Cost Awards and Offers to Settle
As we have previously blogged, the possibility of an adverse costs award should always be top of mind for parties who intend to litigate an estate-related matter. In Ontario, the general rule in civil litigation is that costs – some or all of the successful party’s legal fees – are to be paid by the losing party.
Costs are ultimately at the discretion of the Court. In addition to considering the result of the proceedings, the Court may also take any written offers to settle into consideration when making a determination regarding costs awards.
It is generally advisable for parties to make a reasonable offer early in the litigation. If the offer does not result in a settlement, it may still be helpful to the offeror on the issue of costs if the litigation proceeds.
In particular, an offer made pursuant to Rule 49 of the Rules of Civil Procedure can be an effective mechanism to reduce a party’s exposure to costs. Pursuant to Rule 49.10, where an offer to settle is made at least seven days before the commencement of the hearing and remains open for acceptance until the commencement of the hearing, there may be cost consequences if the offeree fails to accept the offer.
Manufacturers Life Insurance Co. v Sorozan Estate, 2016 ONSC 3805, a recent costs decision rendered by the Honourable Justice Dunphy, reiterates the importance of making an early and reasonable offer to settle.
Professor David Freedman recently blogged about Justice Dunphy’s judgment on the motion regarding the proper designated beneficiary of the Deceased’s group life insurance policy. The Deceased’s son brought a motion to have the disputed portion of the insurance proceeds paid to him, and the Deceased’s spouse brought a cross-motion for the proceeds to be paid to her. Justice Dunphy concluded that the Deceased’s spouse was the sole designated beneficiary of the policy.
In his subsequent reasons on the issue of costs, Justice Dunphy noted that the Deceased’s spouse had made two offers to settle: one offer to divide the disputed insurance proceeds equally prior to the commencement of the litigation, and a further less favourable offer after argument before the Court.
Justice Dunphy did not give any weight to the later offer, but did attach some weight to the offer made prior to the motion. Justice Dunphy noted that even though the offer was not in technical conformity with Rule 49 and was not an official offer to settle, and it was unclear if the offer was open for acceptance until the commencement of the hearing, “such an offer is entitled to some weight if not necessarily the same weight as one that was formally made and legally open to acceptance up until the commencement of the hearing the motion.”
In the result, costs were awarded against the Deceased’s son. Importantly, Justice Dunphy noted that if the offer had not been made, the Court would have been inclined to leave the parties to bear their own costs due to the “unusual circumstances” of the case.
Thank you for reading,
Umair Abdul Qadir