A party needs leave to appeal when it is appealing only a costs decision. Leave was granted in the case of Pletch v. Pletch Estate, 2024 ONSC 1411 (CanLII) (Ont. Div. Crt) (“Pletch Estate”), where an estate trustee was not awarded any costs of the application.  In Pletch Estate the deceased died without a will. He had three children from his first marriage, two of whom were minors, and another child from his second marriage, who was also a minor.  Three separate applications were commenced: an application seeking dependant’s relief on behalf of three of the children; an application by the second spouse to be appointed estate trustee; and an application brought by the Children’s Lawyer to, among other things, appoint the deceased’s sister as estate trustee. The first spouse acted as litigation guardian for her two minor children. The second spouse acted as litigation guardian for her minor child, leading to a conflict of interest in her appointment as estate trustee and grounds for her eventual removal.

The application judge found that the steps taken by the two litigation guardians led to protracted and expensive litigation. The application judge was particularly critical of the second spouse and ordered her to pay costs of two of the parties. With respect to the estate trustee, the application judge commended her for not claiming compensation. The application judge was not critical of the estate trustee and found that her actions benefited the estate (for example, by investigating and seeking the return of retainer funds held by the deceased’s family law lawyer).  On appeal the court noted that when the estate trustee asked the application judge about indemnification of her costs (including litigation costs she personally funded on behalf of the estate), he said he would not be dealing with costs at that time. Later in his decision, after awarding costs against some parties and costs out of the estate, the application judge determined that “no other legal costs shall be paid out of the estate” and “there shall be no other order as to costs.” Notably, the application judge gave no reasons for declining to award any other costs or for declining to award any costs to the estate trustee.

On appeal, the estate trustee sought a blended costs award.  She requested that the second spouse pay the largest portion of the estate’s costs and that the estate pay the balance. This blended costs award would result in full indemnification to the estate trustee.  Since appellate courts can only intervene in costs orders where there is an error in principle or the costs award is plainly wrong, the test is a high one to meet. After finding that the failure to give reasons to decline an award of costs was an error of law, the appellate court reviewed the principles of estate trustee indemnification and blended costs awards.

Three seminal cases (Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), Sawdon Estate v. Sawdon, 2014 ONCA 101 (CanLII), and Neuberger Estate v. York, 2016 ONCA 303 (CanLII)), provide the evolution of estate trustee indemnification and blended costs awards. As noted in Pletch Estate, the Ontario Court of Appeal in Brown v. Rigsby, 2016 ONCA 521 (CanLII), (“Rigsby”), reaffirmed the general rule that estate trustees are entitled to be fully indemnified by the estate for their reasonable costs, to the extent they are not recovered from another person or party. In Rigsby, the Court of Appeal summarized those principles as follows:

1. an estate trustee is entitled to indemnification from the estate for all reasonably incurred legal costs;
2. if an estate trustee acts unreasonably or in his or her own self-interest, he or she is not entitled to indemnification from the estate; and
3. 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 reasonably incurred costs.

In Pletch Estate, the failure to award costs to the estate trustee was an error in principle and plainly wrong, warranting appellate intervention.  The estate trustee acted reasonably and not in her own self-interest.  In contrast, the conduct of the second spouse was “egregious and driven by self-interest for herself and her daughter” (such as failing to disclose s. 72 assets that she received personally after the deceased’s death).  The conduct of the second spouse led to greatest amount of costs incurred by the estate trustee in the litigation.  The appellate court exercised its discretion to substitute a costs award, rather than return the issue to an application judge.  The second spouse was ordered to pay substantial indemnity costs of $136,988.69 to the estate trustee, with the remaining balance of $24,000.00 to be paid by the estate.  This blended costs award resulted in full indemnification to the estate trustee.