2010 ONSC 7120, 2010 ONSC 7120

CITATION: Watson Estate v. Beatrice Watson-Atcheson Foundation (Costs), 2010 ONSC 7120 COURT FILE NO.: 02-110/09 DATE: 20101223 SUPERIOR COURT OF JUSTICE - ONTARIO RE: IN THE ESTATE OF JOHN CAMERON WATSON, deceased Late of the City of Scarborough in the Province of Ontario Occupation: Orchardist Who died on July 16, 2004 BEFORE: Mr. Justice Lederer COUNSEL: Josephine Polk, personally, for the Applicant (Trustee) Robert J.

Allen, for the Respondent (Objector), Beatrice Watson- Atcheson Foundation COSTS ENDORSEMENT [1] This request for costs comes at the end of a difficult and unfortunate series of court proceedings, all concerned with theadministration of the estate of John Cameron Watson. They are each related to the others. To understand whether a costs award should be made requires an appreciation of the history of these proceedings [2] Josephine Polk was an executor of the estate of John Cameron Watson. [3] As a result of the first proceeding, she was removed from that position.

She failed to recognize or fulfill the responsibilitiesher appointment placed on her. Madam Justice Low, who heard that application, determined that: …the circumstances are an aggregate of Ms. Polk's conflict of interest, a lack of frank and honest disclosure of the conflict, and a historyof conduct in which Ms. Polk has placed her interest over the interests of the estate or has otherwise failed to abide by her duty to placethe interest of the estate paramount over others. (Beatrice Watson-Acheson Foundation v. Polk, (On.

S.C.) at para. 60) [4] The second proceeding dealt with the costs of the first. [5] The applicants sought their costs. The applicants were the principal beneficiary of the estate of John Cameron Watson, beingthe Beatrice Watson-Acheson Foundation, and another of the executors, Glenda Deigan. [6] Madam Justice Low awarded costs to the applicants, but not without exhibiting a high degree of concern for their approachto the original application and to the costs they asked the court to award. She noted: Ms.

Polk's conflict of interest and her conduct as executor gave rise to cause for removal and the application to do so was successful.That being said, I am not persuaded that costs against Ms. Polk ought to be on a higher scale than that of partial indemnity. … . . .

I am of the view that the applicants, in an overabundance of zeal, have unnecessarily complicated the proceeding, and have incurred amagnitude of legal expense that ought not to be laid at the feet of the unsuccessful party. . . . … The bill of costs therefore requires a significant culling and there is to be an assessment of the applicants’ costs of this applicationunless the parties are able to agree as to quantum. (Beatrice Watson-Acheson Foundation v.

Polk (Costs), (ON S.C.) at paras. 25 and 27) [7] The third proceeding was framed as a motion to pass certain accounts of the estate of John Cameron Watson, but thesubstantive issue before the court was whether Josephine Polk should be required to re-pay the fees that she had already received. [8] It was ordered that the fees that had been paid to Josephine Polk be returned.

[9] I am now asked to consider the costs of the proceeding which led to that order. [10] The Beatrice Watson-Acheson Foundation was the applicant and seeks its costs. Costs are a matter left to the discretion of the Court [11] Costs are in the discretion of the court. The Courts of Justice Act, R.S.O 1990 c. C. 43, as amended, s. 131(1) states: Subject to the provisions of

an Act or rules of court, the costs of and incidental to a proceeding or a step in the proceeding are in thediscretion of the court, and the court may determine by whom and to what extent the costs shall be paid. [12] Rule 57.01 of the Rules of Civil Procedure outlines the factors to be considered in the exercise of this discretion. It begins: In exercising its discretion under

section 131 of the Courts of Justice Act to award costs, the court may consider… [13] The permissive, rather than mandatory, nature of this instruction does not detract from the proposition that, at its root, costs isa matter of discretion. [14] The Beatrice Watson-Acheson Foundation makes its claim for costs on the basis that it was the successful party. Thesubmissions rely on the case of Bell Canada v. Olympia & York Developments Ltd., (ON CA), 1994 CarswellOnt 520(C.A.).

They quote that case as follows: Thus, while it is well established that a successful party has no entitlement to costs, that party is entitled to a reasonable expectation inthe absence of special circumstances… (Bell Canada v. Olympia & York Developments Ltd., supra, at para. 23) [15] In furtherance of the same point, Bell Canada v. Olympia & York Developments Ltd. and the submissions seeking costs bothrefer to the case of Henderson v. Laframboise (1930), (ON CA), 65 O.L.R. 610 (C.A.).

The submissions quote thatcase as follows: There is no doubt that the trial Judge in the exercise of his discretion must act judicially; no doubt he must bear in mind that in theabsence of special circumstances the successful party is entitled to a reasonable expectation of obtaining an order for the payment of hiscosts by the unsuccessful party… (Henderson v. Laframboise, supra, at pp. 612-13, as quoted in Bell Canada v.

Olympia & York Developments Ltd., supra, at para. 22) [16] From these quotations, the submissions made in support of the request for costs suggest that the expectation that thesuccessful party will be awarded costs serves to narrow the court’s discretion. [17] I do not agree. [18] Being the successful party does not mean one has a right to costs. This is made all the more certain when the sentences whichimmediately follow both of these quotations are considered. The quotation from Bell Canada v.

Olympia & York Developments Ltd.,supra, goes on: … However, it is only where it can be demonstrated that the trial judge proceeded on an erroneous principle of law that the discretioncan be overruled… (Bell Canada v. Olympia & York Developments Ltd., supra, at para. 23) [19] In that case, the judge refused to award costs to the successful defendant because it had made no settlement offer until the trialwas well under way. This was found to be an error of law. [20] If one reads further in Henderson v.

Laframboise, supra, it becomes clear that it was not meant to limit the discretion of thecourt in respect of an award of costs. The words which follow after those quoted in the submissions as to costs are: …but, if the trial judge, upon facts connected with or leading up to the litigation, exercises his discretion to withhold those costs fromhim, the discretion of the trial judge is unfettered… (Bell Canada v. Olympia & York Developments Ltd., supra, at pp. 612-13, as quoted in Bell Canada v.

Olympia & York DevelopmentsLtd., supra, at para. 22) [21] I exercise the discretion of the court to find that, in this case, there should be no award as to costs. [22] The reasons for this follow. The other two executors, including Glenda Deigan, share in the blame for the failure in the administration of the estate [23] The estate of John Cameron Watson was dysfunctional (see: Beatrice Watson-Acheson Foundation v. Polk, supra, at para.41). As Madam Justice Low noted when she dealt with the application to have Josephine Polk removed as an executor: …I would observe that Ms.

Polk was not alone in pursuing a course of conduct that was likely to create dysfunction and ill-will amongthe executrixes…

( Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 36) [ 24 ] She attached at least some blame to Glenda Deigan. The judge continued: Ms. Deigan started to secretly audiotape her conversations and meetings with Ms. Polk and with Ms. Pappin [the third executor] almost from the time of Mr. Watson’s death. While the taping may not have been illegal per se, it could hardly be seen as ethical and forthright behaviour, and while the tapes supplied corroboration of the affidavit evidence as to what was said by Ms.

Polk on various subjects at various times, the clandestine action demonstrates an adversarial attitude that cannot have been conducive to the effective functioning of the executrixes. ( Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 36) [ 25 ] The submissions as to costs that I am asked to consider make an effort to disabuse the court of this perspective. The submissions suggest that, in considering the taping of the discussions, the court should recall that: “Glenda Deigan was aware of Josephine Polk’s parasitic relationship with Mr. Watson and Ms. Deigan witnessed many of the dark events in Mr.

Watson’s final days at the hospital.” The submission goes on to conclude: “It is hardly surprising that Ms. Deigan would distrust Ms. Polk from the outset of the estate administration” [Emphasis added]. In other words, the submissions suggest that having supported the will being probated, it was appropriate and acceptable for Glenda Deigan to make no serious attempt to work with Josephine Polk in the proper administration of this estate.

This is simply not acceptable. [ 26 ] I repeat what I said at the end of the reasons delivered in respect of the third proceeding, which was the application by which the Foundation sought the return of the fees that had been paid to Josephine Polk: Finally, I express a concern as to the overall conduct of the administration of this estate. No one involved should see this result as a victory. As noted by Madam Justice Low, the estate, in the hands of these executrixes, was dysfunctional. In their own way, each one contributed to this failure.

To my mind, each one in their own way breached the faith placed in them by John Cameron Watson… It is my hope that, rather than seeing this decision as vindication, those left to carry on will understand the responsibility they hold and be governed by it as they move properly in whatever work is left to complete the administration of this estate. ( Watson Estate v. Beatrice Watson-Acheson Foundation , 2010 ONSC 5043 (CanLII at para. 39) [ 27 ] It would seem that the hope expressed in this paragraph was in vain.

Rather than accept these findings the submissions as to costs seek to absolve Glenda Deigan any role in the unfortunate way the estate was administered [ 28 ] The implication, if not the direct statement, is that Glenda Deigan stood alone against the improper conduct of Josephine Polk. The submissions made on behalf of the Foundation seeking costs ends with the following: It is not surprising that the estate administration was dysfunctional; dysfunction is to be expected when an honest worker objects to brazen and determined pilfering by his fellows.

Is one who calls out "Stop thief" in the night to be criticized for disturbing the peace? [ 29 ] The submissions made on behalf of the Foundation, by which it seeks its costs, are a defence of the actions of Glenda Deigan. [ 30 ] It is said, for example, that the “over-reliance on the estate solicitors did not result from the hostility among the executors but was instituted by Josephine Polk from the outset of the administration”.

It may or may not be that the solicitors were invited to the initial meetings of the executors by Josephine Polk, but this does not serve to explain why the accounts of the law firm, for a period of less than two years, amounted to “something in the range of $300,000” (see: Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 41). This was explained by Madam Justice Low when she considered the application to have Josephine Polk removed as an executor. She noted: …This was an avoidable expense had the executrixes been able to carry out their duties effectively.

Because of the hostility and distrust among the executrixes, and particularly between Ms. Polk and Ms. Deigan, the solicitors – often a team of personnel from the law firm – were routinely required to attend at the executrixes’ meetings and communications between them and the beneficiary also had to be carried out through solicitors. ( Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 41) [ 31 ] The submissions made on behalf of the Foundation seeking costs suggest that Glenda Deigan “confronted Ms. Polk many breaches of her duties as a trustee…”.

This may be true, but does not deal with all the actions taken by Josephine Polk. By way of example, Josephine Polk submitted accounts to cover the food and shelter for animals that had belonged to John Cameron Watson. The animals had been moved to her home. At first, they were paid by Glenda Deigan and Maureen Pappin. In dealing with the application to have Josephine Polk removed, Madam Justice Low commented: Ms. Polk relies on the fact that the other two executrixes paid the account in suggesting that the claim was a legitimate one.

In my view, that the account was accepted and paid was not to the credit of the other executrixes but they did at least come reasonably promptly to recognize that the claim was not a reasonable one and declined to continue to pay further. ( Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 27) [ 32 ] What is clear is the determination of the judge that Glenda Deigan did not stand apart as the sole opposition to the actions of Josephine Polk. The judge said: In the course of administering the estate, Ms. Polk launched a number of proposals or initiatives that, if translated into action, would

certainly have amounted to breaches of the duties of the executors. It is apparent that Ms. Polk was under a misapprehension as to thenature of the duties imposed on her as an executor and trustee. Fortunately, ill-conceived proposals did not, in the majority of cases, ripeninto action: the real property (5 acres in Scarborough with a house) was not summarily auctioned off without appraisals, estate fundswere not spent to commission a book about Mr. Watson; the settlement of the claim asserted by Mr. Regele, the handyman on theWatson farm, was not made contingent on forgiveness of Ms.

Polk’s debt to the estate; and no final and binding settlement of Mr.Regele’s claim was made over the objections of the Foundation. That brakes were applied to these initiatives is probably a result of themoderating effect of the other two executrixes and the then solicitors of the estate, the firm of Miller Thomson. [Emphasis added] (Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 20) [33] The submissions by which the Foundation seeks its costs go on to say: “Moreover, it soon became clear that Ms. Polk wassupported in large measure by the third trustee… Ms.

Deigan found herself very much isolated as the sole defender of the interests of theestate”. The decision as to costs made on the application to remove Josephine Polk demonstrates that this was not so. On the applicationto remove Josephine Polk, it was Maureen Pappin who was left to defend the interests of the estate. In that decision, Madam Justice Lowobserved: It is said that Ms. Pappin was not neutral and instead took Ms. Polk’s side. I am not persuaded that this was the case so much as it wasthe case that Ms.

Pappin attempted to mediate the interests and goals of the various parties including what she perceived were the wishesof the testator as expressed in the will. At one stage in the proceeding, she advanced the proposal that an institutional trustee step in as aninterim measure pending resolution of Ms. Polk’s conflict of interest and at the end of the day, she argued that a less draconian form ofrelief than removal could serve to address the conflict of interest. I do not see these proposals for a resolution of the lis either as a defenceor as a justification of Ms.

Polk’s conduct; nor do I view them as necessarily taking Ms. Polk’s side per se as Ms. Pappin’s point ofreference appears throughout to have been the wishes of the testator. Ms. Pappin spoke to remedy and her suggestion was notunreasonable. (Beatrice Watson-Acheson Foundation v. Polk (Costs), supra, at para. 15) The Beatrice Watson-Acheson Foundation cannot separate itself from the estate of John Cameron Watson or the actions of GlendaDeigan [34] “The Foundation is controlled by its members [who], under its by-laws, must number at least 3 up to 20.

Membership in theFoundation is governed by the Foundation’s by-laws. The effect of By-law No. 2 of the Foundation is that a person who is an executor ofthe will of [John] Cameron Watson is, by virtue of that position, also a member of the Foundation” (see: Beatrice Watson-AchesonFoundation v. Polk, supra, at para. 6). At the time that John Cameron Watson died, there were six members of the Foundation, includingthe three executors.

No reference is made to the other three and they took no part, separate from the Foundation, in the proceedings thathave been considered by this court. [35] “It was not disputed that the existing members of the Foundation (apart from Ms. Pappin) did not wish Ms. Polk to be amongtheir number” (see: Beatrice Watson-Acheson Foundation v. Polk (Costs), (ON S.C.) at para. 19). The reasons as tocosts on the application seeking to remove Josephine Polk refers to the submission of counsel for Josephine Polk “that the real and onlyreason the applicants have brought the application to remove Ms.

Polk as executor is to achieve the end of removing her as a member ofthe Foundation” (see: Beatrice Watson-Acheson Foundation v. Polk (Costs), (ON S.C.) at para. 18). [36] Thus, the Beatrice Watson-Acheson Foundation as the principal beneficiary of the estate of John Cameron Watson was notindependent of the estate and its actions. The executors were also members of the Foundation. While this does not serve to put the executors in a position of conflict (see: Ballard Estate (Re) (1994), (ON SC), 20 O.R. (3rd) 189 (Gen.

Div.) at 196), itdoes suggest that actions of the estate could be influenced by the interests of the Foundation. [37] In this regard, it is important to note that Glenda Deigan is also the Executive Director of the Foundation. The actions of Glenda Deigan were motivated by the interests of the Foundation rather than the estate [38] The seed to the difficulties that arose was planted shortly before John Cameron Watson died. As his death approached, a newwill was prepared.

The preparation of this will was facilitated by Josephine Polk and introduced her as an executor of the estate. [39] Glenda Deigan joined the other two executors to obtain probate of the will. She did this understanding that John CameronWatson had expressed a desire that Josephine Polk not be a member of the Foundation or an executor under his will because of herhistory of financial instability (see: Beatrice Watson-Acheson Foundation v. Polk, supra, at para. 7). [40] Glenda Deigan did this despite misgivings concerning the validity of the will.

The affidavit she swore and the cross-examination of her that was conducted, in respect of the first proceeding, contained evidence that John Cameron Watson was notcompetent at the time the will was made and that it was made under undue pressure from Josephine Polk (see: Beatrice Watson-AchesonFoundation v. Polk, supra, at para. 9). [41] One might wonder why she would do this. As its Executive Director, she was an employee of the Foundation.

The Foundationenjoyed a far greater benefit under the new will and did not want it to be found invalid (see: Beatrice Watson-Acheson Foundation v.Polk, supra, at para. 10). [42] At the hearing concerning whether Josephine Polk should be removed, the applicants took the position that the evidence as topressure exerted by Josephine Polk and as to the mental state of John Cameron Watson at the time the will was prepared were put intothe material only to illustrate the pattern of conduct of Josephine Polk and that the applicants were not asserting undue influence orabsence of testamentary capacity per se (see: Beatrice Watson-Acheson Foundation v.

Polk, supra, at para. 10). Madam Justice Low

noted: …The applicants have persisted in throwing into the fray a number of irrelevant issues — for example, the question of testamentarycapacity and the personal history between Ms. Polk and the testator. (Beatrice Watson-Acheson Foundation v. Polk (Costs), (ON S.C.) at para. 25) [43] When the application to have Josephine Polk removed was heard by the court, the applicants complained of the manner inwhich Josephine Polk handled a claim made by the handyman who had worked for John Cameron Watson and lived on the Watsonfarm.

It seems that any objection made by Glenda Deigan only came after the Foundation had made its opposition to the proposedsettlement known. The judge made the following observation: …The earliest request was for $150,000 and the executrixes, including Ms. Deigan were receptive to this. The Foundation was not infavour of the settlement, however, and Ms. Deigan therefore withdrew her support. There does not appear to have been any seriousanalysis of the legal merits and demerits of the claim or any consideration of the various courses of action open to the executrixes. . . . (Beatrice Watson-Acheson Foundation v.

Polk, supra, at para. 33) [44] Glenda Deigan acted on the views expressed by the Foundation. The application seeking the re-payment of the fees paid to Josephine Polk was unnecessary [45] As I have already observed, while the application was framed as a motion to pass accounts, the substantive issue before thecourt was whether Josephine Polk should be required to re-pay the fees that she had already received. The basis for this request were thesame matters that had been raised before Madam Justice Low when she considered whether Josephine Polk should be removed as anexecutor.

This is demonstrated by the reliance placed on her decision in finding that the fees paid should be returned. [46] To put it simply, the request for the return of the fees is another remedy for the same wrongs and could have been and, to mymind, should have been, sought at the time of the application to have Josephine Polk removed as an executor. [47] Madam Justice Low took the pre-taken fees into account. Towards the end of her reasons, she noted: The applicants have made out a compelling case for removal and the application is granted. Ms.

Polk is removed and an order will alsogo requiring her to pass her accounts. The pre-taken compensation is to be taken into account although it need not be repaid forthwith. (Beatrice Watson-Acheson Foundation v. Polk, (On. S.C.) at para. 61) [48] There is no reason why, if the required submissions had been made, the issue of the re-payment of fees could not have beenfinally dealt with by Madam Justice Low.

Conclusion [49] It is the role that Glenda Deigan played in the unhappy administration of this estate, her connection to the beneficiary and thereliance the beneficiary placed on her actions as the basis on which it now seeks its costs that leads me to determine that this is not a casefor costs to be awarded. You cannot contribute to the difficulties that arose in the estate and then expect to be compensated despite thatcontribution. [50] Finally, the issue of the re-payment of fees should have been dealt with on the earlier motion. [51] There will be no award of costs. LEDERER J. Date: 20101223