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The expensive consequences of being unreasonable in estate litigation

by Robin Spurr

The recent case of Newlands Estate v. Newlands Estate highlights the need for proportionality in litigation, and the expensive consequences if you are not.

The case centred around a painting that belonged to the father, which all the parties agreed was worth $30,000. $30,000 is nothing to sneeze at, but when it comes to litigation costs that can be eaten up very quickly. It is fair to say that a rational person would take a reasoned and practical approach to solving this dispute. However, these litigants did not and took this fight all the way to a hearing, and spent $500,000 between them on legal fees.

The facts of the case were that three of the deceased’s children were named as estate trustees.  One of those children (John) claimed that this painting was not part of the estate and that his father wanted him to have it, provided John paid the estate market price for it.   The other two estate trustees (Joan and Brian) disputed John’s claim.  After years of litigation and several reasonable offers to settle from John (including paying full price for the painting), the application was heard by the court.  The judge found in John’s favour, and allowed him to purchase the painting from the estate.  The judge then ordered that Joan and Brian had to pay John’s legal costs on a substantial indemnity basis.  This means that Joan and Brian had to pay John’s legal fees of $216,000, in addition to their own legal fees of $243,000.  The judge determined that while Joan and Brian were acting in their capacities as estate trustees, their conduct was so unreasonable that they had to pay these costs personally and were not allowed to pay any of them from the estate.

In the judge’s reasons, she noted that this case was clearly not just about the painting, but that it was the deep animosity between the parties that drove the litigation to such expensive results.

There are a few lessons to be learned from this case.  Firstly, that litigation must be proportional; and secondly, that you cannot hide behind the guise of “estate trustee” to protect you from costs if you act irrationally. But the most important lesson from this case is to be practical and not to let your emotions control the litigation – it can be a very bad financial decision.

The court’s decision can be found here, and the costs award can be found here.