CLIENT GUIDE

   Offers to Settle

(This is an edited version of our Client Guide which provides general information and is made available to our clients to assist them to understand the purposes and consequences of an offer to settle. This is not intended to constitute legal advice, which by its nature is situation specific. If you have questions about a specific legal problem, you should consult a lawyer who will provide legal advice only after reviewing all the facts relevant to your situation before providing that advice, rather than relying on the general information provided in this Guide.)

Here are a few words on the subject of settlement from Abraham Lincoln. This quotation is taken from notes for a law lecture to lawyers dated July 1, 1850. Although it is not known if he ever delivered the lecture, the advice is as appropriate today as when Mr. Lincoln wrote it:

Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out
to them how the nominal winner is often a real loser -- in fees, expenses, and waste of time.
As a peacemaker the lawyer has a superior opportunity of being a good man. There will still
be business enough.

 

Settlement

To attempt to reduce the number of cases which must proceed to a trial for a resolution of the issues between the parties, the Rules of Civil Procedure permit each party to serve a formal written settlement offer on the other side. Settlement of the litigation offers certainty of result and an end to legal expenses and drain on personal and corporate resources in return for a compromise of positions. Most cases in the court system settle before the trial is over. Settlement can occur at any stage in the litigation process. Early settlement is one of the objectives of the Rules. If the offer to settle is accepted by the other party, the case is over and the terms of the offer form the basis of the settlement agreement.

To promote early settlement, the Rules provide for advantageous costs consequences for a party who makes a settlement offer and achieves a better result at trial than the offer. Accordingly, in addition to all the traditional benefits of ending the case by settlement rather than a trial, the Rules offer a costs benefit to settlement offers even where the case does go all the way to trial.

Offers to Settle

In order to achieve the favourable costs consequences under the Rules, a party serves a written settlement offer on the other party. There is also a discretion in the court to consider all settlement offers, even if they do not meet the formal requirements of the Rules. The written settlement offer usually offers a compromise from your position in the litigation. In fact, offers which offer no real compromise have been held by the courts not to attract the favourable costs consequences.

Where money is involved, usually the amount the party would pay or accept to settle the case is set out. This can be done as a single amount for claim and interest or the interest component may be described separately. Costs are generally not referred to; however, there are some circumstances where it is appropriate to do so.

Where the relief claimed does not include money, the action or result which would be acceptable is set out instead of a monetary amount. Naturally, it is generally easier for a trial judge to assess a monetary offer after trial as to whether or not a party has achieved a more favourable result at trial so as to attract the beneficial costs consequences of making the offer to settle.

Other common terms which may be contained in an offer to settle include the exchange of releases and a dismissal of the case.

Unlike informal offers, a counter-offer does not revoke a formal offer to settle. This means that you can respond to a formal offer to settle from the other party with a formal offer to settle of your own and the other party's offer will remain open for you to accept it. In fact, your offer must remain open for acceptance until after the commencement of the trial to obtain the beneficial costs consequences. Like all settlement offers, a formal offer to settle is made on a without prejudice basis which means that it cannot be used against you by the other party in the litigation of the case on the merits (it does affect costs). The offer to settle is not revealed to the trial judge until after a decision is made. Accordingly, making a settlement offer cannot affect the decision of the trial judge in any way. A settlement offer is usually discussed at a pretrial conference but the judge conducting the pretrial cannot be the judge at trial so that its confidentiality is preserved.

General Rule for Costs

In Ontario, the general rule for costs, is that a successful party is usually awarded an amount for costs to be paid by the unsuccessful party. Accordingly, a plaintiff who succeeds against a defendant can also recover costs against the defendant. Similarly, a defendant who successfully resists the plaintiffs claim at trial, can recover costs against the plaintiff.

This general rule is subject to an overriding discretion in the judge to vary the general rule in appropriate circumstances. It is also affected by the costs consequences of offers to settle.

If awarded by a court, they may be on one of two scales:

Typically, the scale of costs is determined by the trial judge while the actual amount of the costs is determined by an officer of the court, called an assessment officer, in a subsequent proceeding. They can also be settled as between the parties in an agreed amount, or, in some cases, they are awarded by the judge or master in a fixed amount.

Costs Consequences of Offers to Settle

After a trial judge has given a decision on the merits of the litigation and the parties know who has won the case, the trial judge asks if there are any offers to settle which must be considered on the question of costs.

The basic costs consequences are described below. Although they are described in terms of monetary recovery for ease of expression, the same consequences apply where the results of a non-monetary offer are involved. Subject to the overriding discretion of the court, they are:

 

 

 

 

   FURTHER QUESTIONS

Any questions? If you have any questions about offers to settle, please contact us at:

W. Bruce Drake
Hooey Remus
Telephone: (416) 362-2051
Facsimile: (416) 362-3646
330 Bay Street, Suite 210
Toronto, Ontario M5J 2P1
eMail: bdrake@hooeyremus.com
 
Website: www.hooeyremus.com

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This page was originally created on July 3, 1996 and was last updated on April 8, 2017.
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