In Brown, Dale and Shackleton v. Rigsby and Shackleton,
which we have previously blogged about here, attorney and estate accounting litigation was
settled save for the issue of costs, which issue was argued in the
first instance by way of motion, with each party seeking
substantial indemnity relief against the opposing side personally
(the beneficiary applicants sought costs of approx.. $75,000.00,
and the estate trustee respondents sought costs of approx.
$80,000.00). No one sought costs out of the estate assets,
presumably because all of the parties were residuary beneficiaries
of the estate and wished to avoid their interest being diluted by
any such cost award.
The Court applied the modern "loser pays" approach to
costs, but nonetheless viewed the settlement as amounting to
"divided success" such that each party was ordered to
personally absorb their own costs. The estate trustees appealed the decision, submitting that the
motion judge erred in principle in finding that, as estate
trustees, the appellants were responsible for their own costs. They
assert that they were duty bound to respond to the lawsuit and,
absent serious misconduct or self-interested or unreasonable
conduct, an estate trustee is entitled to costs payable out of the
The Court of Appeal reviewed the applicable general cost
principles, citing that, subject to the discretion of the
an estate trustee is entitled to
indemnification from the estate for reasonably-incurred legal
if an estate trustee acts in a
self-interested or unreasonable manner, the entitlement of
indemnification is lost; and
if an estate trustee recovers a
portion of his or her costs from another person or party, he or she
is entitled to indemnification from the estate for the remaining
Although the Court of Appeal and the appellants appeared to
agree on the legal principles, the appellants lost the appeal. The
estate trustees were criticized for not making timely disclosure to
the beneficiaries, which in large part was the focus of the
dispute. Such conduct elevated the costs for all parties. The Court
found that the motion judge fairly characterized the
appellants' behaviour as unreasonable, and viewed their conduct
as serving to protect their own interests over that of the estate
and the other residual beneficiaries.
This case is a sobering reminder to estate trustees,
particularly in cases where they are also beneficiaries of the
estate, of the importance of fulfilling their fiduciary duty to act
in the best interest of the beneficiaries as well as to be
transparent in the administration. The consequences otherwise can
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