Has the Court of Appeal eliminated the impact of Rule 49 offers?

This post was written by Andrea Girones:

February 24, 2015

As a general rule in Ontario personal injury lawsuits, the loser pays the legal costs of the winning side. Rule 49 of the Rules of Civil Procedure deals with offers to settle which can reverse the standard “winner takes all” approach to costs. Typically if you offer to settle a case for $X dollars, which is rejected by your opponent, and you achieve a better result at trial, you can have your courts costs paid for from the date of the offer to the date of judgment.

At least that used to be the clear cut rule until the recent case of  Elbakhiet v. Palmer, a car accident case in Ottawa that went to the Court of Appeal on the issue of Rule 49 offers and the costs consequences. Without getting into the complex facts surrounding the offers and counter offer ( for that you should read the Judgment) the bottom line is the Trial Judge found that the plaintiff did better at trial than the defendant’s Rule 49 offer and awarded them  legal costs of $578,742.28 on a Judgment of $144,013.00. The defendant appealed.

The Court of Appeal found that the defendant did not meet the burden of proving their offer to settle was lower (better) that the Plaintiff’s ultimate trial judgment due to some uncertainty in the calculation of pre-judgment interest.  Further the Court confirmed there is no “near miss” doctrine for offer that come close under Rule 49. Therefore the Defendants did not get reduced costs to pay under the Rule 49 procedure.

But then the Court of appeal went on to states that the Plaintiff’s costs should be reduced as the award was disporportianet to the award actually obtained at trial.  Just a breath after declaring that there was no “near miss’ legal principle, the Court of Appeal  still held that the defendant’s offer was made in accordance with “the spirit of Rule 49”.

The Court went on to reduce the Plaintiff’s cost award  to $100,000.00, using such clear cut, and precise legal terms, as “proportionality” , “discretion” and a “holistic” approach.

I guess an offer to settle that’s “close enough” but not a reasonable and proper assessment of a claim, should be recommended to all injured parties. Otherwise the “Spirit of Rule 49” will visit in the night, haunting plaintiff’s counsel when faced with vague, unclear and “close to the mark” offers from stingy defendants.

Whereas Elbakhiet should have been about clarifying how to make a clear and precise Rule 49 offer, query whether the Court of Appeal has in face increased the uncertainly surrounding cost awards in a successful civil action



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