Spending $1 to recover a nickel: are there costs consequences?

A big factor in any type of litigation is the payment of legal fees. At the end of a trial or other court proceedings, the judge will usually make an order about who among the parties is paying the legal fees for whom. Perhaps everyone will pay his or her own lawyer. Perhaps the estate may have to cover some portion of fees. Or perhaps one party will be ordered to pay not only his or her own legal fees but that of the other parties as well. When that order is made, we call that having costs ordered against the party who must pay. Our general rule of court costs is that the loser of the case ends up paying for the fees of the winning party.

If you are involved in estate litigation, you know it's expensive. Your fees could be in the tens of thousands and perhaps even more. Your lawyer may already have warned you that your costs may be more than the asset you're fighting over.

This was the topic of an article I recently read on the blog of a Toronto law firm called Wagner Sidlofsky. Click here to read the article if you'd like more detail.

The question discussed in that post is whether the courts will punish parties for carrying on battles when the legal fees exceed the value of the asset they are fighting about. When that happens, you know that people are fighting on principle and perhaps are not being reasonable. The article took a look at what judges have been doing about costs in recent estate litigation cases.

While there isn't perfect consistency between judges, there is a trend towards judges refusing to allow costs awards that are above the value of the disputed asset, or even when not in excess of the value, are disproportionate to the value. The idea is to discourage parties from battling it out in the courts when there are better, cheaper, faster methods if only people would be reasonable.

The article talks about a case where the parties spent nearly $500,000 fighting over a $30,000 painting in an estate. The judge awarded the winning party most of what it wanted (about $200,000) against the losing party personally. This means the estate wasn't paying anyone's fees. The winner still had to absorb about a $100,000 tab. The loser had to pay $200,000 of the winner's fees plus about $250,000 of his own fees. I bet that made every single person involved sorry they ever laid eyes on that painting. Imagine having to pay $450,000 just because you wouldn't settle a dispute.

I'm pleased to see this trend. I've seen a number of cases where one stubborn person will hold up an entire estate, sometimes for years, refusing all reasonable settlement offers and insisting on putting everyone through the legal wringer for no good reason. Those people often get dinged with costs. I am happy to see cases we see where the judges make decisions not to punish people who have won a case because not only were in the right legally, but they made settlement offers and did all they could to avoid going to court. The people who insist on using the courts as their personal hammer despite all logic are exactly the folks who should be paying the costs.