Joy Estate v McGrath, 2022 ONCA 119 – Case Summary RE: Costs
By: Nicholas André, JD
The Courts of Justice Act provides that the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid. In the estates context, this discretion has evolved through several principled approaches. Recently, the correct approach to costs was clarified by the Court of Appeal for Ontario in Joy Estate v McGrath, 2022 ONCA 119, when the Court found that the application judge failed to follow the governing principles on costs orders in estate litigation.
In McGrath, the Deceased died by suicide leaving behind a suicide note that his son propounded as being a holograph Will. However, the application judge determined that the Deceased did not have the requisite testamentary capacity to make a valid Will. Further, in respect of costs the application judge reasoned that although the Estate bore some burden the Deceased’s son had to face cost consequences as the unsuccessful party. Ultimately, the Court of Appeal reversed the application judge’s decision by (i) finding that the holograph Will was valid and (ii) finding that costs were wrongly decided and reiterating the sequential analysis that must be used to determine costs in estate litigation—the second point being the focus of this summary.
Traditional Approach vs. Modern Approach
Traditionally, public policy reasons dictated that courts award the costs of all parties to an estate litigation matter from the estate—as it was in the public interest to give effect to valid wills and ensure that estates are properly administered. This traditional approach was supplanted by the modern approach, as identified by the Court of Appeal citing its decision in McDougald Estate v Gooderham, courts must: carefully scrutinize the litigation and, unless the court finds that one or more public policy considerations applies, to follow the costs rules that apply in civil litigation.
The change in approach aimed to dispel the thought that parties had nothing to lose in pursuing estate litigation, avoid depletion of an estate’s assets, and inject, “some modicum of reasonableness into decisions about whether to litigate estate-related disputes” in an area of law often inundated with emotionally charged dynamics.
Current Approach
As noted in the Court of Appeal’s decision, the modern approach is not a balancing of the public policy considerations against the rationale for cost rules that ordinarily apply to civil litigation but a sequential analysis. First one must determine whether one or more of the public policy considerations apply (e.g., if the dispute arose from ambiguity or omissions in the testator’s will or other conduct of the testator, or if there were reasonable grounds upon which to question the will’s validity). If so, generally, the parties’ reasonable costs should be payable from the estate. A departure from this general principle requires justification on the part of the court.
In McGrath, the application judge failed to use the sequential analysis, instead his Honour applied the civil litigation costs regime from the outset by ordering the Applicant (i.e., the losing party) to pay the bulk of the other parties’ costs.
However, the Court of Appeal found that the public policy considerations were clear in this case as the circumstance of the Deceased’s death raised suspicious circumstances which created reasonable grounds on which to question his testamentary capacity. Thus, the Court of Appeal reversed the lower court’s decision on costs and found that the Estate should bear all parties’ reasonable costs.
Costs at the Appellate Level
In determining costs at the appellate level, the Court noted the same rules that govern costs in civil litigation apply to unsuccessful appellants in estate litigation. Therefore, absent exceptional circumstances, an unsuccessful appellant is not entitled to costs of the appeal and will be ordered to pay the respondent(s) costs on a partial indemnity basis. However, where an appellant in estate litigation is successful, the appellant’s costs are generally payable from the estate on a full indemnity basis.
Further, the public policy considerations that applied at the lower court continue to operate at the appellate level. Accordingly, because the Appellant was the wholly successful party, the Court ordered that his full indemnity costs be paid from the Estate. Further, the Court noted that a blended costs award is also available where an appellant succeeds in an estate matter. However, in the present case, although unsuccessful on appeal the Respondents were not required to pay the Appellant’s costs on a partial indemnity basis because their participation at first instance was necessary to ensure that the questions surrounding the Deceased’s testamentary capacity were fully explored. Consequently, the Respondents were found to be entitled to their reasonable costs of the appeal from the Estate as well.