Offers to Settle

Offers to settle are an excellent tool in getting litigation resolved without the cost of proceeding to trial. The Ontario Rules of Civil Procedure encourages this by providing for cost consequences of offers to settle. In effect litigants are given a useful device that can deter the opposite party from continuing with the legal action. Given the high cost of litigation Toronto lawyers in particular are advised to make frequent use of offers to settle.

Legal Costs are Payable in Ontario Civil Suits

Ontario is a loser pay jurisdiction when it comes to the issue of legal costs. The usual rule for court cases in Ontario is that the losing party to a law suit will be ordered to contribute to the legal costs of the winning party. Typically the court will not order full reimbursement of those legal costs. Unless circumstances require another outcome the losing party will be ordered to make a partial indemnity payment of legal costs to the winning party. These costs will usually be fixed by the trial judge at the conclusion of the case once a decision on the merits has been made.

Offers to Settle have Cost Consequences

The offer to settle rule alters the landscape in a significant way when it comes to the award of costs.The party who makes an offer to settle prior to trial and achieves a better result at the trial will benefit by receiving a better award of costs than would otherwise be the case. The application of the rule works differently for plaintiffs and defendants. Take the situation of a plaintiff that is forced to proceed to trial as the defendant has refused to settle on the terms proposed by the plaintiff. At the trial the plaintiff not only succeeds but receives an award that is greater than the amount of the offer the plaintiff had made previously. In this case provided the plaintiff made an offer to settle that complied with the formalities required by the rule then the plaintiff will be entitled to payment of a full indemnity of legal costs from the date of the offer to the conclusion of the trial. This increased level of costs increases the potential payout by the defendant and thereby increases the risk in proceeding to trial. The situation is somewhat different when a defendant makes an offer that is higher than an award given to the plaintiff at the trial of the action. In this case the defendant is entitled to payment of partial indemnity costs from the date of the offer to the conclusion of the trial even if the plaintiff achieves some form of positive result at trial. While not a payment of costs at a level of full indemnity any costs awarded tot he defendant must be paid out of the award received by the plaintiff. This will reduce the plaintiff’s recovery and in certain situations will have made the litigation less than worthwhile for the plaintiff.

Toronto Lawyers and Offers to Settle

We recommend that offers to settle be used in every case. It will be of greatest effect once it is possible to assess the issues of liability and damages sensibly based on good information and documents. Lawyers should incorporate offers into the strategic plan for their civil cases.