Estate of Gow, 2023 ABKB 73

Court of King’s Bench of Alberta Citation: Estate of Gow, 2023 ABKB 73 Date: 20230209 Docket: ES14 05515 Registry: St. Paul Between: Frances Neill and Logan Gow Applicants - and - Helen Millar and Sheryl Gow Respondents _______________________________________________________ Endorsement as to Costs of the Honourable Justice L.K. Harris _______________________________________________________ I. Introduction [ 1 ] George Gow (the “Deceased”) passed away in March 2020. He leaves four children: Helen Millar (“Helen”), Sheryl Gow (“Sheryl”), Logan Gow (“Logan”) and Francis Neill (“Francis”).

Prior to his death, the Deceased owned substantial property, consisting of a farm comprised of several quarter sections of land near Vermillion, Alberta, and cash and other property, totaling approximately $6.6 million. [ 2 ] Logan and Francis, the Applicants, sought an order setting aside the grant of probate and directing a trial to determine the issues of testamentary capacity of the Deceased, and of and undue influence over the Deceased by the Respondents Helen and Sheryl.

The Respondents cross applied for a dismissal of this action. [ 3 ] In my decision reported as Estate of Gow , 2022 ABKB 750 , I found in favor of the Respondents and dismissed the application. I found that there was no triable issue as to whether the Deceased lacked testamentary capacity and that there was no triable issue as to whether the Respondents had exercised undue influence over the Deceased. I ordered that costs be paid to the Respondents. [ 4 ] The parties have been unable to agree on the costs to be paid and seek the court’s decision on the scale of costs arising from the application. II.

The Parties’ Positions [ 5 ] The Respondents seek costs in the amount of $100,000, to be paid by the Applicants personally from their respective inheritances. [ 6 ] The Respondents have provided a Bill of Costs which calculates their costs pursuant to Column 5 of

Schedule C of the Rules of Court , plus disbursements, totaling $40,001.59. [ 7 ] However, the Respondents argue that they are entitled to enhanced costs, which the Applicants dispute. [ 8 ] The Respondents say that there are two methods open to the Court to arrive at $100,000 in costs. First, they multiply the total amount of their Bill of Costs by approximately 2.5.

Alternatively, they calculate approximately 2/3 of what they say is their actual solicitor-client costs which exceed $150,000. [ 9 ] The Respondents argue that there are two reasons why they are entitled to enhanced costs. [ 10 ] First, they argue that the application was unreasonable. They say that they provided fulsome evidence to the Applicants before the Application was filed demonstrating that the concerns regarding testamentary capacity and undue influence were unsupported.

Despite that evidence, the Applicants proceeded to file their application. [ 11 ] Second, the Applicants alleged undue influence on the part of the Respondents, which is tantamount to an allegation of fraud, and their lack of success in establishing a triable issue on that point ought to attract a higher award of costs. [ 12 ] Although the Applicants do not take issue with the specific items claimed on the Bill of Costs, they argue that no costs, or alternatively, nominal costs, should be awarded against them.

They say that given the circumstances, which included the sudden drastic change in how the Deceased’s estate was to be divided amongst the beneficiaries against the background of the Deceased’s health concerns, it was reasonable for them to bring the application. Further, the issue of undue influence is often brought hand-in-hand with a testamentary capacity claim and there is no reason to elevate such an issue to the same level as an allegation of fraud.

The Appellants point out that despite their requests, the Respondents initially refused to provide certain information and applications for production were required. The Respondents did not provide a complete record until days before the Application was to be heard, and not prior to the Application being filed as they argue. [ 13 ] The Applicants further argue that the enhanced costs are not warranted in this case as such costs are only awarded in rare and exceptional circumstances when there is reprehensible, scandalous, or outrageous conduct by a party. Such circumstances do not exist here. III. Analysis a.

Legal Framework [ 14 ] This Court has wide discretion pursuant to Rules 10.31 and 10.33 of the Alberta Rules of Court and the Alberta Surrogate Rules with respect to an award of costs. Under the Surrogate Rules , AR 130/1995 (“ Surrogate Rules ”) the Court may order costs to be paid from the estate or by any person who is a party to an application: Surrogate Rules , r 64(1)(h).

In addition, rule 2 of the Surrogate Rules states that the Alberta Rules of Court , AR 124/2010 (“ Alberta Rules ”) applies to an application to the court if the matter is not otherwise dealt with under the Surrogate Rules . [ 15 ] Alberta Rule 10.31(1) provides that the court’s discretion extends to awarding “any amount that the Court considers to be appropriate in the circumstances, including... an indemnity to a party for that party’s lawyer’s charges”: Alberta Rule 10.31(1)(b)(i).

The considerations for the court in making a costs award are set out in Alberta Rule 10.33. [ 16 ] The Court’s discretion must be exercised “judicially and in accordance with established principles”: Lameman v Alberta , 2011 ABQB 532 at para 6 , leave to appeal refused 2011 ABQB 724 . [ 17 ] In estate matters, what has been described as “the modern rule” applies, which is that there is no longer any presumption that the parties in estate litigation will be paid costs out of estate funds : McCarthy Estate (Re) 2022 ABCA 131 at para 14 .

Where there were reasonable grounds to question the validity of the will or where issues arose from the actions of the testator, it is sometimes appropriate for the estate to bear costs. Otherwise, the normal rule that costs are paid by the unsuccessful party applies. [ 18 ] In McAllister v. Calgary (City) , 2021 ABCA 25 , the Court of Appeal states that absent misconduct, a successful party should be partially indemnified to about 40 – 50% of their actual costs. The Court may use

Schedule C to the Alberta Rules as a guide, can use multipliers of certain columns of

Schedule C to achieve this goal, or can exercise its discretion to pay another amount entirely.

[ 19 ] Graesser, J. held in Schwartz Estate v. Kwinter , 213 ABQB 147 at paras 119 and 120 that Surrogate Rule 90(

h) is a statutory modification of the Alberta Rules relating to costs with respect to Estate matters and supplements the ordinary costs principles. The relevant portion of Surrogate Rule 90(

h) states as follows: 90 On an application under this Division the court may … (

h) direct the payment of costs, including penalizing any person who required formal proof of the will if it became clear during the proceedings that (

i) the application was frivolous or vexatious, … (iii) the person had no substantial basis for requiring the scrutiny of the court [ 20 ] In Schwartz Estate it was held that Surrogate Rule 90(

h) provides the Court with jurisdiction to penalize a person who has required formal proof of a will if it becomes clear during proceedings that the application was frivolous or vexatious, or the person had no substantial basis for requiring court scrutiny. In other words, Surrogate Rule 90(

h) makes it clear that an unsuccessful claimant may be liable for penalty costs should the right conditions exist. The “no substantial basis” test is a lower threshold than “misconduct” and it requires the Court to consider not only the conduct of the parties, but also the objective reasonableness of their positions. [ 21 ] In other words, while it may be true that enhanced costs are awarded under the Alberta Rules in exceptional circumstances, that may not be true in Estate cases where the lower threshold of “no substantial basis” is considered.

The fact that this is an Estate matter mandates a consideration of the objective reasonableness of the Applicants’ position during this litigation: Schwartz Estate at para 122. b. Are the Respondents Entitled to Ordinary Costs? [ 22 ] Graesser, J. makes it clear in Schwartz Estate that: In ordinary civil litigation, parties to the dispute are generally said to be entitled to their day in court subject to being liable to pay

Schedule C costs if they are unsuccessful. It is not normally a basis to seek elevated costs that the claim was unreasonable from the get- go or became obviously unreasonable during the course of the litigation. [ 23 ] McAllister and McCarthy follow up on this principle by stating that unless other considerations, such as misconduct, apply, the successful party is entitled to costs. Indeed, I had ordered that the Respondents were entitled to costs in this case, and without more those cost would have been the amount set out in the Respondents’ Bill of Costs, or $40,001.59.

I see no reason why no, or nominal costs, would be awarded against the Applicants in this case. [ 24 ] Having said that, I must now consider whether some additional amount, or enhanced costs, ought to be awarded to the Respondents. c.

Reasonableness of the Application [ 25 ] I will first address whether the application was frivolous or vexatious or had no substantial basis under Surrogate Rule 90(h). [ 26 ] Although I ultimately decided in favor of the Respondents, I cannot conclude that the application brought by the Applicants was frivolous and vexatious. [ 27 ] Vexatious litigation has been found to include “any misuse of legal procedure in a manner that has no valid purpose, and, as a consequence, causes harm to involved litigants and wastes court resources.” Additionally, while non-legal dictionary

definitions of “vexatious” focus on

an act being wrongful, harassing, malicious, or intended to annoy, the legal meaning of this word is broader: Laird v (Alberta) Maintenance Enforcement , 2019 ABQB 12 at para 64 . A vexatious proceeding is one that in effect abuses or misuses legal processes : Kavanagh v Kavanagh , 2016 ABQB 107 at para 64 [ 28 ] Frivolity refers to a matter which is so palpably bad that no real argument is needed to show how bad it is. [ 29 ] The Applicants’ claim was nether frivolous nor vexatious. There was some evidence of the deceased suffering from some cognitive ailment around the relevant time frames.

There was some evidence of fractured relationships between various beneficiaries and between the Deceased and some of his children. All of this was imposed upon the background of the Deceased making significant changes to his bequests to his children. These circumstances were sufficient to cause the Applicants to investigate further . Surrogate Rule 90(h)(

i) does not assist the Respondents in this case. [ 30 ] Next, to assess whether the Applicants’ claim had no substantial basis, Schwartz Estate provides some guidance. Graesser J notes that the threshold for awarding penalty costs is somewhat lower than “misconduct”. He also states that the rule mandates a “consideration of the objective reasonableness” of the Applicant’s position. Later at para 122 he refers to whether a position is “obviously unreasonable”. He also states at para 119 that although it may be arguable that “substantial” may mean something different than “reasonable” he chooses to follow decided cases and equate the two:

In estate litigation, those modifications are found in Surrogate Rule 90(h), which provides that the courts have a jurisdiction to “penalize”a person who has required formal proof of the will “if it becomes clear during the proceedings” that the application was frivolous orvexatious, the person delayed the proceedings, or the person had no substantial basis for requiring court scrutiny.

I equate “substantial”with “reasonable” as a minimum equivalency, although it is certainly arguable if not grammatically correct, that ‘substantial’ is a higheronus than ‘reasonable’ (as in ‘substantial fortune’ versus a ‘reasonable’ fortune).

The decided cases talk about the reasonableness of theclaim so I will restrict my comments to that standard and leave the semantic arguments for another day in another case. [31] Graesser J also notes that the reasonableness of a party’s position can change throughout the course of the action. [32] In the various decisions considering what constitutes reasonableness for the purposes of Surrogate Rule 90(h)(iii), the court isclearly very concerned with the conduct of the parties. For example, in Schwartz Estate, Graesser J described the litigation as“shameful” and “firestorm litigation”: para 9.

In Re Sedahely Estate, 2005 ABQB 861 at para 55, Johnstone J uses the followinglanguage to describe the conduct before her: The Respondents impeded the process of formally proving the Last Will with repeated motions and appeals that were determined to haveno foundation. Throughout the litigation, they chose to pursue a highly oppositional course of conduct with little or no substantive basisfor their position. There were numerous examples of arbitrary conduct and bad faith. It was the most egregious of obstructionist litigationI have observed.

It was tantamount to what I would categorize as the shotgun approach to surrogate warfare. [33] I find that the conduct of the Applicants in this case did not approach the level of animosity, arbitrariness or obstructionist thatappears to be required. [34] While it is true that the Respondents provided certain information to the Applicants early on to dissuade them from bringingtheir application, I note that not all of the information requested by the Applicants was immediately provided.

In particular, very detailedletters were sent by the Estate’s then-solicitors in June, 2020 explaining the background and reasoning behind the substantial changesmade by the Deceased to his estate planning. The Applicants then brought a successful application before Feth J for further production,which was provided by the Estate’s counsel in July, 2021. During submissions the Applicants argued that the Respondents did notprovide some of the information requested by way of undertaking until shortly before their application was heard by me. [35] As noted, ultimately, I decided in favour of the Respondents.

I do not consider, however, the position taken by theApplicants, nor their behavior, unreasonable to the extent noted in cases such as Schwartz Estate and Re Sedahely Estate. On that basisI decline to find that this case passes the threshold set out in Surrogate Rule 90(h)(iii) such that I should use it to award enhanced costs tothe Respondents. d. Allegations of Undue Influence [36] The Courts have been clear that allegations like fraud, that put the issue of a party’s honesty before the Court, may attractenhanced costs.

I consider the allegations of undue influence, as they were framed and advanced by the applicants, to be allegations thatfall into this category. In this regard, I rely upon Stewart v. McLean, in which Belzil J states beginning at para 12: An allegation of undue influence on any testator is extremely serious, and as was pointed out in Vout v. Hay, this is a species of fraud.

Itwas clear from her testimony before me that this allegation had a devastating emotional impact on Mona Stewart in particular, and wasthe cause of enormous embarrassment and humiliation for her, not only within her extended family but within her community of PowellRiver, B.C., as well. This allegation was ultimately abandoned, but virtually at the end of trial. This allegation was certainly in the public domain for asubstantial period of time. Courts have long held that serious costs consequences must flow from an unproven allegation of undue influence. Re Marshall Estate,[1998] O.J. No. 258 and Riva v.

Johnson, 2000 ABQB 391 , [2000] A.J. No. 681. These costs consequences are intended todiscourage litigation of unsubstantiated allegations which have virtually no chance of success but which cause enormous distress.

One of the issues before me is whether or not the allegation of undue influence should have been abandoned earlier. [37] See also Re Wyker (Estate of), 2003 ABQB 553 and Re West (Estate of), 2003 ABQB 205. [38] I do not agree with the Applicants’ submissions that an allegation of undue influence typically is made hand-in-hand withallegations of lack of testamentary capacity, and as such, should not rise to the level of an allegation of fraud. [39] I find that the explanations provided to the Applicants in the June, 2020 letters from the Estate’s counsel, as well as theadditional information provided pursuant to Feth J’s production order ought to have caused the Applicants to reassess and withdraw theirallegations of undue influence.

This becomes particularly clear from the evidence of Logan during questioning in August 2021 when headmitted that he had no information to prove that allegation, and the evidence of Francis during questioning in January 2021 when shespeculated that the portion of the Estate that she did receive may have “been a bribe” and that she “didn’t know”. [40] Finally, the Respondents were clear to the Applicants that their intention was to pursue costs as a consequence of being

involved in what proved to be unsuccessful litigation through the making of a Calderbank offer in October 2021. [ 41 ] Because the allegations of undue influence were not successful, I conclude based upon the prior case authorities that it would be in order to award some measure of enhanced costs. e.

Determination of the Scale of Enhanced Costs [ 42 ] The Respondents have proposed two methods of calculating their claim for enhanced costs of $100,000. [ 43 ] I find the first method, that of multiplying the total amount of their Bill of Costs by approximately 2.5% problematic as that calculation includes disbursements.

If one removes the disbursements and uses the same approximate multiplier, then the amount is slightly less - $88,839.79. [ 44 ] I also find the second method somewhat problematic because although the Respondents argued that their total fees exceeded $150,000, they have not provided any evidence of that. [ 45 ] The Applicants raised two issues: undue influence and lack of testamentary capacity. I find that the time spent litigating these two issues was roughly equal.

I therefore conclude that the Respondents ought to be entitled to enhanced costs for the failure to establish a triable issue relating to undue influence, calculated at 2.5 times for half of their fees: $33,952.50/2 = 16,976.25 $16,976.25 x 2.5 = $42,440.63 Total Fees: $16,976.25 + $42,440.63 = $59,416.88 [ 46 ] Thus, the total fees owed to the Respondents by the Applicants amounts to $59,416.88.

The Respondents are also entitled to their disbursements as set out in their Bill of Costs, and GST. [ 47 ] As the Applicants agreed that I have authority to direct that the amount owed may be paid from their inheritance from the Estate, I so order. If the parties cannot agree on the manner in which that amount may be paid, they may return to me for further direction in 30 days. Heard the 2 nd day of February, 2023. Dated at the Town of St. Paul, Alberta this 9 th day of February, 2023. L.K. Harris J.C.K.B.A.

Appearances: Marco Poretti Reynolds Mirth Richards & Farmer LLP for the Applicants Helen Ward Duncan Craig LLP

for the Respondents