Litigation is not cheap.  Some litigants have little choice but to fund the litigation through loans provided by litigation lending companies.  While litigation loans may be more common in certain practice areas, such as personal injury, it is possible to obtain this type of loan for estate litigation. This is precisely what the applicant did in Drennan v Drennan, 2024 ONSC 3905 (CanLII) (“Drennan”), a recently reported decision of Justice F.L. Myers. After the applicant was successful, the court determined costs.  The court held that the interest owing on the litigation loan taken out by the applicant was recoverable against the respondents.

In Drennan, the applicant’s father died with a will leaving the applicant one-half of his estate. The applicant’s brother was left one-quarter. The remaining one-quarter was left to two children of a deceased sibling of the applicant and brother.  The brother, niece, and nephew of the applicant were the three respondents. The brother was appointed the estate trustee under the will but took the position that the proper division of the estate was one-third to each of the applicant, the niece and nephew,  and him.  The niece and nephew agreed with the one-third division.

The applicant commenced a proceeding seeking to remove her brother as estate trustee and, in the alternative, to appoint an estate trustee during litigation (“ETDL”).  Many allegations were made by the respondents against the applicant, and the respondents indicated that they may challenge the will and bring other claims against the estate.  However, none of the respondents delivered any sworn evidence or filed Notices of Appearance.  They remained self-represented. Despite the lack of compliance with the Rules of Civil Procedure, the respondents were afforded opportunities to speak at the hearing and additional time to file material. They were encouraged by the court to speak with and/or retain counsel.  They  were also warned by the court about the costs of litigation and possible costs consequences.

After the court ordered the appointment of an ETDL the brother (still the estate trustee), would not approve the form and content of the draft order prepared by applicant’s counsel.  The brother, niece, and nephew stopped responding.  After several months of inaction and silence by the respondents, the court ordered the appointment of an estate trustee and the brother was removed.  Given that the relief sought by the applicant was granted, the applicant was successful and the court turned to the issue of costs.

For several reasons the court found that this was a case warranting costs on an increased scale against the brother.  The niece and nephew, who supported their uncle, were jointly and severally liable for the costs award.  As part of the applicant’s costs, she included as a disbursement the interest on her litigation loan.  In determining this request, the court found the following:

• there was evidence that the applicant required the loans because of her brother’s failure to administer the estate;
• the funds borrowed were used solely to pay the costs of the application;
• while the applicant did not put her brother on notice of her need to borrow money to fund the litigation, nor to seek recovery of it from him, litigants often do not advise parties of their disbursements costs in advance (for example, retaining experts); and
• it should not be surprising to the brother that his failure to pay his sister anything from the estate would mean that she would require funds to compel him to act as estate trustee.

The court determined that the interest on the litigation loan was recoverable against the respondents.  In doing so, the court noted that the loan amount was modest. (The decision in Drennan does not include the interest rate, or the amount of interest paid on the litigation loan).  Perhaps we will see more litigation loans in estate litigation in the future. However, if the interest owing is significant the court may decline to award it, or all of it, as recoverable against the losing party, particularly if notice of the litigation loan is not given in advance to opposing parties. Costs awards are highly discretionary and the factors enumerated in r. 57.01(1) of the Rules of Civil Procedure are likely to be considered, including the amount that a losing party could reasonably expect to pay (r. 57.01(1)(0.a)).  If a party in estate litigation obtains a litigation loan, he or she may be wise to give notice to opposing parties, disclose the interest rate, and advise that the loan amount and corresponding interest will be sought against them in future costs submissions.