Ontario estate litigation is a branch of civil litigation, and costs follow the ordinary civil rules: the unsuccessful party generally pays a portion of the successful party's legal costs. The older practice of paying every party's costs out of the estate was displaced by the Court of Appeal in McDougald Estate v. Gooderham (2005), and it survives only as a limited exception where public policy considerations apply. Costs are always discretionary, so no rule produces a certain outcome, but anyone approaching an estate dispute on the assumption that the estate will fund it is working from a version of the law that changed twenty years ago. This article sets out the framework, the exceptions, and the situations where a party ends up paying personally.
What Did McDougald Estate Actually Change?
Before it, the parties' costs in estate litigation were routinely paid from the testator's estate. The reasoning behind that tradition was sound: there is a public interest in giving effect to valid wills made by competent testators, and in ensuring estates are properly administered. If there are reasonable grounds to question the execution of a will or the testator's capacity, it is in the public interest that those questions be resolved without cost to the person raising them. And where the ambiguity that caused the litigation was created by the testator, it is fair for the estate to bear the cost of clearing it up.
The problem was that the tradition was applied as a default rather than as an exception. Estates were being consumed by litigation that nobody had any financial reason to stop. In McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435, the Court of Appeal set the traditional approach aside and replaced it with a two-stage analysis.
The analysis runs in a fixed order:
The court examines the litigation to determine whether one or more public policy considerations apply.
If they do, the parties' reasonable costs may be ordered paid out of the estate.
If they do not, the ordinary civil costs regime applies, under section 131 of the Courts of Justice Act and Rule 57 of the Rules of Civil Procedure, and the unsuccessful party generally pays.
It is a sequence, not a balancing exercise. The Court of Appeal has since confirmed that the determination is not a weighing of public policy considerations against the ordinary costs rules. Either the exception is engaged or it is not.
The phrase that captures the shift came from Justice Brown in Salter v. Salter Estate (2009): the assets of an estate are not a kind of automated bank machine from which withdrawals flow to fund the parties' litigation.
What Are the Public Policy Exceptions?
| Exception | What it covers |
|---|---|
| The testator caused the difficulty | Ambiguous drafting, an unexplained document, conflicting instruments, or circumstances the testator created that make the outcome genuinely unclear |
| Reasonable grounds to question validity | Where there is a real basis to question due execution or testamentary capacity, so that the question ought to be resolved without cost to the person raising it |
| The litigation was reasonably necessary for proper administration | Applications for directions, and other proceedings the estate genuinely needed in order to be administered correctly |
"Reasonable grounds" is doing significant work in the second row. A challenge that turns out to be unsuccessful can still have been reasonably brought, and a party in that position may recover from the estate. A challenge with nothing behind it does not become reasonable because the challenger believed in it.
The first exception is about the testator's conduct, not the parties'. Where the litigation arose because a will was ambiguous, or because the testator left two documents that cannot both stand, the estate carries the cost of resolving what the testator left behind. Where it arose because a beneficiary is aggrieved about the division, it does not.
When Does Someone Pay Personally?
An estate trustee is ordinarily entitled to be indemnified from the estate for the reasonable costs of administration, including the cost of litigation properly brought or defended on the estate's behalf. That indemnity is the reason most trustees are not exposed.
It is not unconditional. In Westover Estate v. Jolicouer, 2024 ONCA 81, the Court of Appeal confirmed that an estate trustee may be ordered to pay costs personally where they have acted unreasonably, or in substance for their own benefit rather than for the benefit of the estate.
Two patterns produce that result:
The trustee who is really a litigant. A trustee who is also a beneficiary, and who defends a position that benefits them personally while describing it as defending the estate, is exposed. The test looks at substance rather than at how the position is framed in the materials.
The trustee whose own conduct made the application necessary. Where an application had to be brought because a trustee refused to answer, refused to account, or refused to acknowledge a plain conflict, the costs of that application can land on them. Our guides to an executor who is not communicating and to dealing with an uncooperative beneficiary cover the escalation steps on both sides of that problem.
How Much Does the Losing Party Actually Pay?
Not all of the winner's legal bill. Ontario costs awards are made on a partial indemnity scale by default, which recovers a portion of actual fees, or on a substantial indemnity scale where conduct justifies it. A successful party ordinarily recovers less than they spent.
Rule 57 sets out what the court weighs, and the factors that move a costs award are recognisable: the result, the complexity and importance of the issues, the amount claimed and recovered, the conduct of the parties including anything that lengthened the proceeding unnecessarily, whether any step was improper or unnecessary, and offers to settle.
Offers to settle carry real consequences. A party who refuses an offer and does no better at the hearing can face a costs consequence from the date of the offer, and in estate matters, where positions harden for reasons that are not financial, this is frequently where the damage is done.
Where This Goes Wrong
Treating the estate as a war chest. Both sides sometimes proceed as though the money at stake is not their own. Where the public policy exception does not apply, an unsuccessful challenger can face their own legal fees and a costs award, on an inheritance they did not receive.
The trustee who funds a defence from estate money without thinking about indemnity. Paying legal fees out of the estate account during the litigation does not settle the question of who ultimately bears them. Where the court later finds the trustee acted for their own benefit, those payments become an item on the passing of accounts and may have to be repaid.
Assuming a will challenge is funded because it is a will challenge. The exception is not triggered by the subject matter. It is triggered by reasonable grounds, or by the testator having caused the problem. A challenge brought because a beneficiary is unhappy with their share engages neither.
Confusing the costs of administration with the costs of a fight. Applying for directions on a genuine ambiguity is administration, and the estate ordinarily bears it. Litigating over who should have received a piece of property is a dispute between beneficiaries, and it is treated as one.
Underestimating how long the exposure lasts. Costs are dealt with at the end of a proceeding or of a step within it. A party who has been running a dispute for two years does not learn the costs outcome until the point at which it is least possible to do anything about it.
Our guide to estate disputes in Ontario covers the broader landscape. If a dispute is developing and you want a realistic view of the costs exposure before positions harden, you can book a free call. Success fee engagements are possible in estate dispute matters.
Frequently Asked Questions
Does the estate pay everyone's legal fees in an Ontario estate dispute?
Generally no. That was the traditional approach, and the Court of Appeal displaced it in McDougald Estate v. Gooderham (2005). The ordinary civil costs rules now apply under section 131 of the Courts of Justice Act and Rule 57, meaning the unsuccessful party generally pays a portion of the successful party's costs, unless the court finds that a public policy consideration applies. Costs remain discretionary in every case.
When will the court order costs paid out of the estate?
Where a public policy consideration is engaged. The recognised categories are where the difficulty or ambiguity that caused the litigation was created by the testator, where there were reasonable grounds to question the execution of the will or the testator's capacity, and where the litigation was reasonably necessary to ensure the proper administration of the estate. The court examines the litigation first to decide whether any of these applies, and only then turns to the costs outcome.
Can an executor be ordered to pay costs out of their own pocket?
Yes. An estate trustee is ordinarily indemnified from the estate for the reasonable costs of administration, but in Westover Estate v. Jolicouer, 2024 ONCA 81, the Court of Appeal confirmed that a trustee may be ordered to pay costs personally where they acted unreasonably or in substance for their own benefit rather than for the benefit of the estate. Where a trustee is also a beneficiary defending a position that benefits them personally, the court looks at substance rather than framing.
What percentage of my legal fees will I recover if I win?
Less than all of them. Costs are ordinarily awarded on a partial indemnity scale, which recovers a portion of actual fees, with a substantial indemnity scale available where the conduct of the losing party justifies it. The amount is set under Rule 57 by reference to factors including the complexity and importance of the issues, the amounts claimed and recovered, the conduct of the parties, and offers to settle.
Do I have to pay costs if I lose a will challenge I brought in good faith?
Not necessarily, and this is where the reasonable-grounds exception does real work. A challenge that fails can still have been reasonably brought, and a challenger in that position may have their costs paid from the estate. What does not attract the exception is a challenge with no evidentiary basis, or one motivated by dissatisfaction with the division rather than by a genuine question about the will's validity.
Does making a settlement offer help with costs?
It can matter a great deal. Offers to settle are among the factors the court weighs under Rule 57, and a party who declines an offer and then does no better at the hearing can face a costs consequence running from the date of the offer. In estate matters, where positions often harden for reasons that are not financial, a well-timed and properly documented offer is one of the few tools that shifts the costs risk onto the other side.
This article provides general information about Ontario law and is not legal advice. Speak with a lawyer about your specific circumstances.