On February 10, 2022, the Ontario Court of Appeal (the “Court”) released its decision in McGrath v. Joy, 2022 ONCA 119. In this case, the applicant challenged the validity of a holograph will written shortly before the testator committed suicide because there was evidence that the testator had been drinking and using drugs the day before his death. The application judge weighed the evidence and determined that the testator lacked the testamentary capacity required to make a valid will; ultimately, the Court of Appeal reversed this decision. More interesting, however, were the Court of Appeal’s comments on the principles governing cost orders in estate litigation.
The traditional approach to estate litigation involves having the testator’s estate pay for all of the parties’ costs. The rationale for this approach was that if there were reasonable grounds on which to question the execution of a will, the interpretation of a will, or the testator’s capacity to make the will, then it was in the public interest for such questions to be resolved without cost to the litigants.
However, over time, it became apparent that the courts needed to prevent their processes from being used to unnecessarily deplete a testator’s estate. From this concern emerged the modern approach to estate litigation, articulated in McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 (Ont. C.A.). First, the court must carefully scrutinize the litigation to determine whether one or more public policy considerations apply. Where public policy considerations apply, then the parties’ reasonable costs should be paid from the testator’s estate. Where public policy considerations do not apply, the parties should expect to follow the cost rules that apply in civil litigation, most notably that the “loser pays.”
With its decision in McGrath v. Joy, the Court confirmed this approach and clarified that the determination of costs for estate litigation “is not a balancing of the public policy considerations against the rationale for cost rules that ordinarily apply to civil litigation. Rather, it is a sequential analysis, the first step of which is to determine whether one or more of the public policy considerations apply. If so, generally the parties’ reasonable costs should be payable from the estate. A departure from this general principle requires justification on the part of the court.”
Applying these principles to the appeal at hand, the Court found that the application judge had failed to take the necessary first step. Instead, he had ordered the appellant, the “losing” party, to pay the bulk of the costs because he assumed that the civil litigation cost regime applied. The application judge did not first consider whether public policy considerations pertained to the facts. The Court found that if he had taken the appropriate first step, then the application judge would have found that public policy considerations applied and that the application was necessary to ensure that the estate was properly administered.
In this case, the testator had written a note that met the requirements for a holograph will shortly before committing suicide. It was reasonable for the appellant to challenge the capacity of the testator while preparing the will because the testator had been drinking and using drugs the day before his death. In other words, the circumstances of the will’s preparation were suspicious and reasonably warranted litigation. The application was necessary for the public policy purpose of ensuring that the estate was distributed in accordance with the deceased’s true testamentary wishes. Accordingly, the Court reversed the lower court’s decision on costs and held that the general principle governing cost awards in estate litigation applied. The estate thus bore the parties’ reasonable costs associated with the application.
This decision follows others decided by the Court, including McDougald Estate, supra, Sawdon Estate v. Sawdon, 2014 ONCA 101, and Neuberger v. York, 2016 ONCA 303, which have been gradually developing the law of costs in Ontario estate litigation. These decisions are in line with the principle that parties to an estate litigation that have reasonable questions about the validity of a testamentary document must be able to raise those questions in court without fear of the consequences to themselves. In such cases, the costs related to estate litigation should be paid by the estate.
If you have any questions about this decision, or other estate litigation issues, please contact a member our team.