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The ATM is closed, courts say

|Written By I. John Harvey

The courts are increasingly voicing their displeasure at litigants who expect the estate to fund their squabbles over wills, win or lose.

‘Do we want to dissuade those who need protection through legal intervention from taking steps because of costs risks?’ asks Kimberly Whaley.

The door to the estate’s bank machine slammed shut Sept. 9 this year when Superior Court Justice David Brown handed down his decision in the matter of Fiacco v. Lombardi.

Somewhat ironically, Brown resorted to quoting a decision he made in March this year in Salter v. Salter Estate, saying it’s time the profession started paying attention to existing jurisprudence.

“Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation,” Brown wrote. “The ‘loser pays’ principle brings needed discipline to civil litigation by requiring parties to assess their personal exposure to costs before launching down the road of a lawsuit or a motion.”

Both decisions have sent ripples through circles of practitioners working in estates litigation, says Sender Tator of Schnurr Kirsh Schnurr Oelbaum Tator LLP.

“In tough times, we tend to get busier in estates because people are looking for money wherever they can get it,” says Tator. “I have to applaud [the decision], especially the reference to the ATM. It’s quite a statement.”

He adds that while the courts have been clearly signalling this move, up until fairly recently there was consensus in the profession that it was always worth the gamble of bringing a claim because costs were usually covered out of the estate.

“It was hard to explain to clients that their brother could continue to litigate on the assumption the costs would be covered. Now, you can explain that there will be an accounting at the end and, if the court sees the facts our way, the costs will apply to the losing party.”

Still, Tator says, the appetite for litigation is balanced by the value of the estate.

“Unless there are millions in the estate, it doesn’t justify going to trial,” he says, noting his firm also provides alternative dispute resolution services, a route it prefers for its own clients because it’s based in Toronto where mediation is mandatory before trial.

“I think in the eight years I’ve been here we’ve had three trials,” he points out.

Brown’s decision in the Fiacco case revolved around the ailing Maria Lombardi, who suffered from dementia and was in a nursing home.

She had granted her four children power of attorney for personal care and a continuing power of attorney for property in 2003.

However, the four siblings couldn’t agree and by 2008 were litigating over guardianship. In January this year, the court appointed Carmela Fiacco and Antonio Lombardi as her joint guardians for property and of the person along with several provisions to ensure prudent action.

In June, costs were fixed by a taxing officer at $21,398 for the applicants, Fiacco and Antonio, and $8,624 for the respondents, Giovanni Lombardi and Giuseppina Lombardi. That made a total of $30,022 to be paid from Maria’s estate.

Trouble soon arose when the newly appointed guardians couldn’t obtain clear information about how much of their mother’s property Giovanni and Giuseppina controlled.

After returning to court for direction, it was clear that Giovanni and Giuseppina had “unlawfully kept assets of Maria for over half a year” and that the amount was about $225,000.

“I find that the respondents, Giovanni Lombardi and Giuseppina Lombardi, failed to comply with the order of Cameron J. that they account for their mother’s property,” wrote Brown. “It took this motion by the guardians and my order of Aug. 21 to prompt them to identify the assets of their mother which they were holding.

When a court makes an order designed to protect the property of a vulnerable person, such as Maria Lombardi, it is not acceptable for any person, including the children of the incapable person, to fail to comply with that order.

“The misconduct of the respondents in this case has been very serious; their delay in turning over assets has put a strain on the ability of their mother’s estate to pay for her ongoing needs.”

But it was on the issue of costs that Brown was especially stern.

“The applicants sought their costs of this motion in the amount of $24,645.02 against the respondents or, alternatively, out of the estate of Maria Lombardi. The respondents sought their costs of $4,509.12 payable by the estate,” he wrote.

“Let me recall that the assessed costs of the contested guardianship application amounted to $30,022.22 paid out of Maria’s assets. Her children are now asking that their mother’s property be depleted by another $29,154.14 to fund their continuing sibling rivalry.”

Citing his own decision in Salter and also citing a Court of Appeal ruling in McDougald (Estate) v. Gooderham, he wrote: “Estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime established by s. 131 of the Courts of Justice Act and rule 57 of the Rules of Civil Procedure, except in a limited number of circumstances where public policy considerations permit the costs of all parties to be ordered paid out of the estate.”

Despite those words, lawyer Kimberly Whaley of Whaley Estate Litigation urges a little caution in approaching the issue.

“Conduct is often a key element,” she says.

“But of even greater consideration should be the whole of the principles enunciated in the concepts of access to justice and proportionality. These concepts do not simply mean access to quicker court proceedings and to counsel at a lesser cost.

Do we want to dissuade those who need protection through legal intervention from taking steps because of costs risks? Is that the main objective? I suggest not.”

  • Counsel

    Charles Blakey
    The decision stands for a principle that the squabbling of possible beneficiaries should not deplete the estate so that the owner of the estate risks becoming a charge on the public purse. This is finding in many cases, and falls within the public interest exception.
  • The ATM Is CLosed, Courts Say

    Howard G. Zweig
    The article hints at the court's decision regarding costs in Fiacco v. Lombardi, but does not actually state what the decision was.

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