Legal Costs of Estate Litigation in Ontario

The policy behind legal costs of estate litigation in Ontario has undergone a significant evolution. Historically, courts frequently ordered costs to be paid out of the estate. Today, however, the dominant approach aligns estate litigation with ordinary civil litigation principles: loser pays, subject to important exceptions.

Understanding this shift is critical for estate trustees, beneficiaries, and litigators navigating contentious estate disputes.

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The Historical Rule: The Estate Pays

Traditionally, estate litigation operated under a distinct costs regime. Courts often ordered that all parties’ costs be paid from the estate, particularly in will challenges. The rationale was rooted in public policy:

1. The deceased created the ambiguity or dispute;
2. The litigation was necessary to determine the validity of a testamentary instrument; and
3. Beneficiaries should not be penalized for seeking the court’s guidance.

This approach was grounded in English jurisprudence and adopted in early Ontario decisions. Two recognized exceptions justified estate-funded costs:

• Testator-caused litigation (e.g., ambiguous will drafting); and
• Reasonable investigation of will validity, even if unsuccessful.

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The Modern Shift: Loser Pays

The leading authority marking a decisive change is the Ontario Court of Appeal decision in McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA).

In McDougald Estate, the Ontario Court of Appeal rejected the automatic “estate pays” approach and confirmed that estate litigation is subject to the same costs principles as other civil proceedings under Rule 57 of the Rules of Civil Procedure.

The Court emphasized that modern litigation policy requires proportionality and accountability. Estate assets should not be routinely depleted to fund unsuccessful or unnecessary litigation.

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An Estate Is Not an ATM

The modern philosophy was stated forcefully in Salter v. Salter Estate, 2009 CanLII 28403 (ON SC), where the court observed:

“Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation.”

This language has been repeatedly cited to reinforce that estate funds are not automatically available to bankroll intra-family disputes.

The policy concern is straightforward: estates exist to distribute assets according to the deceased’s intentions or statutory schemes — not to subsidize speculative litigation.

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When Will an Estate Still Pay Costs?

Despite the shift to loser-pays, Ontario courts retain discretion to order costs payable from the estate in limited circumstances.

1. Where the Testator’s Conduct Caused the Dispute

If the will is ambiguous, poorly drafted, or raises legitimate questions of interpretation, courts may find that the deceased effectively created the litigation.

This principle was reaffirmed in Sawdon Estate v. Sawdon, 2014 ONCA 101, where the Court of Appeal acknowledged that costs may properly come from the estate where the litigation arises from the testator’s own actions.

2. Where There Is a Genuine and Reasonable Investigation

Courts may protect a party who reasonably challenges a will based on suspicious circumstances, even if unsuccessful.

However, the key word is reasonable. If a challenge lacks evidentiary foundation, costs will likely follow the result.

3. Public Policy Considerations

In some capacity disputes or cases involving vulnerable parties, courts may moderate cost consequences to avoid discouraging legitimate oversight.

But the modern trend is clear: public policy does not justify unlimited estate-funded litigation.

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Blended Cost Awards in Ontario

Ontario courts increasingly use blended cost awards to reflect mixed success or nuanced conduct.

A blended costs award may include:

• Partial indemnity to one party;
• Substantial indemnity for a discrete issue;
• Estate-paid costs for certain procedural steps; and
• Personal costs consequences for unreasonable conduct.

An instructive example is The Estate of Irmgard Burgstaler (disability), 2018 ONSC 4725 (CanLII), arising from a passing of accounts proceeding against an attorney for property. In that case, Justice Shaw found that the estate trustee had acted reasonably and in a way that benefited the estate. The applicant (the attorney) was unsuccessful in her position and was ordered to pay partial indemnity costs to the objectors. The estate was then ordered to pay the remaining balance of the successful party’s costs, resulting in a blended cost structure.

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The Policy Reasons Behind the Modern Approach

The evolution from “estate pays” to “loser pays” reflects several policy considerations:

1. Preservation of Estate Assets

Estate assets belong to beneficiaries collectively. Courts are reluctant to permit depletion through meritless litigation.

2. Deterrence of Strategic Litigation

If costs always came from the estate, disappointed beneficiaries would have little disincentive to litigate aggressively.

3. Alignment With Civil Litigation Norms

Estate litigation is still litigation. The same proportionality principles under Rule 57 apply.

4. Fairness to Successful Parties

A party forced to defend a valid will or fiduciary conduct should not bear the financial burden of doing so.

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Conclusion

Ontario estate litigation costs have moved decisively away from the historical presumption that “the estate pays.” As confirmed in McDougald Estate v. Gooderham and reinforced in Salter v. Salter Estate, the estate is not an automatic funding source for litigation.

While courts retain discretion to order costs payable from the estate in appropriate circumstances — particularly where the testator’s conduct created the dispute — the prevailing rule is now clear: costs follow the event.

Understanding this modern costs landscape is essential for litigants navigating will challenges, capacity disputes, dependant support claims, and fiduciary litigation in Ontario.