Saturday, January 13, 2007

Costs in B.C. Estate Litigation Cases

The usual rule in British Columbia is that an unsuccessful party to a lawsuit is required to pay court costs to the successful party. The amount of costs are usually quite a bit less than the successful party's actual legal expenses, but the amount can be substantial.

I have sometimes heard people say that in estate litigation the usual rule does not apply, and all parties get their costs paid by the estate. That is a myth. There are some exceptions to the usual rule in estate litigation, but you should not assume that you will get your costs from the estate if you unsuccessful make a claim.

The B.C. Court of Appeal has again recently held that an unsuccessful party should not get costs out of the estate in an estate litigation case in Davey v. Gruyaert, 2007 BCCA 20.

In Davey, the issue at trial was whether Ms. Gruyaert was Mr. Ricky Davey's common law spouse when he died, as "common law spouse" is defined in section 1 of the Estate Administration Act, RSBC 1996, c. 122. If Ms. Gruyaert was his common law spouse, she would be entitled to inherit Ricky Davey's estate. He died without a will. If she was not his common law spouse, Ricky Davey's mother would receive the estate. The trial judge found that Ms. Gruyaert was not Mr. Davey's common law spouse, but the trial judge did award Ms. Gruyaert's costs out of the estate. You can read the trial judge's decision is here.

Mr. Davey's mother appealed the order granting Ms. Gruyaert's costs out of the estate. The Court of Appeal allowed the appeal of the costs order, and held that she should not get her costs paid out of the estate.

Madam Justice Newbury quoted a passage from the decision of Master Horn in Lee v. Lee Estate (1993) 84 B.C.L.R. (2d) 341 (S.C.) in which the court distinguished between cases where there is a genuine issue concerning the validity or interpretation of a will--where the court may award all parties costs out of the estate--and other types of estate litigation.

An order for costs in favour of a completely unsuccessful party against a completely successful party is a most exceptional order. The general rule is that costs follow the event and, while a court may depart from this rule, any departure is usually in the way of depriving a successful party of costs and not of awarding costs to an unsuccessful party. In either case, the usual rule should not be departed from simply because an unsuccessful party did not expect to lose. (Baart v. Kumar (1985) 21 D.L.R. (4th) 705 [66 B.C.L.R. 61] (B.C.C.A.), at p. 711; Burnaby (District) Approving Officer) v. Mutual Development Corp., [1971] 5 W.W.R. 97 (B.C.C.A.) at pp. 100 and 105; Donald Campbell & Co. v. Pollak [1927] A.C. 732 (H.L.), at p. 776.)

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. This is the reasoning which underlies such cases as Re Dingwall (1967), 65 D.L.R. (2d) 43 (Ont. H.C.); and McNamara v. Hyde [1943] 2 W.W.R. 344 (B.C.C.A.); and Re Lotzkar Estate (1965), 51 W.W.R. 99 (B.C.C.A.). The question to be asked in such case is whether the parties were forced into litigation by the conduct of the testator or the conduct of the main beneficiaries.

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 no 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 … have been necessary to enable the estate to be distributed. The action does not benefit the estate. [At 346-7; emphasis added.]

But, in Davey, the Court of Appeal did not apply the usual rule in litigation either. The Court did not order Ms. Gruyaert to pay costs at trial. The Court merely deprived her of an award of costs.

No comments: