Death of a Party: What Happens when the Deceased’s Executor is forced to discontinue a claim?

In our previous blog, we discussed the practical recourse available to a party where the deceased litigant’s interest in the lawsuit is transferred or transmitted to his/her estate trustee (the “Trustee”), but an order to continue has not been obtained in a timely manner (or at all).

In this blog, we look at a unique scenario where a Trustee has no legal right to continue an action and must discontinue. Who bears the costs in this scenario?

The vast majority of claims commenced by a deceased party can be continued following the person’s death.

Section 38 of the Trustee Act is the statutory provision regulating the recovery of damages on behalf of a deceased. It provides that,

(1) Except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action for all torts or injuries to the person or to the property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, have been entitled to do, and the damages when recovered shall form part of the personal estate of the deceased; but, if death results from such injuries, no damages shall be allowed for the death or for the loss of the expectation of life, but this proviso is not in derogation of any rights conferred by Part V of the Family Law Act.

However, claims that are determined to be “personal in nature” will terminate with the death of the affected individual and cannot be continued.   Which begs the question; what does “personal in nature” mean?

In Giacomelli Estate v. Canada (Attorney General), the deceased’s claim for damages pursuant to s. 24(1) of the Charter based on violations of s. 7 and s. 15 of the Charter were not allowed to be continued by the Deceased’s estate.¹

The Court of Appeal relied on the Supreme Court’s ruling in Hislop where the Court stated that,

“In the context in which the claim is made here, an estate is just a collection of assets and liabilities of a person who has died. It is not an individual and it has no dignity that may be infringed. The use of the term “individual” in s. 15(1) was intentional. For these reasons, we conclude that estates do not have standing to commence s. 15(1) Charter claims. In this sense, it may be said that s. 15 rights die with the person”²

As a further example, in Balkos v. Cook, the Ontario Court of Appeal held that the recovery of non-pecuniary general damages, such as loss of expectation of life falls directly within the exclusions under s. 38 of the trustee act and could not be advanced by the deceased’s trustee pursuant.³

Interestingly, the legislative approach to whether punitive damages can be recovered by an Estate differs widely across Canada.

“Five jurisdictions (Alberta, Newfoundland, Nova Scotia, Prince Edward Island and the Yukon) completely exclude estates from recovering punitive damages. One jurisdiction (Manitoba) excludes estates from such damages if the tort causes the death of a person. Two jurisdictions (Saskatchewan and New Brunswick) explicitly allow punitive damages. Four jurisdictions (Ontario, British Columbia, Nunavut and the Northwest Territories) are silent as to the availability of punitive damages”.⁴

In British Columbia, the Court of Appeal determined that a claim for punitive damages is not sustainable under the Estate Administration Act (the “EAA”), because the trustee is only permitted to advance claims for damages to avoid the diminution of the personal estate of the deceased. However, in Ontario, the Court of Appeal determined that punitive damages may be available to an estate under the Trustee Act.⁵

In any event, getting back to our original question, if a claim initiated by the deceased cannot be pursued by the Trustee on behalf of the estate, who will bear those costs?

Rule 23.05 of the Rules provides that “If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action”. This iteration of the Rule stands in stark contrast to its predecessor, which contemplated that the defendant will ordinarily be entitled to costs when the plaintiff discontinues the action, unless the Court exercises its discretion to order otherwise.

The case law has established that an onus will be placed on a plaintiff to demonstrate a bona fide cause of action when considering whether to relieve the plaintiff of an obligation to pay the defendant’s costs on a discontinued action.⁶  In Provincial Crane this onus is described as follows:⁷

In order to establish that it ought to be relieved of costs in the courts discretion it is my opinion that, at this early stage of the action the plaintiff must satisfy the court that the material filed discloses a bona fide cause of action, that is not frivolous or vexatious and which the plaintiff had some justification to commence, having regard to the conduct of the defendant. Since the court cannot, at this early stage, make final findings of fact or credibility, the court is left to determine if, notwithstanding conflict, there is some evidence to justify the commencement of the action whether or not it can be said that the action may or may not ultimately succeed.

In Carrier Industrial Supply Ltd., Justice Brown extended the bona fide test beyond an assessment of the commencement of the pleadings and held that, “whether or not a defendant should be awarded costs on the discontinuance of an action will require a very fact-specific analysis of the circumstances giving rise to the initiation of the action and its discontinuance”.⁸ [emphasis added]

In analogous situations to where a Trustee has no choice but to discontinue an action, the Court has considered the fact that the plaintiff is, through no fault of their own, effectively forced to discontinue the action as grounds to exercise their discretion and relieve the plaintiff of the costs consequences normally associated with discontinuing an action.

For example, in Park v. McManus Motors Ltd., the Court granted leave allowing the plaintiffs to discontinue their actions without costs. In that case, the plaintiffs properly commenced a claim to enforce their rights, however, in the middle of the proceeding, the legislature changed the relevant laws taking away “the whole foundation” of the plaintiffs’ cause of action.⁹

Similarly, in Provincial Crane, the Court relied, in part, on the fact that the issues in the action had become moot and that the plaintiff was obliged to discontinue the action in the circumstances to order that the plaintiff should not “be obliged to pay costs” as justification for ordering that the defendants’ bear their own costs.¹⁰

It is important to note however that in both Provincial Crane and Park, the Court also relied on its determination that the commencement of the action passed the bona fide test. In other words, it appears that the death of a party is not an automatic “get out of jail free card”, but that a Trustee will still be called on to demonstrate that the commencement of the claim was justifiable.

Assuming the Trustee can get over this hurdle however, based upon the analogous cases noted above, it is likely that the defendants will have to bear their own costs incurred to date, through no fault of their own.