Objector's Reasonable Expectations About Costs When Objecting To Estate Accounts Play An Importa
One of the obligations of an estate trustee is to have the court pass the estate's accounts which means that the court approves the trustee's management of the estate accounts including the collection of assets, payments of liabilities and distributions of gifts and bequests. All beneficiaries even those with only a contingent or vested interest must be informed of this process and are given the opportunity to object in court to any improprieties which they believe occurred.
The application to pass accounts can be quite contentious if the trustee has not keep fulsome records or has potentially acted improperly. Legal costs associated with the process can mount quickly. Following the judge's decision, both the trustee and the objector(s) are allowed to make submissions to the court about who should pay their costs.
In the normal course, Ontario is governed by a "loser pays" regime and the unsuccessful party pays for the successful party's costs. This regime also applies in estate litigation. This can mean an unsuccessful objector is responsible to pay the costs of the estate trustee. Alternatively, if the objector was successful, his or her costs may be paid by the estate. In rare cases, the estate trustee, who typically gets his or her costs reimbursed by the estate may be personally responsible for his or her own costs and the costs of the objector. (This situation is generally limited to circumstances where the estate trustee acted for his or her own personal benefit.)
One of the considerations for a judge is whether the costs involved could reasonably have been expected to occur. If a party could not have reasonably foreseen the magnitude of costs, the amount awarded will be reduced as a recent case illustrates.
In Re Medynski, BMO was hired to act as estate trustee when the adult children of aging parents discovered they were unable to agree on the management of their parents' affairs. The contract included compensation for services and an agreement to reimburse BMO for legal fees and costs.
Following the contentious passing of accounts, costs submission were made. BMO requested payment in excess of $240,000 against the objector. Both counsel for the trustee and for the objector agreed that the escalation of costs occurred because both parties were motivated by the desire to prove a matter of principle. Despite this motivation, and despite the agreement to indemnify BMO, the judge held that the objector could not have reasonably expected costs of the litigation to be that excessive. The objector was ordered to pay $66,325. with the estate paying the balance.
The Lesson: Costs should be factored into any decision before objecting to the actions of trustees. Proving a matter of principle can be quite expensive.
Medynski Estate, 2016 ONSC 4257 https://www.canlii.org/en/on/onsc/doc/2016/2016onsc4257/2016onsc4257.pdf
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