Rolling the Dice on Costs of Estate Litigation
Alberta Courts have been busy on the topic of costs in estate litigation in the past few months. Four recent decisions issued out of three judicial centres in Alberta provide a good reminder of just how unpredictable litigation is and the Court’s wide discretion in compensating parties for their litigation expenses.
If there was still any doubt, I think it is now clear in Alberta at least, that whether litigation concerns an estate or not, the general rule that “costs follow the event” is the starting point. To put it perhaps more harshly, the Courts for the most part continue to give effect to the “loser pays” principle in litigation. There is a narrow exception to relieve a losing party of those costs consequences in cases where the testator has caused the litigation or there were sound public policy reasons behind the dispute. However, simply dying without a will or cutting out a beneficiary who expected to inherit is not enough to find fault with the testator.
In what should be no surprise to any litigator, the multitude of factors to be considered under Rule 10.33 of the Alberta Rules of Court means that there is lots of room for the Court to craft a costs award specific to the circumstances. Anyone considering a will challenge should also be aware that unfounded requests for formal proof of a will may result in a penalty under the Surrogate Rules.
There is also a good reminder that Formal Offers to Settle must be reasonable to be enforceable. With Estate matters, where issues are not always strictly monetary, the nature of the offer should be carefully considered. The $10 nuisance settlement offer may therefore not be as appropriate in a will challenge as it may be in a debt claim or a personal injury matter.
The cases, briefly
- Neufeld Estate (Re), 2017 ABQB 802 was a formal proof application to admit an unsigned copy of a will to probate. The decision on the merits was rendered orally, so the underlying facts are scarce. The applicant was successful in the face of opposition from a disappointed family member. The applicant sought partial indemnity costs from the respondent on Column 3 of Schedule C of the Rules of Court (claims between $150,000 and $500,000). There is no explanation for why that column was chosen, but it may have been based on the net value of the Estate. The applicant also asked for double costs pursuant to a Formal Offer for the trial and written submissions. The defendant asked for both parties’ costs to be paid from the Estate on a partial indemnity basis. The Court ordered the unsuccessful defendant to pay Column 3 costs to the applicant, but declined to enforce the Formal Offer as it was not held to have been genuine. Costs of some pleadings not related to the litigation were also deducted. The defendant was ordered to bear his own costs.
- Lyttle Estate (Re), 2018 ABQB 49 involved an unsuccessful application by a self-represented individual for family maintenance and support. The net value of the estate after payment of some specific bequests was $150,000 to be split between 12 beneficiaries. The application was dismissed orally. It appears to have been opposed by the personal representative and one of the beneficiaries, who asked for their legal fees to be paid by the applicant personally. The applicant did not make submissions as to costs.
The Court awarded the personal representative’s full indemnity costs of about $14,000 to be paid from the Estate. The opposing beneficiary’s costs of about $4,500 were also paid from the Estate. The applicant was ordered to bear her own costs to the extent she had any. I find this decision somewhat problematic with respect to the indemnification of the personal representative’s fees, particularly because the Court acknowledged that she had a duty to stay neutral in these proceedings and because there was a beneficiary actively opposing the claim. It is therefore surprising to see such a large amount of litigation fees incurred by the personal representative when it was not her role to defend the claim. There is contrary case law out there, so I am curious as to how this decision will be subsequently treated in similar scenarios.
- Kraczkowski Estate (Re), 2018 ABQB 115 arose from a successful summary dismissal of an application for formal proof of a will and a quantum meruit claim. The successful personal representative incurred over $100,000 in legal fees. He sought repayment of his fees on a full indemnity basis from the unsuccessful challenger, or alternatively on a multiple of the highest column under the Rules of Court. The losing party asked for her costs out of the estate, or alternatively that she should only pay on Column 3 (the equivalent of about $4,500). Even though the Estate was worth $2,000,000 the Court did not apply Column 5. Instead, taking into account a Calderbank settlement offer, the parties' conduct, the nature of the requests for relief and the evidence, he awarded the successful party total costs of about $27,700 plus GST and with pre- and post- judgment interest.
- Marasse Estate (Re), 2018 ABQB 119 is a case I previously wrote about, where an ex-spouse was found to be responsible for paying spousal support payments to his deceased ex-wife's estate. The judge considered the issue of costs based on written submissions. The terms of the specific agreement between the parties again came back to haunt the unsuccessful party, who was ordered to pay the successful estate full indemnity costs of the underlying application. No specific dollar amounts were referenced, but assuming this was heard as a Special Chambers application, this could be a fairly significant amount. If your particular contractual arrangements specify the costs consequences of litigation, you need to be particularly mindful about engaging with the litigation process.
Remember, the default rules mean that costs will rarely result in a complete reimbursement of litigation fees. Attempting to settle is always encouraged, but as you can see from the above cases, your efforts to resolve matters must be genuine. In cases where settlement is not in your best interests, it still pays to conduct yourself reasonably and expeditiously throughout the litigation process.
If you or someone you know has an estate litigation issue and are looking for an assessment of that matter before embarking down the litigation process, feel free to contact us to discuss.
As always, thank you for reading,