the court should not attempt to run a ‘phantom trial’ in an attempt to determine which party might have been successful on which issue had the matter actually proceeded to trial.”

[16] 2017 ONSC 1304, at paras. 33-34.

[17] Kearney, at para. 39.

[18] [2008] O.J. No. 1977 (S.C.), at para. 10.

[19] Muskala, at para. 12: “There may be exceptional cases where a settlement is reached and different considerations lead to a different outcome.” Casey, at para. 8: “If a party eventually makes a good litigation choice by signing Minutes, that epiphany doesn’t automatically wipe out any history of bad litigation choices which would otherwise justify costs. Settling in the face of the inevitable may be little more than damage control.” (emphasis in original)

[20] 2024 ONCA 81, at paras. 12-13.

[21] Ibid, at para. 13.

[22] Sawdon Estate v. Watch Tower Bible and Tract Society of Canada, 2014 ONCA 101, 119 O.R. (3d) 81, at para. 85.

[23] , [1991] 2 S.C.R. 353, at pp. 390-391: “The courts have long held that trustees are entitled to be indemnified for all costs, including legal costs, which they have reasonably incurred.” Brown v. Rigsby, 2016 ONCA 521, 350 O.A.C. 236, at para. 11; Sawdon Estate, at para. 82.

[24] 2024 ONCA 81, at para. 14.