NEW DEVELOPMENTS IN ESTATE LITIGATION COST AWARDS

1. INTRODUCTION

Cost awards are the amount of monies that a Court awards one litigant against another as a contribution towards legal fees incurred.

Until recent years, practitioners in estate litigation , had little to fear with respect to costs awards. Win or lose, the costs of the court action were usually paid out of the estate.

In the last ten years however, the courts have shown a growing inclination to let costs follow the event. This means that one litigant, usually the successful one is awarded party and party costs against the other. In real terms this amounts to a contribution of about 20% of the actual legal fees incurred.

More recently, in some circumstances judges are allowing full indemnity for or nearly full indemnity for legal fees. This paper will attempt to provide an overview of some the principles emerging in the law of costs.


2. SOME GENERAL PRINCIPLES

In some respects, cost awards in estate litigation are different from such awards in most other types of litigation. A number of factors contribute to this distinction, including the following:

(i) the litigation may arise as a result because of the actions of the testator or the residuary beneficiaries. For example, the will may be ambiguous and thus require interpretation by the court. In such situations the court will generally order that costs be paid out of the estate;

(ii) executors and trustees are usually entitled to be indemnified for all costs that they have reasonably incurred, including the cost of legal proceedings. Courts generally regard this approach as necessary in order not to discourage executors and trustees from carrying out their duties;

(iii) in some cases there may be good cause to question matters such as the capacity of the testator or the execution of the will. In such cases the court may feel the litigation was justified and thus not order costs against the unsuccessful parties;

The principles to be applied in relation to estate and estate trust litigation were summarized in Turner v. Telecommunications Workers' Pension Plan, [2001], 197 D.L.R. (4th) 533 (B.C.C.A.).

(i) “an application made by trustees of the will or settlement, asking the court to construe the trust instrument for their guidance; to ascertain the interest of the beneficiaries; or to answer a question which arises in the administration of the trusts. In such instances, the costs of all parties, which are necessarily incurred for the benefit of the estate, should be taxed as between solicitor and client and paid out of the estate;

(ii) an application made by the beneficiaries as a result of difficulty of construction or administration of the trust which would have justified an application by the trustees. Again the application is necessary for the administration of the trust and the costs of all parties, which are necessarily incurred for the benefit of the estate, are paid out of estate;

(iii) an application made by the beneficiaries who make claims adverse to other beneficiaries. Such litigation is adversarial in nature and, subject to the court's discretion, the unsuccessful party bears the costs of those whom he or she brings to court.”

Subject to the above, in most cases the costs of litigation will follow the event, unless the court directs otherwise. In other words, the winning party will generally be awarded costs against the losing party. These costs are usually awarded on scale three of a tariff, with each unit awarded representing $80. Unfortunately, the amount of costs awarded is usually in the range of 20-25% of the actual amount of legal fees incurred.

On the one hand, the courts are showing an increasingly willingness to punish frivolous or vindictive litigation by imposing special costs against the unsuccessful party.

Conversely, the courts do not wish to discourage legitimate court actions, particularly those brought by the executor or trustee.

Given these competing concerns with respect to costs, there is a great variation in awards given.

3. INHERENT JURISDICTION OF COURT

Despite the Rules of Court dealing with costs, the court retains inherent jurisdiction with respect to costs.

As Justice Lambert said in Oasis Hotel Ltd. and others v. Zurich Insurance Company and others, (1981) 28 B.C.L.R. 230 (C.A.) at page 232:

“The full powers of the high court of Chancery in the ancient courts of common law have descended to us unimpaired.”

In Oasis, the court invoked inherent jurisdiction to award costs personally against the principal of an insolvent company. He was found to have abused the court to attempt to perpetrate a fraud.

The existence of inherent equitable jurisdiction, independent of the rules of court, was reiterated in Baart v. Kumar, (1985) 21 D.L.R. 4th 706 B.C.C.A. and Moore v Dhillon, (1993) 85 B.C.L.R. (2d) 69 (C.A.).

Although the court has a wide discretion in relation to costs, that discretion must be exercised judicially and with due regard to accepted legal principles.


4. SPECIAL COSTS

The law relating to special costs in estate litigation has evolved greatly in the last ten years. The cases show an increasing willingness by the courts to award special costs, particularly where the behaviour of the plaintiff warrants rebuke.

(A) WHAT ARE SPECIAL COSTS:

Special costs are where one party is ordered to pay the entire legal fees of the other party. They were formerly called solicitor and client costs.

A primary function of special costs awards is to provide a penalty as a deterrent for conduct worthy of rebuke.

In the leading case of Bradshaw Construction Ltd. v. Bank of Nova Scotia, (1991) 48 C.P.C. (2d) 74, Bouck J. states that special costs are more or less the old solicitor and client costs as described in the 1989 rules, Rule 51(1); Appendix C.

When taxing special costs there is no detailed scale corresponding to the scale that applies to ordinary costs and Appendix B. Instead those fees that the Registrar considers were properly and reasonably necessary to conduct the proceeding to which the fees relate are allowable at a special costs assessment.

This analysis of Bouck J. in Bradshaw was adopted by the Court of Appeal in Laye v. College of Psychologists of British Columbia, Vancouver Registry Docket C.A. 024099, March 19, 1998.

Rule 57(3) covers special costs and is stated as follows:

57(3) Where the court orders that costs be assessed as special costs, the registrar shall allow those fees that the registrar considers were proper or reasonably necessary to conduct the proceeding to which the fees relate, and, in exercising that discretion, the registrar shall consider all of the circumstances, including,

(a) the complexity of the proceeding and the difficulty or the novelty of the issues involved,
(b) the skill, specialized knowledge and responsibility required of the solicitor,
(c) the amount involved in the proceeding,
(d) the time reasonably expended in conducting the proceeding,
(e) the conduct of any party that tended to shorten, or to unnecessarily lengthen, the duration of the proceeding,
(f) the importance of the proceeding to the party whose bill is being assessed, and the result obtained, and,
(g) the benefit to the party whose bill is being assessed of the services rendered by the solicitor.

In fact an award of special costs or solicitor and client costs may be made even if the award will extend beyond indemnity of the successful party.

In Fullerton v. Matsqui, 1992, 74 B.C.L.R. (2d) 311, the Court of Appeal held that unlike party and party costs, which are designed to indemnify, special costs or costs awarded on a solicitor and client basis may be awarded on a higher scale as a penalty or deterrent for certain conduct" (page 316), and when the court "seeks to disassociate itself from some misconduct" (page 318). In such circumstances the award may go beyond indemnity and into the realm of punishment.

(B) SPECIFIC EXAMPLES OF SPECIAL COST AWARDS:


(i) REPREHENSIBLE CONDUCT

In Hicks v. Hicks, 16 E.T.R. (2d) 179, Mr. Justice Shaw awarded full indemnity for costs against the defendant, as a result of his reprehensible conduct in exercising undue influence over his elderly mother. The costs in that case were approximately $70,000.

In doing so, Justice Shaw stated as follows:

"In my opinion, the surreptitious and dishonest conduct of Edward was so highly reprehensible as to warrant an award of full indemnity, that is, solicitor and own client costs. I make this order under the inherent jurisdiction of the court.”

In Stiles v. Workers Compensation Board of British Columbia (1989), 38 B.C.L.R. (2d) 307 (C.A.) Justice Lambert stated that full indemnity for legal fees should not be awarded unless there is some form of reprehensible, scandalous or outrageous conduct in the circumstances giving rise to the cause of action, or in the proceedings themselves that warrants chastisement.

(ii) LACK OF BONA FIDES

In Louie v Louie Estate, Unreported, Vancouver Registry No. A971301, September 3, 1998, Boyd J., the court awarded special costs against the plaintiff in a Wills Variation action. She did so because she found that the action "was not brought bona fides, but rather as a vehicle to force or coerce the other beneficiaries of the estate to bend to the plaintiff's will". The court found that the plaintiff had been relentless in his campaign of making outrageous false allegations and attacking the moral turpitude and professionalism of the defendant lawyer.

(iii) CONDUCT WORTHY OF REPROOF OR REBUKE

In Fong v. Lee, 2002 B.C.S.C. 678 - Mr. Justice Hood ordered special costs against defendant executors on the basis that their conduct deserved reproof or rebuke.

Mr. Justice Hood made the following comments:

"The test I proposed to apply is that stated by Chief Justice Esson of this court, and which was adopted by the Court of Appeal in Laye v College of Psychologists (British Columbia, (1999), 59 B.C.L.R. 3d) 349 (C.A.) at p. 355. Can the conduct of the defendant brothers be described as misconduct deserving of reproof or rebuke? The answer without question is in the affirmative.

The Court of Appeal has stated that the general rule is that special costs are awarded only for misconduct in the proceedings in which the costs order is made. See Laye and the cases at page 355. The court also stated earlier in Stiles v. Workers Compensation Board of British Columbia, (1989), 38 B.C.L.R. (2d) 307 (C.A.) at p. 311 that special costs should not be awarded unless there is some form of reprehensible conduct, "either in the circumstances giving rise to the cause of action, or in the proceeding, which make such costs desirable as a form of chastisement.

Without doing a detailed analysis of the cases, I have concluded that the general rule that special costs are ordered only for misconduct in the proceeding is not absolute, although it would follow that pre-litigation conduct alone is not a basis on which to award special costs. This was the conclusion reached by my brother Cohen J. in Okanagan Similkameen (Regional District) v. Blackwell Stores Ltd., (1998) 15 C.P.C. 68 (B.C.S.C.) at p. 73."

Mr. Justice Hood awarded special costs on the basis of both pre-litigation misconduct as well as continuing misconduct throughout the proceedings

See also Ram v. Prasad, 1999, 28 E.T.R. (2d) 140, where the B.C. Court of Appeal upheld the trial judge who awarded special costs against the defendant. In that case the defendant improperly backdated a document and propounded a purported will that was executed before the deceased was admitted to hospital in a paranoid, confused, agitated, and suicidal state.

(iv) UNFOUNDED SERIOUS ALLEGATIONS

There is an increasing trend by the courts to award special costs if the allegations of fraud, undue influence, or other unfounded serious allegations are not proved. Litigators who routinely allege undue influence should pay heed.

In Kouwenhoven Estate v. Kouwenhoven, 2001 B.C.S.C. 1402, Vickers J., an award of special costs was made against three sons who brought an action for fraud and undue influence against their deceased father’s second wife. The action was dismissed as being founded on speculation and innuendo, and special costs were ordered. Special costs were ordered at a rate of 100% of the actual legal fees. This order, made pursuant to Rule 57(3) of the Rules of Court, was made both against the estate and personally against the executor who had initiated the action.

See also Danchuk v. Calderwood, 1996, 58 E.T.R. (2d) 193, (see additional Reasons for Judgement dated June 16, 1997). In that case Justice Harvey concluded that the plaintiff exercised undue influence upon the deceased testator and that the circumstances surrounding the preparation of the will were suspicious. The plaintiff's application for costs was dismissed, however the defendant's application for special costs was granted. These awards were made on the basis of the plaintiff’s reprehensible conduct.

(v) BRINGING A DEFECTIVE APPLICATION FOR AN EX PARTE ORDER

In British Columbia (Public Trustee) v Batiuk, 14 E.T.R. (2d) 18, Vickers, J. set aside an ex parte order obtained by the Public Trustee that required a patient to submit to examination by a geriatric psychiatrist. The court found, inter alia, that the Public Trustee had failed to disclose all relevant information and had provided incorrect information to the court.

The court awarded special costs against the Public Trustee even though it was found that the Public Trustee made the application in good faith.


5. PARTIAL SPECIAL COSTS

If the court does not wish to punish a party on the basis of full indemnity for costs, it may still award a certain percentage of special costs.

Examples of awards of a partial percentage of full indemnity for costs include the following:

(i) In Shipp v. Tremblay, June 26, 1998, Macaulay J. awarded 80% of special costs where the plaintiff succeeded in an action to recover essentially all of his assets that were transferred to the defendant through undue influence. The court refused to consider the plaintiff's claim at trial for punitive damages under the guise of the claim for special costs. The court found that the actual legal fees incurred were approximately $165,000, while costs at scale 3 awarded only $36,300, and costs at scale 4 ( now abolished) only $45,250.

The judge found that to award ordinary costs would amount to an unjust result, and accordingly awarded $131,000, which represented 80% of special costs.

(ii) In Re Woodward Estate, 40 E.T.R. (2d) 306, Mr. Justice Edwards proposed 75% of special costs against the petitioner for advancing a mischievous claim against an estate. The petition had been brought by an executor, and the court held that there was no question as to the validity or the meaning of the will or the capacity of the testator. Accordingly the special costs at 75% in favour of both the estate executors and the residuary beneficiary were awarded.

(iii) Easton v. Easton, 2002 B.C.S.C. 1076, District Registrar Bouck assessed 60% of special costs in favour of the petitioner. An order had been obtained that the respondent be passed over as executor. The main issue was whether the petitioner, himself a lawyer during most of the litigation, was entitled to charge for his time and disbursements. He had initially acted on his own, but later hired other counsel and assisted them throughout.

The court held that a solicitor who acts for him or herself is nonetheless entitled to all necessary costs as assessed in the ordinary way. Most services however could not be claimed during times when the petitioner was represented by other counsel. The amount allowed had to be moderate and reasonable.

6. SPECIAL COSTS IN WILLS VARIATION CASES

In Clucas v. Clucas Estate, Unreported, Vancouver Registry No. A973288,October 15, 1999, Madam Justice Satanove, made the following statement:

"Before the advent of special and increased costs, successful plaintiffs in wills variation actions were often indemnified at least in part, by an order of solicitor/client costs. The reason appeared to be that where widows (and children) had to proceed to trial to obtain what should have been given to them, then they should not be expected to pay the costs of the proceedings or to suffer financially because of it." See Campbell v. Campbell 1986 B.C. J. No. 1221 (S.C.)

In Clucas, Madam Justice Satanove awarded increased costs on the basis of 70% of special costs to avoid the unjust result which would otherwise result.

In Rampling v Nootebas, 2003, B.C.S.C. 1225, August 5, 2003, Mr. Justice Truscott in a Wills Variation action, exercised his discretion and awarded special costs out of the estate to both the plaintiffs and the executrix.

In Chan v. Lee Estate, 2003 B.C.S.C. 513, Mr. Justice Hood awarded successful plaintiffs in a wills variation action against their brothers, special costs. The plaintiffs were entitled to special costs against the brothers in view of the brothers' pre-action conduct, which they carried over throughout the trial.

7. SPECIAL COSTS REFUSED

In Tamboline v. Dobbs Estate, Unreported Vancouver Registry No. A951001, January 31, 1997, Mr. Justice Dross refused to award special costs where the applicant unsuccessfully sought to remove an executor for alleged improper conduct. The court did not find that the allegations advanced were so reprehensible or seriously prejudicial to the executor so as to warrant special costs, and accordingly the court awarded only scale 3 costs against the applicant.

8. SPECIAL COSTS TO BE PAID OUT OF THE ESTATE

In Schippmann Estate v. Schippmann, 38 E.T.R. (2d) 96, the Court of Appeal dealt with an appeal between an estate beneficiary and the executrix beneficiary, disputing their responsibility for an anticipated tax liability.

The court found that neither party had any complete success on the appeal, and held that the beneficiary and the executrix beneficiary should be awarded special costs to be paid out of the estate.

The court essentially determined that the application was made in the context of an application to pass accounts.

The court followed Re Kanee Estate (1992), 69 B.C.L.R. (2d) 89, where the majority of the B.C. Court of Appeal stated as follows:

"Thus, in my view, the statutory scheme mandates that the costs of these remuneration proceedings, being non-contentious (although opposed) should be assessed as special costs unless the court otherwise orders. In fact ... the Rule makes special costs in these circumstances the "normative" assessment."

9. INCREASED COSTS

A significant development occurred here when by order in council effective July 1,2002 increased costs were abolished.

This development is unfortunate in that the Courts now have one less discretionary tool with which to fashion cost awards that approach the appropriate level of indemnity for legal fees incurred.

10. REDUCED COSTS

In Behnsen Estate v Behnsen, Unreported, Victoria Registry No. 4993/99, December 14, 1999, Mr. Justice Wilson dealt with a plaintiff executor who brought an action to resolve a simple property dispute with the defendant.

The judge was critical of the procedure followed by the plaintiff, and found that the plaintiff should have applied to strike out the relevant portions of the defendant's materials. The plaintiff instead responded to the defendant's irrelevant materials with further disputatious affidavits, said to be necessary to counter the defendant's assertion of good character.

The court disallowed the plaintiff his costs of those latter affidavits, and the defendant was directed to pay all remaining costs of the action on a scale 1.

11. COSTS AWARDED AGAINST THE EXECUTOR PERSONALLY

In Stangland v.Wiebe, Unreported, New Westminster Registry No. S046956, November 19, 1998, Madam Justice Martinson ratified her previous award of special costs to an estate beneficiary, by making those costs payable by the executor personally, rather than by the estate. The basis for purportedly making this change was that there were not funds left in the estate. The dispute centered over monies which the beneficiary alleged were owing to her, while the executor took the position that the monies were his. The court found that the money belonged to the beneficiary.

The general rule is that, in the absence of misconduct, a trustee should be reimbursed for his or her costs, charges and expenses out of the trust estate, even in cases of unsuccessful litigation.

There is ample authority, however for the principle that an executor should be personally liable for costs where he or she institutes proceedings that are entirely without merit, and the executor may be required to indemnify the estate for such costs where they have been paid out of the estate.

For example in Re Preymak, (1964), 45 D.L.R. (2d) 554, an administrator who brought a motion for construction of a will, and circumstances were the wording of the will was clear, was ordered to pay not only his own costs, but also those of the successful applicant.

In Re Olenchuk Estate (1991) 43 E.T.R. 146, an executor who proceeded on the issue of undue influence to trial, without having any appropriate grounds to do so, was ordered to be personally liable for costs.

12. COSTS PAYABLE PERSONALLY BY THE SOLICITOR

In Jones and The Public Trustee for the Province of British Columbia v. Humeston, Unreported , Kelowna Registry No. 3/1999, Madam Justice Beames dealt with an estate litigation matter arising out a motor vehicle accident. There appeared to a mix-up between the instructions given by the Public Trustee's office to the lawyer for three infant plaintiffs.

The court found that the lawyer allowed himself to become too close to the proceedings, and failed in his obligations as a lawyer, to ensure that he was receiving instructions, from someone capable of providing instructions to bring the matter to court. The court awarded the defendant's costs up to March of 1995, and the plaintiff's counsel was ordered to pay the defendants' costs incurred thereafter.

In Johnson v. Pelkey, 1999 B.C.C.A. 348, the Court of Appeal declined to interfere in the trial judge award of special costs against the solicitor and one defendant who supported the will. It was determined that the solicitor who drafted the testator's will, and who was named the executor of his estate, and who applied unsuccessfully for an order upholding the validity of the will, should have to pay 60% of the defendant's special costs. The facts of this case are somewhat unsual.

13. COSTS PAYABLE PERSONALLY BY A TRUSTEE IN BANKRUPTCY

In Carpe Investments Corporation v. Creative Prosperity Capital Corporation and others, Unreported, Vancouver Registry C974863, November 18, 1998. In this case Mr. Justice Tysoe dismissed proceedings brought on behalf of the petitioner by its trustee in bankruptcy.

The court awarded costs personally against the trustee in bankruptcy at scale 4. The court found that as general proposition, trustees in bankruptcy should not be allowed to pursue litigation with immunity against personal liability for costs in the circumstances where there is no statutory duty to prosecute a litigation and the trustee knows or ought to know that there will likely be insufficient assets in the estate to satisfy an award of costs in the event the litigation fails.

14. COSTS FOLLOW THE EVENT

Generally speaking, estate litigation cases will now follow the general rule that costs follow the event. The general rule as found in Rule 57(9) is that costs follow the event unless the court otherwise orders.

In Romaine v. Romaine, the trial judge, Madam Justice Smith, dealt with the issue of costs at 35 E.T.R. (2d) 218. The action involved that of a donor making an apparent gift of property to the defendant, and then suing to set aside the transfer. The donor died before the conclusion of the action and his estate carried it forward to a successful conclusion. The Court of Appeal reversed the trial judge's decision as to the result of the outcome, but the trial judge held that the cause of the litigation may have been the uncertainty of the donor's intention, but the object of that was uncertainty was his alleged inter vivos gift and not his will, and that accordingly the general rule had to prevail that costs should follow the event.

In Perry, Executrix of the Estate of Margaret Hall v. Marshall, Unreported, Vancouver Registry A992882, January 29, 2001, Mr. Justice E.R.A. Edwards dismissed the plaintiff’s claim involving an alleged inter vivos transaction, and awarded the defendant costs on scale 3. The plaintiff proposed that there be no order as to costs. The court held that the plaintiff proceeded to trial on a good or arguable point, but found that the fact that the plaintiff proceeded to trial on a good or arguable point is not a proper basis for depriving the defendant of costs. The court followed Pierce, Van Loon v. Davro Investments Ltd. et al C.A. 19833, May 7, 1996 B.C.C.A.

15. COSTS WHERE EXECUTOR IS ALSO A BENEFICIARY

Generally speaking, where a matter becomes contentious such that there is potential liability for the trustees, the courts have held that the trustee should pay their legal expenses personally with later indemnification by the estate, if appropriate. The courts are not willing to permit estate trustees to finance their personal legal expenses out of the estate, while the beneficiaries are obliged to fund their own expenses until judgment.

Thus in Wilcox v. Wilcox, 2002 B.C.C.A. 574, the Court of Appeal dealt with a situation where the executor was joined in the court action both as an executor and as a beneficiary. The court found that under the Wills Variation Act, it was necessary for the executor to be made a party to the action, and was expected to play a neutral role in the litigation. As a result of having to play a neutral role, an executor would generally receive special costs from the estate. However the executor was also a beneficiary and the court held that the costs must be separated. The court followed Ewasew v. Ewasew 1996, 11 E.T.R. (2d) 309.

The court held that the executor/beneficiary performed two separate functions. One was bringing the will forward on behalf of the estate for the assistance of the court. The other was representing her own interests as a beneficiary.

The court held that it is necessary to break out whatever part of the costs were attributable to the executrix’s duties as executrix, as opposed to her actions as a defending beneficiary.

16. NO COSTS AWARDED

In O’Hagan v. O’Hagan, Unreported, Vancouver Registry No. A940325, April 26, 1999, Mr. Justice Henderson declined to make any award for costs where the Public Trustee had asked for special costs payable from the estate, where a novel application had been made and presented to the court that was something akin to a “test case”. The court followed the B.C. Court of Appeal case of The Public Trustee v. Macht (1991) 53 B.C.L.R. (2d) 390.

In Singh v. Bhandar, Unreported, Victoria Registry No. 99/5629, March 15, 2001, Mr. Justice E.R.A. Edwards declined to make an order for any costs to either party, where both parties had sought an order for special costs. The court found that if special costs were awarded, there would be no monies left in the estate for the beneficiary. The court found that all parties involved in the court application were acting in what they believed was the petitioner’s best interests.

17. DIVIDED SUCCESS

In 2002 B.C.S.C. 1128, Mr. Justice Sigurdson handed down supplementary reasons for judgment dealing with the matter of costs concerning litigation between a lawyer and his former client.

The court found that both parties were successful. The lawyer was awarded $275,000 legal fees from his initial claim of $778,000. The client defendant in turn had argued that the lawyer was not entitled to any fees because the services rendered were valueless.

The court ordered that the lawyer was to receive 70% of his costs and the client received 30% of his costs, and that the costs would be set off against each other.

In Walter v. Crum, Unreported, New Westminster Registry No. S018935, July 31, 1998, Mr. Justice Collver. The court dealt with some rather unusual circumstances in this estate litigation dispute. The court awarded the plaintiff scale 3 costs up to the date of trial, and then awarded the defendant scale 3 costs of the actual trial.

In Hadlen v. Boose, 2001 B.C.S.C., 1792, Mr. Justice Williamson in a wills variation action, found that as both parties had a divided success, they should each therefore bear their own costs.

18. PROSPECTIVE ( PREMPTIVE) COSTS

Applications for prospective costs in British Columbia are being made more frequently than in the past. In England there is more jurisprudence directly on point. The applications are usually made where there is a large fund of monies and the applicant will try to have use of the funds to pay for the litigation. The application is usually based on the principle that the application is being made to ascertain the interests of the beneficiaries, or to answer a question which arises in the administration of a trust, or for the Court to construe a document, or the like. Generally there will not be an award for prospective costs when the nature of the proceedings is truly adversarial.

However, it is often not clear if the nature of the proceedings is truly adversarial or whether it can be more characterized as necessarily incurred for the benefit of the estate so as to warrant that the entire fees should be paid out of the estate.

I expect that there will be an increasing number of such applications in the future.

In Turner v. Andrews, the Court of Appeal upheld the dismissal of an application for prospective costs brought by approximately 189 members out of some 14,000 to 15,000 employees against the trustees of their pension plan. The members alleged that the surpluses were distributed in a manner so that the plaintiffs did not receive their fair share. Because the litigation was expensive, and involved extensive expert evidence and legal fees, the plaintiff applied for the award of prospective fees and disbursements from the pension plan trust fund.

Both the trial judge and the Court of Appeal held that the case was adversarial, and was not being brought for the benefit of or in the interests of the plan as a whole, but for the particular class of plan members representative by the plaintiffs. Accordingly the application for prospective costs was dismissed.

The Court of Appeal reasons for judgment are Unreported, Vancouver Registry No. CA 026505, February 6, 2001.

The reasons for judgment of the Supreme Court Chambers application are found at 1999, 30 E.T.R. (2d) 126.

A more recent case heard on September 3.03, dealing with prospective costs is The Bank of Nova Scotia Trust Company, executor of the estate of Harry Mudrie, deceased v. Powlik and others unreported 2003 BCSC 1382, where Justice Rogers dismissed an application by the executor bank for payment of past and future legal fees in litigation between the parties involving two conflicting wills prepared by the deceased. The bank sought access to the deceased’s monies to fund the litigation on the basis that the executor had a duty to protect the estate and its proper beneficiaries and because there were tow wills, with testamentary capacity in issue, then it was proper for the estate to indemnify the executor for their legal fees.

The Court rejected this argument and applied the criteria as stated in Alsop Wilkinson v. Neary (1996) 1 W.L.R. 1220 (Ch.) as follows:

(1) the strength of the party’s case;
(2) the likely order as to costs at the trial;
(3) the justice of the application; and
(4) any special circumstances.

The Court reviewed the evidence as it related to each of the criteria and refused the application. The Court stated :

“ The BNS is an amply solvent litigant. Its desire for indemnity is not motivated by concern its limited resources will prevent an important question form being tried, but rather by a desire to avoid the risk of [paying its lawyers out of its own pocket rather than out of the estate. The relief the BNS seeks is so unusual, so extraordinary, so out of the realm of the usual that the court should grant it only in the most narrow and deserving of circumstances. An order for prospective costs might go in a different case on a different set of facts, but it cannot go in this case on these facts.”

For other cases dealing with prospective costs, I refer you to:

(a) Discovery Enterprises Inc. v. Ebco Industries Ltd. (1999) 70 B.C.L.R. (3d) 299

(b) In the matter of Westar Mining Retirement Plan, (Vancouver Registry No. A92477, April 8, 1994,

(c) Bentall Corp. v. Canada Trust Company, 1996, 26 B.C.L.R. (3d) 181.

(d) McDonald v. Horn (1995) 1 All E.R. 961 ( C.A.)


19. CONCLUSION

Clearly there are valid social policy reasons for the historic approach of the courts to cost awards in estate litigation. Accordingly in many estate litigation cases, the court will continue to grant costs out of the estate, even to an unsuccessful litigant.

It is clear however from a review of the case law over the last ten years, that the courts are increasing letting costs follow the event.

Accordingly, the financial stakes in estate litigation have increased significantly. Not unlike family litigation, parties in estate litigation cases are often emotionally charged. If the conduct of a party is such as to warrant rebuke by the Court, then the unsuccessful party runs a significant risk of having special costs awarded against him or her. The amount of special costs can be very substantial. The courts have become far less hesitant to award personal costs against executors, solicitors, trustees in bankruptcy, and the Public Guardian, for conduct which the court finds is inappropriate.

Litigators routinely proceeding to trial with serious allegations, such as undue influence, run the risk of an award of special costs being made against their client, should such allegations be unproved.

Counsel would be well advised to ask for special costs, or increased costs, where the nature of the case, or the conduct of the parties, might lead the court to exercise its discretion to award same. It is increasingly necessary to provide evidence to the court as to the amount of the actual legal fees, versus what ordinary costs would amount to, so as to persuade the court that it may be unjust if special costs or increased costs were not awarded.