Cost Award in Hsia v. Yen-Zimmerman

I wrote an earlier post about the case Hsia v. Yen-Zimmerman, in which Mr. Justice Barrow upheld the validity of Chester Hun’s will, which had been challenged by two of his grandchildren. They had alleged that it had not been signed in accordance with the formal requirements of the Wills Act, and that Mr. Hun did not have testamentary capacity. Although one of the witnesses to the will had died, and the other could not be found, Mr. Justice Barrow applied a presumption that because the will bore the signatures of Chester Hun and two witnesses, that it was valid. He also found that Mr. Hun had capacity.

Since then, Mr. Justice Barrow has given his decision on court costs, at 2013 BCSC 624.

In British Columbia, after a decision is made on the substance of a law suit, the court may make an award of costs. Usually, the unsuccessful party is required to pay the successful party costs. Usually the costs do not fully indemnify the successful party for his or her legal expense, although in some cases the courts may award special costs, which may fully indemnify the successful party.

Cost awards in estate litigation are more complex than in many other types of disputes. There are different principles at play. There are some cases where the courts have found that the law suit was necessary because of something that the deceased did or that the circumstances were such that the matter should have been brought to the court. For example, the wording of the will might not be clear, and the court is required to interpret the will. Or there may be a genuine question about whether the will-maker had capacity to make a will. Sometimes, the courts have applied the rule that the successful party is entitled to costs from the unsuccessful party, but in others the courts have awarded costs out of the estate, or in some cases have even awarded costs out of an estate to the unsuccessful parties.

The cases are difficult—I would even say impossible—to reconcile. I am skeptical of attempts to even identify trends.

In Hsia, the executor, who was successful in proving that the will was valid, sought an order that the unsuccessful grandchildren pay costs, and that she be indemnified out of the estate for the difference between those costs and her legal expenses.

The unsuccessful grandchildren argued that they should also receive costs out of the estate, or at least not be ordered to pay costs. They agreed that the executor was entitled to be indemnified out of the estate for the executor's expenses.

Relying on the principles articulated in the Court of Appeal decision in Vielbigv. Waterland Estate (1995), 6 E.T.R. (2d) 1, the grandchildren argued that the circumstances were such that the lawsuit was need to ensure that the will was valid:

[6]             The defendants argue that the law remains as expressed in Vielbig v. Waterland Estate (1995), 6 E.T.R. (2d) 1 (B.C.C.A.). In that case Hinds J.A. adopted the analysis of Master Horn in Lee v. Lee Estate (1993), 84 B.C.L.R. (2d) 341 (S.C.), where he explained the general rules and the rationale for them. The general rule is that costs follow the event. When that rule is departed from, it is usually only to the extent of ordering the parties to each bear their own costs. Ordering the successful party to pay the costs of the unsuccessful party is very rare. In estate litigation, the rule is applied somewhat differently. Master Horn explained at paras. 13-14:

[13]      In probate or administration actions or in proceedings for the construction of wills, the rule may be more frequently departed from. In such cases where the validity of a will or the capacity of the testator to make a will or the meaning of a will is in issue, it is sometimes the case that the costs of all parties are ordered to be paid out of the estate. This is upon the principle that where such an issue must be litigated to remove all doubts, then all interested parties must be joined and are entitled to be heard and should not be out of pocket if in the result the litigation does not conclude in their favour. The estate must bear the cost of settling disputes as a cost of administration... 

[14]      But the case is different where the litigation does not relate to the validity of the will or the capacity of the testator or the construction of the will. Actions brought under dependants relief legislation presume the validity of the will and the capacity of the testator and that his intentions are clear. There are not doubts to be settled. The remedies provided by such legislation are directed to the maintenance and support of the dependants of the testator and are based on public policy. The legislation does not invalidate the will, it merely permits the court to vary the provisions made by the testator. So an unsuccessful action under such legislation cannot be said to have been caused by a testator, or to be have been necessary to enable the estate to be distributed. The action does not benefit the estate.

The plaintiff, on the other hand, pointed to the decision in Woodward v. Grant, 2007 BCSC 1549, in which Madam Justice Gray emphasized the role the rule that the unsuccessful party must pay costs to the successful party play in encouraging negotiated settlements:

[8]             In Woodward v. Grant, 2007 BCSC 1549, Gray J. reviewed the law relating to costs in estate litigation, including the Court of Appeal’s decision in Vielbig v. Waterland Estate (1995), 1 B.C.L.R. (3d) 76. She concluded that the kinds of cases in which it may be appropriate to order that the estate bear the costs of all parties to the litigation are ones in which either the validity of the will or the testamentary capacity of the testator is in issue. She noted, however, that even in those situations it cannot be said that the estate is “normally” ordered to pay the costs of all parties. She wrote that more recent authorities (Kirkham v. Fox, [1993] B.C.J. No. 2518 (S.C.) and Field v. James, [1999] B.C.J. No. 1398 (S.C.)) suggest a trend towards applying the usual rule that costs follow the event, at least where the issue is the testator’s capacity. She explained the likely justification for the trend writing at paras. 16 and 17 that:

[16]      The trend towards the general rule that costs should follow the event is likely, in part, a recognition of the significant costs that can be incurred in litigation and that consideration of costs can assist in achieving settlement. Providing that an unsuccessful party can recover its costs from an estate would discourage that party from taking into account the legal costs of proceeding when considering settlement. As a result, awarding costs from the estate could encourage probate litigation and discourage settlement. It would defeat the testator's intentions to the extent that the costs reduced the size of the estate available for distribution. 

[17]      As a result, costs should follow the event unless the court orders otherwise, exercising its discretion judicially.

In declining to award any costs to the grandchildren, Mr. Justice Barrow applied the principles set out in another case, Morton v.National Trust Co. Mr. Justice Barrow wrote at paragraph 10:

In exercising that discretion, the principles set out by Gow J. in Morton v. National Trust Co., [1993] B.C.J. No. 1523 (S.C.) apply. At paras. 39 and 40 he wrote:

[39]      R. 57(9) provides that costs of and incidental to a proceeding shall follow the event unless the court otherwise orders. In probate actions that has been the rule since 1907, subject however, to these provisos:

(1)   Where the testator or the residuary legatees have been the cause of the litigation;
(2)   If the circumstances lead reasonably to an investigation in regard to the propounded document;
(3)   The overriding discretion of the court.

[40]      If proviso (1) applies then ordinarily the court will grant the unsuccessful party costs out of the estate. If proviso (2) applies then ordinarily the court will not make an order for costs against the unsuccessful party. c.f. Hodson L.J. in Cutcliffe's Estate (1959), P. 6 at p. 13.

Mr. Justice Barrow found that there was nothing in the conduct of the will-maker, Chester Hun or of the executor that gave rise to the lawsuit. With respect to their allegation that Mr. Hun did not have capacity to make a will, there were no circumstances that reasonably lead them to require an investigation.

On the other hand, Mr. Justice Barrow did not award costs against the grandchildren. They reasonably raised the issue of whether the executor could rely on the presumption that the will was valid from the appearance that it was signed in accordance with the Wills Act formalities. He wrote:

[14]         As just noted, the conclusion regarding testamentary capacity turned, in part, on whether the presumption in Vout v. Hay was applicable. That issue turned on whether the Will had been executed with the requisite formalities. Given that one of the witnesses to the Will could not be identified, and hence could not be located, and the other had passed away, it may not have been unreasonable to require investigation into the circumstances surrounding the execution of the Will. 

[15]         There are two other circumstances of note in the matter at hand. These are relevant to the exercise of the overriding discretion referred to by Gow J. and Gray J. First, I do not question the bone fides of the defendants. I accept that they are now, and were prior to the deceased’s death, perplexed by the remote and distant approach their grandfather seemed to take towards them. It was because of that behaviour that they questioned his capacity. Second, while I concluded that the presumptions applicable to proving due execution were sufficient to establish that fact, that is not a conclusion that is free from doubt.

In the result, the grandchildren will have to fully bear their own legal expenses, but are not required to pay any costs to the executor, whose legal expenses will be paid out of the estate on a special costs basis.