An estate trustee who took an “egregious” position in litigation has been ordered to personally pay more than $140,000 in costs.
“I think as counsel to estate trustees, we now need to advise them of the potential exposure of significant awards being made against them personally rather than assuming that their costs are all going to get paid out of the estate,” says Lisa Filgiano, a partner with Miller Thomson LLP, who was not involved in the case.
Historically, the courts had ordered costs to be paid from the estate, but they have been shifting away from this in recent years whenever executors have engaged in unreasonable conduct during litigation.
The case concerned a claim for damages by a Brantford Ont. mother, Julie Craven, after her estranged spouse, Andrew Osidacz, stabbed their son to death, and threatened to kill her before he was shot to death by police in 2006.
The deceased husband’s brother, Michael Osidacz, became the executor of his estate. Craven brought a wrongful death suit against the estate as well as a claim for damages as her deceased spouse had physically assaulted her before they separated.
The litigation dragged on for a decade, ultimately ending in May with a $565,000 judgment in Craven’s favour.
Ontario Superior Court Justice Thomas Lofchik found that Osidacz acted to carry out a vendetta against Craven to limit the compensation she would get from the estate and that he submitted “virtually no evidence” in the estate’s defence.
“His actions went far beyond ‘misguided litigation’ and amounted to harassment of another party by pursuit of ‘fruitless litigation,’” Lofchik said in the decision.
Lofchik ruled that the estate trustee had tried putting in place “every conceivable roadblock” and “carried out a ‘tooth and nail’ defence” that caused the inflated legal costs.
Lofchik also determined that if a defence had been carried on “in a reasonable manner,” the plaintiff’s legal costs would have been closer to $45,000.
Craven sought more than $156,000 in legal costs.
Lofchik ordered the estate trustee to pay costs personally on an elevated basis, as his conduct had been “foregoing, reckless and egregious.”
Osidacz will also be required to pay his own costs in addition to an order to repay $71,000 back to the estate for legal costs.
Michael Jaeger, the lawyer who represented Craven in the proceedings, says the decision provides detail as to when and why an estate trustee will be ordered to pay costs personally on a solicitor-client basis as well as the behaviours they ought not to engage in.
“It’s a reminder that in contested or adverse litigation cases, estate trustees should seek guidance of the courts before embarking on extensive litigation, because if they don’t they can be found personally liable on a solicitor-client basis,” says Jaeger, of Boddy Ryerson LLP.
Jaeger adds that the decision serves as a stern warning for estate trustees to make sure they seek direction from the court and look to resolve matters at a very early stage.
The lawyer who represented the trustee at trial, Rick Simmons, says he intends to seek leave to appeal the costs award, and he has already filed in appeal for the underlying decision.
He says that, if upheld, Lofchik’s decision could mean that estate trustees will pay out claims right away, which will increase their exposure to actual beneficiaries.
“Overall, it’s a devastating award on an executor of an estate,” says Simmons, who is a partner at Ross & McBride LLP.
“Whether mistakes were made or not, who would stay on as an executor if there is litigation and you’re going to have your decisions second-guessed?”
Simmons says his client did not make the types of mistakes the judge said he did and that a lot of the blame should be put on lawyers involved. He adds that the plaintiffs were still amending their pleadings years after the incident, making it hard to suggest the case should have settled.
“It’s an example of how litigation can be very expensive if you don’t keep it under control,” he says of the case.
Filgiano says it is important for lawyers acting for an estate trustee going forward to consider putting evidence before the court in a non-contentious manner because, if they’re unsuccessful, costs might be awarded personally against the estate trustee.
“Rather than taking an entrenched position, consider resolving cases early through either offers to settle of mediation and seeking directions from the court,” she says.
Brendan Donovan, a lawyer who was not involved in the case, says he is concerned that a judge could view such a case as so extreme that it is a unique set of circumstances.
“It might be that it just looks so egregious that it was easy for the judge to sort of step outside the box, but really I would hope that the reasoning in this case would be given a bit more credence than that,” says Donovan, who is a partner with Wagner Sidlofsky LLP.
Making an executor pay costs, however, does not only happen in unusual circumstances, lawyers say. This could happen if their conduct is deemed simply unreasonable.
Donovan pointed to a 2016 Court of Appeal decision in Brown v. Rigsby, which dealt with what happens when a trustee engages in unreasonable litigation.
He says that the costs decision in Craven v. Osidacz is just the latest in a “growing wave” of case law in this area.
“Most estate trustees go into litigation thinking that they’re going to get all their costs paid out of the estate and it’s not going to cost them a dime,” he says.
“But more and more . . . there are estate trustees that are not being given their costs out of the estate. They’re being ordered to shoulder their own costs personally and sometimes pay the costs of the other side personally.”