Prepared by Alexandra Ormond, Articling Student
The majority of legal cases settle before trial, and recent statistics show the number of settled cases to be as high as 95% in Ontario. This is likely due to Rule 49 of the Rules of Civil Procedure, which encourages and facilitates settlement by imposing costs consequences (payment of a portion of another party’s legal fees) on a party who fails to accept a reasonable offer.
Rule 49 was introduced in 1985 to encourage litigants to make and accept reasonable settlement offers, thus discouraging parties from using the judicial process to delay judgment and increase costs unnecessarily. To ensure that litigation ends more quickly and cost-effectively, Rule 49 is all encompassing. Rule 49 applies to offers to settle made in respect of actions, applications, counterclaims, third party claims, crossclaims and motions, and a plaintiff, defendant, applicant or respondent can serve on any other party an offer to settle one or more claims. To submit a valid Rule 49 offer to settle, some formal requirements must be met. The offer must be in writing, effectively delivered to the opposing party, and a proposal that can be construed as an offer to settle, open for acceptance and binding if accepted. If a valid offer to settle is submitted and a party fails to accept what turns out after trial to be an offer that should have been accepted before trial, significant costs consequences will be imposed.
If costs consequences result, the effect of the rule for a plaintiff’s offer is different than the effect of the rule for a defendant’s offer. Where a plaintiff makes an offer to settle that is refused and subsequently obtains a judgment that is as favourable or more favourable than the offer, unless the court orders otherwise, the plaintiff is entitled to partial costs from the outset of the lawsuit to the date the offer was served, as well as substantial costs from the date the offer was served to the end of the proceeding. Conversely, where an offer to settle made by a defendant is refused and the plaintiff subsequently obtains a judgment that is only as favourable or less favourable than the terms of the offer, unless the court orders otherwise, the plaintiff is entitled to partial costs from the outset of the lawsuit to the date the offer was served, and the defendant is entitled to partial costs from the date the offer was served to the end of the proceeding.
Due to the fact that settlements are commonly encountered in a litigation process at various stages of the matter, it is important to seek the advice of legal counsel to balance the interest in getting a settlement and achieving or avoiding costs consequences.
For more information, please contact Caroline Failes, Partner at 613.566.2849 or [email protected].
