While full indemnity is rarely ordered by a court, in a recent decision, the court ordered an estate co-trustee to personally pay costs to the other estate trustee in the amount of $30,000 due to a “loss of perspective”.
Court Hears Dispute Between Joint Trustees
The deceased passed away on June 27, 2015. At the time of his death, the value of his estate was over $339,000. The testamentary trustee and the estate trustee had been appointed as joint estate trustees.
The estate trustee brought an application to pass her accounts. However, the testamentary trustee raised anumber of objections that related to the estate trustee’s conduct. The essence of his objections came down to his view that the estate trustee had breached her obligations as fiduciary, that her actions had not been transparent, that she had acted in bad faith, and that the time she had claimed on account of her time spent had been exorbitant and amounted to the misappropriation of the estate’s funds.
The estate trustee refuted the objections and accused the testamentary trustee of not concerning himself with the administration of the estate.
The court concluded that the estate trustee had acted honestly and with humanity, had been transparent in her conduct, and had demonstrated ordinary prudence.
Following the court’s decision, the two trustees made costs submissions in January 2020.
The testamentary trustee claimed costs of $64,276. He submitted that, as estate co-trustee, he had had an obligation to request an accounting from the estate trustee, the proceeding had been rendered complex by the estate trustee’s failings, the issues he had raised had been important, and in the circumstances, the costs claimed were reasonable.
For her part, the estate trustee submitted that she should receive her costs on a full indemnity basis. In her view, the overall outcome to her application to pass accounts had vindicated her and amounted to an overwhelming rejection of the testamentary trustee’s pronounced challenges of her conduct. In her view, she had been obliged to undertake steps solely on the basis of his allegations, which were unfounded and totally disproportionate to the value of the estate.
As to who should pay for the costs, the estate trustee submitted that the testamentary trustee should be personally responsible because of his unfounded allegations. She said that the beneficiaries should not be penalized by the testamentary trustee’s “unilateral and unfounded actions”.
Testamentary Trustee Must Personally Pay Costs
After reviewing the procedural history and the actions of both parties, the court concluded that testamentary trustee was entitled to costs of the original application on a partial indemnity basis at 60 per cent of his full indemnity costs, which amounted to $18,000.
However, the court also concluded that estate trustee was entitled to the costs of her application for the passing of accounts, which was fixed at $48,000. As a result, the court ordered that the net sum owing personally by the testamentary trustee to the estate trustee amounted to $30,000. The court explained its decision by stating:
“My overriding concern with the submissions by both parties is the continued and persistent lack of self-awareness of the respective weaknesses in their conduct and approach to the case. That, combined with a revisionist view of this litigation creates a misleading impression of what occurred and neglects the fact that at the end of the day, the gross value of [the] estate came to only $339,000 or so. If both parties were to be awarded the costs they seek, the only real beneficiaries of [the] estate would be the lawyers who represented each side, with nothing left for the beneficiaries.
In my view, both parties lost perspective over this litigation. They became entrenched in their views and positions and missed several opportunities to reach a settlement. This observation as well as my findings that follow are essential pillars to my ultimate decision and reconciliation of the respective claims. […]
My finding that [the testamentary trustee] had a right to request an accounting does not diminish the fact that at some point in the course of the litigation, [he] lost perspective and credibility. […] Regrettably for [the testamentary trustee] this loss of perspective comes with serious consequences.”
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