Ruling awarding substantial indemnity costs elaborates on 'minimum evidentiary' standard: lawyer
For imposing massive costs on his mother’s estate with “reprehensible litigation behaviour,” the Superior Court of Ontario has ordered a man to pay substantial indemnity costs amounting to $1,000 less than his entire inheritance.
The decision is a “helpful message” to estates litigators that bringing cases with little merit may result in “significant cost consequences,” says Jacob Kaufman, an estates and commercial litigator at Donovan Kochman LLP. He was not involved in the case.
“If a party is going to commence litigation to challenge a will, and if that challenge is not proportionate, it should not be the estate trustee or the estate that bears the burden of that disproportionate proceeding,” says Kaufman.
Fanelli v Fanelli-Bruno, 2023 ONSC 6501 was a dispute between siblings. A year before her death, Lina Fanelli changed her will. It had previously split her assets equally between her two adult children, Damiano Gabriele Fanelli and Sonia-Gina Fanelli-Bruno. The new will divided the estate, worth $320,000, between Lina Fanelli’s two children and two grandchildren, with each receiving 25 percent.
But the grandkids were both Sonia-Gina’s children. With the will change, Damiano Gabriele saw his share drop by $85,000, from $160,000 to around $75,000.
So, he sued to have his mother’s will set aside, arguing she lacked capacity and that his sister exercised undue influence.
The two sides eventually settled, and Damiano Gabriele accepted the new will. But first, he got an order to produce financial, medical, and legal records amounting to 9,000 pages and was unable to find any basis for his claims. For an $85,000 issue, he racked up $60,000 in costs, and Sonia-Gina spent $90,000 defending it.
The issue for the court in Fanelli v Fanelli-Bruno was who would bear Sonia-Gina’s costs. Damiano Gabriele’s position was that it should be the estate. Sonia-Gina submitted that if the estate bore her costs, 75 percent of that amount would come from her and her children.
“This litigation is an example of scorched earth litigation,” said Superior Court Justice Fred Myers. “It’s a lose-lose all around unless the applicant pays the respondents’ costs.”
The “biggest lesson” in Fanelli v Fanelli-Bruno is that courts are not shying away from imposing significant cost consequences on “would-be litigants who take a laissez-faire approach to challenging the validity of wills,” says Matthew Kersten, counsel for Sonia-Gina and a civil litigator at Sutherland Law in Vaughan, Ont.
“What [the decision] is saying to them is the courts will not be afraid to severely punish a litigant who comes to the court with hearsay and innuendo as opposed to solid facts,” he says. “Estates lawyers need to have more than just subjective impressions of what evidence they might be able to muster. They need to have their ducks in a row before they commence litigation.”
Myers said the case exemplified the inherent harm in the motion for directions process that the Court of Appeal predicted in Johnson v. Johnson, 2022 ONCA 682. In that case, the court said a minimum evidentiary threshold was necessary before parties in estate litigation embark on a massive documentary review.
“The feared outcome is exactly what happened here,” said Myers. Damiano Gabriele was disgruntled over the will change and brought a claim “with no real evidence to support his position,” nor any found years later after a “huge swath of documents” had been “sought, obtained, organized, analyzed, and produced.”
Fanelli v Fanelli-Bruno further elaborates on a series of cases dealing with the minimal evidentiary standard, says Kaufman. He says that parties cannot commence litigation with mere suspicion supporting their position and obtain an order for production to determine if those suspicions are warranted.
“What the court is signalling and affirming is parties who bring a challenge to a will – whether it be for testamentary incapacity or undue influence – you have to have some evidence. You don't have to have all the evidence, but you have to have something.”
Damiano Gabriele argued he had bona fide causes of action that were not frivolous or vexatious and that if he had some justification, he should not be penalized. He argued his mother caused the litigation because her lawyer advised her that he would be disgruntled and to discuss the will change with her children, which she did not.
Myers said he disagreed with Damiano Gabriele’s argument that his claim was reasonable and neither frivolous nor vexatious. The only evidence he had that his mother lacked capacity was that his mother, who had cancer, took morphine to dull the pain from a recent surgery the day before she changed the will.
The evidence Damiano Gabriele had to support his claim that his sister exerted undue influence – a conversation he recounted between him and his uncle – was “all inadmissible hearsay” and “makes no sense,” said Myers. He also argued it was suspicious that his mother used a lawyer to change the will who is related to his sister’s husband, but Myers said he disagreed.
Undue influence is a “fact-heavy, serious allegation of wrongdoing that is tantamount to fraud,” said the judge. “He had no evidence to make any such assertion. Being disgruntled and therefore prone to believe another person has done you wrong is not alchemy that transforms speculation into evidence.”
“Lacking objective evidence, the applicant embarked on a long, expensive fishing expedition into his mother’s most private information,” said Myers. “In the applicant’s favour, at least he agreed to walk away once his fishhook came back empty.”
Myers concluded that Damiano Gabriele failed to establish on balance that he had “some justification” for his lawsuit.